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7784	dbpedia	0	30	https://mises.org/quarterly-journal-austrian-economics/place-human-action-development-modern-economic-thought	en	The Place of Human Action in the Development of Modern Economic Thought	https://cdn.mises.org/st…PG?itok=9eQJSk7W	https://cdn.mises.org/st…PG?itok=9eQJSk7W	[ "https://cdn.mises.org/styles/responsive_4_3_650w/s3/static-page/img/mises_1.JPG.webp?itok=aaiq4dq_ 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/static-page/img/mises_1.JPG.webp?itok=4JjwQwqy 870w,/s3/files/styles/responsive_4_3_1090w/s3/static-page/img/mises_1.JPG.webp?itok=zpWGcZh0 1090w,/s3/files/styles/responsive_4_3_1310w/s3/static-page/img/mises_1.JPG.webp?itok=JKL2-Qrj 1310w,/s3/files/styles/responsive_4_3_1530w/s3/static-page/img/mises_1.JPG.webp?itok=re7xlXwN 1530w", "https://cdn.mises.org/styles/responsive_4_3_650w/s3/images/2024-07/Salerno_8x10_2013_0.jpg.webp?itok=XYFGFH8s 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/images/2024-07/Salerno_8x10_2013_0.jpg.webp?itok=YYPewMYJ 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/images/2024-07/Salerno_8x10_2013_0.jpg.webp?itok=EIv3iBe8 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/images/2024-07/Salerno_8x10_2013_0.jpg.webp?itok=2oLRG6LE 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/images/2024-07/Salerno_8x10_2013_0.jpg.webp?itok=UT1h_F_4 1530w", "https://cdn.mises.org/styles/responsive_650w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=_yN9d85Q 650w,https://cdn.mises.org/styles/responsive_870w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=4mMxN_Nl 870w,https://cdn.mises.org/styles/responsive_1090w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=6MtQxVYY 1090w,https://cdn.mises.org/styles/responsive_1310w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=GcnJ_GBM 1310w,https://cdn.mises.org/styles/responsive_1530w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=iB7UWEt8 1530w", "https://mises.org/themes/custom/mises/components/elements/element-footer-charity/charity-navigator.png" ]	[]	[]	[ "" ]	null	[ "Joseph T. Salerno" ]	2019-12-25T00:00:00-06:00	The core of any system of economic theory is the explanation of how prices are determined.	en	/themes/custom/mises/favicon.ico	Mises Institute	https://mises.org/quarterly-journal-austrian-economics/place-human-action-development-modern-economic-thought	Volume 2, No. 1 (Spring 1999) The core of any system of economic theory is the explanation of how prices are determined. As Mises (1998, p. 235) himself put it, “Economics is mainly concerned with the analysis of the determination of money prices of goods and services exchanged on the market.” Thus, the core of Human Action is parts three and four (pp. 201–684), entitled, respectively, “Economic Calculation” and “Catallactics or Economics of the Market Society.” In these two parts, comprising 484 pages, there is presented for the first time a complete and systematic theory of how actual market prices are determined. Of course, Mises did not create this theory out of whole cloth. In fact, the theory of price elaborated in Human Action represents the crowning achievement of the Austrian school of economics. It is the culmination of the approach to price theory originated by Carl Menger in 1871 and developed further by a handful of brilliant economists of the generation intervening between Menger and Mises. These latter included especially Eugen von Böhm-Bawerk, J. B. Clark, Phillip H. Wicksteed, Frank A. Fetter, and Herbert J. Davenport. Unfortunately, for reasons to be explained below, the entire Mengerian approach went into decline after World War I and had lapsed into nearly complete dormancy by the mid-1930s. Mises’s outstanding contribution in Human Action was to single-handedly revive this approach and elaborate it into a coherent and systematic theory of price determination. This article is divided into sections. Section 1 describes the development of the Mengerian approach to price theory up until World War I, by which time it had reached the zenith of its international influence. Section 2 describes its amazingly rapid decline and suggests four reasons for it, including two fundamental theoretical problems that had not been solved by the first two generations of Mengerians. Mises’s solitary struggle to revive the approach, beginning in the mid-1930s and culminating with the publication of Human Action in 1949, is the topic of Section 3. A revisionist thesis is also proposed in this section that disputes the conventional view that Austrian economics was riding high in the mid-1930s when it was suddenly and tragically buried by the “Keynesian avalanche.” The Mengerian Tradition Before World War I To appreciate the full significance of Mises’s contribution, it is necessary to broadly review the course of development of pure economic theory from the early 1870s through the 1930s. Three disparate approaches to price theory emerged out of the marginalist revolution of the 1870s. Léon Walras attempted to explain price formation along the lines of astronomy and classical mechanics, explicitly conceiving of “the state of the market as a general problem of static equilibrium described by a system of equations” (Ingrao and Israel 1990, p. 92). Walras’s general-equilibrium approach, while admittedly systematic, was timeless and mechanical and thus incapable of producing a theory of the real-world pricing process, i.e., of the actual, and necessary disequilibrium, money prices generated by the historical market process. In contrast, the partial-equilibrium approach devised by Alfred Marshall involved a misguided attempt to secure realism in economic theory by shunning analysis of the ultimate causes of price and cost phenomena in terms of consumer choices, adopting instead the classical economists’ superficial focus on the businessman. This approach, far from securing a greater realism, led to an analysis of the determination of individual prices in isolation, which ignored or downplayed the general interdependency existing among all values and prices in the real-world economy. Menger’s approach differed sharply from both Walras’s and Marshall’s. It was at once systematic and realistic. As he boldly declared in the Preface to his Principles, I have devoted special attention to the investigation of the causal connections between economic phenomena involving products and the corresponding agents of production, not only for the purpose of establishing a price theory based upon reality and placing all price phenomena (including interest, wages, ground rent, etc.) together under one unified point of view, but also because of the insights we thereby gain into many other economic processes heretofore completely misunderstood. (Menger 1981, p. 49) Consistent with his pursuit of an all-encompassing, reality-based price theory, Menger sought to explain “the quantities of goods actually exchanged” (p. 191). He thus focused his explanation on the momentary exchange equilibria, or what he called “points of rest,” which coincided with the emergence of historical market prices (p. 188). While Menger thus eschewed mechanical general-equilibrium analysis because it was incapable of yielding a causal explanation of the determination of real prices, he did not fail to present a systematic explication of the pricing process. Thus, he began his treatise with the recognition that “All things are subject to the law of cause and effect” (p. 51). And for Menger, the real and ultimate cause of all value and price phenomena was the incontrovertible fact of the universal human striving for want satisfaction. This striving has as its object the scarce elements of the external world that are perceived as the cause of want satisfaction; that is, economic goods. Moreover, since human actors must evaluate the relative importance of satisfying a variety of concrete needs or wants, all economic goods are interrelated in what Menger called “the causal nexus of goods” as complements, substitutes, inputs or products (p. 56). The entire constellation of values and prices is, therefore, a systematic and interdependent outcome of the interaction of individual human valuations and choices. In the early 1880s, Menger’s first followers, Böhm-Bawerk and the latter’s friend and brother-in-law, Friedrich von Wieser, began to publish, and, as the decade progressed, the growing stream of publications by them and by others who had been influenced by Menger in Austria and elsewhere increased to a flood. Consequently, by the end of the decade, an identifiable “Austrian school” had coalesced and begun to achieve worldwide renown. It is important to note that even at this early stage, the Austrian school was deeply divided on a crucial issue of basic theory. On the one hand, Böhm-Bawerk fully absorbed Menger’s causal-realistic approach to price theory and endeavored to develop it further and apply it to new areas. Wieser, on the other hand, seized narrowly on Menger’s “subjectivism” as embodied in the principle of marginal utility and, while usefully elaborating some of the implications of this principle, completely ignored the structure of reality-based price theory that Menger had labored to build upon it. Wieser’s purpose was to construct his own peculiar ideal of social welfare based on a state of general equilibrium that he called “natural value,” and to link it through the concept of marginal utility to foundations in human psychology. As we shall see below, this split between Menger’s earliest and most eminent protégés had momentous consequences for the later development of the Austrian school. In the three decades from 1884 to 1914, the Austrian school flourished and substantial progress was made in developing the Mengerian approach into a complete theory of price. This progress was embodied especially in the works of Böhm-Bawerk, Wicksteed (1967) in Great Britain, and Clark (1965), Fetter (1915), and Davenport (1968), the core members of the so-called “American Psychological School” in the U.S. The peak of the influence of Mengerian price theory coincided with the publication of the treatises by Wicksteed, Davenport, and Fetter in 1910, 1913, and 1915 respectively. Indeed, as Hayek recounted years later “in the early postwar period the work of the American theorists John Bates Clark, Thomas Nixon Carver, Irving Fisher, Frank Fetter, and Herbert Joseph Davenport was more familiar to us in Vienna than that of any foreign economists except perhaps the Swedes.” The Decline of the Mengerian Tradition Unfortunately, the Austrian school and its causal-realistic method declined swiftly from the acme of its international influence. There were four basic causes of this decline. The first involved events that occurred in Vienna in the decade leading up to World War I. These included, most importantly, the premature wilting of Böhm-Bawerk’s vital and creative powers, culminating in his untimely demise in 1914 and the concurrent flowering of the creativity and intellectual influence of Joseph A. Schumpeter. The second was the rapid rise of Marshallian economics in Anglophone countries to almost complete dominance in the field of pure theory by the early 1920s. The third factor that served to undermine the Mengerian approach to price theory was the great stimulus given to research in Continental general-equilibrium analysis at the London School of Economics by the arrival of Friedrich A. Hayek in 1931. Finally, the Mengerian approach itself, even in its most sophisticated elaboration in the works of Wicksteed, Fetter, and Davenport, contained important deficiencies that were conducive to the widespread view that it offered nothing more than a less rigorous, verbal rendering of general-equilibrium analysis. Each of these factors will be dealt with in turn in the following four subsections. The Decline of Böhm-Bawerk and the Rise of Schumpeter With the publication in 1886 of his monograph, Grundzüge der Theorie des wirtschaftlichen Güterwerthes, restating and extending the principles of Mengerian value and price theory, Böhm’s monograph on the theory of value, published … in the most respected German-language journal, came soon to be recognized as a brilliant statement of some of the core views of the group, and all the more so as Menger’s Grundsätze was by that time extremely difficult to obtain. Hayek (1992, vol. 4, p. 112) referred to “Böhm-Bawerk’s brilliant exposition” in which he “gave the most complete version of the new doctrine, including the law of costs, the form in which the doctrine was popularized.” Böhm-Bawerk had attained an international reputation. Following publication of the second volume of his magisterial treatise on Capital and Interest (1959) in 1889 and the long-running controversy it almost immediately precipitated, Böhm-Bawerk assumed the mantle of leadership of the Austrian school from Menger. Except for two brilliant articles on capital and on money, published in 1888 and 1892, respectively, the latter had made no substantive contributions to economic theory since the early 1880s and his Principles was by then long out of print and extremely difficult to obtain. Long before Böhm-Bawerk’s death in 1914 at the age of sixty-three, events in Austria had begun to take an unfavorable turn for the Mengerian approach. In 1889, Böhm-Bawerk went into government service, where he remained for fifteen years. Although he closely followed the rapidly expanding literature and continued to publish during these years, his duties as a high-level public servant left him little time to spare for scholarly activities. By the time Böhm-Bawerk assumed a specially created chair at the University of Vienna and returned to full-time academic pursuits in 1905, he had attained the status of a venerable elder statesman and could not completely escape continued nonacademic demands on his time and energies. In addition, he was also naturally accorded a statesman’s role within the economics profession, he served for many years on the council of the Austrian Economic Association, and was also elected Vice-President and then President of the Austrian Academy of Sciences in 1907 and 1911, respectively. In addition to these heavy demands on his time, his ability to vigorously renew his scientific research was hampered by his enormous workload in the previous fifteen years and the heavy toll it had taken on his health. Thus, upon his return to academic life at the age of fifty-four, he “seemed older than his years suggested.” Two years, later he described himself as an “old man.” Meanwhile, during Böhm-Bawerk’s debilitating hiatus from academic life, Menger retired from the University of Vienna in 1902 and Wieser acceded to his chair the following year. Wieser was a diffuse and idiosyncratic thinker and, as noted above, inclined to follow the Walrasian general-equilibrium approach to price theory. Although his primary doctrinal influence was admittedly Menger, he certainly could not be classified as a Mengerian price theorist in the same sense as Böhm-Bawerk or even Wicksteed and Fetter. As his university student, Schumpeter, wrote of him: Any professional colleague who penetrates Wieser’s intellectual universe is at once aware of a new atmosphere. It is as though one had stepped into a house that bears no resemblance to others’ houses one knows, whose organization and furnishings are alien to our era and at first disconcerting Rarely has an author owed as little to other authors as Wieser. At bottom his only indebtedness is to Menger, and all that he owes Menger is the initial impetus. ... With sovereign calm he waves aside what other specialists have written when he creates his own work. ... He reads neither rapidly nor extensively and rarely seeks to grasp the finer points of other people’s intellectual systems. Mises expressed considerably less enthusiasm for Wieser’s intellectual abilities and achievements than Schumpeter, but also contended that Wieser’s work did not owe much beyond initial inspiration to Menger. While conceding that Wieser recognized the significance of Menger’s work “immediately” and “enriched the thought in some respects,” Mises denied that Wieser was a “creative thinker” and believed he was generally “more harmful than useful.” In fact, according to Mises, Wieser never really understood the gist of the idea of Subjectivism in the Austrian school of thought, which limitation caused him to make many unfortunate mistakes. ... His ideas on value calculation justify the conclusion that he could not be called a member of the Austrian School, but rather was a member of the Lausanne School. (Mises 1978, p. 36) On the latter point, George Stigler’s judgment echoed Mises’s. Stigler (1949, p. 158) stated that Wieser’s theory of imputation “is much more closely allied to the earlier writings of Walras than to those of Menger and Böhm-Bawerk.” Schumpeter entered the University of Vienna in 1901 and began to study economics in 1903 under Wieser, then newly ensconced in Menger’s former chair. The fateful meeting of these two men as teacher and pupil marks the beginning of the downfall of the Mengerian approach to price theory in Austria itself. Schumpeter was “deeply influenced” by Wieser, and “their ideas on many topics in economic theory bear great similarity” (Allen 1994, p. 37). And while it is also true that Schumpeter (1969, p. 143–90) participated in Böhm-Bawerk’s famous seminar in 1905 and 1906 and later eulogized him in glowing terms as his great teacher and master, Schumpeter himself identified Walras and Wieser in his first book as “the two authors to whom [he] felt closest affinity” (Machlup 1978, p. 462). This book, Das Wesen und der Hauptinhalt der Theoretischen Nationalökonomie (The Nature and Essence of Theoretical Economics), was published in 1908 and was an attempt to explain and defend the use of the model, or “schema” as Schumpeter called it, of the “static economy” — wherein all economic quantities subsist in changeless, mutually-determined general equilibrium — as the main tool of pure economic analysis. Significantly, it was also in this book that Schumpeter originated the concept of “methodological individualism,” which was to become so closely identified with the Austrian School of economics (Swedberg 1991, p. 26). Das Wesen immediately propelled Schumpeter to the front ranks of economic theorists on the Continent and established him as the preeminent member of the third generation of the Austrian School. Wieser accorded the book a long and respectful review, which, in parts, was highly laudatory. Wieser’s main objection was the misguided one that Schumpeter rejected the use of “psychology” as a foundation for marginal utility theory. Nonetheless, Wieser viewed the book as the achievement of a first-rate, if precocious, mind. Thus, Wieser wrote that One recognizes everywhere the richly and variedly trained mind which is open to all intellectual currents of the time [Schumpeter] who only got started a few years ago, may claim with justifiable pride that this book has not been written for beginners but presupposes a fairly detailed knowledge of the state of our science. (Quoted in Allen 1994, pp. 83–84) Walras, also, was favorably impressed by the book, writing to a colleague that the book was a “very handsome and important work” (quoted in Swedberg 1991, p. 30). In the U.S., Clark, by this time the doyen of American economists, favorably reviewed the book for the Political Science Quarterly, concluding that “This work is both critical and constructive, and in each direction it contributes greatly to the progress of economic science” (quoted in Allen 1994, p. 84). In contrast to his eminent contemporaries, Böhm-Bawerk did not have anything good to say about Das Wesen, because he correctly perceived how profoundly anti-Mengerian its theoretical method was. Yet, he too evidently considered Schumpeter an outstanding economic theorist. In a typically penetrating footnote, Böhm-Bawerk provided a devastating critique of Schumpeter’s egregious attempt in Das Wesen to extirpate the concepts of “causation” and “explanation” from economic theory and to replace them with the concepts of “function” and “description,” respectively (Böhm-Bawerk 1959, vol. 3, pp. 228–29). However, Böhm-Bawerk softened his critique by concluding with a playful reference to “an eminent economic theorist” who “allow[ed] himself to be misled because of his use of the mathematical concept of function and consequently being unaware of the dangers of the vicious circle.” Indeed, it was largely due to Böhm-Bawerk’s intercession that Schumpeter became the youngest full professor at the prestigious University of Graz, and one of the youngest in the Empire, in 1911 at the age of twenty-eight (Allen 1994, pp. 101–02, 117–22; Stolper 1994, p. 6). Böhm-Bawerk’s strangely ambivalent attitude toward Schumpeter — his contempt for his work but esteem for his abilities — is starkly revealed in letters that he wrote to Knut Wicksell. In a letter dated July 9, 1912, Böhm-Bawerk wrote: Schumpeter is also very young. And of course he neither [sic] could possibly have been able to master the gigantic undertaking [Das Wesen] that he has ventured to tackle. But I consider him to be very talented. About his next, second book (Theorie der wirtschaftlichen Entwicklung, 1912 ) you will probably be shocked even more. He has developed his theory of interest, which I consider to be totally wrong. (Hennings 1997, p. 269) In fact, Böhm-Bawerk penned a bitter sixty-page critique of Schumpeter’s interest theory and, after a forty-page reply by Schumpeter, renewed the attack in a twenty-page rejoinder (Swedberg 1991, p. 39). In a letter written in April 1913, Böhm-Bawerk alluded to “the clever but insubstantial fantasies of Schumpeter” (Hennings 1997, p. 272). But in correspondence a few months later, in September 1913, Böhm-Bawerk was again singing the praises of Schumpeter’s talents while dismissing his work as superficial: “With our young economists I am also not in agreement. Schumpeter I consider to be the most gifted among them; and if he could find the way from his present cursoriness to solid and meticulous research he could, with his abilities, make important contributions to science” (p. 273). It is instructive at this point to contrast Böhm-Bawerk’s treatment of Schumpeter with that received by Mises in these letters to Wicksell. Whereas Schumpeter is affectionately portrayed as a brilliant, if rambunctious and willful, enfant terrible, Böhm-Bawerk’s references to Mises do not betray the slightest degree of personal regard or appreciation for his abilities, despite the fact that Mises had been a regular participant in his seminar for seven years. For example, in a letter dated August 12, 1912, Böhm-Bawerk requested that Wicksell write a review of Mises’s The Theory of Money and Credit, remarking: You have probably also recently received a book on the theory of money by a young Viennese scholar, Dr. von Mises. Mises is a student of myself and Prof. Wieser, which, however, does not mean I would want to take responsibility for all his views. I have just begun to read his book myself, and am not yet familiar with its content. (Hennings 1997, p. 270) Similarly, in the three subsequent letters written over the next twenty months in which Böhm-Bawerk referred to Wicksell’s review of Mises’s book, there is not a positive word conveyed concerning Mises’s contributions or abilities (Hennings 1997, pp. 271, 274, 275). From this, it must be concluded that even Böhm-Bawerk, despite his profound objections to Schumpeter’s approach to price theory, considered him far and away the most promising of the third generation of Austrian economists. While Schumpeter was being proclaimed by his teachers, Wieser and Böhm-Bawerk, as their most brilliant student and attaining to the status of the youngest full professor in Austria-Hungary, he published his second book, The Theory of Economic Development (1969). When this book appeared in 1911, it was greeted with broad acclaim and almost immediately established his reputation among the international community of economists. According to one of his biographers: Schumpeter’s development book, as he had hoped, made him world famous among serious economists almost overnight. While his first book had alerted the profession to a rising new star, this second one cemented his position as the wunderkind of economics and identified him as the most outstanding theorist of social and economic development. (Allen 1994, p. 110) Schumpeter’s reputation spread far and wide. Thus, for example, writing in 1917, the Russian Marxist theoretician, Nicolai Bukharin (1972, p. 56), in his influential critique of Austrian economic theory, characterized Schumpeter as “one of the principal representatives of the Austrian School.” By comparison, Bukharin’s tone was almost dismissive when referring to Mises in a footnote as “one of the latest advocates of the Austrian School” and a “specialist in the theory of money” (p. 198, n. 100). The decade leading up to World War I thus represented the watershed decade for the Austrian School in the nation of its birth. A physically debilitated Böhm-Bawerk, although still an influential teacher, was no longer able to undertake original work in pure theory, while Menger had already retired from active teaching and publishing in 1903. In this situation, the publication of Schumpeter’s two books sparked a powerful movement to recast the price-theoretic core of Austrian economics along the lines of (verbal) Walrasian general-equilibrium analysis. The publication of Wieser’s Theorie der gesellschaftlichen Wirtschaft in 1914 added momentum to this movement. Since Wieser’s book, later translated into English as Social Economics (1967), was the first comprehensive treatise on economics produced by the Austrian School, this meant that the field of pure theory was now almost completely dominated by the general-equilibrium wing of the school. The momentous result of this state of affairs was that when the fourth generation of the Austrian School entered the University of Vienna immediately after World War I, it was inevitable that its members would cut their theoretical teeth on the works of Wieser and Schumpeter. Wieser was, in Hayek’s words, the “grand-seigneur” of the school and the most influential economics professor at the university, teaching the main economics theory sequence until 1922, although he continued to lecture as an honorary professor until 1925 (Hayek 1992, pp. 22, 123–24). Wieser, of course, was Hayek’s “revered teacher,” and Hayek always considered himself an adherent of the “Wieser tradition” rather than the Böhm-Bawerk (and Mises) tradition. But Wieser was also Machlup’s “first major teacher” and Machlup took his yearlong theory course twice (Ebeling and Salerno 1980, p. 1). Haberler, too, took Wieser’s course and later studied with Wieser’s follower, Hans Mayer, who acceded to Wieser’s chair in 1922. Since Wieser’s theory lectures followed Social Economics very closely — he either “read from” the book or “knew it more or less by heart” (Ebeling and Salerno 1979, p. 1; Hayek 1992, p. 22) it was not surprising that members of the fourth generation considered Wieser’s treatise the major theoretical expression of the Austrian School. According to Hayek, writing in 1926: “Theorie der gesellschaftlichen Wirtschaft offers not only the sole consistent treatment of economic theory produced by the modern subjectivist school, but it also constitutes, above all, what may well be the greatest synthesis achieved by economic theory in our time” (p. 119). In 1927, Hayek’s fellow student, Oskar Morgenstern, effusively hailed the book as “a work that has become the most important statement of the Austrian theory” and “the greatest systematic treatise that has been written by an Austrian in which the principle of marginal utility is analyzed in all its ramifications.” Morgenstern (1976a, pp. 482–83) also characterized it as “one of those universally interesting books which mark an epoch in the development of economic theory.” As important as Wieser’s treatise was in their formative years, however, Schumpeter’s first book, Das Wesen, in which he defended the general-equilibrium model as the core concept of pure economic theory, appears to have had an even greater influence on the budding economic theorists of the fourth generation. Writing in 1980, Hayek referred to “his brilliant first book” and argued that the ideas in this work are “certainly essential enough to the understanding of the development of economic theory. Indeed Schumpeter made a contribution to the tradition of the Austrian School which is sufficiently original to be made available to a wider public” (Hayek 1962, p. 161). Hayek also revealed that, “Of course [Schumpeter’s] two prewar books and his essay on money were familiar to all of us [of the fourth generation]” (p. 34). Speaking of Das Wesen and its great influence on the fourth generation, Morgenstern (1976b, p. 490) recollected that The work was read avidly in Vienna even long after the World War I, and its youthful freshness and vigor appealed to the young students. I myself remember what sort of revelation it was to me when I first laid hands on it and, like many others of my generation, I resolved to read everything Schumpeter had written and would ever write. Haberler (1993, p. 22) characterized Das Wesen as Schumpeter’s “first great book.” Machlup, also, was greatly impressed by Schumpeter. He lamented that Schumpeter was “unjustly” excluded from membership in the Austrian School, “because of his admiration for the mathematical school of Lausanne” (Machlup 1981, p. 21). In fact, he embraced the Schumpeterian vision of the purpose and method of pure theory. In an article surveying Schumpeter’s economic methodology, which frequently and approvingly cited Das Wesen, Machlup (1978, p. 462) attributed to Schumpeter a “superior understanding of general epistemology and scientific method.” In his own voluminous writings on methodology, it is clear that Machlup adopted the position of “methodological tolerance” that he ascribed to Schumpeter in this article (p. 463). This position boiled down to two claims: first, that the full explanation of a complex economic reality requires historical and statistical as well as theoretical analysis; but, second, in Machlup’s words (p. 466), “it is economic theory, which in its ‘schemas’ or ‘models’ and in its ‘theorems’ defines and describes (or constructs) the relevant relationships.” For Schumpeter in Das Wesen ... the economic model is the chief expression and operational tool of the economic theorist. He preferred to call it a schema, or sometimes schemata. In his book he employs both partial and general-equilibrium models. ... The model of which Schumpeter writes primarily, and the focal model of all of Schumpeter’s work in static economic theory, is the circular-flow model or the general-equilibrium economy in a stationary state. It was a variation on the model first developed in mathematical form by Walras. While such partial-equilibrium and general-equilibrium models are indeed arbitrary constructions and logically anterior to the facts of reality, they are not mere “aprioristic speculations,” because they are “designed with the facts in mind.” In Machlup’s view, the “decisive point” of Schumpeter’s methodological position is summed up in the following statement by Schumpeter: “On the one hand our theory is in essence arbitrary, and on this is based its system, its rigor, and its exactness; on the other hand, it fits the phenomena and is conditioned by them, and this alone gives it content and significance” (p. 467). Needless to say, Machlup’s methodological approach, which portrays the formulation of arbitrary models as the central concern of theoretical research, describes a major departure from the causal-realistic paradigm of Menger. But what of the tradition of Menger and Böhm-Bawerk during the 1920s: wasn’t Menger’s Principles, after all, still the guiding star of the Austrian School? And wasn’t Mises, the longtime student of Böhm-Bawerk, now teaching a university seminar and conducting his own Privatseminar? Regarding Menger’s direct influence during this period, although he was still alive, he was “more a myth than a reality” to the fourth generation, “particularly since his book had become a great rarity which was practically unobtainable as the copies had even disappeared from the libraries” (Allen 1994, p.22). And although it is true that Mises was a popular lecturer at the university, he lectured as an unsalaried Privatdozent and, in the early 1920s, hardly rivaled Wieser in prestige as a teacher or Schumpeter in reputation as a pure theorist. In addition, Mises’s university course was an advanced seminar that reflected Mises’s research interests, such as the theory of money and credit, and was not focused on value and price theory (Haberler 1981, pp. 50–51). While it is true that Haberler and Machlup both attended Mises’s university seminar, Hayek never took a formal course from Mises as a university student and never really met him until after he had already received his degree (Haberler 1981, pp. 50–51; Ebeling and Salerno 1980, p. 1). Mises’s exciting and influential Privatseminar was even less focused on pure theory, addressing topics of money, business cycles, and economic policy, and often ranging far beyond economics to the philosophy of science and sociology. Moreover, members of the fourth generation were invited to join this seminar only after they had already obtained their doctorates (Haberler 1981, pp. 51; Ebeling and Salerno 1980, p. 1). For these reasons, it is unlikely that the seminar was instrumental in altering the basic approach to economic theory that they had absorbed from Wieser and Schumpeter. And indeed, it is quite apparent in their later works in the 1930s that Machlup, Morgenstern, and Haberler all accepted the model or, in Schumpeterian terms, the “schema” of general equilibrium as the heart of economic theory. In his early work, from the mid-1920s up to 1933, Hayek, too, viewed general-equilibrium theory as the core of economic theory. In Monetary Theory and the Trade Cycle, for instance, which was originally published in German in 1929 as Geldtheorie und Konjunturtheorie, Hayek made it clear that a successful business-cycle theory must be logically integrated with the “fundamental propositions” of the “theory of equilibrium.” And by equilibrium theory Hayek (1966, pp. 28–29, 42, n. 2) explicitly understood “primarily ... the modern theory of the general interdependence of all economic quantities, which has been most perfectly expressed by the Lausanne School of theoretical economics.” After 1933, it is true, Hayek struggled mightily to “break out of the Walrasian box” by attempting to dynamize general-equilibrium theory by extending it to include within its purview expectations of the future and the division of knowledge among market participants. But even in his most creative work along these lines, “Economics and Knowledge” published in 1937, he still clung to the belief that “the pure logic of choice,” which could be represented by the timeless equations of general equilibrium, played a central role in economic theory (Hayek 1972, pp. 33–56). By 1945, with the publication of his famous article, “The Use of Knowledge in Society,” Hayek had definitively abandoned the intractable project of dynamizing general-equilibrium theory. Instead he narrowed his focus to the problem of the interpersonal dispersion of knowledge, and, while assuming that real-world prices were always near their general-equilibrium values, argued that “The mere fact that there is one price for any commodity ... brings about the solution which (it is just conceptually possible) might have been arrived at by one single mind possessing all the information which is in fact dispersed among all the people involved in the process” (p. 86). So Hayek, like his Vienna-trained cohort, was never able to escape the general-equilibrium framework he learned in his youth. Of course, no one would deny that Mises heavily influenced the fourth generation of the Austrian School, but he did so mainly as a monetary theorist and political economist. Having published Theorie des Geldes und der Umlaufsmittel (The Theory of Money and Credit) in 1912, by the time Hayek and company had entered the university, Mises had already established himself as the preeminent monetary theorist of the Austrian School and, arguably, among Continental economists. It was the publication of Die Gemeinwirtschaft (Socialism), however, “which would make the most profound impression on [the fourth] generation” (Hayek 1992, p. 133). And while it did unquestionably revolutionize the political-economic worldview of Hayek and his cohorts, it did not challenge them on the level of pure theory. It was not until 1928 when Mises began publishing the series of methodological essays that were collected in 1933 in Grundprobleme der Nationalökonomie (Epistemological Problems of Economics) that Mises began to be recognized as a general theorist and system-builder along the lines of a Schumpeter. When these essays were first published they marked the transition of the author then mainly known for his theory of money and credit and his critical analysis of socialism from an economist in the narrow sense of the term to a general theorist and philosopher of society. However, even in these years, the members of the Mises-Kreis could not have comprehended the details of the reconstructed system of Mengerian economic theory that Mises would finally elaborate in his 1940 treatise Nationalökonomie. The Rise of Marshallian Economics This brings us to the second factor operating to undermine the Mengerian approach to price theory: the rapid rise to ascendancy of Marshallian economics after 1890 in the Anglophone countries. With Böhm-Bawerk’s pen silenced and with Wicksteed, a part-time economist with no academic base and with diffuse scholarly interests, Marshallian partial-equilibrium economics swept the field in Great Britain by the 1920s. This left the London School of Economics, under the leadership of Lionel (later Lord) Robbins, as the lone outpost of Austro-Wicksteedian economics in postwar Great Britain. The economist, William Smart, exemplifies the speed and thoroughgoing nature of the Marshallian conversion of the British economics profession. In 1891, the year after publication of the first edition of Marshall’s Principles, Smart published a little primer, An Introduction to the Theory of Value (1966), which gave English-speaking economists a lucid and highly sympathetic introduction to Austrian value theory. In the second edition, which was published nineteen years later, Smart added an appendix consisting of a summary of his university lectures on “The Theory of Value: The Demand Side” in order to indicate his more mature attitude toward Austrian doctrines. As the title suggests, this appendix purported to show that Austrian value theory only addressed the demand side of price determination. In the Preface to this edition (p. viii), Smart informed his readers that this summary was meant to be studied “along with Book III of the classic which has moulded modern economic thought, Professor Marshall’s Principles.” In the United States, the growth of the Austro-American School was stunted by the idiosyncratic personality and writing style of Davenport and the deep personal animosity that developed between him and Fetter, and it failed to produce an influential thinker among its second generation of adherents. Consequently, during the 1920s, with Clark, Fetter, and Davenport nearing the end of their illustrious careers and no longer contributing to pure theory, the school’s influence on the mainstream of American economics declined precipitously, leaving the field of high theory in the U.S. completely open to Marshallian domination. Thus, the top three best-selling economics textbooks between World War I and the Great Depression were those written by Richard T. Ely (with three collaborators), Frank W. Taussig, and Henry R. Seager, although the prewar treatises by Davenport and Fetter remained in the top eleven (Dorfman 1969, p. 211). Although incorporating some Austrian insights, the Ely et al. and Seager texts expounded straightforward Marshallian price theory, while Taussig built his original theoretical edifice on John Stuart Mill and was perceptively summed up by Joseph Schumpeter as “the American Marshall” (Schumpeter 1969, p. 220; Ely et al. 1928, pp. 143–79; Seager 1908, pp. 81–106; and Taussig 1928, pp. 109–220). Hayek visited the U.S. in 1923 and was stunned and dismayed by the remarkably sudden foundering of the Austro-American School of price theorists. Reflecting back on this early personal encounter with the American economics profession, Hayek wrote: I must confess that from my predominantly theoretical interest the first impression of American economics was disappointing. I soon discovered that the great names which were household words to me were regarded as old-fashioned men by my American contemporaries, that work on their lines had moved no further than I knew already. (Hayek 1992, p. 35) In Germany, the long night of domination by the anti-theoretical German Historical school was coming to an end, but the book that reawakened the theoretical curiosity of German economists after the World War I was neither Marshall’s, nor Menger’s Principles, but Gustav Cassel’s The Theory of Social Economy (1932), which offered a verbal rendition of Walrasian price theory. However, in the Romance countries, nascent Mengerian schools were shunted aside by peculiar, indigenous blends of renewed British classicism and moderate German historicism. In France, the Mengerian approach was eagerly embraced by Paul Leroy-Beaulieu and Maurice Block, the leaders of the French Liberal School. These doctrinal descendants of Jean-Baptiste Say and Frédéric Bastiat considered Menger’s causal analysis of price that began from the fact of human wants as the natural development of the French subjective-value tradition initiated by Say (Leroy-Beaulieu 1910, vol. 1, pp. 83–114; vol. 3, pp. 15–94; Block 1897, pp. 129–85). Unhappily, the Liberal School, which had completely dominated French economics from the beginning of the century, began to go into decline in the 1880s as a result of a radical institutional reform in French higher education that established chairs of political economy in all the Law Faculties. University statutes ensured that these chairs would be filled by jurists and lawyers, most of whom were by temperament and training sympathetic to the approach and policy prescriptions of the German Historical School and radically opposed to the deductive method and hardcore laissez-faire policy program of the Liberal School. This outcome was not exactly uncongenial to the French government, which had engineered the institutional coup. Thus, almost overnight, a self-pro-claimed “new” school sprang to life under the leadership of Charles Gide and soon became entrenched as the new orthodoxy in French economics. Gide and the new school “economists” were not particularly interested in developing pure theory, preferring to rehash outmoded and previously refuted historicist criticisms of classical economics, while struggling futilely to come up with a moderate synthesis of the two bodies of doctrine. Even as late as 1907, there still did not exist a formal course on economic theory taught by the Law Faculties, despite the fact that they almost completely monopolized the academic teaching of economics. By the end of World War I, the Liberal School had passed into history and with it any chance for a Mengerian renaissance of French economics. By the 1920s, what passed for pure economic theory in France, outside of a small circle of Walrasians, was a weak and unimaginative brew of classical economics and German historicism with some watered-down marginal-utility theory and Marshallian partial-equilibrium analysis poured in for good measure. The Mengerian approach fared a little better in Italy, where there also existed a dominant Liberal School in the Say-Bastiat tradition, which was led by Francesco Ferrara. Liberal economists, especially Augusto Graziani and Ugo Mazzola, early on began to absorb the lessons of Menger and Böhm-Bawerk and, from 1886 to 1890, the “Austrian School was the most influential among Italian economists.” In 1890, the year that three marginalists, including Mazzola and the Jevonian Maffeo Pantaleoni assumed joint editorship of the leading Italian economics journal, Giornale degli Economisti, “the army of ‘marginalist-liberalists’ ... suddenly grew more numerous” (Barucci 1973, pp. 264–65). However, classical economics and moderate German historicism had already taken firm root in Italian economic thought, predisposing most Italian economists toward eclecticism and preventing these early seeds of the Mengerian approach from achieving their full bloom. The muddled character of Italian economic thought after World War I was well summarized by Lewis H. Haney: By the early 1900s, there had emerged in Italy “the dominant historico-liberalistic eclecticism. ... Soon the Austrian subjectivism was added, with Graziani outstanding. But even the marginal-utility theorists have made some modification, approaching more closely the Classical theories and so making a fusion with the other group less difficult” (Haney 1949, p. 844). Hayek and the Transformation of Economics at the London School of Economics By 1930, there remained one seemingly impregnable academic stronghold of Mengerian economics in Europe: the Economics Department of the London School of Economics (LSE) headed by Robbins. But events were already developing elsewhere in Europe that would rapidly and fundamentally transform the character of LSE economics. In the early 1930s, the Austrian School had begun to melt away in Austria as more attractive prospects abroad or the National Socialist threat of Anschluss drove the leading Austrian economists to emigrate to Great Britain (Hayek and Rosenstein-Rodan), the United States (Machlup, Haberler, and Morgenstern), and Switzerland (Mises). Ironically, this great Austrian migration was the third factor contributing to the downfall of the Mengerian tradition, particularly in Great Britain. For it was under Hayek’s influence that economists at the LSE, especially John Hicks, began to introduce Walrasian general-equilibrium theory, as reformulated by Pareto, to Anglo-American economists. Ingrao and Israel perceptively describe Hayek’s crucial role in the early development of the Anglo-American version of general-equilibrium theory: The problem that fascinated Hayek was the one Walras and Pareto had left unsolved: the possibility of constructing a convincing interpretation of cyclical fluctuations while not only maintaining the central core of equilibrium theory but actually taking it as a starting point. ... In his London lectures ... Hayek started precisely from the concept of general market equilibrium and proclaimed its key importance in economic analysis. ... Although Hayek did not provide any formalization of his theories, his equilibrium theory offered a wealth of suggestions that were to be taken up in the literature of the 1940s and 1950s. The idea of intertemporal equilibrium, which was to be precisely defined in axiomatic terms by Arrow and Debreu, took shape in his writings of the 1920s and 1930s. ... The best introduction to a more detailed exposition of the content of Value and Capital is perhaps Hicks’s own outline of the divide that opened at a certain point between his research program and Hayek’s. (Ingrao and Israel 1990, pp. 232–34) Although Hicks had read Pareto before he met Hayek, he affirmed that Hayek’s teaching stimulated him to begin “once again, from Pareto.” Regarding the line of work that he pursued during the 1930s and that culminated in Value and Capital, Hicks (1983, p. 359) revealed that “I did not begin from Keynes; I began from Pareto, and Hayek.” Hayek (1992, pp. 53–54) himself regarded the analysis of value theory in Value and Capital in terms of marginal rates of substitution and indifference curves as “the ultimate statement of more than half a century’s discussion in the tradition of the Austrian School.” More momentous, however, than Hayek’s direct impact on Hicks, the idiosyncratic and eclectic theorist, was the profound effect that the Hayek-Hicks collaboration had on Robbins, the very heart and soul of LSE economics. Between 1927 and 1934, Robbins had written a series of brilliant papers elaborating and applying causal-realistic price theory and criticizing Marshallian partial-equilibrium economics. In addition, his Essay on the Nature and Significance of Economic Science, first published in 1932, clearly evinced the author’s “especial indebtedness” to the works of Mises and Wicksteed while compellingly arguing that economic theory was indeed “based upon reality,” as Menger had originally claimed (Robbins 1969, pp. xv–xvi). Robbins’s book quickly succeeded in demonstrating to most of the profession that the Mengerian method of formulating economic theory was both obvious and realistic. As Robbins (1969, p. 78) characterized this method: The propositions of economic theory, like all scientific theory, are obviously deductions from a series of postulates. And the chief of these postulates are all assumptions involving in some way simple and indisputable facts of experience relating to the way in which the scarcity of goods which is the subject matter of our science actually shows itself in the world of reality. By the mid-1930s, however, Robbins had begun to fall under the sway of Hayek and Hicks, conflating the dynamic Menger-Wicksteed price analysis with the Walrasian pure logic of choice as the essence of economic theory. For example, in the syllabus for his course on “General Principles of Economic Analysis” given during the 1934–35 session, Robbins included under the heading “Modern works in general theory” the treatises by Böhm-Bawerk, Wicksteed, Fetter, Clark, and Davenport alongside those of Cassel, Pareto, and the latter’s follower, Enrico Barone. In a revealing note in the syllabus, Robbins wrote: “The treatment will be nonmathematical in character. Students who wish to witness the same problems treated mathematically should attend course no. 66 (Introduction to Mathematical Economics)” (McCormick 1992, pp. 31–32). For Robbins, evidently, the choice between the causal-realistic and the mechanical general-equilibrium approaches was now merely a matter of taste. Robbins’s syllabus for 1938–39 evinced his further evolution away from the Mengerian tradition. Gone from the sections on general theory (“Statics” and “Comparative Statics”) were the great Austro-American treatises of Clark, Fetter, and Davenport, while Pareto’s treatise remained and Hicks and Allen’s article on “A Reconsideration of the Theory of Value,” Edgeworth’s Mathematical Psychics, and Chamberlain’s Theory of Monopolistic Competition were added. Moreover, while Wicksteed’s treatise was listed as a prerequisite, Knight’s Risk, Uncertainty, and Profit was now identified as the organizing text for the course. Additional evidence of Robbins’s drift away from the Mengerian camp can be found in the second edition of Nature and Significance published in 1935. In this edition, there are still numerous footnotes citing the works of Fetter, Davenport, Wicksteed, Mises, and Richard von Strigl, but now coexisting, somewhat incongruously, with footnote references to the works of Pareto and Hicks. Apparently this was not the case in the first edition. As Richard M. Ebeling, who compared the two editions, explains: The footnote references in this first edition show more clearly the strongly “Austrian” influence on Robbins’s thinking than in the second edition of 1935, in which modifications in the text and deletions in and additions to the footnote references create the impression of different authorities having influenced his ideas. (Ebeling 1998, p. 1, n. 1) Also, as Robbins significantly reveals in the Preface to the second edition, these changes were made under the “advice and criticism” of Hayek, Paul N. Rosenstein-Rodan and Alfred W. Stonier. Like Hayek, Rosenstein-Rodan was a member of the fourth generation and also a member of the Wieser-Mayer circle (Hennings 1997, p. 272). It is significant that in the Preface to the first edition of Value and Capital, Hicks also specifically mentioned Hayek and Rosenstein-Rodan, along with LSE general-equilibrium theorists Nicholas Kaldor, Abba Lerner and R.G.D. Allen, as contributing to the ideas underlying his own book (p. 273). A brief word must here be said about the socialist calculation debate, because it starkly reveals the difference in approach between Mengerian price theorists like Mises, and verbal general-equilibrium theorists such as Hayek and the later Robbins. Both Hayek and Robbins in their critiques of socialist central planning emphasized the impracticality of the full and timely discovery by the central planning board of the widely dispersed knowledge needed to solve the system of simultaneous equations that were supposed to substitute for the monetary calculations of entrepreneurs. But for Mises, the economy was always in deep and fundamental disequilibrium and these equations were, therefore, completely irrelevant to the problem of economic calculation. Moreover, the problem of incomplete knowledge, especially due to ineradicable uncertainty of the future, was a problem that afflicted central planners and private entrepreneurs equally. While generally refraining from engaging in controversy with his fellow critics of socialism, Mises did explicitly address the differences between his own position and that of Hayek in an article published in a French economics journal in 1938. After arguing that the state of equilibrium describable by mathematical equations is a purely hypothetical, imaginary, and unrealizable future state whose conditions can never be known today and which “does not correspond to anything real,” Mises wrote: Hayek, too, has shown that the application to economic calculation of the equations that describe the state of equilibrium presupposes knowledge of the future valuations of consumers. But in this he has seen only an increase of the difficulty of the practical application of those equations, instead of seeing a fundamental and insurmountable obstacle to their employment in economic calculation. It is of absolutely no importance at all that we envisage the socialist regime as a dictatorship with central planning, in which only the valuations of the dictator are relevant, rather than in the form of a community organized according to democratic principles in which the valuations of individual consumers or groups of consumers would be relevant to economic planning. The dictator too cannot know today how he will make his evaluations in the future when conditions will have changed; he cannot know it just as the individual consumer cannot know. Now, while it is true that important Austrian contributions to money, capital, and business-cycle theory continued to pour forth from the LSE throughout the 1930s, most from the pen of Hayek himself, they were progressively weakened by the fact that they were straying farther and farther afield from their roots in dynamic Mengerian price theory. The culmination of this unfortunate trend was Hayek’s The Pure Theory of Capital, published in 1941, which was largely unsuccessful precisely because it was an attempt to reconstruct Böhm-Bawerkian capital theory on the basis of an intertemporal general equilibrium. The last gasp of Mengerian price theory in its pre-Misesian incarnation actually occurred in the U.S. in the mid-1930s. Vernon A. Mund, a student of Fetter’s at Princeton, published a monograph Monopoly: A History and Theory (1933), which was far superior to the Marshallian works on the subject published concurrently by Joan Robinson and Edward Chamberlain. Mund explicitly based his own analysis of monopoly on Menger’s “new and unified analysis of monopoly and competition,” which, he declared, “made Menger’s work a signal contribution to economic theory.” Two years later, there appeared posthumously Davenport’s (1935) monumental — but stylistically opaque — dissection and critique of the entire system of Marshallian economics from the standpoint of causal-realistic price theory. Finally, in 1937, Fetter contributed four original chapters to a textbook on Economic Principles and Problems, edited by Walter E. Spahr. In retrospect, Fetter’s eighty-five-page contribution represented the canonical statement of the core of Mengerian price theory as it stood immediately prior to Mises’s reconstruction (Fetter 1937a,b,c,d). Needless to say, all of these works sank without a trace under the successive tidal waves of the Marshallian Imperfect Competition Revolution and the Hayek-Hicks reconstruction of general-equilibrium theory. Unresolved Problems within the Mengerian Paradigm The fourth and final factor that contributed to the rapid dissolution of the Mengerian paradigm after World War I did not involve external circumstances, but analytical deficiencies internal to its theoretical approach. These shortcomings were twofold and tended to obscure the distinctiveness of the causal-realistic approach and to lead to a superficial, but widely accepted, characterization of it as a less rigorous, verbal version of the general-equilibrium approach. The first problem revolved around the concept of equilibrium. Menger had shown the importance of the concept of actually observable “points of rest” or momentary exchange equilibria in his analysis of the formation of real market prices. However, since Menger’s Principles was intended as the general introduction for a prospective multi-volume treatise that he never wrote, he formulated the general principles of value-imputation for higher-order goods, but refrained from analyzing the pricing and allocation of the factors of production in an exchange economy. Hence, he had no need for the concept of long-run equilibrium of production. Now Menger’s concept of realizable exchange equilibrium is fully adequate for the analysis of the formation of actual moment-to-moment market prices and has remained the central analytical concept of causal-realistic price theory. Writing in 1910, Fetter emphatically affirmed that “The concept of the economic equilibrium ... must be thought of as present in all dynamic societies. ... Any price, no matter how temporary or unstable, is one that for the moment brings into equilibrium the quantities bought and sold, produced and wanted at that price” (Fetter 1910, p. 133). Davenport coined the term “moving equilibrium” to designate the interdependent system of money prices that continually emerges from each moment’s exchanges on the market. According to Davenport (1968, pp. 113–14), “Prices have their setting in a great moving equilibrium, all parts of which are related to all other parts and are in close interdependence with them.” The actual, if momentary, equation of supply and demand that gives rise to a definite price in each individual market “assumes ... an existing system of prices upon goods in general and an established price relation for these goods in terms of money.” It is in this restricted, but crucial, sense that current-day Mengerians insist that the market is always in equilibrium. Nevertheless, in order to trace out the causal relations that govern the complete and time-consuming adjustment of the structure of resource prices and allocations to given changes in the underlying data of the economy, the subsidiary and purely imaginary construct of a final equilibrium of prices and production is indispensable. This was recognized by Böhm-Bawerk, who employed the imaginary construct of a fully-adjusted, changeless economy in developing Menger’s theory of imputation into a full-blown marginal productivity theory of factor pricing in a capital-using market economy (Böhm-Bawerk 1959, pp. 248–56). However, Böhm-Bawerk himself never explicitly identified or completely understood this method of imaginary construction. Unfortunately, still methodologically under the influence of John Stuart Mill, as was Menger also, Böhm-Bawerk erroneously maintained that it was merely “frictional obstacles” that prevented the real-world economy from instantaneously adjusting itself to this state of long-run equilibrium. While noting that “In actual practice such frictional obstacles’ are infinite in number,” Böhm-Bawerk disastrously conceded that if “perfection were attained” then the pricing and allocation of resources could be determined with “ideal mathematical accuracy.” More disastrous still, Böhm-Bawerk argued that economic laws, such as the law of marginal productivity, would have “ideally complete validity” only in a world of undisturbed long-run equilibrium (pp. 255–56). Thus, Böhm-Bawerk’s and Menger’s methodology — i.e., the account they gave of the method they used to formulate economic theorems — was not only confused, but also incompatible with the actual method they employed in successfully formulating a causal-realistic price theory. The first economist to self-consciously identify and attempt a comprehensive explanation of the method that guided the Mengerian approach in theoretical research was John Bates Clark. But terminological obscurity and internal inconsistencies marred even Clark’s perceptive and pathbreaking discussion. Clark argued that the starting point of theorizing about the causal economic laws governing a market economy is the imagining of what he called a “static state.” In this mental construct, the underlying data of the economic system are changeless and the pattern of prices and of resource allocation have been completely adjusted to these data, and, consequently, all product prices equal their average costs of production and entrepreneurial profits and losses are nonexistent. Clark (1965, p. 400) admitted that the depiction of such an economy is “completely imaginary” and that “a static society is an impossible one.” However, he pointed out, using the static state in our reasoning is “a heroic but necessary application of the isolating method.” This method permits us to analyze causal laws or “forces” which “[w]e always see ... working in connection with other forces, but we have to imagine ... working alone.” Correcting Böhm-Bawerk and Menger, Clark thus affirmed without qualification that the “static laws” deduced with the aid of this imaginary construction are “nevertheless real laws ... that still operate in the changing world of reality” (p. 30). Indeed, “static laws dominate the activities of a real and dynamic society” and the influences they exert on dynamic adjustment processes “are not imaginary; they are as real as anything on earth” (pp. 37, 401). Clark thus had brilliantly and completely freed himself from Mill’s harmful misconception that economic laws were only “hypothetically true,” i.e., true in the absence of “disturbing causes,” such as imperfect factor mobility or nonpecuniary motives for action. Unfortunately, Clark opened the door for another pernicious error with his choice of the term “static laws” to characterize the content of economic theorems. For these theorems are not about laws that apply in the timeless, changeless static state, which by Clark’s own admission is “completely imaginary” and “impossible”; rather they are about the laws of the real, dynamic market economy that unfolds in history. “Static law” is therefore a self-contradictory and confusing misnomer. Economic laws, in whose derivation the fiction of the static state is indispensable, are immutable laws of reality that govern human action and interaction in the irreversible flux of time; hence, they can have no application in the unrealizable static state where time and action are defined away. The problems with Clark’s discussion go beyond the merely semantic, however. Apparently confused by his own misleading terminology, he could not resist reifying the static state, implying that it has an independent and permanent existence — albeit one that is agitated by the never-ending “frictions and disturbances” associated with dynamic phenomena. For Clark, therefore, the static state exists in the same way that the level of the ocean really exists independently of the waves that continually roil its surface. In Clark’s words, The static state ... should ... be thought of as an ideal arrangement, projecting itself through the disturbed and changing group system [i.e., competitive market economy] of actual society just as the imaginary level surface of the sea projects itself through the waves. [S]tatic society ... is a shape and mode of action that the real world carries within it. ... [W]e may grasp the essential reality of it. (Clark 1965, p. 402–03) In accord with this reification, Clark divided economic theorems into propositions about “static forces” and “dynamic forces.” Since both sets of forces are operating in the “world of fact,” static economic theory must be supplemented by a theory of economic dynamics, i.e., “a science of economic friction and disturbance” (p. 32). Furthermore, the effects of the two sets of forces are not symmetrical: the static forces “at work in the unchanging world are not only working in the changeful one, but are even the dominant forces in it.” As a result, despite the continual dynamic frictions and disturbances, real-world prices, wage rates and interest rates are “always comparatively near” to the “natural standards” set by static forces (p. 30). Of course, Clark’s lapse into fallacious concretizing of the static state should not obscure his brilliant achievement in demonstrating that the so-called “static method” is the one, true method of theoretical inquiry in economics. Nonetheless, Clark’s preeminent position as “the first American theorist of international reputation” (Mai 1975, p. 51) ensured that his compelling but defective methodological account would have dire consequences. For once, it is admitted that dynamic phenomena are secondary and that economic theory is basically a system of propositions about a virtually existing static world, the causal-realistic approach suddenly appears as a redundant and much less rigorous version of the general-equilibrium approach. And, as noted above, this is exactly how even its erstwhile supporters at the FSE treated it, after Hayek and Hicks began to introduce general-equilibrium economics to English-speaking economists in the 1930s. As it encountered the theoretical developments of the 1930s, the Mengerian approach embodied a second, and even more fundamental, shortcoming. This was its failure to provide a theory of money prices and, therefore, of monetary calculation. Even in its most sophisticated variants, as found in the treatises of Wicksteed, Fetter, and Davenport, it remained essentially a theory of a barter economy. While Menger and his followers keenly perceived that economic calculation could only operate with money prices and that a realistic theory of price must be a theory of a monetary-exchange economy, they were unable to overcome the seemingly irremediable split between monetary and value theory. Menger himself identified the crucial difference between the money economy and the barter economy, pointing out that the quantitative comparison of the means and ends of economic activity facilitated by monetary calculation “is of the utmost practical importance, if not the basis and precondition for purposeful action,” while “[i]n a barter economy the measurement of economic wealth and economic calculation are wrought with troublesome difficulties” (Zlabinger 1977, pp. 9–10). Menger also took the momentous first step in developing a theory of money prices by presenting a pioneering explanation of the demand for money in terms of individual desires for cash balances (pp. 32–40). Böhm-Bawerk, too, stressed that economic calculation must be monetary calculation, pointing out that “[m]oney furnishes ... the neutral common denominator for the otherwise noncomparable needs and emotions of different individuals” (Böhm-Bawerk 1959, p. 250). Thus, his definitions of price always referred to money, and he continually emphasized the vital role of money prices in the process of “imputing” the subjective values of consumers upward from consumer goods through the ascending orders of capital goods to the original factors of land and labor. The factor prices thus determined through this monetary-imputation process permit entrepreneurs to compute and compare the costs of alternative production processes and to allocate scarce factors according to the law of marginal productivity. Böhm-Bawerk also conceived the opportunity cost of a commodity in terms of the marginal utility of its money price (Geldgrenznutzen) to the buyer (Böhm-Bawerk, 1962, pp. 351–70). Based on similar insights, Wicksteed (1967, vol. 1, pp. 135–41; vol. 2, pp. 575–623, 768–69, 825–26) and Davenport (1968, pp. 254–331) both rejected the mechanical and aggregative quantity theory of money and attempted to develop a theory of money and money prices within the framework of the “micro” causal-realistic approach. Although they both made important progress toward this goal — and Wicksteed came very near to achieving it — their ultimate failure meant that Mengerian price theory still remained a theory of barter exchange. Now, it is true that Mises had made substantial progress in integrating monetary and value theory in his treatise on money (Theorie des Geldes und der Unlaufsmittel [The Theory of Money and Credit]) published in 1912. However, he had not elaborated the implications of this integration for price theory proper, and, as we shall see below, he himself considered this project unfinished until 1940. Mengerian price theorists before 1940 thus lacked the analytical wherewithal to demonstrate that the timeless and moneyless general equilibrium approach and the unsystematic, partial-equilibrium Marshallian approach — the analytical pyrotechnics of the 1930s notwithstanding — were both plainly and profoundly irrelevant to the central problem of economic theory. This problem is to explain how monetary exchange gives rise to the processes of economic calculation that are essential to rational resource allocation in a dynamic world. So, after a period of remarkable development and influence from 1871 to 1914, Mengerian price theory, the core doctrine of the Austrian School of economics, had stagnated and, by the mid-1930s, was virtually a closed chapter in the history of economic thought. It was not so much that the approach had been rejected but that — due partly to its own deficiencies — it had been uncomprehendingly conflated with competing approaches. Not surprisingly, given his central role in its accomplishment, this “fusion” of approaches and effective dissolution of the Austrian School in the 1930s was approvingly cited by Hayek in 1968 as evidence of the School’s triumph. Implicating the entire fourth generation of the School, of which he himself was the most eminent member, Hayek wrote: But if this fourth generation in style of thinking and in interests still shows the Vienna tradition clearly, nonetheless it can hardly any longer be seen as a separate school in the sense of representing particular doctrines. A school has its greatest success when it ceases as such to exist because its leading ideals have become a part of the general dominant thinking. The Vienna school has to a great extent come to enjoy such a success. Its development has indeed led to a fusion of the thought stemming from Menger with that of [William Stanley] Jevons (by way of Philip H. Wicksteed), of Léon Walras (by way of Vilfredo Pareto), and especially, of the leading ideas of Alfred Marshall. (Hayek 1992, p. 52) Human Action and the Rebirth of the Mengerian Tradition Mises must have been fully cognizant of this disastrous state of affairs when he immigrated to Switzerland in 1934. Comfortably ensconced as a fulltime, salaried faculty member at the Graduate Institute of International Studies in Geneva, Mises for the first time could fully focus his attention on academic research. Mises used this opportunity to write Nationalökonomie, the German-language predecessor of Human Action and a book that was intended to revive the Mengerian approach and elaborate it into a complete and unified system of economic theory. As evidence of the importance that Mises attached to this book and of the time and energy he poured into it, he wrote very little else in the years leading up to its publication in 1940. Previously an enormously prolific writer, the extent of his output from 1934 to 1939 was comparatively meager: in addition to book reviews, short memos, newspaper and magazine articles, notes, and introductions, there was only one substantial article for an academic audience. In retrospectively describing his purpose in writing Nationalökonomie, Mises left no doubt that he sought to address the two burning issues left unresolved by his Mengerian forerunners: the status of the equilibrium construct and the bifurcation between monetary and value theory. Regarding the former, Mises wrote: I try in my treatise to consider the concept of static equilibrium as instrumental only and to make use of this purely hypothetical abstraction only as a means of approaching an understanding of a continuously changing world. It is one of the shortcomings of many economic theorists that they have forgotten the purpose underlying the introduction of this hypothetical concept into our analysis. We cannot do without this notion of a world where there is no change; but we have to use it only for the purpose of studying changes and their consequences, that means for the study of risk and uncertainty and therefore of profits and losses. (Mises 1980, pp. 230–31) Regarding his effort to incorporate money into the Mengerian theoretical system, Mises identified his immediate inspiration as his opponents in the socialist calculation debate of the 1930s. These economic theorists, under the influence of the general-equilibrium approach, advocated the mathematical solution to the problem of socialist calculation. As Mises argued: They failed to see the very first challenge: How can economic action that always consists of preferring and setting aside; that is, of making unequal valuations, be transformed into equal valuations, and the use of equations? Thus the socialists came up with the absurd recommendation of substituting equations of mathematical catallactics, depicting an image from which human action is eliminated, for the monetary calculation in the market economy. (Mises 1978, p. 112) But without an adequate theory of monetary calculation, which ultimately rests upon a unified theory of a money-exchange economy, Mises realized that there could be no definitive refutation of the socialist position. Accordingly, Mises revealed: My Nationalökonomie finally afforded me the opportunity to present the problems of economic calculation in their full significance. … Only in the explanations offered in the third part of my Nationalökonomie did my theory of money achieve completion. Thus I accomplished the project that had presented itself to me thirty-five years earlier. I had merged the theory of indirect exchange with that of direct exchange into a coherent system of human action. (Ibid.) Thus, Nationalökonomie marked the culmination of the Mengerian theoretical approach, and, in a real sense, the rebirth of the Austrian School of economics. The causal-realistic approach now had the great systematic treatise that it required in order to definitively distinguish it from the rival approaches to price theory. When one compared Nationalökonomie to the influential restatement of the general-equilibrium approach Hicks had achieved in Value and Capital — which represented a fusion of the Walras-Pareto with the Wieser-Schumpeter traditions — the fundamental and irreconcilable differences between the Mengerian and Walrasian approaches were at last starkly and unmistakably revealed. Hayek’s reaction to Nationalökonomie is indicative of the wide gulf separating Mises’s Mengerian approach to economic theory from that of the fusionists of the fourth generation. Although his 1941 review was generally sympathetic to the work, Hayek is perplexed by the fact that Mises had been unaffected by “the general evolution of our subject during the period over which his work extends [i.e., during the previous twenty to thirty years]” and that the development of Mises’s thought during this period “appears to be decidedly autonomous.” Hayek’s bemusement stemmed from his failure to comprehend the fact that Nationalökonomie represented Mises’s deliberate attempt to “autonomously” reconstruct a paradigm that could not be reconciled with the “general evolution” of economics in the direction of the Walrasian-Marshallian fusion of which Hayek himself approved. Particularly revealing is Hayek’s prediction that the “central part” of the book, viz., the sections on monetary calculation and catallactics, would not be its main interest to most readers. But, of course, these are precisely the sections that contain the substance of the reconstructed system of Mengerian economic theory (Hayek 1992, pp. 150–51). With the Austrian school poised for a vigorous comeback on the strength of the publication of Nationalökonomie in early 1940, disaster struck. Cut off from the German-speaking market by the war in Europe, its Swiss publisher went out of business and the sale and distribution of Mises’s treatise ceased. By the time the English-language edition was published by Yale University Press in 1949, the moment had passed for the immediate restoration of the influence of Mengerian price theory within the mainstream of economic theory. Leadership in pure theory had passed from Europe to the United States after the war, due to the migration of many Central European economists to America, combined with the enormous expansion of U.S. higher education faculties induced by the tuition subsidies created by the G.I. Bill (Barber 1970, p. 14). At the same time, intellectual currents were developing in the U.S. that led to a merging of the Marshallian and Walrasian approaches into an invincible orthodoxy. Marshallian price theory in various forms had dominated the textbook literature and undergraduate teaching in the U.S. since the 1920s, but began to lose some of its luster by the late 1930s. By this time, economists began to perceive the limits of the Marshallian partial-equilibrium method that underlay the imperfect-competition revolution and, in works like Robert Triffin’s Monopolistic Competition and General Equilibrium Theory (1940), attempts were made to incorporate it into general equilibrium theory. In the meantime, however, partial-equilibrium analysis had been transplanted to the Midwestern United States after World War I where it was expounded by Jacob Viner who had learned it from his Marshallian mentor, Taussig. The partial-equilibrium approach was absorbed by Viner’s students at the University of Chicago along with Frank Knight’s concept of perfect competition. The formal amalgamation of Marshall, Knight, and Viner, or “Chicago price theory” as it came to be called, was given its definitive statement in George Stigler’s The Theory of Competitive Price published in 1942. Stigler’s textbook, whose subsequent editions bore the title of The Theory of Price, was the precursor of and inspiration for the deluge of intermediate price-theory and microecononomics textbooks that were used to inculcate Marshallian partial-equilibrium price analysis into generations of American undergraduates in the postwar era. Needless to say, these books did not instruct their readers in the problems of monetary calculation or even alert them to their existence. Although prices and values are often given in terms of money, money has nothing essential to do with the analysis. ... It is often asserted that economics is about money or that what is wrong with economics is that it only takes money into account. That is almost the opposite of the truth. While money does play an important role in a few areas of economics, such as the analysis of business cycles, price theory could be derived and explained in a pure barter economy without ever mentioning money. (Friedman 1990, pp. 100, 102–03) There was a second, independent factor that produced a resurgence of interest in Marshallian price theory among American economists. Economists found their experience as policy advisers to the U.S. government during World War II very agreeable and were eager to continue in this role in the postwar world. And given the problems of postwar reconstruction in Europe and Japan in the face of the looming Soviet threat and of the reconversion of the U.S. war economy to a peacetime footing, there certainly was a continuing demand for their services. More importantly, due to the inevitable “ratchet effect” that characterizes government expansion during crises such as the Great Depression and World War II, the U.S. government had permanently increased its scope of intervention into the American economy. It, therefore, now required a patina of scientific justification and guidance for its peacetime “economic management” functions that the economist as policy adviser was well suited to perform. But policy advising meant giving reasonably clearcut answers to the problems confronting policymakers. And for managing particular industries, markets and sectors, e.g., antitrust, labor, agriculture, and defense, partial-equilibrium models were made to order. In the meanwhile, the American economics profession was evolving toward a technique-driven, journal-centered and positivistic “research” culture, and the formalizing and testing of partial-equilibrium models and their adaptation to particular problems served as grist for such research. This culture also fueled interest in general-equilibrium analysis, which had secured a firm foothold in the U.S. economics profession with the publication of Samuelson’s Foundations of Economic Analysis in 1947. Articles dealing with the problems of existence, uniqueness and stability of general equilibrium as well as with the application of the model to international trade and welfare economics quickly found their niche in the journals. These two research trends were eventually reflected in the peculiar fusion of Marshallian and Walrasian approaches found in almost all descendants of the Stigler intermediate price-theory text. Needless to say, in this era of arrant formalism there was no room for the causal-realistic price theory of Carl Menger. This state of affairs was recognized and summed up by the editor of a collection of readings in price theory in 1971: The shades of Jevons, Menger, Edgeworth, Wicksteed, Wicksell, Clark, and Fisher may justifiably be offended by the attribution of modern price theory to two sources, Alfred Marshall and Léon Walras, but these two scholars have had far and away the most influence on twentieth century thought. ... In contrast with Marshall’s down-to-earth struggle with the interpretation of the detailed working of the economy stands Walras’s grand construction of general equilibrium. In a typical British or American textbook on price theory nine-tenths of the contents stem from Marshall’s work, general equilibrium only getting notice in a last chapter or appendix. (Townsend 1971, p. 57) One need only add that the shades of Menger and Wicksteed at least (Clark lived until 1938) would have been feeling very restless by the 1930s. This discussion suggests a revisionist thesis regarding the main reason why the influence of Austrian economics, seemingly at its international peak in the mid-1930s, should have declined so precipitously that, arguably, by 1940 — and certainly by the end of World War II — it was absolutely nil. The conventional view is that Austrian economics was buried by the “Keynesian avalanche.” But this is only true if we acquiesce to the mistaken identification of the essence of Austrian economics as monetary and business cycle theory. In fact, the Cambridge cycle theories of Pigou and Robertson were submerged along with the Austrian theory, while Marshallian imperfect competition theory not only survived, but has continued to flourish down to this very day. Similarly, Chicago price theory and Wicksell’s and Cassel’s general-equilibrium analyses endured the foundering of the Fisherian quantity theory and the Stockholm School’s monetary “sequence analysis,” respectively. No, causal-realistic price theory, the quintessence of Austrian economics, was not suddenly undone in its prime by the thunderous eruption of Keynesian macroeconomics in the mid-1930s in Great Britain. Rather, abandoned by almost all of its defenders while still in an immature state, it had begun to be silently usurped by a rival approach many years before in the land of its birth. Returning to Mises’s achievement, the writing of Nationalökonomie, then, was a profoundly lonely venture. By the late 1930s, Mises could count on no intellectual allies in his solitary quest to revive and perfect the Mengerian tradition. As Hayek approvingly noted, the Austrian School of economics was virtually a closed chapter in the history of economic thought as Mises toiled away in Geneva at the close of the 1930s. When the first fruits of his labors withered on the vine unattended by a world otherwise occupied, Mises persisted and delivered Human Action into a positively hostile and uncomprehending world almost a decade later. It was this great work that, however improbably, diverted the course of intellectual history by igniting the modern revival of research in the Mengerian paradigm that started in the early 1960s and has continued to flourish down to the present day. But an account of this chapter of the history of the Austrian School has yet to be written.
7784	dbpedia	3	6	https://www.huffpost.com/entry/keynes-hayek-eternal-truths_b_2294476	en	Keynes, Hayek and the Eternal Truths	https://img.huffingtonpo…jpg?ops=1200_630	https://img.huffingtonpo…jpg?ops=1200_630	[ "https://img.huffingtonpost.com/asset/5bb2e0952000003000000f88.jpeg?ops=scalefit_720_noupscale", "https://sb.scorecardresearch.com/p?c1=2&c2=6723616&c3=&c4=&c5=&c6=&c15=&cj=1" ]	[]	[]	[ "Business", "Friedrich Hayek", "Paul Krugman", "John Maynard Keynes" ]	null	[ "Robert Teitelman" ]	2012-12-14T16:21:39+00:00	Keynes, Hayek and the Eternal Truths	en	/favicon.ico	HuffPost	https://www.huffpost.com/entry/keynes-hayek-eternal-truths_b_2294476	Over the past year, we've seen a lot of commentary about John Maynard Keynes, Friedrich Hayek, their relationship, their debates, their various ideas and, of course, the movements that sprang up around them, not to say the policies all this engendered. I recently wrote several pieces, here and here, about Angus Burgin's historical study (The Great Persuasion: Reinventing Free Markets since the Depression) of the rise of the conservative, free-market, laissez-faire or neoliberal movement -- pick your phraseology -- from the '30s to the present, with Hayek and his book, The Road to Serfdom, at the center. Nicholas Wapshott published Keynes Hayek: The Clash That Defined Modern Economics earlier in the year, and a variety of Keynesian economists, from Paul Krugman (The Return of Depression Economics and the Crisis of 2008 to End This Depression Now!) to Lance Taylor (Maynard's Revenge: The Collapse of Free Market Macroeconomics) have used Keynes to hammer current free-market policies, from austerity to the efficient market hypothesis. Meanwhile, Keynes' biographer, Robert Skidelsky, continues to write about him and his ideas (How Much is Enough: Money and the Good Life, with his son Edward) and critics from the right continue to portray him as the closest thing to the antichrist this side of, well, Krugman. Advertisement So who's right in the popular dichotomy, Keynes or Hayek? My answer, apparently very unsatisfying to many, is both and neither. (Burgin has also been carped at on this question as to right or wrong, though he has a good excuse: He was writing history, not parsing economics.) Both Keynes and Hayek wrote a vast amount over two long careers. Folks still argue about how to read their two seminal works, Keynes' The General Theory of Employment, Interest and Money and Hayek's The Road to Serfdom. The General Theory attempts to capture complex economic concepts through language and is often murky or ambiguous; Keynes himself believed deeply in ambiguity as a condition of the world and of ideas. There's a good case to be made that Keynes would not have agreed with much that was done in his name, notably the mathematization of his ideas by the likes of John Hicks and Paul Samuelson and the Keynesians. Krugman, in a speech at Cambridge celebrating the 75th anniversary of The General Theory last year, admitted that Keynes argued for the radical uncertainty of markets in the famous Chapter 12 of The General Theory, which would seem to contradict the argument Keynes made in Part 1 involving "quasi-equilibrium" models. Krugman defends those models, which he admits were probably not close to Keynes' deepest personal belief (that would have been uncertainty, which undercuts equilibrium). He then tries to square this particular circle by saying that equilibrium -- and the models and math that go with it -- are useful "intuition pumps" for economists to go beyond "word play and prejudice" to new insights. "The trick always," he writes, "is not to take your equilibrium too seriously, to understand that they're aids to insight not Truths." And so the debate about the authentic Keynes rattles onward. As for Hayek, Burgin makes it clear how taken aback he was by the reaction to 1944's The Road to Serfdom, which sold more briskly than he expected, particularly in the United States. In the U.S., the book was quickly abridged in Reader's Digest, which then provided reprints through the Book-of-the-Month Club. All this gave it a far broader, and a far more ideological, readership in America. (Look magazine published a cartoon version and King Features distributed even more of the condensed version.) This certainly spurred Hayek's career as a public lecturer, but made him uneasy as well. Burgin wrote: "As he repeatedly observed, the message did not always align with its depiction in the hands of its advocates. In particular, he grew frustrated at a tendency among his more reactionary readers to disregard all his caveats and qualifications in order to represent the text as a return to laissez faire." As Burgin notes, the Reader's Digest version was a "re-creation" of the text by Max Eastman and the editor DeWitt Wallace. Both were staunch anti-communists and many of Hayek's qualifications were dropped. As he concludes, "No author can control readers' interpretation of his or her published texts, but Hayek lost control over the words themselves." Advertisement In fact, Keynes and Hayek were closer intellectually than one might think, particularly on the issue of government intervention: "At a number of points in the book Hayek explicitly condoned a vigorous role for the state. He informed his readers that responsible governments could limit the fluctuations of the business cycle through monetary and perhaps even fiscal policy. They could provide those items, like transportation infrastructure, that the price system failed to allocate efficiently. They could maintain quite strict regulations against certain business practices by limiting working hours, requiring sanitary arrangements..." Keynes himself wrote to Hayek not long before his death in 1946 that he found himself "in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement." Just as many readers of The General Theory found vague and contradictory passages, so too did readers of The Road to Serfdom. What's the point of all this? Unlike Krugman, and admittedly lacking his deep technical knowledge, I'm more of a Chapter 12 guy, and thus constitutionally against the belief that any economic doctrine, whether from Vienna, the fens of Cambridge or the South Side of Chicago, has much validity beyond its own era and its own particular circumstances. For confirmation of that point one can turn to Keynes himself. Keynes made a number of powerful points about conditions that existed in the '30s and in the post-2008 period. Hayek also made important points about tendencies -- not inevitabilities -- of a collectivist approach, however defined (and he was vague), to lead to totalitarianism, a variant, one might add, to Max Weber's notion of bureaucracies' bias toward growth. But neither man was offering up absolute policies for all times and places; and both knew it. Krugman actually veers quite closely to that sense of contingency in his Cambridge speech when, after enumerating a few of the deficiencies of The General Theory, he turns and asks why we continually seem to be making the same mistakes of the '30s all over again. His answer, in part, involves what he calls "intellectual, political and financial instability." Intellectually, economists following Samuelson tended over time to blur microeconomics and macroeconomics -- so-called microfoundations. This was an intellectual category error shared by Keynesians and free-market economists. Politically, Krugman posits a mechanical monetarism (Milton Friedman's contribution) that was replaced by the "cult of the independent central bank," embodied by Alan Greenspan, which worked for awhile, until it too failed in 2008. And financially, the Great Moderation plus deregulation produced the situation Hyman Minsky foresaw so clearly of good times producing too much leverage and risk-taking. Economics has strict limits; it can't speak to matters of faith, metaphysics or Platonic absolutes. That's another category error. Whether you accept Krugman's analysis or not, he's clearly applying Keynes' most profound philosophical contribution to economics, the manifestations of radical uncertainty, in the form of these instabilities -- that is, Chapter 12. (Krugman also suggests inadvertently why the intuition pump of equilibrium has to be handled so gingerly; it's so very easy to mistake appealing theoretical ideals for quotidian reality.) That said, one is left leaning for guidance not on the technical brilliance of Keynes and Hayek, but on a handful of ideas about how the world operates that reside in "wordplay and prejudice" and methodology and that are invariably the first things disciples drop when they set about creating a movement. That's what lasts. The rest is mere empiricism.
7784	dbpedia	3	73	https://www.linkedin.com/posts/bschutt_brian-schutt-revisiting-fa-hayeks-prize-activity-7195796938221387777-VWTZ	en	Brian Schutt on LinkedIn: Brian Schutt: Revisiting F.A. Hayek’s prize speech 50 years later	https://media.licdn.com/dms/image/sync/v2/D4E27AQFlsCChCEEcaQ/articleshare-shrink_800/articleshare-shrink_800/0/1721687475531?e=2147483647&v=beta&t=FUHcmEhur4i1Z4CLKI0NlUfTFvvJnqX5-QUw3I-bmg4	https://media.licdn.com/dms/image/sync/v2/D4E27AQFlsCChCEEcaQ/articleshare-shrink_800/articleshare-shrink_800/0/1721687475531?e=2147483647&v=beta&t=FUHcmEhur4i1Z4CLKI0NlUfTFvvJnqX5-QUw3I-bmg4	[ "https://media.licdn.com/dms/image/v2/C4E16AQHWIFCywYhIMA/profile-displaybackgroundimage-shrink_200_800/profile-displaybackgroundimage-shrink_200_800/0/1517664972052?e=2147483647&v=beta&t=Ssy76uTNJnwwQo2KrvFqQ-BzqbtwW7CI2Um7qOvbj3k" ]	[]	[]	[ "" ]	null	[ "Brian Schutt" ]	2024-05-13T14:48:01.488000+00:00	The economist F.A. Hayek won the Nobel Prize 50 years ago. His speech, a caution against the centralization of power to "experts" is more relevant today than…	en	https://static.licdn.com/aero-v1/sc/h/al2o9zrvru7aqj8e1x2rzsrca		https://www.linkedin.com/posts/bschutt_brian-schutt-revisiting-fa-hayeks-prize-activity-7195796938221387777-VWTZ	Important works of F.A. Hayek (in ranking order) 1. Economics and Knowledge 2. The Constitution of Liberty 3. The Theory of Complex Phenomenona 4. The Use of Knowledge in Society 5. The Road to Serfdom 6. The Fatal Conceit 7. The Pretense of Knowledge 8. Competition as Discovery Procedure 9. The Sensory Order 10. The Counter Revolution of Science 11. The Denationalization of Money Others • The Pure Theory of Capital • Monetary Theory and Trade Cycle • Prices and Production • Monetary Nationalism I have read 8/11 out of that list only though. There can be some changes made in the list probably. The works from the list range from Economics to Political Science to Psychology (and Cognitive Neuroscience) to Jurisprudence to Philosophy of Science to Social Philosophy. Hayek can be claimed as the greatest polymath in last two centuries (or further). He's probably the greatest economist ever who went on to inspire several economists and Nobel Laureates like John Hicks, Milton Friedman, James M. Buchanan, Ronald Coase, Vernon L. Smith, Amartya Sen, Elinor Ostrom etc. and himself won Nobel Prize in 1974. An underrated but very essential figure of social science. Friedrich von August Hayek! Today we launch The Center's LinkedIn site with our first press release announcing the launch of a new book series (De Gruyter Series in Oligarchs and Oligarchies) with our friends and colleagues at De Gruyter Business & Economics De Gruyter Brill. Shortly, we will be sharing a multi-disciplinary Request for Proposals for this series. Stay tuned! We are also pleased to announce that we have signed a contract for the first book in that series: The Oligarchs of the Americas--The Journey Through Uncertainty. Our Executive Director Valentina Rodríguez is the lead author, and our Executive Chair David Lingelbach the second author. This book continues the intellectual journey that began with #oligarchsgrip with a deep dive into the Western Hemisphere--the world's most oligarch-intensive region over more than 500 years--and its #oligarchs. From conquistadores to tech bros, the oligarchs of the Americas have played a central role in shaping this phenomenon. Facultad de Ciencias Económicas UNAL Bogotá Universidad Nacional de Colombia University of Baltimore Merrick School of Business University of Baltimore University of Exeter Business School University of Exeter Massachusetts Institute of Technology MIT Political Science MIT Department of Economics https://lnkd.in/d4TJgkrN Whenever I look at books starting with their names as "General Theory", one thing that strikes my mind is that these books have caused significant disruptions in society. These books have left indelible marks not just on academia but beyond it. A few such books are as follows: 1. "The General Theory of Relativity" - Albert Einstein's groundbreaking work, published in 1915, revolutionized our understanding of gravity by providing a new framework for describing the gravitational force as the curvature of spacetime, leading to predictions such as the bending of light around massive objects and the existence of black holes. 2. "The General Theory of Employment, Interest and Money" - This seminal work by John Maynard Keynes, published in 1936, revolutionized economic thought by challenging classical economic ideas and introducing the concepts of aggregate demand, effective demand, and the role of government intervention in managing economic downturns. 3. "General Theory of Law and State" - This seminal work by Hans Kelsen, first published in 1945, presents his influential theory of law, which emphasizes the hierarchical structure of legal systems and the primacy of basic norms as the foundation of legal validity. P.S- In the pic, Einstein, Keynes, and Kelsen respectively. #thoughts #history #books #ideas #physics #economics #law My first book is officially out today! And it's FREE for anyone who'd like to read it here: https://lnkd.in/da3kheMx So please pass it on to anyone with an interest in the future of humanity (hopefully that's you too!) Physical copies are also available here: https://lnkd.in/dEw4NAJ3 And here's some nice words that very clever people have said about it: “A uniquely rich and thoughtful account of one of the most destructive ideologies of our time. This is a book for anyone who wants a clearsighted view of the current political moment.” Alice Crary, University of Oxford "Erudite and thorough - the most rational discussion of Transhumanism to date. No less than a seminal intervention in the field." Jonathan Hay, University of Chester, University of Chester “Thomas does a brilliant job of criticizing transhumanist thought...This full-length book is incredibly well researched and a timely addition to the current discourse.” Richard Lewis, University of Washington Bothell "This is a brilliant, timely, and important contribution...A must-read for anyone interested in the future of humanity and how this future could go terribly wrong." Émile P. Torres, Case Western Reserve University “At the edge of academic debates, an increasingly powerful position has developed: transhumanism. Thomas exposes its celebratory take on capitalism, data and technology, and its false solutions to contemporary dilemmas. A much-needed guide.” Nick Couldry, London School of Economics and Political Science I am delighted to announce that my research paper, "BRIDGING THE GAP: INTEGRATING PHILOSOPHICAL FOUNDATION INTO ECONOMIC POLICY" has been accepted for presentation at the 4th International Conference on Contemporary Problems of Law & Economics. The conference, organized by the Center for American and European Studies in collaboration with various universities worldwide, will feature my presentation at 9:30 on 6th July. Paper Overview: My paper, delves into the fundamental concept of law in philosophical thought, drawing inspiration from the seminal works of Friedrich Hegel and Hayek. I contend that the shortcomings of macroeconomic policies in achieving market equilibrium stem from inherent loopholes, and that a paradigm shift towards micro-data-driven policies is essential. By analyzing a decade's worth of research data (2010-2020), I reveal a striking trend of economic research prioritizing macroeconomic models at the expense of micro-level dynamics, neglecting the very variables that hold the key to true market understanding and equilibrium. Through this research, I aim to bridge the gap between philosophical foundations and economic practice, offering a novel perspective on the intricate relationship between law, philosophy, and economics Professionally mourning Nobel Prize winner Prof. Robert Solow... since Sunday morning, the day I found out about his passing, also the day I learned who he was. A month after the fact, from a two weeks old issue of "The Economist" (I was the last one at the breakfast table)... The "0 to 60mph in less than 3 seconds" standard of the industry had nothing on the sudden deceleration of my dreams. Now, explaining through rolling tears to the standbyer husband how my dreams could have been related (at all, leave alone on that level) to a person whose life The Economist unveiled to me in tandem with his passing proved challenging. It had to do with Prof. Solow clearly being the philosopher-king (as portrayed by The Economist: knife-sharp philosophical levels of knowledge, the Occam's razor type—"he liked formal models and mathematics. But nothing too fancy", no “over-refinement”), a double-edged sword with the practical edge sharp enough to cut through the web of political power. He is portrayed as a man whose pursuit of knowledge and social virtue was immune to the allure of personal gain and corruption (while serving in wwii “He declined to become an officer so that he would not have to boss anyone around," accepting a job at MIT but asking "what the lowest-paid professor earned, and accepted the same"). Uniquely able to apply his knowledge for the good of the state through the new Institute for Equitable Growth... that is literally the definition of the philosopher-king, isn't it? So here I am, midweek, still feeling bereft of "my chance," which “chance” thoroughly amused the bystander. Because, with zero formal econ education, I cried my lost chance to pitch to this philosopher-king who, (in the said professional dreams) would have totally listened to my framework and mathematical formulae for swiftly modeling growth and wealth distribution through the layers of the socioeconomic stackup. But I know he would have because he always "made time for students" and had deep sympathy for the "foreman on the factory floor"—because he seemed to have truly valued practical insights from unexpected sources…it might have come to nothing, of course, but I could have at least thoroughly amused him. 🚗💨😢 #Solow, #TheEconomist, #WealthDistributionJourney Dear colleagues, Abstracts are invited for an edited collection of scholarly papers that utilize the afterlife and death (in general) as hermeneutical tools to understand our world today. The volume discusses that, if philosophy (as a way of life) has always been a means to deal with death, then also death (and its places) can tell us quite a lot about philosophy and, more in general, our way of life. For example, authors and critical thinkers like Giorgio Agamben, Hannah Arendt, Pascal Bruckner, Albert Camus, David Graeber, Jean-Paul Sartre, Wolfgang Streeck, just to name a few, all have used the afterlife and death as a hermeneutical tool to read aspects of their/our time (e.g. internment camps, social cohabitation, labour market, capitalism, etc.). I have dedicated two volumes to this hermeneutical reflectiveness of death and the afterlife (Limbo Reapplied [2018] and The Mirror of Death [2024]), but so much more can and should be said about it. Besides new or alternate readings of the authors and phenomena mentioned above, topics like Climate Change, Growing Old/Up (adults/children), Immigration, Integration, Pandemics (COVID-19 and others), Rise of Substance Abuse, Social Cohesion, Victimization, Wokeism, etc., all seem open to a similar hermeneutical reading with all the consequences that this involves. As such, I invite serious philosophical thought on this hermeneutics; wherein a diversity of views, direction, methodologies, approaches, etc. are strongly encouraged. Papers can come from the fields of Philosophy (so-called ‘Continental’ and ‘Analytical’), Theology, and from Literature and are not limited historically (the sources from which a text takes its original inspiration can be ancient, medieval, or contemporary). Papers should be the length of a typical journal article or book chapter. Both Rowman & Littlefield Publishers and Lexington Books have expressed interest. - Submit abstracts of no more than 600 words to: [email protected] - Abstracts due: September 1, 2024 - Notification of accepted abstracts: October 1, 2024 - First drafts of article-length/book chapter-length papers due: May 1, 2025 (date is flexible) Thank you for your consideration. Kristof K.P. Vanhoutte
7784	dbpedia	0	26	https://ideasofeconomists.com/2022/04/02/john-richard-hicks-1904-1989/	en	John Richard Hicks (1904–1989)	https://ideasofeconomist…rait-cropped.jpg	https://ideasofeconomist…rait-cropped.jpg	[ "https://ideasofeconomists.com/wp-content/uploads/2012/02/young-keynes.jpg?w=105", "https://ideasofeconomists.com/wp-content/uploads/2018/07/hicks-portrait-cropped.jpg?w=816", "https://2.gravatar.com/avatar/21eb726062467bba6e2e0b2642608a1f15bc09e3da7b2ef2979a07598dc665d6?s=100&d=identicon&r=G", "https://ideasofeconomists.files.wordpress.com/2012/02/young-keynes.jpg?w=300", "https://secure.gravatar.com/blavatar/0adb746104000d71bbe8eb24a219a81cb107fbd3db2209494d4b68f5d37c965f?s=50&d=https%3A%2F%2Fs2.wp.com%2Fi%2Flogo%2Fwpcom-gray-white.png", "https://secure.gravatar.com/blavatar/0adb746104000d71bbe8eb24a219a81cb107fbd3db2209494d4b68f5d37c965f?s=50&d=https%3A%2F%2Fs2.wp.com%2Fi%2Flogo%2Fwpcom-gray-white.png", "https://pixel.wp.com/b.gif?v=noscript" ]	[]	[]	[ "" ]	null	[ "George Alogoskoufis" ]	2022-04-02T00:00:00	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…	en	https://secure.gravatar.com/blavatar/0adb746104000d71bbe8eb24a219a81cb107fbd3db2209494d4b68f5d37c965f?s=32	The Ideas of Economists	https://ideasofeconomists.com/2022/04/02/john-richard-hicks-1904-1989/	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
7784	dbpedia	3	24	https://www.elgaronline.com/display/nlm-book/9781849801720/h1-sec7.xml	en	Hayek, Friedrich A. von	https://www.elgaronline.…801720_cover.jpg	https://www.elgaronline.…801720_cover.jpg	[ "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-mobile.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-mobile.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/coverimage?doc=%2Fnlm-book%2F9781849801720%2F9781849801720.xml&width=200", "https://www.elgaronline.com/fileasset/footer/Elgaronlinepublishing-footer.png" ]	[]	[]	[ "" ]	null	[]	2013-01-01T00:00:00	"Hayek, Friedrich A. von" published on 01 Jan 2013 by Edward Elgar Publishing Limited.	en	/fileasset/fileasset/assets/favicon.ico	Elgar Online: The online content platform for Edward Elgar Publishing	https://www.elgaronline.com/display/nlm-book/9781849801720/h1-sec7.xml	You are not authenticated to view the full text of this chapter or article. Access options Get access to the full article by using one of the access options below.
7784	dbpedia	0	71	https://samplecontents.library.ph/wikipedia/wp/j/John_Maynard_Keynes.htm	en	John Maynard Keynes			[ "https://samplecontents.library.ph/wikipedia/checked-content.png", "https://samplecontents.library.ph/wikipedia/images/2635/263512.jpg", "https://samplecontents.library.ph/wikipedia/images/1491/149150.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2539/253983.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2619/261908.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2635/263513.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2454/245452.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2635/263514.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2635/263520.png", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2635/263524.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/1715/171559.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/images/2635/263532.jpg", "https://samplecontents.library.ph/wikipedia/images/1x1white.gif", "https://samplecontents.library.ph/wikipedia/schools-wikipedia-logo.png" ]	[]	[]	[ "" ]	null	[ "SOS Children" ]	null	Find out about John Maynard Keynes on the Wikipedia for Schools from SOS Children	en			http://schools-wikipedia.org/wp/j/John_Maynard_Keynes.htm	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.
7784	dbpedia	2	13	https://www.sothebys.com/en/articles/this-is-what-we-believe-margaret-thatcher-and-f-a-hayek	en	The Man Whose Powerful Critique of Socialism Influenced Margaret Thatcher	https://sothebys-com.bri…ne-hayek-coh.jpg	https://sothebys-com.bri…ne-hayek-coh.jpg	[ "https://sothebys-com.brightspotcdn.com/dims4/default/a38eeb8/2147483647/strip/true/crop/6340x4916+0+0/resize/343x266!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2F95%2F34%2Ff14d01cf4324890c25081edc4ff5%2Fhayek-british-l19409-b4zky-2.jpg 343w,https://sothebys-com.brightspotcdn.com/dims4/default/b5efd90/2147483647/strip/true/crop/6340x4916+0+0/resize/548x425!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2F95%2F34%2Ff14d01cf4324890c25081edc4ff5%2Fhayek-british-l19409-b4zky-2.jpg 548w,https://sothebys-com.brightspotcdn.com/dims4/default/7642f79/2147483647/strip/true/crop/6340x4916+0+0/resize/684x530!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2F95%2F34%2Ff14d01cf4324890c25081edc4ff5%2Fhayek-british-l19409-b4zky-2.jpg 684w", "https://sothebys-com.brightspotcdn.com/dims4/default/a3523bc/2147483647/strip/true/crop/2400x1600+0+0/resize/343x229!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2F10%2Fb8%2F56e349bb4ca09f13440447ef3ccd%2Fhayek-online-thatcher-visiting-iea.jpg 343w,https://sothebys-com.brightspotcdn.com/dims4/default/0647a12/2147483647/strip/true/crop/2400x1600+0+0/resize/548x365!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2F10%2Fb8%2F56e349bb4ca09f13440447ef3ccd%2Fhayek-online-thatcher-visiting-iea.jpg 548w,https://sothebys-com.brightspotcdn.com/dims4/default/1bb5e00/2147483647/strip/true/crop/2400x1600+0+0/resize/684x456!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2F10%2Fb8%2F56e349bb4ca09f13440447ef3ccd%2Fhayek-online-thatcher-visiting-iea.jpg 684w", "https://sothebys-com.brightspotcdn.com/dims4/default/786f3c6/2147483647/strip/true/crop/4147x5126+663+932/resize/343x424!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fe9%2Fa5%2F6983d1f64f098627b4b644025fe0%2Fhayek-british-l19409-b4zks-1.jpg 343w,https://sothebys-com.brightspotcdn.com/dims4/default/ba1643c/2147483647/strip/true/crop/4147x5126+663+932/resize/548x678!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fe9%2Fa5%2F6983d1f64f098627b4b644025fe0%2Fhayek-british-l19409-b4zks-1.jpg 548w,https://sothebys-com.brightspotcdn.com/dims4/default/2d79892/2147483647/strip/true/crop/4147x5126+663+932/resize/684x846!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fe9%2Fa5%2F6983d1f64f098627b4b644025fe0%2Fhayek-british-l19409-b4zks-1.jpg 684w", "https://sothebys-com.brightspotcdn.com/dims4/default/fb12a05/2147483647/strip/true/crop/10740x7716+0+0/resize/343x246!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fa2%2F05%2F0e2573f341eaae2701d1779ac696%2Fhayek-british-l19409-b4yt4-side-by-side.jpg 343w,https://sothebys-com.brightspotcdn.com/dims4/default/3d8b6b4/2147483647/strip/true/crop/10740x7716+0+0/resize/548x393!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fa2%2F05%2F0e2573f341eaae2701d1779ac696%2Fhayek-british-l19409-b4yt4-side-by-side.jpg 548w,https://sothebys-com.brightspotcdn.com/dims4/default/f8b2054/2147483647/strip/true/crop/10740x7716+0+0/resize/684x491!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fa2%2F05%2F0e2573f341eaae2701d1779ac696%2Fhayek-british-l19409-b4yt4-side-by-side.jpg 684w", "https://sothebys-com.brightspotcdn.com/dims4/default/7c8385d/2147483647/strip/true/crop/7237x4435+610+0/resize/328x201!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fc1%2F26%2F22775f78420489946d29f078702b%2Fhayek-l19409-group-8.jpg 328w", "https://sothebys-com.brightspotcdn.com/dims4/default/629363f/2147483647/strip/true/crop/4435x4435+2011+0/resize/76x76!/quality/90/?url=http%3A%2F%2Fsothebys-brightspot.s3.amazonaws.com%2Fdotcom%2Fc1%2F26%2F22775f78420489946d29f078702b%2Fhayek-l19409-group-8.jpg 76w" ]	[]	[]	[ "" ]	null	[ "Sotheby's" ]	2019-03-12T16:51:05.391000+00:00	Sotheby's upcoming online auction, Friedrich von Hayek: His Nobel Prize and Family Collection from 8–19 March, features selected awards, photographs and personal effects of one of the 20th century's most influential economists.	en	/apple-touch-icon.png	Sothebys.com	https://www.sothebys.com/en/articles/this-is-what-we-believe-margaret-thatcher-and-f-a-hayek	I n 1931 Friedrich von Hayek was asked to join the faculty of the London School of Economics. At this point Hayek had a reputation as an economic theorist of formidable insight and rigour. His penetrating work on the business cycle brought him into conflict with John Maynard Keynes – the leading economist in Britain and perhaps the world – over the appropriate fiscal and monetary responses to the depression. The move to the LSE proved to be of great personal importance. “I fell in love with England when I first went to Cambridge in January, 1931. Emotionally and intellectually it was my climate and it still is.” (interview with The Times, 1985). In 1938 – following the absorption of Austria into the Nazi Reich – Hayek and his family became naturalised citizens of Britain, and Hayek retained his British citizenship for the rest of his life. It was a very particular vision of Britain that attracted Hayek: “of all the forms of life, that at one of the colleges of the old universities […] still seems to be the most attractive” (Hayek on Hayek, p.98). It was a world in which, at its best, intellectual disagreements went hand in hand with collegiality. When the LSE moved to Cambridge at the outbreak of World War II it was, of all people, Keynes who found rooms for Hayek at King’s College. The two men shared fire-watching duties on the roof of King’s Chapel, and Hayek later said that “the evenings at High Table and the Combination Room at King’s are among the pleasantest recollections of my life.” Hayek’s tenure at the LSE saw the publication of his seminal work, The Road to Serfdom. The book, published by Routledge in 1944, was a warning that central planning posed a threat to freedom, and was specifically written to address a British readership at a time when there was growing pressure for a welfare state to be developed in the UK after the war. Although the work was widely read, Hayek remained a relatively marginal figure in the UK until 1975 when Margaret Thatcher was elected leader of the Conservative Party. Soon after her election Thatcher met Hayek at The Institute of Economic affairs. Ralph Harris explained "although she is known as being a rather overpowering lady she sat down like a meek schoolgirl and listened." Throughout her political career Thatcher was a fierce advocate of free-market libertarianism. There is a famous anecdote that during a Conservative Party policy meeting, Thatcher removed her copy of Hayek’s Constitution of Liberty from her handbag, slammed it down on the table and declared, “This is what we believe.” The impact that Hayek’s writing had on Thatcher, her advisors, and her policies is undeniable. Thatcher herself wrote: “the most powerful critique of socialist planning and the socialist state which I read at this time and to which I have returned so often since [is] F.A. Hayek's The Road to Serfdom." Hayek himself returned kind words back to the PM, not only in their private correspondence, but publicly in many letters to newspapers. In a letter to The Times in 1982 he wrote: “It is Mrs Thatcher’s great merit that she has broken the Keynesian immorality of ‘in the long run we are all dead’ and to have concentrated on the long run future of the country irrespective of possible effects on the electors…Mrs Thatcher’s courage makes her put the long run future of the country first.” In the early 1983, Thatcher wrote to Hayek to let him know that he she would like to put his name forward for the Order of the Companion of Honours. The Order of the Companions of Honour was founded in 1917 by King George V which is “awarded for having a major contribution to the arts, science, medicine or government lasting over a long period of time”. The number of Companions of Honour is limited to 65 members. Hayek was appointed a Companion of Honour in the 1984 Birthday honours for “services to the study of Economics”. The appointment was a 20-minute audience with the Queen followed by dinner at the Institute of Economic Affairs. That evening, after the festivities, Hayek is reported to have said “I’ve just had the happiest day of my life” Throughout her career Thatcher constantly returned to her favourite economist. A decade after Hayek’s death, she was awarded the Internationaler Preis der Friedrich-August-von-Hayek-Stiftung prize. Her acceptance speech concluded “Hayek is, therefore, the prophet not of doom and disaster, but of peace and plenty. His is a voice of wisdom for our time, and for all time. We should listen to him.”
7784	dbpedia	2	44	https://www.famousphilosophers.org/friedrich-hayek/	en	Biography, Philosophy and Facts	https://www.famousphilosophers.org/wp-content/themes/eleven40/images/favicon.ico	https://www.famousphilosophers.org/wp-content/themes/eleven40/images/favicon.ico	[ "https://www.famousphilosophers.org/philosophers/friedrich-hayek.jpg", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320553&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320553", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226315398&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226315398", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320669&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320669", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320618&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320618", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320936&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320936", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320847&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320847", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320839&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320839", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320863&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320863", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320944&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320944", "https://ws.assoc-amazon.com/widgets/q?_encoding=UTF8&Format=_SL160_&ASIN=0226320901&MarketPlace=US&ID=AsinImage&WS=1&tag=famousphilosophers-20&ServiceVersion=20070822", "https://www.assoc-amazon.com/e/ir?t=famousphilosophers-20&l=as2&o=1&a=0226320901" ]	[]	[]	[ "" ]	null	[]	2012-02-24T18:18:39+00:00	Friedrich Hayek Biography - Friedrich Hayek, a renowned Austrian-British philosopher and economist, was born on May 8, 1899 as Friedrich August von Hayek, in Vienna, Austria. Hayek	en	https://www.famousphilosophers.org/wp-content/themes/eleven40/images/favicon.ico		https://www.famousphilosophers.org/friedrich-hayek/	Friedrich Hayek, a renowned Austrian-British philosopher and economist, was born on May 8, 1899 as Friedrich August von Hayek, in Vienna, Austria. Hayek hailed from an affluent and noble family, his father, August von Hayek was a famous botanist and renowned physician. Hayek’s upbringing was extremely educational and scholarly, his father encouraged him to study the works of influential philosophers including Hugo de Vries and Ludwig Feuerbach. During high school, Hayek came under the influence of the lecturers he attended on Aristotle’s ethics. In 1917, he had to discontinue his studies as he was called to serve the Austro-Hungarian army at the Italian border, as a part of an artillery regiment. Following the war, Hayek devoted his time to pursue his education and to analyse the events that led to the outbreak of the WWI. Hayek was a remarkable student, he enrolled at the University of Vienna and extensively studied philosophy, psychology and economics. He earned his doctorates in law and political science. When the University of Vienna was briefly shut down, Hayek attended the Constantin von Monakow’s Institute of Brain Anatomy and spent his time Manakow’s laboratory. His explorations on brain cells and the work of Ernst Mach influenced him to make his first academic contribution, ‘The Sensory Order’, which was published later in 1952. Upon reading ‘Socialism’ by Ludwig von Mises, Hayek became very influenced by the teachings of the philosopher and began attending the private seminars of Ludwig von Mises. Ludwig soon became his mentor, and helped to promote his career. Hayek was a regular attendant at the biweekly seminar hoster by Ludwig, and he qualified for the Habilitation exam, which proved his intellectual abilities capable of being a university teacher. Friedrich Hayek was employed by the Austrian government to work as an expert on drafting the legal and economic details of the Saint Germain. He was also appointed as the director of the recently founded Austrian Institute for Business Cycle Research. In 1929, Hayek published his first book, ‘Monetary Theory and the Trade Cycle’. In 1931, he was invited to deliver four lectures on monetary economics at the prestigious institute, London School of Economics and Political Science. In England, Hayek also participated in a debate with renowned economist, Keynes, on their specific theories on the role and impacts of currency on a developed economy. Hayek has been one of Keynes most prominent critics, in his books, ‘Prices and Production’ published in 1931 and ‘The Pure Theory of Capital’, he strongly opposed Keynes models of economic thought, however, his publications did not enjoy the same popularity as Keynes’. In 1950, Hayek secured a position of professor in the Committee on Social Thought at the University of Chicago. He spent the next 12 years in Chicago, and during this period he published and wrote several works on the philosophy of science, political philosophy and economics. He published a book on political philosophy, ‘The Constitution of Liberty’ in 1960, and later, ‘The Creative Powers of a free Civilization’. In 1962, he moved to West Germany, upon accepting a position at the University of Freiburg in Breisgau. He served there for the next 8 years, until his retirement in 1968. Meanwhile, he also served as an honorary professor at the University of Salzburg, in Austria. In 1977, Hayek returned to Freiburg and finished his book, ‘Law, Legislation and Liberty’, which was a critical analysis of the redistribution of income under the farce of social justice. The book was issued in three volumes. In the 1980’s Hayek began composing his last critic of socialism, however, due to his failing health, he had to avail the assistance of philosopher William W. Bartley in editing his last work, ‘The Fatal Conceit: The Errors of Socialism’, which was published in 1988. Friedrich Hayek’s academic contributions to the fields of economics, psychology and political philosophy were awarded by a Nobel Prize in 1974. He died on March 23, 1922, in Freiburg, Germany. Buy books by Friedrich Hayek
7784	dbpedia	2	52	https://www.oxfordreference.com/display/10.1093/oi/authority.20110803095925629	en	Friedrich August von Hayek	https://www.oxfordrefere…780199264797.jpg	https://www.oxfordrefere…780199264797.jpg	[ "https://ouptag.scholarlyiq.com/ntpagetag.gif?js=0" ]	[]	[]	[ "" ]	null	[]	null	"Friedrich August von Hayek" published on by null.	en	/assets/ctx/6ab902f7/favicon.ico	Oxford Reference	https://www.oxfordreference.com/display/10.1093/oi/authority.20110803095925629	(1899–1992) Austrian-born British economist whose free-market theories influenced a political generation and earned him a share in the Nobel Prize for Economics in 1974. Friedrich Hayek, a product of the anti-Marxist Austrian School of liberal economics, became a civil servant before being appointed director of the Austrian Institute for Economic Research (1926). He then taught successively at the universities of Vienna (1929–31), London (1931–50), Chicago (1950–62), and Freiburg (1962–70), becoming a naturalized British subject in 1938. He specialized in the history of economic thought, the broad pattern of his work evolving from a preoccupation with monetary theory to a much more philosophical concern with the role of government in society. Hayek brought an historical perspective to the analysis of economic growth, summarizing his arguments against governmental interference in his widely influential book The Road to Serfdom (1944). His view was that economic freedom is inseparable from personal freedom and that state intervention, no matter how well intentioned, inevitably leads to the eventual destruction of both economic and personal freedom. The only legitimate functions of government were, therefore, ‘to provide a framework for the market and to provide services that the market cannot provide’. By the time Hayek had developed his views in The Fatal Conceit: the Errors of Socialism (1988), his doctrines were providing the ideological justification for abandoning neo-Keynesian orthodoxies in favour of the hands-off policies known as ‘Thatcherism’ and ‘Reaganomics’. Ironically, Hayek shared his Nobel Prize with the Swedish welfare economist Gunnar Myrdal, whose views were almost directly the opposite of his.
7784	dbpedia	1	4	https://osf.io/ajdnq/download/%3Fformat%3Dpdf	en	OSF			[]	[]	[]	[ "" ]	null	[]	null		en			null
7784	dbpedia	2	25	https://www.minneapolisfed.org/article/1992/hayeks-legacy-of-the-spontaneous-order	en	Hayek's Legacy of the Spontaneous Order	https://www.minneapolisf…olis-fed-key.jpg	https://www.minneapolisf…olis-fed-key.jpg	[ "https://www.minneapolisfed.org/assets/mfed-logo.svg", "https://www.minneapolisfed.org/-/media/assets/people/mpls-person-fallback-key.png", "https://www.minneapolisfed.org/-/media/assets/backgroundimages/mfed-banner-bg.jpg", "https://www.minneapolisfed.org/-/media/assets/articles/2024/non-mortgage-costs-were-40-percent-of-housing-budgets-through-2021/non-mortgage-costs-were-40-percent-of-housing-budgets-through-2021-key.jpg?w=555&hash=66BE6B565C4B8DDF9C680CA7AADE32B1", "https://www.minneapolisfed.org/-/media/assets/articles/2024/demand-for-electricity-grows-even-as-supplies-become-less-predictable/demand-for-electricity-grows-even-as-supplies-become-less-predictable-key.jpg?w=555&hash=3A46B0EA83137B112CDD4DC7CB3F2751", "https://www.minneapolisfed.org/-/media/assets/pages/regional-economic-indicators/regional-economic-indicators-key.jpg?w=555&hash=B0B00BCFECE4DF61AFB0C8CE630D2DF9", "https://www.minneapolisfed.org/-/media/assets/articles/2024/non-mortgage-costs-were-40-percent-of-housing-budgets-through-2021/non-mortgage-costs-were-40-percent-of-housing-budgets-through-2021-key.jpg?w=555&hash=66BE6B565C4B8DDF9C680CA7AADE32B1", "https://www.minneapolisfed.org/assets/mfed-logo.svg" ]	[]	[]	[ "" ]	null	[]	null	Friedrich A. Hayek, 1974 Nobel Prize winner in economics, obituary	en	/assets/apple-touch-icon.png		https://www.minneapolisfed.org/article/1992/hayeks-legacy-of-the-spontaneous-order	Friedrich A. Hayek, the 1974 Nobel Prize winner in economics, died March 23 in Freiburg, Germany. An unseemingly quiet man of 92, he was, in fact, an intellectual revolutionary who brought to economics an evolutionary theory of institutions which has shattered the static economic world forever. Moreover, his enduring ideas cross the border of economics and venture into political theory. After all, this was a man who authored more than 30 books and 150 articles on topics ranging from the methodology used in the social sciences to the foundations of constitutional democracy. As an economist, Hayek initially focused his attention on the development of capital theory, business cycle theory and the origin of money in the industrial order. But his real legacy, which has touched each of us more than we will likely ever know, centers around a rather simple notion of spontaneous order of societal development. Its implications for politics and economics are immense. Hayek borrowed the notion of spontaneous order from Adam Smith (remember "the invisible hand" of the market from Smith's Wealth of Nations) and the Scottish natural law philosophers, who argued that society developed from a spontaneous order which was the result of human action but not of human design. Hayek, expanding on arguments advanced by the Scots, wrote that society developed through tradition and reason, concurrently. Both logical and practical, everyday experience influenced man's advancement. The use of reason, however, was not limitless, being bounded by bias held by an individual or group. This meant that society was too complex to be created piece by piece in a strictly rational, logical manner. Hayek argued that those who misunderstood or disregarded the notion of spontaneous order did so because they incorrectly divided the world into two categories: "planned" (which implicitly means order and purpose) and "unplanned" (which connotes disorder, randomness and chaos). Hayek argued that society, and its most advanced institutionthe market economyfit into neither category and, therefore, belonged in a third group. Each member of this third group would be bounded by rules, have its own order and increase in complexity in a way that would not be fully understood. Hayek's best example of this third group would be our language. No single individual or group thought it up. It has its own rules of grammar, and language continues to evolve as mankind advances. Language could not be described in complete detail even if every computer was dispatched to this use. The political implications of spontaneous order theory are strikingly evident with the recent fall of the Soviet Union. In fact, Hayek's 1944 book, The Road to Serfdom, foreshadowed what we see and read about daily. No political system could assume, as fascism did on the right and communism did on the left, that men were cogs to be "fit" into the state machine. Tyranny results from government's attempts to plan the workings of daily life. The implications for the economy are even more striking. First, the very role of government economic planning comes into question, whether the issue is federal funding for highways or the use of taxes to influence investment decisions. It is only the unabashedly "free" market that can generate the signals for producers and consumers to trade. Any attempt by government to regulate prices, impose interstate or intrastate tariffs, or impose quality standards sends conflicting, inaccurate messages that have a discoordination effect in the market. This equally applies to a society like the former Soviet Union that desired complete planning or the local community housing authority that plans what type of homes will be built. Second, reliance on institutions that were created through government fiat need to be questioned and reevaluated. Hayek, for example, grew increasingly disenchanted with a central bank as the sole authority for a nation's money supply and called for competitive currencies that would eliminate monopoly control. A competitive currency would allow for all types of previously untried services for producers and consumers alike in a more uncertain environment. Monetary institutions would then evolve naturally rather than being artificially created by government. Finally, Hayek would argue that centrally directed institutions neither have the wherewithal to keep abreast of all the relevant economic conditions of "the particular time and place" and be able to fully understand the information received. This means the policymakers may not be able to know all the relevant information to make decisions or may base decisions on old data no longer applicable. Only a spontaneously created market, resulting from hundreds of millions of valuations by individuals, would ensure economic vitality. Hayek's legacy of the spontaneous order will, like its own theory, continue to evolve. It will ensure that his life continues to affect us all. David K. Rehr is vice president of government affairs for the National Beer Wholesalers Association in Washington, D.C., and is a doctoral candidate in economics from George Mason University where he studies Hayek's work.
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7784	dbpedia	2	33	https://jacobin.com/2024/05/friedrich-von-hayek-freedom-neoliberalism-democracy	en	Friedrich August von Hayek Was an Enemy of Freedom	https://images.jacobinma…60546-scaled.jpg	https://images.jacobinma…60546-scaled.jpg	[ "https://www.facebook.com/tr?id=166148367275777&ev=PageView&noscript=1", "https://images.jacobinmag.com/wp-content/uploads/2024/05/08104857/GettyImages-89860546-scaled.jpg" ]	[]	[]	[ "" ]	null	[]	null	Today marks 125 years since the birth of Austrian-British economist Friedrich August von Hayek. He theorized the need to keep the masses away from the levers of state power — and did it in the name of defending freedom.	en	/static/apple-touch-icon.png		https://jacobin.com/2024/05/friedrich-von-hayek-freedom-neoliberalism-democracy	Of all the enemies of democracy and freedom, Friedrich August von Hayek was probably the smartest. At least, he was the most influential: the structures of today’s global economy — the European Economic and Monetary Union, central banks, “balanced budget amendments” to national constitutions, and “free” trade agreements guaranteeing capital’s future profits — are essentially based on his ideas and those of his students. Margaret Thatcher is said to have once pulled Hayek’s The Constitution of Liberty out of her bag during a Conservative policy meeting and proclaimed: “This is what we believe in!” Even after fifty years of neoliberal devastation, there are still true believers. One is Javier Milei. When the son of an upwardly mobile capital entrepreneur was elected Argentina’s president in December, the Berlin-based Hayek Society awarded him its greatest prize: the Hayek Medal. The society, which has come under fire for its closeness to the far-right Alternative für Deutschland, hailed Milei’s “clear view of the power of a market economy” able to “once again lay the foundations for freedom, prosperity and social peace,” in the tradition of “Ludwig Erhard, Ronald Reagan and Margret Thatcher.” Gerd Habermann, member of the Hayek Society’s executive board and honorary professor in economics at Potsdam University, wrote upon Milei’s hundredth day in office that he sought the abolition of “the egalitarian welfare state (not just its reform) and socio-political destructionism (genderism and all that).” Milei had indeed fired up the “chain saw” just ten days into his term, as he pushed through an emergency decree: in the name of total freedom for capital, he abolished or amended workers’ rights to unionize; laws to protect against layoffs and in the workplace; price controls on electricity, health and mobility; protection of tenants against real estate corporations; and consumer protection against practices of pharmaceutical, banking, and credit card companies. All government spending has been frozen, with the exception of the military. Moreover, Milei seeks the total privatization of all state-owned companies. To implement these policies without opposition, the decree included an “enabling law” intended to give Milei quasi-dictatorial powers in key policy areas. Hayek would surely have liked all this a great deal. Writing in business daily Handelsblatt, Hayek Society chairman Stefan Kooths described Milei as a “stroke of luck for liberalism” — and hoped that he foreshadows a new wave of market fundamentalism. Hayek’s first goal was to systematically keep the people, “the big lout” (in Heinrich Heine’s words), at a distance from all the social and economic decisions affecting their own lives. His second major goal was to hand the working class over to capital utterly defenseless. He and his followers have always done this in the name of “liberty.” This word runs throughout Hayek’s work, which his student Milton Friedman called the “battle for freedom.” What is always meant, however, is the unrestricted freedom of capital, the flip side of which is wage slavery. Hayek wanted exploitation without limits. For this, he was awarded the Nobel Prize for Economics in 1974 — at a time when the profits of capital were squeezed — which, according to the conservative magazine the National Interest, made him a “cult figure of the radical right.” At that time, Hayek still had to share the prize with the left-wing Keynesian economist Gunnar Myrdal — a sign that Fordism’s crisis was an open process, with multiple ways out. Friedman’s award in 1976 later signaled the neoliberal turning point, long before Thatcher and Reagan were elected and radicalized policies already were set in place by their predecessors. Hayek hated equality. He only accepted equality before the law — a mockery when ordinary Joe is forced to sue an oligopolistic auto industry, pharmaceutical, or hospital corporation. Hayek justified the dramatic economic inequalities inherent in capitalist development — i.e. the fact described by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman that without massive redistribution, income from capital eats up income from labor — with reference to “hereditary” differences. This resonates with the assumption that the fortunes of Elon Musk, Jeff Bezos, Mark Zuckerberg, and the Quandts and Klattens are the result of personal achievement and merit. Market Radicalism Cornered In the 1930s, as a result of the capitalist crisis, mass strikes, and the bourgeoisie’s fear of communism, there was an attempt in the United States to get to grips with the glaring inequality and make the distribution of wealth and income more egalitarian again by strengthening trade union rights, introducing and expanding wealth and progressive income taxation, and expanding the public sector of the economy. President Franklin Delano Roosevelt was confronted with the failure of his predecessor Herbert Hoover’s liberal austerity policy, which had caused mass unemployment to swell to 25 percent. He now radically skimmed off all annual income over $1 million at 75 percent taxation, later reaching 91 percent. This was successfully invested in public employment programs (Works Progress Administration, Civilian Conservation Corps), the expansion of infrastructure (electrification, highways, bridges, subways, dams, and irrigation systems, etc.), nature conservation (establishment and expansion of national parks), the development of welfare state structures, and also the promotion of cultural life. If he had got his way, the tax rate would have been 100 percent. In 1936, the economist John Maynard Keynes, in his major work The General Theory of Employment, Interest and Money — on which the demand-oriented economic policy in Fordist capitalism (1933–75) was essentially based — anticipated the “euthanasia of the rentier” who lives exclusively from merit-less capital income. However, the Keynesian paradigm was replaced by Hayek’s neoliberal ideas during the crisis of Fordism in the 1970s. The fact that Keynes himself had helped Hayek to obtain a position at King’s College in London may be regarded as a staircase joke of history. Since then, the rentiers have been celebrating once again. According to the Federal Statistical Office, 1 percent of the German population now lives exclusively from capital income, i.e. from other people’s (surplus) labor, the value of which is appropriated through profits and dividends from shares in stock exchange–listed companies. Some sociologists once accused Occupy’s distinction between the bottom 99 percent and the top 1 percent of society of simplifying its concept of class. However, this distinction was actually quite close to real class relations. Either way, this is how the gigantic billion-dollar fortunes of today were created, which contrast with the relative and increasingly also absolute poverty of the population and the collapse of public infrastructure like schools, bridges, and public transit. As Piketty has shown, inequality reached the highs of 1929 again in 2007, on the eve of the global financial crisis. This was no coincidence: financial market capitalism constantly leads to financial crises because the gigantic piles of capital in search of profitable investment opportunities constantly produce new speculative bubbles. And they also cause societal crises, where politics has created new investments by privatizing public housing, health care, pension systems, education, etc. Hayek had already learned to hate politics like Roosevelt’s in social democratic “Red Vienna,” up through his early 1920s university years. In 1921, one of his professors connected him with the Austrian economist Ludwig von Mises, the author of a radical refutation of socialism called Die Gemeinwirtschaft (1922), who then became his mentor. In his 1944 work The Road to Serfdom, addressed to an Anglo-American audience in the midst of World War II, Hayek placed Roosevelt in close proximity to Hitler: one had to “state the unpalatable truth that it is Germany whose fate we are in some danger of repeating.” Certainly “the conditions in England and the United States” were different, he conceded. Perhaps he wanted to preempt skepticism as to whether the extension of the right to strike for US workers was really so similar to the annihilation of the German labor movement in the Nazi concentration camps, or if public employment programs for workers of all ethnicities were an American Auschwitz. But, according to Hayek, these differences should not obscure the realization “that we are moving in the same direction.” Hayek rightly saw market radicalism on the defensive in the 1940s. Although US big business financed the mass distribution of The Road to Serfdom, there was a tendency toward greater regulation of capitalism and more economic planning. Liberal capitalism had led to the Great Depression, the Depression to fascism and fascism to world war. Only the Soviet Union had come through the crisis well thanks to economic planning and, although it had emerged from a dependent and backward developing country, was now in the process of liberating Europe from German fascism almost single-handedly. In the United States, Roosevelt successfully pursued left-wing policies. After the war, Soviet-style socialism was extended to Eastern Europe, while a seriously left-wing Labour government came to power in Britain, and the Communists gained massive strength in France and Italy. In Germany, too, immediately after 1945, millions of people in all occupation zones flocked to the labor movement, and even backed the socialization of large-scale industry in a referendum in Hesse, which the US occupying forces blocked. Even the Christian Democratic Union (CDU) acknowledged in its Ahlen Program that the “capitalist economic system has not served the . . . interests of the German people,” which is why a “socialist economic order” beyond the “capitalist pursuit of profit and power” was needed. Counterrevolutionary In this moment, Hayek saw himself as a counterrevolutionary. His utopia lay in the past. “Manchesterian capitalism” with child labor and sixteen-hour working days was his “Paradise Lost.” Reagan once said that, if he had the chance, he would turn the wheel of history back to the nineteenth century. When he said these words, Hayek was speaking. However, paradise was lost because, as Hayek’s theoretical opponent Karl Polanyi described in his The Great Transformation, also published in 1944, the imposition of a liberal market order forces society to defend itself against the market, faced with the exploitation of nature and the “fictitious commodity” of labor. According to Polanyi, such an order could “not exist over extended periods of time without annihilating the human and natural substance of society.” Hayek observed the “Great Transformation” that took place after 1870. Its ideological reflection was the migration of the hegemony of thought from the Anglo-Saxon to the German-speaking world, which he observed and regretted: away from John Locke and Adam Smith and toward Karl Marx and Max Weber. Hayek sought a new “Great Transformation” back to the future. His work is a declaration of war on socialism. For him, however, this begins with corporate liberalism, which, out of fear of the workers’ movement, tried to curb at least the most blatant excesses of capitalism with measures such as factory inspections and the legal maximum working day. In The Road to Serfdom, Hayek called this the “slippery slope” to socialism. He dedicated his book “To the socialists of all parties.” Still, for all his nostalgia, Hayek also saw the need to modernize classical liberalism. He wanted a return to a “free economy,” as he called it, through a political system in which, according to his biographer Bruce Caldwell, “any legislation that has a specific redistribution of income as its goal would be forbidden.” He was confronted with a basic problem: how to prevent the masses from using the universal suffrage they had won to reclaim at least part of the surplus value siphoned off by capital — or even to abolish the capitalist private ownership of the means of production on which the rule of capital is based. Hayek used a sleight of hand for this. He negated the existence of classes and conceived of an abstract individual, whose — exclusively negative — freedom is based on not being controlled by the state. He thereby defined every tax policy as a deprivation of freedom. For some — because there are still calves that choose their own butchers — this negative concept of freedom still resonates today. It is the address to the adult who has remained a child, who rails against the parental expectation to wash their hands before eating so that they don’t get sick, or to help tidy their own room so that they don’t sink into chaos. At the same time, this infantile approach connects with the alienation of those isolated in capitalist competition and transfers it into the social Darwinist attitude of “every man for himself.” “Libertarians” are, according to a tweet that went viral in 2023, “like house cats: absolutely convinced of their fierce independence while utterly dependent on a system they don’t appreciate or understand.” Natural Order? In The Constitution of Liberty, Hayek propagated the “rule of law.” Unlike Marx, he does not see capital born “dripping from head to foot, from every pore, with blood and dirt.” For him, capitalism is not part of a general gradual process of revolutionarily created and transformed production relations, a transitional society that creates the conditions for a developed socialist society. Rather, he considers it a “natural” market economy. Basically, the dispute between Marxists and Polanyi on the one hand and neoliberals like Hayek on the other is also about which order is actually “unnatural”: socialism or the “free market.” Often Hayek and his disciples contradict themselves when they sometimes, as Friedman does in the introduction to the new English edition of The Road to Serfdom, describe the market as “common sense,” and at other times socialism as the natural emotional reaction to capitalism and market radicalism as highly intellectual reasoning. According to Hayek, (market) civilization has emerged from “unconscious habits” that have been transformed into “explicit and articulated statements” and have thus become increasingly “abstract and general.” Referring to Smith’s thesis of the “invisible hand,” he writes that “the spontaneous and uncontrolled efforts of individuals were capable of producing a complex order of economic activities.” A constitution should limit the state to supervising the rules of the market and protecting capitalist private property. Democracy and decisions by majorities are intrinsically disruptive in this system. Since the market tends toward a stable equilibrium — the optimal allocation of resources and self-regulation of the economy — there is no market failure. Rather, the state is the cause of all and any problems. Hayek countered the argument that the neoliberals’ utopia had been disproved by the dystopia of Manchester capitalism with the argument that nineteenth-century destitution was not in fact a consequence of liberal economic policies. It was not even genuine misery. Rather, the increased “wealth of nations” brought about by the market merely increased the prosperity expectations of the “big lout” and led to the discovery of “very dark spots in society.” In truth, however, there was “no class that did not substantially benefit from the general advance.” He explains away the contradiction of a strong labor movement emerging in reaction to the impositions of liberal capitalism by saying that the implementation of the “free market” was not radical enough and its advance too “slow.” His argument is fundamentally antidemocratic. Basically, societies appear to him — not coincidentally — like ungrateful children who demand more and more. It was their “boundless ambition” which, “seemingly justified by the material improvements already achieved,” in his view caused a shift that “toward the turn of the century the belief in the basic tenets of liberalism was more and more relinquished.” Moreover, socialism is also the fault of intellectuals who seduce workers into something alien to their nature — collectivism, rather than individualism. Socialism and the “Communistic” (Michael Brie), which has its roots in Christianity and all world religions and has shaped human history, is in truth a rejection of “the spontaneously generated moral traditions underlying the competitive market order,” writes Hayek in The Fatal Conceit (1988). Socialism is “a rationally designed moral system . . . whose appeal depends on the instinctual appeal of its promised consequences.” And he complained that “the higher we climb up the ladder of intelligence, the more we talk with intellectuals, the more likely we are to encounter socialist convictions.” Ultimately, market radicalism owes its survival to the fact that, destructive as it is, it inevitably provokes a countermovement that reregulates capitalism. It means that the neoliberals may cling to their view of the humanity-enhancing effect of “free” markets. They can always claim that their utopia has not yet been fully realized anywhere. But back to the “constitution of freedom”: the rules to be monitored by it should only be “abstract, general and impersonal.” For Hayek, the “rule of law” is fundamentally incompatible with redistribution policies in favor of “social justice.” Tax and regulation policies already appear in The Road to Serfdom as arbitrary rule, the welfare state as totalitarianism. Hayek’s historical counterfactual attempt to portray fascism and communism not as mutual mortal enemies, but as siblings of one and the same family of “collectivism,” is also based on this. Whenever right-wing libertarians today emphasize that Adolf Hitler was, after all, a “national socialist,” we are dealing with a Hayek-inspired bullshit bingo. Authoritarian Liberalism As a classical liberal, Hayek followed the theory of Locke, who defended the interests of the propertied classes with the argument that every person should be allowed to take possession of all the wealth of the natural environment that he is able to appropriate. The early socialist Pierre-Joseph Proudhon once stated: “Property is theft.” Hayek argues against this: not only socialization, but even taxation is theft. Actually-existing capitalism remained Hayek’s Achilles’s heel. The inequality that he has to justify is not solely the result of performance. He acknowledged “accidents of environment” — meaning, that anyone who inherits millions or billions as a child and “makes it work for them” does not have to be a new Einstein. But “natural talent and innate abilities” are also “unfair advantages.” The “desire to eliminate the effects of accident, which lies at the root of the demand for ‘social justice’ can be satisfied . . . only by eliminating all those possibilities which are not subject to deliberate control. But the growth of civilization rests largely on the individuals’ making the best use of whatever accidents they encounter.” Hayek calls this “freedom under the law,” which he calls his “central concern.” Any equality other than the “equality of the general rules of law and conduct” would be equivalent to “destroying liberty.” Preserving the “order” (of capitalism) and its (market) “rules” was sacrosanct for Hayek. It does not matter what the “demos” wants. On the contrary, for Hayek the people’s efforts to determine their own destiny were mere tyranny. Hayek, his teacher Ludwig von Mises, and his students such as Friedman and James Buchanan — in short, the masterminds of neoliberalism — faced the same problem as Carl Schmitt and fascism. The fact that they observed a historical connection between the growth of mass democracy and the overcoming of economic liberalism meant that the antidemocratic legacy of classical liberalism was continued in their thinking — and that the real history of neoliberalism is also closely linked to authoritarianism. Neoliberalism and fascism are forms of bourgeois thinking in reaction to mass democracy and socialism. Both face the problem: under the conditions of universal suffrage, how to prevent the masses from suddenly devising the idea of countering the housing shortage and rent madness with social housing; providing basic foodstuffs, health, education, and mobility as free or subsidized public goods in line with basic human rights rather than as commodities; or even transforming the capitalist private ownership of land, industry, and banks in their own interest, so that a socialized economy serves the people and not the other way around. Fascist thinkers like Schmitt sought to abolish universal suffrage in favor of an outright (presidential) dictatorship. Hayek, writing for the Anglo-American bourgeoisie of the anti-Hitler coalition, knew all too well that this battle was lost. He instead concentrated on neutralizing the democratic process. Hayek is the chief theorist of “post-democracy” (in Colin Crouch’s apt term). His theoretical work boils down to the search for the means to establish the dictatorship of capital without permanent political dictatorship. He thus focuses on fundamentally restricting the scope for elected governments. His theory systematically removes their sovereignty over financial and economic policy. Compared to Schmitt, this ultimately makes Hayek the smarter bourgeois counterrevolutionary. Still, he too remained open to outright dictatorship in order to win the war against democracy, the masses, and welfare. Hayek found what he was looking for in the liberal theoretical tradition — Montesquieu, Benjamin Constant, and Locke — and in US history. In the US Constitution of 1776, he found the ultimate solution to the problem of the bourgeoisie, even as a social minority, determining the politics of the state. As historians Charles Beard and Terry Bouton have shown, the US Constitution emerged in the same spirit as a product of the counterrevolution against the “democratic moment” of the revolutionary anti-colonial war of the time, which made universal suffrage unchallengeable. One of the earliest observers of how constitutions can erode democracy was Polanyi, when he wrote that the United States “isolated the economic sphere entirely from the jurisdiction of the Constitution, thereby placing private property under the greatest conceivable protection and creating the only legally established [capitalist] market society in the world. Despite universal suffrage, American voters were powerless against the propertied classes.” As early as 1939, Hayek had argued in Freedom and the Economic System that “we can ‘plan’ a system of general rules that apply equally to all and are designed to remain permanent.” What should apply to individuals should now also be binding for parliamentary democracies. Economic Constitution Hayek and his students used two mechanisms to establish market-driven social development: firstly, through legally binding (economic) constitutions and, secondly, the systematic weakening of the nation state’s economic and financial policy competences through a policy of federalization. Both centralization and decentralization therefore had a role to play: on the one hand, centralization of decision-making powers in antidemocratic bodies such as the central banks, which have been declared “independent,” i.e. not democratically accountable and controlled, and in international treaties with a constitutional status that is legally binding on states; and on the other, decentralization in favor of local state apparatuses with few fiscal etc. powers of direction and control. Historically, the “internationalization of the state” (Robert W. Cox) would become the essential tool of the “new constitutionalism” (Stephen Gill) based on Hayek. This amounted to the restriction of nation-states through legally binding constitutions for world capitalism such as the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), investment protection agreements, the EU economic constitution with its neoliberal convergence criteria (“balanced budget amendments” to constitutions, etc.), and bodies beyond the influence of national parliaments such as the G7 and European Commission. The new constitutionalism thus strengthened the structural power of capital, i.e. its mobility, which serves to force subsidies from states and wage policy concessions from trade unions in a perpetual cycle, and to enable capital flight and, as a result, the fall of governments if they plan redistribution or socialization. It also strengthened the ministries (especially finance) closest to this system, at the expense of economic, labor, and social portfolios. Hayek thus created the essential foundations for a market system with no alternative, with rules that governments should only question on pain of their downfall. It is in Hayek’s spirit that the WTO rules on the equal treatment of national and international capital were created, making it impossible for dependent states to strive for independence. He created the basis for the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement on the protection of “intellectual property rights,” allowing pharmaceutical companies to monopolize even plants and seeds, no matter how many several hundred thousands of Indian farmers commit suicide as a result. Hayek can ultimately be credited for investment-protection agreements such as the Comprehensive Economic and Trade Agreement (CETA) and Transatlantic Trade and Investment Partnership (TTIP), based on which transnational corporations can sue states for horrendous compensation payments for future loss of capital profits if they make democratic decisions such as banning smoking or phasing out nuclear energy. In addition to this de-democratization, Hayek also developed another means of making the dictatorship of capital complete. This was federalization. Based on the assumption that “the creation of a [democratic] world state is probably a greater danger to the future of civilization than war,” Hayek and, in his wake, Buchanan pursued the systematic decentralization of government functions, a “political economy of open federalism” (Adam Harmes) and “competition between local governments.” Hayek writes: We have yet to learn how to limit the powers of all government effectively and how to divide these powers between the tiers of authority. . . . The creation of a world state probably would be a greater danger to the future of civilization than even war. . . . While it has always been characteristic of those favoring an increase in governmental powers to support maximum concentration of these powers, those mainly concerned with individual liberty have generally advocated decentralization. Hayek recognized the potential for budgetary discipline of local governments when they compete with each other for capital and its direct investments, which are no longer restrained by capital controls. The same principle of decentralization also proved useful in terms of drying up the hated welfare state, because local authorities are usually unable to satisfy social pressure for social housing, better schools, housing for people with the right to asylum, etc. — pointing to their hands being tied by fiscal policy. During the global financial crisis, the individual US states were forced by regional debt brakes to choose between tax increases or social cuts. Social cuts are thus structurally embedded in the constitutions. Freedom of the Few Hayek thus proved to be the sharpest weapon of bourgeois hostility to democracy. The “market-compliant democracy” demanded by German chancellor Angela Merkel in the wake of the eurozone crisis, which submits to the international financial markets, is based on his thinking. Theorizing the dictatorship of capital in a system of universal suffrage and thus finding a hearing among the bourgeoisie during the 1970s crisis of Fordism was Hayek’s historical triumph — making him the most powerful propagandist for the freedom of the few at the expense of the freedom of the many. Today, liberalism claims the concept of freedom for itself. Hayek was still aware of its controversial nature. There is “no doubt that the promise of greater freedom has become one of the most effective weapons of socialist propaganda.” This wider freedom does indeed only come about through socialism: as freedom from exploitation and unfree time, which is the prerequisite for a self-determined life for all those who have to live from their wage labor. Hayek’s elitist hostility to democracy suggests that market radicalism cannot be in the interests of the wage-earning class majority. Even if he did not reach fascist conclusions — Mises had still in 1927 welcomed fascism as the “salvation of European civilization” — he nevertheless assumed that the counterrevolution against the welfare state would probably have to be dictatorial because, according to his and Buchanan’s “overload” theory, the masses would never vote against welfarism. Hayek therefore demanded in the 1970s that the “net transfer recipients,” i.e. all public sector employees, all retired and all unemployed workers, be deprived of the right to vote. The neoliberals therefore also directly supported the coup against democratic socialism in Chile in 1973 and the military dictatorship of Augusto Pinochet. Only Thatcher and her “authoritarian populism,” which combined the dismantling of the welfare state with nationalist appeals and war and thus basically Hayek with Schmitt, showed six years later that neoliberalism was possible even if universal suffrage was retained. But as late as 1981, Hayek declared in an interview that he would always prefer a market dictatorship to a welfare-state democracy. “Competition,” Hayek said, “is, after all, always a process in which a small number makes it necessary for larger numbers to do what they do not like, be it to work harder, to change habits, or to devote a degree of attention, continuous application, or regularity to their work which without competition would not be needed.” Hayek doubted “whether a functioning market has ever newly arisen under an unlimited democracy.” In this regard, he was surely right.
7784	dbpedia	0	1	https://fee.org/articles/friedrich-a-hayek-a-centenary-appreciation/	en	Friedrich A. Hayek: A Centenary Appreciation	https://fee.org/wp-conte…-f-1-1-32x32.png	https://fee.org/wp-conte…-f-1-1-32x32.png	[ "https://fee.org/wp-content/themes/fee-theme/dist/images/fee-header-logo.png", "https://fee.org/wp-content/uploads/authors/richard-ebeling.jpg", "https://fee.org/wp-content/uploads/authors/richard-ebeling.jpg", "https://fee.org/wp-content/uploads/2023/12/monument-valley-1593318-300x169.jpg", "https://fee.org/wp-content/uploads/2023/12/hand-up-democracy-300x199.jpg", "https://fee.org/wp-content/uploads/2023/12/hand_coffin_grave-300x216.jpg", "https://fee.org/wp-content/uploads/2023/12/fist_break_chain-300x225.jpg", "https://fee.org/wp-content/themes/fee-theme/dist/images/fee-footer-logo.png", "https://fee.org/wp-content/themes/fee-theme/dist/images/social/youtube.png", "https://fee.org/wp-content/themes/fee-theme/dist/images/social/instagram.png", "https://fee.org/wp-content/themes/fee-theme/dist/images/social/facebook.png", "https://fee.org/wp-content/themes/fee-theme/dist/images/social/x.png", "https://fee.org/wp-content/themes/fee-theme/dist/images/social/linkedin-alt.png", "https://fee.org/wp-content/themes/fee-theme/dist/images/social/tiktok.webp" ]	[]	[]	[ "" ]	null	[ "Richard M. Ebeling" ]	null	In 1967, English economist Sir John Hicks published an essay titled “The Hayek Story” in which he said that:	en	https://fee.org/wp-conte…-f-1-1-32x32.png	Foundation for Economic Education	https://fee.org/articles/friedrich-a-hayek-a-centenary-appreciation/	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
7784	dbpedia	3	53	https://sticerd.lse.ac.uk/_new/about/history/lionel-robbins.asp	en	The Era of Lionel Robbins	https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/icons/sticerd.ico	https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/icons/sticerd.ico	[ "https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/logos/STICERD/touch-icon.png", "https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/logos/LSE_STICERD.gif", "https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/logos/STICERD/lse-rlab-print-logo.png" ]	[]	[]	[ "" ]	null	[]	null	STICERD, About, History, History of Economics, The Era of Lionel Robbins	en	/scripts/_NEW2018/_assets/images/icons/sticerd.ico		null	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.
7784	dbpedia	1	8	https://www.linkedin.com/posts/michael-cox-0099a66_friedrich-a-von-hayek-18991992-at-lse-activity-7213135208521285632-DZUt	en	Michael Cox on LinkedIn: Friedrich A von Hayek (1899–1992) at LSE	https://media.licdn.com/dms/image/D4E10AQGu_DUPGdNHEg/image-shrink_800/0/1719673248520?e=2147483647&v=beta&t=i2aAdnbRxYkdFzmBSS6TkSIqN_nv06hQuBUuzM3VMgI	https://media.licdn.com/dms/image/D4E10AQGu_DUPGdNHEg/image-shrink_800/0/1719673248520?e=2147483647&v=beta&t=i2aAdnbRxYkdFzmBSS6TkSIqN_nv06hQuBUuzM3VMgI	[ "https://media.licdn.com/dms/image/v2/D4E16AQFhNmvipSW2Sw/profile-displaybackgroundimage-shrink_200_800/profile-displaybackgroundimage-shrink_200_800/0/1682712311310?e=2147483647&v=beta&t=_BjDaCMEupXN89tLfQRM6khEB-9bw-V0JzeMbJu-VOQ" ]	[]	[]	[ "" ]	null	[ "Michael Cox" ]	2024-06-30T11:04:07.257000+00:00	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…	en	https://static.licdn.com/aero-v1/sc/h/al2o9zrvru7aqj8e1x2rzsrca		https://www.linkedin.com/posts/michael-cox-0099a66_friedrich-a-von-hayek-18991992-at-lse-activity-7213135208521285632-DZUt	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.
7784	dbpedia	0	47	https://www.encyclopedia.com/people/history/russian-soviet-and-cis-history-biographies/friedrich-hayek	en	Encyclopedia.com			[ "https://www.encyclopedia.com/themes/custom/trustme/images/header-logo.jpg" ]	[]	[]	[ "Get information", "facts", "and pictures", "about Friedrich Hayek", "at Encyclopedia.com", "Make", "research", "projects", "and school reports", "about Friedrich Hayek", "easy", "with credible", "articles", "from our FREE", "online encyclopedia and dictionary" ]	null	[]	null	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.	en	/sites/default/files/favicon.ico		https://www.encyclopedia.com/people/history/russian-soviet-and-cis-history-biographies/friedrich-hayek	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
7784	dbpedia	2	3	https://www.britannica.com/money/F-A-Hayek	en	Biography, Books, & Facts	https://www.britannica.c…0ca1ca22e32fe0d6	https://www.britannica.c…0ca1ca22e32fe0d6	[ "https://cdn.britannica.com/money/assets/MoneyLogo-30x236-2x.png", "https://cdn.britannica.com/35/99635-050-85CE42AA/Diagram-flow-goods-money-services-economy.jpg?c=crop&h=40&w=50", "https://cdn.britannica.com/75/94775-050-F8658579/John-Kenneth-Galbraith-1968.jpg?c=crop&h=40&w=50", "https://cdn.britannica.com/60/194260-050-9FCF22F9/Detail-sculpture-breadline-men-Great-Depression-George.jpg?c=crop&h=40&w=50", "https://cdn.britannica.com/35/99635-050-85CE42AA/Diagram-flow-goods-money-services-economy.jpg?c=crop&h=40&w=50", "https://cdn.britannica.com/75/94775-050-F8658579/John-Kenneth-Galbraith-1968.jpg?c=crop&h=40&w=50", "https://cdn.britannica.com/60/194260-050-9FCF22F9/Detail-sculpture-breadline-men-Great-Depression-George.jpg?c=crop&h=40&w=50", "https://cdn.britannica.com/28/94128-050-0DD79FE4/FA-Hayek-1950.jpg?w=385", "https://cdn.britannica.com/37/129537-131-759449E7/stock-market-ticker-blog-society-history-wall-2009.jpg", "https://cdn.britannica.com/money/assets/Money-475x60-footer-2x.png?h=47&w=390" ]	[]	[]	[ "" ]	null	[]	2024-08-16T00:00:00		en	/money/favicon.ico		https://www.britannica.com/money	During World War I Hayek served in a field artillery battery on the Italian front, and after the war he enrolled at the University of Vienna. Hayek was attracted to both law and psychology in his early university years, but he settled on law for his first degree in 1921. Among his classmates were a number of people who would become prominent economists, including Fritz Machlup, Gottfried von Haberler, and Oskar Morgenstern. In 1923, his last year at the university, Hayek studied under the Austrian economist Friedrich von Wieser and was awarded a second doctorate in political economy. He also began working at a temporary government office, where he met Ludwig von Mises, a monetary theorist and author of a book-length critique of socialism. (Von Mises’s book was originally published as Die Gemeinwirtschaft: Untersuchungen über den Sozialismus in 1922 and translated as Socialism: An Economic and Sociological Analysis in 1936.) Von Mises quickly became Hayek’s mentor. After a trip to the United States in 1923–24, Hayek returned to Vienna, married, and with von Mises’s assistance became the director of the newly founded Austrian Institute for Business Cycle Research. Hayek also became a regular attendee at von Mises’s biweekly seminar, passed his Habilitation (an oral examination that is a necessary step toward becoming a university teacher), and published his first book, Monetary Theory and the Trade Cycle, in 1929. In early 1931 Hayek was invited to England by Lionel Robbins to present four lectures on monetary economics at the London School of Economics and Political Science (LSE). The lectures would ultimately lead to his appointment the following year as the Tooke Professor of Economic Science and Statistics at LSE, where Hayek remained until 1950, having become a naturalized British subject in 1938. Immediately upon arriving in England, Hayek became embroiled in a debate with University of Cambridge economist John Maynard Keynes over their respective theories about the role and effect of money within a developed economy. Hayek wrote a lengthy critical review of Keynes’s 1930 book, A Treatise on Money, to which Keynes forcefully replied, in the course of which he attacked Hayek’s own recent book, Prices and Production (1931). Both economists were criticized by other economists, and this caused each to rethink his framework. Keynes finished first, publishing in 1936 what would become perhaps the most famous economics book of the century, The General Theory of Employment, Interest and Money. Hayek’s own book, The Pure Theory of Capital, did not appear until 1941, and both World War II and the book’s opaqueness caused it to be much less noticed than Keynes’s work. In the mid-1930s Hayek also participated in a debate among economists on the merits of socialism. Those discussions would help shape his later ideas on economics and knowledge, eventually presented in his 1936 presidential address to the London Economic Club. During the war years LSE evacuated to Cambridge. There Hayek worked on his Abuse of Reason project, a wide-ranging critique of an assortment of doctrines that he lumped together under the label of “scientism,” which he defined as “the slavish imitation of the method and language of Science” by social scientists who had appropriated the methods of the natural sciences in areas where they did not apply. Although the project as originally envisioned was never completed, it became the basis for a number of essays and also led to the 1944 publication of Hayek’s most famous book, The Road to Serfdom, which became an immediate best-seller. In the same year Hayek was elected as a fellow of the British Academy. At the end of World War II, Hayek began work on a theoretical psychology book based on an essay he had written during his student days in Vienna. In 1947 he organized a meeting of 39 scholars from 10 countries at Mont Pèlerin, on Lake Geneva in the Swiss Alps. This was the beginning of the Mont Pèlerin Society, an organization dedicated to articulating the principles that would lead to the establishment and preservation of free societies. Von Mises, Robbins, and Machlup were among the original attendees, as were Milton Friedman, Frank Knight, George Stigler, Aaron Director, Michael Polanyi, and the Austrian philosopher Karl Popper. Hayek had been instrumental in bringing Popper from New Zealand to LSE at war’s end, and he had also secured a publisher for Popper’s book The Open Society and Its Enemies (1945). Popper and Hayek would remain lifelong friends. In 1950 Hayek left LSE for a position on the newly formed Committee on Social Thought at the University of Chicago. In 1952 his book on psychology, The Sensory Order, was published, as was a collection of his essays from the Abuse of Reason project under the title The Counter-Revolution of Science: Studies on the Abuse of Reason. Hayek would spend 12 years at Chicago. While there he wrote articles on a number of themes, among them political philosophy, the history of ideas, and social science methodology. Aspects of his wide-ranging research were woven into his 1960 book on political philosophy, The Constitution of Liberty. In 1962 Hayek left Chicago for the University of Freiburg im Breisgau in West Germany. He remained there until his retirement in 1968, when he accepted an honorary professorship at the University of Salzburg in Austria. In 1974 Hayek was awarded the Nobel Prize for Economics, which, ironically, he shared with Gunnar Myrdal, whose political and economic views were often opposed to his. Hayek returned to Freiburg permanently in 1977 and finished work on what would become the three-part Law, Legislation and Liberty (1973–79), a critique of efforts to redistribute incomes in the name of “social justice.” Later in the 1970s Hayek’s monograph The Denationalization of Money was published by the Institute of Economic Affairs in London, one of the many classical liberal think tanks that Hayek, directly or indirectly, had a hand in establishing.
7784	dbpedia	2	2	https://www.prospectmagazine.co.uk/culture/60233/the-remarkable-influence-of-friedrich-hayek	en	The remarkable influence of Friedrich Hayek	https://media.prospectma…ksonfeatured.jpg	https://media.prospectma…ksonfeatured.jpg	[ "https://media.prospectmagazine.co.uk/prod/images/gm_grid_thumbnail/358ffc17208c-f4c3cddcdeda-prospect-masthead.png", "https://media.prospectmagazine.co.uk/prod/images/portrait_small_fit/bba8beaa0d3b-cover-augset-24v2.jpg", "https://media.prospectmagazine.co.uk/prod/images/portrait_small_fit/bba8beaa0d3b-cover-augset-24v2.jpg", "https://media.prospectmagazine.co.uk/prod/images/landscape_large_fill/7e194bb5b19b-jacksonfeatured.jpg", "https://media.prospectmagazine.co.uk/prod/images/gm_preview/4d1e3abe9ca2-chi-calwellklausinger-img016a4-2.png", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/8ca7de6d39bd-paintingensor-01.png", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/1ec6b45aa873-duchenfeatured.jpg", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/edbb0df08e83-julian-close-lee-bisset-benedict-nelson-lfo-gotterdammerung-2024-cr-matthew-wi.jpg", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/4dc0edbc31a3-lex-header-securonomics-illustration-by-andy-smith.jpg", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/ef0929fff550-reeves-aa.jpg", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/301018fff5ef-onlinesukhdevsailing.png", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/6721c5b26d62-livesnewyear-header-illustration-by-clara-nicoll.jpg", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/3316e75c1727-podcast-convo-2407.jpg", "https://media.prospectmagazine.co.uk/prod/images/square_small_fill/4582e9d41f3a-landingpagefeatured.jpg", "https://media.prospectmagazine.co.uk/prod/images/gm_grid_thumbnail/912430b39857-prospectlogoregular.png", "https://media.prospectmagazine.co.uk/prod/images/gm_list_thumbnail/1e0499963152-facebook-social-footer-bottom.png", "https://media.prospectmagazine.co.uk/prod/images/gm_list_thumbnail/4a7539ee343c-twitter-social-footer-bottom.png", "https://media.prospectmagazine.co.uk/prod/images/gm_list_thumbnail/451441c9a06a-linkedin-social-footer-bottom.png" ]	[]	[]	[ "" ]	null	[ "Ben Jackson" ]	null	Modern free-market ideology owes much to the thought of an Austrian economist neglected for the first half of his life	en	https://assets.prospectm…94d5f60f9389.png		https://www.prospectmagazine.co.uk/culture/60233/the-remarkable-influence-of-friedrich-hayek	Everyone now agrees that Friedrich Hayek was an unusually influential intellectual. His writings are credited with inspiring a powerful pro-market revival in the late 20th century. Margaret Thatcher, Ronald Reagan and many other political leaders all declared that they had imbibed Hayek’s ideas at a formative stage. Thatcher recalled reading Hayek’s The Road to Serfdom while an 18-year-old undergraduate at Oxford. Fast forward half a century and another future prime minister, Liz Truss, is said to have been a member of the Oxford University Hayek Society, presumably while still a Liberal Democrat. Truss’s tax-cutting economic policies were incubated by think tanks who regard themselves as the keepers of the Hayekian flame. Yet this new biography by Bruce Caldwell and Hansjörg Klausinger of the first half of Hayek’s life tells a different story. Here we meet a Hayek who was widely believed to be intellectually defeated and marginal to mainstream politics. As such, it offers an opportunity to look again at Hayek as a historical rather than mythical figure. The book has two strands: Hayek’s life, which in this period took him from Vienna to London to Chicago; and Hayek’s ideas, which moved from technical economics to sweeping political works. This is a long book—nearly 900 pages—but there are dramatic twists in both sides of the narrative that make for a propulsive read. The authors are expert guides to Hayek’s intellectual evolution. Both Caldwell and Klausinger have published many distinguished works on Hayek and the Austrian economic tradition in which he was raised. More unexpectedly, they are also perceptive guides to Hayek’s private life. The climactic personal drama of the book is Hayek’s divorce and remarriage, which precipitated his move to the United States and political proximity to the nascent American libertarian movement. In this, as in other respects, the personal and the political were intertwined in Hayek’s life. There is therefore enormous benefit to a book that brings both together. In short, Caldwell and Klausinger have triumphantly succeeded in their stated aim of writing “the definitive, full biography of FA Hayek”—for the years 1899 to 1950, at any rate. A second volume is promised to cover the period up to his death in 1992. Although he stopped using the title in later life, Hayek was born with the family name “von Hayek”. Any aristocratic connotations are misleading, however, as members of the “lower nobility” of imperial Austria, including the Hayeks, were chiefly professionals of various sorts. Hayek’s father was a doctor, his mother the daughter of a university professor. Hayek grew up as part of the Austrian bourgeoisie, served in the First World War in an artillery regiment and returned to Vienna in 1918 to find that the political assumptions of his youth had been overturned by the turmoil of total war. The collapse of the Austro-Hungarian monarchy had left Hayek a citizen of an uncertain new Austrian republic. Hayek attended the University of Vienna—initially studying law, along with philosophy and psychology—before gravitating to economics. He settled on the subject for free-market reasons: he believed he was likely to get a better job. As it happened, though, Vienna was the birthplace of the famous “Austrian School” of economics. A tradition that spanned several generations of scholars by the time Hayek entered university, the Austrian School was known for its economic liberalism and austere commitment to economic theory derived from deductive reasoning rather than empirical study. Hayek was deeply influenced by this approach and was mentored by one of the rising names in Austrian economics, Ludwig von Mises, an implacable and irascible opponent of socialism in all its guises. Hayek first approached Mises with a letter of introduction from another professor that described Hayek as a “promising economist”. Mises responded: “Promising economist? I’ve never seen you at my lectures.” Also relevant was that Mises was Jewish in a society riven by antisemitism. Caldwell and Klausinger document the gap that opened between Hayek and his immediate family as far-right politics became more influential in Austria. Hayek’s father was involved in an antisemitic medical organisation; his mother supported the Anschluss; one of his brothers went on to join the Nazi party. Hayek’s commitment to liberalism put him at odds with his closest relatives. Hayek moved to London to take up a post at the London School of Economics in 1931. There he became a close friend of Lionel Robbins, a dynamic economist well known for his espousal of market liberalism. Hayek arrived at the LSE before either Austria or Germany turned fascist, so the move seems to have been motivated more by a lack of academic opportunities in Austria rather than any apprehension about the state’s political trajectory. Hayek was by now a married man. He proposed to Helena (Hella) von Fritsch, after his first love, Helene (Lenerl) Bitterlich, married someone else. (Hayek was too diffident to express his feelings towards Lenerl.) Apparently there was a strong physical resemblance between the two women. Caldwell and Klausinger show how important Britain was to Hayek’s intellectual development. The LSE in the 1930s was a remarkable institution populated by outstanding scholars, many on the left. In the LSE senior common room, Hayek rubbed shoulders with many characters that he disagreed with politically, such as RH Tawney, Harold Laski, Evan Durbin and the School’s director, William Beveridge, later the author of the 1942 report that laid the groundwork for the welfare state. This was an aspect of British social life that Hayek admired: the combination of rigorous academic debate in the classroom with more lighthearted discussions afterwards over dinner. Hayek’s exposure to the British intelligentsia of the 1930s changed the emphasis of his research. His early work had focused on the business cycle, pushing forward the Austrian argument that booms and slumps were caused by banks creating too much credit. A recession was therefore a painful but necessary reassertion of market forces. Hayek was fatalistic about how much government could do to counteract downturns, a position at odds with the economic activism offered by John Maynard Keynes. Hayek and Keynes duly had some acerbic exchanges, with Keynes describing Hayek’s 1931 book Prices and Production as “one of the most frightful muddles I have ever read, with scarcely a sound proposition in it.” Although Hayek in his turn criticised Keynes in the 1930s, Caldwell and Klausinger show that, by the time the LSE moved to Cambridge to flee the Blitz, Hayek had established a cordial, personal relationship with Keynes, who was at King’s College in the city. At this time he became more concerned with the rising popularity of socialism in Britain. Whereas Keynes sought to keep a broadly market economy intact by expanding state spending, socialists sought to introduce public ownership of industry and use the state rather than markets to allocate resources. Hayek’s celebrated argument, developed from the late 1930s until the publication of The Road to Serfdom in 1944, was that these policies were precisely what had led to the totalitarian regimes of Nazi Germany and the Soviet Union (although the wartime alliance meant that The Road to Serfdom scrupulously focused only on the Nazi regime). As capitalist economies reeled from the impact of depression, Hayek seemed to be prosecuting a losing case Initially, Hayek sought to show an English-language audience that continental European debates had already made a lot of progress in critiquing the economics of socialism. Mises, for example, had argued that in the absence of market price signals there would be no basis for rational economic calculation in a socialist economy: people would simply not know how to allocate resources efficiently. Socialist economists countered that a central planning board would be in a better position to set prices because it would be able to comprehend the requirements of the whole economy. Hayek’s rejoinder was that economic knowledge could not be aggregated in that fashion because it was only accessible locally, to individuals acting on their own preferences. Markets were essential, argued Hayek, because they coordinated that dispersed knowledge. This was later regarded as an important idea. At the time, however, as capitalist economies reeled from the impact of depression and Soviet central planning rose in prestige, Hayek seemed to be prosecuting a losing case. The discipline of economics, populated by a new generation of socialists and Keynesians, was increasingly unfriendly terrain for Hayek. In response, he unexpectedly pivoted to intellectual history. Hayek sought to demonstrate that totalitarianism had been produced by mistaken philosophies rather than by class conflict or economic depression. This was a bold approach at a time when Marxist materialism was becoming the fashionable model of social explanation. Hayek focused on the emergence of the 19th-century idea that the social sciences could use the same methods and achieve the same predictive accuracy as the natural sciences. This “scientism”, developed by French positivists and socialists, was in Hayek’s view the origin of the disastrous idea that experts possessed the necessary technical knowledge to plan the economy. Precisely why this idea was so disastrous was what Hayek then set out in The Road to Serfdom, a frequently misunderstood book that Caldwell and Klausinger provide a careful account of. It did not make any strong claims about social welfare provision or even Keynes-style reflationary spending. Instead, it argued that attempts to plan an economy by replacing market mechanisms with government decisions will inevitably come into conflict with value pluralism. Hayek agreed that planning could work during the Second World War, since there was widespread agreement on the overriding goal of victory. But in peacetime, when citizens have diverse preferences about what to produce and consume, an interventionist state will find itself inexorably drawn into favouring some individual preferences over others—and enforcing its plan coercively. The subversive twist to Hayek’s argument was that he claimed to have witnessed this before, in Austria and Germany, as well-meaning socialists inadvertently paved the way for fascism by introducing economic planning. His British socialist friends were quite wrong, Hayek thought, to attribute the rise of the Nazis to the failures of interwar capitalism. Apart from anything else, this was the book of someone who felt left out. Unlike nearly all his leading economist colleagues, Hayek’s Austrian background meant that he was not required for wartime service: The Road to Serfdom was his contribution to the war effort. It had a huge impact, particularly in the US where it was condensed by Reader’s Digest and eagerly championed by American libertarians. Hayek capitalised on his new fame by founding the Mont Pèlerin Society in 1947. Believing that socialism had flourished because intellectuals had turned the political debate against markets, Hayek’s logical next step was to bring together disillusioned economic liberals from across the world to reverse that ideological trend. Meanwhile his personal life had imploded. Hayek had remained in contact with his first love Lenerl. After the war he sought a divorce from his wife. Hella refused to grant it and an acrimonious breakup of the family (they had two children) ensued. The only way Hayek was able to access a divorce was by taking a temporary position at the University of Arkansas, which enabled him to use the state’s laxer marriage laws. Although this story has been told before, Caldwell and Klausinger draw on new sources to give an unsparing account that is unflattering to Hayek, even allowing for the fact that the restrictive British divorce laws at that time were a recipe for human misery. Lionel Robbins cut off all contact with Hayek, believing him to have treated Hella abominably. Hayek married Lenerl in 1950 and, since they faced an arctic welcome in London circles, they moved to Chicago. His salary at Chicago University was paid not by the university but by the Volker Fund, an American charitable foundation supporting libertarian causes. The next chapter of Hayek’s life, in which his ideas became hugely influential in the US and Britain, had begun. That will be the subject of the second volume. If it is as good as this one, we are in for a treat.
7784	dbpedia	0	11	https://www.newworldencyclopedia.org/entry/Friedrich_Hayek	en	New World Encyclopedia	https://www.newworldency…avicon-32x32.png	https://www.newworldency…avicon-32x32.png	[ "https://www.newworldencyclopedia.org/images/nwe_header.jpg", "https://www.newworldencyclopedia.org/d/images/thumb/2/2a/FvonHayek.jpg/200px-FvonHayek.jpg", "https://static.newworldencyclopedia.org/skins/common/images/Cc.logo.circle.png", "https://www.newworldencyclopedia.org/resources/assets/poweredby_mediawiki_88x31.png" ]	[]	[]	[ "" ]	null	[]	null		en	https://static.newworldencyclopedia.org/favicon.ico		https://www.newworldencyclopedia.org/entry/Friedrich_Hayek	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.
7784	dbpedia	1	9	https://austrianeconomics.fandom.com/wiki/Friedrich_Hayek	en	Friedrich Hayek	https://static.wikia.nocookie.net/ucp-internal-test-starter-commons/images/a/aa/FandomFireLogo.png/revision/latest?cb=20210713142711	https://static.wikia.nocookie.net/ucp-internal-test-starter-commons/images/a/aa/FandomFireLogo.png/revision/latest?cb=20210713142711	[ "https://static.wikia.nocookie.net/6a181c72-e8bf-419b-b4db-18fd56a0eb60", "https://static.wikia.nocookie.net/6c42ce6a-b205-41f5-82c6-5011721932e7", "https://static.wikia.nocookie.net/464fc70a-5090-490b-b47e-0759e89c263f", "https://static.wikia.nocookie.net/f7bb9d33-4f9a-4faa-88fe-2a0bd8138668" ]	[]	[]	[ "" ]	null	[ "Contributors to Austrian Economics Wiki" ]	null	"A claim for equality of material position can be met only by a government with totalitarian powers." F.A.Hayek, Law, Legislation, and Liberty Friedrich August von Hayek is one of the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig...	en	/skins-ucp/mw139/common/favicon.ico	Austrian Economics Wiki	https://austrianeconomics.fandom.com/wiki/Friedrich_Hayek	"A claim for equality of material position can be met only by a government with totalitarian powers." F.A.Hayek, Law, Legislation, and Liberty Friedrich August von Hayek is one of the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian school theorists, Hayek was very successful in spreading Austrian ideas throughout the English-speaking world. "When the definitive history of economic analysis during the 1930s comes to be written," said John Hicks in 1967, "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".[1] Unfortunately, Hayek's theory of the business cycle was eventually swept aside by the Keynesian revolution. His work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes. Life and Work[] Hayek's life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge, England). Though he was enrolled as a law student, his primary interests were economics and psychology, the latter due to the influence of Mach's theory of perception on Wieser and Wieser's colleague Othmar Spann, and the former stemming from the reformist ideal of Fabian socialism so typical of Hayek's generation. Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions--the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. "To none of us young men who read the book when it appeared," Hayek recalled, "the world was ever the same again". Socialism, an elaboration of Mises's pioneering article from two years before, argued that economic calculation requires a market for the means of production; without such a market there is no way to establish the values of those means and, consequently, no way to find their proper uses in production. Mises's devastating attack on central planning converted Hayek to laissez-faire, along with contemporaries like Wilhelm Röpke[2], Lionel Robbins, and Bertil Ohlin. It was around this time that Hayek began attending Mises's famed Privatseminar. Regular participants, who received no academic credit or other official recognition for their time, included Hayek, Gottfried von Haberler[3], Fritz Machlup[4], Oskar Morgenstern, Paul Rosenstein-Rodan, Richard von Strigl[5], Karl Schlesinger, Felix Kaufmann, Alfred Schütz[6], Eric Voegelin, Karl Menger, Jr., and others not so famous. For several years the Privatseminar was the center of the economics community in Vienna, attracting such visitors as Robbins from London and Howard S. Ellis from Berkeley. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. Mises had done earlier work on monetary and banking theory, successfully applying the Austrian marginal utility principle to the value of money and then sketching a theory of industrial fluctuations based on the doctrines of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this as a starting point for his own research on fluctuations, explaining the origin of the business cycle in terms of bank credit expansion and its transmission in terms of capital malinvestments. His work in this area eventually earned him an invitation to lecture at the London School of Economics and Political Science and then to occupy its Tooke Chair in Economics and Statistics, which he accepted in 1931. There he found himself among a vibrant and exciting group: Robbins, J. R. Hicks, Arnold Plant, Dennis Robertson, T. E. Gregory, Abba Lerner, Kenneth Boulding, and George Shackle, to name only the most prominent. Hayek brought his (to them) unfamiliar views, and gradually, the "Austrian" theory of the business cycle became known and accepted. At the L.S.E. Hayek lectured on Mises's business-cycle theory, which he was refining and which, until Keynes's General Theory (text) came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes's Treatise on Money. As one of Keynes's leading professional adversaries, Hayek was well situated to provide a full refutation of the 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. 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 thought a better course would be to produce a fuller elaboration of Böhm-Bawerk's capital theory, and he began to devote his energies to this project. Unfortunately, The Pure Theory of Capital (pdf) was not completed until 1941, and by then the Keynesian macro model had become firmly established. The fortunes of the Austrian school have suffered a dramatic reversal with the next few years. First, the Austrian theory of capital, an integral part of the business-cycle theory, came under attack from the Italian-born Cambridge economist Piero Sraffa and the American Frank Knight, while the cycle theory itself was forgotten amid the enthusiasm for the General Theory. Second, beginning with Hayek's move to London and continuing until the early 1940s, the Austrian economists left Vienna, for personal and then for political reasons, so that a school ceased to exist there as such. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek's generation became prominent in the U.S.--Gottfried von Haberler[3] at Harvard, Fritz Machlup and Oskar Morgenstern at Princeton, Paul Rosenstein-Rodan at MIT--but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group: the economics department, led by Knight, Milton Friedman, and later George Stigler, was one of the best anywhere, and Aaron Director at the law school soon set up the first law and economics program. But economic theory, in particular its style of reasoning, was rapidly changing; Paul Samuelson's Foundations had appeared in 1947, establishing physics as the science for economics to imitate, and Friedman's 1953 essay on "positive economics" set a new standard for economic method. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and Austrian economics entered a prolonged eclipse. Important work in the Austrian tradition was done during this period by Rothbard, Kirzner, and Lachmann[7], but at least publicly, the Austrian tradition lay mostly dormant. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian school was suddenly and unexpectedly revived. While this was not the first event of the so-called "Austrian revival," the memorable South Royalton conference having taken place earlier the same year, the rediscovery of Hayek by the economics profession was nonetheless a decisive event in the renaissance of Austrian economics. Hayek's writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. There are several institutions founded in Hayek's name, including the Hayek Institute in Austria, the Friedrich A. von Hayek-Gesellschaft in Germany and F.A.Hayek Foundation in Slovakia. References[] Please consult the original text by Peter G. Klein for more references; reprinted with generous permission from the Mises Institute. []
7784	dbpedia	2	49	https://www.heritage.org/report/ten-mostly-hayekian-insights-trying-economic-times	en	Ten (Mostly) Hayekian Insights for Trying Economic Times	https://www.heritage.org…/images/bell.png	https://www.heritage.org…/images/bell.png	[ "https://www.facebook.com/tr?id=757309131330167&ev=PageView&noscript=1", "https://www.heritage.org/themes/heritage/src/images/instagram.svg", "https://www.heritage.org/themes/heritage/src/images/YouTube.svg", "https://ds.reson8.com/insights.gif?rand=[cache_buster]&t=0&pixt=resonate&advkey=0013000000R6OopAAF&opptykey=THEF0617C&evkey=100200825&evtype=custom" ]	[]	[]	[ "Friedrich Hayek", "economics", "Professor Bruce Caldwell", "public choice", "economists", "liberalism", "Keynesian economics", "macroeconomics", "monetary policy" ]	null	[ "Bruce Caldwell" ]	null	The economist Friedrich Hayek attempted in his writings to spotlight the interlocking set of ideas¬—constructivist rationalism, scientism, socialism, “the engineering mentality”—that was leading the West down what he famously called the road to serfdom and to propose in its place a return to a revitalized form of classical liberalism. In this essay, Professor Bruce Caldwell draws upon the writings of Hayek, other Austrian economists, and public choice theorists to distill 10 fundamental insights that not only apply to the current crisis, but also can help us to think more clearly about the nature and limits of economics more generally. His conclusion: We usually do not have the necessary knowledge to intervene effectively in the economy, and the political process is such that, even if we did, we still likely would get bad policy, coupled with an ever-growing government sector. Hence the preference for smaller government among Austrian economists and public choice theorists.	en	/themes/heritage/src/images/favicon/apple-touch-icon.png	The Heritage Foundation	https://www.heritage.org/report/ten-mostly-hayekian-insights-trying-economic-times	Abstract: The economist Friedrich Hayek attempted in his writings to spotlight the interlocking set of ideas—constructivist rationalism, scientism, socialism, “the engineering mentality”—that was leading the West down what he famously called the road to serfdom and to propose in its place a return to a revitalized form of classical liberalism. In this essay, Professor Bruce Caldwell draws upon the writings of Hayek, other Austrian economists, and public choice theorists to distill 10 fundamental insights that not only apply to the current crisis, but also can help us to think more clearly about the nature and limits of economics more generally. His conclusion: We usually do not have the necessary knowledge to intervene effectively in the economy, and the political process is such that, even if we did, we still likely would get bad policy, coupled with an ever-growing government sector. Hence the preference for smaller government among Austrian economists and public choice theorists. I will begin with an observation that is rather commonplace among historians: History provides no magic bullet. What it provides is perspective. It shows what sorts of ideas our predecessors entertained, the sorts of policies that their ideas led them to, and what transpired as a result. It also allows us to see that our times are not unique and that, as bad as things sometimes seem, there have always been worse times. We need only think, for example, of what Friedrich Hayek lived through: two world wars, hyperinflation, the creation of the Soviet Union, the Great Depression, and the birth of the welfare state. I mention Hayek here, and will draw on his ideas and writings throughout this essay, because I am a Hayek scholar. But to buttress my insights into the economy, many others could as easily have been cited, not only those who participated directly in the Austrian school like Ludwig von Mises or Ludwig Lachmann, or the Austrians who were more on the periphery like Fritz Machlup or Gottfried Haberler, or even non-Austrians like James Buchanan, Ronald Coase, Douglass North, or Vernon Smith. I see such scholars as all contributing to a broad tradition that challenges the authoritative pretensions of economics and offers an alternative view of the way that the world works. They are all, I would submit, advocates of basic economic reasoning, the sound core of ideas that economics contains and which we forget only at our peril. In what follows, I will identify 10 key themes to be found in the writings of Hayek and others in the tradition to which he belonged that may provide some insights into how we might respond to the current dilemmas that we face. Before I do so, I should briefly introduce Hayek since not everyone is familiar with this remarkable man.[1] The Life and Times of Friedrich August von Hayek Born on May 8, 1899, the polymath economist and social theorist Friedrich August von Hayek had the good fortune to be repeatedly in the right place at the right time, crossing paths with some of the century’s most brilliant economists and thinkers. He grew up in Vienna, at the time a place of extraordinary intellectual vitality. After finishing his studies at the University of Vienna, Hayek spent 15 months in the United States where, armed with letters of introduction from Joseph Schumpeter, he encountered most of the major American economists. When he returned, he joined the Miseskreis, the study circle of Ludwig von Mises, the leading Austrian economist at the time. In the later 1920s, he published an article in German that was read by Lionel Robbins, a newly appointed professor at the London School of Economics (LSE). This led to an invitation to present some lectures and ultimately, in 1932, to Hayek’s being appointed to the Tooke Chair of Economic Science and Statistics. While at the LSE, Hayek would engage in debates on the leading issues in economics with some of the discipline’s most important members, including John Maynard Keynes. Hayek remained at the LSE until 1950, when he moved to the Committee on Social Thought at the University of Chicago. There he counted among his colleagues Milton Friedman, Aaron Director, and George Stigler. Retiring in 1962, Hayek had successive appointments at the University of Freiburg and the University of Salzburg, returning again to Freiburg in 1977. In 1974, he was awarded, with Gunnar Myrdal, the Bank of Sweden Nobel Prize in Economic Sciences; in 1991, he was awarded the Presidential Medal of Freedom. Hayek died in Freiburg on March 23, 1992. If Hayek was in the right place at the right time, it was usually with the wrong ideas, at least from the perspective of most of his contemporaries. He was a sharp critic of Keynes well before the onset of the Keynesian Revolution. Though he helped to introduce English-speaking economists to general equilibrium theory, he claimed that a preoccupation with static equilibrium analysis would mislead economists about the true nature of a dynamic market process. He attacked socialism when most members of the intelligentsia viewed it as a preferred middle way between an apparently failed capitalist system and totalitarianisms of the communist and fascist varieties; for Hayek, such thinking was “the muddle of the middle.” When most Western democracies were embracing some form of the welfare state, he criticized the concept of social justice that provided its philosophical foundations. While most of the social sciences were moving toward more and more specialized studies, his work was increasingly integrative and multidisciplinary. The views Hayek embraced over most of his career were almost systematically out of step. From the perspective of the early 21st century, however, history would judge Hayek’s legacy more kindly than did many of his contemporaries. He lived to witness the collapse of the Soviet bloc, which many took as vindication of his and Ludwig von Mises’ early critique of central planning. His view that a competitive market system with freely adjusting prices is an essential mechanism for coordinating social action in a world of dispersed knowledge is taken by economists as a fundamental insight. His insistence that markets be embedded in a host of other social and political institutions for their proper functioning provides a jumping-off point for such diverse movements within economics as experimental investigations of market institutions, public choice and constitutional analysis, and the new institutional economics. Philosophers of mind, evolutionary biologists, and neuroscientists have been attracted to his “connectionist” approach for understanding the development and functioning of the brain. His theory of complex phenomena and work on spontaneous orders has clear analogues in complexity theory and agent-based computational modeling. If Hayek remains a controversial figure in some quarters, even his critics acknowledge the breadth and depth of his contributions. One pundit, writing in The New Yorker in 2000, even went so far as to call the 20th century “the Hayek century.”[2] Considering that this was only about two decades after the British Labour politician Michael Foot had referred to him as a “mad professor,” the reputational turnabout has been substantial. Theme #1: The Business Cycle Is a Necessary and Unavoidable Concomitant of a Free-Market Money-Using Economy. It is perhaps an exaggeration, but sometimes it seems as though people today are surprised that business cycles—shifts between periods of economic growth and periods of stagnation or decline—can still happen. Hayek, whose first book was titled Monetary Theory and the Trade Cycle, certainly recognized the problem, as did his rival on this issue, John Maynard Keynes. As introductory economics textbooks remind us, money performs many essential functions, among them to provide a unit of account and a store of value. Its most important function, though, is to facilitate trade, thereby making specialization and the division of labor profitable, and thereby establishing key preconditions for economic growth. Money, then, is essential, but as Hayek argued in his first book,[3] money is also the loose joint in a free-market system—hence my designation “free-market money-using economy.” It will be intimately involved in crises because changes in the money supply affect credit conditions—that is, interest rates—sometimes adversely. We need not detain ourselves with a full description of the Austrian theory of the cycle here, other than to note that Hayek’s theory offers a pretty good description of at least part of what happened in the latest meltdown, especially in terms of the Federal Reserve’s interest rate policy and its effects on the housing sector. In Hayek’s theory, problems start when the market rate of interest is held too low for too long. This always politically popular policy leads to malinvestment—too many investment projects get started that cannot ultimately be sustained. When people realize what has happened, investment spending collapses and a recession begins. The dangers of a prolonged low-interest-rate regime in distorting how the various factors of production in the economy are allocated—what the Austrians call the structure of production—is something to take away from the theory, especially given the political popularity of such a policy. A much more controversial aspect of the Austrian theory is the claim that the downturn in a business cycle is painful but necessary medicine for restoring equilibrium to the economic system. To the extent that this explanation is sound, it tells you what not to do in terms of policy: namely, it rejects further lowering of the interest rate (stimulative monetary policy) or any other attempts (for example, deficit spending or stimulative fiscal policy) to stimulate demand. There are two reasons why the Austrians reject stimulative fiscal and monetary policies during an economic downturn. The first is that such measures simply perpetuate the problem. If the problem is that the current structure of production does not accurately reflect the actual demand for goods in the economy, you do not want to undertake a policy that serves to preserve that structure of production. The examples of the automotive and house-building industries during the recent crisis illustrate well Hayek’s claim. In late December 2008, GMAC, the lending arm of General Motors, was given a $6 billion bailout by the Bush Administration. What did they do with it? Within a day, the radio and television were filled with ads saying that GMAC was now providing zero-interest loans and lowering its minimum required credit scores from 700 to 621 (the “sub-prime” designation applies to loan applicants with credit scores of 660 and below). So to stimulate the economy and revitalize the automobile industry, a policy was adopted that essentially made it easier for people with bad credit to purchase a car. The other example is the $8,000 tax credit offered by the federal government in 2009 for first-time homebuyers. The objective, as far as I can tell, was to reduce the inventory of existing homes. Unfortunately, it led to a mini-boom in the construction of new single-family homes. In other words, this policy further increased the supply of housing at a time when the evident problem was an excess supply of housing. These are paradigmatic examples of how attempts to further stimulate demand can perpetuate an initial malinvestment. The other reason that the Austrians reject stimulative policy in a downturn is that it raises the threat of inflation or of other ills down the road (see my second point below). This being said, the reason the Austrian message has been almost wholly ignored in the current debate is that it is very dour. Hayek’s recommendation back in the 1930s was for the government to try to provide better information in the upswing about potential dangers while letting the economy readjust when the downturn hit. It is not clear that providing warnings during a boom ever does anything. Smart investors usually know when a bubble is forming, but they also know that there are great amounts of money to be made, fast, if one can stay in until just before the bubble bursts and then get out (investors who are not as smart see money being made and jump in, usually too late, and fail to jump out). We saw in the 1990s that the lure of a fast buck was not overcome by messages concerning the dangers of what Federal Reserve Board Chairman Alan Greenspan called “irrational exuberance,” no matter how trusted (at least back then) the source. But even more fundamentally, the Austrian perspective counsels politicians to do nothing at a time when all their instincts are to show voters that the government is doing something. In later years, Hayek proposed that the Fed be done away with and that the competitive issue of private currency by banks be put in its place. This alternative has been trumpeted by certain present-day Austrian economists, and such ideas need to be more widely disseminated and debated. But for those who do not want to go into the intricacies of alternative monetary regimes, it is simply important to recognize that the Austrian message was not popular in the 1930s, is not popular today, and will never be popular. Rather than argue directly for it, perhaps a better strategy is to warn of the dangers of Keynesian economics. Theme #2: The 1970s and Why Keynesian Economics Was Rejected The 1970s experience is what got Hayek writing about macroeconomics again. It provided for him the quintessential example of the dangers of scientism—the idea that the purported methods of the natural sciences are equally applicable to social phenomena.[4] He derided the idea that we can engineer the macroeconomy as engineers design a bridge. And as noted above, it was in response to the inflation of the 1970s that he was led to pen his controversial, if too little appreciated, pamphlet “The Denationalization of Money.” There were good reasons why Keynesianism went into eclipse. Though the theory had entered academia decades earlier, the first real experiment with Keynesian demand management policy was the 1964 Kennedy–Johnson tax cut, and it worked like a charm. Economists began to talk about “fine-tuning” the economy—a wonderful metaphor, conjuring up the images of a skilled technician working on a finely tuned machine and also, perhaps, the “fine-tuning” of FM radio, the latter appealing to the innate good taste of the intelligentsia. The heyday did not last long. When inflation began to appear in the late 1960s due to LBJ’s deficits, a precisely calibrated income tax surcharge designed to tamp down demand was imposed. Yet because it was viewed as temporary, it had no effect, and inflation continued to rise. This was the first signal that the machine metaphor might have been the wrong one. Things got much worse in the 1970s as inflation turned into stagflation. The main lesson of the 1970s was that once inflation gets started, it is very difficult to get rid of it. To fight it, the government has to tighten up the economy. This in turn induces unemployment, and because the effect on inflation is not immediate, for a time both the unemployment rate and the inflation rate go up together. This politically disastrous outcome led to all sorts of bizarre policy experiments: wage-price controls under Richard Nixon; “Whip Inflation Now” buttons under Gerald Ford; and Jimmy Carter’s malaise speech. The basic problem was that until Paul Volcker became chairman of the Federal Reserve in 1979, policymakers in the 1970s would start to restimulate the economy before inflation was fully driven out of the system, leading to a stop-go policy that was exacerbated by oil shocks and structural changes in the labor market (the entry of young people and women into the labor force). Stagflation was the end result, and it was not wrung out of the system until Volcker induced a very long and real recession—the worst one since the Great Depression and the one that our current downturn should be compared to. In short, the worst recession since the Great Depression was (1) consciously policy-induced and (2) made necessary by the failed attempts at activist, discretionary policy aimed at combating the business cycle during the previous decade and a half. It is hard to imagine a more vivid cautionary tale, and it explains why Keynesian demand management policy went so rapidly into eclipse three decades ago. Am I forecasting that stagflation will reoccur? No, because the economy is too complex to make any such prediction—another Hayekian insight (see my fifth point below).[5] But it is clear that if one puts record amounts of money into the financial system (as the Fed has done to provide liquidity) while the federal government runs record-breaking deficits which promise to exist far into the future, the chances of any plausible exit strategy working become quite remote. As Clive Crook of the Financial Times put it in July 2009, “What the stimulus gives, the debt projections take away.”[6] Theme #3: Some Regulation Is Necessary… How can we avoid such problems in the future? The answer that many would give is that we need more regulation. As Mark Calabria of the Cato Institute put it: “the growing narrative in Washington is that a decades-long unraveling of the regulatory system allowed and encouraged Wall Street to excess.”[7] Hayek faced an analogous dilemma in 1930s. Free-market capitalism had apparently collapsed, and the favored solution to the problems of the Depression was again more regulation, which then went under the rubric of “planning.” Indeed, his friend Lionel Robbins described planning as “the grand panacea of our age.”[8] The problem was, then as now, that the word “planning,” like the word “regulation,” can mean just about anything. Hayek’s strategy was not to deny the necessity of planning. After all, we all plan. It was rather to show how a certain type of planning—namely, central planning of the economy—if fully implemented, would lead to disastrous economic results and ultimately to restrictions on political and personal freedoms. He made this argument in his 1939 pamphlet “Freedom and the Economic System” and developed it further in his most famous work, The Road to Serfdom, published in 1944. In these works, as well as in other writings, Hayek made it clear that he was not advocating an alternative system of pure laissez-faire. The sort of planning that Hayek favored was a general system of rules, one that would best enable individuals to carry out their own plans. As he wrote: We can “plan” a system of general rules, equally applicable to all people and intended to be permanent (even if subject to revision with the growth of knowledge), which provides an institutional framework within which the decisions as to what to do and how to earn a living are left up to the individuals. In other words, we can plan a system in which individual initiative is given the widest possible scope and the best opportunity to bring about effective coordination of individual effort.[9] Hayek is talking here, as was his wont, at a very general level. In The Constitution of Liberty and other writings, he would provide a little more detail, laying out the set of social institutions that he thought would best enable individuals to utilize their own knowledge to carry out their own plans. These institutions included a market system, in a democratic polity, with a system of well-defined, enforced, and exchangeable property rights, protected by a strong constitution, and operating under the rule of law, in which laws are stable, predictable, and equally applied. Hayek’s goal was to enunciate a framework for the creation of a new form of liberalism appropriate for the 20th century and beyond. But what he came up with was still very general.[10] Even so, Hayek’s contribution here was to stress the importance of the institutional setting, and in that regard he was way ahead of his time. For markets to work effectively, they must be embedded in a set of complementary social institutions. The new institutional economics associated with the work of Douglass North, Ronald Coase, and Oliver Williamson, as well as the experimental work of Vernon Smith, all take off from this basic insight. Those institutions seem well secured in most of the developed world, but it is also true that they can be brought to ruin virtually overnight by a dictator. The experience of Zimbabwe under Robert Mugabe should be carefully examined by every student of development on the planet. It is a case study in how to dismantle a society, and each step that was taken there can be well described as a negation of one of the principles articulated in Hayek’s general vision for a liberal society. Theme #4: …But a Lot of Regulation Is Fraught with Problems and Will Make Matters Worse. Hayek was less diffident when it came to pointing out the problems with socialist planning, and many of his warnings are applicable, with very little tweaking, to our current situation. Hayek thought that a planned system with prices set by the government would always be playing catch-up with the rapid price adjustments that occur in a free-market system. In a like manner, regulation and legislation cannot keep up with market innovation. New sets of regulations and laws always target problems that arose in the last crisis. This does little to address the problems of the next crisis, and indeed the new regulations and laws sometimes make things worse. The basic Austrian insight here is that entrepreneurs (including those who realize there is money to be made from devising ways of getting around regulations) are always forward-looking, while regulators and legislators are almost of necessity backward-looking. Regulation also inserts uncertainty. As Hayek put it, “the more the state ‘plans,’ the more difficult planning becomes for the individual.”[11] There was plentiful evidence of this in the recent downturn. In the fall of 2008, each announcement by the Fed and the Department of the Treasury, while meant to reassure the markets, produced more and more panic. It also froze people into inaction. One could imagine the decision-making process that took place in many people’s minds: “Should I hold onto my house that is underwater, in the hopes of a government bailout? Should I buy a car now that the prices are low or wait for some government program that will cause them to fall even lower? A stimulus plan is coming, and I don’t know what it will look like; probably best to delay all decision-making for now, to wait and see.” Over and over again, we encounter examples of people basing their decisions on trying to guess what the government is going to do. Contrast this with what happens in well-functioning markets, where people make their decisions principally by looking at changes in market prices, prices that reflect underlying scarcities. A third problem is the tendency for even the most well-intentioned attempts at regulation to be hijacked by strong special interests that are able to bend the regulations or the laws to meet their needs. The examples of this are so everywhere evident—think of the explosion in the use of earmarks or the subsidization of ethanol—that further comment seems unnecessary. Certain types of legislation, often justified as helping those in need, simply encourage bad behavior, causing increased moral hazard and misaligned incentives. Bailing out those who took large risks—be they homeowners, firms, or bankers—is the standard recent example, as is the “too big to fail” philosophy more generally. About the latter, Hayek, writing in 1978, had this to say: We must finally mention another instance in which it is undeniable that the mere fact of bigness creates a highly undesirable position: namely where, because of the consequences of what happens to a big enterprise, government cannot afford to let such an enterprise fail.[12] He goes on to recommend that the best policy would be to deprive government of the power to provide such protection. At the time, he doubtless had in mind the federal government’s bailout of Chrysler. It is a sad irony, but perhaps predictable, that the very same arguments about being too big to fail were being made about the very same American industry some 30 years later. Another problem with regulation is: Who is to watch the regulators? The most notorious example here is probably still the inglorious episode of the Keating Five in 1989. The Austrians would note that the market provides its own very effective regulators that go by the names of profit and loss. Finally, and most basically, the desire to plan endangers liberty. Hayek argued passionately in the 1930s and 1940s that the nation’s uncritical enthusiasm for planning put at risk not only the successful operation of a market economy, but democracy and freedom as well. It is no less true today. He found it appropriate then to quote Benjamin Franklin, who said, “Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.”[13] (And are likely to get neither, we might add.) Hayek knew well that the urge to plan is always with us. He attributed this in his early work to the hubris of reason and traced its origins to the planning mentality and the scientistic pretensions of his age.[14] But as he pointed out in his 1933 address, in the past, the power of markets to organize human activity was revealed most dramatically when we witnessed the ill effects of attempts to regulate them.[15] This has been the experience of centuries and is another reason why the study of history is an essential component of a proper education. Theme #5: The Economy Is an Essentially Complex Phenomenon for Which Precise Forecasting—on Which the Construction of Rational Policy Depends—Is Ruled Out. Earlier, I refrained from forecasting the likely outcome of the injection of unprecedented amounts of money into the financial system together with a massive fiscal stimulus program. I did so because we simply do not know what will happen. In fact, it is hard enough even to assess past events. After the stimulus package passed and started to operate, the unemployment rate rose faster than had been predicted and indeed exceeded forecasts of what it would have been absent the stimulus (so much for forecasts). Paul Krugman’s response to this was that we needed a larger stimulus package. The response of most Republicans was that the rise in unemployment showed that a stimulus program that depends a lot on increased spending simply doesn’t work, and they recommended in its place tax cuts, arguing that they would work more quickly. Larry Summers, playing the role of the baby bear, said that the stimulus was just right. The point is: No one really knows. Each position is consistent with the evidence, and other reasonable explanations are indeed possible. For example, another plausible scenario is that the announcements that were made in fall 2008 concerning the dire condition of the economy—announcements aimed at getting a robust stimulus program passed—in fact caused the ensuing recession to be much worse than it would have been. The point is that we just can’t know. This knowledge problem is a huge obstacle to rational policymaking. When it is joined with other political and economic obstacles, the hope of getting rational policy out of Washington becomes very dim. We know, for example, that there is a lag between the time a problem in the economy is recognized and a policy response is developed, and another between the introduction of a policy and its actually taking effect. We have plentiful evidence that the political process sometimes subordinates the stabilization goal to other government policy goals or simply to the self-interested goals of Congressmen and Senators. We know that tax cuts, despite Republican rhetoric, sometimes get saved rather than spent and therefore have little stimulative impact. We know that lower interest rates will not accomplish much if banks are fearful of lending or firms are fearful of borrowing. As it used to be put, you can’t push on a string. In sum, the things that we actually do know all concern limitations on our knowledge and on our ability to formulate and carry out rational policy. It is important to be clear: This does not mean that policymakers cannot get things right when it comes to managing the economy as a whole. It is just that sometimes stabilization policy stabilizes the economy, and sometimes it destabilizes it, and we usually can’t tell in advance—and sometimes not even in retrospect—which scenario is unfolding or has unfolded. Theme #6: In Any Complex Social Order, Any Action May Have Both Good and Bad Unintended Consequences. Hayek talked a lot about the unintended consequences of intentional human action. Following Carl Menger, the founder of the Austrian School, he pointed out that many beneficial social institutions have emerged gradually and spontaneously throughout human history. No one, for example, invented language, perhaps the most useful and universal of human institutions, and indeed conscious attempts to construct a non-natural language—think of Esperanto—have been miserable failures. Other such institutions include money, the division of labor, trade, and the moral traditions that support a market system. These institutions have created social cooperation on a global scale, leading to enormous increases in material wealth, even though that outcome was not the intent of any individual participant. Indeed, each individual participant has only a tiny bit of knowledge that he brings to the whole process. I know how to wait tables, you know how to raise chick peas, someone else is a skilled worker in a linen factory; and from these people’s efforts and those of hundreds of thousands of others, every day, Paris gets fed, though it was no one’s plan, goal, intention, or desire to feed Paris. From Frédéric Bastiat to Leonard Read, many have marveled at this unintended miracle. Hayek often used the word “marvel” to describe the workings of the market mechanism.[16] The bad side of unintended consequences is that many attempts to impose our will on the complex adaptive system that is the economy cause things to happen that were not part of our original intention. For example, as everyone recognizes, a market system does not satisfy our longings for “social justice.”[17] In response, well-intentioned people—or those with interests who can play on the sentiments of the well-intentioned—naturally seek to make adjustments in a market system so as to produce more desirable results. Unfortunately, time and again, history has demonstrated that when aiming at certain ends, particularly when their achievement involves interfering with the workings of the price mechanism, all sorts of pernicious effects will occur that were not part of the original intention. Some of these patterns are so well established that they have worked their way into our basic economic reasoning. Hayek was not opposed to experimentation and change, which indeed is one of the driving forces in both the competitive market process and cultural evolution. He thought, though, that piecemeal change is always preferable to wholesale attempts to remake society anew, quoting to make his point Adam Smith’s wonderful lines from The Theory of Moral Sentiments on the dangers of “the man of system”: The man of system…seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard. He does not consider that the pieces upon the chessboard have no other principle of motion besides that which the hand impresses upon them; but that, in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.[18] When the man of system is also a man of genius, someone popular and well-trusted by the public who “declaims and insists, not only that the special improvement is a good thing in itself, but the best of all things, and the root of all other good things,” the situation becomes especially dire.[19] One suspects that Hayek would not have been sanguine about the recent campaign slogan “Change we can believe in.” Theme #7: Basic Economic Reasoning Captures What We Can Know and Say About the Essentially Complex Phenomenon That We Call the Economy. Hayek argued that, when dealing with spontaneous orders or other complex adaptive systems, often the best that we can do is to make pattern predictions or to offer explanations of the principle by which a phenomenon may work. His examples were usually drawn from areas other than economics. Thus, he explained that we all can understand the principle by which footpaths are formed even if we never observed one being created. He noted that the theory of evolution allows us to understand how speciation works and to rule out certain evolutionary changes, but it does not allow us to predict specific changes that will occur. What might constitute equivalent sorts of explanations or predictions in the domain of economics? In my view, the basic sorts of insights about the workings of a market order that economists teach in their introductory classes are what Hayek was talking about when he discussed “explanations of the principle” and “pattern predictions.” These insights have evolved slowly, emerging in the writings of the great economists of the past three centuries or so, and are now captured in such everyday classroom constructions as supply and demand curves and production possibility frontiers. These tools allow us to talk about the fundamental fact of scarcity, the choices that scarcity makes necessary, the costs of choice, and the ways to push back against scarcity, at which point the notions of the division of labor, specialization, comparative advantage, the productivity of capital, and the gains from trade are introduced. If one adds to these the concepts of elasticity of demand and supply, and some basic intuitions about market structures, one can explain a lot about the world, as anyone who has ever taught an introductory economics course knows. I say “basic intuitions” to emphasize that this does not have to be complicated; there is a reason why the introductory course is often labeled “Principles of Economics.” This course, if well taught, is probably the most important course that anyone who wants to understand how a market system works can take. It shows how markets work and also how they sometimes fail to work. It also helps one to identify which policy problems are real ones and which are pseudo-problems. For those, for example, who are worried about the world running out of a natural resource like oil, it shows how very effectively the unhindered market deals with such shortages (the price of oil rises, which encourages conservation on the demand side and makes profitable the search for new supplies of oil, as well as for substitutes, on the supply side). Many of the most compelling examples in a principles class, however, have to do with bad policy responses, and most of these involve some form of price-fixing. Case studies that look at the effects of minimum wage laws, agricultural price supports, rent controls, comparable worth policies, price ceilings on gasoline or natural gas, or laws prohibiting the resale of concert tickets all drive home the very predictable adverse effects of these policies. It is ironic that in a field in which forecasting is so difficult, the one area where it is relatively easy to predict results is when some form of price-fixing is involved. Indeed, in the case of price ceilings, the effects are so predictable that economists have come up with generic categories—the emergence of black markets, deterioration in product quality, and emergence of non-price mechanisms for allocation of the good—to describe the effects of the intervention. A good economics course will help to identify more appropriate policy responses—responses that utilize markets rather than fixing prices or trying to legislate specific outcomes. The entire field of “free market environmentalism,” with its emphasis on the establishment of property rights and the design of institutions that make the best use of market mechanisms, is a case in point. Last but not least, a good principles of economics class can serve as a counterweight to some of the widely held myths that pass as facts within the popular culture. Take the critique of “neoliberalism,” as recently articulated by Naomi Klein in her book The Shock Doctrine.[20] According to Klein, neoliberals embrace the shock doctrine: the idea that multinational corporations should enlist the power of national states during times of crisis (sometimes crises that they are complicit in fomenting) to impose a worldwide regime of free trade, thereby ensuring a steady supply of resources from less developed countries, a steady market for their goods worldwide, and a steady flow of profits to their owners. I would encourage anyone to read Klein’s book. Half of it could have been written by Murray Rothbard: I refer here to the places where she talks about the dangers to our liberties and economic freedoms when big states and big corporations collude, or where she documents, in sickening detail, case after case of states trampling on the civil liberties of their citizens, from Chile and Argentina to Russia and China. A good libertarian could take the facts documented in the book and construct a devastating case about the dangers of untrammeled state power. Unfortunately, Klein was raised by socialist parents in Canada and apparently never had an economics course. She makes the fantastical accusation that economists from the University of Chicago, and in particular Milton Friedman, developed the doctrine to support the power of corporations and their owners. She is exactly wrong, of course, about Friedman’s position. He supported free trade for a number of reasons, but a principal one was that it serves to limit the power of corporations. Rather than an extended argument, I will only offer here an anecdote to illuminate Friedman’s position. When I was in graduate school, I was fascinated with what happens when a few players dominate an industry. Markets work well when they are competitive, but what happens when an industry, like the U.S. automobile industry at the time—this was before the oil embargo and the subsequent increase in the price of gasoline brought the American automobile industry to its knees and to Washington to beg for protection—grows too powerful? How could such powerful firms be constrained? I got my answer one day when Milton Friedman came to speak at a nearby university. I chanced to run into him as he was leaving the auditorium after his talk, so I asked him his opinion on the matter. He turned to me, put his hand on my shoulder, and asked: “Given your knowledge of economics, what one policy could we implement that would limit the power of the automobile industry?” “Open up our markets to foreign competition?” I ventured. He smiled, patted me on the shoulder as if to say, “Good boy,” and went on his way. Sadly, this basic insight, that international trade is a way of constraining the power of large domestic firms, has little traction among the oceans of protesters who show up at every trade meeting. They do not realize that the policies they favor would, by granting them protection from foreign competition, make American corporations more powerful. Theme #8: The Cry for Social Justice Is Both Misguided and Dangerous. As noted above, Hayek recognized that a market system necessarily results in an unequal distribution of income. Many critics of markets cite disparities in income as prima facie evidence of a lack of fairness. Of course, the causes of income inequality are many and are rooted in differences in everything from initial endowments to effort to intelligence to luck. We usually do not think it unfair when someone who works hard succeeds, and only the most curmudgeonly among us would begrudge someone who has experienced a run of good luck, if only because we all wish it for ourselves. Still, the wide disparities in income that a market system inevitably fuels call for reform, for the imposition of some sort of egalitarian “social justice.” How might one respond? Must those who favor markets argue for social injustice? Hayek viewed the cry for social justice as both misguided and dangerous and offered a number of arguments against it. His first claim was that it was wrong even to apply the concept of “justice” to something like an impersonal market process. For Hayek, justice is an attribute of human conduct. As such, a person’s or an organization’s actions may be deemed just or unjust. The market process generates a specific income distribution, but since that distribution was not the result of anyone’s design, it is wrong to speak of it as just or unjust, just as it would be wrong to speak of, say, a misfortune like contracting a disease or losing a loved one as just or unjust.[21] A second argument invokes the rule of law, the notion that all people should be treated equally under the law. If we accept this principle, equal treatment of all, and then add the observation that people differ in their attributes, we are led naturally to the result that different people will experience different outcomes. Conversely, the only way to get similar outcomes for different people is to treat them differently. Egalitarianism of this sort goes against the rule of law and, more generally, against the idea that if we set up a game in which the procedural rules are viewed as fair, a particular outcome might be viewed as unfortunate, but it cannot rightly be judged to be unfair.[22] A third argument is that even if we were to accept the general desirability of some form of redistribution of income, the principles by which it might be made to work are unclear and often presume that we possess knowledge that we can never in fact possess. Take, for example, the notion that we should reward people according to “merit.” Hayek points out that merit typically is “not a matter of the objective outcome but of subjective effort. The attempt to achieve a valuable result may be highly meritorious but a complete failure, and full success may be entirely the result of accident and thus without merit.”[23] Thus, if we set up a merit system in which we rewarded people according to their efforts, regardless of outcome, those who were least skilled and therefore had to try the hardest would be rewarded the most, and those who achieved much by little effort, the least. If one is concerned with the total amount of goods produced, such a system is as perverse as one can imagine.[24] But leaving that aside, since merit is a matter of subjective effort, we could never have the knowledge necessary to determine which acts are in fact meritorious. Somewhat controversially in the eyes of certain Austrians and libertarians, Hayek argued that in a society that had reached the general level of wealth that Britain or the U.S. had achieved, “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” and also that the state should “assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision.”[25] He was, in short, in favor of some form of safety net, at least in 1944. By the 1970s, however, he worried about coalitions of organized interests, and often well-off special interests, that would use pleas for greater social justice to advance their own ends. Wherever one might come down on the desirability of a safety net, perhaps the strongest argument for a market system is that it has led to a better standard of living for literally billions of people worldwide. The point has been well made by Peter Saunders in his memorable piece “Why Capitalism Is Good for the Soul”: The way this [capitalism] has enhanced people’s capacity to lead a good life can be seen in the spectacular reduction in levels of global poverty, brought about by the spread of capitalism on a world scale. In 1820, 85% of the world’s population lived on today’s equivalent of less than a dollar per day. By 1950, this proportion had fallen to 50%. Today it is down to 20%.... In 1900, the average life expectancy in the “less developed countries” was just thirty years. By 1960, this had risen to forty-six years. By 1998, it was 65 years. To put this extraordinary achievement into perspective, the average life expectancy in the poorest countries at the end of the twentieth century was fifteen years longer than the average life expectancy in the richest country in the world—Britain—at the start of the century.[26] From this perspective, the extension of free markets, while leading to income inequality, simultaneously increases the total size of the pie to be shared and thereby benefits mankind as a whole. There are many ways to think about “social justice.” Advocates of markets would do well to emphasize benefits that extend to the world as a whole. Theme #9: The Basic Hayekian Insight—Freely Adjusting Market Prices Help Solve the Knowledge Problem and Allow Social Coordination. How has capitalism been able to accomplish so much in such a short time? For Hayek, the answer was that markets allow for the coordination of individual plans on a vast scale. Markets, in short, help to solve “the knowledge problem.” Hayek’s best articulation of the process is contained in his classic 1945 essay “The Use of Knowledge in Society.” He begins there by asking a very simple question: What problem must we solve if we want to construct a rational economic order? He points out that if (and he italicizes the if) we had all the relevant information about preferences, endowments, and technology, the problem would solve itself, as it would simply be a question of logic. In such a world, we could put everything into the hands of a central planner, who would then allocate resources and goods to their highest valued uses. All of the problems for constructing a rational economic order arise precisely because we do not have such information. Instead, in the real world, knowledge is dispersed among millions of people. Each person has a bit of localized knowledge, or what Hayek calls “knowledge of the particular circumstances of time and place.”[27] In the real world, it is also the case that some people are mistaken about what they think they know. The question that must be solved in constructing a rational economic order in such a world is: How can we use the knowledge that is dispersed among millions of fallible market agents so as to achieve some level of social coordination and cooperation? Hayek’s answer was that a market system with freely adjusting market-determined prices is, when embedded within an appropriate institutional structure, a marvelous mechanism for coordinating human action. As noted above, a free-market economy is a complex system. It is also an adaptive complex system, which helps to explain why it works. As Hayek illustrates with his famous tin example, whenever a change occurs somewhere in the system, price adjustments immediately signal millions of market participants that something has changed, and this causes some of them (those on the margin) to adjust their behavior, which of course sends further signals out into the system, causing further adjustments, ad infinitum.[28] As Hayek put it, “The whole acts as one market, not because any of its members survey the whole field, but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all.”[29] In a world that is filled with unpredictability, where “the man on the spot” has only his own small bit of local (and sometimes tacit) knowledge, market signals provide information on which he can base his decisions. His decisions, together with those of millions of others, feed into the system to form the prices that emerge. The actions of market participants are thereby simultaneously price-determined and price-determining. Bad decisions and mistakes are constantly made, but in a market system, errors made by some are opportunities for others, and the latter’s profit-seeking actions help to correct them. The self-regulating market system, when it is functioning well, reduces some of the unpredictability that we all face in the economic arena and helps to coordinate our actions with those of millions of others. It also allows individuals to act on their own local knowledge and thereby allows others to make use of that knowledge even though they do not posses the knowledge themselves. The flip side of Hayek’s insights provides a warning to those who seek to improve on markets. Two sorts of errors are possible. The first is not to recognize that for the vast coordination mechanism to work, agents must be allowed to act on their knowledge, and prices must be allowed to adjust freely. Many “reforms,” of course, do just the opposite, seeking to restrict entry into markets or to keep prices from adjusting on the grounds of protecting the consumer, assuring the quality of a product or service, supporting diversity or equity or balance or fairness, and so on. The second error lies in assuming that decision-makers have more knowledge than they in fact have. Hayek admitted that if we had more knowledge we could do a lot more to improve the world. But we don’t, and in the world we live in—a world of dispersed knowledge—much of the knowledge we actually do possess is due to the workings of the market mechanism. Theme #10: The Basic Public Choice Insight—More Often Than Not, Government Cures Are Not Only Worse Than the Disease, but Lead to Further Disease. Although some have occasionally identified public choice insights in the writings of Hayek and other Austrians, I think that it is fair to say that the public choice school is a separate though complementary intellectual development. Just how complementary it is will be evident once the following list of public choice insights has been outlined. A central claim concerns “the rationally ignorant voter,” by which I mean the voter who deems it to be in his interest not to stay informed. Since learning the various candidates’ positions on a host of issues is costly and the chances of an election turning on a single voter’s ballot are miniscule, many voters rationally choose not to be very informed about the issues. When one couples this with Bryan Caplan’s argument that public opinion generally favors policies that not only make voters feel good or moral or more American (for example, raising the minimum wage to fight poverty or attributing a rise in gasoline prices to the greed of oil corporations), but also make for policy outcomes that most economists and more educated voters view as pernicious (for example, increasing the incidence of unemployment among the least skilled workers or passing “excess profit tax” legislation that reduces the supply of domestically produced oil),[30] it is hard to feel much confidence in the policy that is generated in a democracy. From this perspective, politicians who seek to be re-elected are justified in supplying voters with the policies they want even though they are unsound. A second claim has to do with the effects of concentrated benefits and diffused costs on policymaking. Politicians frequently pay lip service to “the public good,” but if a politician is to be successful (that is, stay in office), he or she will typically support policy that is aimed at benefiting the well-organized and informed few rather than the unorganized and uninformed many. As a result, legislation tends to favor special interests over the public good, and once a policy is in place, it is nearly impossible to get rid of it. Public choice theorists believe that politicians, like everyone else, act in their own self-interest. If consumers maximize utility, firms maximize profits, and politicians maximize votes, what do bureaucrats maximize? The answer is troubling: Bureaucrats have an incentive to maximize the size of the bureaucracy under their control. Governments don’t shrink; they grow. Never has the triumph of hope over reality been better illustrated than by the steady stream of politicians who promise to pay for new programs by “reducing waste and inefficiency” in the existing government. In their wonderfully titled 1977 book Democracy in Deficit,[31] James Buchanan and Richard Wagner made the point that democratic politics leads naturally to deficits. Politicians typically insist that they intend to constrain the growth of government spending, but in reality they seldom are able to overcome (and, given the ignorance of the electorate, seldom need to do so) the natural incentives of increasing government spending and decreasing taxes. Can anyone remember a politician who campaigned successfully with a platform of raising taxes? The past 30 years have demonstrated this to be one of the few areas in which bipartisan endorsement of a basic principle has been nearly complete. For a case study of how difficult it is for politicians to actually cut government spending, even when they have a mandate to do so, one need only consult William Greider’s classic 1981 piece “The Education of David Stockman.”[32] While constantly mouthing the rhetoric of balanced budgets, Ronald Reagan offered up instead tax cuts and substantially smaller cuts in government spending and won two terms. When George H. W. Bush tried to balance the budget by raising taxes, he was excoriated by his own party and served only one term. After that, the policy of cutting taxes but leaving government spending intact became canonized in certain Republican circles under the cynical “starve the beast” philosophy. For a while, it seemed as if the only difference between the two major American parties was that the Democrats favored tax and spend, while the Republicans favored don’t tax and spend. This changed in 2008, when the Democrats began following the Republican mantra in spades. It seems that no one these days, with the exception of Libertarians and Ron Paul, speaks about a smaller government, period. Another central concept in the public choice literature is the notion of rent-seeking. Firms can compete successfully in two ways: directly, by producing a better product at a lower cost than their rivals, or indirectly, by getting the government to grant them an advantage over their rivals through the granting of subsidies or the imposition of licensing restrictions, taxes, tariffs, or quotas on their competitors. Given an expected level of added profits from getting the government to intervene, a firm would be justified in spending up to that amount in lobbying the government to do so. Such rent-seeking behavior is a waste of resources but takes place all the time. Gordon Tullock once asked: “[W]hy is the level of rent-seeking as small as it is?” Perhaps it is time for him to recalculate his estimates. We said above that the best regulator for market behavior is the carrot of profits and the stick of losses. No equivalent regulator exists when the government undertakes a project. Indeed, if a government program does not achieve its goals, the solution always seems to be: We just need to spend more money. Finally, it is evident that many government programs introduce moral hazard into the marketplace, undermining initiative and the taking of responsibility for actions. From welfare programs for the poor to welfare programs for the rich (the socialization of losses under the bailout programs being the most recent example of the latter), ubiquitous government intervention makes all of us more likely to seek a handout. The list of ills that public choice theorists have identified leads one to a general three-step principle that, if followed, can help to minimize the impact of government intervention.[33] In capsule form: Negotiation (as occurs in market exchange) is always preferable to adjudication. If negotiation fails, adjudication that clarifies rights is always preferable to regulation or legislation. Only if both negotiation and adjudication fail should one turn to regulation or legislation. Unfortunately, too often, regulation and legislation are the first and only step. In conclusion, if we combine the last two insights, we see that the Austrian economists and the public choice theorists deliver a one-two punch: We usually do not have the necessary knowledge to intervene effectively in the economy, and the political process is such that, even if we did, we still likely would get bad policy together with an ever-growing government sector. That is why the Austrian economists and the public choice theorists favor smaller government. Especially in today’s environment, their insights bear repetition.
7784	dbpedia	0	50	https://sticerd.lse.ac.uk/_new/about/history/lionel-robbins.asp	en	The Era of Lionel Robbins	https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/icons/sticerd.ico	https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/icons/sticerd.ico	[ "https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/logos/STICERD/touch-icon.png", "https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/logos/LSE_STICERD.gif", "https://sticerd.lse.ac.uk/scripts/_NEW2018/_assets/images/logos/STICERD/lse-rlab-print-logo.png" ]	[]	[]	[ "" ]	null	[]	null	STICERD, About, History, History of Economics, The Era of Lionel Robbins	en	/scripts/_NEW2018/_assets/images/icons/sticerd.ico		null	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.
7784	dbpedia	0	0	https://mises.org/articles-interest/biography-f-hayek-1899-1992	en	Biography of F. A. Hayek (1899-1992)	https://cdn.mises.org/st…pg?itok=ITApaJtO	https://cdn.mises.org/st…pg?itok=ITApaJtO	[ "https://cdn.mises.org/styles/responsive_4_3_650w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=ex6AkYmU 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=MZm8BjW_ 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=smqhJAMI 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=BQieFl6c 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=iZRc7PPy 1530w", "http://mises.org/images4/Hayek6.jpg", "http://mises.org/images4/Hayek4.jpg", "http://mises.org/images4/Hayek2.jpg", "http://mises.org/images4/Hayek3.jpg", "http://mises.org/images4/Hayek5.jpg", "http://mises.org/images4/Hayek7.jpg", "https://cdn.mises.org/styles/responsive_4_3_650w/s3/peter-klein_2023.jpg.webp?itok=lti7bAcc 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/peter-klein_2023.jpg.webp?itok=ITN9Zzvt 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/peter-klein_2023.jpg.webp?itok=XMh1xxxp 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/peter-klein_2023.jpg.webp?itok=iHxbzBgc 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/peter-klein_2023.jpg.webp?itok=CffTksmJ 1530w", "https://cdn.mises.org/styles/responsive_650w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=_yN9d85Q 650w,https://cdn.mises.org/styles/responsive_870w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=4mMxN_Nl 870w,https://cdn.mises.org/styles/responsive_1090w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=6MtQxVYY 1090w,https://cdn.mises.org/styles/responsive_1310w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=GcnJ_GBM 1310w,https://cdn.mises.org/styles/responsive_1530w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=iB7UWEt8 1530w", "https://mises.org/themes/custom/mises/components/elements/element-footer-charity/charity-navigator.png" ]	[]	[]	[ "" ]	null	[ "Peter G. Klein" ]	2007-08-01T01:00:00-05:00		en	/themes/custom/mises/favicon.ico	Mises Institute	https://mises.org/articles-interest/biography-f-hayek-1899-1992	“A claim for equality of material position can be met only by a government with totalitarian powers.” F. A. Hayek is undoubtedly the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian school theorists, Hayek was more successful than anyone else in spreading Austrian ideas throughout the English-speaking world. “When the definitive history of economic analysis during the 1930s comes to be written,” said John Hicks in 1967, “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, p. 203). Unfortunately, Hayek’s theory of the business cycle was eventually swept aside by the Keynesian revolution. Ultimately, however, this work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes. Life and Work Hayek’s life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge, England). Though he was enrolled as a law student, his primary interests were economics and psychology, the latter due to the influence of Mach’s theory of perception on Wieser and Wieser’s colleague Othmar Spann, and the former stemming from the reformist ideal of Fabian socialism so typical of Hayek’s generation. Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions--the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. “To none of us young men who read the book when it appeared,” Hayek recalled, “the world was ever the same again” (Hayek, 1956, p. 133). Socialism, an elaboration of Mises’s pioneering article from two years before, argued that economic calculation requires a market for the means of production; without such a market there is no way to establish the values of those means and, consequently, no way to find their proper uses in production. Mises’s devastating attack on central planning converted Hayek to laissez-faire, along with contemporaries like Wilhelm Röpke, Lionel Robbins, and Bertil Ohlin. It was around this time that Hayek began attending Mises’s famed Privatseminar. Regular participants, who received no academic credit or other official recognition for their time, included Hayek, Gottfried Haberler, Fritz Machlup, Oskar Morgenstern, Paul Rosenstein-Rodan, Richard von Strigl, Karl Schlesinger, Felix Kaufmann, Alfred Schütz, Eric Voegelin, Karl Menger, Jr., and others not so famous. For several years the Privatseminar was the center of the economics community in Vienna, attracting such visitors as Robbins from London and Howard S. Ellis from Berkeley. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. Mises had done earlier work on monetary and banking theory, successfully applying the Austrian marginal utility principle to the value of money and then sketching a theory of industrial fluctuations based on the doctrines of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this last as a starting point for his own research on fluctuations, explaining the origin of the business cycle in terms of bank credit expansion and its transmission in terms of capital malinvestments. His work in this area eventually earned him an invitation to lecture at the London School of Economics and Political Science and then to occupy its Tooke Chair in Economics and Statistics, which he accepted in 1931. There he found himself among a vibrant and exciting group: Robbins, J. R. Hicks, Arnold Plant, Dennis Robertson, T. E. Gregory, Abba Lerner, Kenneth Boulding, and George Shackle, to name only the most prominent. Hayek brought his (to them) unfamiliar views, and gradually, the “Austrian” theory of the business cycle became known and accepted. At the L.S.E. Hayek lectured on Mises’s business-cycle theory, which he was refining and which, until Keynes’s General Theory came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes’s Treatise on Money. As one of Keynes’s leading professional adversaries, Hayek was well situated to provide a full refutation of the 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, p. 91). 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, p. 60; Hayek, 1966, pp. 240-41). Hayek thought a better course would be to produce a fuller elaboration of Böhm-Bawerk’s capital theory, and he began to devote his energies to this project. Unfortunately, The Pure Theory of Capital was not completed until 1941, and by then the Keynesian macro model had become firmly established. Within a very few years, however, the fortunes of the Austrian school suffered a dramatic reversal. First, the Austrian theory of capital, an integral part of the business-cycle theory, came under attack from the Italian-born Cambridge economist Piero Sraffa and the American Frank Knight, while the cycle theory itself was forgotten amid the enthusiasm for the General Theory. Second, beginning with Hayek’s move to London and continuing until the early 1940s, the Austrian economists left Vienna, for personal and then for political reasons, so that a school ceased to exist there as such. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek’s generation became prominent in the U.S.--Gottfried Haberler at Harvard, Fritz Machlup and Oskar Morgenstern at Princeton, Paul Rosenstein-Rodan at MIT--but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group: the economics department, led by Knight, Milton Friedman, and later George Stigler, was one of the best anywhere, and Aaron Director at the law school soon set up the first law and economics program. But economic theory, in particular its style of reasoning, was rapidly changing; Paul Samuelson’s Foundations had appeared in 1947, establishing physics as the science for economics to imitate, and Friedman’s 1953 essay on “positive economics” set a new standard for economic method. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and A ustrian economics entered a prolonged eclipse. Important work in the Austrian tradition was done during this period by Rothbard (1956, 1962, 1963a, 1963b), Kirzner (1963, 1966, 1973), and Lachmann (1956), but at least publicly, the Austrian tradition lay mostly dormant. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian school was suddenly and unexpectedly revived. While this was not the first event of the so-called “Austrian revival,” the memorable South Royalton conference having taken place earlier the same year, the rediscovery of Hayek by the economics profession was nonetheless a decisive event in the renaissance of Austrian economics. Hayek’s writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. Contributions to Economics Hayek’s legacy in economics is complex. Among mainstream economists, he is mainly known for his popular The Road to Serfdom (1944) and for his work on knowledge in the 1930s and 1940s (Hayek, 1937, 1945). Specialists in business-cycle theory recognize his early work on industrial fluctuations, and modern information theorists often acknowledge Hayek’s work on prices as signals, although his conclusions are typically disputed. Hayek’s work is also known in political philosophy (Hayek, 1960), legal theory (Hayek 1973-79), and psychology (Hayek, 1952). Within the Austrian school of economics, Hayek’s influence, while undeniably immense, has very recently become the subject of some controversy. His emphasis on spontaneous order and his work on complex systems has been widely influential among many Austrians. Others have preferred to stress Hayek’s work in technical economics, particularly on capital and the business cycle, citing a tension between some of Hayek’s and Mises’s views on the social order. (While Mises was a rationalist and a utilitarian, Hayek focused on the limits to reason, basing his defense of capitalism on its ability to use limited knowledge and learning by trial and error.) Business-cycle theory. Hayek’s writings on capital, money, and the business cycle are widely regarded as his most important contributions to economics (Hicks, 1967; Machlup, 1976). Building on Mises’s Theory of Money and Credit (1912), Hayek showed how fluctuations in economy-wide output and employment are related to the economy’s capital structure. In Prices and Production (1931) he introduced the famous “Hayekian triangles” to illustrate the relationship between the value of capital goods and their place in the temporal sequence of production. Because production takes time, factors of production must be committed in the present for making final goods that will have value only in the future after they are sold. However, capital is heterogeneous. As capital goods are used in production, they are transformed from general-purpose materials and components to intermediate products specific to particular final goods. Consequently, these assets cannot be easily redeployed to alternative uses if demands for final goods change. The central macroeconomic problem in a modern capital-using economy is thus one of intertemporal coordination: how can the allocation of resources between capital and consumer goods be aligned with consumers’ preferences between present and future consumption? In The Pure Theory of Capital (1941), perhaps his most ambitious work, Hayek describes how the economy’s structure of production depends on the characteristics of capital goods--durability, complementarity, substitutability, specificity, and so on. This structure can be described by the various “investment periods” of inputs, an extension of Böhm-Bawerk’s notion of “roundaboutness,” the degree to which production takes up resources over time. In Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933a) Hayek showed how monetary injections, by lowering the rate of interest below what Mises (following Wicksell) called its “natural rate,” distort the economy’s intertemporal 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. The Austrian theory, as developed by Mises and Hayek, focuses 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’ intertemporal 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’ intertemporal 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 e xpansion, 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’ intertemporal preferences. Knowledge, prices, and competition as a discovery procedure. Hayek’s writings on dispersed knowledge and spontaneous order are also widely known, but more controversial. 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, p. 78). 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.” 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, 1968a), by which this information is unknowingly transmitted throughout the economy as an unintended consequence of individuals’ pursuing their own ends. Indeed, Hayek’s (1948b) 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 (Kirzner, 1973; Machovec, 1995). 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, pp. 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 firm 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” (D. H. Robertson, quoted in Coase, 1937, p. 35). Most commentators view Hayek’s work on knowledge, discovery, and competition as an outgrowth of his participation in the socialist calculation debate of the 1920s and 1930s. The socialists erred, in Hayek’s view, in failing to see that the economy as a whole is necessarily a spontaneous order and can never be deliberately made over in the way that the operators of a planned order can exercise control over their organization. This is because planned orders can handle only problems of strictly limited complexity. Spontaneous orders, by contrast, tend to evolve through a process of natural selection, and therefore do not need to be designed or even understood by a single mind. Hayek and Austrian Economics Clearly, the Austrian revival owes as much to Hayek as to anyone. But are Hayek’s writings really “Austrian economics”--part of a separate, recognizable tradition--or should we regard them, instead, as an original, deeply personal, contribution? Some observers charge that Hayek’s later work, particularly after he began to turn away from technical economics, shows more influence of his friend Sir Karl Popper than of Carl Menger or Mises: one critic speaks of “Hayek I” and “Hayek II”; another writes on “Hayek’s Transformation.” It is true that Popper had a significant impact on Hayek’s mature thought. Of greater interest is the precise nature of Hayek’s relationship with Mises. Undoubtedly, no economist has had a greater impact on Hayek’s thinking than Mises--not even Wieser, from whom Hayek learned his craft but who died in 1927 when Hayek was still a young man. In addition, Mises clearly considered Hayek the brightest of his generation. Yet, as Hayek (1978a) noted, he was from the beginning always something less than a pure follower: “Although I do owe [Mises] a decisive stimulus at a crucial point of my intellectual development, and continuous inspiration through a decade, I have perhaps most profited from his teaching because I was not initially his student at the university, an innocent young man who took his word for gospel, but came to him as a trained economist, versed in a parallel branch of Austrian economics [the Wieser branch] from which he gradually, but never completely, won me over.” Much has been written on Hayek’s and Mises’s views on the socialist calculation debate. The issue is whether a socialist economy is “impossible,” as Mises charged in 1920, or simply less efficient or more difficult to implement. Hayek (1992, p. 127) maintained later that Mises’s “central thesis was not, as it is sometimes misleadingly put, that socialism is impossible, but that it cannot achieve an efficient utilization of resources.” That interpretation is itself subject to dispute. Hayek is arguing here against the standard view on economic calculation, found for instance in Schumpeter (1942, pp. 172-186) or Bergson (1948). This view holds that Mises’s original statement of the impossibility of economic calculation under socialism was refuted by Oskar Lange, Fred Taylor, and Abba Lerner, and that later modifications by Hayek and Robbins amounted to an admission that a socialist economy is possible in theory but difficult in practice because knowledge is decentralized and incentives are weak. Hayek’s response in the cited text, that Mises’s actual position has been exaggerated, receives support from the primary revisionist historian of the calculation debate, Don Lavoie, who states that the “central arguments advanced by Hayek and Robbins did not constitute a ‘retreat’ from Mises, but rather a clarification directing the challenge to the later versions of central planning . . . Although comments by both Hayek and Robbins about computational difficulties of the [later approaches] were responsible for misleading interpretations of their arguments, in fact their main contributions were fully consistent with Mises’s challenge” (Lavoie, 1985, p. 20). Kirzner (1988) similarly contends that Mises’s and Hayek’s positions should be viewed together as an early attempt to elaborate the Austrian “entrepreneurial-discovery” view of the market process. Salerno (1990a) argues, by contrast, in favor of the traditional view--that Mises’s original calculation problem is different from the discovery-process problem emphasized b y Lavoie and Kirzner. Furthermore, Hayek’s later emphasis on group selection and spontaneous order is not shared by Mises, although there are elements of this line of thought in Menger. A clue to this difference is in Hayek’s (1978a) statement that “Mises himself was still much more a child of the rationalist tradition of the Enlightenment and of continental, rather than of English, liberalism . . . than I am myself.” This is a reference to the “two types of liberalism” to which Hayek frequently refers: the continental rationalist or utilitarian tradition, which emphasizes reason and man’s ability to shape his surroundings, and the English common-law tradition, which stresses the limits to reason and the “spontaneous” forces of evolution. Recently, the relationship between Mises and Hayek has become a full-fledged “de-homogenization” debate. Salerno (1990a, 1990b, 1993, 1994) and Rothbard (1991, 1995) see Hayek’s emphasis on knowledge and discovery as substantially different from Mises’s emphasis on purposeful human action. Salerno (1993), for example, argues that there are two strands of modern Austrian economics, both descended from Menger. One, the Wieser-Hayek strand, focuses on dispersed knowledge and the price system as a device for communicating knowledge. Another, the Böhm-Bawerk-Mises strand, focuses on monetary calculation (or “appraisal,” meaning anticipation of future prices) based on existing money prices. Kirzner (1995a, 1995b, 1996, 1997) and Yeager (1994, 1995) argue, by contrast, that the differences between Hayek and Mises are more matters of emphasis and language than substance. Regardless, there is widespread agreement that Hayek ranks among the greatest members of the Austrian school, and among the leading economists of the twentieth century. His work continues to be influential in business-cycle theory, comparative economic systems, political and social philosophy, legal theory, and even cognitive psychology. Hayek’s writings are not always easy to follow--he describes himself as “puzzler” or “muddler” rather than a “master of his subject”--and this may have contributed to the variety of interpretations his work has aroused. Partly for this reason, Hayek remains one of the most intriguing intellectual figures of our time. References Bellante, Don, and Roger W. Garrison. 1988. “Phillips Curves and Hayekian Triangles: Two Perspectives on Monetary Dynamics.” History of Political Economy 20 (Summer): 207-34. Bergson, Abram. 1948. “Socialist Economics.” In Howard S. Ellis, ed., A Survey of Contemporary Economics. Vol. 1. Homewood, Ill.: Richard D. Irwin, pp. 412-48. Blaug, Mark. 1993. “Hayek Revisited.” Critical Review 7, no. 1: 51-60. Boettke, Peter J. 1997. “Economic Calculation: The Austrian Contribution to Political Economy.” Advances in Austrian Economics, forthcoming. Caldwell, Bruce J. 1988. “Hayek’s Transformation.” History of Political Economy 20 (Winter): 513-41. Caldwell, Bruce J. 1995. “Introduction.” In Hayek, 1995, pp. 1-48. Caldwell, Bruce J. 1997. “Hayek and Socialism.” Journal of Economic Literature 35, no. 4 (December): 1856-90. Coase, Ronald H. 1937. “The Nature of the Firm.” Economica (N.S.) 4: 386-405. Reprinted in idem., The Firm, the Market, and the Law. Chicago: University of Chicago Press, 1988, pp. 33-55. Craver, Earlene. 1986. “The Emigration of the Austrian Economists.” History of Political Economy 18, no. 1: 1-32. Dolan, Edwin G., ed. 1976. The Foundations of Modern Austrian Economics. Kansas City: Sheed & Ward. Ekelund, Robert B. 1986. “Wieser’s Social Economics: A Link to Modern Austrian Theory?” Austrian Economics Newsletter 6 (Fall): 1-2, 4, 9-11. Farrell, Joseph, and Patrick Bolton. 1990. “Decentralization, Duplication, and Delay.” Journal of Political Economy 98, no. 4: 803-26. Fehl, Ulrich. 1986. “Spontaneous Order and the Subjectivity of Expectations: A Contribution to the Lachmann-O’Driscoll Problem.” In Israel M. Kirzner, ed., Subjectivism, Intelligibility, and Economic Understanding. New York: New York University Press, pp. 72-86. Foss, Nicolai J. 1994. The Austrian School and Modern Economics: A Reassessment. Copenhagen: Handelshøjskolens Forlag. Garrison, Roger W. 1978. “Austrian Macroeconomics: A Diagrammatical Exposition.” In Spadaro, 1978, pp. 167-204. Garrison, Roger W. 1984. “Time and Money: The Universals of Macroeconomic Theorizing.” Journal of Macroeconomics 6, no. 2 (Spring): 197-213. Garrison, Roger W., and Israel M. Kirzner. 1987. “Hayek, Friedrich August von.” In John Eatwell, Murray Milgate, and Peter Newman, eds., The New Palgrave Dictionary of Economics. Vol. 2. London: Macmillan, pp. 609-14. Gray, John. 1984. Hayek on Liberty. Second edition. Oxford: Basil Blackwell, 1986. Grossman, Sanford J. 1980. “On the Impossibility of Informationally Efficient Markets.” American Economic Review 70, no. 3 (June): 393-408. Grossman, Sanford J. 1989. The Informational Role of Prices. Cambridge, Mass., and London: MIT Press. Grossman, Sanford J., and Joseph E. Stiglitz. 1976. “Information and Competitive Price Systems.” American Economic Review 66, no. 2 (May): 246-53. Hayek, F. A. 1931. Prices and Production. London: Routledge & Sons. Second revised edition, London: Routledge & Kegan Paul, 1935. Hayek, F. A. 1933a. Monetary Theory and the Trade Cycle. London: Jonathan Cape. Hayek, F. A. 1933b. “The Trend of Economic Thinking.” Economica 13: 121-37. Reprinted in Hayek, 1991, pp. 17-34. Hayek, F. A. 1937. “Economics and Knowledge.” Economica N.S. 4: 33-54. Reprinted in Hayek, 1948a, pp. 33-56. Hayek, F. A. 1939. “Price Expectations, Monetary Disturbances, and Malinvestments.” In Hayek, Profits, Interest, and Investment. London: Routledge and Kegan Paul, pp. 135-56. 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. “The Use of Knowledge in Society.” American Economic Review 35 (September): 519-30. Reprinted in Hayek, 1948a, pp. 77-91. Hayek, F. A. 1948a. Individualism and Economic Order. Chicago: University of Chicago Press. Hayek, F. A. 1948b. “The Meaning of Competition.” In Hayek, 1948a, pp. 92-106. Hayek, F. A. 1952. The Sensory Order. Chicago: University of Chicago Press. Hayek, F. A. 1956. “In Honour of Professor Mises.” In Hayek, 1992, pp. 129-36. Hayek, F. A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press. Hayek, F. A. 1963. “The Economics of the 1930s as Seen from London.” In Hayek, 1995, pp. 49-73. Hayek, F. A. 1966. “Personal Recollections of Keynes and the ‘Keynesian Revolution.’” In Hayek, 1995, pp. 240-46. Hayek, F. A. 1968a. “Competition as a Discovery Procedure.” In Hayek, 1978b, pp. 179-90. Hayek, F. A. 1968b. “The Confusion of Language in Political Thought.” In Hayek, 1978b, pp. 71-97. Hayek, F. A. 1973-79. Law, Legislation, and Liberty. Three volumes. Chicago: University of Chicago Press. Hayek, F. A. 1975. “Two Types of Mind.” In Hayek, The Trend of Economic Thinking. Edited by W. W. Bartley III and Stephen Kresge. Vol. 3 of The Collected Works of F. A. Hayek. London: Routledge, and Chicago: University of Chicago Press, 1991, pp. 49-55. Hayek, F. A. 1976. Denationalisation of Money : An Analysis of the Theory and Practice of Concurrent Currencies. London: Institute of Economic Affairs. Hayek, F. A. 1978a. “Coping with Ignorance.” Imprimis 7, no. 7 (July): 1-6. Reprinted in Champions of Freedom. Hillsdale, Mich.: Hillsdale College Press, 1979. Hayek, F. A. 1978b. New Studies in Philosophy, Politics and Economics. Chicago: University of Chicago Press. Hayek, F. A. 1988. The Fatal Conceit: The Errors of Socialism. Edited by W. W. Bartley III. Vol. 1 of The Collected Works of F. A. Hayek. London: Routledge, and Chicago: University of Chicago Press, 1989. Hayek, F. A. 1991. The Trend of Economic Thinking: Essays on Political Economists and Economic History. Edited by 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. 1994. Hayek on Hayek: An Autobiographical Dialogue. Edited by Stephen Kresge and Leif Wenar. Chicago: University of Chicago Press, and London: Routledge. Hayek, F. A. 1995. Contra Keynes and Cambridge: Essays, Correspondence. Edited by Bruce Caldwell. Vol. 9 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge. Hayek, F. A. 1997. Socialism and War: Essays, Documents, Reviews. Edited by Bruce Caldwell. Vol. 10 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge. Herbener, Jeffrey M. 1991. “Ludwig von Mises and the Austrian School of Economics.” Review of Austrian Economics 5, no. 2: 33-50. Herbener, Jeffrey M. 1996. “Calculation and the Question of Arithmetic.” Review of Austrian Economics 9, no. 1: 151-62. Hicks, Sir John. 1967. Critical Essays in Monetary Theory. Oxford: Clarendon Press. Hoppe, Hans-Hermann. 1996. “Socialism: A Property or Knowledge Problem?” Review of Austrian Economics 9, no. 1: 143-49. Hutchison, T. W. 1984. “Austrians on Philosophy and Method (since Menger).” In idem., The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians. New York and London: New York University Press, pp. 203-32. Kirzner, Israel M. 1963. Market Theory and the Price System. Princeton: Van Nostrand. Kirzner, Israel M. 1966. An Essay on Capital. New York: Augustus M. Kelley. Kirzner, Israel M. 1973. Competition and Entrepreneurship. Chicago: University of Chicago Press. Kirzner, Israel M. 1988. “The Socialist Calculation Debate: Lessons for Austrians.” Review of Austrian Economics 2: 1-18. Kirzner, Israel M. 1995a. “Introduction.” In idem., ed., Classics in Austrian Economics: A Sampling in the History of a Tradition. Vol. 3. London: William Pickering, pp. vii-xvii. Kirzner, Israel M. 1995b. Review of Jack Birner and Rudy Van Zijp, Hayek, Co-ordination, and Evolution. Southern Economic Journal 61, no. 4 (April): 1243-44. Kirzner, Israel M. 1996. “Reflections on the Misesian Legacy in Economics.” Review of Austrian Economics 9, no. 2: 143-54. Kirzner, Israel M. 1997. “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach.” Journal of Economic Literature 35, no. 1 (March): 60-85. Klein, Peter G. 1992. “Introduction.” In Hayek, 1992, pp. 1-15. Klein, Peter G. 1996. “Economic Calculation and the Limits of Organization.” Review of Austrian Economics 9, no. 2: 51-77. Lachmann, Ludwig. 1956. Capital and Its Structure. Kansas City: Sheed Andrews and McMeel. Lavoie, Don. 1985. Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. Cambridge: Cambridge University Press. Lucas, Robert E. 1977. “Understanding Business Cycles.” In idem., Studies in Business-Cycle Theory. Cambridge, Mass.: MIT Press, 1981. Machlup, Fritz. 1976. “Hayek’s Contributions to Economics.” In idem., ed., Essays on Hayek. Hillsdale, Mich.: Hillsdale College Press, pp. 13-59. Machovec, Frank M. 1995. Perfect Competition and the Transformation of Economics. London: Routledge. McCormick, Brian J. 1992. Hayek and the Keynesian Avalanche. New York: St. Martin’s Press. Mises, Ludwig von. 1912. The Theory of Money and Credit. New Haven: Yale University Press, 1953. Mises, Margit von. 1984. My Years with Ludwig von Mises. Second enlarged edition. Cedar Falls, Iowa: Center for Futures Education. O’Driscoll, Gerald P., Jr. 1977. Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City: Sheed Andrews & McMeel. Rothbard, Murray N. 1956. “Toward a Reconstruction of Utility and Welfare Economics.” In Mary Sennholz, ed., On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: Van Nostrand, pp. 224-62. Rothbard, Murray N. 1962. Man, Economy, and State. Auburn, Ala.: Ludwig von Mises Institute, 1993. Rothbard, Murray N. 1963a. America’s Great Depression. Second revised edition. New York: Richardson and Snyder, 1983. Rothbard, Murray N. 1963b. What Has Government Done to Our Money? Auburn, Ala.: Ludwig von Mises Institute, 1990. Rothbard, Murray N. 1991. “The End of Socialism and the Calculation Debate Revisited.” Review of Austrian Economics 5, no. 2: 51-76. Rothbard, Murray N. 1994. Review of Bruce Caldwell and Stephan Boehm, eds., Austrian Economics: Tensions and New Directions. Southern Economic Journal 61, no. 2 (October): 559-60. Rothbard, Murray N. 1995. “The Present State of Austrian Economics.” In idem., The Logic of Action. Cheltenham, U.K.: Edward Elgar, 1997, vol. 1, pp. 111-72. Salerno, Joseph T. 1990a. “Ludwig von Mises as Social Rationalist.” Review of Austrian Economics 4: 26-54. Salerno, Joseph T. 1990b. “Postscript: Why a Socialist Economy Is ‘Impossible.’” In Ludwig von Mises, Economic Calculation in the Socialist Commonwealth. Auburn, Ala.: Ludwig von Mises Institute, pp. 51-71. Salerno, Joseph T. 1993. “Mises and Hayek Dehomogenized.” Review of Austrian Economics 6, no. 2: 113-46. Salerno, Joseph T. 1994. “Reply to Leland B. Yeager.” Review of Austrian Economics 7, no. 2: 111-25. Salerno, Joseph T. 1996a. “A Final Word: Calculation, Knowledge, and Appraisement.” Review of Austrian Economics 9, no. 1: 141-42. Salerno, Joseph T. 1996b. “Why We’re Winning: An Interview with Joseph T. Salerno.” Austrian Economics Newsletter 16, no. 3 (Fall): 1-8. Schumpeter, Joseph A. 1942. Capitalism, Socialism, and Democracy. New York: Harper & Row. Spadaro, Louis M., ed. 1978. New Directions in Austrian Economics. Kansas City: Sheed Andrews & McMeel, 1978. Van Zijp, Rudy. 1993. Austrian and New Classical Business Cycle Theories: A Comparative Study Through the Method of Rational Reconstruction. Brookfield, Vt.: Edward Elgar. Vanberg, Viktor J. 1994. “Spontaneous Market Order and Social Rules: A Critical Examination of F. A. Hayek’s Theory of Cultural Evolution.” In idem., Rules and Choice in Economics. London and New York: Routledge, pp. 75-94. Vaughn, Karen I. 1996. Austrian Economics in America: The Migration of a Tradition. Cambridge: Cambridge University Press. White, Lawrence H. 1996. “Hayek’s Pure Theory of Capital.“ Unpublished manuscript. Department of Economics, University of Georgia. White, Lawrence H. 1997. “Why Didn’t Hayek Favor Laissez-Faire in Banking?” History of Political Economy, forthcoming. Williamson, Oliver E. 1991. “Economic Institutions: Spontaneous and Intentional Governance.” Journal of Law, Economics and Organization 7 (special issue):159-87. Yeager, Leland B. 1994. “Mises and Hayek on Calculation and Knowledge.” Review of Austrian Economics 7, no. 2: 93-109. Yeager, Leland B. 1995. “Rejoinder: Salerno on Calculation, Knowledge, and Appraisement.” Review of Austrian Economics 9, no.1: 137-39.
7784	dbpedia	2	65	https://iea.org.uk/noble-prizing-winning-economists/f-a-hayek/	en	F.A Hayek	https://iea.org.uk/wp-co…/placeholder.jpg	https://iea.org.uk/wp-co…/placeholder.jpg	[ "https://iea.org.uk/wp-content/uploads/2022/03/iea-logo.png" ]	[]	[]	[ "" ]	null	[]	2022-03-29T10:12:29+00:00	Friedrich August von Hayek was an Austrian-born economist who is widely recognised for his influence on the development of the field of economics.	en	https://iea.org.uk/wp-co…a-logo-32x32.png	Institute of Economic Affairs	https://iea.org.uk/noble-prizing-winning-economists/f-a-hayek/	Friedrich August von Hayek was an Austrian-born economist who is widely recognised for his influence on the development of the field of economics. A veteran of World War I, he received doctoral degrees in law and political science from the University of Vienna in 1921 and 1923, respectively. Several of Hayek’s books, including The Road to Serfdom (1944) and The Constitution of Liberty (1960), remain some of the most influential works among modern liberals and indeed in the field of economics as a whole. In the former, Hayek argued that collectivism inevitably leads to tyranny because power is passed from the individual to the state. He is considered to be among the leading theorists of the Austrian School of Economics, and alongside his reception of the Nobel Prize in 1974, he was appointed a Companion of Honour by Her Majesty the Queen on the advice of Margaret Thatcher and was awarded the Presidential Medal of Freedom by President George H.W. Bush. The Confusion of Language in Political Thought (1968) A Tiger by the Tail (1972) The Repercussions of Rent Restrictions (1972) Economic Freedom and Representative Government (1973) Inflation: The Path to Unemployment (1974) Full Employment at any Price? (1975) Denationalisation of Money (1976) Choice in Currency: A Way to Stop Inflation (1976) Will the Democratic Ideal Prevail? (1978) Trade Unions – The Biggest Obstacle (1980) 1980s Unemployment and the Unions (1984) Market Standards for Money (1986) The Road to Serfdom and Intellectuals and Society (2005)
7784	dbpedia	3	91	https://en.wikiquote.org/wiki/Friedrich_Hayek	en	Friedrich Hayek	https://upload.wikimedia…yek_portrait.jpg	https://upload.wikimedia…yek_portrait.jpg	[ "https://upload.wikimedia.org/wikipedia/commons/thumb/7/7f/Friedrich_Hayek_portrait.jpg/220px-Friedrich_Hayek_portrait.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/2/2f/Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg/168px-Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg", "https://upload.wikimedia.org/wikipedia/commons/a/a6/Hayek.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/d/dc/Flag_of_South_Africa_%281928-1982%29.svg/220px-Flag_of_South_Africa_%281928-1982%29.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/1/12/ApartheidSignEnglishAfrikaans.jpg/220px-ApartheidSignEnglishAfrikaans.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/a/a4/Flag_of_the_United_States.svg/220px-Flag_of_the_United_States.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/a/a9/Edward_Armitage_-_Julian_the_Apostate_presiding_at_a_conference_of_sectarian_-_1875.jpg/220px-Edward_Armitage_-_Julian_the_Apostate_presiding_at_a_conference_of_sectarian_-_1875.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/d/dc/Friedrich_August_von_Hayek_1981.jpg/220px-Friedrich_August_von_Hayek_1981.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/c/cc/Alice_%26_Red_Queen.jpg/220px-Alice_%26_Red_Queen.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/5/5a/Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981.jpg/220px-Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/8/84/Nasdaq_Composite_dot-com_bubble.svg/220px-Nasdaq_Composite_dot-com_bubble.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/f2/Neustifter_Friedhof_-_Friedrich_August_Hayek.jpg/220px-Neustifter_Friedhof_-_Friedrich_August_Hayek.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/8/80/Wikipedia-logo-v2.svg/50px-Wikipedia-logo-v2.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/4/4a/Commons-logo.svg/50px-Commons-logo.svg.png", "https://login.wikimedia.org/wiki/Special:CentralAutoLogin/start?type=1x1", "https://en.wikiquote.org/static/images/footer/wikimedia-button.svg", "https://en.wikiquote.org/static/images/footer/poweredby_mediawiki.svg" ]	[]	[]	[ "" ]	null	[ "Contributors to Wikimedia projects" ]	2005-02-19T10:47:25+00:00		en	/static/favicon/wikiquote.ico		https://en.wikiquote.org/wiki/Friedrich_Hayek	The misconception that costs determined prices prevented economists for a long time from recognizing that it was prices which operated as the indispensable signals telling producers what costs it was worth expending on the production of the various commodities and services, and not the other way around. It was the costs which they had expended which determined the prices of things produced. It was this crucial insight which finally broke through and established itself about a hundred years ago through the so-called marginal revolution in economics. The chief insight gained by modern economists is that the market is essentially an ordering mechanism, growing up without anybody wholly understanding it, that enables us to utilize widely dispersed information about the significance of circumstances of which we are mostly ignorant. However, the various planners (and not only the planners in the socialist camp) and dirigists have still not yet grasped this. "Coping with Ignorance," The Ludwig von Mises Memorial Lecture, Originally published in Imprimis 7 (Hillsdale, Michigan: Hillsdale College, July 1978). Later reprinted in Cheryl A. Yurchis (ed.) Champions of Freedom (The Ludwig von Mises Lecture Series Vol. 5; Hillsdale, Michigan: Hillsdale College Press, 1979). It seems to me more and more that the immense efforts which during the great popularity of macroeconomics over the last thirty or forty years have been devoted to it, were largely misspent, and that if we want to be useful in the future we shall have to be content to improve and spread the admittedly limited insights which microeconomics conveys. I believe it is only microeconomics which enables us to understand the crucial functions of the market process: that it enables us to make effective use of information about thousands of facts of which nobody can have full knowledge. "Coping with Ignorance," The Ludwig von Mises Memorial Lecture, Originally published in Imprimis 7 (Hillsdale, Michigan: Hillsdale College, July 1978). Later reprinted in Cheryl A. Yurchis (ed.) Champions of Freedom (The Ludwig von Mises Lecture Series Vol. 5; Hillsdale, Michigan: Hillsdale College Press, 1979). The basic problem is that there are three Hayeks: the--absolutely brilliant--price-system-as-information-aggregator Hayek. the--absolutely bonkers--business-cycle "liquidationist" Hayek. the--absolutely wrong--social-democracy-is-evil Hayek. The first was a genius. The second was a moron--his could never make his arguments cohere either conceptually or empirically, but he kept doubling down on them and wound up in infinite reputational bankruptcy. The third was wrong--I would say blinded ex ante by ideology, others would say proved wrong ex post by events. The problem is that the modern-day Hayekians are by-and-large uninterested in the good Hayek (1), and interested only in the bad Hayeks (2) and (3)... J. Bradford DeLong, "Daniel Davies Watches the Hayekian Yahoos Attack the Late Tony Judt" (May 16, 2012)
7784	dbpedia	1	67	https://www.cato.org/regulation/winter-2021/2022/future-economics-1930s	en				[]	[]	[]	[ "" ]	null	[]	null					null
7784	dbpedia	2	32	https://www.tutor2u.net/economics/reference/what-were-hayeks-key-contributions-to-economic-thought	en	What were Hayek's key contributions to economic thought?	https://tutor2u-net.imgi…=630&q=80&w=1200	https://tutor2u-net.imgi…=630&q=80&w=1200	[ "https://www.facebook.com/tr?id=1725202554432375&ev=PageView&noscript=1", "https://tutor2u-net.imgix.net/user-photos/gbr_profile.jpg?auto=compress%2Cformat&crop=focalpoint&fit=crop&fp-x=0.5&fp-y=0.5&h=100&q=80&w=100", "https://tutor2u-net.imgix.net/user-photos/gbr_profile.jpg?auto=compress%2Cformat&crop=focalpoint&fit=crop&fp-x=0.5&fp-y=0.5&h=100&q=80&w=100" ]	[]	[]	[ "" ]	null	[]	null	Friedrich Hayek was a prominent economist and social philosopher who made several key contributions to economic thought. His ideas have had a significant impact on the fields of economics, political philosophy, and social theory.	en	https://www.tutor2u.net/…e-touch-icon.png		https://www.tutor2u.net/economics/reference/what-were-hayeks-key-contributions-to-economic-thought	Friedrich Hayek was a prominent economist and social philosopher who made several key contributions to economic thought. His ideas have had a significant impact on the fields of economics, political philosophy, and social theory. Here are some of Hayek's key contributions: The Price System and Market Coordination: Hayek emphasized the role of the price system as a crucial information mechanism for coordinating economic activities in a decentralized manner. He argued that market prices convey knowledge about scarce resources and reflect the dispersed information held by individuals throughout the economy. According to Hayek, the price system allows for efficient resource allocation and economic coordination without relying on centralized planning. The Knowledge Problem and Economic Calculation: Hayek highlighted the inherent limitations of central planning due to the "knowledge problem." He argued that the vast and dispersed knowledge required for efficient allocation of resources is not available to any central authority. This knowledge is tacit, context-specific, and constantly changing, residing in the minds of individuals. As a result, Hayek emphasized the importance of decentralized decision-making and the market process in efficiently allocating resources. The Theory of Spontaneous Order: Hayek's concept of spontaneous order emphasizes that complex social systems, including economies, arise organically through the interactions of individuals, without intentional design. Hayek argued that social order emerges from individuals pursuing their own goals within a framework of rules and institutions. This idea challenges the notion that social order must be consciously constructed by central authorities. Individualism and Liberalism: Hayek defended the principles of individualism and liberalism, advocating for limited government intervention in the economy and society. He believed in the importance of personal freedom, individual rights, and the rule of law as foundational to a prosperous and just society. Hayek argued that interventions and attempts to impose comprehensive plans on society could lead to unintended consequences, undermine personal freedom, and hinder economic progress. The Constitution of Liberty: Hayek's influential book, "The Constitution of Liberty," provided a comprehensive defense of classical liberal principles. He argued that a liberal order based on individual freedom, private property rights, and the rule of law is essential for social cooperation, economic prosperity, and the preservation of individual dignity. Critique of Socialism: Hayek was a vocal critic of socialism and central planning. His most famous work on this topic is "The Road to Serfdom," where he argued that central planning inevitably leads to a loss of individual liberty and the rise of authoritarianism. Hayek warned about the dangers of concentrating economic and political power in the hands of a few, and he emphasized the importance of free markets and competition as a safeguard against tyranny. Hayek's ideas have had a lasting impact on economic thought, particularly in emphasizing the limitations of central planning, the importance of individual freedom and spontaneous order, and the role of markets in coordinating economic activities. His work continues to shape debates on economic policy, political philosophy, and the role of government in society. However, Hayek's ideas have also been criticized by economists who believe that the government should play a more active role in the economy.
7784	dbpedia	2	24	https://lindayueh.com/blog/f/friedrich-hayeks-devotion-to-free-markets	en	Friedrich Hayek's devotion to the free market	https://img1.wsimg.com/i…d6d0bc40b31f.jpg	https://img1.wsimg.com/i…d6d0bc40b31f.jpg	[]	[]	[]	[ "" ]	null	[ "Linda Yueh" ]	null	Weblink: https://www.the-tls.co.uk/articles/public/hayek-devotion-free-market/	en	//img1.wsimg.com/isteam/ip/static/pwa-app/logo-default.png/:/rs=w:57,h:57,m	Linda Yueh	https://lindayueh.com/blog/f/friedrich-hayeks-devotion-to-free-markets
7784	dbpedia	0	85	https://www.palgrave.com/gp/blogs/business-economics-finance-management/exploring-economic-history/lse-and-the-history-of-economic-thought	en	LSE and the History of Economic Thought	https://resource-cms.springernature.com/springer-cms/rest/v1/content/16537354/data/v3	https://resource-cms.springernature.com/springer-cms/rest/v1/content/16537354/data/v3	[ "https://www.palgrave.com/spcom/sites/palgrave/images/palgrave_logo_dark.png", "https://static.palgrave.com/spcom/sites/palgrave/images/palgrave_logo_dark.png", "https://resource-cms.springernature.com/springer-cms/rest/v1/content/15708590/data/v1", "https://static.palgrave.com/spcom/sites/palgrave/images/palgrave_logo_light.svg" ]	[]	[]	[ "" ]	null	[]	null	with Palgrave Macmillan	en	../../../../favicon.ico	www.palgrave.com	null	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.
7784	dbpedia	2	53	https://kids.kiddle.co/Friedrich_Hayek	en	Friedrich Hayek facts for kids	https://kids.kiddle.co/i…yek_portrait.jpg	https://kids.kiddle.co/i…yek_portrait.jpg	[ "https://kids.kiddle.co/images/wk/kids-robot.svg", "https://kids.kiddle.co/images/wk/kids-search-engine.svg", "https://kids.kiddle.co/images/7/7f/Friedrich_Hayek_portrait.jpg", "https://kids.kiddle.co/images/thumb/b/b0/Friedrich_von_Hayek_signature.gif/150px-Friedrich_von_Hayek_signature.gif", "https://kids.kiddle.co/images/thumb/4/43/Wien_-_Universit%C3%A4t_%282%29.JPG/240px-Wien_-_Universit%C3%A4t_%282%29.JPG", "https://kids.kiddle.co/images/thumb/7/77/LSE_main_entrance.jpg/300px-LSE_main_entrance.jpg", "https://kids.kiddle.co/images/thumb/9/93/The-Road-to-Serfdom-First-Edition1.jpg/300px-The-Road-to-Serfdom-First-Edition1.jpg", "https://kids.kiddle.co/images/thumb/1/1a/Harper_Midway_Chicago.jpg/330px-Harper_Midway_Chicago.jpg", "https://kids.kiddle.co/images/thumb/9/95/Freiburg_Breisgau_um_1900.jpg/260px-Freiburg_Breisgau_um_1900.jpg", "https://kids.kiddle.co/images/thumb/6/69/BuildingUniversitySalzburg1.jpg/260px-BuildingUniversitySalzburg1.jpg", "https://kids.kiddle.co/images/thumb/2/2f/Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg/300px-Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg", "https://kids.kiddle.co/images/thumb/a/a2/Business_cycle.jpg/200px-Business_cycle.jpg", "https://kids.kiddle.co/images/thumb/a/a0/World_Business_Cycle.png/200px-World_Business_Cycle.png", "https://kids.kiddle.co/images/thumb/2/27/Neustifter_Friedhof_-_Friedrich_August_Hayek_%28cropped%29.jpg/300px-Neustifter_Friedhof_-_Friedrich_August_Hayek_%28cropped%29.jpg", "https://kids.kiddle.co/images/thumb/5/5f/Kids_robot.svg/60px-Kids_robot.svg.png", "https://kids.kiddle.co/images/wk/kids-search-engine.svg" ]	[]	[]	[ "" ]	null	[]	null	Learn Friedrich Hayek facts for kids	en	/images/wk/favicon-16x16.png		https://kids.kiddle.co/Friedrich_Hayek	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
7784	dbpedia	1	10	https://webhome.auburn.edu/~garriro/strigl.htm	en	OVERCONSUMPTION AND FORCED SAVING			[ "https://webhome.auburn.edu/~garriro/hopelogo.gif", "https://webhome.auburn.edu/~garriro/hope01.gif", "https://webhome.auburn.edu/~garriro/hope02.gif", "https://webhome.auburn.edu/~garriro/hope03.gif", "https://webhome.auburn.edu/~garriro/hope04.gif" ]	[]	[]	[ "" ]	null	[ "Auburn User" ]	null					null	forthcoming in History of Political Economy vol. 36, no. 2 (summer) 2004 Overconsumption and Forced Saving in the Mises-Hayek Theory of the Business Cycle Roger W. Garrison ABSTRACT Overconsumption and forced saving, though seeming antonyms, are actually cognates that describe different phases of the business cycle, as variously understood by the Austrian economists. Recognizing the sense in which the two terms are conformable helps to resolve terminological and substantive differences within the Austrian school and to show why the term "forced saving" has been such an obstacle to understanding-both within and beyond that school. Accounting for overconsumption (as well as overinvestment) allows for some reconciliation between Austrian and mainstream views, while at the same time enhancing the internal logic of the Austrian theory. As an important aside, unperceived-or only dimly perceived-shortcomings in F. A. Hayek's theorizing may help explain why Hayek was largely ineffective in responding to his critics and why he failed to produce a timely and effective critique of Keynes's General Theory. The business cycle theory developed during the interwar period by Ludwig von Mises and Friedrich A. Hayek is a theory of the unsustainable boom. Responding to cheap-credit policies of the central bank, the economy can find itself on a growth path that is inconsistent with the underlying economic realities. (1) Internal tensions in the market forces that guide consumption and investment decisions eventually precipitate a bust. This understanding of the market process that takes the economy through boom and bust has come piecemeal and in a leapfrog progression in the writings of Mises and Hayek. Mises first gave the theory its Austrian identity in his Theory of Money and Credit ([1913] 1953, pp. 357-366). Clearly, the theory emerges as a combination of the interest-rate dynamics introduced by Swedish economist Knut Wicksell ([1898] 1962) and the Austrian capital theory outlined by Carl Menger ([1871] 1981) and developed by Eugen von Böhm-Bawerk ([1889] 1959). The divergence of the market rate of interest from the natural rate causes a misallocation of resources among the temporally sequenced stages of production. The "internal tensions," which become most pronounced at the upper turning point of the cycle, manifest themselves in Mises's original account as "counter-movements" in the prices of consumption goods relative to the prices of production goods. These relative prices fall during the boom but eventually rise, provoking corresponding counter-movements of resources and marking the economy's transition from boom to bust. In the mid 1920s, Hayek applied Mises' theory to the policy-driven boom in the United States. But having been persuaded by Gottfried Haberler that Mises's initial casting of the theory was too sketchy to serve this purpose, Hayek (1984, pp. 27-28) added a footnote of more than five-hundred words to set out his own version of Mises' theory. (2) The counter-movements in Hayek's account take the form of movements in the demand for raw materials in the early stages of production. When the rate of interest is artificially low, this demand is strengthened, but because of ultimate resource constraints and pressing demands elsewhere, it must eventually decline. A key analytical stepping stone in the development of the Austrian theory came with Hayek's 1931 lectures at the London School of Economics and his introduction of a graphical device for depicting the effects of a change in the rate of interest on the intertemporal allocation of resources. The Hayekian triangle depicted in Figure 1 keeps track of the relationship between (1) the economy's consumable output and (2) the time dimension of the production process from which that output emerges. This relationship is not fixed by technological considerations but rather can vary with changes in intertemporal preferences. Variation can also be induced�though not to the benefit of the economy's long-run macroeconomic health�by the central bank. In its simplest application, the two legs of this right triangle measure consumption and the corresponding production time (reckoned in the number of stages of production) for an economy that has achieved an intertemporal equilibrium. A primitive instance of this intertemporal equilibrium and of potential changes in it can be illustrated by a Robinson Crusoe who for some time is content to sustain himself by catching fish with the aid of little or no fishing equipment. A greater output of fish is possible but only if Crusoe is willing to take time away from fishing in order to fashion a net and possibly a boat. Consumable output would have to fall while the production process is being enhanced. Once the new, more capital intensive (and more time-consuming) process is completed, however, the level of output would rise above its initial level. The new intertemporal equilibrium can be depicted by a Hayekian triangle with a longer consumption leg, representing more fish, and a longer production-time leg, representing the increase in the time spent maintaining the new production process. The Hayekian triangle is intended to apply generally to the macroeconomy, a setting in which the decisions to forgo current consumables in order to be able to enjoy greater levels of consumption later and the decisions to alter the production process are made by different groups of individuals. The saving decisions of the first group affect the investment decisions of the second group through movements in the interest rate. A decision on the part of income earners to save more depresses the rate of interest. And with a lower interest rate, investment rises. This much follows straightforwardly from the pre-Keynesian loanable-funds theory, a theory relied upon in much of Mises's and Hayek's theorizing. Unique to the Austrian theory is the accompanying change in the intertemporal pattern of investments. A saving-induced lowering of the interest rate favors investments in the relatively early stages of production. Further, incentives to shift resources from late-stage activities to early-stage activities is reinforced by a pronounced derived-demand effect operating in the late stages: Reduced demand for current consumables, that is, for output of the final stage of production, translates into reduced demands for resources used in stages in close temporal proximity to the final stage. During the capital restructuring, the macroeconomy is depicted by a Hayekian triangle whose consumption leg is shortened and whose production-time leg is lengthened. The ultimate effect of the increased investment�and, importantly, the altered pattern of investment activities�is to shift consumable output forward in time. It is through just such adjustments in the face of reduced current consumption demand and a lower interest rate that the market economy, according to the Austrians, is able to bring investment decisions in line with the changed intertemporal preferences. Accordingly, policy actions by the central bank can distort the adjustment process, "forcing" behavior that is at odds with intertemporal preferences. Forced Saving or Overconsumption? The boom-bust cycle, in the Austrian view, is an instance in which the interest rate is lowered by a centrally directed credit expansion rather than by a change in intertemporal preferences. In Wicksellian terms, the market rate is pushed below the natural rate. The policy-induced lowering of the interest rate causes the economy to react in important respects as if the additional investment funds had been made available by voluntary saving. Hence, the corresponding increase in investment in the early stages of production gets labeled with the opposing term "forced saving": Resources are allocated (at least in the initial phases of the boom) in accordance with greater saving even though the saving implied by such an allocation is not at all voluntary�and even though saving in the more literal sense of abstaining from consumption has not increased at all. The term "forced saving" used in this way signals a conflict between consumers and producers and hints strongly that there will be trouble ahead. But the very fact that it is intertemporal markets that are thrown into disequilibrium means that time must elapse before the market process that allocates resources intertemporally turns conflict into crisis. Hayek's Prices and Production ([1935] 1967), which is the print version of his 1931 LSE lectures, details the sequence of boom and bust with the aid of this particular notion of forced saving. In Mises's subsequent exposition in Human Action (1966), forced saving takes on a substantially different meaning. Mises articulates a theory of boom and bust that is largely compatible with Hayek's formulation but not obviously so. The essential problem of the credit-induced boom is repeatedly summarized by Mises (1966, pp. 432, 470, 563, 564, 565, 467, 569, and 575) with variations of the phrase "malinvestment and overconsumption." The aspect of the problem identified by the first term of this phrase is recognized and emphasized by Hayek. The misallocation of resources�too many resources committed to the early stages of production�is the malinvestment. But what about the "overconsumption"? Can a macroeconomy experience forced saving and overconsumption at the same time or, at least, during the same boom? On the surface it would seem that the two terms are virtual antonyms. (3) A sorting out of their various meanings and applications to the different phases of the boom-bust sequence, however, can almost fully resolve the seeming contradiction and in the process produce a more thorough understanding of the Mises-Hayek theory of the business cycle. The notion that the boom is characterized by overconsumption also follows straightforwardly from the loanable-funds theory. The market for loanable funds�or, more inclusively, for investable resources�is equilibrated by movements in the interest rate, broadly conceived. An increase in saving would be depicted by a rightward shift in the supply of loanable funds. The market would take the economy down along the demand for loanable funds to a new equilibrium at which the interest rate is lower and both saving and investment are greater. While creating similar incentives for the business community, a credit expansion in the absence of an increase in saving would have ultimate consequences that are fundamentally different. With this policy-induced change in market conditions, the apparent rightward shift of the supply curve represents an increase in credit in the absence of an increase in saving. Saving is simply augmented by credit creation. Nonetheless, the rate of interest would fall and the business community would be enticed, at least initially and to some extent, to undertake greater investments and would tend to allocate the credit-financed resources to the early stages of production. But since saving, as still represented by the unaugmented supply curve, has not changed, the lower rate of interest means that the amount saved actually decreases. Only in the extreme and unlikely case of a perfectly inelastic supply of loanable funds would there be no decrease in saving. With an upward sloping supply, credit expansion causes the volume of saving to decrease�which is to say, it causes consumption to increase. This increase in consumption associated with a policy-induced decrease in the rate of interest is justifiably labeled by Mises as "overconsumption." Workers and other factor owners receiving increased incomes as a result of credit expansion will be induced to consume more than is implied by their pre-expansion intertemporal choices. There is an easy�though only partial�reconciliation between Mises's and Hayek's contrasting formulations. It comes from our recognition that Hayek's "forced saving," rather than being the antonym of "overconsumption," is actually a synonym for "malinvestment." With unduly favorable credit conditions, the business community is investing as if saving has increased when in fact saving has decreased. There is no contradiction here between Mises and Hayek but rather a contradiction recognized by both in the market forces associated with a credit-driven boom. It is this contradiction, if fact, that lies at the root of the boom's unsustainability. A fuller resolution of the differences between Mises and Hayek requires a closer look at "forced saving" and "overconsumption" as used by each. Forced Saving: A Problem or a (Partial) Solution? In his 1932 "Note on the Development of 'Forced Saving,'" Hayek ([139] 1975, pp. 183-197) traced this concept from Jeremy Bentham and Henry Thornton through J. S. Mill, Leon Walras, Knut Wicksell, and, though without so saying, to himself. According to Fritz Machlup (1963, p. 217), Joseph Schumpeter once considered the term "an extremely happy expression" [?!], but later saw it as a "misleading phrase" which "it is better to avoid." Machlup himself identified some thirty-four different meanings of forced saving. John Maynard Keynes found a use for the concept in his Treatise on Money (1930, vol. 1, p. 171), but in his General Theory ([1936] 1964, p. 79-81) he found the term virtually meaningless. There is no need to recount these many meanings and contrasting assessments here. Our concerns are relatively narrow ones, focusing largely on Hayek's use of the term (despite his own dissatisfaction with it) and on Mises alternative uses. Sometime between Hayek's survey of the term's use and Machlup's probing of economic semantics, the economics profession learned the importance of maintaining the distinction between "saving" and "investment." The words stand for two different activities such that saving and investment, in conditions of disequilibrium, can be of different magnitudes. This is a lesson that was learned or relearned while grappling with Keynes's General Theory, a book in which saving and investment are but two perspectives on the same magnitude and in which difficulties arise when saving is not equal to investment. The problem with Hayek's "forced saving," then, is that it presents itself syntactically as a kind of saving while referring contextually to a pattern of investment. Hayek himself was certainly alive to this point even as early as his Monetary Theory and the Trade Cycle. In a chapter titled "Unsettled Problems in Trade Cycle Theory," Hayek ([1928] 1975, p. 220) referred to the term as a "rather unfortunate expression." He preferred the phrase "artificially induced capital accumulation." In his subsequent "Note on the Development," Hayek ([1939] 1975, p. 197) mentions Keynes's avoidance of the term in his Treatise on Money: "Keynes ... rejects this terminology [forced saving] and prefers to speak simply of investment being in excess of saving; and there is much to be said in favor of this." But despite Hayek's and others' dissatisfaction with using the term to refer to a pattern of investment rather than a kind of saving, forced saving (both the term and the concept) has come to be considered the sine qua non of Austrian business cycle theory and particularly of Hayek's rendition of that theory. In his most mature discussion of the boom-bust sequence, Mises (1966, esp. pp. 548-565 and pp. 571-78) makes use of the term "forced saving" a dozen or more times, but he associates with it a meaning quite different from the one intended by Hayek. Ironically, the meaning adopted by Mises is similar to that assumed by Piero Sraffa (1932), Hayek's harshest critic. Credit expansion redistributes wealth away from workers, who tend to have low saving preferences, and toward entrepreneurs and capitalists, who tend to have high saving preferences. With wealth redistributed in this way, the total amount of saving may be greater than before and the corresponding natural rate of interest may be lower than before. Mises refers to this extra increment of saving as "forced saving" without explicitly recognizing that his use of the term is fundamentally different from Hayek's. This forced saving can support an extra increment of investment. But could considerations of wealth redistribution cause saving to be as great as it would have been had the economic expansion been initiated by a change in saving preferences rather than credit creation? Sraffa (1932, pp. 47-48) seems to think it would; at least, he charges Hayek with failing to prove that it wouldn't. Mises (1966, p. 549) argues in summary terms that it wouldn't. So, unlike Hayek's forced saving, the term in Mises's argument (as in Sraffa's) actually refers to a particular instance of saving rather than to a pattern of investment that is at odds with saving preferences. Mises differs from Sraffa, however, on the issue of the magnitude of such saving in comparison to the saving actually needed to see the policy-induced investments through to completion. Mises points out that it isn't necessarily true that such saving will be a positive amount, let alone a sufficient amount. The effect on total saving of a redistribution of wealth depends upon the particular pattern of the redistribution relative to the particular saving preferences of those who lost or gained wealth in the process. Further, the overconsumption, which Mises takes to be a characteristic of the boom, virtually guarantees that the net change in saving, if positive at all, is far short of sufficient. According to the summary statement offered by Mises (1966, pp. 575f), "it is very questionable whether forced saving can achieve more than to counterbalance a part of the capital consumption generated during the boom." Hayek ([1928] 1975, p. 226) was aware early on that the term was sometimes understood as a (partial) solution to the problem (a source of saving) rather than as the problem itself (an unsustainable pattern of investment): "[I]t is probably more proper to regard forced saving as the cause of economic crises than to expect it to restore a balanced structure of production" [emphasis original]. Overconsumption and then Forced Saving In a few instances, Mises uses "forced saving" in a way that is wholly unrelated to the redistribution of wealth that may accompany a credit-driven boom. In these instances, the term refers to an increase in saving near the end of the boom. Consumer goods have been in high demand during the boom but are now increasingly in short supply because so many resources have been committed to production processes that are yet to yield any consumable output. The prices of consumer goods are bid up, which according to Mises (1966, p. 556), "brings about the tendency toward forced saving." Reinforcing this tendency is the movement in the rate of interest during this same phase of the cycle (p. 558). Entrepreneurs who are trying to secure additional�but increasingly scarce�resources to see their projects through to completion are bidding up interest rates, a circumstance that provides an incentive for would-be consumers to save instead. (4) Used in this way, the concept of forced saving is wholly conformable with the concept of overconsumption. The two terms taken together suggest a pattern of consumption and saving that characterize the boom-bust cycle. As the boom begins, consumption demand is high relative to the pre-expansion level. Incomes earned by workers and other factors in the early stages of production are being spent on consumer goods. To the extent that this high consumption demand is met with increased allocations to the late stages of production, then resources are being doubly misallocated. Considerations of derived demand and of time discount are sending resources in opposite directions. The Hayekian triangle is being pulled at both ends against the middle. Production activities in the middle stages, which have been effectively raided because of high demands in both the early and late stages, eventually reach maturity�but with yields of consumer goods that are deficient with respect to both the boom phase and the pre-expansion economy. It is at this point that consumption falls, as it must, and saving increases. Framing the concept of forced saving in this way is not suggested by Hayek (who, as we will see, denied overconsumption) but is implicit in Mises. Interestingly, the notion of the production process being pulled at both ends against the middle is clearly set out by Richard Strigl as understood by Fritz Machlup (5). According to Strigl ([1934] 2000, pp.131): [A] prerequisite of any production using roundabout methods is, of course, the corresponding supply of consumer goods which can serve to support the originary factors of production. Here [in the case of credit expansion] we are confronted on the one hand with an expanded provision of consumer goods, and on the other, with an lengthening of the roundabout production methods. Both of these movements work together in such a way that the expansion in provisions occurs at the expense of the supply of capital.... [T]he consumption of capital only makes an expanded supply possible temporarily, but as a result of this consumption of capital, a continuous provision will not be possible to the same extent. At the same time, lengthening the roundabout methods of production requires that a perpetual supply from the previous stock of capital lasts in order to be able to bridge the time span until the end of the lengthened roundabout production process. In a simple formula: Expanding the production of consumer goods by consuming capital will further increase the difficulties which must result from lengthening the roundabout methods of production. In a 1933 lecture at Columbia University (see footnote 5), Machlup recast Strigl's formulation with an explicit reference to the stages of production that make up the Hayekian triangle: The additional credit causes an increased demand on the market for consumer goods without a substantial delay. The output of consumer goods is elastic, indeed, and simultaneous expansion of production in the construction goods industry and in the consumption goods industry takes place. We see at the same time symptoms of a lengthened and of a shortened production period, a swelling at both ends of the production structure at the expense of some middle parts of the stage system. The subsequent maturing of those middle stages is coincident with�and virtually synonymous with�forced saving. But neither Strigl nor Sraffa nor anyone else claims that this increase in saving could be sufficient to accommodate the increased demands by the business community. Funds�and resources�needed to complete the projects initiated during the boom are simply not available. This is the essence of the internal conflict in the market process set in motion by credit expansion. Just as overconsumption eventually begets forced saving, malinvestment eventually begets liquidation. Using the two pairs of terms in this way maintains the distinction between saving and investment while emphasizing the essential nature and temporal charactistics of the boom-bust cycle. Overconsumption, then, is not a denial of forced saving in the Hayekian sense but rather a compounding of the problem identified with that term. That is, the market conditions during the boom are even more untenable�less sustainable�than if saving were merely involuntary or than if saving had simply not increased. The problem created by forced saving (read: malinvestment) is compounded by a simultaneous decrease in saving (read: overconsumption). Mises ([1913] 1953, p. 362) was aware of this compounding of effects even in his earliest exposition, when he tended to think in terms of the classical economists' subsistence fund: A time must necessarily come when the means of subsistence available for consumption are all used up although the capital goods employed in production have not yet been transformed into consumption goods. This time must come all the more quickly inasmuch as the fall in the rate of interest weakens the motive for saving and slows up the rate of capital accumulation (emphasis added). Almost inexplicably, Hayek himself never gives play to the overconsumption that accompanies credit expansion or even acknowledges the possibility of it. (6) In connection with his discussion of Arthur Spiethoff's analysis, (7) Hayek ([1939] 1975, p. 172) refers to the scarcity of circulating capital that characterizes the end of the boom as "relative over-consumption." The "relative" appended here suggests that consumption is excessive only in comparison with the level consistent with the actual completion of the investment projects initiated during the boom. This term does not allow for consumption in excess of its pre-expansion level. For Hayek ([1928] 1975, p. 218-19), overconsumption seems to be ruled out by the very concept of forced saving: "This phenomenon, we are to understand, consists of an increase in capital creation at the cost of consumption, through the granting of additional credit, without voluntary action on the part of individuals who forgo consumption, and without their deriving any immediate benefit." (Hayek offered this statement as the "usual presentation," objecting to it only because it supposedly works through a change in the overall value of money rather than through a change in relative prices.) In Prices and Production, Hayek ([1935] 1967, p. 88) denied even the possibility of overconsumption in the sense later emphasized by Mises. His discussion of the situation created a by cheap-credit investment boom is to the point: "[A]s thing are, for some time, society as a whole will have to put up with an involuntary reduction of consumption." (8) Hayek does allow for an increase in consumer demand and for this increase having significant price effects, but he allows for no positive quantity effects in the early phases of the boom. It is as if the supply of consumption goods were in fact perfectly inelastic. He even allows for the increase in incomes of workers and other factor owners and for the resulting increases in consumption demands to drive the price of consumer goods still higher. Hayek ([1935] 1967, p. 89) insists, however, that during the boom, "these decisions [i.e., increased consumption demand] will not change the amount of consumers' goods immediately available." If we were to lay stress on the word "immediately," we could take Hayek to be making the simple and obvious point that these goods do not and cannot simply pop into existence; all production activities take time; resources have to be reallocated. Hayek's own emphasis, however, makes clear that his meaning is something different. For him, the eventual increased consumption characterizes the end of the boom. Using italics, he makes the "fundamental point" that the increase in consumer demand means "a new and reversed change of proportion between the demand for consumers' goods and the demand for producers' goods in favour of the former." In summary terms we can say that Hayek sees the boom-bust cycle as forced saving, which is eventually countered by intensified consumption demand; Mises sees the boom as malinvestment, which is immediately compounded by overconsumption. We now understand that Hayek's forced saving and Mises's malinvestment are the same thing. But how do we understand the contrast of views about the corresponding pattern of consumption? At this point there seems to be no room for reconciling the two views. We must ask instead: Which is more consistent with our understanding of the market forces set in motion by credit expansion? Several considerations suggest that Mises's view is the more consistent and the more plausible of the two. First, for Hayek's view to be correct, there must be an accounting of the time lag between the increased allocation of resources toward the early stages and the subsequent reallocation in the direction of late stages. Why wouldn't workers and other factor owners in the early stages spend their higher incomes on consumer goods almost immediately? And why wouldn't entrepreneurs respond to the increased demand so that there would be not only a price effect but also a quantity effect? These are the questions posed by John Hicks (1967) in his critique of Hayek's version of the theory. Hicks could find no basis for such a lag and thus concluded that the counter-movement of resources would set in almost immediately. The Hayekian business cycle would end just about as soon as it began. (9) Comparing Hayek with Mises (or Hayek and Strigl), we see that there is an alternative answer: While there is no lag between earning money (in the early stages) and spending it (on consumables), there is scope for both malinvestment and overconsumption to take place at once. Thinking strictly in terms of the Hayekian triangle, we can envision a pattern of reallocation in which both early and late stages get increased allocations at the expense of middle stages. This understanding of the market process set into motion by credit expansion helps dramatize the notion that malinvestment and overconsumption are compounding problems. And even beyond this two-way distortion of the intertemporal pattern of resource allocation, there is scope for temporary, i.e., unsustainable, increases in production all around. Both capital and labor can be employed more intensely than is possible on a sustainable basis. Routine maintenance of machinery can be postponed, and the machinery can be kept running more hours per day or more days per week than usual. A greater proportion of the population can be drawn into the labor force, some workers can work overtime, and others can postpone retirement. These considerations allow for the production of both investment goods and consumption goods to increase simultaneously but, of course, not on a sustainable basis. Second, Hayek may have allowed the "rather unfortunate expression," forced saving, to mislead him into the belief that income earners, like it or not, were actually saving. What else could he mean when he wrote, as quoted above, that "for some time, society as a whole will have to put up with an involuntary reduction of consumption"? To the extent that such reductions actually occurred, the resources would in fact be available to continue the credit-driven investment activities, and the subsequent crisis would be less severe. The problem is precisely that people do not forgo current consumption. The telling point, as recognized by Mises, is that the incentives they actually face are pushing in exactly the opposite direction. Third, even a casual understanding of economic conditions created by credit expansion warns against arguing that people are somehow forced to save while the economy becomes more capital intensive. The Roaring '20s, (and, later, the Bullish '80s and the Dot.com '90s) were years of high consumption. And the high consumption�the overconsumption�is driven by the same set of incentives that drives the malinvestment. Further, we should recognize that it's the "good times" (read: high consumption) associated with artificial booms that make credit expansions so attractive to elected officials and policymakers. Policies that actually did force people to reduce consumption would not likely be included in any incumbent candidate's re-election strategy. All of these reasons for questioning Hayek's view of the pattern of consumption during the boom-bust cycle are also reasons for accepting Mises's view: Credit expansion gives rise to malinvestment (a.k.a. "forced saving") and, at the same time, overconsumption. On the eve of the bust, market conditions change such that income earners actually do curtail consumption and save instead. This forgoing of consumption, which more-than-offsets the earlier overconsumption, is a necessary part of the market process that takes the economy back to a sustainable growth path. (10) The case can be made for reserving the term forced saving to refer to this eventual eve-of-the-bust curtailment of consumption. The discussion and graphics (11) in the following section make just such a use of the term. The analytical coherence of the story that can be told with the aid of forced saving so conceived (together with the overconsumption that precedes it) lends credence to our treatment of these and related terms in the Mises-Hayek theory. Overconsumption and Forced Saving by the Numbers A change in actual saving behavior has effects that can be represented by changes in consumption and in investment, the latter being facilitated by the saving. The direction of change, which is suggested by a straightforward application of loanable-funds theory, can be depicted with the aid of a production possibilities frontier (PPF) showing sustainable combinations of consumption (on the vertical axis) and investment (on the horizontal axis). (12) An increase in saving allows for an increase in investment by curtailing consumption; the economy moves clockwise along the PPF. A decrease in saving allows for an increase in consumption by curtailing investment; the economy moves counterclockwise along the PPF. The initial effects of credit expansion can be conceived as a hybrid of the effects of (1) an increase in saving and (2) a decrease in saving. Credit expansion increases both investment and consumption without there being any corresponding curtailment. In effect, it combines the positive aspects of the opposing preference changes but eliminates (or, rather, postpones) the negative aspects. Figure 2 depicts an macroeconomy in terms of the PPF, the corresponding supply and demand for loanable funds, and the Hayekian triangle. The solid points represent a fully employed economy with a market-clearing rate of interest, such that saving is equal to investment. Credit expansion is depicted by the augmented supply of loanable funds. With Saug in play, the rate of interest falls from ieq toward i', motivating savers to save less and investors to invest more (as shown by the two hollow points in the loanable-funds diagram). (13) The decreased saving translates into the PPF diagram as increased consumption. Thus, conflicting forces in the loanable funds market correspond to forces in the PPF diagram that are inconsistent with the economy remaining on its frontier. Market forces are pushing the economy neither clockwise nor counterclockwise along the PPF but rather are pushing in a direction nearly orthogonal to the frontier. The levels of consumption and investment consistent with the two hollow points in the loanable-funds diagram correspond to a hollow point that lies beyond the PPF. The very nature of this hybrid effect helps to explain why credit expansion has such strong political appeal. To allow for market forces that are pushing towards some point beyond the frontier during a credit expansion is to recognize that there will actually be some movement�some quantity adjustments�in that direction. New money is being lent to the business community and spent on investment projects. Closely on the heels of this effect, workers and other factor owners are earning greater incomes and spending them to a larger extent than before on consumption goods. In the early phase of the expansion, it doesn't much matter that it is the business community that gets the new money first. There is no significant lag between the earning and the spending. It all happens, according to John Hicks (1967, p. 208), within a "Robertsonian week." Resources are reallocated on the basis of conflicting market signals. The low interest rate that accompanies the boom phase of a credit expansion directs resources to the early stages of production. But at the same time, the increased demand for consumption goods is accompanied by an increased (derived) demand for resources in the very late stages. Resources are pulled in that direction, too. For a time both kinds of policy-induced misallocations can occur, as depicted as a double distortion of the Hayekian triangle. The misallocation of resources (both malinvestment and overconsumption) shown in Figure 2 corresponds to the economy that has reached the hollow diamond point along the adjustment path that extends beyond the PPF. The Hayekian triangle shows resources being allocated away from middle stages of production in both directions. This movement would translate into Strigl's account of the unsustainable boom as increased consumption and increased long-term capital creation, both made possible, in part, by the undermaintenance of existing capital. John Cochran (2001, 19) has introduced the memorable term �dueling production structures� to refer to this conflicted pattern of resource allocation. While the Hayekian triangle of Figure 2 gives us a snapshot of one point in the adjustment path, Figure 3 allows us to track the adjustment by the numbers. The hollow diamond point in Figure 2 translates into Figure 3 as Point 1, where the economy is experiencing both overconsumption and overinvestment. Not far beyond the PPF the limits imposed by scarcity become increasingly binding, but the low rate of interest continues to favor investment over consumption. At this point it does matter that the investment community gets the new money first. (14) Resources continue to be bid into the early stages, while production processes that were in their middle stages at the beginning of the expansion�and from which resources were being misallocated at point 1�now begin to yield a declining volume of consumables. Overconsumption, measured by the vertical displacement from the initial equilibrium, reaches its maximum at point 2. At point 3 forced saving in the sense most conformable with overconsumption sets in. (15) Projects that were in their middle stages at the outset of the expansion are now reaching maturity. Earlier misallocations have reduced the supply of consumables now available, and at the same time, interest rates have risen (not shown in Figure 2) in the face of distress borrowing by the business community. The boom is faltering; the consumers are under duress. Overinvestment reaches its maximum level at point 4, where the continued investment in early stages of production can be accommodated only by drawing resources from the late and final stages of production. (16) With forced saving continuing at point 5, liquidation has begun. Amid bankruptcies and other, less dramatic reorientations of businesses, resources can now be allocated away from early stages of production and toward the late stages. Under favorable institutional arrangements, the reallocation of resources that follows the bust can bring business decisions back into conformity with actual consumer preferences. In circumstances of the intertemporal disequilibrium created during the boom, the needed liquidation will undoubtedly take the economy inside the PPF. But in the absence of systemic perversities, market forces will move the economy back in the direction of the initial equilibrium. History suggests that there is clearly a danger, especially in the face of ill-conceived policy actions by the monetary and fiscal authorities and counterproductive measures of the regulatory authorities, that the recovery phase will be preempted by spiraling downward into deep depression. Points 6, 7 and 8 show the economy moving to successively lower levels of both consumption and investment despite its already having fallen below the PPF. This is the aspect of the downturn that concerned Keynes in his General Theory�which is why he couldn't find application for the concept of forced saving in that book. Hayek ([1939] 1975, p. 176; 1975, p. 44) recognized that the downturn can feed on itself, but he labeled this possible development a "secondary deflation" or "secondary depression" to distinguish it from the more direct implications of an artificially low rate of interest. The discussion of Figure 3 adopts a labeling scheme that conforms reasonably well with the use of terms in the literature. Figure 4 shows and labels the possible four-way movements during the course of the boom-bust cycle. The accompanying table indicates the nature of the actual movements at points 1 through 5; movements at points 6 through 8 are summarily labeled "secondary depression." POINTS ON PATH VERTICAL MOVEMENT HORIZONTAL MOVEMENT 1 OVERCONSUMPTION OVERINVESTMENT 2 ----- OVERINVESTMENT 3 FORCED SAVING OVERINVESTMENT 4 FORCED SAVING ----- 5 FORCED SAVING LIQUIDATION 6 SECONDARY DEPRESSION SECONDARY DEPRESSION 7 SECONDARY DEPRESSION SECONDARY DEPRESSION 8 SECONDARY DEPRESSION SECONDARY DEPRESSION Two further points of clarification are warranted. First, the direction of movement indicated by the arrows have their most straightforward interpretation in the context of a no-growth economy. In a growing economy, in which the PPF is shifting outward, the arrows represent movements relative to trend. Hence, a decrease in consumption may be only a decrease in consumption's growth rate. Second, the real losses suffered as a result of resource misallocations during boom-bust cycle will prevent the economy from fully recovering to the initial equilibrium. That is, as a result of the cyclical episode, the PPF itself will shift inward�or, allowing for ongoing growth, it will shift outward at a slower rate. The pattern of movement represented in Figure 3 is consistent with the incentives and constraints associated with the business cycle as broadly understood by the Austrian economists. Setting out the dynamics in this way also helps to resolve terminological and substantive differences within the Austrian school and to show why the term "forced saving" has been an obstacle to understanding both within and outside that school. Mises v. Hayek, Again The most significant difference between Hayek's and Mises's understanding of the issues lies in Hayek's taking an increase in consumption to be a reversal of the market process set in motion by credit expansion. This aspect of Hayek's expostion readily translates into an alternative PPF accounting of the process: The economy is forced clockwise along the frontier. (If this is what Hayek had in mind, his "forced saving" really is a forced reduction in consumption.) Then, when income earners begin spending on consumer goods, the market forces are reversed, and the economy moves counterclockwise back toward its original intertemporal equilibrium. Continued attempts by the central bank to keep the economy rotating clockwise along the frontier will, sooner or later, throw it off the frontier in the direction of depression. This reckoning is consistent with many passages in Prices and Production and related writings. (17) There are two basic problems with depicting the effects of credit expansion as a movement along the PPF. First, it denies without good reason that a general overproduction is one of the effects. It treats the constraints on the economy's overall output as if they were absolute physical constraints. Second, it exposes the theory to the sort of criticism issued by John Hicks. The basis for�and the duration of�the lag between the initial movements along the frontier and the subsequent counter-movements are left as unsolved mysteries. And in the absence of a lag, the policy-induced boom is nipped in the bud by market forces. As it turns out, the two problems are very much interrelated, and they have the same solution, namely, allowing for movements beyond the PPF. That is, while there is little or no lag between earning money in the early stages of production and spending it on consumables, there is some scope for earning and spending beyond the PPF, that is, for the (temporary) expansion of output beyond the sustainable level. This understanding is more consistent with Mises' "overconsumption and malinvestment" than with Hayek's "forced saving." There remains, however, an inconsistency in Mises' characterization of the boom. Mises allows for�and even emphasizes�overconsumption but does not allow for�and even denies�overinvestment. By overconsumption, Mises can't mean a counterclockwise rotation along the PPF. This movement would be contradictory to his understanding of malinvestment. Nor is the term intended to mean "relative overconsumption" in the sense suggested by Hayek or merely a tendency towards overconsumption but one that does not materialize as actual quantity adjustments. He must mean an actual (but temporary) movement beyond the frontier in the direction of consumption. Consider, for instance, that overconsumption "squanders capital and impairs the future state of want-satisfaction" (Mises, 1966, p. 432). Also, "the immediate consequence of credit expansion is a rise in consumption on the part of those wage earners whose wages have risen on account of the intensified demand for labor displayed by the expanding entrepreneurs" (p. 556). "As, apart from forced saving [which occurs later in the process in accordance with Figure 3], the boom itself does not result in a restriction but rather in an increase in consumption" (p. 559). And again, "the boom affects also the consumers' goods industries. They too invest more and expand their production capacity" (p. 560). If entrepreneurs in both the early stages and in the late stages are investing more and expanding their production capacity, how can there be no overinvestment? As already argued, some of the resources are drawn from the middle stages. (This is the aspect of the policy-induced misallocations that, in due course, necessitates forced saving in excess of the prior overconsumption.) But it would be difficult�and unnecessary�to argue that all of the misallocated resources must have such origins. There is some scope for overinvestment. The employment of labor beyond the level that can be sustained indefinitely allows for the expansion of productive capacity in most all stages of production. In the absence of this overinvestment and abstracting from ongoing growth, the Austrian theory would have output levels in middle stages actually falling�and falling enough to accommodate expansions in both early and late stages. But with the possibility of overinvestment taken into account, the theory can allow for the output level in most stages to be rising�but rising more rapidly in the early and late stages in comparison to the middle stages. This combination of absolute and relative effects makes the theory more plausible and squares the theory with our understanding of the PPF. (18) Mises (1966, p. 559), however, was insistent that malinvestment and not overinvestment was the essential feature of the boom. He attributed the common misperception of the matter to faulty observation. The observer notices only the malinvestments which are visible and fails to notice that these establishments are malinvestments only because of the fact that other plants�those required for the production of complementary factors of production and those required for the production of consumers' goods more urgently demanded by the public�are lacking" (emphasis added). The italicized "only" in this passage is unwarranted. The resources are coming only partly from later stages; they are also coming from the increased use of labor and capital equipment beyond the levels associated with full employment. Notice, too, that whereas this passage seems almost to deny overconsumption, consistency would demand that Mises issue a similar statement to the effect that the observed overconsumption is achieved only by the withdrawal of resources from the earlier stages of production. Mises (1966, p. 560) illustrates the essential malinvestment with a parable in which both overinvestment and overconsumption are ruled out by construction. During an artificial boom, the whole entrepreneurial class is, as it were, in a position of a master-builder whose task it is to erect a building out of a limited [i.e., fixed] supply of building materials. If this man overestimates the quantity of the available supply, he drafts a plan for the execution of which the means at his disposal are not sufficient. He oversizes the groundwork and the foundations and only discovers later in the progress of the construction that he lacks the material needed for the completion of the structure. It is obvious that our master-builder's fault was not overinvestment, but an inappropriate employment of the means at his disposal. Mises' parable is a memorable one for its vivid illustration of a point that is wholly ignored outside the Austrian school. But it does not demonstrate the absence of overinvestment any more than it demonstrates the absence of overconsumption. And since Mises had affirmed�even emphasized�the problem of overconsumption in a less restrictive setting than is created for his master-builder, he should have no reason to deny the problem of overinvestment. What he should deny, of course, is that overinvestment is the whole problem. As understood in the context of a macroeconomy, it would seem that while malinvestment is unique to the Austrian theory, both malinvestment and overinvestment (along with overconsumption) are essential to it. Malinvestment without overinvestment would allow the counter-movements to set in early, undoing the damage before much damage is done. Overinvestment (along with overconsumption) without malinvestment would allow the economy to experience a temporarily high growth rate, moving first beyond and then back to the PPF but without there being any intertemporal misallocations requiring painful adjustments that can send the economy inside the frontier. Only with both prefixes (mal- and over-) in play do we have (1) a problem of intertemporal misallocation and (2) time for that problem to fester before the internal conflict of market forces eventually turns boom into bust. Reconciling Within and Beyond the Austrian Theories In describing the ill-fated growth path depicted in Figure 3, "overconsumption" and "forced saving" are cognates. The market forces set in motion by credit expansion cause income-earners first to consume more than they otherwise would have and then to consume less than they otherwise could have. This use of the terms squares fully with Mises' use of "overconsumption" and with several instances of his use of "forced saving." The corresponding "overinvestment," though denied by Mises, is consistent with a full understanding of the nature of the credit-driven boom. Hayek's use of "forced saving," as Schumpeter suggested, is better avoided, if only because what is called saving is actually investment. Still, his usage is broadly in line with the meaning that corresponds with the downward movement of the economy's adjustment path as depicted in Figure 3. Narrow and broad understandings are captured in a summary treatment of the issues in Garrison (2002, p. 66): On the eve of the bust, distress borrowing allows some producers to finish their projects and minimize their losses. In this phase, the high interest rates bolstered by distress borrowing cause people to curtail their consumption and to save instead. The resources thus freed up constitute an explicit form of 'forced saving'�a term used more broadly by Hayek to characterize all the boom-related commitments of resources that are at odds with consumers' time preferences. The view that economic booms were characterized by overinvestment was commonly held when the Austrian theory was being developed. This view is still clearly evident in today's mainstream macroeconomics. Monetary expansion sends the economy up an upward-sloping short-run aggregate supply curve. Or, alternatively, the economy moves up along a downward sloping short-run Phillips curve. (The effects of monetary expansion could be similarly expressed in the context of New Classicism or New Keynesianism.) In these reckonings, overproduction relative to the output levels associated with the corresponding long-run aggregate-supply and Phillips curves is the essence of the boom. And owing to the underlying structure of this mainstream theorizing, namely, the high level of aggregation adopted, there is no accounting for malinvestment or for forced saving in any of the relevant senses without fundamentally recasting the theory. The opportunity for reconciliation is quite different from the Austrian point of view. The movements of the mainstream aggregates are both plausible and consistent with casual observation. There is little to be gained in denying these movements and insisting that the boom is characterized exclusively by misallocations within the output aggregate rather than misallocations accompanied by a temporary bloating of the aggregates themselves. In fact, as this paper has argued, a productive reconciliation lies in the direction of incorporating just such movements of aggregate output into the Austrian theory. With these movements (overconsumption as well as overinvestment) taken into account, the Austrian theory encompasses mainstream theory and observations while at the same time enhancing its own internal logic. BIBLIOGRAPHY Böhm-Bawerk, E. ([1884, 1889, and 1909] 1959) Capital and Interest, 3 vols., South Holland, Ill.: Libertarian Press. Brimelow, P. (1982) "Talking Money with Milton Friedman," Barron's, 25 October, 6-7. Caldwell, B. (1995) "Introduction," in B. Caldwell (ed.) Contra Keynes and Cambridge, Chicago: University of Chicago Press, 1-48. ______ (1998) "Why Didn't Hayek Review Keynes's General Theory?" History of Political Economy, 30(4), pp.545-569. Cochran, J. (2001) "Capital-Based Macroeconomics: Recent Developments and Extensions of Austrian Business Cycle Theory," Quarterly Journal of Austrian Economics, vol. 4, no. .3, pp. 17-25. Cowen, T. (1997) Risk and Business Cycles, London: Routledge. Ebeling, R. (2002), "Fritz machlup and His Early Writings: A Summary and Appriciation," conference paper, Southern Economic Association meetings, New Orleans, Louisiana, November. Garrison, R (1995) "Linking the Keynesian Cross and the Production Possibilities Frontier," Journal of Economic Education, 26(2), 122-130. _____(2001) Time and Money: The Macroeconomics of Capital Structure, London: Routledge. _____(2002) "Business Cycles: Austrian Approach," Snowden and Vane, eds., Encyclopedia of Macroeconomics, Edward Elgar. pp. 64-68. _____([1935] 1967) Prices and Production, 2nd edn, New York: Augustus M. Kelley. _____([1928] 1975) Monetary Theory and the Trade Cycle, New York: Augustus M. Kelley. _____([1939] 1975) Profits, Interest and Investment, New York: Augustus M. Kelley. _____(1975) Full Employment at Any Price?, Occasional Paper 45, London: Institute of Economic Affairs. _____([1969] 1978) "Three Elucidations of the Ricardo Effect," in F. A. Hayek, New Studies in Philosophy, Politics, Economics and the History of Ideas, Chicago: University of Chicago Press, 165-178. _____(1984) Money, Capital, and Fluctuations: Early Essays, ed. by Roy McCloughry, Chicago: University of Chicago Press. Hicks, J. R. (1967) "The Hayek Story," in J. Hicks, Critical Essays in Monetary Theory, Oxford: Clarendon Press, 203-215. _____(1985 [1925]) "The Monetary Policy of the United States after the Recovery from the 1920 Crisis," in F. A. Hayek, Money, Capital, and Fluctuations: Early Essays, Chicago: Chicago Press. Howson, Susan (2001) "Why Didn't Hayek Review Keynes's General Theory?-A Partial Answer," History of Political Economy, 33(3), pp. 369-374. Keynes, J. M. (1936) The General Theory of Employment, Interest, and Money, New York: Harcourt, Brace, and Company. _____(1930) A Treatise on Money. 2 vols. London: Macmillan. Machlup, F. ([1943] 1963) "Forced or Induced Saving: An Exploration into its Synonyms and Homonyms," in Essays on Economic Semantics, Englewood Cliffs, NJ: Prentice- Hall, pp. 213-240). Menger, C. ([1871] 1981) Principles of Economics, New York: New York University Press. Mises, L. ([1912] 1953) The Theory of Money and Credit, New Haven, Conn: Yale University Press. _____(1966) Human Action: A Treatise on Economics, 3rd rev. edn, Chicago: Henry Regnery. _____(1969) Theory and History: An Interpretation of Social and Economic Evolution, New Rochelle, New York: Arlington House. _____(1978) On the Manipulation of Money and Credit, Dobbs Ferry, NY: Free Market Books. Robinson, J. (1972) "The Second Crisis in Economic Theory," American Economic Review, 62(2) Strigl, R. ([1934] 2000) Capital and Production, trans, M. Hoppe and H. Hoppe, Auburn, Alabama: Ludwig von Mises Institute. Sraffa, P. (1932) "Dr. Hayek on Money and Capital," Economic Journal vol. 42, no. 165, pp. 42-53. Wicksell, K. ([1898] 1962) Interest and Prices. New York: Augustus M. Kelley. ENDNOTES 1. The earliest expositions of the theory focused on alternative originating causes. Following Lord Overestone (and Knut Wicksell), Mises (1978, p. 135) believed that it was some "outside stimulus" [such as technological change] rather than credit creation that initiated the boom; Hayek ([1928] 1975, pp. 143-148) believed that in a setting where bank credit is elastically supplied, most any real change could initiate a boom. Accordingly, he concluded that the cyclical process "must always recur under the existing credit organization, and that it thus represents a tendency inherent in the economic system, and is in the fullest sense of the word an endogenous theory (emphasis original). His most comprehensive analysis (Hayek, [1935] 1967, p. 54), however, focused on "the case most frequently to be encountered in practice: the case of an increase of money in the form of credits granted to producers." 2. The article in which the note appears, "The Monetary Policy of the United States after the Recovery from the 1920 Crisis" in Hayek (1984), is an extract from a longer work first published in German in 1925. 3. The use here of the adjective "forced" and the prefix "over-" reflects common usage in the literature. The doctrinal issues could be sharpened by contrasting "forced saving" with the analogous "forced consumption" or "overconsumption with the analogous "oversaving." 4. Without referencing the Austrians, Milton Friedman (Brimelow, 1982, p. 6) has explained at least one instance of high interest rates on the eve of the bust in terms of "distress borrowing" by the business community. 5. For the references to both Strigl and Machlup, I am indebted to Richard Ebeling, who presented a paper titled "Fritz Machlup and His Early Writings: A Summary and Appreciation" at the Southern Economic Association meetings in New Orleans in November 2002. Ebeling demonstrates on the basis of a 1933 hand-written Machlup lecture on file at the Hoover Institution that Machlup was fully aware of the differences between Hayek and Strigl on the issue of overconsumption. (Machlup's understanding of Strigl is based on a conference paper that predated Strigl's book.) Ebeling also notes the match between Strigl's accounting of the credit-induced distortions of the production process in his Capital and Production (1934, pp. 130-31) and my own graphical representation in Time and Money (Garrison, 2001, p. 69.) 6. We can imagine, however, that in light of the trouble Hayek had in defending the idea of forced saving [i.e., malinvestment] before his English audience in 1931 (Robinson, 1972), he would not have been eager to add that overconsumption was occurring at the same time. 7. Spiethoff's analysis gets attention in Hayek's stocktaking article, "The Present State and Immediate Prospects of the Study of Industrial Fluctuations," originally published in German in the 1933 Festschrift für Arthur Spiethoff and included in translation in Hayek ([1939] 1975, pp. 171-182). 8. Maintaining consistency with this and similar statements, Bruce Caldwell (1995, p. 16) builds into the definition of forced saving the actual forgoing of consumption: "[Consumers] are forced to consume less than they desire; Hayek accordingly attached the term 'forced saving' to this phenomenon." 9. Though without reference to Hicks' criticism, Tyler Cowen (1998, p. 97) reintroduces the lag problem in terms of the first-, second-, and third-round recipients of newly created funds. Once the new money has passed through the hands of commercial banks, business borrowers, and factor owners, these factor owners spend it in accordance with unchanged saving/consumption preferences. Thus, the Austrian theory, according to Cowen, fails to explain how the boom persists beyond the spending of these third-round recipients of the new money. 10. Hayek never recognized that the element of overconsumption was critical in responding effectively to the criticisms offered by Sraffa and (later) by John Hicks. Instead of allowing for overconsumption, Hayek (1978) offered his mound-of-honey analogy to support the notion of a substantial lag between the increased investment spending and the subsequent increase in consumption. (Pouring money into the economy is like pouring honey into a vat: Where the honey hits the surface, a mound forms and persists as long as the pouring continues. Analogously, where the new money is injected into the economy, misallocations occur and persist as long as the injections are continued.) Understandably, Hicks found the analogy unhelpful. Taking account of overconsumption would also have been critical in Hayek's offering a coherent view of boom and bust that could compare favorably with the view offered by Keynes. If it was even dimly perceived that there was a problem here with his own formulation, the lacking of a ready solution could very plausibly be a part of the answer to the question, asked by Bruce Caldwell (1998), "Why Didn't Hayek Review Keynes's General Theory?" Such an answer is not included in�but is not at odds with�the "Partial Answer" offered by Susan Howson (2001). 11. The graphical portrayal is adapted from Garrison (2001), a book in which doctrinal issues, such as the ones addressed here, are downplayed. 12. The PPF of Figure 2 shows combinations of consumption and investment that are sustainable, implying that combinations beyond the frontier are unsustainable. Conventional presentations of this graphical device label the area outside the frontier "unattainable." Certainly, for points very far outside it, this adjective is appropriate. But many of those same expositions identify the frontier itself as entailing the "full employment" of labor and other resources. For macroeconomic applications, then, "unattainable" should be understood as "unsustainable." An economy with an unemployment rate temporarily below the so-called natural rate is producing an output that lies beyond the frontier. Similarly, an economy in which capital equipment is being pressed beyond its normal limits is producing an output that lies beyond the frontier. This is only to say that for the PPF to be useful, the frontier has to depict the macroeconomically relevant limits to production and not some physical or absolute limit. 13. Had the expansion been financed by increased saving rather than by credit expansion, the economy would have moved along the PPF to the small hollow point. 14. The dynamics of a transfer expansion, during which the money goes first to consumers, would entail a rotation in the direction of consumption. See Garrison, 2001, p. 76. 15. It may be helpful in some applications to distinguish between forced saving relative to the maximum overconsumption and forced saving relative to the pre-expansion level. 16. It should be noted that if, at this point in the cycle, the central bank aggressively keeps the interest rate low, the faltering demand for investment goods may be offset by an increased demand for consumer durables, complicating the adjustment path in ways not allowed for in Figures 2 and 3. 17. This Hayekian understanding is incorporated in Garrison (1995), where overconsumption plays no role in the account of boom and bust. The allowance for movements beyond the frontier (both overconsumption and overinvestment) in Garrison (2001) constitutes a critical difference between these two expositions, the 2001 exposition having the greater logical integrity. Machlup, as reported by Ebeling (2002, p. 8), offers an account of Hayek's formulation and recognizes, in effect, that the expansion and subsequent contraction are represented by movements along the PPF: "Hayek holds that additional credit will increase the demand for capital goods and that the production of production goods will be enlarged at the expense of the production of consumer goods. Only in a later step [will the] the inserted credit, converted into income of the employed factors,... increase the demand for consumption goods, rendering unprofitable the enlarged construction goods industries." Maclup considered Strigl's formulation superior to Hayek's in this regard.
7784	dbpedia	2	12	https://webhome.auburn.edu/~garriro/e4hayek.htm	en	FRIEDRICH A. HAYEK			[ "https://webhome.auburn.edu/~garriro/palgrave.jpg", "https://webhome.auburn.edu/~garriro/fahayek75.jpg" ]	[]	[]	[ "" ]	null	[ "Auburn User" ]	null					null	John Eatwell, Murray Milgate, and Peter Newman, eds. The New Palgrave: A Dictionary of Economics London: Macmillan Press Ltd., 1987, pp. 609-614 Friedrich August von Hayek by Roger W. Garrison and Israel Kirzner I. Introduction Friedrich August von Hayek (1899- ), a central figure in twentieth-century economics and foremost representative of the Austrian tradition, 1974 Nobel laureate in Economics, a prolific author not only in the field of economics but also in the fields of political philosophy, psychology, and epistemology, was born in Vienna, Austria on May 8, 1899. Following military service as an artillery officer in World War I, Hayek entered the University of Vienna, where he attended the lectures of Friedrich von Wieser and Othmar Spann and obtained doctorates in law and political science. After spending a year in New York (1923-24), Hayek returned to Vienna where he joined the famous Privatseminar conducted by Ludwig von Mises. In 1927 Hayek became the first director of the Austrian Institute for Business Cycle Research. On an invitation from Lionel Robbins, he lectured at the London School of Economics in 1931 and subsequently accepted the Tooke Chair. Hayek soon came to be a vigorous participant in the debates that raged in England during the 1930s concerning monetary, capital, and business-cycle theories and was a major figure in the celebrated controversies with John Maynard Keynes, Piero Sraffa, and Frank H. Knight. During the late 1930s and early 1940s Hayek's research focused on the role of knowledge and discovery in market processes, and on the methodological underpinnings of the Austrian tradition, particularly subjectivism and methodological individualism. His contributions in these areas were an outgrowth of his participation in the debate over the possibility of economic calculation under socialism. In 1950 Hayek moved to the United States joining the Committee on Social Thought at the University of Chicago. His research there engaged the broader concerns of social, political and legal philosophy. He returned to Europe in 1962 with appointments at the University of Freiburg, West Germany, and then (1969) at the University of Salzburg, Austria. Since 1977 Hayek has resided in Freiburg. Hayek's scholarly output spans more than six decades. Still growing in the mid 1980s, his bibliography (Gray, 1984) includes eighteen books, twenty-five pamphlets, sixteen books edited or introduced, and two hundred thirty-five articles. Although these publications have brought Hayek international renown and honors in several disciplines, his contributions to other social sciences emerged, to a significant degree, as extensions of his scholarship in the field of economics and its methodological foundations. The following survey refers rather narrowly to the career and contributions of Hayek the economist. II. Economics as a Coordination Problem Throughout all of Hayek's writings, both the questions asked and the answers given reflect his general conception of economics as a coordination problem (O'Driscoll, 1977). Thoughtful observation of market economies suggests that they are characterized by order more complex and intricate than can be explained in terms of deliberate efforts to achieve coordination among individual activities. According to Hayek (1952, p. 39), it is precisely the existence of this "spontaneous order" that provides the subject matter for the science of economics. While market economies are better coordinated than can be accounted for by references to deliberate planning, they are always less than fully coordinated, hence the coordination problem. In one important sense, coordination failures are an integral part of an ongoing market process that iterates towards a greater degree of coordination. An oversupply or undersupply of some particular good, for instance, is evidence that the plans of producers and consumers of that good are not well coordinated one with the other. But the discoordination itself provides both an indication of the inconsistency in plans and the incentive for producers and consumers to make the appropriate adjustments. But market economies do occasionally experience profound economywide coordination failures. Much of Hayek's research has been aimed, either directly or indirectly, toward discovering the set of circumstances or, more appropriately, the sequence of events that could cause such failures, i. e., that could cause an economy to collapse into economic depression. The focus of his research is intertemporal discoordination. The coordination of activities over time is inherently more difficult, more problematic, than the coordination of activities in a given period. Producers must make decisions now in anticipation of decisions that other producers and, ultimately, consumers will make sometime in the future. The fact that production is time consuming, the more so the more well developed the economy, figures importantly in Hayek's theorizing. This essential time element increases the likelihood of erroneous investment decisions and gives scope for cumulative investment errors. A spate of intertemporally discoordinated investments, whether triggered by a real or a monetary disturbance, can increase employment opportunities producing an artificial boom. But the eventual realization of the discoordination will necessitate a partial liquidation, which constitutes a bust. In this context, the Austrian theory is differentiated from other macroeconomic theories by its attention to the problem of intertemporal coordination within the investment sector. The more conventional treatments of macroeconomic coordination problems focus on the general level of investment in comparison with the level of saving or the size of the labor force. Hayek adopted a two-tier approach to the study of business cycles. Prerequisite to the question of how an economywide coordination failure could occur is the question of how any degree of intertemporal coordination can be achieved at all in market economies. In Hayek's words, "before we explain why people commit mistakes, we must first explain why they should ever be right" (1937, p. 34). His account first of how a market economy works to coordinate activities over time and then of what can go wrong draws from several different fields of study within the science of economics. In particular, it draws in fundamental ways from price theory, capital theory, and monetary theory. Each of these fields required further development before becoming part of Hayek's account. Price theory had to be recast so as to emphasize the role of the price system as a communications network and as the most efficient means of making use of economic information. Capital theory had to be detailed so as to give play to the individual elements of the capital structure, which is made up of heterogeneous pieces of capital of various degrees of specificity and durability and related to one another by various degrees of intertemporal substitutability and complementarity. And monetary theory had to be extended in scope so as to allow the identification of systematic relative-price effects associated with the process of monetary expansion or contraction. While Hayek contributed importantly to each of these fields of study, his ultimate achievement consists in the integration of price theory, capital theory, and monetary theory. Hayek integrated his own developments in these fields into a cohesive account of a market process that tends towards intertemporal coordination and of central-bank policies that can interfere with that process in such a way as to cause artificial economic booms which are inevitably followed by economic busts. Hayek's business-cycle theory provided a basis for interpreting much of nineteenth- and twentieth-century economic history, for evaluating alternative macroeconomic theories�especially those of John Maynard Keynes, and for promoting institutional reform of the kind that will prevent or minimize intertemporal discoordination. III. Subjectivism and Methodological Individualism The methodological norms adopted by Hayek are a direct reflection of his perception of the subject matter: economic phenomena as spontaneous order. Fundamental institutions in society owe their existence to no identifiable creator. They are the "results of human action but not of human design." The most obvious examples of spontaneous order are the use of language and, among economic phenomena, the use of money. Money, the most commonly accepted medium of exchange, came to be accepted, commonly accepted, and then most commonly accepted as a result of a long sequence of actions on the part of a multitude of individual traders none of whom intended to create the institution of money. Other economic phenomena�from the simple division of labor to the more broadly conceived organization of industry�are to be understood as instances of spontaneous order. If there were no order in society except for what was consciously designed, Hayek argued, there would be no scope and no need for the social sciences. The task of these sciences in a world characterized by spontaneous order is precisely to account for those aspects of social order that were not consciously designed. A central methodological theme that has consistently pervaded Hayek's investigation of spontaneous order stems from his insistence that it is inappropriate to apply uncritically the methods of the physical sciences to the phenomena of the social sciences. Hayek used the term scientism to refer to the slavish imitation of the methods of the physical sciences without regard for the innate differences between physical and non-physical reality. Scientism, which unavoidably overlooks crucial aspects of social reality, such as perception, intent, and anticipation, was the focus of two long and critical articles published by Hayek during World War II. In these articles, which constitute the central core of his 1952 book, The Counter-Revolution of Science: Studies on the Abuse of Reason, Hayek spelled out the case for subjectivism and methodological individualism in the social sciences. "It is probably no exaggeration," according to Hayek, "to say that every important advance in economic theory during the last hundred years was a further step in the consistent application of subjectivism" (1952, p. 31). Classical economists had focused their attention on the objects being valued and had looked for common demominators of value in terms of labor input or costs of production. The Austrian economists, particularly Menger, Mises, and Hayek, are to be credited with shifting attention from the objects being valued to the subjects engaged in valuation. The value attributed to the various objects of economic actions, Hayek emphasized, can be accounted for only with reference to human purposes and in terms of the views that people hold about those objects. Hayek's thoroughly subjectivist outlook and his adherence to the strictures of methodological individualism were mutually reinforcing. Methodological individualism is not a prescription of how to engage in economic research but rather a recognition of what counts as an economic explanation. To explain the undesigned aspects of a spontaneous order is to trace those aspects to the conciously taken individual actions that gave rise to that order. In Hayek's own words, "it is the concepts and the views held by individuals which are directly known to us and which form the elements from which we must build up, as it were, the more complex phenomena..."(Hayek, 1952, p. 38). The contention that Hayek's crusade against scientism has consistently informed his substantive work is at least partly in conflict with a recent argument by T. W. Hutchison, who has sought to establish that Hayek's 1937 article "Economics and Knowledge" marked a sharp change in his methodology towards a "falsificationist" approach to economic science (Hutchison, 1981). This argument has been effectively disputed by John Gray (1984, pp. 16-21), who recognizes that the 1937 article was intended to pursuade Mises that, contrary to Mises' own "praxeology," there is an essential empirical element in our understanding of economic phenomena. Further, Hayek's 1952 commitment to subjectivism and methodological individualism, and his emphasis on the fallacies of scientism suggest in fact a deepening, rather than an erosion, of his recognition of the extent to which economic theory is independent of�in fact a prerequisite to�empirical economic observation. IV. The Price System as a Communication Network It is a short step from Hayek's appreciation of the phenomenon of spontaneous order to his understanding of the price system as a communication network. The key contribution of the price system to social well-being consists, Hayek demonstrated, is the system's capacity to transmit information from one part of the market to another. In the event of a natural disaster which has curtailed the availability of a specific raw material, for example, the fact of a reduced supply will be effectively communicated to potential users through the medium of a higher price�which also provides the incentive for the socially desirable economizing of the particular raw material (Hayek, 1945, p. 85-86). The need for such a communication network arises out of the fact that the information to be communicated is dispersed throughout the society. This insight into the nature of prices as signals has, during the past decade and a half, come to be fairly widely recognized and expounded in modern textbooks. In his treatment of the use of knowledge in society, Hayek made a sharp distinction between two kinds of knowledge: (1) scientific, or theoretical, knowledge and (2) the knowledge of the particular circumstances of time and place. The first-mentioned category is the proper concern of the economist; the second-mentioned category is the proper concern of the market participant. Failure to recognize this "division of knowledge" can lead to one of two serious errors. The assumption that economists can assimilate both kinds of knowledge leads to the conclusion that "rational planning" can outperform�or at least duplicate�the market itself. The assumption that market participants can assimilate both kinds of knowledge leads to the conclusion that "rational expectations" can nullify the systematic effects of monetary manipulation. Hayek recognized and emphasized that if a fully adjusted system of prices�one corresponding to attained equilibrium�can be held to offer a system of coordinated and mutually reinforcing signals, such a system must depend on some prior groping process of market discovery. Hayek saw this process as consisting of market competition�which meant for him not the state of affairs consistent with the conditions for so-called perfect competition, but rather the rough-and-tumble process of market agitation kept in motion by complete freedom for competitive entrepreneurial entry. What such a competitive process can accomplish, Hayek argued, is the discovery of possibilities and preferences that no one had hitherto realized (Hayek, 1968). These insights concerning knowledge and discovery articulated by Hayek in a number of profound papers from the late 1930s to the mid-1940s (Hayek, 1948) were partly responsible for, and partly emergent from, Hayek's participation in the celebrated interwar debate over the possibility of economic calculation under a socialist system. In deepening and widening the case originally presented by Mises in 1920, which challenged the feasibility of such calculation in the absence of market prices for factors of production, Hayek came to perceive the market process itself as crucial for the generation of that very knowledge which it would be necessary for a central planning authority to possess before it could hope to achieve a successful and efficient allocation of societal resources. It was especially this Hayekian appreciation for the market as a discovery process that has significantly contributed to the contemporary revival of interest in the Austrian paradigm. In this context the Austrian contribution is to be distinguished from the more formal, or mathematically tractable, theories by its emphasis on the role of the entrepreneurial discovery in those systematic market processes upon which we must depend, in a world of ignorance and disequilibrium, for any possible tendency toward mutual coordination among the market participants. What Hayek showed was that much modern economics misconstrues the nature of the economic problem facing society by assuming away the problems raised by the fact of dispersed information. To imagine (as earlier critics of Mises and Hayek had proposed) that it would be possible to run a socialist system by simulating the market and promulgating non-market "prices" for the guidance of socialist managers is to ignore the extent to which market prices�both of consumer goods and of the capital goods that constitute the economy's capital structure�already express the outcome of an entrepreneurial discovery procedure that draws upon scattered existing knowledge. V. The Intertemporal Structure of Capital Hayek's contribution to the development of capital theory is commonly regarded as his most fundamental and pathbreaking achievement (Machlup, 1976). His early attention (1928) to "Intertemporal Price Equilibrium and Movements in the Value of Money" (English translation in Hayek, 1984) provided both the basis and inspiration for many subsequent contributions in this area, most notably for those of John R. Hicks. The widely recognized but rarely understood Hayekian triangles, introduced in his Prices and Production (1935), provided a convenient but highly stylized way of describing changes in the intertemporal pattern of the capital structure. The formal and comprehensive analysis in The Pure Theory of Capital (1941) fleshed out the earlier formulations and established the centrality of the "capital problem" in questions about the market's ability to coordinate economic activities over time. The essential element of time in the economy's production process coupled with the inherent complexities of the capital structure gives special significance to the problem of intertemporal coordination. Individual producers must commit resources in the present on the basis of some production plan. Intertemporal coordination in the strictest sense requires that all such plans be mutually compatible and that they be jointly consistent with resource availabilities. The extent to which such compatibility and consistency actually exists is determined only through the market process in which each producer attempts to carry out his own plan. The individual production plans take shape as non-specific capital (e.g. raw material) is committed to a specific use (e.g. a particular tool or machine); the passage of time and the efforts of each producer to secure the additional capital needed to complete his own production plans reveal the extent to which the capital structure is intertemporally coordinated or discoordinated. The actual availability of some raw material complementary to already-committed capital may be less, for instance, than the amount needed for each producer to carry out his plan. As such discoordination is revealed (by an increase in the price of the raw material), production plans are revised. In Hayek's formulation, the capital goods that make up the production process are neither so specific that such plan revision is impossible nor so non-specific that it is costless. In his Pure Theory of Capital, Hayek provides a detailed treatment of capital goods in terms of reproducibility, durability, specificity, substitutability, and complementarity. These multifaceted characteristics of various capital goods and of relationships among them cause the structure of production, taken as a whole, to be characterized by a longer or shorter "period of production," a greater or lesser degree of "roundaboutness." The degree of roundaboutness, the extent to which the production process ties up resources over time, is determined by the market rate of interest�with the "market rate" broadly conceived as the terms of trade between goods available in the present and goods available in the future. The market process works to translate intertemporal preferences into production plans. For instance, a fall in the rate of interest reflecting an increased willingness to forgo present goods for future goods creates incentives for engaging in production processes of greater degrees of roundaboutness. The characteristics, mentioned above, of the individual capital goods and of the relationships among them determine the extent to which the existing capital structure is actually adaptable to changes in intertemporal preferences. VI. Money and Its Effects on Prices Hayek's contribution to monetary theory and to trade-cycle theory are intertwined, a circumstance that reflects the nature of his contribution in both areas. In summary terms, Hayek's monetary theory consists of integrating the idea of money as a medium of exchange with the idea of the price system as a communication network. His trade-cycle theory consists of integrating monetary theory and capital theory�in which a particular aspect of the price system, namely the system of intertemporal prices, is emphasized. Both in his Monetary Theory and the Trade Cycle and his Prices and Production, Hayek argued against the then-dominant (and still-prevalent) idea that the appropriate focus of monetary theory is on the relationship between the quantity of money and the general level of prices. The kernel of truth in the quantity theory of money was not to be denied, but progress in monetary economics was to be made by moving beyond the simple proportionalities implied by a relatively stable velocity of circulation. According to Hayek (1935, p. 127), the proper task of monetary theory requires a thorough reconsideration of the pure theory of price determination, which is based on the assumption of barter, and a determination of what changes in the conclusions are made necessary by the introduction of indirect exchange. Hayek introduced the concept of "neutral money" in part as a means to contrast his own view of money with the more aggregative views. By definition, neutral money characterizes a monetary system in which money, while facilitating the coordination of economic activities, is itself never a source of discoordination. According to the aggregative views, money is neutral so long as the value of money (as measured by the general level of prices) remains unchanged. Thus, increases in economic activity require proportionate increases in the quantity of money in circulation. According to Hayek, monetary neutrality requires the absence of "injection effects." When the quantity of money in increased, the new money is injected in some particular way, which temporarily distorts relative prices causing the price system to communicate false information about consumer preferences and resource availabilities. The contrasting views on the requirements for monetary neutrality had important implications for U.S. monetary policy during the prosperous decade of the 1920s. The rate of monetary growth during that period was roughly equivalent to the the rate of real economic growth, a circumatance which resulted in a near-constant price level. The absence of price inflation was taken by most monetary economists to be a sign of monetary stability. Hayek's contrary assessment (1925) that the injection of money through credit markets must result in a misallocation of resources despite the price-level stability was the basis for his prediction that the money-induced boom would eventually lead to a bust. It should be noted that in other writings, both early and late in his career (e.g. 1933 and 1984), Hayek was ambivalent about the choice between a monetary policy that avoids injection effects (a constant money supply despite a positive real growth rate) and a monetary policy that avoids price deflation (a money growth rate that "accommodates" real growth). VII. The Trade Cycle as Intertemporal Discoordination Hayek's contribution to the theory of the trade cycle consists in his developing the idea that monetary injections can have a systematic effect on the intertemporal pattern of prices. The Austrian theory of the trade cycle was first formulated by Mises (1912), who showed that money-induced movements in the interest rate (as identified by the Swedish economist Knut Wicksell) have identifiable effects on the capital structure (as conceived by Eugen von Böhm-Bawerk). Hayek's major contribution to the theory (1935), as well as many subsequent developments of it, was based on an extremely stylized portrayal of the economy's time-consuming production process. The relevant characteristics of the "structure of production" were identified with the dimensions of a right triangle. One leg of the triangle represents the time dimension of the structure of production, the degree of roundaboutness; the other leg represents the money value of the consumer goods yielded up by the production process. Slices of the triangle perpendicular to the time leg represent stages of production; the height of individual slices represents the money value of the yet-to-be-completed production process. Resources are allocated among the different stages of production as a result of entrepreneurial actions guided by price signals. But because of the distinct temporal dimension of the structure of production, the supplies and demands for resources associated with the different stages are differentially sensitive to changes in the rate of interest: the demand for the output of extraction industries, for example, is more interest elastic than the demand for the output of service industries. Changes in the rate of interest will have a systematic effect on the pattern of prices that allocates resources among the different stages of production. A fall in the rate of interest, for instance, will strengthen the relatively interest-elastic demands drawing resources into the early stages of production. This modification is represented by a relative lengthening of the temporal dimension of the Hayekian triangle. A crucial distinction is made between interest-rate changes attributable to changes in the intertemporal preferences of consumers and interest-rate changes attributable to central-bank policy. In the first instance (Hayek, 1935, pp. 49-54), entrepreneurial actions and resulting changes in the pattern of prices allow the structure of production to be modified in accordance with the changed consumer preferences; in the second instance (Hayek, 1935, pp. 54-62), similar changes in the pattern of prices induced by the injecting of new money through credit markets constitute "false signals," which result in a misallocation of resources among the stages of production. The artificially low rate of interest can trigger an unsustainable boom in which too many resources are committed to the early stages of production. The market process triggered by the injection of money through credit markets, Hayek showed, is a self-reversing process. More production projects are initiated than can possibly be completed. Subsequent resource scarcities turn the artificial boom into a bust. Economic recovery must consist of liquidating the "malinvestments" and reallocating resources in accordance with actual intertemporal preferences and resource availabilities. Hayek (1939) recognized that expectations about future movements in the rate of interest and entrepreneurial interpretations of intertemporal price movements can have an important effect on the course of the trade cycle. That is, prices are signals, not marching orders. But Hayek did not assume, as some modern economicts do, that falsified price signals plus "rational" expectations are equivalent to unfalsified price signals. Such an equivalence would require that market participants make use of knowledge of the kind that they cannot plausibly possess; it would require that they have knowledge of the "real" factors independent of the price system that supposedly communicates that knowledge. VIII. Critique of Keynesianism Hayek's critique of Keynesian theory and policy followed directly from his own theories of capital and of money. Hayek argued that by ignoring the intertemporal structure of production and particularly the intertemporal complementarity of the stages of production, Keynes failed to identify the market process that could achieve intertemporal coordination: "Mr. Keynes's aggregates conceal the most fundamental mechanisms of change" (Hayek, 1931, p. 227). And by shifting the focus of analysis from money as a medium of exchange to money as a liquid asset, Keynes failed to see the harm caused by policies of injecting newly created money through credit markets or of spending it directly on public projects. Hayek had emphasized that in functioning as a medium of exchange, money "constitutes a kind of loose joint in a self-equilibrating apparatus of the price mechanism which is bound to impede its working�the more so the greater the play in the loose joint." Keynesian theory and policy were the specific targets of Hayek's criticism when he warned that "the existence of such a loose joint is no justification for concentrating attention on that loose joint and disregarding the rest of the mechanism, and still less for making the greatest possible use of the short-lived freedom from economic necessity which the existence of this loose joint permits" (Hayek, 1941, p. 408). In the decades that followed the debate between Hayek and Keynes, economic theory was dominated by Keynesianism, and the corresponding macroeconomic policies consisted precisely of those measures that Hayek had warned against: monetary manipulation for political advantage. Monetary injections during the Great Depression, conceived as "pump priming," soon gave way to a more broadly conceived policy of "demand management." The short-run trade-off between inflation and unemployment were treated in the political arena�and in some academic circles�as a societal menu from which elected officials, and hence voters, could choose; deviations of the economy from some conception of full-employment or from some long-run growth path were taken as mandates for macroeconomic "fine tuning" to be implemented by the central bank in cooperation with the fiscal authority. As Hayek clearly recognized in his critique of Keynes's theories and his analysis of the actual effects of Keynesian policies, the political exploitation of the monetary loose joint contains an inherent inflationary bias. Newly created money can be used to hire the unemployed and to finance politically popular spending programs. Monetary injections through the commercial banking system can stimulate the economy by triggering an artificial economic boom. The undesirable effects of inflating the money supply, the eventual collapse of the artificial boom and the general increase in the level of prices, are removed in time from the initial, politically desirable effects and are less conspicuously identified with the elected officials who engineered the monetary expansion (Hayek, 1960, pp. 324-39). As the political process continues, elected officials face the choice of monetary passivity which would permit the market to undergo the painful adjustments to earlier monetary injections or further monetary injections which would reproduce the desirable effects in the short run while staving-off the eventual adjustment. The cumulative effects of the play-off between political advantage and economic necessity is the theme of Hayek's critique of Keynesianism. Excerpts of "a forty years' running commentary on Keynesianism by Hayek," compiled by Sudha Shenoy, is appropriately entitled A Tiger by the Tail (1972). IX. Denationalization of Money Hayek as a monetary reformer is interested in minimizing the potential for discoordination that is inherent in monetary mechanisms and precluding the manipulation of money for political advantage. He has long doubted that the government has either the will or the ability to manipulate the money supply in the public interest. In his early writings Hayek took for granted the existence of a central bank and focused his analysis on the consequences of different policy goals, e.g. the goal of stimulating economic growth or the goal of stabilizing the general price level. In his later writings, he began to see the monopolization of the money supply as the ultimate cause of monetary disturbances. As early as 1960, though still "convinced that modern credit banking as it has developed requires some public institutions such as central banks, [he was] doubtful whether it is necessary or desirable that they (or the government) should have the monopoly of the issue of all kinds of money" (1960, p. 520, n2). In the mid 1970s Hayek's interest in the denationalization of money (1976) was renewed. Having lost all hope of achieving monetary stability through the instruments of highly politicized monetary institutions, Hayek suggested�by his own account, almost as a "bitter joke"�that the business of issuing money be turned over to private enterprise. Soon taking this suggestion seriously, he began to explore the feasibility and the consequences of competing currencies. Hayek's proposal for competition in the issue of money is not subject to the standard objection based on the so-called common-pool problem. The proposal is not that private issuers should compete by issuing some generic currency. Clearly, competition on this basis would produce an explosive inflation. The proposal, rather, is that each competitor issue his own trade-marked currency. Under this arrangement, each issuer would have an incentive to maintain a stable value of his own currency and to minimize the difficulties of using this currency in an environment where other currencies are used as well. In spelling out just how such a system of competing currencies would or could work, Hayek has had to walk the fine line between constructivism on the one hand and blind faith the the market process on the other. His discussions of possible outcomes of the market process should not be taken as prescriptions for the provision of competing currencies, but rather as a basis for believing that competition between private issuers is feasible. Individuals may choose one currency over another on the basis of the issuer's demonstrated ability to achieve purchasing-power stability for that currency. Their choice may be influenced, Hayek has suggested, by what particular price level serves as the issuer's guide for managing the currency. Or it may be that public confidence can be maintained only by a currency that is convertible at a fixed rate into some stipulated commodity or basket of commodities. Hayek does doubt that a gold standard would re-emerge as result of the competitive process, largely because the confidence and stability of gold was based upon beliefs and attitudes on the part of the public that no longer exist and cannot easily be recreated. But if gold did prevail in a competitive environment, there would be no basis for objection. More importantly, Hayek's proposal for monetary reform should be seen not as an aberation from but as thoroughly consistent with his view of economics as a spontaneous order. Markets serve to coordinate the activities of individual market participants. The use of money, while greatly facilitating economic coordination, contains an inherent potential for discoordination. Competition in the market for money holds that potential in check and allows market participants to take the fullest advantage of the remaining elements of the spontaneous order. Bibliography Gray, J. (1984). Hayek on Liberty, Oxford, Basil Blackwell, Inc. Hayek, F. (1925 in German). "The Monetary Policy of the United States after the Recovery from the 1920 Crisis," in F. A. Hayek. Money, Capital, and Fluctuations: Early Essays, edited by Roy McCloughry, Chicago, University of Chicago Press, 1984. ________. (1928 in German). "Intertemporal Price Equilibrium and Movements in the Value of Money," in F. A. Hayek. Money, Capital, and Fluctuations: Early Essays, edited by Roy McCloughry, Chicago, University of Chicago Press, 1984. ________. (1931). "Reflections on the Pure Theory of Money of Mr. J. M. Keynes," Part 1, Economica, 11, August. ________. (1933 in German). "On 'Neutral Money'," in F. A. Hayek. Money, Capital, and Fluctuations: Early Essays, edited by Roy McCloughry, Chicago, University of Chicago Press, 1984. ________. (1933). Monetary Theory and the Trade Cycle, New York, Augustus M. Kelley, 1975. ________. (1935). Prices and Production, 2nd ed., New York, Augustus M. Kelley, 1967. ________. (1937). "Economics and Knowledge," Economica, n.s. 4, February. ________. (1939). "Price Expectations, Monetary Disturbances, and Malimvestments." in Profits, Interest, and Investment, Clifton, NJ, Augustus M. Kelley, 1975. ________. (1941). The Pure Theory of Capital, Chicago, Universtiy of Chicago Press. ________. (1945). "The Use of Knowledge in Society," American Economic Review, September. ________. (1948). Individualism and Economic Order, London, Routledge and Kegan Paul. ________. (1952). The Counter-Revolution of Science: Studies on the Abuse of Reason, Glencoe, Illinois, The Free Press. ________. (1960). The Constitution of Liberty, Chicago, Henry Regnery and Company, 1972. ________. (1968). "Competition as a Discovery Procedure," published in New Studies in Philosophy, Politics, Economics and the History of Ideas, Chicago, University of Chicago Press. ________. (1972). A Tiger by the Tail, ed by Sudha Shenoy, London, Institute for Economic Affairs. ________. (1975) Full Employment at Any Price, Occasional Paper 45, London, Institute of Economic Affairs. ________. (1976). Denationalization of Money, London, Institute of Economic Affairs. ________. (1984). "The Future Monetary Unit of Value," in B. Siegel, ed., Money in Crisis: The Federal Reserve, the Economy, and Monetary Reform, Cambridge, MA, Ballinger Publishing Company. Hutchison, T. W. (1981). The Politics and Philosophy of Economics: Marxians, Keynesians, and Austrians, New York, New York University Press, chapter 7. Keynes, J. (1936) The General Theory of Employment, Interest, and Money, New York, Harcourt, Brace, and Company, Inc. Machlup, F. (1976). "Hayek's Contribution to Economics," in F. Machlup, ed., Essays on Hayek, Hillsdale Michigan, Hillsdale College Press. Mises, L. (1912). The Theory of Money and Credit, New Haven, CT, Yale University Press, 1953.
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7784	dbpedia	3	72	https://fastercapital.com/topics/comparing-hicks-perspective-with-other-monetary-theories.html	en	Comparing Hicks Perspective With Other Monetary Theories	https://fastercapital.co…log-image-og.jpg	https://fastercapital.co…log-image-og.jpg	[ "https://fastercapital.com/content-assets/logo2.webp", "https://fastercapital.com/i\\Monetary-theory--Assessing-John-R--Hicks--Perspective-on-Monetary-Theory--Comparing-Hicks-Perspective-with-Other-Monetary-Theories.webp", "https://fastercapital.com/i\\Economic-welfare--Assessing-John-R--Hicks--Perspective-on-Economic-Welfare--Comparing-Hicks-Perspective-with-Other-Approaches-to-Assessing-Economic-Welfare.webp", "https://fastercapital.com/i\\Economic-welfare--Assessing-John-R--Hicks--Perspective-on-Economic-Welfare--Critiques-and-Controversies-Surrounding-Hicks-Perspective-on-Economic-Welfare.webp", "https://fastercapital.com/i\\Theory-of-value--The-Theory-of-Value--John-R--Hicks--Perspective--The-Role-of-Utility-in-Hicks-Perspective.webp", "https://fastercapital.com/i\\Austrian-Economics--A-Heterodox-Approach-to-Market-Analysis--The-Austrian-Perspective-on-Monetary-Policy-and-Central-Banking.webp", "https://fastercapital.com/images/logo/footer.webp" ]	[]	[]	[ "" ]	null	[]	null	In this page you can find various blogs and articles that are related to this topic: Comparing Hicks Perspective With Other Monetary Theories	en	https://fastercapital.com/images/favicon.ico	FasterCapital	https://fastercapital.com/keyword/comparing-hicks-perspective-with-other-monetary-theories.html	This page is a digest about this topic. It is a compilation from various blogs that discuss it. Each title is linked to the original blog. 1.Comparing Hicks Perspective with Other Monetary Theories[Original Blog] John R. Hicks' perspective on monetary theory is one that has been widely discussed and debated among economists. While Hicks made significant contributions to the field, it is important to compare his perspective with other monetary theories in order to gain a comprehensive understanding of the subject. By examining different points of view, we can identify the strengths and weaknesses of Hicks' approach and explore alternative theories that offer valuable insights into the workings of the monetary system. 1. Quantity Theory of Money: One prominent theory that contrasts with Hicks' perspective is the Quantity Theory of Money. According to this theory, changes in the money supply directly impact prices and inflation. In contrast, Hicks emphasized the importance of interest rates and investment decisions in determining economic outcomes. For example, while both theories acknowledge that an increase in the money supply can lead to inflation, Hicks argued that this relationship is not necessarily linear due to various factors influencing investment behavior. 2. Keynesian Economics: Another influential theory that diverges from Hicks' perspective is Keynesian economics. Keynes emphasized the role of aggregate demand in driving economic activity, particularly during times of recession or depression. In contrast, Hicks focused on the interplay between money supply, interest rates, and investment decisions as key drivers of economic fluctuations. For instance, while Keynes advocated for government intervention through fiscal policy to stimulate demand, Hicks argued that monetary policy could also be effective in influencing investment decisions. 3. Monetarism: Monetarism, associated with economists like Milton Friedman, places a strong emphasis on controlling the money supply as a means to stabilize the economy. This theory suggests that stable growth in the money supply can lead to stable economic growth over time. While Hicks acknowledged the importance of monetary policy, he argued that interest rates and investment decisions should also be considered when formulating policies aimed at stabilizing the economy. For instance, Hicks highlighted how changes in interest rates can affect borrowing costs and investment levels, thereby impacting overall economic activity. 4. New Keynesian Economics: Building upon Hicks' work, the New Keynesian school of thought incorporates elements of both Keynesian economics and neoclassical economics. This theory recognizes the importance of aggregate demand in driving economic fluctuations but also emphasizes the role of price rigidities and market imperfections. By considering these factors, New Keynesian economists aim to provide a more nuanced understanding of how monetary policy can influence economic outcomes. For example, they argue that changes in interest rates may not always lead to immediate adjustments in investment levels due to sticky prices or other market fr Comparing Hicks Perspective with Other Monetary Theories - Monetary theory: Assessing John R: Hicks: Perspective on Monetary Theory 2.Comparing Hicks Perspective with Other Approaches to Assessing Economic Welfare[Original Blog] When it comes to assessing economic welfare, John R. Hicks' perspective offers valuable insights that can be compared and contrasted with other approaches. By examining different points of view, we can gain a comprehensive understanding of the complexities involved in measuring and evaluating economic well-being. While Hicks' framework provides a solid foundation, it is important to consider alternative perspectives to ensure a more holistic assessment. 1. Utilitarianism: One approach often contrasted with Hicks' perspective is utilitarianism, which focuses on maximizing overall societal happiness or utility. While Hicks emphasizes individual preferences and choices as the basis for assessing welfare, utilitarianism takes a broader societal perspective. For example, Hicks might argue that an increase in consumer choice leads to greater welfare, while a utilitarian perspective would consider the distributional effects of such choices on overall happiness. 2. Sen's Capability Approach: Amartya Sen's capability approach offers another lens through which to evaluate economic welfare. Unlike Hicks' focus on preferences and choices, Sen argues that what truly matters is people's ability to achieve valuable functionings or capabilities. For instance, while Hicks may prioritize income growth as an indicator of welfare improvement, Sen would emphasize the importance of access to education, healthcare, and other essential capabilities that enable individuals to lead fulfilling lives. 3. Rawlsian Justice: The concept of justice as fairness put forth by John Rawls also presents an alternative viewpoint for assessing economic welfare. Rawls argues that society should be structured in a way that maximizes the well-being of the least advantaged members. This stands in contrast to Hicks' emphasis on efficiency and Pareto optimality. For instance, while Hicks might support policies that increase overall wealth even if they exacerbate inequality, Rawls would prioritize reducing inequality as a means of improving overall welfare. 4. Sustainable Development: In recent years, there has been a growing recognition of the need to consider environmental sustainability in assessing economic welfare. Hicks' perspective, focused primarily on market efficiency and individual preferences, may not fully capture the long-term implications of economic activities on the environment. Approaches like ecological economics emphasize the importance of balancing economic growth with environmental preservation to ensure intergenerational welfare. 5. Behavioral Economics: Hicks' perspective assumes rational decision-making by individuals, but behavioral economics challenges this assumption. This field explores how cognitive biases and heuristics influence economic choices. For example, while Hicks might assume that individuals always act in their best Comparing Hicks Perspective with Other Approaches to Assessing Economic Welfare - Economic welfare: Assessing John R: Hicks: Perspective on Economic Welfare 3.Critiques and Controversies Surrounding Hicks Perspective on Economic Welfare[Original Blog] John R. Hicks, a renowned economist, made significant contributions to the field of welfare economics with his concept of economic welfare. However, like any influential theory, Hicks' perspective on economic welfare has not been without its fair share of critiques and controversies. These criticisms stem from various points of view and highlight the complexities and limitations of Hicks' framework. 1. Subjectivity of Welfare Measurement: One major critique revolves around the subjective nature of measuring economic welfare. Hicks proposed using individuals' preferences as a basis for assessing welfare, but this approach has been criticized for neglecting important non-preference-based factors that influence well-being. For instance, critics argue that focusing solely on preferences fails to account for externalities or the distributional aspects of welfare. 2. Lack of Consideration for Non-Market Goods: Another criticism is that Hicks' perspective primarily focuses on market goods and overlooks non-market goods, such as environmental resources or social relationships. By excluding these non-market goods from the analysis, Hicks' framework may underestimate or misrepresent true economic welfare. For example, a society with high levels of pollution may experience economic growth according to market indicators but suffer from deteriorating overall well-being due to environmental degradation. 3. Inadequate Treatment of Income Distribution: Critics also contend that Hicks' perspective does not adequately address income distribution concerns. While Hicks acknowledged the importance of distributional issues, his framework does not provide a comprehensive analysis of how changes in economic welfare affect different segments of society. This limitation can lead to an incomplete understanding of the overall impact of policy decisions on societal well-being. 4. Simplistic Assumptions: Some critics argue that Hicks' perspective relies on overly simplistic assumptions about human behavior and decision-making processes. For instance, his framework assumes rationality and consistency in individuals' preferences, which may not accurately reflect real-world complexities. By oversimplifying human behavior, Hicks' perspective may fail to capture the full range of factors that influence economic welfare. 5. Lack of Dynamic Analysis: Hicks' framework primarily focuses on static analysis, which means it does not adequately account for changes over time. Critics argue that this limitation hampers the understanding of how economic welfare evolves and adapts to changing circumstances. For example, a policy that initially improves economic welfare may have unintended consequences in the long run, which Hicks' framework may not fully capture. While John R. Hicks' perspective on economic welfare has made significant contributions Critiques and Controversies Surrounding Hicks Perspective on Economic Welfare - Economic welfare: Assessing John R: Hicks: Perspective on Economic Welfare 4.The Role of Utility in Hicks Perspective[Original Blog] In John R. Hicks' perspective on the theory of value, utility plays a crucial role in understanding economic behavior and decision-making. Utility refers to the satisfaction or happiness that individuals derive from consuming goods and services. Hicks believed that utility is the driving force behind consumer choices and shapes their preferences for different commodities. This section will delve into the significance of utility in Hicks' perspective, exploring its implications for understanding consumer behavior and market equilibrium. 1. Foundation of Consumer Behavior: Hicks argued that utility serves as the foundation for understanding consumer behavior. According to him, individuals aim to maximize their utility by making rational choices based on their preferences and constraints. For instance, when a consumer decides to purchase a particular product, they do so because they believe it will provide them with the highest level of utility compared to other available options. 2. Marginal Utility: Hicks emphasized the concept of marginal utility, which refers to the additional satisfaction gained from consuming one more unit of a good or service. He posited that as individuals consume more of a particular good, the marginal utility derived from each additional unit diminishes. For example, if someone is hungry and eats their first slice of pizza, they may experience high satisfaction (high marginal utility). However, as they continue eating more slices, the satisfaction derived from each additional slice decreases (low marginal utility). 3. Indifference Curves: Hicks introduced indifference curves as a graphical representation of an individual's preferences between different combinations of goods. These curves depict all possible combinations of goods that yield equal levels of utility for an individual. By analyzing these curves, economists can understand how changes in prices or income affect consumer choices and determine optimal consumption bundles. 4. Consumer Equilibrium: In Hicks' perspective, consumer equilibrium occurs when an individual maximizes their utility given their budget constraint. This equilibrium is achieved when the slope of the budget line (representing price ratios) is equal to the slope of the indifference curve (representing the consumer's marginal rate of substitution between goods). At this point, the consumer is allocating their income in a way that maximizes their satisfaction. 5. Market Equilibrium: Hicks' analysis of utility extends beyond individual consumers to market equilibrium. He believed that the interaction of individual preferences and utility-maximizing behavior leads to market equilibrium, where demand equals supply. By understanding how changes in prices or incomes affect consumer choices, economists can predict shifts in demand and supply, leading to adjustments in market equilibrium. Hicks' perspective on the theory of value highlights the The Role of Utility in Hicks Perspective - Theory of value: The Theory of Value: John R: Hicks: Perspective 5.The Austrian Perspective on Monetary Policy and Central Banking[Original Blog] The Austrian perspective on monetary policy and central banking offers a unique and heterodox approach to understanding and analyzing market dynamics. Rooted in the works of prominent economists such as Ludwig von Mises and Friedrich Hayek, Austrian economics provides a compelling framework that challenges mainstream views on the role of money, interest rates, and central bank interventions in the economy. In this section, we delve into the core tenets of the Austrian perspective on monetary policy and central banking, offering insights from different points of view and highlighting key principles. 1. The Nature of Money: Austrian economists argue that money arises naturally in the market as a medium of exchange, rather than being a creation of the state or central bank. They emphasize the importance of individual choice and voluntary exchange in determining the use and value of money. Unlike the mainstream view, which sees money as a neutral tool that can be manipulated by central banks, Austrians view money as a commodity with intrinsic value, such as gold or silver. 2. The Business Cycle: One of the central contributions of Austrian economics is its analysis of the business cycle. Austrian economists argue that central bank interventions, particularly in the form of artificially low interest rates and credit expansion, distort the structure of production and lead to unsustainable booms followed by busts. This perspective challenges the conventional wisdom that central banks can effectively manage the economy through monetary policy. 3. Interest Rates: According to the Austrian view, interest rates are not determined solely by the supply and demand for loanable funds, as suggested by mainstream economics. Instead, interest rates reflect the intertemporal preferences of individuals and the time preferences of savers and investors. When central banks artificially lower interest rates, they create a misallocation of resources, incentivizing investments that are not economically viable in the long run. 4. central Bank independence: Austrian economists are critical of the notion of central bank independence, arguing that it often leads to an unchecked expansion of the money supply. They believe that central banks should not have the power to manipulate interest rates or engage in discretionary monetary policy. Instead, they advocate for a free banking system in which multiple competing currencies can emerge, allowing individuals to choose the money that best suits their needs. 5. Hayek's Knowledge Problem: Friedrich Hayek, a prominent Austrian economist and Nobel laureate, highlighted the knowledge problem faced by central planners, including central banks. He argued that the dispersed and tacit knowledge possessed by individuals in the market cannot be effectively aggregated and utilized by central authorities. This insight challenges the effectiveness of central bank monetary policy, as it suggests that central planners lack the information necessary to make optimal decisions for the economy. 6. Case Study: The Great Recession: The Austrian perspective provides a unique lens through which to analyze the causes and consequences of the Great Recession of 2008. Austrian economists argue that the housing bubble and subsequent financial crisis were the result of central bank policies that artificially lowered interest rates and encouraged excessive risk-taking. They contend that the subsequent government interventions, such as bailouts and stimulus packages, only prolonged the economic downturn and hindered the necessary market adjustments. The Austrian perspective on monetary policy and central banking offers a thought-provoking alternative to mainstream economic theories. By emphasizing the natural emergence of money, the impact of artificially low interest rates on the business cycle, and the knowledge problem faced by central planners, Austrian economics challenges the efficacy of central bank interventions. While this perspective may not be widely embraced in policy circles, it provides valuable insights into the complexities of market dynamics and the potential unintended consequences of monetary policy actions.
7784	dbpedia	3	7	https://www.cambridge.org/core/journals/journal-of-the-history-of-economic-thought/article/retrospective-look-at-the-hayek-story-roundaboutness-sticky-consumption-and-sequestered-capital/18C74DC3B684E4679B696076D1C67C56	en	A RETROSPECTIVE LOOK AT “THE HAYEK STORY”: ROUNDABOUTNESS, STICKY CONSUMPTION, AND SEQUESTERED CAPITAL	https://static.cambridge…-size-image=true	https://static.cambridge…-size-image=true	[ "https://www.cambridge.org/core/cambridge-core/public/images/icn_circle__btn_close_white.svg", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.png", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.svg", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.svg", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.svg", "https://static.cambridge.org/covers/HET_0_0_0/journal-of-the-history-of-economic-thought.jpg", "https://www.cambridge.org/core/page-component/img/share-icon.cbcfad8.svg", "https://www.cambridge.org/core/page-component/img/close-icon.194b28a.svg", "https://www.cambridge.org/core/page-component/img/cite-icon.44eaaa4.svg", "https://www.cambridge.org/core/page-component/img/rights-icon.d4a677c.svg", "https://assets.crossref.org/logo/crossref-logo-100.png", "https://upload.wikimedia.org/wikipedia/commons/a/a9/Google_Scholar_logo_2015.PNG", "https://assets.crossref.org/logo/crossref-logo-100.png", "https://www.cambridge.org/core/cambridge-core/public/images/cambridge_logo.png" ]	[]	[]	[ "" ]	null	[ "James E. McClure", "David Chandler Thomas", "Lee C. Spector" ]	null	A RETROSPECTIVE LOOK AT “THE HAYEK STORY”: ROUNDABOUTNESS, STICKY CONSUMPTION, AND SEQUESTERED CAPITAL - Volume 43 Issue 1	en	/core/cambridge-core/public/images/favicon.ico	Cambridge Core	https://www.cambridge.org/core/journals/journal-of-the-history-of-economic-thought/article/abs/retrospective-look-at-the-hayek-story-roundaboutness-sticky-consumption-and-sequestered-capital/18C74DC3B684E4679B696076D1C67C56
7784	dbpedia	0	31	https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/hicks-john-r	en	Encyclopedia.com			[ "https://www.encyclopedia.com/themes/custom/trustme/images/header-logo.jpg" ]	[]	[]	[ "Hicks", "John R. 1904-1989\nBIBLIOGRAPHY" ]	null	[]	null	Hicks, John R. 1904-1989 BIBLIOGRAPHY Source for information on Hicks, John R.: International Encyclopedia of the Social Sciences dictionary.	en	/sites/default/files/favicon.ico		https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/hicks-john-r	Hicks, John R. 1904-1989 BIBLIOGRAPHY Sir John R. Hicks, a British economist and author of twenty books, was knighted in 1964 and received the 1972 Nobel Prize for his contributions to general equilibrium theory and welfare economics. After graduating from Oxford University in 1925, he taught at the London School of Economics (LSE), where he formulated concepts on the elasticity of substitution, relative income shares of labor and capital, and liquidity. At LSE Hicks came under the influence of Lionel Robbins and Friedrich Hayek but broke away from their thinking in his book The Theory of Wages (1932), in which he considered unions as monopolies in the sense of rigid wages in a discrimination setting. He joined Cambridge University (1935–1938), where he was swayed by John Maynard Keynes’s (1883–1946) writings. Afterward, he was chair of political economy at the University of Manchester. He became a fellow at Nuffield College, Oxford, in 1946 and was the Drummond Professor of Political Economy from 1952 until his retirement in 1965. Hicks continued his work in the areas of fixprice and flexprice markets, liquidity, and inventions. Hicks’s contributions stand out in the areas of applied economics, Keynesian economics, value theory, and technological progress. His method was to modify a theory to fit the facts. Facts are linked to events of the day and have a history that can become dramatic at times. According to Hicks, these dramatic facts are like blinkers waiting to be simplifed, theorized about, and selected to explain topical events. Hicks continually revised his theories because economic facts are less permanent and less repeatable than facts in the natural sciences. Hicks viewed welfare economics as an application of demand theory, focusing on efficient and optimal cost and use of the social product. An efficiency test for welfare benefits tells us how to acquire more of one thing without having less of another thing. Demand theory makes sure that what we are getting more of is not detrimental. A welfare optimum may not be attained in a market with uniform prices, making room for cost-benefit analysis. Hicks’s IS and LL curves represent Keynes’s ideas of equilibrium in the goods and money markets, respectively. Alvin Hansen later suggested the label LM for LL (Hansen 1953, p. 144). Darity and Young (1995, pp. 1–14, 26–27) clarified that Hansen’s contribution emphasized one sector, while Hicks’s contribution emphasized two sectors. Hicks developed a four-equation system representing liquidity preference, M = L (r, Y ); investment, I = I (r, Y ); savings, S = S (r, Y ); and saving-investment equilibrium, S = I, where M is money, I is investment, S is savings, Y is income, and r is the rate of interest. The first equation yields the LM curve. If the interest rate rises, the alternative cost of holding money relative to other assets becomes higher, lowering the demand for money. A rise in income will increase the demand for money. The other three equations yield the IS curve, which shows how income and interest rates adjust to make savings equal to investments. By making unsold inventories depend on the future, the model accommodates short period expectations. In the short term, such as a day, expectations do not change, so the condition for saving to equal investment in the model is achieved. The IS-LM curves can take on special shapes that would prevent automatic adjustments from occurring. Hicks later thought that the IS curve represents a flow concept, and the LM curve, a stock concept. In his Capital and Growth (1965), he proceeded to show that a stock equilibrium over a period would require a flow equilibrium over that period. Hicks argued against the cardinal view, where utility is added, and for the ordinal view of value, where consumers rank their tastes and preferences. Alfred Marshal and the founders of the marginal revolution examined value with a given utility function. They required a utility surface for consumer maximization. Hicks’s value theory examined “what adjustments in the statement of the marginal theory of value are made necessary by Pareto’s discovery” (Hicks 1981, p. 7). Vilfredo Pareto postulated a scale of preferences concept, which represented value only by indifference curves. Hicks transformed the cardinal concept of total utility to the marginal rate of substitution between two commodities on an indifference curve. Similarly, he transformed the idea of diminishing marginal utility to diminishing marginal rate of substitution measured by the convex shape of the indifference curve. Following Hicks’s work, comparative static analysis that allows prediction from demand analysis can be performed. One of his predictions states that if demand shifts from good 1 to good 2, then the relative price of 2 in terms of 1 would increase, except if 2 is a free good. On the technology side, Hicks classified inventions as neutral, labor saving, or capital saving. When inventions change the marginal productivity of labor and capital in the same proportion, the invention is called neutral. Hicks predicted that if wages increase, labor’s share of output would rise, and that would encourage inventions to replace labor, making them labor saving. In an analogous manner, the same can be argued for capital-saving inventions. In general, when changes in relative prices of factors occur, they induce inventions; otherwise inventions are autonomous. Autonomous inventions are likely to be randomly distributed, while induced inventions are likely to be labor saving. SEE ALSO Capital; Economics; Economics, Keynesian; Economics, Nobel Prize in; IS-LM Model; Technological Progress, Economic Growth; Utility, Subjective; Value; Value, Subjective; Welfare Economics BIBLIOGRAPHY Darity, W., and W. Young. 1995. IS-LM: An Inquest. History of Political Economy 27 (1): 1–41. Hansen, Alvin H. 1953. A Guide to Keynes. New York: McGraw-Hill. Hicks, John R. 1932. The Theory of Wages, 2nd ed. London: Macmillan, 1963. Hicks, John R. 1937. Mr. Keynes and the Classics: A Suggested Simplification. Econometrica (April): 147–159. Hicks, John R. 1939. Value and Capital : An Inquiry into Some Fundamental Principles of Economic Theory, 2nd ed. Oxford: Clarendon Press, 1946. Hicks, John R. 1956. A Revision of Demand Theory. Oxford: Clarendon Press. Hicks, John R. 1965. Capital and Growth. New York: Oxford University Press. Hicks, John R. 1980. IS-LM: An Explanation . Journal of Post Keynesian Economics 3 (2): 139–154. Hicks, John R. 1981. Wealth and Welfare. Vol. 1 of Collected Essays in Economic Theory. Oxford: Basil Blackwell. Hicks, John R. 1982. Money, Interest and Wages. Vol. 2 of Collected Essays in Economic Theory. Oxford: Basil Blackwell. Hicks, John R. 1983. Classics and Moderns. Vol. 3 of Collected Essays in Economic Theory. Oxford: Basil Blackwell. Hicks, John R., and R. G. D. Allen. 1934. A Reconsideration of the Theory of Value. Economica 1: 52–76. Lall Ramrattan
7784	dbpedia	2	28	https://www.newworldencyclopedia.org/entry/Friedrich_Hayek	en	New World Encyclopedia	https://www.newworldency…avicon-32x32.png	https://www.newworldency…avicon-32x32.png	[ "https://www.newworldencyclopedia.org/images/nwe_header.jpg", "https://www.newworldencyclopedia.org/d/images/thumb/2/2a/FvonHayek.jpg/200px-FvonHayek.jpg", "https://static.newworldencyclopedia.org/skins/common/images/Cc.logo.circle.png", "https://www.newworldencyclopedia.org/resources/assets/poweredby_mediawiki_88x31.png" ]	[]	[]	[ "" ]	null	[]	null		en	https://static.newworldencyclopedia.org/favicon.ico		https://www.newworldencyclopedia.org/entry/Friedrich_Hayek	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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7784	dbpedia	3	33	https://www.emerald.com/insight/content/doi/10.1108/ECON-10-2022-0139/full/html	en	From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium			[ "https://www.emerald.com/insight/static/img/emerald_publishing_logo-white.svg" ]	[]	[]	[ "Nicholas Kaldor", "Friedrich A. Hayek", "Knut Wicksell", "Gunnar Myrdal", "Expectations", "Equilibrium", "Capital theory", "B13", "B22", "B25", "B31" ]	null	[]	null	From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium - Author: Keanu Telles	en			https://www.emerald.com/insight/content/doi/10.1108/ECON-10-2022-0139/full/html	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).
7784	dbpedia	1	21	http://webhome.auburn.edu/~garriro/fm3bellante.htm	en	PHILLIPS CURVES AND HAYEKIAN TRIANGLES			[ "http://webhome.auburn.edu/~garriro/hopelogo.gif", "http://webhome.auburn.edu/~garriro/phillipshayek.jpg", "http://webhome.auburn.edu/~garriro/hope1.jpg", "http://webhome.auburn.edu/~garriro/hope2.jpg" ]	[]	[]	[ "" ]	null	[ "Auburn User" ]	null					null	Two Perspectives on Monetary Dynamics Don Bellante and Roger W. Garrison I. Introduction During different phases of the Keynesian episode, the monetary theories offered first by Keynes and later by the Keynesians have been judged by changing standards. The standards changed along with the changing perceptions of what constituted the most viable alternative to the Keynesian vision. "[T]here was a time," wrote John Hicks (1967, p. 203), "when the new theories of Hayek were the principal rival of the new theories of Keynes." But times changed, and Milton Friedman (1969d), with his restatement of the quantity theory of money, became the dominant alternative to Maynard Keynes. And eventually, Friedman's Monetarism gave way to New Classicism and the idea of "Rational Expectations." The profession has been treated to exhaustive comparisons of Keynes and then Keynesians with the various opposing schools, but comparisons of the sequential alternatives to Keynesianism have been all but lacking. The present paper begins to fill this void by offering a critical comparison of the Monetarists and the Austrians as represented by Friedman and Hayek.(1) A statement by Robert Lucas (1981, p. 4) suggests how such a comparison can be undertaken: "...I see no way to account for observed employment patterns that does not rest on an understanding of the intertemporal substitutability of labor." Lucas's concise way of identifying the understanding that explicitly underlies his theories (and implicitly underlies Friedman's) hints at an alternative way of accounting for observed unemployment patterns. While Monetarism and New Classicism are based on the intertemporal substitutability within the market for labor, Austrianism is based on the intertemporal complementarity within the market for capital goods. Differences between the monetary theories of Friedman and those of Hayek, then, can be spelled out in terms of the markets (for labor and for capital, respectively) that serve as a focus for each.(2) With attention to the major themes of each theorist, Sections II and III identify the relevant aspects of monetary disturbances as seen by Friedman and as seen by Hayek. Focusing on both substance and method, Section IV offers a critical comparison of the two perspectives. Section V points out some implications in terms of the conventionally defined categories of unemployment, monetary lags, and the concept of "full" employment; and Section VI provides a summary view. II. Friedman (and the Monetarists) on Monetary Dynamics With conventional qualifications and allowances for real growth, increases in the supply of money lead, in the long run, to proportionate increases in the general price level. This proposition, which constitutes the kernel of truth in the quantity theory of money, is not in dispute. But the nature and significance of the monetary dynamics, the market process that translates the initial cause into its ultimate effect, is and has long been a matter of much controversy. This issue, in fact, is what separates the Monetarists from the Austrians and gives scope for interpretation within both schools. Friedman appears to be of two minds on the issue of monetary dynamics�the transmission mechanism linking money to prices. On occasions where the focus is on long-run comparative-statics results, it is simply admitted that he (along with Anna Schwartz) has "little confidence in [their] knowledge of the transmission mechanism, except in such broad and vague terms as to constitute little more than an impressionistic representation rather than an engineering blueprint" (Friedman, 1969b, p. 222). But on occasions where the focus is on the transmission mechanism itself, such as the market process that traces out a short-run Phillips curve, there is an accounting of the the mechanism in terms of the market for labor that would rival any blueprint(3) (Friedman, 1976). These monetary dynamics, which are used by Friedman to explain the short-run nature of the negatively sloped Phillips curve and to suggest the existence of a vertical long-run Phillips curve, can be used as a basis for evaluating the Monetarist view and for comparing it to the alternative offered by the Austrians. The monetary dynamics envisioned by Friedman hinge on the sequential effects of perceived relative-price changes in the market for labor. A number of heuristic assumptions about the market for capital goods and about income effects in commodity markets are invoked. These assumptions are required to narrow the focus so that the Monetarists' story can be told. The lack of discussion in this context of the allocation of capital goods or of the short-run effects of a monetary injection within the market for capital goods is evidence enough that such considerations are no part of the story.(4) Implicitly, one of several alternative constructions is adopted: (1) Real capital is taken to be completely homogeneous, or�to use the fiction invented by Frank Knight�it is treated as a "Crusonia plant." (2) The structure of real capital, which admittedly consists of heterogeneous elements, is fixed. It cannot or, for some reason, is not altered�even in the short run�as a result of a monetary injection. (3) Allocations within the market for capital goods are (somehow) always governed, whether in the presence or the absence of monetary disturbances, by "real factors only." This third construct is in the spirit of the New Classicism. One of these three or some effectively similar construction or assumption must underlie any macroeconomic theory that ignores the allocation of resources within the capital-goods sector. Implicit assumptions of this sort about capital goods are not at all at odds with the Chicago tradition more broadly conceived. The inattention to capital theory stems from Frank Knight's grappling with the thorny issues and conceptual difficulties that inhere in this subject matter (Knight, 1934). In general, Monetarists have taken comfort in the Knightian view that the structure of capital, particularly the intertemporal structure, can be safely ignored, and that theories in the Austrian tradition, which make use of such concepts as "roundaboutness" and "stages of production," are especially misguided.(5) The Knightian view of capital permits the Monetarists to focus exclusively on the market for labor. But at least two additional assumptions are needed to limit the focus to the relative-price effects in the labor market. Distribution effects (who gets the new money) and differential income effects (how it gets spent) must be removed from consideration. Friedman's heuristic device for short-circuiting the distribution effects is to assume that increases in the money supply are brought about by a one-time dropping of money from a helicopter in such a way that each individual picks up the new money in direct proportion to the amount already in his possession.(6) The differential income effects of "helicopter money"�as it has come to be called�are assumed away. This mode of theorizing reflects the implicit assumption that differential income effects are in fact negligible or the heuristic assumption that indifference curves are both identical across agents and homothetic.(7) Within this theoretical construction, the Quantity Theory holds in its strongest form, and any divergence in the pattern of prices between the initial injection of money and the eventual increase in the price level is purely stochastic. Thus, disequilibrium relative-price movements within the markets for both capital goods and final products are taken to be unsystematic. No generalizations about such movements can be made. But movements in the price of labor relative to the price of final output are systematic in the Monetarist view. And the temporal pattern of these movements depend in a critical way on differences in the ability of workers and of employers to perceive the price changes most relevant to each.(8) The spending of newly created helicopter money begins to bid up the prices of final products in unsystematic ways. The individual worker, who clearly perceives his yet-unchanged nominal wage, has no clear perception of the change in his real wage�depending, as it does, on the change in some index of final-product prices. The employer, whose perception of the general price level is no better than the workers', is motivated by a different concern. From the employer's perspective, the relevant real wage is the Ricardian real wage, which depends upon a single price�the price of the product that the employer produces. If the output price has increased, the wage that he pays to the workers�relative to the output price�has clearly decreased. Alternatively stated, workers and employers alike have no clear perception of the real wage, where real is understood in the market-basket, or Fisherian, sense; but employers have a clear perception of the real wage, where real is understood in the Ricardian sense.) Quantity adjustments in the labor market are made in ways that correspond to the differing perceptions in real-wage movements. The behavior of workers, who make their labor-leisure decisions on the basis of yet unchanged perceptions, is depicted by an unchanged labor supply curve; the behavior of employers who now enjoy higher output prices is depicted by a rightward shift in the demand for labor.(9) The nominal wage rate rises as does the level of employment. (Figure 1 shows the corresponding movement (from A to B) along the initial Short-run Phillips Curve.) The higher nominal wages paid to a larger number of workers exert upward pressure on the prices of final products; increases in output exert downward pressure on final-product prices. And with the passage of time, workers begin to get a clearer perception of their real wage rate. A temporal pattern of the real wage rate is traced out by a series of iterative steps in which the reinforcing and counteracting forces interact. In the end, after a "long and variable"�and fundamentally indeterminate�time lag, the worker-employer perception differential is eliminated; the short-run Phillips curve shifts rightward. The level of employment, the level of output, and the real wage (both Fisherian and Ricardian) return to the levels that characterized the economy before the monetary injection. (Point C in Figure 1 differs from point A only in terms of absolute prices and wages.) III. Hayek (and the Austrians) on Monetary Dynamics If Frank Knight accounts for the Monetarists' inattention to capital theory, Eugen von Böhm-Bawerk (1959) accounts for the Austrians' preoccupation with it. Where Friedman's treatment of monetary dynamics requires some key assumptions about the workings of the market for capital goods, Hayek's treatment(10) requires similar assumptions about the workings of the labor market. Recognizing this symmetry allows us to describe the alternative treatments in a way that facilitates a comparison. More often than not, Hayek's assumptions about labor, like Friedman's assumptions about capital, are implicit. Labor skills are assumed to be non-specific. Individual occupations are defined in terms of the particular capital goods that are complementary to labor. Wage rates are flexible, but not perfectly flexible. Workers can be bid away from some occupations and into others, but not instantaneously. Adjustments in the labor market that involve a reduction in labor demand in some occupations will be characterized by temporary increases in the level of unemployment�the greater the adjustment, the greater and longer-lasting the temporary increase. With allowance for frictions of this sort, workers are able correctly to perceive and respond to changes in the pattern of real wage rates. Expectations about wage rates and prices can come into play�but not expectations whose formulation requires a theoretical understanding of economic relationships, such as (correct or "rational") expectations about the upper turning point of a business cycle. It might be noted at this point that Lucas (1981, pp. 215-17) sees a certain kinship between his own ideas and those of Hayek. But Lucas parts company with the Austrians when he treats knowledge of the economy's structure in the same way as knowledge within the structure. Hayek (1948b, pp. 79-81) makes a first-order distinction between theoretical knowledge and knowledge of the marketplace. Market participants can be expected to make use of information conveyed by prices along with other particular knowledge that they might have, but they cannot be expected to know�even in a probabalistic sense�the parameters of the economy's structure. That is, they cannot be expected to know, or to behave as if they know, the answers to questions that economists have been debating amongst themselves for more than two hundred years.(11) The assumptions spelled out above about the workings of the market for labor allow the Austrians to deal with monetary dynamics exclusively in terms of the market for capital goods. The dynamics within the capital-goods market, coupled with these assumptions, will have clear implications about the corresponding pattern and time path of the employment of labor. The effects of a monetary disturbance within the market for capital goods reflect several considerations. Capital goods in the Austrian view are heterogeneous in the extreme, and the structure of capital involves multidimensional complexity. Individual capital goods are characterized by different degrees of specificity and are related to one another, both intertemporally and atemporally, with various degrees of substitutability and complementarity.(12) Thus, a set of heuristic assumptions about the capital structure is required to allow the identification of its most essential features and to render the treatment of monetary dynamics tractable. In the Austrian view, the central problem in macroeconomics is the problem of intertemporal discoordination. (O'Driscoll, 1977, pp. 70-79; Garrison, 1984, 1985) Whether the focus is on the coordination of investment decisions with consumption decisions or on the time-pattern of macroeconomic magnitudes over the course of a business cycle, the temporal element is essential to the macroeconomic perspective. Hayek incorporated this temporal element into his monetary dynamics by focusing on the intertemporal aspects of the economy's capital structure. To avoid undue complexity, Hayek envisioned a heavily stylized production process. His vision gives recognition, sometimes explicitly and sometimes implicitly, to a set of corresponding heuristic assumptions. Each production process is characterized by a modifiable sequence of inputs and a point output; some production processes are more time-consuming than others. The sequence of inputs is conceived as consisting of "stages" of production. The once- famous Hayekian triangles(13) represent a stylization of the entire economy's production process (See Figure 2): The horizontal leg represents the time element in the process�the depth of the capital structure. In the simplest case this leg represents the time that sepatates the earliest stage of production from the final output; the vertical leg represents the nominal value of the final output. The height of the hypotenuse at successive points in time represents the value of semi-finished goods as they move through time from the earliest to the latest stage of production.(14) Capital goods can be shifted�within limits�from one production process to another in response to relative-price changes. More importantly, capital goods can be shifted from one stage of production to another in ways that modify the intertemporal pattern of output. Some types of capital goods that are employed in the earlier stages of production (or that, with some modification, can be so employed) may be needed in the later stages of production as well. That is, while competing for the use of individual capital goods, the stages themselves exhibit a certain degree of intertemporal complementarity. There is no one-to-one relationship between stages of production and business firms. Some firms may operate within one stage, some in several sequential stages, and some in different stages of different production processes. Spelling out the characteristics of the Hayekian structure of production is, by itself, almost enough to specify the nature of the corresponding monetary dynamics. The general pattern of events set into motion by a monetary injection can be identified as soon as the method of injecting the new money is specified. Because of the historical relevance, Hayek assumed that the new money is injected through credit markets�that the central bank, in effect, pads the supply of loanable funds with newly created money.(15) Clearing the market for loanable funds in the face of such a monetary injection requires that the rate of interest fall until the quantity of funds demanded matches the increased supply.(16) In turn, this lowered rate of interest has implications for the intertemporal structure of capital. To the extent that the temporal relationship between the various types of capital goods and the ultimate output of the production processes is perceived by entrepreneurs, the prices of the capital goods will be affected in a systematic way. In the earlier phases of the market's reaction to the credit expansion, the greater the time between the use of the capital good and the emergence of the ultimate output, the greater the relative increase in the price of the capital good. This pattern of relative-price changes follows from the application of standard discounting techniques. There will be a corresponding pattern of quantity adjustments. Capital will be bid away from relatively less time-consuming production process into relatively more time-consuming processes and away from relatively late stages of production into relatively early stages of production. Marginal adjustments of these sorts will be made throughout the capital structure as firms seek to take advantage of the favorable credit conditions. In Figure 2 the shift towards more time-consuming processes is represented by a movement from A to B. (The change in the slope of the hypotenuse reflects smaller profit differentials between the stages of production, which in turn reflect cheaper credit.) The later phases of this dynamic process are marked by a reversal of the price and quantity movements that characterized the earlier phases (Hayek, 1967, p. 58). The passage of time takes production projects that were begun as a result of credit expansion into their later stages. Some of these later stages require the use of capital that was used up in�or irrevocably committed to�earlier stages. That is, the money-induced expansion caused more capital to be committed to the earlier stages of production without providing the additional resources�as would have been provided had the expansion been savings-induced�necessary for the completion of all the production processes. In Figure 2 the value of the production projects in their final stages is represented by a broken line, indicating that a credit-induced boom cannot be sustained. Capital goods complementary to the yet-uncompleted production processes are now in short supply. Their prices are bid up, and as a result of these higher prices, the demand for credit increases. The rate of interest, which had been artificially low during the monetary expansion, is now bid up. Two significant differences between the Austrian and the Monetarist views can be noted here: First, because of intertemporal complementarity, the initial investment raises the demand for capital(17); second the resulting rise in the interest rate is separate from any Fisher effect, which depends upon a rising price level.(18) Both directly through the market for capital goods and indirectly through credit markets, the prices of capital goods committed to the early stages of production are bid down. Uncommitted capital goods are bid away from the earlier stages of production and into the later stages.(19) But in this phase of the dynamic process, marginal adjustments may not be possible. Some capital goods attracted to the earlier stages of production by the monetary expansion may not be retrievable. As a consequence, many production projects may have to be abandoned; many others can be completed but only with a great delay and/or at a much higher cost than could have been anticipated. (The claim, made in the spirit of the New Classicism, that market participants will anticipate the money-induced capital shortage rings hollow. Such an anticipation would require that they know�or behave as if they know�the "real scarcities" independent of the price system which supposedly communicates that information to them. In the Austrian view, if a monetary injection distorts the price signals, market participants will be economizing on the basis of erroneous information.) This later phase of the adjustment process takes on the characteristics of a crisis, a sharp down-turn. But with time, some types of capital can be liquidated to accommodate the excess demands for other types. Eventually, the economy's capital can be restructured in a way that reflects real resource availabilities, and the credit market can be adjusted to reflect the supply and demand for loanable funds. Abstracting from the capital that is lost forever as a result of the credit expansion and from possible long-run effects on the distribution of income, the rate of interest and the corresponding structure of production will return to the level and configuration that characterized the economy before the credit expansion. Figures 1 and 2 can serve to depict the correspondence between the Monetarist and the Austrian views. Arguing respectively in terms of the wage-rate effect on the employment of labor and the interest-rate effect on capital utilization, Friedman and Hayek have traced out the consequences of a monetary injection from A to B to C, where, in both diagrams, points A and C represent identical sets of real parameters. Point B represents�in Figure 1�a rate of unemployment temporarily and unsustainably below the (Friedmanian) natural rate and�in Figure 2�a depth of capital temporarily and unsustainably maintained by a loan rate of interest kept below the (Wicksellian) natural rate. To this point the Austrian story has been told exclusively in terms of the market for capital goods. Yet a major purpose of the story is to account for the cyclical unemployment of labor. But filling in the blanks about how the labor market is affected by the dynamics in the capital market is not difficult. In the trivial case of perfect wage flexibility and instantaneous adjustments, there need be no unemployment at all. Labor would simply be shifted around during the unfolding of the dynamic process so as to be employed in ways consistent with the changing pattern of relative prices.(20) This is clearly not what Hayek had in mind. The recognition that labor is complementary to (some) capital and that frictions inherent in the market process prevent adjustments from taking place instantaneously is all that is required to translate the story about capital into a story about labor. During the early phases of the dynamic process, there is a net increase in the demand for labor. The new money injected through credit markets is used not only to bid workers away from some jobs and into others but to attract new workers as well. To use Friedman's terminology, unemployment falls below its natural rate. But during the late phases of the process, there are actual decreases in the demand for labor in the early stages of production. And the increases in the demand for labor in the later stages is only partially offsetting�due to the shortage of complementary capital goods. The frictions involved in the economy-wide movements of labor out of the early stages and into the late stages coupled with the net reduction in the demand for labor account for a considerable amount of supernatural unemployment during this phase of the dynamic process. Once the misallocated capital has been liquidated and the wage rates have adjusted to the underlying market conditions, the cyclically unemployed workers can be reabsorbed. In Hayek's story as in Friedman's, unemployment eventually returns to its natural rate. IV. A Critical Comparison While the two views of monetary dynamics spelled out in the previous two sections differ in important respects, they are in several fundamental respects quite similar. Comparing the differences, then, must be prefaced by a clear recognition of the underlying similarities. Five points of commonality are noteworthy: (1) Both theories can be fully squared with the kernel of truth in the quantity theory of money. (2) Both theories deal with disequilibrium phenomena, but neither denies that equilibrating forces dominate in the end. (3) Both hinge in a critical way on the distinction between short-run effects and long-run effects. (4) Both involve a market process that is necessarily, or endogenously, self-reversing. Monetary disturbances cause certain kinds of distortions in market signals. These distortions give rise in the short run to movements in certain prices and quantities, movements which in the long run create market conditions for counter-movements in those same prices and quantities. (5) With appropriate qualifications (about what constitutes the long-run) both theories are characterized by monetary disturbances whose short-run effects are non-neutral but whose long-run effects are neutral. With allowance for these points of commonality, Friedman and Hayek are offering in some respects complementary views, in other respects competing views. Our comparison will attempt to separate the two kinds of differences. Comparing aspects of the two views that are at odds with one another must await a closer look at each view separately. But ways in which the two views are different but complementary can be readily identified. At the root of these kinds of differences is the fact that Friedman focuses his analysis on the market for labor while Hayek focuses his on the market for capital goods.(21) The trade-off that gets distorted by monetary disturbances is labor vs. leisure for Friedman and goods now vs. goods later for Hayek. And due in large part to the differing natures of labor and capital (the more radical heterogeneity of capital as compared to labor(22)), Friedman argues in terms of substitutability and Hayek in terms of complementarity.(23) In an important sense there is simply no scope for conflict here. Labor-leisure preferences and intertemporal preferences interact with the perceived constraints that are relevant to each. The dimensions of the two market processes can be seen as orthogonal to one another. Trading off labor against leisure in a sequence of periods can be understood as substituting labor in some periods for labor in others. Thus, with both views laid out intertemporally, we see that Friedman is dealing with the intertemporal substitutability of labor while Hayek is dealing with the intertemporal complementarity of capital. Spelled out in these general terms, then, we have a harmony, rather than a conflict, of views.(24) 1. A Critical Retelling of Friedman's Story But when we turn again to the specifics of the market processes envisioned by Friedman and Hayek, we see first-order differences. Some of these differences put the two views at odds with one another�or at least allow for a preference of one over the other on the basis of plausibility or fruitfulness. Identifying these differences and their significance can begin with a critical assessment of Friedman's view, which we preface with a recognition of existing criticism in the literature. Sketchy expositions of the Monetarist view have given much scope for misinterpretation. Gardner Ackley (1983, p. 10), for instance, sees the Monetarist dynamics purely in terms of "tricks" played on employers and workers. It is a "trick for an inflation to fool both employers and workers�in opposite directions�about the movements of the real wage paid by one and received by the other." But to call this a trick is to miss Friedman's point. The "real wage" means one thing to workers and something else to employers. Neither workers nor employers have a clear perception about what is happening to the general price level, but both are responding in conventional ways to the incentives that they face. Recognizing these incentives gives Friedman's view a microeconomic footing and insulates it against criticism of the type offered by Ackley. Another criticism of Friedman's view (Birch, Rabin, and Yeager, 1982) is based on a perceived contradiction between the market process envisioned and the equation of exchange.(25) The familiar identity MV = PQ implies that when M, or more properly MV, increases, the corresponding increase in PQ is split in some way between an increase in P and an increase in Q. That is, Q can increase only to the extent that P does not increase. By contrast and according to the Monetarist account of the dynamic process, it is increases in P that cause increases in employment and hence increases in Q. That is, Q increases to the extent that P does increase�hence the perceived contradiction. But what appears at first blush to be a contradiction is in fact a manifestation of a self-reversing process. There is nothing logically contradictory about a process in which P begins rising before Q but in which Q falls as P becomes fully adjusted to the increase in M. While the Ps and the Qs can be squared with the equation of exchange at each point in the process, Q's initial upturn and inevitable downturn, which reflect similar movements in the employment of labor, constitute the essential self reversal that lies at the heart of the Monetarist view. Our own criticism is fundamentally different from the ones identified above. While the sequence of movements in P and Q are not evidence of a contradiction, they are evidence of a certain anomaly in the Phillips Curve story. An initial rise in prices is a prerequisite to any movement along a short-run Phillips curve, but the story accounts inadequately for the nature of this initial rise. To make the story stick we must recognize that there is some other, logically prior, market process that is set into motion by a monetary injection. The process can be easily identified by drawing more broadly from the Monetarist literature. Helicopter money adds to each individual's cash balances, thereby inducing greater spending and the bidding up of prices (Friedman, 1969c, p. 5). But if buyers of labor services receive their pro-rata share of the helicopter money, they would be bidding up the price of labor at the same time. The simultaneous rise in the price of output and the price of labor would preclude the fall (as perceived by the employer) in the real wage, which itself constitutes a critical aspect of the self reversing dynamic process. The real-cash-balance effect, then, becomes the whole story rather than a prelude to the Phillips-curve story. The Phillips Curve story can be saved by assuming a monetary injection in which the new money falls first into the hands of consumers and only later into the hands of producers. While this kind of assumption, which highlights a particular distribution effect, violates the spirit of Monetarism, it allows in a straightforward way for a variation on the Austrian theme. We turn now to consider the Austrian alternative. 2. Heuristic Assumptions and Domain Assumptions The assumptions made by Friedman and Hayek about the nature of the hypothesized monetary injection are not just two alternative assumptions that serve the same purpose. Friedman's assumption (that money is dropped from a helicopter) is a heuristic assumption. It is a deliberate fiction whose purpose is to bypass any questions that relate directly to the actual injection of money while still allowing for the derivation of implications that can be tested empirically. (Friedman's uninhibited use of such fictions identifies his method as instrumentalism.(26)) Hayek's assumption that money is injected through credit markets is a domain assumption.(27) In many instances money actually is injected through credit markets. Thus Hayek's story applies directly and without modification to those instances. A lower rate of interest resulting from the credit expansion increases the quantity of credit demanded. Given the relative volumes of commercial lending and consumer lending, we can say that the new money falls first into the hands of producers and only later into the hands of consumers. This disproportionate distribution of the new money is consistent with Hayek's story about the effect of a monetary injection on the structure of capital: Production for future consumption is temporarily favored over production for present consumption. For instances in which money is injected by some other means, Hayek's story applies only after suitable modifications are made. Suppose, for example, that a monetary expansion takes the form of increased transfer payments to consumers. This type of monetary injection would temporarily favor present consumption over future consumption. Capital goods would be reallocated accordingly. In many respects, the self-reversing market process triggered by such an injection would be a mirror image of the process triggered by a credit expansion. Capital goods in the later stages of production would be first in short supply and subsequently in surplus. The demand for labor would rise and then fall as workers were bid into the later stages of production only to become unemployed when the demand for present consumption fell to its "natural" level. The downturn associated with such a transfer expansion may be less severe than one associated with a credit expansion if only because short-term capital can be liquidated more quickly than long-term capital. Two observations are warranted here. First, Friedman needs to incorporate a transfer expansion, or something like it, into his theoretical construction if his Phillips curve story is to become coherent. Second, inflation-rate and unemployment data that suggest a negatively sloped short-run Phillips curve and a vertical long-run Phillips curve are consistent with Hayek's story whether the new money is lent into existence or transferred into existence.(28) Before we suggest what empirical, or historical, considerations might constitute a basis for choosing between the alternative stories offered by Friedman and Hayek, we turn to one further issue�the issue of generalizability. 3. Generalizability Any theoretical construction that suggests how a particular market works may be more or less generalizable�adaptable to different circumstances or extendable to other markets�depending in large part upon the nature of the assumptions used in the construction. The discussion above suggests that theories based on domain assumptions are more generalizable than theories based on heuristic assumptions. Hayek's story can be adapted to apply to circumstances in which the new money favors consumption activity over investment activity even though it was first told the other way around. The story can be generalized to recognize that monetary expansion can cause intertemporal discoordination�in one direction or the other�depending upon the particular device used to inject the new money. In recent years Hayek has generalized his own story even further by recognizing that monetary expansion causes a self-reversing discoordination in many markets, whether or not it causes any intertemporal discoordination (1975a, pp. 23-24). By generalizing in this way, Hayek has not at all changed his mind about the effects of monetary expansion, he has simply recognized that the domain (credit expansion) that once dominated his subject matter is no longer so dominant. But money-induced discoordination�of one sort or another�still dominates the story.(29) Friedman's story makes use of a monetary helicopter whose precise function is to assume away the discoordination that Hayek's story deals with. The monetary helicopter does not constitute one domain from which the theory can be extended; it constitutes the intentional neglect of all such domains. The Friedmanian helicopter, like the Walrasian auctioneer in a different story, should be seen as a "red flag," a marker where something important has been left out of account so that some other part of the story could be told. From this perspective we can admire the outrageousness of the particular fiction employed: the helicopter is a red flag that virtually no one could fail to see. But a red flag is no basis for generalization. If we go back and take into account the effects of actual monetary injections, we do not get a generalization of Friedman's story; we get Hayek's story. Hayek's story is generalizable in another important respect. The task of identifying the effects of credit expansion was made tractable by employing a heuristic assumption about the structure of capital-using production processes�the assumption of multi-period inputs and a point output. This particular assumption allowed for the abstraction from many complexities while it retained the essential element�the time element�in the analysis. Once the story is told in its most tractable form, then, it can be generalized and extended to take into account some of the complexities that were initially assumed away.(30) Production processes with multi-period outputs can be taken into account as well as processes that make use of capital goods of a greater or lesser degree of durability or whose final output is a durable consumer good. And by recognizing the ways in which the market for "human capital" is like the market for capital goods, Hayek's analysis can be extended in a direct way to labor markets as well (Bellante, 1983). Unfortunately, Hayek's attempt to tell his story in the contexts of several different circumstances was seen as evidence of confusion on Hayek's part. In response to criticism that he assumed an initial state of full employment and placed too much emphasis on changes in the terms of credit, Hayek (1975c, pp. 3-37) offered an alternative account in which widespread unemployment was assumed and the loan rate of interest was held constant. The resulting story was then criticized (Kaldor, 1942) on the grounds that it contradicted Hayek's own earlier rendition. By uncritically adopting Kaldor's assessment of what he dubbed the "concertina effect," modern critics have failed to appreciate the adaptability, the generalizability, that characterizes Hayek's formulation.(31) A similar sort of generalization and extension is not possible for Friedman's story. The essential feature on which his story depends is unique to the particular context in which it is told. For Friedman, the differing perceptions of workers and employers is what gives rise to the story; they are what "drive the system." The market process that Friedman identifies has no direct counterpart in the market for capital goods. The owner of a diverse capital stock, for instance, is unlikely to have perceptions that differ in a systematic way from those who may buy the services of that capital stock. Such perception differences are even less likely in the more prominent cases in which capital goods are owned indirectly through financial markets. Thus, independent of any empirical considerations, we have some basis for preferring Hayek's story over Friedman's. Hayek's domain assumptions and even his heuristic assumptions allow for generalization and extension in ways that Friedman's do not. Hence, Hayek's theoretical construction is the richer, the more fruitful, of the two. 4. Historical Applications and Policy Implications Extensive empirical testing has favored Friedman's view of the nature of the short-run Phillips curve over beliefs or hopes that there is a more permanent trade-off between inflation and unemployment. But this same empirical testing provides no clue at all about the nature of the market process that moves the economy along a short-run Phillips curve and then shifts that curve so as to conform with the long-run vertical Phillips curve. That is, the testing allows to us choose between a Keynesian view and a Friedman-Hayek view, but not between the Friedman view and the Hayek view. Direct empirical evidence about the nature of the monetary dynamics involved in adjusting the economy to a monetary injection may be all but impossible. Directly substantiating Friedman's story would require data on perceived real wage rates; directly substantiating Hayek's story would require the quantification of actual changes in the complex structure of capital.(32) We must look for implications of the two views that allow for empirical differentiation. As it turns out, our comparison of the two views provides the needed clue about differing implications. In Friedman's story a general rise in prices of final output is a necessary link in the self-reversing market process triggered by monetary expansion. Without this price inflation, which has a different significance for workers and for employers, there is no story to tell. While Hayek's story allows for price inflation, his story does not depend upon it (1967, pp. 22-30; 1975b, pp. 104, 121, 196, and passim). An initially depressed interest rate followed by subsequent resource constraints within the market for capital goods can serve alone as the basis for the self-reversing market process envisioned by Hayek.(33) This realization that price inflation plays a leading role in one story and, at best, a supporting role in the other allows us to identify important differences in the way the two stories are used not only in the interpretation of history but also in the prescription of policy. Historical episodes in which monetary expansion is accompanied by an unchanging price level are interpreted differently by Friedman and Hayek. The decade of the 1920s provides the most dramatic illustration of this difference. Real economic growth during this decade, which in the absence of monetary expansion would have produced a decline in the price level, served instead to offset the inflationary effects of the monetary expansion. The self-reversing process that, in Friedman's view, characterizes other episodes of monetary expansion does not get triggered in this one. There is no Phillips-curve story to tell. Economic problems that surfaced at the end of the '20s are not, according to the Monetarist view, a result of a market process that began much earlier in the decade. The economic downturn is blamed instead on exogenous factors�the incompetence and irresponsible behavior of the central bank (Friedman, 1963, pp. 299-419). From an Austrian perspective, the same historical episode is seen quite differently (Hayek, 1975b, pp. 18-20; Robbins, 1934; Rothbard, 1963). The fact that there was virtually no price inflation is irrelevant. There is no scope for the idea that the monetary expansion simply accommodated real growth: real growth, in the Austrian view, must be accommodated by real saving. The credit expansion during the 1920s caused the rate of interest to be lower than it otherwise would have been and thereby triggered a self-reversing process within the market for capital goods. The actual self reversal came in 1929 causing the economic downturn. This historical episode, then, is an illustration of Hayek's story and not an exception to it. Interpretations of history have their counterpart in policy recommendations. Again, the differing significance of price inflation is the basis for differences in preferred policies. In the Monetarist view, so long as the price level is stable, monetary expansion is not disruptive. Monetary expansion may even be necessary to keep prices from falling during periods of real economic growth. In the Austrian view, monetary expansion is a disruptive force, whether or not the price level is changing as a result of the expansion. The particular nature of the disruption will depend upon the particular form of the expansion. The differing recommendations can be stated concisely in terms of the equation of exchange and an assumed constant velocity of money. The Monetarist recommendation: Increase the supply of money to match long-term, secular increases in real output; the Austrian recommendation: Abstain from monetary expansion even in periods of economic growth; increased credit should come only from increased saving; increasing output should be accommodated by a declining price level.(34) These policy differences suggest that the critical comparison of alternative monetary dynamics is more than an idle exercise. V. Further Implications Our critical comparison has important implications about the way we think about macroeconomic problems. The monetary dynamics envisioned by Hayek provide a richer understanding of the market processes that might be triggered by a monetary expansion, but the Austrian alternative may at the same time render less serviceable�or even misleading�some of the standard macroeconomic concepts. At issue, in particular, are the conventionally defined categories of unemployment, the notion of "long and variable" monetary lags, and the concept of "full" employment. 1. Cyclical and Structural Unemployment Beginning with Keynes, it has been standard practice to identify a number of categories of unemployment in order to isolate conceptually one particular component of special interest. Cyclical unemployment is the major focus of macroeconomic and monetary theory. Traditionally, theorizing about what causes unemployment of this category or about how it might be reduced or eliminated have been facilitated by impounding other categories of unemployment in a ceteris paribus assumption. Frictional unemployment, which is inherent in any market economy, is wholly attributable to the existence of search costs. Unemployed workers of this category always find employment, but not instantaneously. Institutional unemployment, such as might be caused by minimum-wage legislation, may be lamentable, but it is to be fully accounted for in terms of the legal constraints. These two categories of unemployment can be conceptually separated from cyclical unemployment, whether we accept Friedman's treatment of monetary dynamics or Hayek's. Structural unemployment involves a geographical or occupational mismatch of workers and employment opportunities. Unemployment of this sort could result from autonomous shifts in consumer demand or from technological innovations. In Keynesian and Monetarist formulations, structural unemployment is combined with frictional and institutional unemployment, and all three are collectively impounded in a ceteris paribus assumption. Keynes's views on unemployment of these sorts are virtually identical to the "Classical" views of, say, Cecil Pigou; they were spelled out by Keynes (1936, p. 6) only to make clear what he was not talking about. Friedman (1976, p. 217) makes use of these categories to locate the vertical long-run Phillips curve. The natural rate of unemployment, which is simply the market rate given frictions, mismatches, and institutional constraints, serves as the base point from which to analyze cyclical unemployment. Operationally, this last category is defined as a residual. Cyclical unemployment is calculated by subtracting an estimation of the natural rate from the measured unemployment rate. Friedman's story begins with an economy in which all unemployed workers are "naturally" unemployed. Initially, then, a monetary expansion gives rise to negative cyclical unemployment, which persists until employer/worker wage-perception differentials are eliminated. In symmetrical fashion, a monetary contraction�or disinflation�causes the actual unemployment rate temporarily to exceed the natural rate. Eventually, the natural rate is reestablished, but�more significant for the present discussion�the rate of structural unemployment remains constant all the while. The market process by which the economy deviates from and then returns to the long-run Phillips curve creates no mismatches between workers and employment opportunities. Money is neutral with respect to the structure of the economy. Hayek's story can begin at the same point as Friedman's, but once the economy begins to react to the monetary expansion, the strict dichotomy between structural unemployment and cyclical unemployment can no longer be maintained. The self-reversing process plays itself out in terms of changes in the structure of capital and corresponding changes in the structure of employment. Friedman's initial increase in employment becomes, in Hayek's story, an increase of some particular kinds of employment at the expense of other particular kinds. If the new money enters the economy through credit markets, the "forced saving," as Hayek uses that term, is financing production for the more remote future at the expense of production for the more immediate future. The structure of employment opportunities is modified accordingly. The unemployment that characterizes the later phase of the dynamic process, then, is structural unemployment. It differs from the structural unemployment that existed prior to the monetary expansion only in terms of the causal factors. But operationally, structural unemployment caused by autonomous changes in tastes and technology and structural unemployment caused by monetary disturbances may not be separable categories of unemployment. (Does the waning of smokestack industries reflect a technological shift towards an information-based economy, or does it represent a structural hang-over from an earlier money-induced boom?) Further, expansion-induced structural unemployment is likely to be long-lasting. The long run in Hayek's formulation must be long enough so that all misallocated capital can be liquidated and all capital/labor mismatches can be rectified. The amount of time required may be so great as to make any propositions about long-run neutrality highly misleading. (It would do violence to standard macroeconomic terminology to categorize the Great Depression as an instance of "short-run non-neurtality.") Hayek (1977, p. 282; 1975a, p. 44) does allow for the possibility that some cyclical unemployment may not be structural unemployment. The reduction in incomes during the downturn can�through the reduction in effective demand�have an aggravating effect on the problem of unemployment. This is what Hayek refers to as the "secondary deflation," or the "cumulative process of contraction." The unemployment associated with the economy's spiraling downwards is the type of cyclical unemployment dealt with by Keynes. Hayek's recognizing the possibilitly of a secondary deflation does not, as some have suggested, constitute a capitulation to Keynes. In fact, this problem was put into perspective (1975b, p. 19) well before the appearance of The General Theory. Rather, the fact that Hayek sees the Keynesian component of cyclical unemployment as a secondary effect draws attention to the primary effect which Keynes overlooked. 2. The Long and Variable Lag We turn now from the nature of the unemployment that is caused by a monetary disturbance to consider the length of time between the initial injection of new money and the economy's eventual adjustment to it. As an empirical summary, the Monetarist phrase "long and variable lag," (Friedman, 1969a, p. 238) is appropriate for both Friedman's and Hayek's account of the monetary injection and its ultimate effect. But further reflection on the two views of monetary dynamics reveals important differences in this respect. First, the "ultimate effect," which marks the end of the lag, refers to different things in the two views. As suggested above, the overall level of prices may become fully adjusted to the increased quantity of money long before the money-induced distortions in the structure of capital (and labor) are fully eliminated. Thus, the short-run and long-run Phillips curves may be separated by a much shorter span of time than the short-run and the long-run Hayekian triangles. Second, the basis for the lag differs between the two views in an important way. Friedman's lag depends upon how long it takes for workers to straighten out their misperceptions of the real wage; Hayek's lag depends upon characteristics of the capital structure�the degree of specificity and intertemporal complementarity of the capital goods that make up the structure. Hayek's story suggests that credit expansion is less disruptive (and involves a shorter adjustment lag) in underdeveloped countries than in industrialized countries. This accords with casual empiricism. Does Friedman's story suggest that workers in underdeveloped countries have better and/or more quickly adjusting perceptions of their real wage rates in comparison to workers in industrialized countries? Third, there is an important difference in the basis for the variability of the lag from one expansionary episode to another within a given economy. For Friedman, the length of the lag, being based on workers' misperceptions, is fundamentally indeterminate. But it is not at all clear why it should take workers so long to straighten out their misperceptions about the real wage and why it should take much longer in some episodes than in others.(35) For Hayek, the length of the lag will depend upon the particular way in which capital and labor markets are distorted, which in turn depends upon how the new money is injected. Monetary injections that discoordinate intertemporally are more likely�precisely because of the temporal nature of the discoordination�to involve longer lags than injections that discoordinate in some atemporal way. This relationship between the method of injection and the likely length of the lag helps to explain why the Austrian theorists have always seen credit expansion, which was characteristic of the 1920s' boom, as particularly troublesome, and why, in their study of this and other expansionary episodes, they are as much or more interested in how�rather than how much�money was injected. 3. "Full" Employment Finally, we turn to the concept of "full" employment as used by Keynes and Friedman in the light of the monetary dynamics as envisioned by Friedman and Hayek. For Keynes, full employment is achieved so long as investors are sufficiently optimistic or sufficiently moved by the "animal spirits," or so long as public works takes up the slack created by any insufficiency of private spending. But the very nature of a self-reversing dynamic process�as incorporated into the visions of both Friedman and Hayek�suggests that the critical issue is whether or not a particular pattern of employment is sustainable. In either vision any level of employment above the full-employment level is clearly not sustainable. But in Friedman's formulation, full-employment is�by construction�a sustainable level of employment. For Hayek, the level of employment that corresponds to Friedman's full-employment may be sustainable or it may contain the seeds of its own undoing (1975c, pp. 60-62). That is, even though the real wage rate consistent with the underlying real factors is correctly perceived by both employers and workers, the existing capital structure may be inconsistent with the intertemporal pattern of consumer demand and resource availabilities. The market process through which these inconsistencies are discovered and remedied may involve a considerable period of cyclical (structural) unemployment. Again, the circumstances existing in the late 1920s can illustrate the distinction. In the Austrian view, the economy was experiencing, in those years, unsustainable full employment. Friedman does recognize that irresponsible monetary policies may eventually increase the natural rate of employment. In two different pieces of analysis (1976, pp. 232-33 and 1977, pp. 459-60), he suggests the possible existence of a "positively sloped Phillips curve." But in each case, new considerations not integral to his story of the adjustment process are introduced to account for such a possibility.(36) In neither case are structural considerations�as conceived by Hayek�integrated into the dynamic process envisioned by Friedman. Friedman's strict dichotomization of structural and cyclical unemployment stands in the way of his recognizing the possibility of full (in the operational sense) but unsustainable (in the Hayekian sense) employment. Hayek's formulation, which involves an interplay between structural and cyclical unemployment, allows for the recognition of such possibilities and for the prescription of policy most conducive to sustainable full employment. VI. A Summary View Purely as an instrumentalist's device, it could be argued, Friedman's story has served the Monetarists well. It put them onto the idea that the Phillips curve trade-off is a short-run trade-off only. After this idea was confirmed empirically (or properly, after it failed to be falsified over many trials) the story itself became superfluous. The realization that the empirically defined long-run Phillips curve is vertical is enough to carry the day. It provides a strong basis for arguing that in the long run, "nominal magnitudes do not influence real magnitudes" and for warning against all attempts to exploit the trade-off offered by the short-run Phillips curve. Friedman's story and Hayek's story differ sharply in methodological terms. Because of its instrumentalist qualities, Friedman's story fares poorly as a source of insights about the market process that translates a monetary injection into its ultimate consequences; it fails to increase our understanding of any actual market process. Hayek's story identifies the essential workings of the self-reversing market process triggered by a monetary expansion in a way that sheds light on the structure and timing of the pattern of unemployment caused by such monetary disturbances. The Austrian insights contained in the Hayekian triangles square with but go beyond the empirical regularities of Monetarism. From a broader perspective, Friedman's story represents a recognition of the intertemporal substitutability of labor and of the possibility that monetary disturbances can interfere with the intertemporal allocation of labor. Hayek's story represents a recognition of the intertemporal complementarity of capital and of the possibility that monetary disturbances can interfere with the intertemporal allocation of capital. Viewed as such, the two stories are themselves not substitutes, but complements. References: Ackley, Gardner 1978. Macroeconomics: theory and policy. New York. ________ 1983. 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Friedman, Milton and David Meiselman 1963. "The relative stability of monetary velocity and the investment multiplier in the United States, 1897-1958." In Stabilization Policies. London. Friedman, Milton and Anna Schwartz 1963. A Monetary History of the United States, 1867-1960. Princeton. ________ 1982. Monetary Trends in the United States and the United Kingdom. Chicago. Garrison, Roger W. 1984. "Time and money: the universals of macroeconomic theorizing." Journal of Macroeconomics, 6.2 (Spring):197-213. ________ 1985. "Intertemporal coordination and the invisible hand: an Austrian perspective on the Keynesian vision." History of Political Economy, 17.2 (summer):309-21. ________ 1986. "Hayekian trade cycle theory: a reappraisal." Cato Journal 6.2 (Fall): 437-53. Hicks, John R. 1946. Capital and Value, 2nd ed. London. ________ 1967. "The Hayek story." In John R. Hicks, Critical Essays in Monetary Theory. Oxford. Hayek, Friedrich A. 1941. The Pure Theory of Capital. Chicago. ________ 1948a. "The Ricardo effect" (1942). In Friedrich A Hayek, Individualism and Economic Order. Chicago. ________ 1948b. "The use of knowledge in society" (1945). In Friedrich A. Hayek, Individualism and Economic Order. Chicago. ________ 1967. Prices and Production, 2nd ed. (1935). New York. ________ 1975a. Full Employment at Any Price, Occasional Paper 45. London. ________ 1975b. Monetary Theory and the Trade Cycle (1933). New York. ________ 1975c. Profits, Interest, and Investment (1939). Clifton, NJ. ________ 1977. "Three elucidations of the Ricardo effect." Journal of Political Economy, 77 (Mar./Apr.):274-85. ________ 1984. "The future monetary unit of value." In Barry N. Siegel, ed. Money in Crisis. Cambridge, MA. Hoover, Kevin D. 1984. "Two types of monetarism." Journal of Economic Literature, 22.1 (Mar.):58-76. Jevons, William S. 1970. The Theory of Political Economy (1871). Middlesex. Kaldor, Nicholas 1942. "Professor Hayek and the concertina effect." Economica, ns 9(Nov.):359-82. Keynes, John M. 1936. The General Theory of Employment, Interest, and Money. New York. Knight, Frank H. 1934. "Capital, time, and the interest rate." Economica, ns 2 (Aug.):257-86. Lachmann, Ludwig M. 1978. Capital and Its Structure (1956). Kansas City. Leijonhufvud, Axel 1968. On Keynesian Economics and the Economics of Keynes. New York. Lucas, Robert E. Jr. 1981. Studies in Business Cycle Theory. Cambridge, MA. Mises, Ludwig von 1953. The Theory of Money and Credit. New Haven, CT. Originally published in German in 1912. Musgrave, Alan 1981. "'Unreal assumptions' in economic theory: the F-twist untwisted." Kyklos, 34.3:377-87. O'Driscoll, Gerald P. Jr. 1977. Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City. O'Driscoll, Gerald P., Jr. and Mario J. Rizzo 1985. The Economics of Time and Ignorance. Oxford. Phelps, Edmund S. 1970. "Money wage dynamics and money market equilibrium." In Edmund Phelps et al., ed., Microeconomic Foundations of Employment and Inflation Theory. New York. Reder, Melvin W. 1982. "Chicago economics: permanence and change." Journal of Economic Literature, 20.1 (Mar.)1-38. Robbins, Lionel 1934. The Great Depression. London. Robertson, Dennis H. 1949. Banking Policy and the Price Level, rev. ed. New York. Robinson, Joan 1972. "The second crisis in economic theory." American Economic Review. 62.2(May):1-10. Rothbard, Murray N. 1975. America's Great Depression (1963). Kansas City. Wainhouse, Charles E. 1984. "Empirical evidence for Hayek's theory of economic fluctuations." In Barry N. Siegel, ed., Money in Crisis. Cambridge, MA. Wagner, Richard E. 1979. "Comment: politics, monetary control, and economic performance." In Mario J. Rizzo, ed., Time, Uncertainty, and Disequilibrium. Lexington, MA. Warburton, Clark 1966. Depression, Inflation, and Monetary Policies: Selected Papers, 1945-1953. Baltimore. Wicksell Knut 1936. Interest and Prices (1898). London. Notes: 1. Two related contributions are Hoover (1984), who provides an insightful comparison between Old Monetarists in the style of Friedman with the New Classicists in the style of Lucas, and Butos (1985) who compares Hayek and Lucas in the context of a general-equilibrium approach to business-cycle analysis. Although not originally conceived for this purpose, the present paper can be seen as completing the trilogy by comparing Hayek and Friedman on the issue of monetary dynamics. 2. We should note that the sharpness of the labor-market/capital-market distinction that characterizes our paper is not intended to suggest that Hayek has had nothing to say about labor markets or that Friedman has had nothing to say about capital markets. Hayek (1975a, pp. 15-29) specifically addresses the relationships among "Inflation, the Misdirection of Labour, and Unemployment"; Friedman (1970, p. 24-25) includes the existence of a cash-balance effect on asset prices as one of the key propositions of Monetarism. Our paper focuses more narrowly on a comparison of Phillips Curves and Hayekian Triangles as alternatives bases for theorizing about monetary dynamics. 3. The article exhibiting Friedman's agnostic stance was first published in 1963; the "engineering blueprint" appeared in 1976 after having been presented at the Southern Economic Association meetings two years earlier. Some might argue that a dozen or so years is enough to transform vagueness into a blueprint. An alternative view is that the agnosticism persists (see, for instance, Friedman, 1969c, p. 6); the arguments in the later effort, which have their roots in his 1967 A.E.A Presidential Address (1969e), are to be understood as Friedman's willingness to take on his adversaries on their own turf. If this view is valid, a distinction must be made between Friedman and his followers. Some Monetarists (e.g. Darby, 1976, pp. 328-50) write as if Friedman's critical analysis which demonstrates the absence of an exploitable long-run Phillips curve is at the same time an exposition of the Monetarist view of the market process which transforms monetary injections into increases in the price level. Also, the formal analysis offered by Phelps (1970. pp. 124-66) is similar to Friedman's critical analysis of the relationship between long-run and short-run Phillips curves. 4. In other contexts, Friedman opts for a more broadly conceived adjustment process in which asset prices change, but he trivializes the corresponding quantity adjustments (e.g. that may temporarily alter the structure of capital) as "first-round effects." See Friedman and Schwartz (1982, ch. 2) and Friedman and Meiselman (1963, pp. 217-22). 5. Reder (1982) could be interpreted as denying the significance in this respect of Knightian capital theory for the development of the Chicago tradition. "The contribution to economic thought with which Knight is most readily identified (theory of the firm, uncertainty and profit, capital theory, social cost, etc.) are only tangentially related to the Chicago tradition" (Reder, 1982, p. 6, our emphasis). An anonymous referee has suggested that Reder's assessment is compatible with our own: "The modern Chicago school interpreted Knight so as to allow them to ignore capital theory." 6. See Friedman (1969c, pp. 4-7). Friedman clearly recognizes that the money drop has to be perceived as a one-time event. "Let us suppose further that everyone is convinced that this is a unique event which will never be repeated." This essential assumption separates Friedman from the New Classicists in terms of the issues that each is addressing. The money drop in Friedman's analysis does not constitute a "policy" in the New Classicist view. Further, Friedman's treatment of expectations creates a certain internal tension in his own view if his analysis is to explain more than a single episode of monetary expansion: Market participants have adaptive expectations (about the price level and real wages) during the period that the market is adjusting to a money drop, but static expectations about the likelihood of a future money drop. 7. As an alternative formulation, Friedman does away with both the distribution effects and the differential income effects by assuming "infinitely lived people" such that no transitory event has any effect on permanent income (Friedman, 1969c, p. 6n). This alternative, however, does not represent a net "relaxation" of simplifying assumptions; it represents the replacement of one assumption with another, analytically equivalent, assumption. 8. The exposition that follows draws primarily from Friedman, 1976, pp. 213-37. 9. As Friedman makes clear, the shifting of and movements along the curves are reversed if we take the employer's point of view. The movement down the employer's demand for labor corresponds to an apparent shift in the supply of labor (Friedman, 1976, p. 223). 10. The exposition of monetary dynamics as seen by Hayek draws largely from his early writings (Hayek, 1967 and 1975b). Even the more advanced of these two books was intended only as an outline (1967, p. vii). Hayek's monetary dynamics is based upon a theory first set out by Mises (1953, pp. 339-66), which integrated the capital theory of Böhm-Bawerk with a theory of interest-rate movements adapted from Wicksell (1936). 11. The kernel of truth in the idea of rational expectations is clearly recognized by Mises as early as 1953 as is demonstrated by the following passage on inflationary finance: "Here the famous dictum of Lincoln holds true: You can't fool all of the people all of the time. Eventually the masses come to understand the schemes of their rulers. Then the cleverly concocted plans of inflation collapse.... [I]nflationism is not a monetary policy that can be considered as an alternative to a sound money policy. It is at best a temporary makeshift. The main problem of an inflationary policy is how to stop it before the masses have seen through their rulers' artifices. It is a display of considerable naivete to recommend openly a monetary system that can work only if its essential features are ignored by the public" (Mises, 1953, p. 419). For a comparison of Hayek's approach to the issue of expectations with that of New Classicism, see Garrison (1986). 12. For a treatment of Austrian capital theory that emphasizes these features, see Lachmann (1956). 13. Jevons (1970, pp. 229-36) had earlier employed a triangular construction for similar purposes. Attempting to characterize the economy's capital structure in terms of the dimensions of a triangle is what qualifies Prices and Production as an outline. In Hayek's more formal�and more formidable�Pure Theory of Capital (1941), many of the heuristic assumptions of his earlier efforts were relaxed. This volume was to serve as the basis for a more comprehensive treatment of monetary theory (Hayek, 1941, p. v-vi), but no follow-on volume was ever written. 14. At the time of Hayek's London lectures, which were to become Prices and Production, this formulation was largely unintelligible to his British audience. Hicks (1967, p. 204) was later to note that "Prices and Production was in English, but it was not English economics." While the neo-Austrian Hicks pointed to difficulties in Hayek's communication of the message, Joan Robinson, who had difficulties with the message itself, dubbed the Hayekian episode a "pitiful state of confusion" and categorized it as a crisis in economic theory (Robinson, 1972, p. 2). 15. See Hayek, 1967, p. 54). In his earlier writing (1975b, pp. 143-48) Hayek criticized L. A. Hahn and Ludwig von Mises for beginning their stories with "arbitrary interferences on the part of banks." Hayek regarded an exogenous credit expansion as a "specially striking case," and as a sufficient condition but not a necessary one for the occurrence of alternating boom and crisis. He did note (p. 150) that "it is possible to assume, with Professor Mises, that the Central Banks, under the pressure of an inflationist ideology, are always trying to expand credit and thus provide the impetus for a new upward swing of the Trade Cycle; and this assumption may be correct in many cases." 16. This aspect of the market process reflects the insights of Wicksell (1936, pp. 102-21): a economic boom grows out of the divergence between the loan rate of interest and the natural rate. But as an anonymous referee has noted, Hayek differed from Wicksell on the question of what causes the divergence of the two rates. Wicksell believed that the natural rate increases first due to technological advance and that the loan rate adjusts but with a lag. 17. This aspect of Hayek's theory is the central focus of his 1937 article, "Investment that raises the demand for capital." (See Hayek, 1975c, pp. 73-82.) 18. Early on, Hayek was acutely aware that his own monetary theory of the trade cycle was distinctive in that it did not hinge on changes in the general level of prices: "We are in no way concerned to explain the effect of the monetary factor on trade fluctuations through changes in the value of money and variations in the price level..." Instead, his explanations hinged upon "changes [monetary in origin] which are bound to disturb the equilibrium inter-relationships existing in the natural economy, whether the disturbance shows itself in a change in the so-called 'general value of money' or not" (1975b. pp. 103-4). 19. Hayek uses the term "Ricardo Effect" (1948a) to refer to the quantity adjustments in markets for capital goods brought about by this upturn in interest rates. Also, see O'Driscoll (1977, pp. 92-134). 20. Richard Wagner (1979, pp. 182-85) demonstrates that the applicability of Austrian business-cycle theory is independent of any unemployed labor that may be associated with the downturn and that to estimate the social costs of a monetary disturbance by the unemployment caused by it is to underestimate those costs. 21. As Hayek (1967, p. 33) clearly recognized, this same distinction separated his own theorizing (1967) from the contemporaneous theorizing of Dennis Robertson (1949). 22. The claim that capital is more radically heterogeneous than labor is not based simply on a difference in degree. Different man-hours of labor are not perfectly substitutable for one another. But our attempt to construct an analogous claim for capital is revealing: Different ________ of capital are not perfectly substitutable for one another. The difficulty of even filling in the blank is a clear sign of dimensional, or radical, heterogeneity. We must resort either to some universal non-unit, such as "hunks," or to some value measure, such as "dollar's worth," which leads to an inescapable conflation of the price of capital and its corresponding quantity. Further, differences between different man-hours of labor are conventionally attributed to differences in human capital. Theories about labor that hinge on such differences are faced with the same thorny problems that are inherent in theories about capital. It is largely because of these well-recognized problems that most monetary theorists have preferred to think in terms of homogeneous, perfectly substitutable, man-hours. 23. Hayek recognized that some capital goods are substitutes for one another. We emphasize the notion of capital complementarity to contrast Hayek with most other theorists, who, explicitly or implicitly, take all capital goods to be substitutes. 24. For an alternative treatment of the relationship between labor-based and capital-based theories, see O'Driscoll and Rizzo, 1985, pp. 160-87. 25. These critics would not take Hayek to be the most viable alternative to Friedman. They would opt instead for theories of monetary disequilibrium in the style of Warburton (1966) and Clower (1969). Their preference is based upon a perceived asymmetry between price adjustments associated with a falling price level and price adjustments associated with a monetary injection. "Deflation has to work through a sequence of millions of piecemeal price and wage decisions; the alternative of nominal monetary expansion puts no such demands on the economy's coordinating mechanism" (Birch, Rabin, and Yeager, p. 213). But the asymmetry is non-existent unless the question-begging assumption of "helicopter money" is employed. Actual deflations and actual monetary expansions "[have] to work through a sequence of millions of piecemeal price and wage decisions." 26. For an instrumentalist defense of Friedman's economics, see Boland (1979). 27. Musgrave (1981) uses the modifiers "negligibility," "domain," and "heuristic" to define three categories of assumptions that underlie various theoretical constructions. Generically, a domain assumption identifies the domain, or scope, of direct applicability; a heuristic assumption is a deliberate fiction used to facilitate the logical development of a theory. Musgrave uses these distinctions to evaluate Friedman's treatment of methodological issues (1953) in which assumptions are categorized as "realistic" or "unrealistic." 28. For a treatment of Hayek's analysis in terms of the Phillips curve, see O'Driscoll (1977, pp. 115-18). It should be noted that O'Driscoll uses Phillips' original construction, which has wage inflation on the vertical axis; the analysis is applicable whether or not there is price inflation as well. 29. It may be misleading to claim that Hayek generalized his theory only in recent years. The case involving the expansion of credit to producers provided a focus for Prices and Production where Hayek "concentrated on the successive changes in the real structure of production, which constitute [cyclical] fluctuations." In his earlier work where he was concerned with "the monetary causes which start the cyclical fluctuations," his arguments were much more general in nature. (See, for instance 1975b, pp. 91, 146-47, and passim; the quoted passages are from the preface, p. 17.) Modern Hayekians may even judge that Hayek generalized a little too much: "The initial change [eliciting a cyclical fluctuation] need have no specific character at all, it may be any one among a thousand different factors which may at any time increase the profitability of any group of enterprises" (1975b, pp. 182-83). 30. Drawing from Hicks (1946, p. 222), Leijonhufvud (1968, p. 222) contends that the Austrian construction cannot be generalized in this way: "the result reached for the point-input point-output case ... 'does not generalize in the sort of way in which it might have been expected to generalize.'" But the obstacles that make generalizing difficult are not to be attributed to the Austrian formulation but to the very nature of capital and hence of capital theory. (See footnote 20 above.) If measured in terms of the "period of production," the time element in the production process depends upon the "quantity" of capital employed at each point in time; the quantity of capital must be measured in value terms, which in turn depend upon the rate of interest. Thus, the "lengthening" of the period of production brought about by a fall in the rate of interest may involve a "lengthening" that follows from the very definition of the period of production plus a "lengthening" that results from a market process set into motion by the fall in the rate of interest. Hayek (1941, pp. 76-77, 140-45, 191-92 and passim) was aware of the hoary problems of this sort well before the so-called "reswitching" debate of the 1960s. The fact that the Austrian formulation is capable of making some important distinctions, such as between the two senses of "lengthening," should be seen as a credit to that theory and not as grounds for condemning it. 31. For modern treatments of Hayek that rely heavily on Kaldor's critique, see Blaug (1978, pp. 571-74) and Ackley (1978, p. 632). Ackley refers to the Austrian view as a fantasy and is particularly vitriolic in his treatment of it. 'In what must be one of the most devastating critiques in the history of economics, Nicholas Kaldor showed the absurdity of what he called Hayek's "concertina effect"�the cyclical "lengthening" and "shortening" of the production process. Remnants of this idea may still be circulating in the byways of economics, but the writer has not encountered them for several decades.' 32. Wainhouse (1984), whose comparison of Friedman and Hayek is compatible with the one offered in the present paper, employs "Granger causality tests" in an attempt to establish the empirical relevance of Hayek's story. 33. In recent years Friedman has been attributing high interest rates, not to an inflation premium, but to the volatility of money growth (Brimelow, 1982, p. 5-6). And his argument sounds more Hayekian than Friedmanian: In 1980 the Federal Reserve began a relatively rapid monetary expansion. Businessmen assumed the cheap credit was going to last for a considerable period, but when it didn't, "you had the business community left with all sorts of commitments based on a wrong diagnosis, a wrong prediction. And you had a great deal of distress borrowing that was highly insensitive to interest rates." 34. This policy prescription observes the stricture of separating policy implications from judgments of political feasibility. There is no evidence that Hayek has changed his mind about the implications of his theory, but in recent years he has tempered his recommendations. Prefacing an argument for a stable price level (1975a, pp. 26), Hayek "confess[ed] that 40 years ago I argued differently. I have since altered my opinion�not about the theoretical explanation of the events but about the practical possibility of removing the obstacles to the functioning of the system by allowing deflation to proceed...." And looking to future monetary systems, Hayek (1984, pp. 325-26) notes that "Sixty years ago I began my work on monetary theory by questioning the belief, then universally accepted, that the purchasing power of money should be kept stable. I then suggested that it was more desirable for the purchasing power of money over consumer goods to increase over time. But I have since become convinced that a money of stable value is really the best we can hope for." 35. When Friedman (1969a, pp. 255-56) explicitly considers the question of why the lag should be so long, he gives a Hayekian-triangle answer rather than a Phillips-curve answer. The process of monetary expansion effects the demand for "equities, houses, durable producer goods, durable consumer goods, and so on.... The effects can be described as operating on 'interest rates,' if a more cosmopolitan interpretation of 'interest rates' is adopted than the usual one which refers to a small range of marketable securities." This same process later generates "reactions [which] undo the initial effects on interest rates."
7784	dbpedia	3	38	https://ideas.repec.org/p/sfu/sfudps/dp20-05.html	en	Who's Who and What's What at the LSE, Then and Now? A Review Essay of The Palgrave Companion to LSE Economics	https://ideas.repec.org/cgi-bin/twimage.cgi?p&sfu:sfudps:dp20-05	https://ideas.repec.org/cgi-bin/twimage.cgi?p&sfu:sfudps:dp20-05	[ "https://ideas.repec.org/ideas4.jpg", "https://ideas.repec.org/ideas4.jpg", "https://ideas.repec.org/images/mastodon.svg" ]	[]	[]	[ "LSE; Review Essay" ]	null	[ "Richard G. Lipsey" ]	2020-07-30T00:00:00	Downloadable! This valuable discussion of LSE economics runs from the Schoolâ€™s inception in 1895 to the present. I review the whole, including where relevant, observations and criticisms based on personal knowledge from the my time as a graduate student, then a staff member of the LSE, from 1953 to 1963. Part I contains excellent essays on what the editor says are â€œâ€¦the contributions made by a centre [LSE in this case] where these contributions are considered to be especially importantâ€¦â€ . These cover econometrics, economic history, accounting, business history, social policy, and the LSEâ€™s house journal Economica. The notable absence is economic theory despite the LSE having had notable theorists throughout its entire history. For an early example, in the 1930s the School had Lionel Robbins, Friedrich Hayek, John Hicks, R. D. G. Allen, James Meade, Ronald Coase, Abba Lerner, and Nicky Kaldor. Also absent is an essay on methodology in spite of the LSE having had Carl Popper, Irme Lakatos and Joseph Agassi, all of whom had a major influence on economics at the LSE and worldwide. Part II presents essays on 29 economists who had been or still are on the Schoolâ€™s staff. It is organised in chronological order of birth dates, from 1861 for Canaan to 1948 for Pissarides. The coverage is quite comprehensive, although a few important staff members are omitted. The essays are excellent and mostly honour the important work of these staff members. The one exception is James Forderâ€™s rather critical essay on Bill Phillips, on which I offer some criticisms.	en	/favicon.ico		https://ideas.repec.org//p/sfu/sfudps/dp20-05.html	Corrections All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sfu:sfudps:dp20-05. See general information about how to correct material in RePEc. If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about. We have no bibliographic references for this item. You can help adding them by using this form . If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation. For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Working Paper Coordinator (email available below). General contact details of provider: https://edirc.repec.org/data/desfuca.html . Please note that corrections may take a couple of weeks to filter through the various RePEc services.
7784	dbpedia	2	23	https://www.economist.com/culture/2022/11/17/a-fascinating-readable-biography-of-friedrich-hayek	en	A fascinating, readable biography of Friedrich Hayek	https://www.economist.co…21119_CUP509.jpg	https://www.economist.co…21119_CUP509.jpg	[ "https://www.economist.com/cdn-cgi/image/width=360,quality=80,format=auto/media-assets/image/20221119_CUP509.jpg 360w, https://www.economist.com/cdn-cgi/image/width=384,quality=80,format=auto/media-assets/image/20221119_CUP509.jpg 384w, https://www.economist.com/cdn-cgi/image/width=480,quality=80,format=auto/media-assets/image/20221119_CUP509.jpg 480w, https://www.economist.com/cdn-cgi/image/width=600,quality=80,format=auto/media-assets/image/20221119_CUP509.jpg 600w, https://www.economist.com/cdn-cgi/image/width=834,quality=80,format=auto/media-assets/image/20221119_CUP509.jpg 834w, https://www.economist.com/cdn-cgi/image/width=960,quality=80,format=auto/media-assets/image/20221119_CUP509.jpg 960w, 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https://www.economist.com/cdn-cgi/image/width=1424,quality=80,format=auto/media-assets/image/20240817_CUP504.jpg 1424w" ]	[]	[]	[ "" ]	null	[ "The Economist" ]	2022-11-17T00:00:00	Bruce Caldwell and Hansjoerg Klausinger puncture some long-standing myths about the Austrian economist \| Culture	en	/favicon.ico	The Economist	https://www.economist.com/culture/2022/11/17/a-fascinating-readable-biography-of-friedrich-hayek	Bruce Caldwell and Hansjoerg Klausinger puncture some long-standing myths about the Austrian economist Nov 17th 2022 Hayek. By Bruce Caldwell and Hansjoerg Klausinger. University of Chicago Press; 824 pages; $50 and £35 This article appeared in the Culture section of the print edition under the headline “This is what we believe” From the November 19th 2022 edition Discover stories from this section and more in the list of contents Explore the edition More from Culture Is Western culture stopping people from growing up? Kidults are all around you Two centuries after his death, why is Lord Byron still seductive? The poet is celebrated where he spent his period of exile A famous forecaster takes on the establishment Nate Silver offers praise for contrarians and scorn for intellectual sheep Three years ago this month America withdrew from Afghanistan A trio of new books tries to make sense of the war and its aftermath Making sense of the world’s most dangerous horse race Il Palio is chaotic and corrupt—and full of community spirit A love story, shaped by Ukraine’s travails A Ukrainian journalist imagines a couple brought together and wrenched apart in the 20th century
7784	dbpedia	2	35	https://simple.wikipedia.org/wiki/Friedrich_Hayek	en	Simple English Wikipedia, the free encyclopedia	https://upload.wikimedia…yek_portrait.jpg	https://upload.wikimedia…yek_portrait.jpg	[ "https://simple.wikipedia.org/static/images/icons/wikipedia.png", "https://simple.wikipedia.org/static/images/mobile/copyright/wikipedia-wordmark-en.svg", "https://simple.wikipedia.org/static/images/mobile/copyright/wikipedia-tagline-simple.svg", "https://upload.wikimedia.org/wikipedia/commons/thumb/3/32/Nobel_prize_medal.svg/20px-Nobel_prize_medal.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/7/7f/Friedrich_Hayek_portrait.jpg/200px-Friedrich_Hayek_portrait.jpg", "https://login.wikimedia.org/wiki/Special:CentralAutoLogin/start?type=1x1", "https://simple.wikipedia.org/static/images/footer/wikimedia-button.svg", "https://simple.wikipedia.org/static/images/footer/poweredby_mediawiki.svg" ]	[]	[]	[ "" ]	null	[ "Contributors to Wikimedia projects" ]	2008-10-09T15:38:19+00:00		en	/static/apple-touch/wikipedia.png		https://simple.wikipedia.org/wiki/Friedrich_Hayek	Friedrich August von Hayek, CH (8 May 1899 – 23 March 1992) was an Austrian-British economist and political philosopher. He became known because he strongly defended liberalism and free-market capitalism. He was against too much central control of the economy and society. He thought that forms of government like socialism were not good for the economy, and damaged freedom of the individual. Hayek's signature work, The Road to Serfdom, refers to the consequences of socialism. He was one of the most important economists and political philosophers of the 20th century.[1] He was one of the most important members of the Austrian School of economics. He also had many ideas in the fields of jurisprudence and cognitive science. He shared the 1974 Nobel Prize in Economics with his rival Gunnar Myrdal. The award was for their work in the theory of money and economic fluctuations; also for their analysis of the inter-dependence of economic, social and institutional phenomena.[2] He also received the U.S. Presidential Medal of Freedom in 1991.[3] He is thought to be one of the major causes of change from the Keynesian policies of the first part of the 20th century. Instead of governments handling the details of the economy, they went back towards classical liberalism in the 1980s and later. This happened most clearly in the 1980s in the U.S.A. (under Ronald Reagan) and the U.K. (under Margaret Thatcher). Main books [change \| change source] Profits, interest and investment: and other essays on the theory of industrial fluctuations, 1939. The road to serfdom, 1944. ISBN 978-0-226-32055-7 Individualism and economic order, 1948. ISBN 978-0-226-32093-9 The counter-revolution of science: studies on the abuse of reason, 1952. ISBN 978-0-913966-67-9 Hayek, F.A. (2011). The Constitution of Liberty: The Definitive Edition. University of Chicago Press. ISBN 978-0-226-31539-3. Law, legislation and liberty (3 volumes) Volume I. Rules and order, 1973.[4] ISBN 978-0-226-32086-1 Volume II. The mirage of social justice, 1976.[5] ISBN 978-0-226-32083-0 Volume III. The political order of a free people, 1979.[6] ISBN 978-0-226-32090-8 The fatal conceit: the errors of socialism, 1988. ISBN 978-0-226-32066-3 Related pages [change \| change source]
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You won't learn much economic...	en	http://noahpinionblog.blogspot.com/favicon.ico		http://noahpinionblog.blogspot.com/2012/11/keynes-hayek-by-nicholas-wapshott.html
7784	dbpedia	0	7	https://www.linkedin.com/posts/michael-cox-0099a66_friedrich-a-von-hayek-18991992-at-lse-activity-7213135208521285632-DZUt	en	Michael Cox on LinkedIn: Friedrich A von Hayek (1899–1992) at LSE	https://media.licdn.com/dms/image/D4E10AQGu_DUPGdNHEg/image-shrink_800/0/1719673248520?e=2147483647&v=beta&t=i2aAdnbRxYkdFzmBSS6TkSIqN_nv06hQuBUuzM3VMgI	https://media.licdn.com/dms/image/D4E10AQGu_DUPGdNHEg/image-shrink_800/0/1719673248520?e=2147483647&v=beta&t=i2aAdnbRxYkdFzmBSS6TkSIqN_nv06hQuBUuzM3VMgI	[ "https://media.licdn.com/dms/image/v2/D4E16AQFhNmvipSW2Sw/profile-displaybackgroundimage-shrink_200_800/profile-displaybackgroundimage-shrink_200_800/0/1682712311310?e=2147483647&v=beta&t=_BjDaCMEupXN89tLfQRM6khEB-9bw-V0JzeMbJu-VOQ" ]	[]	[]	[ "" ]	null	[ "Michael Cox" ]	2024-06-30T11:04:07.257000+00:00	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…	en	https://static.licdn.com/aero-v1/sc/h/al2o9zrvru7aqj8e1x2rzsrca		https://www.linkedin.com/posts/michael-cox-0099a66_friedrich-a-von-hayek-18991992-at-lse-activity-7213135208521285632-DZUt	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.
7784	dbpedia	2	62	https://doi.org/10.7208/chicago/9780226091921.003.0007	en				[]	[]	[]	[ "" ]	null	[]	null					null
7784	dbpedia	1	37	https://en.wikipedia.org/wiki/Friedrich_Hayek	en	Friedrich Hayek	https://upload.wikimedia…yek_portrait.jpg	https://upload.wikimedia…yek_portrait.jpg	[ "https://en.wikipedia.org/static/images/icons/wikipedia.png", "https://en.wikipedia.org/static/images/mobile/copyright/wikipedia-wordmark-en.svg", "https://en.wikipedia.org/static/images/mobile/copyright/wikipedia-tagline-en.svg", "https://upload.wikimedia.org/wikipedia/commons/thumb/7/7f/Friedrich_Hayek_portrait.jpg/220px-Friedrich_Hayek_portrait.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/b/b0/Friedrich_von_Hayek_signature.gif/150px-Friedrich_von_Hayek_signature.gif", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/16px-Emblem-money.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Bills_and_coins.svg/16px-Bills_and_coins.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/5/56/An_Austrian_School_crest_-_Grey.png/100px-An_Austrian_School_crest_-_Grey.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/16px-Emblem-money.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/2/2f/Capitalismlogo.svg/16px-Capitalismlogo.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/16px-Emblem-money.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/0/01/A_coloured_voting_box.svg/16px-A_coloured_voting_box.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/1/1b/Yellow_flag_waving.svg/75px-Yellow_flag_waving.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/1/1b/Yellow_flag_waving.svg/15px-Yellow_flag_waving.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/0/01/A_coloured_voting_box.svg/16px-A_coloured_voting_box.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/a/a2/Business_cycle.jpg/200px-Business_cycle.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/a/a0/World_Business_Cycle.png/200px-World_Business_Cycle.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/fa/Wikiquote-logo.svg/34px-Wikiquote-logo.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/2/2f/Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg/220px-Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/2/27/Neustifter_Friedhof_-_Friedrich_August_Hayek_%28cropped%29.jpg/220px-Neustifter_Friedhof_-_Friedrich_August_Hayek_%28cropped%29.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/0/07/Friedrich-von-Hayek-Stra%C3%9Fe_Freiburg.jpg/220px-Friedrich-von-Hayek-Stra%C3%9Fe_Freiburg.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/fa/Wikiquote-logo.svg/34px-Wikiquote-logo.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/4/4a/Commons-logo.svg/30px-Commons-logo.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/8/8a/OOjs_UI_icon_edit-ltr-progressive.svg/10px-OOjs_UI_icon_edit-ltr-progressive.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/8/8a/OOjs_UI_icon_edit-ltr-progressive.svg/10px-OOjs_UI_icon_edit-ltr-progressive.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/2/21/Speaker_Icon.svg/15px-Speaker_Icon.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/4/41/Flag_of_Austria.svg/21px-Flag_of_Austria.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/19px-Emblem-money.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/4/48/P_history.svg/21px-P_history.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/1/1b/Yellow_flag_waving.svg/18px-Yellow_flag_waving.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/3/31/Libertarianism-groups-diagram.png/19px-Libertarianism-groups-diagram.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/c/cd/Socrates.png/12px-Socrates.png", "https://upload.wikimedia.org/wikipedia/en/thumb/0/01/A_coloured_voting_box.svg/19px-A_coloured_voting_box.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/8/8a/OOjs_UI_icon_edit-ltr-progressive.svg/10px-OOjs_UI_icon_edit-ltr-progressive.svg.png", "https://login.wikimedia.org/wiki/Special:CentralAutoLogin/start?type=1x1", "https://en.wikipedia.org/static/images/footer/wikimedia-button.svg", "https://en.wikipedia.org/static/images/footer/poweredby_mediawiki.svg" ]	[]	[]	[ "" ]	null	[ "Contributors to Wikimedia projects" ]	2001-09-22T20:34:16+00:00		en	/static/apple-touch/wikipedia.png		https://en.wikipedia.org/wiki/Friedrich_Hayek	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.
7784	dbpedia	2	19	https://www.uab.edu/uabmagazine/2011/february/hayek	en	Who Is Hayek? - Magazine	https://www.uab.edu/styl…icon-196x196.png	https://www.uab.edu/styl…icon-196x196.png	[ "https://www.uab.edu/uabmagazine/images/0211_hayek1.jpg", "https://www.uab.edu/uabmagazine/images/0211_hayek2.jpg", "https://www.uab.edu/uabmagazine/images/0211_hayek4.jpg" ]	[]	[]	[ "economics", "UAB", "UAB Department of Philosophy", "UAB Department of Marketing", "Industrial Distribution", "and Economics" ]	null	[ "Grant Martin" ]	null	Friedrich Hayek's warnings against the dangers of government intervention have won the late Austrian economist a new following. But Hayek's views are more complex than many of his fans realize, says UAB philosopher and economist Erik Angner.	en	/styles/5.0/images/favicons/favicon.ico		null	Examining an Economic Expert By Glenny Brock Friedrich Hayek's warnings against the dangers of government intervention have won the late economist a new following. But Hayek's views are more complex than many of his fans realize, says UAB philosopher and economist Erik Angner. Austrian economists are hot these days. In 2010, The Road to Serfdom by Friedrich A. Hayek, which was originally published in 1944, rocketed to the top of Amazon’s list of bestselling nonfiction books—propelled in part by praise from commentator Glenn Beck. Hayek’s warning against the dangers of government intervention has earned him renewed attention in recent years, but his ideology was far more nuanced than many of his fans may realize, says Erik Angner, Ph.D., UAB assistant professor of philosophy and economics, director of the UAB Center for Ethics and Values in the Sciences, and author of the book Hayek and Natural Law (2007: Routledge). Here, Angner offers a closer look at a man who is often described as one of the key economists of the 20th century. Opposition to Intervention Unlike many contemporary authors who write about Friedrich Hayek, UAB's Erik Angner (above), says he approaches his subject as a scholar rather than a proponent or critic. Angner explains that contemporary conservatives like Hayek for his opposition to government intervention in the marketplace. They emphasize three main tenets of his philosophy: 1. Government intervention leads to increased debt and inflation, particularly when the government spends money it doesn’t have. 2. Economic control is, in effect, political control. For instance, monetary policy defined by a central banking authority represents government encroachment on overall freedom. 3. Individual freedom is a precondition for prosperity. “Hayek believed that the price system fulfilled a critical function in society, and the price system only works if people can choose freely what to buy and at what price” Angner explains. Consequently, Hayek opposed government monopolies and price ceilings or floors that limit consumer choice. Moreover, Hayek believed that interference with the price system could be the first step toward government intervention in other aspects of people’s lives. Conflict and Context But the conservative reading of Hayek is a highly selective one, Angner suggests. When he wrote The Road to Serfdom in the aftermath of the Great Depression and during World War II, “Hayek was against national socialism, Soviet-style communism, and Keynesians, all of whom argued that government should have a major role in the market,” Angner says. (John Maynard Keynes was a British economist who advocated aggressive government spending during recessions.) “But as a classical liberal, Hayek was anti-conservative. He even had a book chapter titled ‘Why I Am Not a Conservative.’” Why Wasn’t He a Conservative? “While Hayek did believe that government intervention in the price system could take us from free-market governance toward totalitarianism, he also endorsed an extensive system of social services,” Angner explains. In fact, Hayek advocated a limited system of wealth redistribution. “He said that he was in favor of a minimum income for every person in the country,” Angner explains. “There’s a much more multi-faceted vision there, but it’s not acknowledged by people trying to emphasize particular aspects of Hayek’s philosophy.” Ideas in Vogue Angner says that Hayek’s star turn isn’t unusual. Philosophers and economists—along with the ideas they promote—wax and wane in popularity, which can be pumped up by government leaders and tastemakers. Angner compares the recent focus on Hayek’s anti-government intervention concepts to the fixation on Adam Smith’s “invisible hand,” a familiar metaphor created by the 18th-century philosopher to describe the self-regulating movement of markets. “The idea of the invisible hand is all that most people know about Adam Smith, so they put it forward as if it’s his only idea,” Angner explains. “What’s happening with Hayek is comparable.” Angner doesn’t know if Hayek’s newfound fame has made an impact on the sales of his own book on the economist. “I see myself as a scholar rather than an activist,” he says. “A lot of people who write about Hayek are followers or proponents or critics, but I am not one of those. For me, it’s about getting ideas right.” More Information UAB Department of Philosophy
7784	dbpedia	3	14	http://webhome.auburn.edu/~garriro/fm3bellante.htm	en	PHILLIPS CURVES AND HAYEKIAN TRIANGLES			[ "http://webhome.auburn.edu/~garriro/hopelogo.gif", "http://webhome.auburn.edu/~garriro/phillipshayek.jpg", "http://webhome.auburn.edu/~garriro/hope1.jpg", "http://webhome.auburn.edu/~garriro/hope2.jpg" ]	[]	[]	[ "" ]	null	[ "Auburn User" ]	null					null	Two Perspectives on Monetary Dynamics Don Bellante and Roger W. Garrison I. Introduction During different phases of the Keynesian episode, the monetary theories offered first by Keynes and later by the Keynesians have been judged by changing standards. The standards changed along with the changing perceptions of what constituted the most viable alternative to the Keynesian vision. "[T]here was a time," wrote John Hicks (1967, p. 203), "when the new theories of Hayek were the principal rival of the new theories of Keynes." But times changed, and Milton Friedman (1969d), with his restatement of the quantity theory of money, became the dominant alternative to Maynard Keynes. And eventually, Friedman's Monetarism gave way to New Classicism and the idea of "Rational Expectations." The profession has been treated to exhaustive comparisons of Keynes and then Keynesians with the various opposing schools, but comparisons of the sequential alternatives to Keynesianism have been all but lacking. The present paper begins to fill this void by offering a critical comparison of the Monetarists and the Austrians as represented by Friedman and Hayek.(1) A statement by Robert Lucas (1981, p. 4) suggests how such a comparison can be undertaken: "...I see no way to account for observed employment patterns that does not rest on an understanding of the intertemporal substitutability of labor." Lucas's concise way of identifying the understanding that explicitly underlies his theories (and implicitly underlies Friedman's) hints at an alternative way of accounting for observed unemployment patterns. While Monetarism and New Classicism are based on the intertemporal substitutability within the market for labor, Austrianism is based on the intertemporal complementarity within the market for capital goods. Differences between the monetary theories of Friedman and those of Hayek, then, can be spelled out in terms of the markets (for labor and for capital, respectively) that serve as a focus for each.(2) With attention to the major themes of each theorist, Sections II and III identify the relevant aspects of monetary disturbances as seen by Friedman and as seen by Hayek. Focusing on both substance and method, Section IV offers a critical comparison of the two perspectives. Section V points out some implications in terms of the conventionally defined categories of unemployment, monetary lags, and the concept of "full" employment; and Section VI provides a summary view. II. Friedman (and the Monetarists) on Monetary Dynamics With conventional qualifications and allowances for real growth, increases in the supply of money lead, in the long run, to proportionate increases in the general price level. This proposition, which constitutes the kernel of truth in the quantity theory of money, is not in dispute. But the nature and significance of the monetary dynamics, the market process that translates the initial cause into its ultimate effect, is and has long been a matter of much controversy. This issue, in fact, is what separates the Monetarists from the Austrians and gives scope for interpretation within both schools. Friedman appears to be of two minds on the issue of monetary dynamics�the transmission mechanism linking money to prices. On occasions where the focus is on long-run comparative-statics results, it is simply admitted that he (along with Anna Schwartz) has "little confidence in [their] knowledge of the transmission mechanism, except in such broad and vague terms as to constitute little more than an impressionistic representation rather than an engineering blueprint" (Friedman, 1969b, p. 222). But on occasions where the focus is on the transmission mechanism itself, such as the market process that traces out a short-run Phillips curve, there is an accounting of the the mechanism in terms of the market for labor that would rival any blueprint(3) (Friedman, 1976). These monetary dynamics, which are used by Friedman to explain the short-run nature of the negatively sloped Phillips curve and to suggest the existence of a vertical long-run Phillips curve, can be used as a basis for evaluating the Monetarist view and for comparing it to the alternative offered by the Austrians. The monetary dynamics envisioned by Friedman hinge on the sequential effects of perceived relative-price changes in the market for labor. A number of heuristic assumptions about the market for capital goods and about income effects in commodity markets are invoked. These assumptions are required to narrow the focus so that the Monetarists' story can be told. The lack of discussion in this context of the allocation of capital goods or of the short-run effects of a monetary injection within the market for capital goods is evidence enough that such considerations are no part of the story.(4) Implicitly, one of several alternative constructions is adopted: (1) Real capital is taken to be completely homogeneous, or�to use the fiction invented by Frank Knight�it is treated as a "Crusonia plant." (2) The structure of real capital, which admittedly consists of heterogeneous elements, is fixed. It cannot or, for some reason, is not altered�even in the short run�as a result of a monetary injection. (3) Allocations within the market for capital goods are (somehow) always governed, whether in the presence or the absence of monetary disturbances, by "real factors only." This third construct is in the spirit of the New Classicism. One of these three or some effectively similar construction or assumption must underlie any macroeconomic theory that ignores the allocation of resources within the capital-goods sector. Implicit assumptions of this sort about capital goods are not at all at odds with the Chicago tradition more broadly conceived. The inattention to capital theory stems from Frank Knight's grappling with the thorny issues and conceptual difficulties that inhere in this subject matter (Knight, 1934). In general, Monetarists have taken comfort in the Knightian view that the structure of capital, particularly the intertemporal structure, can be safely ignored, and that theories in the Austrian tradition, which make use of such concepts as "roundaboutness" and "stages of production," are especially misguided.(5) The Knightian view of capital permits the Monetarists to focus exclusively on the market for labor. But at least two additional assumptions are needed to limit the focus to the relative-price effects in the labor market. Distribution effects (who gets the new money) and differential income effects (how it gets spent) must be removed from consideration. Friedman's heuristic device for short-circuiting the distribution effects is to assume that increases in the money supply are brought about by a one-time dropping of money from a helicopter in such a way that each individual picks up the new money in direct proportion to the amount already in his possession.(6) The differential income effects of "helicopter money"�as it has come to be called�are assumed away. This mode of theorizing reflects the implicit assumption that differential income effects are in fact negligible or the heuristic assumption that indifference curves are both identical across agents and homothetic.(7) Within this theoretical construction, the Quantity Theory holds in its strongest form, and any divergence in the pattern of prices between the initial injection of money and the eventual increase in the price level is purely stochastic. Thus, disequilibrium relative-price movements within the markets for both capital goods and final products are taken to be unsystematic. No generalizations about such movements can be made. But movements in the price of labor relative to the price of final output are systematic in the Monetarist view. And the temporal pattern of these movements depend in a critical way on differences in the ability of workers and of employers to perceive the price changes most relevant to each.(8) The spending of newly created helicopter money begins to bid up the prices of final products in unsystematic ways. The individual worker, who clearly perceives his yet-unchanged nominal wage, has no clear perception of the change in his real wage�depending, as it does, on the change in some index of final-product prices. The employer, whose perception of the general price level is no better than the workers', is motivated by a different concern. From the employer's perspective, the relevant real wage is the Ricardian real wage, which depends upon a single price�the price of the product that the employer produces. If the output price has increased, the wage that he pays to the workers�relative to the output price�has clearly decreased. Alternatively stated, workers and employers alike have no clear perception of the real wage, where real is understood in the market-basket, or Fisherian, sense; but employers have a clear perception of the real wage, where real is understood in the Ricardian sense.) Quantity adjustments in the labor market are made in ways that correspond to the differing perceptions in real-wage movements. The behavior of workers, who make their labor-leisure decisions on the basis of yet unchanged perceptions, is depicted by an unchanged labor supply curve; the behavior of employers who now enjoy higher output prices is depicted by a rightward shift in the demand for labor.(9) The nominal wage rate rises as does the level of employment. (Figure 1 shows the corresponding movement (from A to B) along the initial Short-run Phillips Curve.) The higher nominal wages paid to a larger number of workers exert upward pressure on the prices of final products; increases in output exert downward pressure on final-product prices. And with the passage of time, workers begin to get a clearer perception of their real wage rate. A temporal pattern of the real wage rate is traced out by a series of iterative steps in which the reinforcing and counteracting forces interact. In the end, after a "long and variable"�and fundamentally indeterminate�time lag, the worker-employer perception differential is eliminated; the short-run Phillips curve shifts rightward. The level of employment, the level of output, and the real wage (both Fisherian and Ricardian) return to the levels that characterized the economy before the monetary injection. (Point C in Figure 1 differs from point A only in terms of absolute prices and wages.) III. Hayek (and the Austrians) on Monetary Dynamics If Frank Knight accounts for the Monetarists' inattention to capital theory, Eugen von Böhm-Bawerk (1959) accounts for the Austrians' preoccupation with it. Where Friedman's treatment of monetary dynamics requires some key assumptions about the workings of the market for capital goods, Hayek's treatment(10) requires similar assumptions about the workings of the labor market. Recognizing this symmetry allows us to describe the alternative treatments in a way that facilitates a comparison. More often than not, Hayek's assumptions about labor, like Friedman's assumptions about capital, are implicit. Labor skills are assumed to be non-specific. Individual occupations are defined in terms of the particular capital goods that are complementary to labor. Wage rates are flexible, but not perfectly flexible. Workers can be bid away from some occupations and into others, but not instantaneously. Adjustments in the labor market that involve a reduction in labor demand in some occupations will be characterized by temporary increases in the level of unemployment�the greater the adjustment, the greater and longer-lasting the temporary increase. With allowance for frictions of this sort, workers are able correctly to perceive and respond to changes in the pattern of real wage rates. Expectations about wage rates and prices can come into play�but not expectations whose formulation requires a theoretical understanding of economic relationships, such as (correct or "rational") expectations about the upper turning point of a business cycle. It might be noted at this point that Lucas (1981, pp. 215-17) sees a certain kinship between his own ideas and those of Hayek. But Lucas parts company with the Austrians when he treats knowledge of the economy's structure in the same way as knowledge within the structure. Hayek (1948b, pp. 79-81) makes a first-order distinction between theoretical knowledge and knowledge of the marketplace. Market participants can be expected to make use of information conveyed by prices along with other particular knowledge that they might have, but they cannot be expected to know�even in a probabalistic sense�the parameters of the economy's structure. That is, they cannot be expected to know, or to behave as if they know, the answers to questions that economists have been debating amongst themselves for more than two hundred years.(11) The assumptions spelled out above about the workings of the market for labor allow the Austrians to deal with monetary dynamics exclusively in terms of the market for capital goods. The dynamics within the capital-goods market, coupled with these assumptions, will have clear implications about the corresponding pattern and time path of the employment of labor. The effects of a monetary disturbance within the market for capital goods reflect several considerations. Capital goods in the Austrian view are heterogeneous in the extreme, and the structure of capital involves multidimensional complexity. Individual capital goods are characterized by different degrees of specificity and are related to one another, both intertemporally and atemporally, with various degrees of substitutability and complementarity.(12) Thus, a set of heuristic assumptions about the capital structure is required to allow the identification of its most essential features and to render the treatment of monetary dynamics tractable. In the Austrian view, the central problem in macroeconomics is the problem of intertemporal discoordination. (O'Driscoll, 1977, pp. 70-79; Garrison, 1984, 1985) Whether the focus is on the coordination of investment decisions with consumption decisions or on the time-pattern of macroeconomic magnitudes over the course of a business cycle, the temporal element is essential to the macroeconomic perspective. Hayek incorporated this temporal element into his monetary dynamics by focusing on the intertemporal aspects of the economy's capital structure. To avoid undue complexity, Hayek envisioned a heavily stylized production process. His vision gives recognition, sometimes explicitly and sometimes implicitly, to a set of corresponding heuristic assumptions. Each production process is characterized by a modifiable sequence of inputs and a point output; some production processes are more time-consuming than others. The sequence of inputs is conceived as consisting of "stages" of production. The once- famous Hayekian triangles(13) represent a stylization of the entire economy's production process (See Figure 2): The horizontal leg represents the time element in the process�the depth of the capital structure. In the simplest case this leg represents the time that sepatates the earliest stage of production from the final output; the vertical leg represents the nominal value of the final output. The height of the hypotenuse at successive points in time represents the value of semi-finished goods as they move through time from the earliest to the latest stage of production.(14) Capital goods can be shifted�within limits�from one production process to another in response to relative-price changes. More importantly, capital goods can be shifted from one stage of production to another in ways that modify the intertemporal pattern of output. Some types of capital goods that are employed in the earlier stages of production (or that, with some modification, can be so employed) may be needed in the later stages of production as well. That is, while competing for the use of individual capital goods, the stages themselves exhibit a certain degree of intertemporal complementarity. There is no one-to-one relationship between stages of production and business firms. Some firms may operate within one stage, some in several sequential stages, and some in different stages of different production processes. Spelling out the characteristics of the Hayekian structure of production is, by itself, almost enough to specify the nature of the corresponding monetary dynamics. The general pattern of events set into motion by a monetary injection can be identified as soon as the method of injecting the new money is specified. Because of the historical relevance, Hayek assumed that the new money is injected through credit markets�that the central bank, in effect, pads the supply of loanable funds with newly created money.(15) Clearing the market for loanable funds in the face of such a monetary injection requires that the rate of interest fall until the quantity of funds demanded matches the increased supply.(16) In turn, this lowered rate of interest has implications for the intertemporal structure of capital. To the extent that the temporal relationship between the various types of capital goods and the ultimate output of the production processes is perceived by entrepreneurs, the prices of the capital goods will be affected in a systematic way. In the earlier phases of the market's reaction to the credit expansion, the greater the time between the use of the capital good and the emergence of the ultimate output, the greater the relative increase in the price of the capital good. This pattern of relative-price changes follows from the application of standard discounting techniques. There will be a corresponding pattern of quantity adjustments. Capital will be bid away from relatively less time-consuming production process into relatively more time-consuming processes and away from relatively late stages of production into relatively early stages of production. Marginal adjustments of these sorts will be made throughout the capital structure as firms seek to take advantage of the favorable credit conditions. In Figure 2 the shift towards more time-consuming processes is represented by a movement from A to B. (The change in the slope of the hypotenuse reflects smaller profit differentials between the stages of production, which in turn reflect cheaper credit.) The later phases of this dynamic process are marked by a reversal of the price and quantity movements that characterized the earlier phases (Hayek, 1967, p. 58). The passage of time takes production projects that were begun as a result of credit expansion into their later stages. Some of these later stages require the use of capital that was used up in�or irrevocably committed to�earlier stages. That is, the money-induced expansion caused more capital to be committed to the earlier stages of production without providing the additional resources�as would have been provided had the expansion been savings-induced�necessary for the completion of all the production processes. In Figure 2 the value of the production projects in their final stages is represented by a broken line, indicating that a credit-induced boom cannot be sustained. Capital goods complementary to the yet-uncompleted production processes are now in short supply. Their prices are bid up, and as a result of these higher prices, the demand for credit increases. The rate of interest, which had been artificially low during the monetary expansion, is now bid up. Two significant differences between the Austrian and the Monetarist views can be noted here: First, because of intertemporal complementarity, the initial investment raises the demand for capital(17); second the resulting rise in the interest rate is separate from any Fisher effect, which depends upon a rising price level.(18) Both directly through the market for capital goods and indirectly through credit markets, the prices of capital goods committed to the early stages of production are bid down. Uncommitted capital goods are bid away from the earlier stages of production and into the later stages.(19) But in this phase of the dynamic process, marginal adjustments may not be possible. Some capital goods attracted to the earlier stages of production by the monetary expansion may not be retrievable. As a consequence, many production projects may have to be abandoned; many others can be completed but only with a great delay and/or at a much higher cost than could have been anticipated. (The claim, made in the spirit of the New Classicism, that market participants will anticipate the money-induced capital shortage rings hollow. Such an anticipation would require that they know�or behave as if they know�the "real scarcities" independent of the price system which supposedly communicates that information to them. In the Austrian view, if a monetary injection distorts the price signals, market participants will be economizing on the basis of erroneous information.) This later phase of the adjustment process takes on the characteristics of a crisis, a sharp down-turn. But with time, some types of capital can be liquidated to accommodate the excess demands for other types. Eventually, the economy's capital can be restructured in a way that reflects real resource availabilities, and the credit market can be adjusted to reflect the supply and demand for loanable funds. Abstracting from the capital that is lost forever as a result of the credit expansion and from possible long-run effects on the distribution of income, the rate of interest and the corresponding structure of production will return to the level and configuration that characterized the economy before the credit expansion. Figures 1 and 2 can serve to depict the correspondence between the Monetarist and the Austrian views. Arguing respectively in terms of the wage-rate effect on the employment of labor and the interest-rate effect on capital utilization, Friedman and Hayek have traced out the consequences of a monetary injection from A to B to C, where, in both diagrams, points A and C represent identical sets of real parameters. Point B represents�in Figure 1�a rate of unemployment temporarily and unsustainably below the (Friedmanian) natural rate and�in Figure 2�a depth of capital temporarily and unsustainably maintained by a loan rate of interest kept below the (Wicksellian) natural rate. To this point the Austrian story has been told exclusively in terms of the market for capital goods. Yet a major purpose of the story is to account for the cyclical unemployment of labor. But filling in the blanks about how the labor market is affected by the dynamics in the capital market is not difficult. In the trivial case of perfect wage flexibility and instantaneous adjustments, there need be no unemployment at all. Labor would simply be shifted around during the unfolding of the dynamic process so as to be employed in ways consistent with the changing pattern of relative prices.(20) This is clearly not what Hayek had in mind. The recognition that labor is complementary to (some) capital and that frictions inherent in the market process prevent adjustments from taking place instantaneously is all that is required to translate the story about capital into a story about labor. During the early phases of the dynamic process, there is a net increase in the demand for labor. The new money injected through credit markets is used not only to bid workers away from some jobs and into others but to attract new workers as well. To use Friedman's terminology, unemployment falls below its natural rate. But during the late phases of the process, there are actual decreases in the demand for labor in the early stages of production. And the increases in the demand for labor in the later stages is only partially offsetting�due to the shortage of complementary capital goods. The frictions involved in the economy-wide movements of labor out of the early stages and into the late stages coupled with the net reduction in the demand for labor account for a considerable amount of supernatural unemployment during this phase of the dynamic process. Once the misallocated capital has been liquidated and the wage rates have adjusted to the underlying market conditions, the cyclically unemployed workers can be reabsorbed. In Hayek's story as in Friedman's, unemployment eventually returns to its natural rate. IV. A Critical Comparison While the two views of monetary dynamics spelled out in the previous two sections differ in important respects, they are in several fundamental respects quite similar. Comparing the differences, then, must be prefaced by a clear recognition of the underlying similarities. Five points of commonality are noteworthy: (1) Both theories can be fully squared with the kernel of truth in the quantity theory of money. (2) Both theories deal with disequilibrium phenomena, but neither denies that equilibrating forces dominate in the end. (3) Both hinge in a critical way on the distinction between short-run effects and long-run effects. (4) Both involve a market process that is necessarily, or endogenously, self-reversing. Monetary disturbances cause certain kinds of distortions in market signals. These distortions give rise in the short run to movements in certain prices and quantities, movements which in the long run create market conditions for counter-movements in those same prices and quantities. (5) With appropriate qualifications (about what constitutes the long-run) both theories are characterized by monetary disturbances whose short-run effects are non-neutral but whose long-run effects are neutral. With allowance for these points of commonality, Friedman and Hayek are offering in some respects complementary views, in other respects competing views. Our comparison will attempt to separate the two kinds of differences. Comparing aspects of the two views that are at odds with one another must await a closer look at each view separately. But ways in which the two views are different but complementary can be readily identified. At the root of these kinds of differences is the fact that Friedman focuses his analysis on the market for labor while Hayek focuses his on the market for capital goods.(21) The trade-off that gets distorted by monetary disturbances is labor vs. leisure for Friedman and goods now vs. goods later for Hayek. And due in large part to the differing natures of labor and capital (the more radical heterogeneity of capital as compared to labor(22)), Friedman argues in terms of substitutability and Hayek in terms of complementarity.(23) In an important sense there is simply no scope for conflict here. Labor-leisure preferences and intertemporal preferences interact with the perceived constraints that are relevant to each. The dimensions of the two market processes can be seen as orthogonal to one another. Trading off labor against leisure in a sequence of periods can be understood as substituting labor in some periods for labor in others. Thus, with both views laid out intertemporally, we see that Friedman is dealing with the intertemporal substitutability of labor while Hayek is dealing with the intertemporal complementarity of capital. Spelled out in these general terms, then, we have a harmony, rather than a conflict, of views.(24) 1. A Critical Retelling of Friedman's Story But when we turn again to the specifics of the market processes envisioned by Friedman and Hayek, we see first-order differences. Some of these differences put the two views at odds with one another�or at least allow for a preference of one over the other on the basis of plausibility or fruitfulness. Identifying these differences and their significance can begin with a critical assessment of Friedman's view, which we preface with a recognition of existing criticism in the literature. Sketchy expositions of the Monetarist view have given much scope for misinterpretation. Gardner Ackley (1983, p. 10), for instance, sees the Monetarist dynamics purely in terms of "tricks" played on employers and workers. It is a "trick for an inflation to fool both employers and workers�in opposite directions�about the movements of the real wage paid by one and received by the other." But to call this a trick is to miss Friedman's point. The "real wage" means one thing to workers and something else to employers. Neither workers nor employers have a clear perception about what is happening to the general price level, but both are responding in conventional ways to the incentives that they face. Recognizing these incentives gives Friedman's view a microeconomic footing and insulates it against criticism of the type offered by Ackley. Another criticism of Friedman's view (Birch, Rabin, and Yeager, 1982) is based on a perceived contradiction between the market process envisioned and the equation of exchange.(25) The familiar identity MV = PQ implies that when M, or more properly MV, increases, the corresponding increase in PQ is split in some way between an increase in P and an increase in Q. That is, Q can increase only to the extent that P does not increase. By contrast and according to the Monetarist account of the dynamic process, it is increases in P that cause increases in employment and hence increases in Q. That is, Q increases to the extent that P does increase�hence the perceived contradiction. But what appears at first blush to be a contradiction is in fact a manifestation of a self-reversing process. There is nothing logically contradictory about a process in which P begins rising before Q but in which Q falls as P becomes fully adjusted to the increase in M. While the Ps and the Qs can be squared with the equation of exchange at each point in the process, Q's initial upturn and inevitable downturn, which reflect similar movements in the employment of labor, constitute the essential self reversal that lies at the heart of the Monetarist view. Our own criticism is fundamentally different from the ones identified above. While the sequence of movements in P and Q are not evidence of a contradiction, they are evidence of a certain anomaly in the Phillips Curve story. An initial rise in prices is a prerequisite to any movement along a short-run Phillips curve, but the story accounts inadequately for the nature of this initial rise. To make the story stick we must recognize that there is some other, logically prior, market process that is set into motion by a monetary injection. The process can be easily identified by drawing more broadly from the Monetarist literature. Helicopter money adds to each individual's cash balances, thereby inducing greater spending and the bidding up of prices (Friedman, 1969c, p. 5). But if buyers of labor services receive their pro-rata share of the helicopter money, they would be bidding up the price of labor at the same time. The simultaneous rise in the price of output and the price of labor would preclude the fall (as perceived by the employer) in the real wage, which itself constitutes a critical aspect of the self reversing dynamic process. The real-cash-balance effect, then, becomes the whole story rather than a prelude to the Phillips-curve story. The Phillips Curve story can be saved by assuming a monetary injection in which the new money falls first into the hands of consumers and only later into the hands of producers. While this kind of assumption, which highlights a particular distribution effect, violates the spirit of Monetarism, it allows in a straightforward way for a variation on the Austrian theme. We turn now to consider the Austrian alternative. 2. Heuristic Assumptions and Domain Assumptions The assumptions made by Friedman and Hayek about the nature of the hypothesized monetary injection are not just two alternative assumptions that serve the same purpose. Friedman's assumption (that money is dropped from a helicopter) is a heuristic assumption. It is a deliberate fiction whose purpose is to bypass any questions that relate directly to the actual injection of money while still allowing for the derivation of implications that can be tested empirically. (Friedman's uninhibited use of such fictions identifies his method as instrumentalism.(26)) Hayek's assumption that money is injected through credit markets is a domain assumption.(27) In many instances money actually is injected through credit markets. Thus Hayek's story applies directly and without modification to those instances. A lower rate of interest resulting from the credit expansion increases the quantity of credit demanded. Given the relative volumes of commercial lending and consumer lending, we can say that the new money falls first into the hands of producers and only later into the hands of consumers. This disproportionate distribution of the new money is consistent with Hayek's story about the effect of a monetary injection on the structure of capital: Production for future consumption is temporarily favored over production for present consumption. For instances in which money is injected by some other means, Hayek's story applies only after suitable modifications are made. Suppose, for example, that a monetary expansion takes the form of increased transfer payments to consumers. This type of monetary injection would temporarily favor present consumption over future consumption. Capital goods would be reallocated accordingly. In many respects, the self-reversing market process triggered by such an injection would be a mirror image of the process triggered by a credit expansion. Capital goods in the later stages of production would be first in short supply and subsequently in surplus. The demand for labor would rise and then fall as workers were bid into the later stages of production only to become unemployed when the demand for present consumption fell to its "natural" level. The downturn associated with such a transfer expansion may be less severe than one associated with a credit expansion if only because short-term capital can be liquidated more quickly than long-term capital. Two observations are warranted here. First, Friedman needs to incorporate a transfer expansion, or something like it, into his theoretical construction if his Phillips curve story is to become coherent. Second, inflation-rate and unemployment data that suggest a negatively sloped short-run Phillips curve and a vertical long-run Phillips curve are consistent with Hayek's story whether the new money is lent into existence or transferred into existence.(28) Before we suggest what empirical, or historical, considerations might constitute a basis for choosing between the alternative stories offered by Friedman and Hayek, we turn to one further issue�the issue of generalizability. 3. Generalizability Any theoretical construction that suggests how a particular market works may be more or less generalizable�adaptable to different circumstances or extendable to other markets�depending in large part upon the nature of the assumptions used in the construction. The discussion above suggests that theories based on domain assumptions are more generalizable than theories based on heuristic assumptions. Hayek's story can be adapted to apply to circumstances in which the new money favors consumption activity over investment activity even though it was first told the other way around. The story can be generalized to recognize that monetary expansion can cause intertemporal discoordination�in one direction or the other�depending upon the particular device used to inject the new money. In recent years Hayek has generalized his own story even further by recognizing that monetary expansion causes a self-reversing discoordination in many markets, whether or not it causes any intertemporal discoordination (1975a, pp. 23-24). By generalizing in this way, Hayek has not at all changed his mind about the effects of monetary expansion, he has simply recognized that the domain (credit expansion) that once dominated his subject matter is no longer so dominant. But money-induced discoordination�of one sort or another�still dominates the story.(29) Friedman's story makes use of a monetary helicopter whose precise function is to assume away the discoordination that Hayek's story deals with. The monetary helicopter does not constitute one domain from which the theory can be extended; it constitutes the intentional neglect of all such domains. The Friedmanian helicopter, like the Walrasian auctioneer in a different story, should be seen as a "red flag," a marker where something important has been left out of account so that some other part of the story could be told. From this perspective we can admire the outrageousness of the particular fiction employed: the helicopter is a red flag that virtually no one could fail to see. But a red flag is no basis for generalization. If we go back and take into account the effects of actual monetary injections, we do not get a generalization of Friedman's story; we get Hayek's story. Hayek's story is generalizable in another important respect. The task of identifying the effects of credit expansion was made tractable by employing a heuristic assumption about the structure of capital-using production processes�the assumption of multi-period inputs and a point output. This particular assumption allowed for the abstraction from many complexities while it retained the essential element�the time element�in the analysis. Once the story is told in its most tractable form, then, it can be generalized and extended to take into account some of the complexities that were initially assumed away.(30) Production processes with multi-period outputs can be taken into account as well as processes that make use of capital goods of a greater or lesser degree of durability or whose final output is a durable consumer good. And by recognizing the ways in which the market for "human capital" is like the market for capital goods, Hayek's analysis can be extended in a direct way to labor markets as well (Bellante, 1983). Unfortunately, Hayek's attempt to tell his story in the contexts of several different circumstances was seen as evidence of confusion on Hayek's part. In response to criticism that he assumed an initial state of full employment and placed too much emphasis on changes in the terms of credit, Hayek (1975c, pp. 3-37) offered an alternative account in which widespread unemployment was assumed and the loan rate of interest was held constant. The resulting story was then criticized (Kaldor, 1942) on the grounds that it contradicted Hayek's own earlier rendition. By uncritically adopting Kaldor's assessment of what he dubbed the "concertina effect," modern critics have failed to appreciate the adaptability, the generalizability, that characterizes Hayek's formulation.(31) A similar sort of generalization and extension is not possible for Friedman's story. The essential feature on which his story depends is unique to the particular context in which it is told. For Friedman, the differing perceptions of workers and employers is what gives rise to the story; they are what "drive the system." The market process that Friedman identifies has no direct counterpart in the market for capital goods. The owner of a diverse capital stock, for instance, is unlikely to have perceptions that differ in a systematic way from those who may buy the services of that capital stock. Such perception differences are even less likely in the more prominent cases in which capital goods are owned indirectly through financial markets. Thus, independent of any empirical considerations, we have some basis for preferring Hayek's story over Friedman's. Hayek's domain assumptions and even his heuristic assumptions allow for generalization and extension in ways that Friedman's do not. Hence, Hayek's theoretical construction is the richer, the more fruitful, of the two. 4. Historical Applications and Policy Implications Extensive empirical testing has favored Friedman's view of the nature of the short-run Phillips curve over beliefs or hopes that there is a more permanent trade-off between inflation and unemployment. But this same empirical testing provides no clue at all about the nature of the market process that moves the economy along a short-run Phillips curve and then shifts that curve so as to conform with the long-run vertical Phillips curve. That is, the testing allows to us choose between a Keynesian view and a Friedman-Hayek view, but not between the Friedman view and the Hayek view. Direct empirical evidence about the nature of the monetary dynamics involved in adjusting the economy to a monetary injection may be all but impossible. Directly substantiating Friedman's story would require data on perceived real wage rates; directly substantiating Hayek's story would require the quantification of actual changes in the complex structure of capital.(32) We must look for implications of the two views that allow for empirical differentiation. As it turns out, our comparison of the two views provides the needed clue about differing implications. In Friedman's story a general rise in prices of final output is a necessary link in the self-reversing market process triggered by monetary expansion. Without this price inflation, which has a different significance for workers and for employers, there is no story to tell. While Hayek's story allows for price inflation, his story does not depend upon it (1967, pp. 22-30; 1975b, pp. 104, 121, 196, and passim). An initially depressed interest rate followed by subsequent resource constraints within the market for capital goods can serve alone as the basis for the self-reversing market process envisioned by Hayek.(33) This realization that price inflation plays a leading role in one story and, at best, a supporting role in the other allows us to identify important differences in the way the two stories are used not only in the interpretation of history but also in the prescription of policy. Historical episodes in which monetary expansion is accompanied by an unchanging price level are interpreted differently by Friedman and Hayek. The decade of the 1920s provides the most dramatic illustration of this difference. Real economic growth during this decade, which in the absence of monetary expansion would have produced a decline in the price level, served instead to offset the inflationary effects of the monetary expansion. The self-reversing process that, in Friedman's view, characterizes other episodes of monetary expansion does not get triggered in this one. There is no Phillips-curve story to tell. Economic problems that surfaced at the end of the '20s are not, according to the Monetarist view, a result of a market process that began much earlier in the decade. The economic downturn is blamed instead on exogenous factors�the incompetence and irresponsible behavior of the central bank (Friedman, 1963, pp. 299-419). From an Austrian perspective, the same historical episode is seen quite differently (Hayek, 1975b, pp. 18-20; Robbins, 1934; Rothbard, 1963). The fact that there was virtually no price inflation is irrelevant. There is no scope for the idea that the monetary expansion simply accommodated real growth: real growth, in the Austrian view, must be accommodated by real saving. The credit expansion during the 1920s caused the rate of interest to be lower than it otherwise would have been and thereby triggered a self-reversing process within the market for capital goods. The actual self reversal came in 1929 causing the economic downturn. This historical episode, then, is an illustration of Hayek's story and not an exception to it. Interpretations of history have their counterpart in policy recommendations. Again, the differing significance of price inflation is the basis for differences in preferred policies. In the Monetarist view, so long as the price level is stable, monetary expansion is not disruptive. Monetary expansion may even be necessary to keep prices from falling during periods of real economic growth. In the Austrian view, monetary expansion is a disruptive force, whether or not the price level is changing as a result of the expansion. The particular nature of the disruption will depend upon the particular form of the expansion. The differing recommendations can be stated concisely in terms of the equation of exchange and an assumed constant velocity of money. The Monetarist recommendation: Increase the supply of money to match long-term, secular increases in real output; the Austrian recommendation: Abstain from monetary expansion even in periods of economic growth; increased credit should come only from increased saving; increasing output should be accommodated by a declining price level.(34) These policy differences suggest that the critical comparison of alternative monetary dynamics is more than an idle exercise. V. Further Implications Our critical comparison has important implications about the way we think about macroeconomic problems. The monetary dynamics envisioned by Hayek provide a richer understanding of the market processes that might be triggered by a monetary expansion, but the Austrian alternative may at the same time render less serviceable�or even misleading�some of the standard macroeconomic concepts. At issue, in particular, are the conventionally defined categories of unemployment, the notion of "long and variable" monetary lags, and the concept of "full" employment. 1. Cyclical and Structural Unemployment Beginning with Keynes, it has been standard practice to identify a number of categories of unemployment in order to isolate conceptually one particular component of special interest. Cyclical unemployment is the major focus of macroeconomic and monetary theory. Traditionally, theorizing about what causes unemployment of this category or about how it might be reduced or eliminated have been facilitated by impounding other categories of unemployment in a ceteris paribus assumption. Frictional unemployment, which is inherent in any market economy, is wholly attributable to the existence of search costs. Unemployed workers of this category always find employment, but not instantaneously. Institutional unemployment, such as might be caused by minimum-wage legislation, may be lamentable, but it is to be fully accounted for in terms of the legal constraints. These two categories of unemployment can be conceptually separated from cyclical unemployment, whether we accept Friedman's treatment of monetary dynamics or Hayek's. Structural unemployment involves a geographical or occupational mismatch of workers and employment opportunities. Unemployment of this sort could result from autonomous shifts in consumer demand or from technological innovations. In Keynesian and Monetarist formulations, structural unemployment is combined with frictional and institutional unemployment, and all three are collectively impounded in a ceteris paribus assumption. Keynes's views on unemployment of these sorts are virtually identical to the "Classical" views of, say, Cecil Pigou; they were spelled out by Keynes (1936, p. 6) only to make clear what he was not talking about. Friedman (1976, p. 217) makes use of these categories to locate the vertical long-run Phillips curve. The natural rate of unemployment, which is simply the market rate given frictions, mismatches, and institutional constraints, serves as the base point from which to analyze cyclical unemployment. Operationally, this last category is defined as a residual. Cyclical unemployment is calculated by subtracting an estimation of the natural rate from the measured unemployment rate. Friedman's story begins with an economy in which all unemployed workers are "naturally" unemployed. Initially, then, a monetary expansion gives rise to negative cyclical unemployment, which persists until employer/worker wage-perception differentials are eliminated. In symmetrical fashion, a monetary contraction�or disinflation�causes the actual unemployment rate temporarily to exceed the natural rate. Eventually, the natural rate is reestablished, but�more significant for the present discussion�the rate of structural unemployment remains constant all the while. The market process by which the economy deviates from and then returns to the long-run Phillips curve creates no mismatches between workers and employment opportunities. Money is neutral with respect to the structure of the economy. Hayek's story can begin at the same point as Friedman's, but once the economy begins to react to the monetary expansion, the strict dichotomy between structural unemployment and cyclical unemployment can no longer be maintained. The self-reversing process plays itself out in terms of changes in the structure of capital and corresponding changes in the structure of employment. Friedman's initial increase in employment becomes, in Hayek's story, an increase of some particular kinds of employment at the expense of other particular kinds. If the new money enters the economy through credit markets, the "forced saving," as Hayek uses that term, is financing production for the more remote future at the expense of production for the more immediate future. The structure of employment opportunities is modified accordingly. The unemployment that characterizes the later phase of the dynamic process, then, is structural unemployment. It differs from the structural unemployment that existed prior to the monetary expansion only in terms of the causal factors. But operationally, structural unemployment caused by autonomous changes in tastes and technology and structural unemployment caused by monetary disturbances may not be separable categories of unemployment. (Does the waning of smokestack industries reflect a technological shift towards an information-based economy, or does it represent a structural hang-over from an earlier money-induced boom?) Further, expansion-induced structural unemployment is likely to be long-lasting. The long run in Hayek's formulation must be long enough so that all misallocated capital can be liquidated and all capital/labor mismatches can be rectified. The amount of time required may be so great as to make any propositions about long-run neutrality highly misleading. (It would do violence to standard macroeconomic terminology to categorize the Great Depression as an instance of "short-run non-neurtality.") Hayek (1977, p. 282; 1975a, p. 44) does allow for the possibility that some cyclical unemployment may not be structural unemployment. The reduction in incomes during the downturn can�through the reduction in effective demand�have an aggravating effect on the problem of unemployment. This is what Hayek refers to as the "secondary deflation," or the "cumulative process of contraction." The unemployment associated with the economy's spiraling downwards is the type of cyclical unemployment dealt with by Keynes. Hayek's recognizing the possibilitly of a secondary deflation does not, as some have suggested, constitute a capitulation to Keynes. In fact, this problem was put into perspective (1975b, p. 19) well before the appearance of The General Theory. Rather, the fact that Hayek sees the Keynesian component of cyclical unemployment as a secondary effect draws attention to the primary effect which Keynes overlooked. 2. The Long and Variable Lag We turn now from the nature of the unemployment that is caused by a monetary disturbance to consider the length of time between the initial injection of new money and the economy's eventual adjustment to it. As an empirical summary, the Monetarist phrase "long and variable lag," (Friedman, 1969a, p. 238) is appropriate for both Friedman's and Hayek's account of the monetary injection and its ultimate effect. But further reflection on the two views of monetary dynamics reveals important differences in this respect. First, the "ultimate effect," which marks the end of the lag, refers to different things in the two views. As suggested above, the overall level of prices may become fully adjusted to the increased quantity of money long before the money-induced distortions in the structure of capital (and labor) are fully eliminated. Thus, the short-run and long-run Phillips curves may be separated by a much shorter span of time than the short-run and the long-run Hayekian triangles. Second, the basis for the lag differs between the two views in an important way. Friedman's lag depends upon how long it takes for workers to straighten out their misperceptions of the real wage; Hayek's lag depends upon characteristics of the capital structure�the degree of specificity and intertemporal complementarity of the capital goods that make up the structure. Hayek's story suggests that credit expansion is less disruptive (and involves a shorter adjustment lag) in underdeveloped countries than in industrialized countries. This accords with casual empiricism. Does Friedman's story suggest that workers in underdeveloped countries have better and/or more quickly adjusting perceptions of their real wage rates in comparison to workers in industrialized countries? Third, there is an important difference in the basis for the variability of the lag from one expansionary episode to another within a given economy. For Friedman, the length of the lag, being based on workers' misperceptions, is fundamentally indeterminate. But it is not at all clear why it should take workers so long to straighten out their misperceptions about the real wage and why it should take much longer in some episodes than in others.(35) For Hayek, the length of the lag will depend upon the particular way in which capital and labor markets are distorted, which in turn depends upon how the new money is injected. Monetary injections that discoordinate intertemporally are more likely�precisely because of the temporal nature of the discoordination�to involve longer lags than injections that discoordinate in some atemporal way. This relationship between the method of injection and the likely length of the lag helps to explain why the Austrian theorists have always seen credit expansion, which was characteristic of the 1920s' boom, as particularly troublesome, and why, in their study of this and other expansionary episodes, they are as much or more interested in how�rather than how much�money was injected. 3. "Full" Employment Finally, we turn to the concept of "full" employment as used by Keynes and Friedman in the light of the monetary dynamics as envisioned by Friedman and Hayek. For Keynes, full employment is achieved so long as investors are sufficiently optimistic or sufficiently moved by the "animal spirits," or so long as public works takes up the slack created by any insufficiency of private spending. But the very nature of a self-reversing dynamic process�as incorporated into the visions of both Friedman and Hayek�suggests that the critical issue is whether or not a particular pattern of employment is sustainable. In either vision any level of employment above the full-employment level is clearly not sustainable. But in Friedman's formulation, full-employment is�by construction�a sustainable level of employment. For Hayek, the level of employment that corresponds to Friedman's full-employment may be sustainable or it may contain the seeds of its own undoing (1975c, pp. 60-62). That is, even though the real wage rate consistent with the underlying real factors is correctly perceived by both employers and workers, the existing capital structure may be inconsistent with the intertemporal pattern of consumer demand and resource availabilities. The market process through which these inconsistencies are discovered and remedied may involve a considerable period of cyclical (structural) unemployment. Again, the circumstances existing in the late 1920s can illustrate the distinction. In the Austrian view, the economy was experiencing, in those years, unsustainable full employment. Friedman does recognize that irresponsible monetary policies may eventually increase the natural rate of employment. In two different pieces of analysis (1976, pp. 232-33 and 1977, pp. 459-60), he suggests the possible existence of a "positively sloped Phillips curve." But in each case, new considerations not integral to his story of the adjustment process are introduced to account for such a possibility.(36) In neither case are structural considerations�as conceived by Hayek�integrated into the dynamic process envisioned by Friedman. Friedman's strict dichotomization of structural and cyclical unemployment stands in the way of his recognizing the possibility of full (in the operational sense) but unsustainable (in the Hayekian sense) employment. Hayek's formulation, which involves an interplay between structural and cyclical unemployment, allows for the recognition of such possibilities and for the prescription of policy most conducive to sustainable full employment. VI. A Summary View Purely as an instrumentalist's device, it could be argued, Friedman's story has served the Monetarists well. It put them onto the idea that the Phillips curve trade-off is a short-run trade-off only. After this idea was confirmed empirically (or properly, after it failed to be falsified over many trials) the story itself became superfluous. The realization that the empirically defined long-run Phillips curve is vertical is enough to carry the day. It provides a strong basis for arguing that in the long run, "nominal magnitudes do not influence real magnitudes" and for warning against all attempts to exploit the trade-off offered by the short-run Phillips curve. Friedman's story and Hayek's story differ sharply in methodological terms. Because of its instrumentalist qualities, Friedman's story fares poorly as a source of insights about the market process that translates a monetary injection into its ultimate consequences; it fails to increase our understanding of any actual market process. Hayek's story identifies the essential workings of the self-reversing market process triggered by a monetary expansion in a way that sheds light on the structure and timing of the pattern of unemployment caused by such monetary disturbances. The Austrian insights contained in the Hayekian triangles square with but go beyond the empirical regularities of Monetarism. From a broader perspective, Friedman's story represents a recognition of the intertemporal substitutability of labor and of the possibility that monetary disturbances can interfere with the intertemporal allocation of labor. Hayek's story represents a recognition of the intertemporal complementarity of capital and of the possibility that monetary disturbances can interfere with the intertemporal allocation of capital. Viewed as such, the two stories are themselves not substitutes, but complements. References: Ackley, Gardner 1978. Macroeconomics: theory and policy. New York. ________ 1983. "Commodities and capital: prices and quantities." American Economic Review, 73.1 (March):1-30. Bellante, Don 1983. "A subjectivist essay on modern labor economics." Managerial and Decision Economics, 4.4:234-43. Birch, Dan, Alan Rabin, and Leland Yeager 1982. "Inflation, output, and employment: some clarifications." Economic Inquiry, 20.2 (April):209-21. Blaug, Mark 1978. Economic Theory in Retrospect, 3rd ed. London. Böhm-Bawerk, Eugen 1959. Capital and Interest, vol. 2 (1889). South Holland, IL. Boland, Lawrence A. 1979. "A critique of Friedman's critics." Journal of Economic Literature, 17.2 (June):503-22. Brimelow, Peter 1982. "Talking money with Milton Friedman." Barron's, 62.43 (Oct. 25):5-6. Butos, William 1985. "Hayek and general equilibrium analysis." Southern Economic Journal, 52.2 (Oct.)332-43. Clower, Robert W. 1969. "The Keynesian counter-revolution: a theoretical appraisal" (1965). In Robert W. Clower, ed., Monetary Theory. Middlesex. Darby, Michael 1976. Macroeconomics. 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Friedman, Milton and David Meiselman 1963. "The relative stability of monetary velocity and the investment multiplier in the United States, 1897-1958." In Stabilization Policies. London. Friedman, Milton and Anna Schwartz 1963. A Monetary History of the United States, 1867-1960. Princeton. ________ 1982. Monetary Trends in the United States and the United Kingdom. Chicago. Garrison, Roger W. 1984. "Time and money: the universals of macroeconomic theorizing." Journal of Macroeconomics, 6.2 (Spring):197-213. ________ 1985. "Intertemporal coordination and the invisible hand: an Austrian perspective on the Keynesian vision." History of Political Economy, 17.2 (summer):309-21. ________ 1986. "Hayekian trade cycle theory: a reappraisal." Cato Journal 6.2 (Fall): 437-53. Hicks, John R. 1946. Capital and Value, 2nd ed. London. ________ 1967. "The Hayek story." In John R. Hicks, Critical Essays in Monetary Theory. Oxford. Hayek, Friedrich A. 1941. The Pure Theory of Capital. Chicago. ________ 1948a. "The Ricardo effect" (1942). In Friedrich A Hayek, Individualism and Economic Order. Chicago. ________ 1948b. "The use of knowledge in society" (1945). In Friedrich A. Hayek, Individualism and Economic Order. Chicago. ________ 1967. Prices and Production, 2nd ed. (1935). New York. ________ 1975a. Full Employment at Any Price, Occasional Paper 45. London. ________ 1975b. Monetary Theory and the Trade Cycle (1933). New York. ________ 1975c. Profits, Interest, and Investment (1939). Clifton, NJ. ________ 1977. "Three elucidations of the Ricardo effect." Journal of Political Economy, 77 (Mar./Apr.):274-85. ________ 1984. "The future monetary unit of value." In Barry N. Siegel, ed. Money in Crisis. Cambridge, MA. Hoover, Kevin D. 1984. "Two types of monetarism." Journal of Economic Literature, 22.1 (Mar.):58-76. Jevons, William S. 1970. The Theory of Political Economy (1871). Middlesex. Kaldor, Nicholas 1942. "Professor Hayek and the concertina effect." Economica, ns 9(Nov.):359-82. Keynes, John M. 1936. The General Theory of Employment, Interest, and Money. New York. Knight, Frank H. 1934. "Capital, time, and the interest rate." Economica, ns 2 (Aug.):257-86. Lachmann, Ludwig M. 1978. Capital and Its Structure (1956). Kansas City. Leijonhufvud, Axel 1968. On Keynesian Economics and the Economics of Keynes. New York. Lucas, Robert E. Jr. 1981. Studies in Business Cycle Theory. Cambridge, MA. Mises, Ludwig von 1953. The Theory of Money and Credit. New Haven, CT. Originally published in German in 1912. Musgrave, Alan 1981. "'Unreal assumptions' in economic theory: the F-twist untwisted." Kyklos, 34.3:377-87. O'Driscoll, Gerald P. Jr. 1977. Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City. O'Driscoll, Gerald P., Jr. and Mario J. Rizzo 1985. The Economics of Time and Ignorance. Oxford. Phelps, Edmund S. 1970. "Money wage dynamics and money market equilibrium." In Edmund Phelps et al., ed., Microeconomic Foundations of Employment and Inflation Theory. New York. Reder, Melvin W. 1982. "Chicago economics: permanence and change." Journal of Economic Literature, 20.1 (Mar.)1-38. Robbins, Lionel 1934. The Great Depression. London. Robertson, Dennis H. 1949. Banking Policy and the Price Level, rev. ed. New York. Robinson, Joan 1972. "The second crisis in economic theory." American Economic Review. 62.2(May):1-10. Rothbard, Murray N. 1975. America's Great Depression (1963). Kansas City. Wainhouse, Charles E. 1984. "Empirical evidence for Hayek's theory of economic fluctuations." In Barry N. Siegel, ed., Money in Crisis. Cambridge, MA. Wagner, Richard E. 1979. "Comment: politics, monetary control, and economic performance." In Mario J. Rizzo, ed., Time, Uncertainty, and Disequilibrium. Lexington, MA. Warburton, Clark 1966. Depression, Inflation, and Monetary Policies: Selected Papers, 1945-1953. Baltimore. Wicksell Knut 1936. Interest and Prices (1898). London. Notes: 1. Two related contributions are Hoover (1984), who provides an insightful comparison between Old Monetarists in the style of Friedman with the New Classicists in the style of Lucas, and Butos (1985) who compares Hayek and Lucas in the context of a general-equilibrium approach to business-cycle analysis. Although not originally conceived for this purpose, the present paper can be seen as completing the trilogy by comparing Hayek and Friedman on the issue of monetary dynamics. 2. We should note that the sharpness of the labor-market/capital-market distinction that characterizes our paper is not intended to suggest that Hayek has had nothing to say about labor markets or that Friedman has had nothing to say about capital markets. Hayek (1975a, pp. 15-29) specifically addresses the relationships among "Inflation, the Misdirection of Labour, and Unemployment"; Friedman (1970, p. 24-25) includes the existence of a cash-balance effect on asset prices as one of the key propositions of Monetarism. Our paper focuses more narrowly on a comparison of Phillips Curves and Hayekian Triangles as alternatives bases for theorizing about monetary dynamics. 3. The article exhibiting Friedman's agnostic stance was first published in 1963; the "engineering blueprint" appeared in 1976 after having been presented at the Southern Economic Association meetings two years earlier. Some might argue that a dozen or so years is enough to transform vagueness into a blueprint. An alternative view is that the agnosticism persists (see, for instance, Friedman, 1969c, p. 6); the arguments in the later effort, which have their roots in his 1967 A.E.A Presidential Address (1969e), are to be understood as Friedman's willingness to take on his adversaries on their own turf. If this view is valid, a distinction must be made between Friedman and his followers. Some Monetarists (e.g. Darby, 1976, pp. 328-50) write as if Friedman's critical analysis which demonstrates the absence of an exploitable long-run Phillips curve is at the same time an exposition of the Monetarist view of the market process which transforms monetary injections into increases in the price level. Also, the formal analysis offered by Phelps (1970. pp. 124-66) is similar to Friedman's critical analysis of the relationship between long-run and short-run Phillips curves. 4. In other contexts, Friedman opts for a more broadly conceived adjustment process in which asset prices change, but he trivializes the corresponding quantity adjustments (e.g. that may temporarily alter the structure of capital) as "first-round effects." See Friedman and Schwartz (1982, ch. 2) and Friedman and Meiselman (1963, pp. 217-22). 5. Reder (1982) could be interpreted as denying the significance in this respect of Knightian capital theory for the development of the Chicago tradition. "The contribution to economic thought with which Knight is most readily identified (theory of the firm, uncertainty and profit, capital theory, social cost, etc.) are only tangentially related to the Chicago tradition" (Reder, 1982, p. 6, our emphasis). An anonymous referee has suggested that Reder's assessment is compatible with our own: "The modern Chicago school interpreted Knight so as to allow them to ignore capital theory." 6. See Friedman (1969c, pp. 4-7). Friedman clearly recognizes that the money drop has to be perceived as a one-time event. "Let us suppose further that everyone is convinced that this is a unique event which will never be repeated." This essential assumption separates Friedman from the New Classicists in terms of the issues that each is addressing. The money drop in Friedman's analysis does not constitute a "policy" in the New Classicist view. Further, Friedman's treatment of expectations creates a certain internal tension in his own view if his analysis is to explain more than a single episode of monetary expansion: Market participants have adaptive expectations (about the price level and real wages) during the period that the market is adjusting to a money drop, but static expectations about the likelihood of a future money drop. 7. As an alternative formulation, Friedman does away with both the distribution effects and the differential income effects by assuming "infinitely lived people" such that no transitory event has any effect on permanent income (Friedman, 1969c, p. 6n). This alternative, however, does not represent a net "relaxation" of simplifying assumptions; it represents the replacement of one assumption with another, analytically equivalent, assumption. 8. The exposition that follows draws primarily from Friedman, 1976, pp. 213-37. 9. As Friedman makes clear, the shifting of and movements along the curves are reversed if we take the employer's point of view. The movement down the employer's demand for labor corresponds to an apparent shift in the supply of labor (Friedman, 1976, p. 223). 10. The exposition of monetary dynamics as seen by Hayek draws largely from his early writings (Hayek, 1967 and 1975b). Even the more advanced of these two books was intended only as an outline (1967, p. vii). Hayek's monetary dynamics is based upon a theory first set out by Mises (1953, pp. 339-66), which integrated the capital theory of Böhm-Bawerk with a theory of interest-rate movements adapted from Wicksell (1936). 11. The kernel of truth in the idea of rational expectations is clearly recognized by Mises as early as 1953 as is demonstrated by the following passage on inflationary finance: "Here the famous dictum of Lincoln holds true: You can't fool all of the people all of the time. Eventually the masses come to understand the schemes of their rulers. Then the cleverly concocted plans of inflation collapse.... [I]nflationism is not a monetary policy that can be considered as an alternative to a sound money policy. It is at best a temporary makeshift. The main problem of an inflationary policy is how to stop it before the masses have seen through their rulers' artifices. It is a display of considerable naivete to recommend openly a monetary system that can work only if its essential features are ignored by the public" (Mises, 1953, p. 419). For a comparison of Hayek's approach to the issue of expectations with that of New Classicism, see Garrison (1986). 12. For a treatment of Austrian capital theory that emphasizes these features, see Lachmann (1956). 13. Jevons (1970, pp. 229-36) had earlier employed a triangular construction for similar purposes. Attempting to characterize the economy's capital structure in terms of the dimensions of a triangle is what qualifies Prices and Production as an outline. In Hayek's more formal�and more formidable�Pure Theory of Capital (1941), many of the heuristic assumptions of his earlier efforts were relaxed. This volume was to serve as the basis for a more comprehensive treatment of monetary theory (Hayek, 1941, p. v-vi), but no follow-on volume was ever written. 14. At the time of Hayek's London lectures, which were to become Prices and Production, this formulation was largely unintelligible to his British audience. Hicks (1967, p. 204) was later to note that "Prices and Production was in English, but it was not English economics." While the neo-Austrian Hicks pointed to difficulties in Hayek's communication of the message, Joan Robinson, who had difficulties with the message itself, dubbed the Hayekian episode a "pitiful state of confusion" and categorized it as a crisis in economic theory (Robinson, 1972, p. 2). 15. See Hayek, 1967, p. 54). In his earlier writing (1975b, pp. 143-48) Hayek criticized L. A. Hahn and Ludwig von Mises for beginning their stories with "arbitrary interferences on the part of banks." Hayek regarded an exogenous credit expansion as a "specially striking case," and as a sufficient condition but not a necessary one for the occurrence of alternating boom and crisis. He did note (p. 150) that "it is possible to assume, with Professor Mises, that the Central Banks, under the pressure of an inflationist ideology, are always trying to expand credit and thus provide the impetus for a new upward swing of the Trade Cycle; and this assumption may be correct in many cases." 16. This aspect of the market process reflects the insights of Wicksell (1936, pp. 102-21): a economic boom grows out of the divergence between the loan rate of interest and the natural rate. But as an anonymous referee has noted, Hayek differed from Wicksell on the question of what causes the divergence of the two rates. Wicksell believed that the natural rate increases first due to technological advance and that the loan rate adjusts but with a lag. 17. This aspect of Hayek's theory is the central focus of his 1937 article, "Investment that raises the demand for capital." (See Hayek, 1975c, pp. 73-82.) 18. Early on, Hayek was acutely aware that his own monetary theory of the trade cycle was distinctive in that it did not hinge on changes in the general level of prices: "We are in no way concerned to explain the effect of the monetary factor on trade fluctuations through changes in the value of money and variations in the price level..." Instead, his explanations hinged upon "changes [monetary in origin] which are bound to disturb the equilibrium inter-relationships existing in the natural economy, whether the disturbance shows itself in a change in the so-called 'general value of money' or not" (1975b. pp. 103-4). 19. Hayek uses the term "Ricardo Effect" (1948a) to refer to the quantity adjustments in markets for capital goods brought about by this upturn in interest rates. Also, see O'Driscoll (1977, pp. 92-134). 20. Richard Wagner (1979, pp. 182-85) demonstrates that the applicability of Austrian business-cycle theory is independent of any unemployed labor that may be associated with the downturn and that to estimate the social costs of a monetary disturbance by the unemployment caused by it is to underestimate those costs. 21. As Hayek (1967, p. 33) clearly recognized, this same distinction separated his own theorizing (1967) from the contemporaneous theorizing of Dennis Robertson (1949). 22. The claim that capital is more radically heterogeneous than labor is not based simply on a difference in degree. Different man-hours of labor are not perfectly substitutable for one another. But our attempt to construct an analogous claim for capital is revealing: Different ________ of capital are not perfectly substitutable for one another. The difficulty of even filling in the blank is a clear sign of dimensional, or radical, heterogeneity. We must resort either to some universal non-unit, such as "hunks," or to some value measure, such as "dollar's worth," which leads to an inescapable conflation of the price of capital and its corresponding quantity. Further, differences between different man-hours of labor are conventionally attributed to differences in human capital. Theories about labor that hinge on such differences are faced with the same thorny problems that are inherent in theories about capital. It is largely because of these well-recognized problems that most monetary theorists have preferred to think in terms of homogeneous, perfectly substitutable, man-hours. 23. Hayek recognized that some capital goods are substitutes for one another. We emphasize the notion of capital complementarity to contrast Hayek with most other theorists, who, explicitly or implicitly, take all capital goods to be substitutes. 24. For an alternative treatment of the relationship between labor-based and capital-based theories, see O'Driscoll and Rizzo, 1985, pp. 160-87. 25. These critics would not take Hayek to be the most viable alternative to Friedman. They would opt instead for theories of monetary disequilibrium in the style of Warburton (1966) and Clower (1969). Their preference is based upon a perceived asymmetry between price adjustments associated with a falling price level and price adjustments associated with a monetary injection. "Deflation has to work through a sequence of millions of piecemeal price and wage decisions; the alternative of nominal monetary expansion puts no such demands on the economy's coordinating mechanism" (Birch, Rabin, and Yeager, p. 213). But the asymmetry is non-existent unless the question-begging assumption of "helicopter money" is employed. Actual deflations and actual monetary expansions "[have] to work through a sequence of millions of piecemeal price and wage decisions." 26. For an instrumentalist defense of Friedman's economics, see Boland (1979). 27. Musgrave (1981) uses the modifiers "negligibility," "domain," and "heuristic" to define three categories of assumptions that underlie various theoretical constructions. Generically, a domain assumption identifies the domain, or scope, of direct applicability; a heuristic assumption is a deliberate fiction used to facilitate the logical development of a theory. Musgrave uses these distinctions to evaluate Friedman's treatment of methodological issues (1953) in which assumptions are categorized as "realistic" or "unrealistic." 28. For a treatment of Hayek's analysis in terms of the Phillips curve, see O'Driscoll (1977, pp. 115-18). It should be noted that O'Driscoll uses Phillips' original construction, which has wage inflation on the vertical axis; the analysis is applicable whether or not there is price inflation as well. 29. It may be misleading to claim that Hayek generalized his theory only in recent years. The case involving the expansion of credit to producers provided a focus for Prices and Production where Hayek "concentrated on the successive changes in the real structure of production, which constitute [cyclical] fluctuations." In his earlier work where he was concerned with "the monetary causes which start the cyclical fluctuations," his arguments were much more general in nature. (See, for instance 1975b, pp. 91, 146-47, and passim; the quoted passages are from the preface, p. 17.) Modern Hayekians may even judge that Hayek generalized a little too much: "The initial change [eliciting a cyclical fluctuation] need have no specific character at all, it may be any one among a thousand different factors which may at any time increase the profitability of any group of enterprises" (1975b, pp. 182-83). 30. Drawing from Hicks (1946, p. 222), Leijonhufvud (1968, p. 222) contends that the Austrian construction cannot be generalized in this way: "the result reached for the point-input point-output case ... 'does not generalize in the sort of way in which it might have been expected to generalize.'" But the obstacles that make generalizing difficult are not to be attributed to the Austrian formulation but to the very nature of capital and hence of capital theory. (See footnote 20 above.) If measured in terms of the "period of production," the time element in the production process depends upon the "quantity" of capital employed at each point in time; the quantity of capital must be measured in value terms, which in turn depend upon the rate of interest. Thus, the "lengthening" of the period of production brought about by a fall in the rate of interest may involve a "lengthening" that follows from the very definition of the period of production plus a "lengthening" that results from a market process set into motion by the fall in the rate of interest. Hayek (1941, pp. 76-77, 140-45, 191-92 and passim) was aware of the hoary problems of this sort well before the so-called "reswitching" debate of the 1960s. The fact that the Austrian formulation is capable of making some important distinctions, such as between the two senses of "lengthening," should be seen as a credit to that theory and not as grounds for condemning it. 31. For modern treatments of Hayek that rely heavily on Kaldor's critique, see Blaug (1978, pp. 571-74) and Ackley (1978, p. 632). Ackley refers to the Austrian view as a fantasy and is particularly vitriolic in his treatment of it. 'In what must be one of the most devastating critiques in the history of economics, Nicholas Kaldor showed the absurdity of what he called Hayek's "concertina effect"�the cyclical "lengthening" and "shortening" of the production process. Remnants of this idea may still be circulating in the byways of economics, but the writer has not encountered them for several decades.' 32. Wainhouse (1984), whose comparison of Friedman and Hayek is compatible with the one offered in the present paper, employs "Granger causality tests" in an attempt to establish the empirical relevance of Hayek's story. 33. In recent years Friedman has been attributing high interest rates, not to an inflation premium, but to the volatility of money growth (Brimelow, 1982, p. 5-6). And his argument sounds more Hayekian than Friedmanian: In 1980 the Federal Reserve began a relatively rapid monetary expansion. Businessmen assumed the cheap credit was going to last for a considerable period, but when it didn't, "you had the business community left with all sorts of commitments based on a wrong diagnosis, a wrong prediction. And you had a great deal of distress borrowing that was highly insensitive to interest rates." 34. This policy prescription observes the stricture of separating policy implications from judgments of political feasibility. There is no evidence that Hayek has changed his mind about the implications of his theory, but in recent years he has tempered his recommendations. Prefacing an argument for a stable price level (1975a, pp. 26), Hayek "confess[ed] that 40 years ago I argued differently. I have since altered my opinion�not about the theoretical explanation of the events but about the practical possibility of removing the obstacles to the functioning of the system by allowing deflation to proceed...." And looking to future monetary systems, Hayek (1984, pp. 325-26) notes that "Sixty years ago I began my work on monetary theory by questioning the belief, then universally accepted, that the purchasing power of money should be kept stable. I then suggested that it was more desirable for the purchasing power of money over consumer goods to increase over time. But I have since become convinced that a money of stable value is really the best we can hope for." 35. When Friedman (1969a, pp. 255-56) explicitly considers the question of why the lag should be so long, he gives a Hayekian-triangle answer rather than a Phillips-curve answer. The process of monetary expansion effects the demand for "equities, houses, durable producer goods, durable consumer goods, and so on.... The effects can be described as operating on 'interest rates,' if a more cosmopolitan interpretation of 'interest rates' is adopted than the usual one which refers to a small range of marketable securities." This same process later generates "reactions [which] undo the initial effects on interest rates."
7784	dbpedia	0	16	https://www.drkps.com/books/john-hicks-his-contributions-to-economic-theory-and-application.html	en	drkps: JOHN HICKS – HIS CONTRIBUTIONS TO ECONOMIC THEORY AND APPLICATION			[ "https://www.drkps.com/books/fileadmin/templates/drkps/imgs/logo.png", "https://www.drkps.com/books/uploads/tx_templavoila/book_26.png" ]	[]	[]	[ "" ]	null	[]	null		en			null	The development of economic ideas from ancient to the medieval period, then, ideas during the period of classical economists like Adam Smith, Thomas Robert Malthus, David Ricardo and their critics were a good beginning to thinkers in economics. During the period when capitalism and socialism were the main themes for writers and their critics, it was yet a better period for economists to ponder over new ideas. The Das Capital and the Ricardian theories swept all paths and led to the modern period. The works of Ricardo and Marx are the starting milestones and laid the foundation to the present day thoughts, to a large extent. It was during the modern period predominated by the development of the new economic ideas, neoclassical economics and, as an offshoot of that, the recent economic thought, which we may term as new economics came to stay. Starting from Principles of Economics by Alfred Marshall and Economic Welfare by A. C. Pigou, it was J. M. Keynes who through his General Theory (1939) tried to influence economics through his various ideas including areas concerning micro and macro economics, the Theory of Employment, consumption and investment and the concept of marginal efficiency of capital and many more concepts including Theory of Price and Trade Cycles. John Maynard Keynes is, in fact, the important stand point in the annals of modern economic theory. Later, R. G. Hawtrey, D. H. Robertson and Lord Lionel Robbins tried to develop their own ideas based on the General Theory. The General Equilibrium Theory was well set by J. M. Keynes and the strength of the English economists lie under the writings of Keynes and his predecessors. Sir John Hicks was one economist who was considered as the eminent economist in England after J.M.Keynes. He was undoubtedly the greatest economist after Marshall and Keynes. It is Hicks who gave further orientation to the General Theory of Keynes by his wide ranging contributions. He is the first British Economist to win the Nobel Prize in Economic Science (1972) for his wide ranging contributions in general and Value and Capital in particular. Hicks shared this Nobel Prize with Prof. Kenneth J. Arrow for his pioneering contributions in the General Equilibrium Theory and Welfare Theory. Sir John Hicks has contributed to this fundamental areas in no less a measure. Prof. Paul A. Samuelson has aptly put it in his paper: 'My John Hicks' and has said, referring to Value and Capital that it "was a major intellectual stimulus for me. I went over his contributions with a powerful microscope, a much more intensive analysis than he ever gave either to my own work or to that of any other economist. That was the way Hicks was. Always he preferred to do things his way. And that was the source both of his creative originality and prolific scientific productivity". He has further said that "Value and Capital is a scientific epic saga and a jewel among his works". Prof. Samuelson has further rightly mentioned that: "if J.M. Keynes was the greatest economist of the World (J936), J.R.Hicks was the greatest young economist of the time". Hicks later became one of the greatest economist, in fact, a World economist by his contributions which are listed at the end of this Volume (the list is reprinted from Puttaswamaiah, K. Nobel Economists - Lives and Contributions, Vol. I, Ch. VII, pp 333-343). Prof. Samuelson has done much research work on Keynes and his praise on Hicks in his paper and quoted from the New Pal grave Dictionary of Economics (1997) - is the real description which one has to keep in mind while recognising Hicks as a British pioneer in new ideas in economics which made him great. While Prof. Paul A. Samuelson has quoted from Christopher Bliss about Value and Capital as above, I am tempted to quote a few more lines from the same source. It is stated that "Value and Capital is a work so rich in ideas that a short account of it cannot hope to do it justice. It showed that the basic results of consumer theory could be obtained from ordinal utility; it expounded what became known as the 'Hicksian substitution effect', obtained by varying income as relative prices changed so as to maintain an index of utility constant; it developed the parallel results for production theory; and it popularized among English speaking economists the notion of a general equilibrium of markets" (1939, p.60). The Value and Capital (1939, 46) was written when the author was 35 and is described by Prof. Samuelson "as a scientific epic saga -full of new and beautiful things and a springboard toward future advances". The appreciation of the works of Hicks, the first British Nobel Laureate, by Prof. Paul A. Samuelson, the first American Nobel Laureate, has established more credibility in the hard work of Hicks, which, one is afraid, even the British economists have rarely done. It is noteworthy that Prof. Samuelson himself has said "no single misprint mars its mathematical text; and the one major omission in its first edition, he was able to repair by altering a few pages only". The Value and Capital which is undoubtedly the monumental work of Hicks came out as it did just after three years of the publication of the General Theory of Keynes which, in fact, revolutionized the entire fabric of economic science and became a starting point for the subsequent micro and macro economic theories in Britain and United States too, thanks to the pioneering efforts by Prof. Paul A. Samuelson, who revolutionized economics and led to further research on the General Theory and many others followed. Prof. Samuelson's abiding interest in General Theory may be amplified by the fact that when the copies of it were not available, when published, he managed to borrow one from his teacher and summarised it in a few days. The summary prepared in short duration, will certainly have covered the crest areas of Keynes's 'General Theory' and would be an invaluable piece if that could be traced and printed. He is the first American economist who has evinced such great interest in the works of Keynes and created himself and scope for others a World of research pieces which might be called "Keynes ramified World created by Professor Samuelson" and he himself became popular among economists as the 'American Keynes'. It is with this background that Professor Samuelson took interest in the works of John Hicks and studied them 'microscopically' and appreciated his works and became so intimate that he has aptly given the title My John Hicks to his paper. The idea of bringing out this volume on 'John Hicks' occurred to me because of the following reasons: - i. Prof. Hicks, Prof. Ursula Hicks and their family friends and colleagues were known to me eversince 1975 when I started translating Value and Capital into an Indian language, and since then, they have been very affectionate; ii. Hicks, as a great thinker, by his varied contributions including Value and Capital which is termed by one and all as the 'Jewel' of his works was translated by me, published by the University of Mysore and released by Hicks himself in 1979 at the campus of University of Mysore, India; iii. Hicks by nature is a brilliant British economist without whose effort the present day economist would not have grown in such dimension by now and the Value and Capital is a work which revolutionised the science of economics and, probably, such of these works prompted the Royal Swedish Academy to institute the Nobel Prize lo 'Economics' recognising it as a 'Science' in 1969; iv. Prof. Samuelson has taken very keen interest in the works of Keynes iv. Prof. Samuelson has taken very keen interest in the works of Keynes and Hicks and there is no part of Hicks' works which is not touched by him by one way or the other and he has presented his frank and fair views. He has so much of admiration to Hicks that he has titled his paper: 'My John Hicks'; v. There was an overwhelming enthusiasm when I requested the Keynesian economists and those who were friends of Hicks, colleagues and students, and they agreed to contribute papers in the areas of Hicks in which they were very familiar and they informed me of the title even before they started writing; vi. When I thought of a work on 'John Hicks' and contacted the right men who could contribute, about 25 in number, all of them happily contributed and lent their support to bring out this volume. The authors are very eminent in areas of 'Hicksian Economics', each one of them specialised in some aspect or the other in the contributions of Hicks; vii. Personally. I had become part of Hicks' family and we were in good correspondence till the Hicks Couple passed away; and viii. The works of Hicks after Keynes have definitely created land marks which became the basis for further research for economists later and, therefore, the current thinking was felt necessary. Keeping the above points in view, it was felt necessary to bring out this volume in memory of Hicks, and contrary to expectations, the overwhelming enthusiasm among authors resulted in receiving about 25 papers (all authors requested sent their papers) -depicting various aspects of Hicks's works and personality. Some of the facts contained in the articles, probably may throw new light to economists on the works of Hicks. Before we go into the details of this 'Contents' in this book, based on Chapter 7 of Volume 1 of Nobel Economists - Lives and Contributions authored by Puttaswamaiah,K., pp.309-343, and 'Foreword' by Jan Tinber-gen, the first Nobel Laureate in Economics, I would like to briefly summarise Hicks and his works. The chief characteristic of Hicks's works was that he moved away from the partial equilibrium approach of Alfred Marshall back towards the older continental Walrasian General Equilibrium approach. He also introduced a dynamic dimension with his work on period analysis and his theory of elasticity of expectations. His book Value and Capital in which his approach to general equilibrium theory really is one of the rarest books in economic science which marked a definite stage in the advance of a science. It may be pertinent to quote that "Everything Prof. Hicks writes bears the hallmark of quality and connoisseures will pick up his book on Value and Capital expecting authentic, desiccated thrill which can be got only from the contemplation of abstract reasoning. They will not be disappointed". His work in developing concepts in the theory of value is built on the writings of Edgeworth, Parcto and Slutsky. This led to an original exposition of the roles of income elasticity of the elasticity of substitution in determining the elasticity of demand. He later drew heavily on the great Swedish School, led by Myrdal and Lindhal in working out his ideas on income and the role of expectations. Further, modern and demand theory substitutes indifference curves for marginal utility. More than any other economist, he rehabilitated and extended the indifference curve apparatus. The book contains, in its first 52 pages, the best exposition of contemporary theory. Before the General Theory of Keynes appeared in 1936, Hicks had already acquired the necessary background through his well-known papers. Hicks's reaction to General Theory of Keynes was therefore valuable. Hicks in his paper The General Theory: A First Impression has approached Keynes's work in a typically Hicksian style. He has said: "The reviewer of this book is best by two contrary temptations. On the one hand, he can accept Mr.Keynes' elaborate disquisition about his own theory, and its place in the development of economics; praising or blaming the alleged more than Jevonian revolution. Or, on the other hand, he can concentrate upon investigating these disquisition, and tracing (perhaps) a pleasing degree of continuity and tradition, surviving the revolution from the ancient regime. But it seems better to avoid such questions, and try to consider the new theory on its merits .... The new theory is a theory of employment, in so far as the problem of employment and unemployment is the most urgent practical problem to which this sort of theoretical improvement is relevant".' With the General Theory behind him, Hicks completed Value and Capital, which may be regarded as his greatest work, perhaps which was more successful intellectually. Harrod wrote in 1939: "Prof. Hicks, his place in the first rank of economic theorists long since secure, establishes by this volume his claim to admission to a narrow circle-the economists with a distinctive and distinguished style of writing. Take up any page of Pigou, Macgregor, Keynes, Robertson; you do not need to be told the author. And, henceforth, I think the Hicks' manner will be unmistakable".2 "Value and Capital is sometimes misrepresented as an attempt to bridge the gap between micro and macro propositions, in a comparison between it and the General Theory. However, a much more reasonable interpretation would be as an attempt to bridge the gap between statics and dynamics, and in particular to extend static methods to dynamic cases. Just as consumer theory had been unrealistic in employing cardinality assumptions, so economic theory was in general unrealistic in being 'out of time'. Value and Capital should be perceived more as an attempt to drop the latter assumption"³. To quote Dieter Helm, "What did Hicks make of the new theory in his first attempts at reviewing it? Analytically he broke down its components in a fashion that would enable the Keynesian theory to be compared and contrasted with the position that it purported to attack, the Classic view".4 F.A.Hayek, has evaluated Hicks Value and Capital in the following words: "absolutely first-class work in his time. So far as there is a theory of value proper, which does not extend beyond this and which doesn't really analyze it in terms of directing production, I think it's the final formulation of the theory of value"5. Ordinal utility in terms of indifference curves and budget lines could derive the same conclusions as cardinal utility in terms of justifiable marginal utilities. However, the former achieved the ends with greater precision. Hicks appears to have tacitly accepted Marshall's neglect of the income effect so long as the commodity in question forms a small part of the consumer's budget. The other pioneering works are The Social Framework and A Revision of Demand Theory. Pigou writing about 'The Social Framework' has said that "beginner coming to this book will find concepts with which he has long been familiar in a vague way clarified and given a more significant meaning and he will also acquire a good deal of actual knowledge. Hicks's experiment is an enterprising and ingenious one'. While praising this book, Harrod has observed that 'it is an introduction to economics written by an economist of the highest calibre. His style is easy and popular.... the presentation is straight forward and dignified'. Hicks explains that the ideas with which economics is concerned are chiefly those which arise, not in connection with one industry only, but with most of all industries, such ideas as capital, income, cost, arise in all business problemsthese are the sort of ideas we have particularly to study. Economic theory tends to shape itself into a system of thought, for the questions we want to ask turn out to be inter-related." His contribution to the Theory of Trade Cycle has been regarded as one of the major contributions to trade cycle theory. It is apt to quote. "A beautiful theory of the cycle is here built up with an admirable economy of means.... Undoubtedly a tour de force." His book on A Revision of Demand Theory has received academic acclamation, being "A superb exercise to exposition" and "Probably the last word there is to be said on this aspect of demand theory". He explains that the law of demand does apply, with full force, to the behaviour of groups as much as to the behaviour of individuals. The theory of the demand for a single commodity is only the beginning of demand theory. The general theory of demand is a theory of the relation between the set of prices, at which purchases are made, and the set of quantities which are purchased. The foundations of demand theory have deserved careful definition, mainly because we are thereby enabled to get significant results in this wider field also. The generalised law of demand, when properly stated, is a symmetrical relation between price changes and quantity changes. It can accordingly be interpreted into a "price into quantity" or in a "quantity into price" manner. In his book on Essays in World Economics, the problems of the underdeveloped countries are discussed. The problem of inflation has also been discussed. The problem is severe in most of the underdeveloped countries. One of the most crucial difficulties of monetary theory is to distinguish between temporary changes in conditions and permanent conditions and to make adjustments that are appropriate to each. The countries have been classified into two groups viz., manufacturing countries and primary producing countries. The first depending mainly on manufactured exports and the second upon the export of raw materials and foodstuffs. Though the under-developed countries are primary producers, but there are primary producers which arc not underdeveloped. There are countries which have natural resources that are so abundant, relatively to their population, that they can do better by exploiting those resources than they could do if they turned to manufacturing. The under-developed countries are primary producers which are not in this happy position, their natural resources are insufficient for them to be able to achieve a full prosperity by the exploitation of those resources alone. It is futile to tell such countries to rely for development on the further exploitation of their natural resources. Of course they will only harm themselves if they neglect to do what they can in that direction, but they are right in thinking that the only way in which they can break out of their impasse is by industrialising. In Capital and growth. Hicks assumes that prices are determined exogenously. The flex price/fix price bifurcation of markets is adopted. The former refers to the price flexibility of competitive markets; the later to the 'stickness' of prices in some types of markets. This distinction has vital and different implications for stocks and flows. In his analysis of the bond market. Keynes, according to Hicks, realised the essentiality of this distinction. The multiplier process is dependent on supply adjustments in fix price markets. Critical Essays in Monetary Theory is a collection of papers published in journals right from 1935. Though not a monetary economist, the book is the result of his original thinking on the subject. Two of the papers viz., A Suggestion for Simplifying the Theory of Money and Mr.Keynes and the Classics are well known in the World of economists and monetary thinkers. The book contains gist of the contributions to monetary theory of three economists-Henry Thornton (Paper and Credit), Keynes (Treatise), and Hayek (Prices and Production). The equilibrium is determined by subjective factors like prices, when we are looking for policies which make for economic stability, we must not be led aside by a feeling that monetary troubles are due to bad economic policy. He emphasises that money is a human institution. A fully developed monetary system is very sensitive and is therefore unstable. The famous 'Hicks- Hansen' effect in interest theory is an acknowledged improvement in the Keynesian framework. A Theory of Economic History (1969), in this, he introduces the concept of an impulse, a shock which can be traced through a sequence of consequences flowing from the potential of a major new invention. It is the same impulse which Capital and Time attempts of model. In his Theory of Economic History Hicks delves into the past to analyze the effects of operations of merchants in the flex price market-merchants were the price sellers depending on the stock positions of goods. He emphasises the transformation of the economy through different stages. The poorer a country, the narrower will be its range of technological opportunities, the more likely, therefore, it is that it will suffer long-lasting damage, now and then, from a backwash of improvements that have occurred elsewhere. Even in already industrialised countries, mobility of labour is not perfect. It is a motive for protectionism. But it is an obstacle. Temporary use of such measures is defensible. The symptoms are inflation, balance of payments deficits, a variety of monetary and exchange disorders. These will change their forms by technical adjustments, purely monetary adjustments and changes in monetary policy. So long as the resources of the richer countries are kept under strain, what they have to spare for furthering the growth of the world economy is bound to be restricted. The book Capital and Time-A Neo Austrian Theory was published after he secured the coveted award in 1972. This is the third book that Hicks has written about Capital, the first two being Value and Capital, and Capital and Growth. Value and Capital was a product of the Keynesian thirties. It is deeply influenced by Keynes. The second book Capital and Growth is critical and expository, rather than constructive. The concept of full employment is emphasised in this volume. With the given techniques and given employment of labour, production and distribution are entirely separated. The movement of productivity will fairly reflect the movement of wages. The Crisis in Keynesian Economics elaborates on the 'fix price' and 'flex price' market systems described earlier. In the context of high transaction costs, prices arc geared to absorb 'permanent' market conditions. Transaction dominating assets emerge the highest being money which substitutes for all, at the margin. There is a lucid plea for a wider portfolio composition than the narrow choice of money versus bonds. In the last chapter, the lack of a coherent wage theory in the Keynesian tradition is pinpointed. The Theory of Wages was originally published in 1932 and revised in 1963. While the first edition was an extension of the thinking of Marshall in his principles, Clark in his Distribution of Wealth and Pigou in his Economics of Welfare, the second edition contains his revised views on the subject. Section 3 contained in the book entitled 'Commentary' is a piece written exclusively for the new edition. Hicks pays highest recognition to all the critical reviews of his book published in 1932 and says that "I am very anxious that my readers who ever now are tempted to take the 1932 volume literally should read Shove's criticism." Thus Section 3 of this book contains "pre-natal as well as the post-natal vicissitudes" of his earlier edition of this book. The book is a valuable contribution in the theory of wages. The concept of elasticity of substitution was introduced to demonstrate its usefulness in highlighting relative factor shares. Inventions are autonomous and induced and can be neutral, labour-saving or capital saving. With a given capitallabour ratio, a labour-saving change reduces labour's share of national income. Autonomous inventions are likely to be neutral; induced inventions, are in developed countries, likely to labour saving with upward shifts in the supply price of labour. These concepts saw the rise of prolonged debate with Harrod, Samuelson and other savants on the nature of inventions. The way relative factor prices change, determines the isoquant chosen by the firm. He emphasises that despite high interest rates inflation is not controlled and there is a real threat to recession and unemployment. The supply of commodities is concentrated in a small group of countries for this he has given the example of the recent oil crises. There is a major shift in distribution of international income, without it leading to corresponding changes in consumption since the oil consuming countries have failed to reduce their consumption or to generate savings for the required transfer of income and the oil producing countries have failed to reduce their consumption or investment in keeping with their higher income. In this context, he has made an important contribution to the study of Keynesian economics. Economic Perspectives contains several refreshing ideas. His concept of long-term growth approximates to that of Kuznets. The Ricardo-Wicksell effects in monetary theory are examined. The quantity approach of Friedman is decried. He favours a credit squeese to control inflation. Causality in Economics is developed from his stock flow analysis. Three relationships are identified-static, contemporaneous and sequential. It is difficult to trace out causal relationships when stock and flow relationships have to be dovetailed. Relations must be deduced in sequential form. There is an intermediate stage between cause and effect where decisions are made. Prior and posterior lags should be understood as also reactions to signals. An integrated general theory of the multiplier process and liquidity spectrum is attempted. Regarding Causality in Economics (1979), it may be quoted that: "It was a brave book to write; it strays on to others' territory, and it contains a particular view as to the nature of economics as distinct from science, history, and other areas of social concern, yet requiring all three types of consideration. But its importance for the student of Hicks' work lies with the critique which it provides of the possibility of economic theory. In particular it provides careful reasons as to why prediction is not a strong possibility, and thus it explains Hicks' dislike of econometric practice. The book provides careful categorisation of different kinds of 'cause' from two dimensions; first with regard to time in terms of contemporaneous sequential and static causality, and second in terms strength of influence. This later division is between 'strong' and 'weak' causality, where to claim that A strongly causes B is to say that A is the only cause of B. If A is a weak cause, then it is one of potentially many, and in explanation must be protected by a series of ceteris paribus clauses. Now it is only in cases of strong causality that prediction is possible, and it is unlikely, Hicks points out, that there are many cases of strong causality in economics. Economists are doomed to deal with weak causality, and are thus limited in their ability to predict. Falsification, at least in its naive form, is inapplicable, as the ceteris paribus clauses cannot be tested for. And the evolution of economic theory is not to be perceived as the rationalistic programme encapsulated by the philosophers of science such as Lakatos and Popper." Wealth and Welfare (Vol.1) is a collection of earlier pieces having a penetrating one on social income. The other two of his collected works are Money, Interest and Wages (Vol. II) and Classics and Moderns (Vol.III). The Wealth and Welfare (Vol. I) brings together into a coherent whole certain essays which are already justly celebrated and others, often of no less importance, which have been relatively neglected, perhaps because till then, they were not readily accessible. These essays on welfare economics are not represented in any previous collections of the author's works, although it was for some of them that Sir John received the Nobel Prize for Economics in 1972. Again in volume Wealth and Welfare, the economist has observed that: ".. .much of what is taken for granted in the subject has its point of departure in Sir John's writings. Moreover, a good deal which seems obvious to commonsense turns out to be extremely problematic when subject to the critical scrutiny of a Hicks. In this connection, it is very much to his credit that so much of what he has had to say on the theory of value and welfare is incorporated into the main body of the economics and is now taken for granted with scarcely a reference to its origin....Sir John is an extremely careful and rigorous thinker." The Money, Interest and Wages, the second volume of the collection, has centered upon the monetary discussions and shows that the author is not merely an interpreter of Keynes but has views of his own, which owe as much to other of Keynes' contemporaries as to Keynes himself. This second volume of Hicks's Collected Essays traces the evolution of his thinking over five decades. Five highly original papers, published before he saw Keynes's General Theory, show that he anticipated certain aspects of the Keynesian revolution. The story of this early work is set out in an introductory paper written especially for this book. The essays which follow show how subsequently his thinking was modified and expanded. Robert M. Solow, who became a Nobel Laureate later, has said as follows about this volume: "Here are both the classic paper of 1937 and after thoughts of 1980, together with Hicks's review of the General Theory on its appearance. These, and other references reprinted in this fascinating collection, will help the contemporary reader to understand both the depth of the Keynesian revolution and the importance of John Hicks as an economic theorist." In the third volume, Classics and Moderns, John Hicks discusses the various classical traditions, the nature of revolutions in economics, and, indeed, the nature of economics itself. He has also presented his contributions to our understanding of competition, monopoly and international trade. All the essays are distinguished by the clarity and elegance which is characteristic of his approach to economic problems.Talking about Classics and Moderns, Milton Friedman, the other Nobel Laureate has said thus: "There can be no doubt that Sir John Hicks is one of the most distinguished theorists of the twentieth century. He has had a tremendous influence on economic thought…... ". Besides, the above books, Hicks has contributed countless numbers of articles to the various journals of repute in the world like Econometrics, Review of Economic Studies Economica, Economic Journal, etc. His article on A Suggestion for simplifying the theory of money is a masterpiece. Three decades after his eloquent call for a marginal revolution in monetary theory, our students still detect that their mastery of the presumed fundamental theoretical apparatus of economics is put to very little test in their studies of monetary and aggregative models. As Hicks complained, anything seems to go in a subject where propositions do not have to be grounded in some one's optimising behaviour. Mechanics or thermo-dynamics take the place of inferences from utility and profit maximisation. From the other side of the chasm, the student of monetary phenomena can complain that pure economic theory has never delivered the tools to build a structure of his brilliant design. The utility maximising individual and the profit maximising firm know everything relevant about the present and future and about the consequences of their decisions. His prescription for monetary theory in 1935 was in much the same spirit as the approach of Lavington and Pigou. His strictures were nonetheless timely. The spirit of the original Cambridge theory had become obscured by the mechanical constant-velocity tradition. Macro-economics texts have immortalised Hicks' decomposition of the Keynesian system into sub-models. One of these tells what asset stock equilibrium corresponds to any tentative assumption about aggregate real income and the commodity price level. In this conditional equilibrium, the interest rate equates the demand and supply of money and clears the markets for other assets. Two of his articles viz., Preface and a manifesto and The Rehabilitation of Consumer's Surplus have been included in one of the books edited by Arrow and Scitovsky entitled Readings in Welfare Economics. These two papers stress the narrowness of traditional welfare economics and warn against the aridity into which it might too easily fall. Hicks has eminently argued that the increasing affluence renders wealth relatively unimportant. These papers are quite in tune with the present policies of the Government of India where equal opportunities for all and equalisation of wealth among the different people of the society are emphasised. The most well-known contribution by Hicks to welfare theory are his analysis of criteria for comparisons between different economic situations and his revision of the concept of consumer's surplus. Pigou had correlated economic and general welfare and he had made freely interpersonal comparisons. He had identified the sum of consumer surpluses with the real value of the national dividend. Hicks has advocated certain steps to rectify these measures. To mention a few, he suggested changes in tax structure and alternations in tariff schedules. Later, he felt that there could be gains to some when tariff schedules are altered and he felt vital to identify the gains and losses. Modern welfare economics thus became the process in the precise identification of the conditions of maximum welfare. Some other imporatnt articles of Hicks are: Mr. Keynes and the Classics, Public Finance in the National Income, Distribution and economic progress: a revised version, Marginal productivity and the principle of variation, Wages and interest-the dynamic problem, Marshall and the indeterminates of wages, Maintaining capital intact: a further suggestion, Mr.Hautrey on bank rate and the long term rate of interest, and Theory of uncertainties and profits. Hicks has contributed abundantly on various aspects of economic theory. However, his major contributions are in the field of equilibrium theory which culminated in his book Value and Capital. This immortal book has been translated into a number of other languages in the world and the author of this present volume has had the fortune of translating it into Kan-nada, one of the important languages in India, at the instance of the University of Mysore which has published it. By his brilliant contributions in the field of economic theory, Hicks has joined the rank of immortals like the earlier economists like Alfred Marshall and Keynes. He has a language of his own and his style and diction are uncommon among other economists. His language is full of profundity of sense and the real meaning could be available at times at a farther distance. He has been outstanding as a clear and tireless thinker, a widely read scholar and a lucid expositor. He is the pioneer who has laid theoretical ground-work for the renewal of the equilibrium theory. His books on Value and Capital and The Theory of Wages are the masterly works in the field of economic science. For the most part, he has worked with labour and capital only. He correctly perceived that capitalism has shown greater growth of capital than of labour. Even more important is his analysis of how technical invention affects progress. Hicks' Causality in Economics published in 1979 examines the heart of the problem. Questions like why economics? Is it a science? Kinds of causality and its theory of application are the subject matters of contemporaneous causality in Keynes as well described. Hicks says that as a youngster he started reading history and went into philosophy which provided him thinking the causality in Economics. Certain other questions like macro and micro economics are discussed. Although it is over five or six decades that the author started dositing, in this treatise, he has examined Causality in Economics as one case of causality in general. The book contains an unconventional approach which sheds new light on some of the old basic concepts of economics. The role of statistics and economics is examined. Hicks has rightly observed that "the economist is concerned with the future as well as with the past; but it is with the past that he has to begin. It is the past that provides him with the facts, the facts which he uses to make his generalisations; he then uses his generalisations as bases for predictions and for advice on planning."7 According to Schumpeter (1954), "Economics does not possess scientific status, nor can this be attained….Economics is for Hicks's discipline, not a science, and it might be added, a pluralistic one. It is the discipline of which Hicks has become a master." The last book of Hicks is The Status of Economics. It is said that, at the time of his death, the manuscript of this title was still to be published and was published in September 1991. This volume brings together the selection of work spanning the late Sir John Hicks' entire career, highlighting his concern with the status of economics as a science and the controversies between economists. This concern with the validity of the discipline led Hicks to consider subjects traditionally outside the boundaries of economics, in particular political theory and cultural history. In the concluding, previously unpublished, essay, Hicks reflects on his own role as an economist. The volume as a whole stands as a magnificent testament to a remarkable career. According to Hicks, "theory should be the servant of the applied economics, but I have also been aware that theory gives one no right to pronounce on practical problems unless one has been through the labour, so often the formidable labour, of mastering the relevant facts."9 This observations of Keynes shows that he was aware that theories alone would not help, unless they are applied to the practical problems with formidable labour. Royal Swedish Academy in its official announcement has said that General equilibrium theory had earlier essentially the character of formal analysis which was brought to light in his celebrated work Value and Capital. The construction of the model relating to the general equilibrium theory included a number of innovations, i.e., a further development of older theories of consumption and of production, the formulation of conditions for multimarket stability, an extension of the applicability of the static method of analysis to include multiperiod analysis and the introduction of a capital theory based on profit maximization assumptions. By being deeply anchored in theories of the behaviour of consumers and of entrepreneurs Hicks' model offered far better possibilities to study the consequence of changes in externally given variables than earlier models in this field and Hicks succeeded in formulating a number of economically interesting theorems. Hicks model became of great importance also as a connecting link between general equilibrium theory and current theories of business cycles... As his mathematical tool Hicks used traditional differential analysis. When later on more modern mathematical methods were introduced in economic sciences, Arrow applied these methods in his studies of general equilibrium systems. In a series of papers, which preferentially treated the properties of solubility and stability of such systems, he provided the basis for a radical reformulation of the traditional equilibrium theory. Though this reformulation, which was based on the mathematical theory of convex sets, the general equilibrium theory gained both in generality and in simplicity. The pioneering work, a paper from 1954, was written together with Gerard Debreu. The model presented in this paper became the starting point for the major part of further research in this field. Among Arrow's many important contributions should also be mentioned his development of the theory of uncertainty and its incorporation within the frame of general equilibrium theory and, furthermore, his analysis of the possibilities for decentralized decisions in a society where the price system is fixed by the central authority. This analysis was made in collaboration with Leonid Hurwicz."10 Ragnar Bentzel of the Royal Academy of Sciences, in his speech on the occasion of prize awarding function has said about Hicks thus: "When in 1939 John Hicks published his book Value and Capital, he breathed fresh life into general equilibrium theory. He constructed a complete equilibrium model, which was systematically built up, to a much greater extent than previous efforts in this field, on assumptions about the behaviour of consumers and producers. This gave greater concreteness to the equations included in the system and made it possible to study the effects produced within the system by impulses coming from outside it. For example, the model could show how changes in phenomena such as the harvest yield, the consumers' taste and the price expectations of business enterprises had consequences which spread throughout the whole economic system and affected prices, production, employment, interest rates, etc. However, Hicks could not have got as far as this if he had not, on several points, himself created the necessary foundations for his model construction, amongst other things, by developing earlier theories of consumption and production and by constructing a theory of capital on the basis of assumptions about profit maximization”." Hayek has expressed in Economics and Knowledge about Hicks thus: "Maximising behaviour is a characteristic of Hicks of the making of choices; in that sense it is a priori true, but its truth is also argued to derive from intuitive appeal. There can be no micro/macro distinction for Hicks; macro propositions cannot be allowed to float without foundation. He is never to be found picking out observations, in the manner of Keynes, such as 'a man's habitual habits having first claim on his income' or, in the long run, 'as a rule, a greater proportion of income (will be) saved as real income increases', without first deriving the result from simple principles. These have to be explained within the framework of rational behaviour. Value and Capital is completed by a mathematical appendix in which the amenability of the arguments in the book to this type of reasoning is demonstrated. But it is more than that; mathematical arguments are used to prove the generality of the propositions to n commodities. It is in the appendix where Hicks demonstrates the general equilibrium method to its full potential. While I got in touch with Prof. Jan Tinbergen in 1977, I had the fortune of establishing intimate contacts with Sir John Hicks and Prof. Ursula Hicks in 1975 itself. Though I was very familiar with his works as an economist and a researcher, I was fortunate that the University of Mysore in Karnataka, India, through a resolution of the Syndicate requested me through the Institute of Kannada studies of the University to take up translation of one of the two books under the Government of India funded textbooks series in the local language. A History of Economic Thought by Eric Roll (1938) and Value and Capital of John R. Hicks were suggested to me to take up one of them. I chose the latter as Value and Capital is a landmark text in the history of economic thought. It is very terse in its presentation of the fundamental ideas of Hicks, making it difficult to find equivalent words. I thought I should try out Value and Capital only. I came in touch with Hicks and Ursula Hicks by writing to them to ensure that the Oxford University Press released the copyright so that my work would not be delayed. Though the letter from Oxford University Press came later, there was already a letter from Hicks to go-ahead. At that time, I was working in the United Nation's Asian Institute at Bangkok and in afternoons, I used to devote to identifying equivalent words for tough technical words in economics contained in Value and Capital and also used my leisure hours in developing parameters for identifying or demarketing backward and forward areas with particular reference to Karnataka, a major state in South India, which work, of course, was later used by the Indian Planning Commission for identifying backward areas in India. Sri.B.Shivaraman, a well-known planner and a Member of the Planning Commission at that time mentioned this book and its utility in several meetings and in all parts of India. After completing my tenure with the United Nation's Asian Institute, I concentrated, in addition to my official work which was abundant, on Hicks's Value and Capital. The experience of translating this work was thrilling. The Kan-nada version of Value and Capital was released at the University of Mysore on February 7, 1979 in a function organised by the University. Prof. Hicks and Ursula Hicks came to India at that time. It was our fortune that he received in a public function organised by the University of Mysore his own Value and Capital translated into Kannada. This function was very largely attended from all economists who could afford to reach Mysore and of course by the Mysore citizens. It was one of the grandest function, that I have ever seen. I was given the task of introducing Hicks to the audience - it was a task to talk about Hicks and his contributions in his own presence. Prof. John Hicks in his reply said that he wrote Value and Capital and as days passed, he went on changing his ideas and now many of the concepts mentioned in that work have undergone some changes in his mind which could be seen in his later books. He was surprised to hear from 12. Hicks, John. The Economics of John Hicks. Selected and with an Introduction by Dieter Helm. Basil Blackwell, 1984. pp.9-10. Economica. 1937, pp.33-54; reprinted in his Individualism and Economic Order, 19481212 l me that my translation was the eleventh language to which Value and Capital was going. He said that he was not himself aware that it had gone to so many languages. Prof. Ursula Hicks mentioned on this occasion that it was the first instance that she and her husband were found on the same platform in a public function of that kind. Prof. V.K.R.V. Rao, my well-wisher, who was the first professor to estimate national income of India in the 1940's said that "Value and Capital does not make easy reading, especially Parts I and II and the reader has to keep alert all the time lest he miss a step in the intricate but continuous logic that characterises this work and Dr. Puttaswamaiah has done an excellent job. It is now possible for Kannada students to obtain in their own language access to a key book in economic theory, and in turn this should enable production in Kannada of books and articles on practical problems of both macro-economic and micro-economic policy by using the logical apparatus and the lucid analysis of economic inter-relations and economic causes and consequences that Prof. Hicks has contributed in this pioneering treatise. I count it as a piece of good fortune and should mark the beginning of a new era of Kannada literature in economics". I have described some of the outstanding works of Hicks. There are many books and research articles and right from his early days, each one of them created a landmark. Value and Capital - A Inquiry into Some Fundamental Principles of Economic Theory (1939, 1946), Capital and Growth (1965) and Capital and Time (1973), which may be called 'Hicks's Triology of Capital', are the most important of his contributions which have created landmarks after the General Theory and provided opportunity to several economists to do further research on these works. These three works of Hicks relating to 'Capital' are the three 'Avataras' of 'Capital' of which consider Value and Capital as the Jewel among them and even among his works. This Volume in Memory of John Hicks consists of 24 papers. Prof. Paul A. Samuelson's paper identifies the land marks in Hicks's life. He considers "Value and Capital as a scientific epic saga - full of new and beautiful ideas and a springboard toward future advances, as said earlier. He goes on saying that even before the General Theory, if Keynes was considered as the greatest economist of the world, J.R.Hicks was the greatest young economist at that time. - Hicks's works are immortal". Thus, Samuelson has briefly but aptly described Hicks's works and I am extremely grateful to him for his immediate response in sending this paper under the title: My John Hicks. The title itself shows what an amount of affection Prof. Samuleson has had for Hicks and how his works were held in esteem. Prof. Colin Simkin who describes vividly his close association with Prof. Hicks and his wife gives a vivid account of their inner life which makes the reader want to read it more than once. Prof. Colin Simkin tells that he had the good fortune of knowing two men who are something of genius, both of whom became lifelong friends. He derived intellectual benefits from them and feels that he cannot forget them and also their two exceptionally friendly wives. These two exceptional friends are Sir John Hicks and Karl Popper. Simkin has given a separate paper on Karl Popper also, since these three had a close association in academic work discussions and even in travels. Prof. O.F.Hamouda in his paper: Hicks, a World Economist has tried with great difficulty to condense as best he can all he has to say about Hicks and his works. The paper presents a scholarly and comprehensive analysis of Hicks's economics. The paper is an offshoot of his ambitious work: John R. Hicks - The Economists' Economist (Basil Blackwell, 1993). Prof. Michio Morishima, Sir John Hicks Professor of Economics in London School of Economics and Political Science writing under the title "Mr. Keynes in Hicks's Value and Capital deals with the theory of firm and ideas of Hicks's IS and LM curves and his views on it. He gives a vivid account of Keynes and Value and Capital - how they are related and in the process identifies some inconsistencies. Syed Ahmad, McMaster University, Canada, while, writing about Hicks on Capital briefly writes about Hicks and classifies capital into three ways: (i) exactly like any other factor, (ii) as a produced means of production and (iii) as representing the role of time in the production process and Hicks contributed to theories in all these frameworks. After describing under these three main heads, he comes out with the significance of the Theory of Capital. Prof. Frank Hahn in his paper: Hicks and Economic Theory vividly and with brevity writes about his views on major works of Hicks and he has been a balanced critic without loss of appreciation whereever necessary in the paper. Harald Hagcmann has chosen the area of Monetary Causes of the Business Cycles and Technological Changes: Hicks vs. Hayek tries to distinguish between the works of Hicks and Hayek. While Hicks was a pure economist, Hayek was not only an economist but a social thinker. Harald Hagcmann has brought out very well in his paper a critical analysis of the works of these two great thinkers, both Nobel Laureates. The rest of the authors like Professors Michael Emmett Brady, Joseph Halevi, J.W.Nevile, B.B.Price, John Lodewijks, Carlo Benetti, Kunibert Raffer, Mauro Ba-ranzini, Michael Rosier and Christian Tutin, John Luc Gaffard with other authors, Keith Griffin, Surajit Sinha, R.S.Dhananjayan with N.Sasikaladevi have chosen different areas of Hicks's works - sometimes confining themselves to a single work of Hicks and have given a vivid account of their own thoughts on selected Hicks's works. These papers are invaluable to any economist and to all those senior professors and students who are concerned with Hicks's works in relation to his earlier thinkers and the present day thinking. Since each paper contains the summary of one work or the other of Hicks and their views, I do not wish to elaborate further as the papers speak for themselves. Sir John Hicks started the Sienna Workshop and he attended the first two workshops during 1987 and 1988 and he was to attend the third in 1989 but could not do so as he had by then passed away. Proceedings of the first two workshops have been published. We are fortunate in getting a small piece in the form of a "memoriam" of John Hicks by Axel Leijonhufvud. He goes to Sienna to attend the Third Summer Workshop. He was earlier anticipating that he would listen to the presentation of Hicks; instead he had to present a memoriam containing the life and works of Hicks and, to some extent, the main events of Hicks' life and works in economics. Though the memoriam provides the necessary material which gives more and more of Hicks inner life, yet, I am tempted to, draw attention to a few points. He was dedicated and determined in his life when he thinks of a academic life. Axel Leijonhufvud checklists three important points as reflections on the achievement of Hicks: (i) He has, of course, been enormously, amazingly influential. His ideas have seeped into the ways economists think and work to the point where the very familiarity of many Hicksian ideas make it difficult for us rightly to assess the contribution. Yet, it is parts of his work that has had this influence - and some of it has not had quite the influence that he originally intended or would later have wished. Hicks, more than most authors, had to experience in his life time how the readers wrest control of the text from the author. So it was part of the Suggestion for Simplifying Monetary Theory', most of ‘Mr.Keynes and the classics, only the first eight chapters of ‘Value and Capital ‘, and so on- that went into the foundations on which post-world War 11 economic theory was built . (ii) Economic theory to John Hicks was always more an exercise in judgment than in deduction. The economist constantly makes choices - among methods or approaches, among assumptions, and among 'facts'. Hicks, even 55 years ago, always discussed his choices with the reader. You always know the reasons for all his choices and, if you disbelieve his conclusions, it is possible to track back and find where you differ with his judgment, (iii) Over the years he developed a style of writing that is really quite remarkable. It is clean, spare, direct with a simple conversational tone that is quite engaging - but can be in equal measure misleading, if the apparent simplicity lulls you into overlooking the depth at which he is penetrating very complex problems. It is clear that whatever Hicks has said is not final and he would go on thinking time after time and change his views. Ex: At the Mysore Function on the occasion of the release of the translated Value and Capital, he said that he had changed his views on several concepts contained in it. His nature was one of churning, meaning he would go on brooding over something till he saw the ultimate reality. In this connection, I will not be wrong if I quote: "John Hicks was a Ulysses among economists; his life is a journey in economics of a striver, seeker, a finder and a non-yielder. The paths are hewed by him; and the tools designed by him. The strange and fascinating aspect of his journey is that he is always going forward and back, back and forward. The greatest critic of Hicks is Hicks himself. And he has left a complete record of these introspections and forward thrusts. He is thus both a contributor and a commentator, a player and a sports critic, the latter of himself. The other qualities of Hicks are those which relate to his nature as an economist and a man. He gave away the entire Nobel Prize money to the Library of London School of Economics. He phrased it as a gift of gratitude lo that institution but it was also a declaration of his dedication to a life of strictly limited material ambitions. He was always thoughtful and thought provoking. He would profess on his own some ideal and not allow himself to be detracted from it. In Sienna Workshop II, Hicks with his few friends including Axel Leijonhufvud was eating in a grape arbor at a restaurant outside town, Axel asked Hicks whether he still did a number theory which was a pet for him, "No" he said, "I stopped doing that a couple of years ago. Now, I have this game I play with myself to go to sleep. I try to remember at least one stanza of poetry from each century from about 500 BC to the present." And he started to tell about what centuries were the most difficult and so on. Before they left that place, they had heard John Hicks quote poetry from memory for atleast a couple of hours. Hicks on the occasion of the function at Mysore for releasing the Kannada version of Value and Capital said that "I have changed my emphasis of ideas quite a good deal. My book Theory of Economic History was of quite of different kind from Value and Capital; but there is change to make a sort of statement from our point of view and of a much less formal kind.... I should perhaps say that in my very last published book of essays called Economic Perspectives-Further Essays on Money and Growth (1977), there is a process which is what is called a survey and it is from my own point of view on the development on my ideas. I tried to stress there what things seem to be important where my emphasis is drastically changed. All, I can say is on this happy occasion that I am glad to receive the Kannada version of Value and Capital. My blessings to the Translator". Finally to end with the words of Prof. Paul A. Samuelson "Sir John Hicks was as he had been throughout his life: a loner scholar, for whom the sun rose in the morning when first he opened his eyes. His works constitute his immortality". Coming to the acknowledgement, I cannot express in mere words the blessings of Prof, Paul A. Samuelson, the Nobel Laureate who has given an excellent piece under the title: My John Hicks spontaneously which shows the utmost affection to the Editor of this book. I wish to place on record my affectionate and highest regards to him. I am extremely grateful to him for writing his "Foreword' also to this work. It is again a brief piece of literature on economic history and his views on Hicks is true and remarkable which runs thus: "He was part of no school, John Hicks was his own school." Prof. Samuelson has thus said that Prof. Hicks did not belong to any school of thought and he had his own independent thinking in his works. The other Professors who are also members of the Editorial Advisory Board of the International Journal of Applied Economics and Econometrics (formerly Indian Journal of Applied Economics) have supported me in large measure by writing papers, like Profs. Nevile, Keith Griffin, and many others also refereed the articles. I was happy to have received the articles from many others including Prof. Frank Hahn and Prof. Michio Morishima. It is really fortunate to have received two papers from Prof. Colin Simkin who has given us the real insight into Hicks' way of working and life style. It is good that Prof. Axel Leijonhufvud has given a brief memoriam in which he has pointed out Hicks as a great traveller and has appreciated him which throws lot of light about Hicks to the readers. Prof. O.F.Hamouda, the author of book entitled: John R. Hicks - The Economist's Economist has summarised Hicks's works and called him a World Economist. The paper from Prof. B.B.Price, is also an excellent contribution of Hicks's works. Many British economists including Prof. G.C.Harcourt have supported and encouraged me to great extent. The status of economics today would have been something far behind what it is. It is the work of earlier economists which has really prompted the Royal Swedish Academy to recognize Economics as a Science and institute the Nobel Prize Award. In a work of this nature it is always likely that we miss somebody or the other who should have been mentioned. If I have erred in any way, I hope I will be forgiven; but I wish that the readers will take all the good contained in this work. I am happy that most of the authors are eminent professors from all parts of the World and some of them are students of Hicks and many of them are intimate colleagues and friends. I am glad that this book, which is based on the special issue published in three parts in the Indian Economic Journal, which is now retitled as International Journal of Applied Economics and Econometris, has now come out. I lack words to express my gratitude to Dr. Irving Louis Horowitz, Chairman and Editorial Director, and Ms. Mary E. Curtis, President and Publisher, Transaction Publishers, RUTGERS, The State of University of New Jersey, for all the support and co-operation in bringing out this publication in such a short time and so well. I wish lo record my appreciation in this context. I also thank Ms. Anne Schneider, Associate Editor and other staff connected with this publication.
7784	dbpedia	2	5	https://www.investopedia.com/terms/f/friedrich-hayek.asp	en	Who Was Friedrich Hayek? What Was His Economic Theory?	https://www.investopedia…e2a339501f01.jpg	https://www.investopedia…e2a339501f01.jpg	[ "https://www.investopedia.com/thmb/ZPvfWnNTIUoaFnnSSiJO4qRIRco=/90x0/filters:no_upscale():max_bytes(150000):strip_icc()/wk_headshot_aug_2018_02__william_kenton-5bfc261446e0fb005118afc9.jpg 90w", "https://www.investopedia.com/thmb/Zci_gLbtyoAYqP8DBmu7x9t0SnQ=/90x200/filters:no_upscale():max_bytes(150000):strip_icc()/wk_headshot_aug_2018_02__william_kenton-5bfc261446e0fb005118afc9.jpg", "https://www.investopedia.com/thmb/gu2qB1LTenatu5Lq2af1f6A8DYU=/90x0/filters:no_upscale():max_bytes(150000):strip_icc()/P2-ThomasCatalano-d5607267f385443798ae950ece178afd.jpg 90w", "https://www.investopedia.com/thmb/hCPQoiOLfRVmstDbVjzxkbdGk1Q=/90x200/filters:no_upscale():max_bytes(150000):strip_icc()/P2-ThomasCatalano-d5607267f385443798ae950ece178afd.jpg", "https://www.investopedia.com/thmb/xvYlB-2y_g4iaKuBAGVCg1M33Gg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/friedrich-hayek.asp-ADD-v1-96e21e5093d94964a396a2987002779e.jpg", "https://www.investopedia.com/thmb/xvYlB-2y_g4iaKuBAGVCg1M33Gg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/friedrich-hayek.asp-ADD-v1-96e21e5093d94964a396a2987002779e.jpg", "https://www.investopedia.com/thmb/zqwrQofD1jcEsN0-4tGMm8gW_mc=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/economy_-5bfc31c146e0fb00260c483e.jpg", "https://www.investopedia.com/thmb/zqwrQofD1jcEsN0-4tGMm8gW_mc=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/economy_-5bfc31c146e0fb00260c483e.jpg", "https://www.investopedia.com/thmb/arttCB3N9ZK91esarevJYTxIOAc=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/WhoWasSirArthurLewisandWhatIstheLewisModel-2359eb5dd73a4a1f9ca4211a73167c9e.jpg", "https://www.investopedia.com/thmb/arttCB3N9ZK91esarevJYTxIOAc=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/WhoWasSirArthurLewisandWhatIstheLewisModel-2359eb5dd73a4a1f9ca4211a73167c9e.jpg", "https://www.investopedia.com/thmb/C9LuYLavQcOGwwjmMf00lGEeI6E=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1223301957-b6c936bde6224884884eddfdc2e8a446.jpg", "https://www.investopedia.com/thmb/C9LuYLavQcOGwwjmMf00lGEeI6E=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1223301957-b6c936bde6224884884eddfdc2e8a446.jpg", "https://www.investopedia.com/thmb/I6eY_2UgfcQ_2ZzYODR8SAjmyXA=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/milton-friedman-v3-c7714695325b4ad0b0c7d4f0fff14093.png", "https://www.investopedia.com/thmb/I6eY_2UgfcQ_2ZzYODR8SAjmyXA=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/milton-friedman-v3-c7714695325b4ad0b0c7d4f0fff14093.png", "https://www.investopedia.com/thmb/tucLfonsb27ULYABwsU1gBrTGRE=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/Gunnar_Myrdal_final-ee457103a3c547f9bdc52ccbad0e543a.png", "https://www.investopedia.com/thmb/tucLfonsb27ULYABwsU1gBrTGRE=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/Gunnar_Myrdal_final-ee457103a3c547f9bdc52ccbad0e543a.png", "https://www.investopedia.com/thmb/EIWg74bvl1kPh34NxLyYQZerDU4=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/karl-marx-ba4e5e494a7140439b835c318ab80d00.jpg", "https://www.investopedia.com/thmb/EIWg74bvl1kPh34NxLyYQZerDU4=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/karl-marx-ba4e5e494a7140439b835c318ab80d00.jpg", "https://privacy-policy.truste.com/privacy-seal/seal?rid=f8e1238d-6371-460f-8ea0-1b8cad9e9c4b" ]	[]	[]	[ "" ]	null	[ "Will Kenton" ]	2008-02-25T12:00:00-05:00	Born in Vienna, Austria, in 1899, Friedrich Hayek was a famous economist known for his numerous contributions in economics and political philosophy.	en	/favicon.ico	Investopedia	https://www.investopedia.com/terms/f/friedrich-hayek.asp	Friedrich Hayek was a famous economist, well-known for his numerous contributions to the field of economics and political philosophy. Hayek's approach mostly stems from the Austrian school of economics and emphasizes the limited nature of knowledge. He is particularly famous for his defense of free-market capitalism and is remembered as one of the greatest critics of the socialist consensus. Early Life and Education Friedrich Hayek was born in Vienna, Austria, on May 8, 1899. He attended the University of Austria where he obtained doctorates in both law and political science in 1921 and 1923, respectively. He also completed postgraduate work at New York University in 1924. Hayek founded the Austrian Institute for Business Cycle Research and served as its director from 1927 to 1931. In 1931, he left to join the London School of Economics (LSE) as the Tooke Professor of Economic Science and Statistics until 1950. After LSE, he took a position at the University of Chicago as the Professor of Social and Moral Science up until 1962. From 1962 to 1968 he was a professor at the University of Freiburg. A World War I veteran, Hayek later said his experience in the war and his desire to help avoid the mistakes that ignited the war drew him into economics. Hayek lived in Austria, Great Britain, the United States, and Germany and became a British subject in 1938. Notable Accomplishments Friedrich Hayek and Gunnar Myrdal each won the Nobel Prize in Economic Sciences in 1974 "for their pioneering work in the theory of money and economic fluctuations and their penetrating analysis of the interdependence of economic, social, and institutional phenomena." Published Works One of Hayek's key achievements was his book The Road to Serfdom, which he wrote out of concern for the general view in British academia that fascism was a capitalist reaction to socialism. It was written between 1940 and 1943. The title was inspired by the French classical liberal thinker Alexis de Tocqueville's writings on the "road to servitude." The book was quite popular and was published in the United States by the University of Chicago in 1944, which propelled it to even 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. Other published works by Hayek include Individualism and Economic Order, John Stuart Mill and Harriet Taylor, The Pure Theory of Capital, and The Sensory Order. Honors and Awards In 1984, Hayek was appointed a member of the Order of the Companions of Honour by Queen Elizabeth II, on the advice of Prime Minister Margaret Thatcher, for his "services to the study of economics." He was the first recipient of the Hanns Martin Schleyer Prize in 1984. He also received the U.S. Presidential Medal of Freedom in 1991 from President George H. W. Bush. The Bottom Line Hayek is considered a major social theorist and political philosopher of the 20th century. His theory on how changing prices relay information that helps people determine their plans is widely regarded as an important milestone achievement in economics. This theory is what led him to the Nobel Prize.
7784	dbpedia	3	34	https://www.cambridge.org/core/books/welfare-theory-public-action-and-ethical-values/john-hickss-farewell-to-economic-welfarism/E16C1C7CAB52435EA570ABA5D82386B1	en	John Hicks’s Farewell to Economic Welfarism (Chapter 7)	https://www.cambridge.or…hare_600x600.jpg	https://www.cambridge.or…hare_600x600.jpg	[ "https://www.cambridge.org/core/cambridge-core/public/images/icn_circle__btn_close_white.svg", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.png", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.svg", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.svg", "https://www.cambridge.org/core/cambridge-core/public/images/logo_core.svg", "https://assets.cambridge.org/97811088/41450/cover/9781108841450.jpg", "https://www.cambridge.org/core/page-component/img/share-icon.cbcfad8.svg", "https://www.cambridge.org/core/page-component/img/close-icon.194b28a.svg", "https://www.cambridge.org/core/page-component/img/cite-icon.44eaaa4.svg", "https://www.cambridge.org/core/cambridge-core/public/images/cambridge_logo.png" ]	[]	[]	[ "" ]	null	[ "Roger E. Backhouse", "Antoinette Baujard", "Tamotsu Nishizawa" ]	null	Welfare Theory, Public Action, and Ethical Values - March 2021	en	/core/cambridge-core/public/images/favicon.ico	Cambridge Core	https://www.cambridge.org/core/books/welfare-theory-public-action-and-ethical-values/john-hickss-farewell-to-economic-welfarism/E16C1C7CAB52435EA570ABA5D82386B1	To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle. Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
7784	dbpedia	0	61	https://mpra.ub.uni-muenchen.de/54402/	en	Hicks' thread (out of the equilibrium labyrinth) Munich Personal RePEc Archive	https://mpra.ub.uni-muenchen.de/favicon.ico	https://mpra.ub.uni-muenchen.de/favicon.ico	[ "https://mpra.ub.uni-muenchen.de/images/mpra_logo.png", "https://mpra.ub.uni-muenchen.de/style/images/warning.png", "https://mpra.ub.uni-muenchen.de/54402/1.hassmallThumbnailVersion/MPRA_paper_54402.pdf", "https://mpra.ub.uni-muenchen.de/54402/1.haspreviewThumbnailVersion/MPRA_paper_54402.pdf", "https://mpra.ub.uni-muenchen.de/style/images/action_view.png", "https://mpra.ub.uni-muenchen.de/images/ub_lmu.png", "https://piwik.ub.uni-muenchen.de/piwik.php?idsite=2" ]	[]	[]	[ "" ]	null	[]	null			/mpra_favicon.png		null	Amendola, M., 1991. Liquidity, Flexibility and Processes of Economic Change, pp. 333-51, in McKenzie, L.W. and Zamagni S. (eds), Value and Capital Fifty Years Later, London, Macmillan. Amendola, M. and Gaffard, J.-L., 1998. Out of equilibrium, Oxford: Clarendon Press. Burmeister, E., 1974. Synthesizing the Neo-Austrian and Alternative Approaches to Capital Theory: A Survey, Journal of Economic Literature, vol. 12, no. 2., 413-456. De Cecco, M., 2008. Hicks’s notion and use of the concepts of fix-price and flex-price, pp. 156-63, in Scazzieri, R., Sen A. and Zamagni S. (eds), Markets, Money and Capital: Hicksian Economics for the Twenty-First Century, Cambridge, Cambridge University Press. Donzelli, F., 2010. Hicks on Walrasian equilibrium in the 1930s and beyond, Working Paper, http://www.economia.unimi.it/uploads/wp/DEAS-2010_39wp.pdf Hagemann, H., 2009. Hicks’s traverse analysis: From Capital and Growth to Capital and Time, pp. 133-49, in Hagemann, H. and Scazzieri R. (eds), Capital, Time and Transitional Dynamics, London, Routledge. Hahn, F.H., 1990. John Hicks the theorist, Economic Journal, vol. 100, no. 401, 539-49. Hamouda, O.F., 1993. John R. Hicks: The Economist’s Economist, Oxford, Blackwell. Hayek, F.A. von, 1928. Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des Geldwertes, Weltwirschaftliches Archiv, Bd. XXVIII, 33-76. Hayek, F.A. von, 1931. Prices and Production, London, Routledge. Hicks, J.R., 1931c. The theory of uncertainty and profit, Economica, no. 32, 170-89. Hicks, J.R., 1932b. The Theory of Wages, London: Macmillan. Hicks, J.R., 1933b. Gleichgewicht und Konjunktur, Zeitschrift für National ̈okonomie, IV. Bd., 4. H., 441-55. English translation: Equilibrium and the trade cycle, Economic Inquiry, vol. 18, no. 4, 523-34, October 1980. Hicks, J.R., 1934a. A reconsideration of the Theory of Value, Part I, Economica, vol. 1, no. 2, 52-76. Hicks, J.R., 1934e. Reviewed Work(s): Beiträge zur Geldtheorie by F. A. von Hayek, Eco- nomica, vol. 1, no. 4, 479-83. Hicks, J.R., 1935b. A suggestion for simplifying the theory of money, Economica, vol. 2, no. 5, 1-19. Hicks, J.R., 1935f. Wages and interest: the dynamic problem, Economic Journal, vol. 45, no. 179, 456-68. Hicks, J.R., 1936b. Mr Keynes’s theory of employment, Economic Journal, vol. 46, no. 182, 238-53. Hicks, J.R., 1937a. Mr Keynes and the “classics”, Econometrica, vol. 5, no. 2, 147-59. Hicks, J.R., 1939a. Value and Capital: an inquiry into some fundamental principles of economic theory, Oxford, Clarendon Press. Hicks, J.R., 1942b. The monetary theory of D.H. Robertson, Economica, vol. 9, no. 33, 174-9. Hicks, J.R., 1956c. Methods of dynamic analysis, in Twenty-five Economic Essays in Honour of Erik Lindahl, Stockholm, Ekonomisk Tidskrift. Hicks, J.R., 1962a. Liquidity, Economic Journal, vol. 72, no. 288, 787-802. Hicks, J.R., 1965a. Capital and Growth, Oxford, Clarendon Press. Hicks, J.R., 1970f. A neo-Austrian growth theory, Economic Journal, vol. 80, no. 318, 257-81. Hicks, J.R., 1973a. The Austrian theory of capital and its rebirth in modern economics, pp. 190-206, in Hicks, J.R. and Weber W. (eds), Carl Menger and the Austrian School of Economics, Oxford, Clarendon Press. Hicks, J.R., 1973c. Recollections and documents, Economica, vol. 40, no. 157, 2-11. Hicks, J.R., 1973d. Capital and Time: A Neo-Austrian Theory, Oxford, Clarendon Press. Hicks, J.R., 1974a. Capital controversies: ancient and modern, American Economic Review, vol. 64, no. 2, 307-16. Hicks, J.R., 1974b. The Crisis in Keynesian Economics, Oxford, Basil Blackwell. Hicks, J.R., 1975f. Revival of Political Economy: the old and the new, reply to Harcourt, Economic Record vol. 51, no. 3, 365-7. Hicks, J.R., 1977a. Economic Perspectives: Further Essays on Money and Growth, Oxford, Clarendon Press. Hicks, J.R., 1979b. The formation of an economist, BNL Quarterly Review, no. 130, 195-204. Hicks, J.R., 1979g. Causality in Economics, Oxford, Basil Blackwell. Hicks, J.R., 1981. Wealth and Welfare: Collected Essays on Economic Theory, vol. I, Oxford, Basil Blackwell. Hicks, J.R., 1982a. Money, Interest and Wages: Collected Essays on Economic Theory, vol. II, Oxford, Basil Blackwell. Hicks, J.R., 1983a. Classics and Moderns: Collected Essays on Economic Theory, vol. III, Oxford, Basil Blackwell. Hicks, J.R., 1985a. Methods of Dynamic Economics, Oxford, Clarendon Press. Hicks, J.R., 1989a. A Market Theory of Money, Oxford, Clarendon Press. Hicks, J.R., 1990b. The unification of macroeconomics, Economic Journal, vol. 100: 528-38. Jones, R.A. and Ostroy, J.M., 1984 Flexibility and Uncertainty, The Review of Economic Studies, vol. 51, no. 1, 13-32. Keynes, J.M., 1930. A Treatise on Money, The Collected Writings of J.M. Keynes, voll. V and VI, London: MacMillan, 1971-2. Keynes, J.M., 1936. The General Theory of Employment, Interest and Money, The Collected Writings of J.M. Keynes, vol. VII, London: MacMillan, 1973. Lindahl, E., 1929. Prisbildnings problemets uppl ̈aggning fr ̊an kapital-teoretisk synpunkt, Economisk Tidskrift, 31-105. Lindahl, E., 1930. Penningspolitikens Medel. Skrifter utgivna av Fahlbeckska Stiftelsen, Malm ̈o, Förlagsaktiebolaget i Malmö Boktryckeri. Lindahl, E., 1939. Studies in the Theory of Money and Capital, London, George Allen & Unwin Ltd. Reprint: New York, Augustus M. Kelley, 1970. Myrdal, G., 1931. Om Penningteorisk Jämvikt; German edition, Der Gleichgewichts Begriff als Instrument der Geldteoretischen Analyse, 1933; English translation on German edition: Monetary Equilibrium, first ed. 1939; reprints, New York, Augustus M. Kelley, 1962, 1965. Pasinetti, L.L. and Mariutti, G., 2008. Hicks’s ‘conversion’ – from J.R. to John, pp. 52-71, in Scazzieri, R., Sen A. and Zamagni S. (eds), Markets, Money and Capital: Hicksian Economics for the Twenty-First Century, Cambridge (UK), Cambridge University Press. Scazzieri, R. and Zamagni, S., 2008. Between theory and history: on the identity of Hicks’s economics, pp. 1-37, in Scazzieri, R., Sen A. and Zamagni S. (eds), Markets, Money and Capital: Hicksian Economics for the Twenty-First Century, Cambridge (UK), Cambridge University Press. Solow, R.M., 1984. Mr. Hicks and the Classics, Oxford Economic Papers, vol. 36, Supplement: Economic Theory and Hicksian Themes, 13-25.
7784	dbpedia	3	63	https://austrianeconomics.fandom.com/wiki/Friedrich_Hayek	en	Friedrich Hayek	https://static.wikia.nocookie.net/ucp-internal-test-starter-commons/images/a/aa/FandomFireLogo.png/revision/latest?cb=20210713142711	https://static.wikia.nocookie.net/ucp-internal-test-starter-commons/images/a/aa/FandomFireLogo.png/revision/latest?cb=20210713142711	[ "https://static.wikia.nocookie.net/ff185fe4-8356-4b6b-ad48-621b95a82a1d", "https://static.wikia.nocookie.net/f3fc9271-3d5e-4c73-9afc-e6a9f6154ff1", "https://static.wikia.nocookie.net/464fc70a-5090-490b-b47e-0759e89c263f", "https://static.wikia.nocookie.net/f7bb9d33-4f9a-4faa-88fe-2a0bd8138668" ]	[]	[]	[ "" ]	null	[ "Contributors to Austrian Economics Wiki" ]	null	"A claim for equality of material position can be met only by a government with totalitarian powers." F.A.Hayek, Law, Legislation, and Liberty Friedrich August von Hayek is one of the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig...	en	/skins-ucp/mw139/common/favicon.ico	Austrian Economics Wiki	https://austrianeconomics.fandom.com/wiki/Friedrich_Hayek	"A claim for equality of material position can be met only by a government with totalitarian powers." F.A.Hayek, Law, Legislation, and Liberty Friedrich August von Hayek is one of the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian school theorists, Hayek was very successful in spreading Austrian ideas throughout the English-speaking world. "When the definitive history of economic analysis during the 1930s comes to be written," said John Hicks in 1967, "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".[1] Unfortunately, Hayek's theory of the business cycle was eventually swept aside by the Keynesian revolution. His work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes. Life and Work[] Hayek's life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge, England). Though he was enrolled as a law student, his primary interests were economics and psychology, the latter due to the influence of Mach's theory of perception on Wieser and Wieser's colleague Othmar Spann, and the former stemming from the reformist ideal of Fabian socialism so typical of Hayek's generation. Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions--the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. "To none of us young men who read the book when it appeared," Hayek recalled, "the world was ever the same again". Socialism, an elaboration of Mises's pioneering article from two years before, argued that economic calculation requires a market for the means of production; without such a market there is no way to establish the values of those means and, consequently, no way to find their proper uses in production. Mises's devastating attack on central planning converted Hayek to laissez-faire, along with contemporaries like Wilhelm Röpke[2], Lionel Robbins, and Bertil Ohlin. It was around this time that Hayek began attending Mises's famed Privatseminar. Regular participants, who received no academic credit or other official recognition for their time, included Hayek, Gottfried von Haberler[3], Fritz Machlup[4], Oskar Morgenstern, Paul Rosenstein-Rodan, Richard von Strigl[5], Karl Schlesinger, Felix Kaufmann, Alfred Schütz[6], Eric Voegelin, Karl Menger, Jr., and others not so famous. For several years the Privatseminar was the center of the economics community in Vienna, attracting such visitors as Robbins from London and Howard S. Ellis from Berkeley. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. Mises had done earlier work on monetary and banking theory, successfully applying the Austrian marginal utility principle to the value of money and then sketching a theory of industrial fluctuations based on the doctrines of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this as a starting point for his own research on fluctuations, explaining the origin of the business cycle in terms of bank credit expansion and its transmission in terms of capital malinvestments. His work in this area eventually earned him an invitation to lecture at the London School of Economics and Political Science and then to occupy its Tooke Chair in Economics and Statistics, which he accepted in 1931. There he found himself among a vibrant and exciting group: Robbins, J. R. Hicks, Arnold Plant, Dennis Robertson, T. E. Gregory, Abba Lerner, Kenneth Boulding, and George Shackle, to name only the most prominent. Hayek brought his (to them) unfamiliar views, and gradually, the "Austrian" theory of the business cycle became known and accepted. At the L.S.E. Hayek lectured on Mises's business-cycle theory, which he was refining and which, until Keynes's General Theory (text) came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes's Treatise on Money. As one of Keynes's leading professional adversaries, Hayek was well situated to provide a full refutation of the 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. 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 thought a better course would be to produce a fuller elaboration of Böhm-Bawerk's capital theory, and he began to devote his energies to this project. Unfortunately, The Pure Theory of Capital (pdf) was not completed until 1941, and by then the Keynesian macro model had become firmly established. The fortunes of the Austrian school have suffered a dramatic reversal with the next few years. First, the Austrian theory of capital, an integral part of the business-cycle theory, came under attack from the Italian-born Cambridge economist Piero Sraffa and the American Frank Knight, while the cycle theory itself was forgotten amid the enthusiasm for the General Theory. Second, beginning with Hayek's move to London and continuing until the early 1940s, the Austrian economists left Vienna, for personal and then for political reasons, so that a school ceased to exist there as such. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek's generation became prominent in the U.S.--Gottfried von Haberler[3] at Harvard, Fritz Machlup and Oskar Morgenstern at Princeton, Paul Rosenstein-Rodan at MIT--but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group: the economics department, led by Knight, Milton Friedman, and later George Stigler, was one of the best anywhere, and Aaron Director at the law school soon set up the first law and economics program. But economic theory, in particular its style of reasoning, was rapidly changing; Paul Samuelson's Foundations had appeared in 1947, establishing physics as the science for economics to imitate, and Friedman's 1953 essay on "positive economics" set a new standard for economic method. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and Austrian economics entered a prolonged eclipse. Important work in the Austrian tradition was done during this period by Rothbard, Kirzner, and Lachmann[7], but at least publicly, the Austrian tradition lay mostly dormant. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian school was suddenly and unexpectedly revived. While this was not the first event of the so-called "Austrian revival," the memorable South Royalton conference having taken place earlier the same year, the rediscovery of Hayek by the economics profession was nonetheless a decisive event in the renaissance of Austrian economics. Hayek's writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. There are several institutions founded in Hayek's name, including the Hayek Institute in Austria, the Friedrich A. von Hayek-Gesellschaft in Germany and F.A.Hayek Foundation in Slovakia. References[] Please consult the original text by Peter G. Klein for more references; reprinted with generous permission from the Mises Institute. []
7784	dbpedia	3	0	https://mises.org/articles-interest/biography-f-hayek-1899-1992	en	Biography of F. A. Hayek (1899-1992)	https://cdn.mises.org/st…pg?itok=ITApaJtO	https://cdn.mises.org/st…pg?itok=ITApaJtO	[ "https://cdn.mises.org/styles/responsive_4_3_650w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=ex6AkYmU 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=MZm8BjW_ 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=smqhJAMI 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=BQieFl6c 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=iZRc7PPy 1530w", "http://mises.org/images4/Hayek6.jpg", "http://mises.org/images4/Hayek4.jpg", "http://mises.org/images4/Hayek2.jpg", "http://mises.org/images4/Hayek3.jpg", "http://mises.org/images4/Hayek5.jpg", "http://mises.org/images4/Hayek7.jpg", "https://cdn.mises.org/styles/responsive_4_3_650w/s3/peter-klein_2023.jpg.webp?itok=lti7bAcc 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/peter-klein_2023.jpg.webp?itok=ITN9Zzvt 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/peter-klein_2023.jpg.webp?itok=XMh1xxxp 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/peter-klein_2023.jpg.webp?itok=iHxbzBgc 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/peter-klein_2023.jpg.webp?itok=CffTksmJ 1530w", "https://cdn.mises.org/styles/responsive_650w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=_yN9d85Q 650w,https://cdn.mises.org/styles/responsive_870w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=4mMxN_Nl 870w,https://cdn.mises.org/styles/responsive_1090w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=6MtQxVYY 1090w,https://cdn.mises.org/styles/responsive_1310w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=GcnJ_GBM 1310w,https://cdn.mises.org/styles/responsive_1530w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=iB7UWEt8 1530w", "https://mises.org/themes/custom/mises/components/elements/element-footer-charity/charity-navigator.png" ]	[]	[]	[ "" ]	null	[ "Peter G. Klein" ]	2007-08-01T01:00:00-05:00		en	/themes/custom/mises/favicon.ico	Mises Institute	https://mises.org/articles-interest/biography-f-hayek-1899-1992	“A claim for equality of material position can be met only by a government with totalitarian powers.” F. A. Hayek is undoubtedly the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian school theorists, Hayek was more successful than anyone else in spreading Austrian ideas throughout the English-speaking world. “When the definitive history of economic analysis during the 1930s comes to be written,” said John Hicks in 1967, “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, p. 203). Unfortunately, Hayek’s theory of the business cycle was eventually swept aside by the Keynesian revolution. Ultimately, however, this work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes. Life and Work Hayek’s life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge, England). Though he was enrolled as a law student, his primary interests were economics and psychology, the latter due to the influence of Mach’s theory of perception on Wieser and Wieser’s colleague Othmar Spann, and the former stemming from the reformist ideal of Fabian socialism so typical of Hayek’s generation. Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions--the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. “To none of us young men who read the book when it appeared,” Hayek recalled, “the world was ever the same again” (Hayek, 1956, p. 133). Socialism, an elaboration of Mises’s pioneering article from two years before, argued that economic calculation requires a market for the means of production; without such a market there is no way to establish the values of those means and, consequently, no way to find their proper uses in production. Mises’s devastating attack on central planning converted Hayek to laissez-faire, along with contemporaries like Wilhelm Röpke, Lionel Robbins, and Bertil Ohlin. It was around this time that Hayek began attending Mises’s famed Privatseminar. Regular participants, who received no academic credit or other official recognition for their time, included Hayek, Gottfried Haberler, Fritz Machlup, Oskar Morgenstern, Paul Rosenstein-Rodan, Richard von Strigl, Karl Schlesinger, Felix Kaufmann, Alfred Schütz, Eric Voegelin, Karl Menger, Jr., and others not so famous. For several years the Privatseminar was the center of the economics community in Vienna, attracting such visitors as Robbins from London and Howard S. Ellis from Berkeley. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. Mises had done earlier work on monetary and banking theory, successfully applying the Austrian marginal utility principle to the value of money and then sketching a theory of industrial fluctuations based on the doctrines of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this last as a starting point for his own research on fluctuations, explaining the origin of the business cycle in terms of bank credit expansion and its transmission in terms of capital malinvestments. His work in this area eventually earned him an invitation to lecture at the London School of Economics and Political Science and then to occupy its Tooke Chair in Economics and Statistics, which he accepted in 1931. There he found himself among a vibrant and exciting group: Robbins, J. R. Hicks, Arnold Plant, Dennis Robertson, T. E. Gregory, Abba Lerner, Kenneth Boulding, and George Shackle, to name only the most prominent. Hayek brought his (to them) unfamiliar views, and gradually, the “Austrian” theory of the business cycle became known and accepted. At the L.S.E. Hayek lectured on Mises’s business-cycle theory, which he was refining and which, until Keynes’s General Theory came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes’s Treatise on Money. As one of Keynes’s leading professional adversaries, Hayek was well situated to provide a full refutation of the 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, p. 91). 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, p. 60; Hayek, 1966, pp. 240-41). Hayek thought a better course would be to produce a fuller elaboration of Böhm-Bawerk’s capital theory, and he began to devote his energies to this project. Unfortunately, The Pure Theory of Capital was not completed until 1941, and by then the Keynesian macro model had become firmly established. Within a very few years, however, the fortunes of the Austrian school suffered a dramatic reversal. First, the Austrian theory of capital, an integral part of the business-cycle theory, came under attack from the Italian-born Cambridge economist Piero Sraffa and the American Frank Knight, while the cycle theory itself was forgotten amid the enthusiasm for the General Theory. Second, beginning with Hayek’s move to London and continuing until the early 1940s, the Austrian economists left Vienna, for personal and then for political reasons, so that a school ceased to exist there as such. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek’s generation became prominent in the U.S.--Gottfried Haberler at Harvard, Fritz Machlup and Oskar Morgenstern at Princeton, Paul Rosenstein-Rodan at MIT--but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group: the economics department, led by Knight, Milton Friedman, and later George Stigler, was one of the best anywhere, and Aaron Director at the law school soon set up the first law and economics program. But economic theory, in particular its style of reasoning, was rapidly changing; Paul Samuelson’s Foundations had appeared in 1947, establishing physics as the science for economics to imitate, and Friedman’s 1953 essay on “positive economics” set a new standard for economic method. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and A ustrian economics entered a prolonged eclipse. Important work in the Austrian tradition was done during this period by Rothbard (1956, 1962, 1963a, 1963b), Kirzner (1963, 1966, 1973), and Lachmann (1956), but at least publicly, the Austrian tradition lay mostly dormant. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian school was suddenly and unexpectedly revived. While this was not the first event of the so-called “Austrian revival,” the memorable South Royalton conference having taken place earlier the same year, the rediscovery of Hayek by the economics profession was nonetheless a decisive event in the renaissance of Austrian economics. Hayek’s writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. Contributions to Economics Hayek’s legacy in economics is complex. Among mainstream economists, he is mainly known for his popular The Road to Serfdom (1944) and for his work on knowledge in the 1930s and 1940s (Hayek, 1937, 1945). Specialists in business-cycle theory recognize his early work on industrial fluctuations, and modern information theorists often acknowledge Hayek’s work on prices as signals, although his conclusions are typically disputed. Hayek’s work is also known in political philosophy (Hayek, 1960), legal theory (Hayek 1973-79), and psychology (Hayek, 1952). Within the Austrian school of economics, Hayek’s influence, while undeniably immense, has very recently become the subject of some controversy. His emphasis on spontaneous order and his work on complex systems has been widely influential among many Austrians. Others have preferred to stress Hayek’s work in technical economics, particularly on capital and the business cycle, citing a tension between some of Hayek’s and Mises’s views on the social order. (While Mises was a rationalist and a utilitarian, Hayek focused on the limits to reason, basing his defense of capitalism on its ability to use limited knowledge and learning by trial and error.) Business-cycle theory. Hayek’s writings on capital, money, and the business cycle are widely regarded as his most important contributions to economics (Hicks, 1967; Machlup, 1976). Building on Mises’s Theory of Money and Credit (1912), Hayek showed how fluctuations in economy-wide output and employment are related to the economy’s capital structure. In Prices and Production (1931) he introduced the famous “Hayekian triangles” to illustrate the relationship between the value of capital goods and their place in the temporal sequence of production. Because production takes time, factors of production must be committed in the present for making final goods that will have value only in the future after they are sold. However, capital is heterogeneous. As capital goods are used in production, they are transformed from general-purpose materials and components to intermediate products specific to particular final goods. Consequently, these assets cannot be easily redeployed to alternative uses if demands for final goods change. The central macroeconomic problem in a modern capital-using economy is thus one of intertemporal coordination: how can the allocation of resources between capital and consumer goods be aligned with consumers’ preferences between present and future consumption? In The Pure Theory of Capital (1941), perhaps his most ambitious work, Hayek describes how the economy’s structure of production depends on the characteristics of capital goods--durability, complementarity, substitutability, specificity, and so on. This structure can be described by the various “investment periods” of inputs, an extension of Böhm-Bawerk’s notion of “roundaboutness,” the degree to which production takes up resources over time. In Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933a) Hayek showed how monetary injections, by lowering the rate of interest below what Mises (following Wicksell) called its “natural rate,” distort the economy’s intertemporal 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. The Austrian theory, as developed by Mises and Hayek, focuses 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’ intertemporal 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’ intertemporal 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 e xpansion, 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’ intertemporal preferences. Knowledge, prices, and competition as a discovery procedure. Hayek’s writings on dispersed knowledge and spontaneous order are also widely known, but more controversial. 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, p. 78). 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.” 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, 1968a), by which this information is unknowingly transmitted throughout the economy as an unintended consequence of individuals’ pursuing their own ends. Indeed, Hayek’s (1948b) 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 (Kirzner, 1973; Machovec, 1995). 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, pp. 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 firm 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” (D. H. Robertson, quoted in Coase, 1937, p. 35). Most commentators view Hayek’s work on knowledge, discovery, and competition as an outgrowth of his participation in the socialist calculation debate of the 1920s and 1930s. The socialists erred, in Hayek’s view, in failing to see that the economy as a whole is necessarily a spontaneous order and can never be deliberately made over in the way that the operators of a planned order can exercise control over their organization. This is because planned orders can handle only problems of strictly limited complexity. Spontaneous orders, by contrast, tend to evolve through a process of natural selection, and therefore do not need to be designed or even understood by a single mind. Hayek and Austrian Economics Clearly, the Austrian revival owes as much to Hayek as to anyone. But are Hayek’s writings really “Austrian economics”--part of a separate, recognizable tradition--or should we regard them, instead, as an original, deeply personal, contribution? Some observers charge that Hayek’s later work, particularly after he began to turn away from technical economics, shows more influence of his friend Sir Karl Popper than of Carl Menger or Mises: one critic speaks of “Hayek I” and “Hayek II”; another writes on “Hayek’s Transformation.” It is true that Popper had a significant impact on Hayek’s mature thought. Of greater interest is the precise nature of Hayek’s relationship with Mises. Undoubtedly, no economist has had a greater impact on Hayek’s thinking than Mises--not even Wieser, from whom Hayek learned his craft but who died in 1927 when Hayek was still a young man. In addition, Mises clearly considered Hayek the brightest of his generation. Yet, as Hayek (1978a) noted, he was from the beginning always something less than a pure follower: “Although I do owe [Mises] a decisive stimulus at a crucial point of my intellectual development, and continuous inspiration through a decade, I have perhaps most profited from his teaching because I was not initially his student at the university, an innocent young man who took his word for gospel, but came to him as a trained economist, versed in a parallel branch of Austrian economics [the Wieser branch] from which he gradually, but never completely, won me over.” Much has been written on Hayek’s and Mises’s views on the socialist calculation debate. The issue is whether a socialist economy is “impossible,” as Mises charged in 1920, or simply less efficient or more difficult to implement. Hayek (1992, p. 127) maintained later that Mises’s “central thesis was not, as it is sometimes misleadingly put, that socialism is impossible, but that it cannot achieve an efficient utilization of resources.” That interpretation is itself subject to dispute. Hayek is arguing here against the standard view on economic calculation, found for instance in Schumpeter (1942, pp. 172-186) or Bergson (1948). This view holds that Mises’s original statement of the impossibility of economic calculation under socialism was refuted by Oskar Lange, Fred Taylor, and Abba Lerner, and that later modifications by Hayek and Robbins amounted to an admission that a socialist economy is possible in theory but difficult in practice because knowledge is decentralized and incentives are weak. Hayek’s response in the cited text, that Mises’s actual position has been exaggerated, receives support from the primary revisionist historian of the calculation debate, Don Lavoie, who states that the “central arguments advanced by Hayek and Robbins did not constitute a ‘retreat’ from Mises, but rather a clarification directing the challenge to the later versions of central planning . . . Although comments by both Hayek and Robbins about computational difficulties of the [later approaches] were responsible for misleading interpretations of their arguments, in fact their main contributions were fully consistent with Mises’s challenge” (Lavoie, 1985, p. 20). Kirzner (1988) similarly contends that Mises’s and Hayek’s positions should be viewed together as an early attempt to elaborate the Austrian “entrepreneurial-discovery” view of the market process. Salerno (1990a) argues, by contrast, in favor of the traditional view--that Mises’s original calculation problem is different from the discovery-process problem emphasized b y Lavoie and Kirzner. Furthermore, Hayek’s later emphasis on group selection and spontaneous order is not shared by Mises, although there are elements of this line of thought in Menger. A clue to this difference is in Hayek’s (1978a) statement that “Mises himself was still much more a child of the rationalist tradition of the Enlightenment and of continental, rather than of English, liberalism . . . than I am myself.” This is a reference to the “two types of liberalism” to which Hayek frequently refers: the continental rationalist or utilitarian tradition, which emphasizes reason and man’s ability to shape his surroundings, and the English common-law tradition, which stresses the limits to reason and the “spontaneous” forces of evolution. Recently, the relationship between Mises and Hayek has become a full-fledged “de-homogenization” debate. Salerno (1990a, 1990b, 1993, 1994) and Rothbard (1991, 1995) see Hayek’s emphasis on knowledge and discovery as substantially different from Mises’s emphasis on purposeful human action. Salerno (1993), for example, argues that there are two strands of modern Austrian economics, both descended from Menger. One, the Wieser-Hayek strand, focuses on dispersed knowledge and the price system as a device for communicating knowledge. Another, the Böhm-Bawerk-Mises strand, focuses on monetary calculation (or “appraisal,” meaning anticipation of future prices) based on existing money prices. Kirzner (1995a, 1995b, 1996, 1997) and Yeager (1994, 1995) argue, by contrast, that the differences between Hayek and Mises are more matters of emphasis and language than substance. 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7784	dbpedia	2	39	https://friesian.com/hayek.htm	en	Friedrich A. Hayek			[ "https://friesian.com/images/hayek.gif", "https://friesian.com/images/key.gif", "https://friesian.com/images/key.gif", "https://friesian.com/images/key.gif", "https://friesian.com/images/hayek-s1.jpg", "https://friesian.com/images/greek/hayik.gif", "https://friesian.com/images/kahlo.jpg" ]	[]	[]	[ "" ]	null	[]	null					null	Friedrich A. Hayek (1899-1992) As a defender of the free market and of classical liberal (i.e. libertarian) principles, F.A. Hayek lived to see his doctrine and warnings justified by the failure of command and socialist economies in the late 1980's. The influence of the Kant-Friesian tradition on Hayek is evident in his use of two precepts: Hume's principle that the propositions of ethics cannot be proven, and Popper's principle that scientific knowledge proceeds by falsification, not by verification. Hume's principle was really just a reformulation of Aristotle's doctrine that the first principles of demonstration cannot themselves, by definition, be proven. Kant's conception of synthetic a priori propositions thus sought the truth of such propositions in some external ground that would unite subjects and predicates whose meanings are not analytically related. Hume is commonly misunderstood to doubt the reality of the principle of causality or of moral propositons expressing "oughts"; but Kant realized that Hume had no doubt of the truth of such matters and famously said that Hume's critics (showing little more understanding than many of his advocates today), "were ever taking for granted that which he doubted, and demonstrating with zeal and often with impudence that which he never thought of doubting..." [Prolegomena to Any Future Metaphysics, p. 259]. Hume merely denied that we are rationally acquainted with the necessary ground for them, as he says: My practice, you say, refutes my doubts. But you mistake the purport of my question. As an agent, I am quite satisfied in the point; but as a philosopher, who has some share of curiosity, I will not say scepticism, I want to learn the foundation of the inference. No reading, no enquiry has yet been able to remove my difficulty, or give me satisifaction in a matter of such importance. Can I do better than propose the difficulty to the public, even though, perhaps, I have small hopes of obtaining a solution? We shall at least, by this means, be sensible of our ignorance, if we do not augment our knowledge. [An Inquiry Concerning Human Undertanding, p.32] Hayek's entire approach to economics, in line with the Austrian School, and also exemplified by Thomas Sowell, emphasized the limited nature of knowledge. The price mechanism of the free market serves to convey information about supply and demand that is dispersed among many consumers and producers and which cannot be assembled or coordinated efficiently in any other way. The abyssmal failure of command economies, or of command devices in mixed capitalistic economies, vindicated the prediction originally made by Ludwig von Mises in 1920, and later promoted by Hayek, that only a free market could coordinate an efficient allocation of resources into productive industries. Hayek thus shared with Hume a profound conviction that we should be "sensible of our ignorance." Hayek also shared with Hume the conviction that the "foundation of the inference" to propositions of ethics or politics was not necessarily available to us. Like Hume too, Hayek had a strong sense that history was a discovery process when it came to ethics and politics. Hayek's theory in that respect, however, reflected Karl Popper's view that propositions of ethics or politics can be tested with the same mechanism of falsification used by scientific method. History as a discovery process could then be a comparison of predictions with consequences. In Friesian terms, that leads us back to the virtues and weaknesses of Popper's theory, since falsification does not provide the Kantian ground for the truth of synthetic a priori propositions. Nevertheless, Hayek's Kantian understanding of Hume and his use of Popper's Friesian logic do provide us with epochal principles of political economy that are ultimately conformable to Kant-Friesian principles. Hayek's personal and professional relationship with Popper, whom he helped in his career, was somewhat ironic considering that Hayek was a cousin of the philosopher Ludwig Wittgenstein (1889-1951), with whom Popper disagreed on almost every conceivable philosophical issue. Popper's critique of Wittgenstein's Tractatus, in the footnotes to The Open Society and Its Enemies, was devastating; and after World War II there was a famous incident when Wittgenstein furiously stalked out of a talk by Popper. Popper was told that he had been the first person to interrupt Wittgenstein the way Wittgenstein interrupted everyone else. Since Hayek wrote about seeing Wittgenstein behave in just such a way, it is often supposed that he was present at the confrontation between Popper and Wittgensgtein. He was not but simply had seen similar behavior on other occasions. Salma Hayek Philosophical Vienna F.A. Hayek on Bernard Mandeville History of Philosophy Political Economy Hayek on Home Page Home Page Copyright (c) 1996, 1999, 2002, 2004, 2012, 2018, 2022 Kelley L. Ross, Ph.D. All Rights Reserved Friedrich A. Hayek (1899-1992), Note Yes, the other, or perhaps the principal, famous Hayek in contemporary culture is the stunning actress Salma Hayek. The obvious question would then be "Any relation?" Probably not, but one can never tell. "Hayek" is a Czech name, Hájek. Since F.A. Hayek was Austrian, it is not at all surprising that he might have a Czech, or Bohemian, name, since Bohemia was long part of the Hapsburg domains of Austria. With Salma, we have something else. She was born in Mexico. It is reported that her father was Lebanese and her mother Spanish. There is a name in Arabic that could be rendered "Hayek," Ḥâʾik, ("Weaver"), so perhaps that is it. Now, there are many German, even Bohemian, immigrants to Mexico. There is even a "Bohemia" beer made in Mexico. The existence of Mexican Czech Hayeks is thus to be expected. Such an origin of Salma's name would not be surprising, but apparently the explanation is her Lebanese connection instead. Self-Portrait with Monkey, 1940, Frida Kahlo; Tate Modern Salma Hayek would probably not care for F.A. Hayek's economics or politics. Her movie Frida [2001] was about the famous Mexican artist Frida Kahlo (1907-1954). The movie included the story of her affair with Leon Trotsky (1879-1940), who was in exile in Mexico. This left the impression that Kahlo, like Trotsky, was opposed to Josef Stalin, who, of course, had Trotsky assassinated -- the famous ice pick. However, Kahlo and her husband, Diego Rivera (1886-1957) then became serious Stalinists, which seems inconsistent with their previous regard for Trotsky. This probably tells us, on the other hand, that the fasionable Communist sympathies of Kahlo and Rivera were superficial and confused. The movie avoids getting into this, which would not put Kahlo in a favorable light. But, after all, she was an artist, not a philosopher. Communism probably sounded good, as long as you didn't need to live under it. Return to Index
7784	dbpedia	3	22	https://www.hetwebsite.net/het/profiles/hayek.htm	en	Friedrich A. Hayek			[ "https://www.hetwebsite.net/het/hetimages/logo.gif", "https://www.hetwebsite.net/het/hetimages/inet_logo_small75.gif", "https://www.hetwebsite.net/het/profiles/image/hayek.jpg", "https://www.hetwebsite.net/het/profiles/image/hayeksig.gif", "https://www.hetwebsite.net/het/hetimages/top1.gif", "https://www.hetwebsite.net/het/hetimages/top1.gif", "https://www.hetwebsite.net/het/hetimages/top1.gif", "https://www.hetwebsite.net/het/hetimages/logo.gif", "https://www.hetwebsite.net/het/hetimages/inet_logo_small75.gif" ]	[]	[]	[ "" ]	null	[]	null			../hetlogo.ico		null	Friedrich August von Hayek, 1899-1992 Among the most masterful and insightful of 20th Century economists, the Austrian economist Friedrich A. von Hayek alone could have stood shoulder-to-shoulder with his great rival, J.M. Keynes. Trained by Wieser and Böhm-Bawerk in the Austrian tradition at Vienna, F.A. Hayek nonetheless carved a distinct spot in the economic pantheon - in some ways more different from the Austrian School than that of his friend and intellectual companion, Ludwig von Mises. After some fundamental early contributions (e.g. his 1928 article is often credited with having introduced the concept of a fully intertemporal equilibrium), Hayek's early work was primarily in monetary cycle theory (1929, 1931, 1939). Drawing upon the "cumulative process" of Knut Wicksell and a Continental tradition of multi-sectoral overinvestment models, Hayek argued that when finance permitted investment to be greater than savings, then both desired investment and consumption demand cannot be met by actual output - thus there will be "forced saving" and changing degrees of "capital intensity" (with capital conceived in a very Austrian sense) changing output and employment. However, forced savings are not sustainable as capital goods demand will not be maintained if consumer goods producers are being dried of consumption demand. Thus, there is a contraction in output and a subsequent fall in capital intensity. Hayek argued that this "concertina" process was the main motor behind business cycles. Hayek presented his main treatise on monetary cycle theory in a slim book, Prices and Production (1931), in England and was immediately drafted by Lord Robbins to join the L.S.E. - where he would serve as that institution's answer to Cambridge's John Maynard Keynes who was then working on similar issues. Keynes did not take lightly the criticisms Hayek made of his Treatise on Money (1930), and thus Keynes and Sraffa joined forces to bury Hayek and his cycle theory in the Economic Journal in 1932. At the L.S.E., Hayek was instrumental in furthering its then-novel "continental" bent and he was highly influential on his junior colleagues (such as Hicks) and students (which included Lerner and Kaldor). However, following the appearance of the General Theory by J.M. Keynes in 1936, Lerner and Kaldor, like the rest of the economics profession, were drawn away from Hayek's orbit. Kaldor's departure was particularly stinging - since his subsequent criticisms of the "Ricardo Effect" upon which Hayek was hanging the remnants of a shredded cycle theory, led Hayek to abandon his cycle theory entirely. Hayek's attempted to work a new system in his Pure Theory of Capital (1941), which he originally envisioned as a part of a larger work. In it, he attempted to develop a joint theory of investment and capital. Inexplicably, his 1941 book fell dead-born from the press and proved to be his last substantial effort in the area of theoretical Neoclassical economics. Nonetheless, many of the Hayekian capital themes would emerge later in the theory of investment by his students, notably Friedrich and Vera Lutz and Abba Lerner and, more distantly, Trygve Haavelmo. Hayek turned in 1944 to the political arena with his Road to Serfdom, a polemical defense of laissez-faire - the work for which he is best known outside academia. His subsequent political activities include the foundation of the libertarian "Mont Pelerin Society" in the 1940s. In 1935, Hayek had edited a book on the Socialist Calcuation debate in which Mises had been engaged. In resurrecting Barone's 1908 article, Hayek realized that the Mises attack on the socialist position was untenable. As a result, in several famous articles - notably, "Economics and Knowledge" (1937) and "On the Use of Knowledge in Society" (1945) - Hayek composed a response which advanced the "Socialist Calculation" debate to a new level. Succinctly, he claimed, countering Lange and the Paretians, that prices are not merely "rates of exchange between goods", but rather "a mechanism for communicating information" (Hayek, 1945). Hayek argued that people have little knowledge of the world beyond their immediate surroundings and this is what forces them to be price-takers - the crucial ingredient that makes the price system work. If, on the other hand, a particular agent's knowledge were greater, agents would then refuse to act as price-takers but rather make decisions in a way which would manipulate their environment to their advantage thereby destroying the price system. In a complex, uncertain environment, Hayek argument, agents are not able to predict the consequences of their actions, and only this way could the price system work. In Hayek's words, the "fatal conceit" of the Oskar Lange and other "Socialists" in the calculation debate was that they believed this order could be "designed" by a planner who just gets the prices right, without realising that a price system evolved spontaneously as a result of lack of knowledge. The same limited knowledge which afflicts the agent's predictive power must necessarily constrain the planner's as well. Hayek enhanced this argument with considerations of "spontaneous order" - the idea that a harmonious, evolving order arises from the interaction of a decentralized, heterogeneous group of self-seeking agents with limited knowledge. This order, he claimed, was not "designed" nor could be "designed" by a social planner, even a very wise one, but merely "emerged" or evolved spontaneously from a seemingly complex network of interaction among agents with limited knowledge. Hayek's elaborations on this complex, evolving spontaneous order are found in various places (e.g. 1952, 1964). Hayek continued with his work on "evolving order", linking it with his work on political and legal theory (e.g. 1960, 1973). In tackling the evolution of political, social, legal and economic institutions, Hayek is rightly conceived as one of the founding fathers of "evolutionary economics". In many ways, one can see how the work of the social "evolutionist" and skeptic philosopher, David Hume was particularly influential on Hayek. Indeed, Hayek's scholarly work on the history of economic thought - e.g. on John Stuart Mill, Richard Cantillon and the Bullionist Debates - often echoed his search for bedfellows in the past, those who had resisted the "rational", calculable worldviews and simplistic solutions ever-so-present within intellectual circles. In his work on the philosophy of science (1952), Hayek traces the intellectual roots of the rational-socialist tendencies of economics to the French tradition of Saint-Simon and Comte in the 19th Century. Hayek's efforts were nonetheless ignored in the Keynesian mainstream which then dominated economics. Finding a deaf ear in economics, he looked elsewhere. In an apparently bizarre interlude, Hayek turned his attention to psychology - turning out an anti-behaviorist (and Hume-drenched) tract, The Sensory Order (1952), which fit into his "group selection" type of evolution he had applied to his "spontaneous order" in economics. All this led to one of his most famous works, the Constitution of Liberty (1960) bringing all his previous work on political theory together into one magnificent defense of "Old Whig" political doctrine and a return attack on the Saint-Simon-Comte collectivism. Having seen his old idea of a "commodity reserve currency" (1943) fail to generate much interest, Hayek turned in the 1970s to champion the cause of a "free banking system" originally proposed by Vera Smith Lutz and the devolution of monetary control away from the central banks and into the hands of private banks (1978). This drew upon him the opposition of Milton Friedman and the Chicago Monetarists.
7784	dbpedia	0	98	https://www.bartleby.com/essay/Review-of-John-Hicks-Article-a-Suggested-FKMSQ43VJ	en	Review of John Hicks' Article 'a Suggested Interpretation...			[ "https://assets.bartleby.com/1.17/images/logos/bartleby/logo-home.svg", "https://assets.bartleby.com/1.17/images/placeholders/essay_preview.png" ]	[]	[]	[ "" ]	null	[]	null	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...				https://www.bartleby.com/essay/Review-of-John-Hicks-Article-a-Suggested-FKMSQ43VJ	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)
7784	dbpedia	2	15	https://mises.org/profile/friedrich-hayek	en	Friedrich A. Hayek	https://cdn.mises.org/st…pg?itok=ITApaJtO	https://cdn.mises.org/st…pg?itok=ITApaJtO	[ "https://cdn.mises.org/styles/responsive_650w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=2h4z3mtC 650w,https://cdn.mises.org/styles/responsive_870w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=2_YbC57V 870w,https://cdn.mises.org/styles/responsive_1090w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=OboCo4HV 1090w,https://cdn.mises.org/styles/responsive_1310w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=gT_Ia6ns 1310w,https://cdn.mises.org/styles/responsive_1530w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=1lxIZQUW 1530w", "https://cdn.mises.org/styles/responsive_650w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=_yN9d85Q 650w,https://cdn.mises.org/styles/responsive_870w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=4mMxN_Nl 870w,https://cdn.mises.org/styles/responsive_1090w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=6MtQxVYY 1090w,https://cdn.mises.org/styles/responsive_1310w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=GcnJ_GBM 1310w,https://cdn.mises.org/styles/responsive_1530w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=iB7UWEt8 1530w", "https://mises.org/themes/custom/mises/components/elements/element-footer-charity/charity-navigator.png" ]	[]	[]	[ "" ]	null	[]	2023-03-19T06:00:00+00:00	F. A. Hayek (1899–1992) is undoubtedly the most eminent of the modern Austrian economists, and a founding board member of the Mises Institute. Student of	en	/themes/custom/mises/favicon.ico	Mises Institute	https://mises.org/profile/friedrich-hayek	F. A. Hayek’s life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge). Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions—the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. “To none of us young men who read the book when it appeared,” Hayek recalled, “the world was ever the same again.” It was around this time that Hayek began attending Mises’s famed Privatseminar. For several years the Privatseminar was the center of the economics community in Vienna. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. At the L.S.E. Hayek lectured on Mises’s business-cycle theory, which he was refining and which, until Keynes’s General Theory came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes’s Treatise on Money. Within a very few years, however, the fortunes of the Austrian School suffered a dramatic reversal. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek’s generation became prominent in the U.S. but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group. But economic theory, in particular its style of reasoning, was rapidly changing. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and Austrian economics entered a prolonged eclipse. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian School was suddenly and unexpectedly revived. Hayek’s writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. Among mainstream economists, he is mainly known for his popular The Road to Serfdom (1944) and for his work on knowledge in the 1930s and 1940s. Specialists in businesscycle theory recognize his early work on industrial fluctuations, and modern information theorists often acknowledge Hayek’s work on prices as signals, although his conclusions are typically disputed. Hayek’s work is also known in political philosophy, legal theory, and psychology. Within the Austrian School of economics, Hayek’s influence, while undeniably immense, has very recently become the subject of some controversy. His emphasis on spontaneous order and his work on complex systems has been widely influential among many Austrians. Others have preferred to stress Hayek’s work in technical economics, particularly on capital and the business cycle, citing a tension between some of Hayek’s and Mises’s views on the social order. Hayek’s writings on capital, money, and the business cycle are widely regarded as his most important contributions to economics. Building on Mises’s Theory of Money and Credit (1912), Hayek showed how fluctuations in economy-wide output and employment are related to the economy’s capital structure. In Prices and Production (1931) he introduced the famous “Hayekian triangles” to illustrate the relationship between the value of capital goods and their place in the temporal sequence of production. In Monetary Theory and the Trade Cycle (1933) Hayek showed how monetary injections, by lowering the rate of interest below what Mises (following Wicksell) called its “natural rate,” distort the economy’s intertemporal 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’s writings on dispersed knowledge and spontaneous order are also widely known, but more controversial. 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. Clearly, the Austrian revival owes much to Hayek. He ranks among the greatest members of the Austrian School, and among the leading economists of the twentieth century. His work continues to be influential in business cycle theory, comparative economic systems, political and social philosophy, legal theory, and even cognitive psychology. Hayek remains one of the most intriguing intellectual figures of our time.
7784	dbpedia	2	42	https://www.thenation.com/article/archive/nietzsches-marginal-children-friedrich-hayek/	en	Nietzsche’s Marginal Children: On Friedrich Hayek	https://www.thenation.co…hhayek_ftr_0.jpg	https://www.thenation.co…hhayek_ftr_0.jpg	[ "https://www.facebook.com/tr?id=233793277040432&ev=PageView&noscript=1", "https://www.thenation.com/wp-content/uploads/2024/07/cover0824.jpg", "https://www.thenation.com/cdn-cgi/image/width=340,quality=80,format=auto/wp-content/uploads/2017/07/denmark-sg-img.jpg", "https://www.thenation.com/cdn-cgi/image/width=340,quality=80,format=auto/wp-content/uploads/2017/08/charlottesville-torches-rtr-img.jpg" ]	[]	[]	[ "" ]	null	[ "Corey Robin", "Steve Brodner", "John Nichols", "Laura Flanders", "Jeet Heer", "Sasha Abramsky", "The Nation", "Mychal Denzel Smith", "www.thenation.com" ]	2013-05-07T22:38:29+00:00	The Nation Magazine	en	https://www.thenation.com/wp-content/themes/thenation-2023/images/favicon.ico?ver=3.0	The Nation	https://www.thenation.com/article/archive/nietzsches-marginal-children-friedrich-hayek/	In the last half-century of American politics, conservatism has hardened around the defense of economic privilege and rule. Whether it’s the libertarianism of the GOP or the neoliberalism of the Democrats, that defense has enabled an upward redistribution of rights and a downward redistribution of duties. The 1 percent possesses more than wealth and political influence; it wields direct and personal power over men and women. Capital governs labor, telling workers what to say, how to vote and when to pee. It has all the substance of noblesse and none of the style of oblige. That many of its most vocal defenders believe Barack Obama to be their mortal enemy—a socialist, no less—is a testament less to the reality about which they speak than to the resonance of the vocabulary they deploy. The Nobel Prize–winning economist Friedrich Hayek is the leading theoretician of this movement, formulating the most genuinely political theory of capitalism on the right we’ve ever seen. The theory does not imagine a shift from government to the individual, as is often claimed by conservatives; nor does it imagine a simple shift from the state to the market or from society to the atomized self, as is sometimes claimed by the left. Rather, it recasts our understanding of politics and where it might be found. This may explain why the University of Chicago chose to reissue Hayek’s The Constitution of Liberty two years ago after the fiftieth anniversary of its publication. Like The Road to Serfdom (1944), which a swooning Glenn Beck catapulted to the bestseller list in 2010, The Constitution of Liberty is a text, as its publisher says, of “our present moment.” But to understand that text and its influence, it’s necessary to turn away from contemporary America to fin de siècle Vienna. The seedbed of Hayek’s arguments is the half-century between the “marginal revolution,” which changed the field of economics in the late nineteenth century, and the collapse of the Habsburg monarchy in 1918. It is by now a commonplace of European cultural history that a dying Austro-Hungarian Empire gave birth to modernism, psychoanalysis and fascism. Yet from the vortex of Vienna came not only Wittgenstein, Freud and Hitler but also Hayek, who was born and educated in the city, and the Austrian school of economics. Friedrich Nietzsche figures critically in this story, less as an influence than a diagnostician. This will strike some as an improbable claim: Wasn’t Nietzsche contemptuous of capitalists, capitalism and economics? Yes, he was, and for all his reading in political economy, he never wrote a treatise on politics or economics. And despite the long shadow he cast over the Viennese avant-garde, he is hardly ever cited by the economists of the Austrian school. Yet no one understood better than Nietzsche the social and cultural forces that would shape the Austrians: the demise of an ancient ruling class; the raising of the labor question by trade unions and socialist parties; the inability of an ascendant bourgeoisie to crush or contain democracy in the streets; the need for a new ruling class in an age of mass politics. The relationship between Nietzsche and the free-market right—which has been seeking to put labor back in its box since the nineteenth century, and now, with the help of the neoliberal left, has succeeded—is thus one of elective affinity rather than direct influence, at the level of idiom rather than policy. Popular "swipe left below to view more authors"Swipe → Donald Trump Is Already Planting the Seeds of the Next Insurrection Donald Trump Is Already Planting the Seeds of the Next Insurrection Jeet Heer When Will the Biden Dead-Enders Admit They Were Wrong? When Will the Biden Dead-Enders Admit They Were Wrong? Joshua A. Cohen The True Source of Trump’s Delusions: The Gospel of Positive Thinking The True Source of Trump’s Delusions: The Gospel of Positive Thinking Chris Lehmann Israel Canceled the FIFA Palestine Cup for No Apparent Reason Israel Canceled the FIFA Palestine Cup for No Apparent Reason Dave Zirin “One day,” Nietzsche wrote in Ecce Homo, “my name will be associated with the memory of something tremendous, a crisis without equal on earth, the most profound collision of conscience.” It is one of the ironies of intellectual history that the terms of the collision can best be seen in the rise of a discourse that Nietzsche, in all likelihood, would have despised. * * * In 1869, Nietzsche was appointed professor of classical philology at Basel University. Like most junior faculty, he was bedeviled by meager wages and bore major responsibilities, such as teaching fourteen hours a week, Monday through Friday, beginning at 7 am. He also sat on multiple committees and covered for senior colleagues who couldn’t make their classes. He lectured to the public on behalf of the university. He dragged himself to dinner parties. Yet within three years he managed to complete The Birth of Tragedy, a minor masterwork of modern literature, which he dedicated to his close friend and “sublime predecessor” Richard Wagner. One chapter, however, he withheld from publication. In 1872, Nietzsche was invited to spend the Christmas holidays with Wagner and his wife Cosima, but sensing a potential rift with the composer, he begged off and sent a gift instead. He bundled “The Greek State” with four other essays, slapped a title onto a cover page (Five Prefaces to Five Unwritten Books), and mailed the leather-bound text to Cosima as a birthday present. Richard was offended; Cosima, unimpressed. “Prof. Nietzsche’s manuscript does not restore our spirits,” she sniffed in her diary. Though presented as a sop to a fraying friendship, “The Greek State” reflects the larger European crisis of war and revolution that had begun in 1789 and would come to an end only in 1945. More immediately, it bears the stamp of the Franco-Prussian War, which had broken out in 1870, and the Paris Commune, which was declared the following year. Initially ambivalent about the war, Nietzsche quickly became a partisan of the German cause. “It’s about our culture!” he wrote to his mother. “And for that no sacrifice is too great! This damned French tiger.” He signed up to serve as a medical orderly; Cosima tried to persuade him to stay put in Basel, recommending that he send cigarettes to the front instead. But Nietzsche was adamant. In August 1870, he left for Bavaria with his sister Elisabeth, riding the rails and singing songs. He got his training, headed to the battlefield, and in no time contracted dysentery and diphtheria. He lasted a month. The war lasted for six. A half-million soldiers were killed or wounded, as were countless civilians. The preliminary peace treaty, signed in February 1871, favored the Germans and punished the French, particularly the citizens of Paris, who were forced to shoulder the burden of heavy indemnities to the Prussians. Enraged by its impositions—and a quarter-century of simmering discontent and broken promises—workers and radicals in Paris rose up and took over the city in March. Nietzsche was scandalized, his horror at the revolt inversely proportional to his exaltation over the war. Fearing that the Communards had destroyed the Louvre (they hadn’t), he wrote: The reports of the past few days have been so awful that my state of mind is altogether intolerable. What does it mean to be a scholar in the face of such earthquakes of culture!… It is the worst day of my life. In the quicksilver transmutation of a conventional war between states into a civil war between classes, Nietzsche saw a terrible alchemy of the future: “Over and above the struggle between nations the object of our terror was that international hydra-head, suddenly and so terrifyingly appearing as a sign of quite different struggles to come.” By May, the Commune had been ruthlessly put down at the cost of tens of thousands of lives—much to the delight of the Parisian aesthete-aristocrat Edmond Goncourt: All is well. There has been neither compromise nor conciliation. The solution has been brutal, imposed by sheer force of arms. The solution has saved everyone from the dangers of cowardly compromise. The solution has restored its self-confidence to the Army, which has learnt in the blood of the Communards that it was still capable of fighting…a bleeding like that, by killing the rebellious part of a population, postpones the next revolution by a whole conscription. Of the man who wrote these words and the literary milieu of which he was a part, Nietzsche would later say: “I know these gentlemen inside out, so well that I have really had enough of them already. One has to be more radical: fundamentally they all lack the main thing—‘la force.’ ” * * * The clash of these competing worlds of war and work echoes throughout “The Greek State.” Nietzsche begins by announcing that the modern era is dedicated to the “dignity of work.” Committed to “equal rights for all,” democracy elevates the worker and the slave. Their demands for justice threaten to “swamp all other ideas,” to tear “down the walls of culture.” Modernity has made a monster in the working class: a created creator (shades of Marx and Mary Shelley), it has the temerity to see itself and its labor as a work of art. Even worse, it seeks to be recognized and publicly acknowledged as such. The Greeks, by contrast, saw work as a “disgrace,” because the existence it serves—the finite life that each of us lives—“has no inherent value.” Existence can be redeemed only by art, but art too is premised on work. It is made, and its maker depends on the labor of others; they take care of him and his household, freeing him from the burdens of everyday life. Inevitably, his art bears the taint of their necessity. No matter how beautiful, art cannot escape the pall of its creation. It arouses shame, for in shame “there lurks the unconscious recognition that these conditions” of work “are required for the actual goal” of art to be achieved. For that reason, the Greeks properly kept labor and the laborer hidden from view. Throughout his writing life, Nietzsche was plagued by the vision of workers massing on the public stage—whether in trade unions, socialist parties or communist leagues. Almost immediately upon his arrival in Basel, the First International descended on the city to hold its fourth congress. Nietzsche was petrified. “There is nothing more terrible,” he wrote in The Birth of Tragedy, “than a class of barbaric slaves who have learned to regard their existence as an injustice, and now prepare to avenge, not only themselves, but all generations.” Several years after the International had left Basel, Nietzsche convinced himself that it was slouching toward Bayreuth in order to ruin Wagner’s festival there. And just weeks before he went mad in 1888 and disappeared forever into his own head, he wrote, “The cause of every stupidity today…lies in the existence of a labour question at all. About certain things one does not ask questions.” One can hear in the opening passages of “The Greek State” the pounding march not only of European workers on the move but also of black slaves in revolt. Hegel was brooding on Haiti while he worked out the master-slave dialectic in The Phenomenology of Spirit. Though generations of scholars have told us otherwise, perhaps Nietzsche had a similar engagement in mind when he wrote, “Even if it were true that the Greeks were ruined because they kept slaves, the opposite is even more certain, that we will be destroyed because we fail to keep slaves.” What theorist, after all, has ever pressed so urgently—not just in this essay but in later works as well—the claim that “slavery belongs to the essence of a culture”? What theorist ever had to? Before the eighteenth century, bonded labor was an accepted fact. Now it was the subject of a roiling debate, provoking revolutions and emancipations throughout the world. Serfdom had been eliminated in Russia only a decade before—and in some German states, only a generation before Nietzsche’s birth in 1844—while Brazil would soon become the last state in the Americas to abolish slavery. An edifice of the ages had been brought down by a mere century’s vibrations; is it so implausible that Nietzsche, attuned to the vectors and velocity of decay as he was, would pause to record the earthquake and insist on taking the full measure of its effects? If slavery was one condition of great art, Nietzsche continued in “The Greek State,” war and high politics were another. “Political men par excellence,” the Greeks channeled their agonistic urges into bloody conflicts between cities and less bloody conflicts within them: healthy states were built on the repression and release of these impulses. The arena for conflict created by that regimen gave “society time to germinate and turn green everywhere” and allowed “blossoms of genius” periodically to “sprout forth.” Those blossoms were not only artistic but also political. Warfare sorted society into lower and higher ranks, and from that hierarchy rose “the military genius,” whose artistry was the state itself. The real dignity of man, Nietzsche insisted, lay not in his lowly self but in the artistic and political genius his life was meant to serve and on whose behalf it was to be expended. Instead of the Greek state, however, Europe had the bourgeois state; instead of aspiring to a work of art, states let markets do their work. Politics, Nietzsche complained, had become “an instrument of the stock exchange” rather than the terrain of heroism and glory. With the “specifically political impulses” of Europe so weakened—even his beloved Franco-Prussian War had not revived the spirit in the way that he had hoped—Nietzsche could only “detect dangerous signs of atrophy in the political sphere, equally worrying for art and society.” The age of aristocratic culture and high politics was at an end. All that remained was the detritus of the lower orders: the disgrace of the laborer, the paper chase of the bourgeoisie, the barreling threat of socialism. “The Paris commune,” Nietzsche would later write in his notebooks, “was perhaps no more than minor indigestion compared to what is coming.” Nietzsche had little, concretely, to offer as a counter-volley to democracy, whether bourgeois or socialist. Despite his appreciation of the political impulse and his studious attention to political events in Germany—from the Schleswig-Holstein crisis of the early 1860s to the imperial push of the late 1880s—he remained leery of programs, movements and platforms. The best he could muster was a vague principle: that society is “the continuing, painful birth of those exalted men of culture in whose service everything else has to consume itself,” and the state a “means of setting [that] process of society in motion and guaranteeing its unobstructed continuation.” It was left to later generations to figure out what that could mean in practice—and where it might lead. Down one path might lay fascism; down another, the free market. * * * Around the time—almost to the year—that Nietzsche was launching his revolution of metaphysics and morals, a trio of economists, working separately across three countries, were starting their own. It began with the publication in 1871 of Carl Menger’s Principles of Economics and William Stanley Jevons’s The Theory of Political Economy. Along with Léon Walras’s Elements of Pure Economics, which appeared three years later, these were the European faces—Austrian, English and French-Swiss—of what would come to be called the marginal revolution. The marginalists focused less on supply and production than on the pulsing demand of consumption. The protagonist was not the landowner or the laborer, working his way through the farm, the factory or the firm; it was the universal man in the market whose signature act was to consume things. That’s how market man increased his utility: by consuming something until he reached the point where consuming one more increment of it gave him so little additional utility that he was better off consuming something else. Of such microscopic calculations at the periphery of our estate was the economy made. Though the early marginalists helped transform economics from a humanistic branch of the moral sciences into a technical discipline of the social sciences, they were still able to command an audience and an influence all too rare in contemporary economics. Jevons spent his career as an independent scholar and professor in Manchester and London worrying about his lack of readers, but William Gladstone invited him over to discuss his work, and John Stuart Mill praised it on the floor of Parliament. Keynes tells us that “for a period of half a century, practically all elementary students both of Logic and of Political Economy in Great Britain and also in India and the Dominions were brought up on Jevons.” According to Hayek, the “immediate reception” of Menger’s Principles “can hardly be called encouraging.” Reviewers seemed not to understand it. Two students at the University of Vienna, however, did. One was Friedrich von Wieser, the other Eugen von Böhm-Bawerk, and both became legendary educators and theoreticians. Their students included Hayek; Ludwig von Mises, who attracted a small but devoted following in the United States and elsewhere; and Joseph Schumpeter, dark poet of capitalism’s forces of “creative destruction.” Through Böhm-Bawerk and Wieser, Menger’s text became the groundwork of the Austrian school, whose reach, due in part to the efforts of Mises and Hayek, now extends across the globe. The contributions of Jevons and Menger were multiple, yet each of them took aim at a central postulate of economics shared by everyone from Adam Smith to the socialist left: the notion that labor is a—if not the—source of value. Though adumbrated in the idiom of prices and exchange, the labor theory of value evinced an almost primitive faith in the metaphysical objectivity of the economic sphere—a faith made all the more surprising by the fact that the objectivity of the rest of the social world (politics, religion and morals) had been subject to increasing scrutiny since the Renaissance. Commodities may have come wrapped in the pretty paper of the market, but inside, many believed, were the brute facts of nature: raw materials from the earth and the physical labor that turned those materials into goods. Because those materials were made useful, hence valuable, only by labor, labor was the source of value. That, and the fact that labor could be measured in some way (usually time), lent the world of work a kind of ontological status—and political authority—that had been increasingly denied to the world of courts and kings, lands and lords, parishes and priests. As the rest of the world melted into air, labor was crystallizing as the one true solid. By the time the marginalists came on the scene, the most politically threatening version of the labor theory of value was associated with the left. Though Marx would significantly revise and recast it in his mature writings, the simple notion that labor produces value remained associated with his name—and even more so with that of his competitor Ferdinand Lasalle, about whom Nietzsche read a fair amount—as well as with the larger socialist and trade union movements of which he was a part. That association helped set the stage for the marginalists’ critique. Admittedly, the relationship between marginalism and anti-socialism is complex. On the one hand, there is little evidence to suggest that the first-generation marginalists had heard of, much less read, Marx, at least not at this early stage of their careers. Much more than the threat of socialism underpinned the emergence of marginalist economics, which was as opposed to traditional defenses of the market as it was to the market’s critics. By the twentieth century, moreover, many marginalists were on the left and used their ideas to help construct the institutions of social democracy; even Walras and Alfred Marshall, another early marginalist, were sympathetic to the claims of the left. And on some readings, the mature Marx shares more with the constructivist thrusts of marginalism than he does with the objectivism of the labor theory of value. On the other hand, Jevons was a tireless polemicist against trade unions, which he identified as “the best example…of the evils and disasters” attending the democratic age. Jevons saw marginalism as a critical antidote to the labor movement and insisted that its teachings be widely transmitted to the working classes. “To avoid such a disaster,” he argued, “we must diffuse knowledge” to the workers—empowered as they were by the vote and the strike—“and the kind of knowledge required is mainly that comprehended in the science of political economy.” Menger interrupted his abstract reflections on value to make the point that while it may “appear deplorable to a lover of mankind that possession of capital or a piece of land often provides the owner a higher income…than the income received by a laborer,” the “cause of this is not immoral.” It was “simply that the satisfaction of more important human needs depends upon the services of the given amount of capital or piece of land than upon the services of the laborer.” Any attempt to get around that truth, he warned, “would undoubtedly require a complete transformation of our social order.” Finally, there is no doubt that the marginalists of the Austrian school, who would later prove so influential on the American right, saw their project as primarily anti-Marxist and anti-socialist. “The most momentous consequence of the theory,” declared Wieser in 1891, “is, I take it, that it is false, with the socialists, to impute to labor alone the entire productive return.” * * * With its division of intellectual labor, the modern academy often separates economics from ethics and philosophy. Earlier economists and philosophers did not make that separation. Even Nietzsche recognized that economics rested on genuine moral and philosophical premises, many of which he found dubious, and that it had tremendous moral and political effects, all of which he detested. In The Wanderer and His Shadow, Nietzsche criticized “our economists” for having “not yet wearied of scenting a similar unity in the word ‘value’ and of searching after the original root-concept of the word.” In his preliminary outline for the summa he hoped to publish on “the will to power,” he scored the “nihilistic consequences of the ways of thinking in politics and economics.” For that reason, Nietzsche saw in labor’s appearance more than an economic theory of goods: he saw a terrible diminution of the good. Morals must be “understood as the doctrine of the relations of supremacy,” he wrote in Beyond Good and Evil; every morality “must be forced to bow…before the order of rank.” But like so many before them, including the Christian slave and the English utilitarian, the economist and the socialist promoted an inferior human type—and an inferior set of values—as the driving agent of the world. Nietzsche saw in this elevation not only a transformation of values but also a loss of value and, potentially, the elimination of value altogether. Conservatives from Edmund Burke to Robert Bork have conflated the transformation of values with the end of value. Nietzsche, on occasion, did too: “What does nihilism mean?” he asked himself in 1887. “That the highest values devaluate themselves.” The nihilism consuming Europe was best understood as a democratic “hatred against the order of rank.” Part of Nietzsche’s worry was philosophical: How was it possible in a godless world, naturalistically conceived, to deem anything of value? But his concern was also cultural and political. Because of democracy, which was “Christianity made natural,” the aristocracy had lost “its naturalness”—that is, the traditional vindication of its power. How then might a hierarchy of excellence, aesthetic and political, re-establish itself, defend itself against the mass—particularly a mass of workers—and dominate that mass? As Nietzsche wrote in the late 1880s: A reverse movement is needed—the production of a synthetic, summarizing, justifying man for whose existence this transformation of mankind into a machine is a precondition, as a base on which he can invent his higher form of being. He needs the opposition of the masses, of the “leveled,” a feeling of distance from them. [He] stands on them, he lives off them. This higher form of aristocracy is that of the future.—Morally speaking, this overall machinery, this solidarity of all gears, represents a maximum of exploitation of man; but it presupposes those on whose account this exploitation has meaning. Nietzsche’s response to that challenge was not to revert or resort to a more objective notion of value: that was neither possible nor desirable. Instead, he embraced one part of the modern understanding of value—its fabricated nature—and turned it against its democratic and Smithian premises. Value was indeed a human creation, Nietzsche acknowledged, and as such could just as easily be conceived as a gift, an honorific bestowed by one man upon another. “Through esteeming alone is there value,” Nietzsche has Zarathustra declare; “to esteem is to create.” Value was not made with coarse and clumsy hands; it was enacted with an appraising gaze, a nod of the head signifying a matchless abundance of taste. It was, in short, aristocratic. While slaves had once created value in the form of Christianity, they had achieved that feat not through their labor but through their censure and praise. They had also done it unwittingly, acting upon a deep and unconscious compulsion: a sense of inferiority, a rage against their powerlessness, and a desire for revenge against their betters. That combination of overt impotence and covert drive made them ill-suited to creating values of excellence. Nietzsche explained in Beyond Good and Evil that the self-conscious exercise and enjoyment of power made the noble type a better candidate for the creation of values in the modern world, for these were values that would have to break with the slave morality that had dominated for millennia. Only insofar as “it knows itself to be that which first accords honor to things” can the noble type truly be “value-creating.” Labor belonged to nature, which is not capable of generating value. Only the man who arrayed himself against nature—the artist, the general, the statesman—could claim that role. He alone had the necessary refinements, wrought by “that pathos of distance which grows out of ingrained difference between strata,” to appreciate and bestow value: upon men, practices and beliefs. Value was not a product of the prole; it was an imposition of peerless taste. In the words of The Gay Science: Whatever has value in our world now does not have value in itself, according to its nature—nature is always value-less, but has been given value at some time, as a present—and it was we who gave and bestowed it. That was in 1882. Just a decade earlier, Menger had written: “Value is therefore nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs, that is, to our lives and well-being.” Jevons’s position was identical, and like Nietzsche, both Menger and Jevons thought value was instead a high or low estimation put by a man upon the things of life. But lest that desiring self be reduced to a simple creature of tabulated needs, Menger and Jevons took care to distinguish their positions from traditional theories of utility. Jevons, for example, was prepared to follow Jeremy Bentham in his definition of utility as “that property in an object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness.” He thought this “perfectly expresses the meaning of the word Economy.” But he also insisted on a critical rider: “provided that the will or inclination of the person concerned is taken as the sole criterion, for the time, of what is good and desirable.” Our expressed desires and aversions are not measures of our objective or underlying good; there is no such thing. Nor can we be assured that those desires or aversions will bring us pleasure or pain. What we want or don’t want is merely a representation, a snapshot of the motions of our will—that black box of preference and partiality that so fascinated Nietzsche precisely because it seemed so groundless and yet so generative. Every mind is inscrutable to itself: we lack, said Jevons, “the means of measuring directly the feelings of the human heart.” The inner life is inaccessible to our inspections; all we can know are its effects, the will it powers and the actions it propels. “The will is our pendulum,” declared Jevons, a representation of forces that cannot be seen but whose effects are nevertheless felt, “and its oscillations are minutely registered in all the price lists of the markets.” Menger thought the value of any good was connected to our needs, but he was extraordinarily attuned to the complexity—and contingency—of that relationship. Needs, wrote Menger, “at least as concerns their origin, depend upon our wills or on our habits.” Needs are more than the givens of our biology or psyche; they are the desideratum of our volitions and practices, which are idiosyncratic and arbitrary. Only when our needs finally “come into existence”—that is, only when we become aware of them—can we truly say that “there is no further arbitrary element” in the process of value formation. Even then, needs must pass through a series of checkpoints before they can enter the land of value. Awareness of a need, says Menger, entails a comprehensive knowledge of how the need might be fulfilled by a particular good, how that good might contribute to our lives, and how (and whether) command of that good is necessary for the satisfaction of that need. That last bit of knowledge requires us to look at the external world: to ask how much of that good is available to us, to consider how many sacrifices we must bear—how many satisfactions we are willing to forgo—in order to secure it. Only when we have answered these questions are we ready to speak of value, which Menger reminds us is “the importance we attribute to the satisfaction of our needs.” Value is thus “a judgment” that “economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being.” It “does not exist outside the consciousness of men.” Even though previous economists had insisted on the “objectification of the value of goods,” Menger, like Jevons and Nietzsche, concludes that value “is entirely subjective in nature.” * * * In their war against socialism, the philosophers of capital faced two challenges. The first was that by the early twentieth century, socialism had cornered the market on morality. As Mises complained in his 1932 preface to the second edition of Socialism, “Any advocate of socialistic measures is looked upon as the friend of the Good, the Noble, and the Moral, as a disinterested pioneer of necessary reforms, in short, as a man who unselfishly serves his own people and all humanity.” Indeed, with the help of kindred notions such as “social justice,” socialism seemed to be the very definition of morality. Nietzsche had long been wise to this insinuation; one source of his discontent with religion was his sense that it had bequeathed to modernity an understanding of what morality entailed (selflessness, universality, equality) such that only socialism and democracy could be said to fulfill it. But where Nietzsche’s response to the equation of socialism and morality was to question the value of morality, at least as it had been customarily understood, economists like Mises and Hayek pursued a different path, one Nietzsche would never have dared to take: they made the market the very expression of morality. Moralists traditionally viewed the pursuit of money and goods as negative or neutral; the Austrians claimed it embodies our deepest values and commitments. “The provision of material goods,” declared Mises, “serves not only those ends which are usually termed economic, but also many other ends.” All of us have ends or ultimate purposes in life: the cultivation of friendship, the contemplation of beauty, a lover’s companionship. We enter the market for the sake of those ends. Economic action thus “consists firstly in valuation of ends, and then in the valuation of the means leading to these ends. All economic activity depends, therefore, upon the existence of ends. Ends dominate economy and alone give it meaning.” We simply cannot speak, writes Hayek in The Road to Serfdom, of “purely economic ends separate from the other ends of life.” This claim, however, could just as easily be enlisted as an argument for socialism. In providing men and women with the means of life—housing, food, healthcare—the socialist state frees them to pursue the ends of life: beauty, knowledge, wisdom. The Austrians went further, insisting that the very decision about what constitutes means and ends was itself a judgment of value. Any economic situation confronts us with the necessity of choice, of having to deploy our limited resources—whether time, money or effort—on behalf of some end. In making that choice, we reveal which of our ends matters most to us: which is higher, which is lower. “Every man who, in the course of economic activity, chooses between the satisfaction of two needs, only one of which can be satisfied, makes judgments of value,” says Mises. For those choices to reveal our ends, our resources must be finite—unlimited time, for example, would obviate the need for choice—and our choice of ends unconstrained by external interference. The best, indeed only, method for guaranteeing such a situation is if money (or its equivalent in material goods) is the currency of choice—and not just of economic choice, but of all of our choices. As Hayek writes in The Road to Serfdom: So long as we can freely dispose over our income and all our possessions, economic loss will always deprive us only of what we regard as the least important of the desires we were able to satisfy. A “merely” economic loss is thus one whose effect we can still make fall on our less important needs…. Economic changes, in other words, usually affect only the fringe, the “margin,” of our needs. There are many things which are more important than anything which economic gains or losses are likely to affect, which for us stand high above the amenities and even above many of the necessities of life which are affected by the economic ups and downs. Should the government decide which of our needs are “merely economic,” we would be deprived of the opportunity to decide whether these are higher or lower goods, the marginal or mandatory items of our flourishing. So vast is the gulf between each soul, so separate and unequal are we, that it is impossible to assume anything universal about the sources and conditions of human happiness, a point Nietzsche and Jevons would have found congenial. The judgment of what constitutes a means, what an end, must be left to the individual self. Hayek again: Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends. And whoever has sole control of the means must also determine which ends are to be served, which values are to be rated higher and which lower—in short what men should believe and strive for. While the economic is, in one sense readily acknowledged by Hayek, the sphere of our lower needs, it is in another and altogether more important sense the anvil upon which we forge our notion of what is lower and higher in this world, our morality. “Economic values,” he writes, “are less important to us than many things precisely because in economic matters we are free to decide what to us is more, and what less, important.” But we can be free to make those choices only if they are left to us to make—and, paradoxically, if we are forced to make them. If we didn’t have to choose, we’d never have to value anything. * * * By imposing this drama of choice, the economy becomes a theater of self-disclosure, the stage upon which we discover and reveal our ultimate ends. It is not in the casual chatter of a seminar or the cloistered pews of a church that we determine our values; it is in the duress—the ordeal—of our lived lives, those moments when we are not only free to choose but forced to choose. “Freedom to order our own conduct in the sphere where material circumstances force a choice upon us,” Hayek wrote, “is the air in which alone moral sense grows and in which moral values are daily re-created.” While progressives often view this discourse of choice as either dime-store morality or fabricated scarcity, the Austrians saw the economy as the disciplining agent of all ethical action, a moment of—and opportunity for—moral artistry. Freud thought the compressions of the dream world made every man an artist; these other Austrians thought the compulsions of the economy made every man a moralist. It is only when we are navigating its narrow channels—where every decision to expend some quantum of energy requires us to make a calculation about the desirability of its posited end—that we are brought face to face with ourselves and compelled to answer the questions: What do I believe? What do I want in this world? From this life? While there are precedents for this argument in Menger’s theory of value (the fewer opportunities there are for the satisfaction of our needs, Menger says, the more our choices will reveal which needs we value most), its true and full dimensions can best be understood in relation to Nietzsche. As much as Nietzsche railed against the repressive effect of laws and morals on the highest types, he also appreciated how much “on earth of freedom, subtlety, boldness, dance, and masterly sureness” was owed to these constraints. Confronted with a set of social strictures, the diverse and driving energies of the self were forced to draw upon unknown and untapped reserves of ingenuity—either to overcome these obstacles or to adapt to them with the minimum of sacrifice. The results were novel, value-creating. Nietzsche’s point was primarily aesthetic. Contrary to the romantic notion of art being produced by a process of “letting go,” Nietzsche insisted that the artist “strictly and subtly…obeys thousandfold laws.” The language of invention—whether poetry, music or speech itself—is bound by “the metrical compulsion of rhyme and rhythm.” Such laws are capricious in their origin and tyrannical in their effect. That is the point: from that unforgiving soil of power and whimsy rises the most miraculous increase. Not just in the arts—Goethe, say, or Beethoven—but in politics and ethics as well: Napoleon, Caesar, Nietzsche himself (“Genuine philosophers…are commanders and legislators: they say, ‘thus it shall be!’”). One school would find expression for these ideas in fascism. Writers like Ernst Jünger and Carl Schmitt imagined political artists of great novelty and originality forcing their way through or past the filtering constraints of everyday life. The leading legal theorist of the Third Reich, Schmitt looked to those extraordinary instances in politics—war, the “decision,” the “exception”—when “the power of real life,” as he put it in Political Theology, “breaks through the crust of a mechanism that has become torpid by repetition.” In that confrontation between mechanism and real life, the man of exception would find or make his moment: by taking an unauthorized decision, ordaining a new regime of law, or founding a political order. In each case, something was “created out of nothingness.” It was the peculiar—and, in the long run, more significant—genius of the Austrian school to look for these moments and experiences not in the political realm but in the marketplace. Money in a capitalist economy, Hayek came to realize, could best be understood and defended in Nietzschean terms: as “the medium through which a force”—the self’s “desire for power to achieve unspecified ends”—“makes itself felt.” * * * The second challenge confronting the philosophers of capital was more daunting. While Nietzsche’s transvaluation of values gave pride of place to the highest types of humanity—values were a gift, the philosopher their greatest source—the political implications of marginalism were more ambidextrous. If on one reading it was the capitalist who gave value to the worker, on another it was the worker—in his capacity as consumer—who gave value to capital. Social democrats pursued the latter argument with great zeal. The result was the welfare state, with its emphasis on high wages and good benefits—as well as unionization—as the driving agent of mass demand and economic prosperity. More than a macroeconomic policy, social democracy (or liberalism, as it was called in America) reflected an ethos of the citizen-worker-consumer as the creator and center of the economy. Long after economists had retired the labor theory of value, the welfare state remained lit by its afterglow. The political economy of the welfare state may have been marginalist, but its moral economy was workerist. The midcentury right was in desperate need of a response that, squaring Nietzsche’s circle, would clear a path for aristocratic action in the capitalist marketplace. It needed not simply an alternative economics but an answering vision of society. Schumpeter provided one, Hayek another. Schumpeter’s entrepreneur is one of the more enigmatic characters of modern social theory. He is not inventive, heroic or charismatic. “There is surely no trace of any mystic glamour about him,” Schumpeter writes in Capitalism, Socialism and Democracy. His instincts and impulses are confined to the office and the counting table. Outside those environs, he cannot “say boo to a goose.” Yet it is this nothing, this great inscrutable blank, that will “bend a nation to his will”—not unlike the father figures of a Mann or Musil novel. What the entrepreneur has—or, better, is—are force and will. As Schumpeter explains in a 1927 essay, the entrepreneur possesses “extraordinary physical and nervous energy.” That energy gives him focus (the maniacal, almost brutal, ability to shut out what is inessential) and stamina. In those late hours when lesser beings have “given way to a state of exhaustion,” he retains his “full force and originality.” By “originality,” Schumpeter means something peculiar: “receptivity to new facts.” It is the entrepreneur’s ability to recognize that sweet spot of novelty and occasion (an untried technology, a new method of production, a different way to market or distribute a product) that enables him to revolutionize the way business gets done. Part opportunist, part fanatic, he is “a leading man,” Schumpeter suggests in Capitalism, Socialism and Democracy, overcoming all resistance in order to create the new modes and orders of everyday life. Schumpeter is careful to distinguish entrepreneurialism from politics as it is conventionally understood: the entrepreneur’s power “does not readily expand…into the leadership of nations”; “he wants to be left alone and to leave politics alone.” Even so, the entrepreneur is best understood as neither an escape from nor an evasion of politics but as its sublimation, the relocation of politics in the economic sphere. Rejecting the static models of other economists—equilibrium is death, he says—Schumpeter depicts the economy as a dramatic confrontation between rising and falling empires (firms). Like Machiavelli in The Prince, whose vision Nietzsche described as “perfection in politics,” Schumpeter identifies two types of agents struggling for position and permanence amid great flux: one is dynastic and lawful, the other upstart and intelligent. Both are engaged in a death dance, with the former in the potentially weaker position unless it can innovate and break with routine. Schumpeter often resorts to political and military metaphors to describe this dance. Production is “a history of revolutions.” Competitors “command” and wield ”pieces of armor.” Competition “strikes” at the “foundations” and “very lives” of firms; entrepreneurs in equilibrium “find themselves in much the same situations as generals would in a society perfectly sure of permanent peace.” In the same way that Schmitt imagines peace as the end of politics, Schumpeter sees equilibrium as the end of economics. Against this backdrop of dramatic, even lethal, contest, the entrepreneur emerges as a legislator of values and new ways of being. The entrepreneur demonstrates a penchant for breaking with “the routine tasks which everybody understands.” He overcomes the multiple resistances of his world—“from simple refusal either to finance or to buy a new thing, to physical attack on the man who tries to produce it.” To act with confidence beyond the range of familiar beacons and to overcome that resistance requires aptitudes that are present in only a small fraction of the population and that define the entrepreneurial type. The entrepreneur, in other words, is a founder. As Schumpeter describes him in The Theory of Economic Development: There is the dream and the will to found a private kingdom, usually, though not necessarily, also a dynasty. The modern world really does not know any such positions, but what may be attained by industrial and commercial success is still the nearest approach to medieval lordship possible to modern man. That may be why his inner life is so reminiscent of the Machiavellian prince, that other virtuoso of novelty. All of his energy and will, the entirety of his force and being, is focused outward, on the enterprise of creating a new order. And yet even as he sketched the broad outline of this legislator of value, Schumpeter sensed that his days were numbered. Innovation was increasingly the work of departments, committees and specialists. The modern corporation “socializes the bourgeois mind.” In the same way that modern regiments had destroyed the “very personal affair” of medieval battle, so did the corporation eliminate the need for “individual leadership acting by virtue of personal force and personal responsibility for success.” The “romance of earlier commercial adventure” was “rapidly wearing away.” With the entrepreneurial function in terminal decline, Schumpeter’s experiment in economics as great politics seemed to be approaching an end. * * * Hayek offered an alternative account of the market as the proving ground of aristocratic action. Schumpeter had already hinted at it in a stray passage in Capitalism, Socialism and Democracy. Taking aim at the notion of a rational chooser who knows what he wants, wants what is best (for him, at any rate) and works efficiently to get it, Schumpeter invoked a half-century of social thought—Le Bon, Pareto and Freud—to emphasize not only “the importance of the extra-rational and irrational element in our behavior,” but also the power of capital to shape the preferences of the consumer. Consumers do not quite live up to the idea that the economic textbooks used to convey. On the one hand, their wants are nothing like as definite, and their actions upon those wants nothing like as rational and prompt. On the other hand, they are so amenable to the influence of advertising and other methods of persuasion that producers often seem to dictate to them instead of being directed by them. In The Constitution of Liberty, Hayek developed this notion into a full-blown theory of the wealthy and the well-born as an avant-garde of taste, as makers of new horizons of value from which the rest of humanity took its bearings. Instead of the market of consumers dictating the actions of capital, it would be capital that would determine the market of consumption—and beyond that, the deepest beliefs and aspirations of a people. The distinction that Hayek draws between mass and elite has not received much attention from his critics or his defenders, bewildered or beguiled as they are by his repeated invocations of liberty. Yet a careful reading of Hayek’s argument reveals that liberty for him is neither the highest good nor an intrinsic good. It is a contingent and instrumental good (a consequence of our ignorance and the condition of our progress), the purpose of which is to make possible the emergence of a heroic legislator of value. Civilization and progress, Hayek argues, depend upon each of us deploying knowledge that is available for our use yet inaccessible to our reason. The computer on which I am typing is a repository of centuries of mathematics, science and engineering. I know how to use it, but I don’t understand it. Most of our knowledge is like that: we know the “how” of things—how to turn on the computer, how to call up our word-processing program and type—without knowing the “that” of things: that electricity is the flow of electrons, that circuits operate through binary choices and so on. Others possess the latter kind of knowledge; not us. That combination of our know-how and their knowledge advances the cause of civilization. Because they have thought through how a computer can be optimally designed, we are free to ignore its transistors and microchips; instead, we can order clothes online, keep up with old friends as if they lived next door, and dive into previously inaccessible libraries and archives in order to produce a novel account of the Crimean War. We can never know what serendipity of knowledge and know-how will produce the best results, which union of genius and basic ignorance will yield the greatest advance. For that reason, individuals—all individuals—must be free to pursue their ends, to exploit the wisdom of others for their own purposes. Allowing for the uncertainties of progress is the greatest guarantor of progress. Hayek’s argument for freedom rests less on what we know or want to know than on what we don’t know, less on what we are morally entitled to as individuals than on the beneficial consequences of individual freedom for society as a whole. In fact, Hayek continues, it is not really my freedom that I should be concerned about; nor is it the freedom of my friends and neighbors. It is the freedom of that unknown and untapped figure of invention to whose imagination and ingenuity my friends and I will later owe our greater happiness and flourishing: “What is important is not what freedom I personally would like to exercise but what freedom some person may need in order to do things beneficial to society. This freedom we can assure to the unknown person only by giving it to all.” Deep inside Hayek’s understanding of freedom, then, is the notion that the freedom of some is worth more than the freedom of others: “The freedom that will be used by only one man in a million may be more important to society and more beneficial to the majority than any freedom that we all use.” Hayek cites approvingly this statement of a nineteenth-century philosopher: “It may be of extreme importance that some should enjoy liberty…although such liberty may be neither possible nor desirable for the great majority.” That we don’t grant freedom only to that individual is due solely to the happenstance of our ignorance: we cannot know in advance who he might be. “If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty.” * * * As this reference to “future wants and desires” suggests, Hayek has much more in mind than producers responding to a pre-existing market of demand; he’s talking about men who create new markets—and not just of wants or desires, but of basic tastes and beliefs. The freedom Hayek cares most about is the freedom of those legislators of value who shape and determine our ends. The overwhelming majority of men and women, Hayek says, are simply not capable of breaking with settled patterns of thought and practice; given a choice, they would never opt for anything new, never do anything better than what they do now. Action by collective agreement is limited to instances where previous efforts have already created a common view, where opinion about what is desirable has become settled, and where the problem is that of choosing between possibilities already generally recognized, not that of discovering new possibilities. While some might claim that Hayek’s argument here is driven less by a dim view of ordinary men and women than his dyspepsia about politics, he explicitly excludes “the decision of some governing elite” from the acid baths of his skepticism. Nor does he hide his misgivings about the individual abilities of wage laborers who comprise the great majority. The working stiff is a being of limited horizons. Unlike the employer or the “independent,” both of whom are dedicated to “shaping and reshaping a plan of life,” the worker’s orientation is “largely a matter of fitting himself into a given framework.” He lacks responsibility, initiative, curiosity and ambition. Though some of this is by necessity—the workplace does not countenance “actions which cannot be prescribed or which are not conventional”—Hayek insists that this is “not only the actual but the preferred position of the majority of the population.” The great majority enjoy submitting to the workplace regime because it “gives them what they mainly want: an assured fixed income available for current expenditure, more or less automatic raises, and provision for old age. They are thus relieved of some of the responsibilities of economic life.” Simply put, these are people for whom taking orders from a superior is not only a welcome relief but a prerequisite of their fulfillment: “To do the bidding of others is for the employed the condition of achieving his purpose.” It thus should come as no surprise that Hayek believes in an avant-garde of tastemakers, whose power and position give them a vantage from which they can not only see beyond the existing horizon but also catch a glimpse of new ones: Only from an advanced position does the next range of desires and possibilities become visible, so that the selection of new goals and the effort toward their achievement will begin long before the majority can strive for them. These horizons include everything from “what we regard as good or beautiful,” to the ambitions, goals and ends we pursue in our everyday lives, to “the propagation of new ideas in politics, morals, and religion.” On all of these fronts, it is the avant-garde that leads the way and sets our parameters. More interesting is how explicit and insistent Hayek is about linking the legislation of new values to the possession of vast amounts of wealth and capital, even—or especially—wealth that has been inherited. Often, says Hayek, it is only the very rich who can afford new products or tastes. Lavishing money on these boutique items, they give producers the opportunity to experiment with better designs and more efficient methods of production. Thanks to their patronage, producers will find cheaper ways of making and delivering these products—cheap enough, that is, for the majority to enjoy them. What was before a luxury of the idle rich—stockings, automobiles, piano lessons, the university—is now an item of mass consumption. The most important contribution of great wealth, however, is that it frees its possessor from the pursuit of money so that he can pursue nonmaterial goals. Liberated from the workplace and the rat race, the “idle rich”—a phrase Hayek seeks to reclaim as a positive good—can devote themselves to patronizing the arts, subsidizing worthy causes like abolition or penal reform, founding new philanthropies and cultural institutions. Those born to wealth are especially important: not only are they the beneficiaries of the higher culture and nobler values that have been transmitted across the generations—Hayek insists that we will get a better elite if we allow parents to pass their fortunes on to their children; requiring a ruling class to start fresh with every generation is a recipe for stagnation, for having to reinvent the wheel—but they are immune to the petty lure of money. “The grosser pleasures in which the newly rich often indulge have usually no attraction for those who have inherited wealth.” (How Hayek reconciles this position with the agnosticism about value he expresses in The Road to Serfdom remains unclear.) The men of capital, in other words, are best understood not as economic magnates but as cultural legislators: “However important the independent owner of property may be for the economic order of a free society, his importance is perhaps even greater in the fields of thought and opinion, of tastes and beliefs.” While this seems to be a universal truth for Hayek, it is especially true in societies where wage labor is the rule. The dominance of paid employment has terrible consequences for the imagination, which are most acutely felt by the producers of that imagination: “There is something seriously lacking in a society in which all the intellectual, moral, and artistic leaders belong to the employed classes…. Yet we are moving everywhere toward such a position.” When labor becomes the norm, in both senses of the term, culture doesn’t stand a chance. * * * In a virtuoso analysis of what he calls “The Intransigent Right,” the British historian Perry Anderson identifies four figures of the twentieth-century conservative canon: Schmitt, Hayek, Michael Oakeshott and Leo Strauss. Strauss and Schmitt come off best (the sharpest, most profound and far-seeing), Oakeshott the worst, and Hayek somewhere in between. This hierarchy of judgment is not completely surprising. Anderson has never taken seriously the political theory produced by a nation of shopkeepers, so the receptivity of the English to Oakeshott and Hayek, who became a British subject in 1938, renders them almost irresistible targets for his critique. Anderson’s cosmopolitan indifference to the indiscreet charms of the Anglo bourgeoisie usually makes him the most sure-footed of guides, but in Hayek’s case it has led him astray. Like many on the left, Anderson is so taken with the bravura and brutality of Strauss’s and Schmitt’s self-styled realism that he can’t grasp the far greater daring and profundity of Hayek’s political theory of shopkeeping—his effort to locate great politics in the economic relations of capitalism. What distinguishes the theoretical men of the right from their counterparts on the left, Anderson writes, is that their voices were “heard in the chancelleries.” Yet whose voice has been more listened to, across decades and continents, than Hayek’s? Schmitt and Strauss have attracted readers from all points of the political spectrum as writers of dazzling if disturbing genius, but the two projects with which they are most associated—European fascism and American neoconservatism—have never generated the global traction or gathering energy that neoliberalism has now sustained for more than four decades. It would be a mistake to draw too sharp a line between the marginal children of Nietzsche—with political man on one branch of the family tree, economic man on the other. Hayek, at times, could sound the most Schmittian notes. At the height of Augusto Pinochet’s power in Chile, Hayek told a Chilean interviewer that when any “government is in a situation of rupture, and there are no recognized rules, rules have to be created.” The sort of situation he had in mind was not anarchy or civil war but Allende-style social democracy, where the government pursues “the mirage of social justice” through administrative and increasingly discretionary means. Even in The Constitution of Liberty, an extended paean to the notion of a “spontaneous order” that slowly evolves over time, we get a brief glimpse of “the lawgiver” whose “task” it is “to create conditions in which an orderly arrangement can establish and ever renew itself.” (“Of the modern German writings” on the rule of law, Hayek also says, Schmitt’s “are still among the most learned and perceptive.”) Current events seemed to supply Hayek with an endless parade of candidates. Two years after its publication in 1960, he sent The Constitution of Liberty to Portuguese strongman António Salazar, with a cover note professing his hope that it might assist the dictator “in his endeavour to design a constitution which is proof against the abuses of democracy.” Pinochet’s Constitution of 1980 is named after the 1960 text. Still, it’s difficult to escape the conclusion that though Nietzschean politics may have fought the battles, Nietzschean economics won the war. Is there any better reminder of that victory than the Detlev-Rohwedder-Haus in Berlin? Built to house the Luftwaffe during World War II, it is now the headquarters of the German Ministry of Finance.
7784	dbpedia	3	18	https://www.newworldencyclopedia.org/entry/John_Richard_Hicks	en	John Richard Hicks	https://www.newworldency…avicon-32x32.png	https://www.newworldency…avicon-32x32.png	[ "https://www.newworldencyclopedia.org/images/nwe_header.jpg", "https://www.newworldencyclopedia.org/d/images/thumb/f/f4/Kaldor-Hicks-en.svg/300px-Kaldor-Hicks-en.svg.png", "https://www.newworldencyclopedia.org/d/images/thumb/b/b9/Islm.svg/200px-Islm.svg.png", "https://static.newworldencyclopedia.org/skins/common/images/Cc.logo.circle.png", "https://www.newworldencyclopedia.org/resources/assets/poweredby_mediawiki_88x31.png" ]	[]	[]	[ "" ]	null	[]	null		en	https://static.newworldencyclopedia.org/favicon.ico		https://www.newworldencyclopedia.org/entry/John_Richard_Hicks	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.
7784	dbpedia	1	2	http://socialdemocracy21stcentury.blogspot.com/2014/07/john-hicks-on-hayeks-business-cycle.html	en	Social Democracy for the 21st Century: A Realist Alternative to the Modern Left	http://socialdemocracy21stcentury.blogspot.com/favicon.ico	http://socialdemocracy21stcentury.blogspot.com/favicon.ico	[ "https://resources.blogblog.com/img/icon18_edit_allbkg.gif", "http://www.blogger.com/img/blogger_logo_round_35.png", "http://resources.blogblog.com/img/blank.gif", "http://resources.blogblog.com/img/blank.gif", "http://4.bp.blogspot.com/-Kkm13a75Swk/Y2pTiN6vSgI/AAAAAAAABEI/mQFfxV2vtkovEQkLBPWxscLULL7HFT3HgCK4BGAYYCw/s35/Keynes3.jpg", "http://resources.blogblog.com/img/blank.gif", "http://4.bp.blogspot.com/-Kkm13a75Swk/Y2pTiN6vSgI/AAAAAAAABEI/mQFfxV2vtkovEQkLBPWxscLULL7HFT3HgCK4BGAYYCw/s35/Keynes3.jpg", "http://www.blogger.com/img/blogger_logo_round_35.png", "http://4.bp.blogspot.com/-Kkm13a75Swk/Y2pTiN6vSgI/AAAAAAAABEI/mQFfxV2vtkovEQkLBPWxscLULL7HFT3HgCK4BGAYYCw/s35/Keynes3.jpg", "http://www.blogger.com/img/blogger_logo_round_35.png", "http://resources.blogblog.com/img/blank.gif", "http://4.bp.blogspot.com/-Kkm13a75Swk/Y2pTiN6vSgI/AAAAAAAABEI/mQFfxV2vtkovEQkLBPWxscLULL7HFT3HgCK4BGAYYCw/s35/Keynes3.jpg", "http://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUh1_ZTIswuJzfoQgXZ9S9blEByHHfQR1r9KH-CHVr5Znp1AauLjTKTJldxErHV4mIgQ_3f94pvw7vY7Ee2qvx2acZgKhAliQmD0zZ_WicljN-oCPi90A1MY2ajGPkKxrKT5k2xvcGuyjq_1t9ctONlt1eIyfXYNFl_-1eKq2G2ebL/s220/Keynes3.jpg" ]	[]	[]	[ "" ]	null	[ "Lord Keynes", "View my complete profile" ]	null	John Hicks (1967) is a short essay on Hayek’s Austrian business cycle theory (ABCT). The paper is quite interesting because it gives the ver...		http://socialdemocracy21stcentury.blogspot.com/favicon.ico		http://socialdemocracy21stcentury.blogspot.com/2014/07/john-hicks-on-hayeks-business-cycle.html
7784	dbpedia	2	54	https://psychology.fandom.com/wiki/Friedrich_Hayek	en	Friedrich Hayek	https://static.wikia.nocookie.net/psychology/images/2/2a/FvonHayek.jpg/revision/latest?cb=20060630091819	https://static.wikia.nocookie.net/psychology/images/2/2a/FvonHayek.jpg/revision/latest?cb=20060630091819	[ "https://static.wikia.nocookie.net/psychology/images/2/2a/FvonHayek.jpg/revision/latest/scale-to-width-down/140?cb=20060630091819", "https://static.wikia.nocookie.net/psychology/images/a/ae/Mergefrom.gif/revision/latest?cb=20060221154148", "https://static.wikia.nocookie.net/psychology/images/1/1a/Wikiquote-logo-en.png/revision/latest/scale-to-width-down/50?cb=20060527122656", "https://static.wikia.nocookie.net/6a181c72-e8bf-419b-b4db-18fd56a0eb60", "https://static.wikia.nocookie.net/6c42ce6a-b205-41f5-82c6-5011721932e7", "https://static.wikia.nocookie.net/464fc70a-5090-490b-b47e-0759e89c263f", "https://static.wikia.nocookie.net/f7bb9d33-4f9a-4faa-88fe-2a0bd8138668" ]	[]	[]	[ "" ]	null	[ "Contributors to Psychology Wiki" ]	null	Assessment \| Biopsychology \| Comparative \| Cognitive \| Developmental \| Language \| Individual differences \| Personality \| Philosophy \| Social \| Methods \| Statistics \| Clinical \| Educational \| Industrial \| Professional items \| World psychology \| Professional Psychology: Debating Chamber ·...	en	/skins-ucp/mw139/common/favicon.ico	Psychology Wiki	https://psychology.fandom.com/wiki/Friedrich_Hayek	Assessment \| Biopsychology \| Comparative \| Cognitive \| Developmental \| Language \| Individual differences \| Personality \| Philosophy \| Social \| Methods \| Statistics \| Clinical \| Educational \| Industrial \| Professional items \| World psychology \| Professional Psychology: Debating Chamber · Psychology Journals · Psychologists 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-20th 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. He 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”. [1] Life[] Hayek was born in Vienna to a Catholic family of prominent intellectuals. He was a distant cousin of the philosopher Ludwig Wittgenstein. At the University of Vienna he received doctorates in law and political science in 1921 and 1923 respectively, and he also studied psychology and economics with keen interest. 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 and other young students. He was a student of Friedrich von Wieser. Hayek worked as a research assistant to Prof. 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 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 but his models were 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 remains unresolved today, with Hayek's position gaining currency since the late 1970s. In 1950 Hayek left the London School of Economics for the University of Chicago, becoming a professor in the Committee on Social Thought (he was not a member of the Economics department). 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 he shared the Nobel Prize for Economics, causing a revival of interest in the Austrian school of economics. In 1984 he was appointed as a member of the Order of the Companions of Honour by Queen Elizabeth II of the United Kingdom on the advice of British Prime Minister Margaret Thatcher for his 'services to the study of economics'. Later he was a visiting professor at the University of Salzburg. Hayek died in 1992 in Freiburg, Germany. Work[] It has been suggested that [[::Extended order\|Extended order]] be merged into this article or section. (Discuss) The economic calculation problem[] Hayek was one of the leading academic critics of collectivism in the 20th century. Hayek 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 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. The efficient exchange and use of resources, Hayek claimed, can be maintained only through the price mechanism in free markets (see economic calculation problem). In The Use of Knowledge in Society (1945), Hayek 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." 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. 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 is referred to as "that which is the result of human action but not of human design". Thus, 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, independently of Donald Hebb, the connectionist hypothesis that forms the basis of the technology of neural networks and of much of modern neurophysiology. Hayek attributed 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. The business cycle[] Hayek's writings on capital, money, and the business cycle are widely regarded as his most important contributions to economics. Mises had earlier explained monetary and banking theory in his Theory of Money and Credit (1912), applying the marginal utility principle to the value of money and then proposing a new theory of industrial fluctuations based on the concepts of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this body of work as a starting point for his own interpretation of the business cycle, which defended what later become known as the "Austrian business cycle theory". In his Prices and Production (1931) and The Pure Theory of Capital (1941) he explained the origin of the business cycle in terms of central bank credit expansion and its transmission over time in terms of capital misallocation caused by artificially low interest rates. The "Austrian business cycle theory" has been criticized by advocates of rational expectations and other components of neoclassical economics, who point to the neutrality of money and to the real business cycle theory as providing a sounder understanding of the phenomenon. Hayek, in his 1939 book Profits, Interest and Investment, distanced himself from other theorists of the Austrian School, such as Mises and Rothbard, in beginning to shun the wholly monetary theory of the business cycle in favor of a more eccentric understanding based more on profits than on interest rates. Hayek explicitly notes that most of the more accurate explanations of the business cycle place more emphasis on real instead of nominal variables. He also notes that this more eccentric explanation model of the business cycle which he proposes cannot be wholly reconciled with any specific Austrian theory. Social and political philosophy[] While known more as an economist than a philosopher, in the latter half of his career Hayek made a number of contributions to social philosophy and political philosophy, derived largely from his views on the limits of human knowledge[2], and the role played by his spontaneous order in social institutions. His arguments in favor of a society organized around a market order (in which the apparatus of state is employed solely to secure the peace necessary for a market of free individuals to function) were informed by a moral philosophy derived from epistemological concerns regarding the inherent limits of human knowledge. In his philosophy of science, Hayek was highly critical of what he termed scientism—abuses of the methods of science in the attempt to justify inherently unknowable propositions, particularly in the fields of economics and economic history (see The Counter-Revolution of Science: Studies in the Abuse of Reason, 1952). In The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology (1952), he develops his social theory of spontaneous order into a bold philosophy of mind which has recently become the focus of a renewed level of interest within the fields of cognitive science and evolutionary psychology. Hayek and conservatism[] Hayek attracted new attention in the 1980s and 1990s with the rise of conservative governments in the United States and the United Kingdom. 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 of us to see. 'This', she said sternly, 'is what we believe', and banged Hayek down on the table." [1] After winning the 1979 election, 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, some of Ronald Reagan’s economic advisors were friends of Hayek. [2]. Hayek wrote an essay entitled Why I Am Not a Conservative [3], (included as an appendix to The Constitution of Liberty) in which he disparaged conservatism for its inability to adapt to changing human realities or to offer a positive political program. His criticism was aimed primarily at European-style conservatism, which has often opposed capitalism as a threat to social stability and traditional values. Hayek identified himself as a classical liberal, but noted that in the United States it had become almost impossible to use "liberal" in the older sense that he gave to the term. In the U.S., Hayek is usually described as a "libertarian", but the denomination that he preferred was "Old Whig" (a phrase borrowed from Edmund Burke). Influence and recognition[] The Liberalism series, part of the Politics series Development History of liberal thought Contributions to liberal theory Schools Classical liberalism Conservative liberalism Cultural liberalism Economic liberalism Neoliberalism Ordoliberalism Paleoliberalism Social liberalism Ideas Individual rights Individualism Laissez-faire Capitalism Liberal democracy Liberal neutrality Negative & positive liberty Free market Mixed economy Open society Organizations Liberal parties worldwide Liberal International · Iflry ELDR/ALDE · Lymec CALD · ALN · Relial. CLH 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 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 academic disciplines recognized by the original Nobel Prizes). While there is some dispute as to the matter of influence, Hayek had a long standing and close friendship with philosopher of science Karl Popper, 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." (See Hacohen, 2000). 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, "...ever since his Logik der Forschung first came out in 1934, I have been a complete adherent to his general theory of methodology." (See Weimer and Palermo, 1982). Their friendship and mutual admiration, however, do not change the fact that there are important differences between their ideas (See Birner, 2001). Having heavily influenced Margaret Thatcher's economic approach, and some of Ronald Reagan's economic advisors, in the 1990's Hayek became one of the most-respected economists in Eastern 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's intellectual foundation was based on the ideas of David Hume, Adam Smith and other Scottish thinkers of the 1700s. He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology and anthropology. Even after his death, Hayek's intellectual presence was noticeable, especially in the universities where he had taught: the London School of Economics, the University of Chicago, and the University of Freiburg. A number of tributes resulted, many posthumous. 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, D.C.'s leading think tanks, named its lower level auditorium after Hayek, who had been a Distinguished Senior Fellow at Cato during his later years. Selected bibliography[] Monetary Theory and the Trade Cycle, 1929. Prices and Production, 1931. Profits, Interest and Investment: And other essays on the theory of industrial fluctuations, 1939. The Road to Serfdom, 1945. The Constitution of Liberty, 1960. The Fatal Conceit, 1989. Notes[] References[] Caldwell, Bruce, 2005. Hayek's Challenge : An Intellectual Biography of F.A. Hayek. Birner, Jack, 2001, "The mind-body problem and social evolution," CEEL Working Paper 1-02. Birner, Hack, and Rudy van Zijp, eds. Hayek: Co-ordination and Evolution: His legacy in philosophy, politics, economics and the history of ideas (1994) Ebenstein, Alan O., 2001. Friedrich Hayek: A Biography. Gray, John, 1998. Hayek on Liberty. Hacohen, Malachi, 2000. Karl Popper: The Formative Years, 1902 – 1945. Kasper, Sherryl, 2002, The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers. Chpt. 4. Kley, Roland, 1994. Hayek's Social and Political Thought. Oxford Univ. Press. Muller, Jerry Z., 2002. The Mind and the Market: Capitalism in Western Thought. Anchor Books. Rosenof, Theodore, 1974, "Freedom, Planning, and Totalitarianism: The Reception of F. A. Hayek's Road to Serfdom," Canadian Review of American Studies. Shearmur; Jeremy, 1996. Hayek and after: Hayekian Liberalism as a Research Programme. Routledge. Touchie, John, 2005. Hayek and Human Rights: Foundations for a Minimalist Approach to Law. Edward Elgar. Weimer, W., and Palermo, D., eds., 1982. Cognition and the Symbolic Processes. Lawrence Erlbaum Associates. Contains Hayek's essay, "The Sensory Order after 25 Years" with "Discussion." See also[] Chicago School (economics) List of Austrian Scientists List of Austrians Austrian School of economics Liberalism in Austria [] Wikiquote has a collection of quotations related to: The FA Hayek Prophecies - is a never-before-seen interview of FA Hayek. TheHayekProphecies.com Bio from the Ludwig von Mises Institute The Hayek Scholar's Page Hayek's influence on Friesian philosophy Official 1974 Nobel Prize page Bio and online works on Econlib The Road to Serfdom in Five Minutes Hayek's book, as illustrated by Look Magazine, condensed into a 5-minute movie Hayek, F. A Directory of links on Hayek from the Open Source Directory F A Hayek on the Adam Smith Institute website Hayek Bio at hayek.de Reason magazine's article on what Hayek might think of gay marriage (describes the conservatism vs. liberalism dispute) Information and Economics: A critique of Hayek essay included in the book Towards a New Socialism reviewed by the hayekian Len Brewster The economics of information, market socialism and Hayek's legacy Hayek and Socialism The Market Dynamics of Speculation: Hayekian Market Signals and the Rise of the Culture Industries Hayek Links The most extensive list of links on Hayek Oxford Hayek Society "The Road from Serfdom", interview in Reason by Thomas W. Hazlett The Individualist on MSN Spaces REDIRECT Template:Nobel Prize in Economics Laureates 1969-1975
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7784	dbpedia	2	8	https://sticerd.lse.ac.uk/_new/programmes/hayek/about.asp	en	Hayek Programme in Economics and Liberal Political Economy	https://sticerd.lse.ac.u…rom-unsplash.jpg	https://sticerd.lse.ac.u…rom-unsplash.jpg	[ "https://sticerd.lse.ac.uk/textonly/_STICERD/images/LSE-FULL.SVG", "https://sticerd.lse.ac.uk/textonly/_STICERD/images/STICERD.SVG", "https://sticerd.lse.ac.uk/textonly/_STICERD/images/sticerd-lse-mini.svg" ]	[]	[]	[ "" ]	null	[]	null		en	/images/_FINAL/_HOME/STICERD.ico	STICERD \| Self Standing Programmes \| Hayek Programme in Economics and Liberal Political Economy	https://sticerd.lse.ac.uk/_new/programmes/hayek/	Friedrich August von Hayek (1899-1992) was an Austrian-British economist who won the 1974 Nobel Memorial Prize in Economic Sciences for his groundbreaking work in understanding the coordination function of prices in economy, formulating new business cycle theory with links to monetary expansion, and investigating how a decentralised free-market economic system is feasible and advantageous over a centralised socialist planning. F A Hayek served in a field artillery battery on the Italian front during the World War I. After the war, he enrolled at the University of Vienna where he got his first doctorate in law in 1921. His classmates included some future prominent economists, including Fritz Machlup, Gottfried von Haberler, and Oskar Morgenstern. Later, in 1923, Hayek was awarded a second doctorate in political economy. During his years at the University of Vienna, Hayek was influenced by Carl Menger's work on explanatory social science research and Friedrich von Wieser's commanding classroom teaching. He also began working at a temporary government office, where he met Ludwig von Mises, a monetary theorist and a critic of socialism. In 1931, Hayek was invited by Lionel Robbins to deliver lectures on monetary economics at the London School of Economics and Political Science (LSE). These lectures ultimately led to his appointment the following year as the Tooke Professor of Economic Science and Statistics at LSE, where Hayek remained until 1950. This period also witnessed "Hayek vs Keynes", the historical debate between F A Hayek and the University of Cambridge economist John Maynard Keynes over their respective monetary economics theories. To stimulate aggregate demand, Keynes suggested demand-side interventions, such as low rate loans, low taxes, and excess borrowing, funded by the government. Hayek, whose saw his homeland of Austria ravaged due to inflation after the World War I, cautioned against such a Keynesian stimulus, which may reduce unemployment in the short term but would completely distort markets in the medium to long term. Following up on his ideas of deregulation, Hayek also engaged in debates with economists on the merits of socialism in the mid 1930s. When LSE was evacuated to Cambridge during the World War II, Hayek started working on his Abuse of Reason project in which he emphasised scientism - the misguided and prejudiced application of the methods of natural science to the problems of social science. Though this project never got completed, it became the basis for Hayek's most famous book, The Road to Serfdom. In 1940s, Hayek was instrumental in the creation of the Mont Pèlerin Society - an organisation dedicated to the establishment and preservation of free societies. The founding meeting of the society in 1947 was attended by 39 prominent scholars, including Ludwig Von Mises, Lionel Robbins, Milton Friedman, Frank Knight, George Stigler, Aaron Director, and Karl Popper. In 1950, Hayek left LSE for the University of Chicago, where he spent the next 12 years of his life. In Chicago, he wrote a number of articles on political philosophy, history of ideas, and social science methodology that weaved into his 1960 book, The Constitution of Liberty. In 1962, Hayek returned to Europe and joined the University of Freiburg in Germany. He remained there until his retirement in 1968, when he accepted an honorary professorship at the University of Salzburg in Austria. During this period, he started working on his book, Law, Legislation and Liberty, which got published in three separate volumes in 1973, 1976 and 1979, which is two years after he permanently moved to Freiburg. In 1976, the Institute of Economic Affairs in London published The Denationalization of Money in which Hayek advocated for the establishment of competitively issued private currency. His final book, The Fatal Conceit, presents forceful critique against socialism and got published four years before his death.
7784	dbpedia	1	3	https://mises.org/articles-interest/biography-f-hayek-1899-1992	en	Biography of F. A. Hayek (1899-1992)	https://cdn.mises.org/st…pg?itok=ITApaJtO	https://cdn.mises.org/st…pg?itok=ITApaJtO	[ "https://cdn.mises.org/styles/responsive_4_3_650w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=ex6AkYmU 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=MZm8BjW_ 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=smqhJAMI 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=BQieFl6c 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=iZRc7PPy 1530w", "http://mises.org/images4/Hayek6.jpg", "http://mises.org/images4/Hayek4.jpg", "http://mises.org/images4/Hayek2.jpg", "http://mises.org/images4/Hayek3.jpg", "http://mises.org/images4/Hayek5.jpg", "http://mises.org/images4/Hayek7.jpg", "https://cdn.mises.org/styles/responsive_4_3_650w/s3/peter-klein_2023.jpg.webp?itok=lti7bAcc 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/peter-klein_2023.jpg.webp?itok=ITN9Zzvt 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/peter-klein_2023.jpg.webp?itok=XMh1xxxp 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/peter-klein_2023.jpg.webp?itok=iHxbzBgc 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/peter-klein_2023.jpg.webp?itok=CffTksmJ 1530w", "https://cdn.mises.org/styles/responsive_650w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=_yN9d85Q 650w,https://cdn.mises.org/styles/responsive_870w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=4mMxN_Nl 870w,https://cdn.mises.org/styles/responsive_1090w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=6MtQxVYY 1090w,https://cdn.mises.org/styles/responsive_1310w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=GcnJ_GBM 1310w,https://cdn.mises.org/styles/responsive_1530w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=iB7UWEt8 1530w", "https://mises.org/themes/custom/mises/components/elements/element-footer-charity/charity-navigator.png" ]	[]	[]	[ "" ]	null	[ "Peter G. Klein" ]	2007-08-01T01:00:00-05:00		en	/themes/custom/mises/favicon.ico	Mises Institute	https://mises.org/articles-interest/biography-f-hayek-1899-1992	“A claim for equality of material position can be met only by a government with totalitarian powers.” F. A. Hayek is undoubtedly the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian school theorists, Hayek was more successful than anyone else in spreading Austrian ideas throughout the English-speaking world. “When the definitive history of economic analysis during the 1930s comes to be written,” said John Hicks in 1967, “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, p. 203). Unfortunately, Hayek’s theory of the business cycle was eventually swept aside by the Keynesian revolution. Ultimately, however, this work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes. Life and Work Hayek’s life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge, England). Though he was enrolled as a law student, his primary interests were economics and psychology, the latter due to the influence of Mach’s theory of perception on Wieser and Wieser’s colleague Othmar Spann, and the former stemming from the reformist ideal of Fabian socialism so typical of Hayek’s generation. Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions--the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. “To none of us young men who read the book when it appeared,” Hayek recalled, “the world was ever the same again” (Hayek, 1956, p. 133). Socialism, an elaboration of Mises’s pioneering article from two years before, argued that economic calculation requires a market for the means of production; without such a market there is no way to establish the values of those means and, consequently, no way to find their proper uses in production. Mises’s devastating attack on central planning converted Hayek to laissez-faire, along with contemporaries like Wilhelm Röpke, Lionel Robbins, and Bertil Ohlin. It was around this time that Hayek began attending Mises’s famed Privatseminar. Regular participants, who received no academic credit or other official recognition for their time, included Hayek, Gottfried Haberler, Fritz Machlup, Oskar Morgenstern, Paul Rosenstein-Rodan, Richard von Strigl, Karl Schlesinger, Felix Kaufmann, Alfred Schütz, Eric Voegelin, Karl Menger, Jr., and others not so famous. For several years the Privatseminar was the center of the economics community in Vienna, attracting such visitors as Robbins from London and Howard S. Ellis from Berkeley. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. Mises had done earlier work on monetary and banking theory, successfully applying the Austrian marginal utility principle to the value of money and then sketching a theory of industrial fluctuations based on the doctrines of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this last as a starting point for his own research on fluctuations, explaining the origin of the business cycle in terms of bank credit expansion and its transmission in terms of capital malinvestments. His work in this area eventually earned him an invitation to lecture at the London School of Economics and Political Science and then to occupy its Tooke Chair in Economics and Statistics, which he accepted in 1931. There he found himself among a vibrant and exciting group: Robbins, J. R. Hicks, Arnold Plant, Dennis Robertson, T. E. Gregory, Abba Lerner, Kenneth Boulding, and George Shackle, to name only the most prominent. Hayek brought his (to them) unfamiliar views, and gradually, the “Austrian” theory of the business cycle became known and accepted. At the L.S.E. Hayek lectured on Mises’s business-cycle theory, which he was refining and which, until Keynes’s General Theory came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes’s Treatise on Money. As one of Keynes’s leading professional adversaries, Hayek was well situated to provide a full refutation of the 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, p. 91). 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, p. 60; Hayek, 1966, pp. 240-41). Hayek thought a better course would be to produce a fuller elaboration of Böhm-Bawerk’s capital theory, and he began to devote his energies to this project. Unfortunately, The Pure Theory of Capital was not completed until 1941, and by then the Keynesian macro model had become firmly established. Within a very few years, however, the fortunes of the Austrian school suffered a dramatic reversal. First, the Austrian theory of capital, an integral part of the business-cycle theory, came under attack from the Italian-born Cambridge economist Piero Sraffa and the American Frank Knight, while the cycle theory itself was forgotten amid the enthusiasm for the General Theory. Second, beginning with Hayek’s move to London and continuing until the early 1940s, the Austrian economists left Vienna, for personal and then for political reasons, so that a school ceased to exist there as such. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek’s generation became prominent in the U.S.--Gottfried Haberler at Harvard, Fritz Machlup and Oskar Morgenstern at Princeton, Paul Rosenstein-Rodan at MIT--but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group: the economics department, led by Knight, Milton Friedman, and later George Stigler, was one of the best anywhere, and Aaron Director at the law school soon set up the first law and economics program. But economic theory, in particular its style of reasoning, was rapidly changing; Paul Samuelson’s Foundations had appeared in 1947, establishing physics as the science for economics to imitate, and Friedman’s 1953 essay on “positive economics” set a new standard for economic method. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and A ustrian economics entered a prolonged eclipse. Important work in the Austrian tradition was done during this period by Rothbard (1956, 1962, 1963a, 1963b), Kirzner (1963, 1966, 1973), and Lachmann (1956), but at least publicly, the Austrian tradition lay mostly dormant. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian school was suddenly and unexpectedly revived. While this was not the first event of the so-called “Austrian revival,” the memorable South Royalton conference having taken place earlier the same year, the rediscovery of Hayek by the economics profession was nonetheless a decisive event in the renaissance of Austrian economics. Hayek’s writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. Contributions to Economics Hayek’s legacy in economics is complex. Among mainstream economists, he is mainly known for his popular The Road to Serfdom (1944) and for his work on knowledge in the 1930s and 1940s (Hayek, 1937, 1945). Specialists in business-cycle theory recognize his early work on industrial fluctuations, and modern information theorists often acknowledge Hayek’s work on prices as signals, although his conclusions are typically disputed. Hayek’s work is also known in political philosophy (Hayek, 1960), legal theory (Hayek 1973-79), and psychology (Hayek, 1952). Within the Austrian school of economics, Hayek’s influence, while undeniably immense, has very recently become the subject of some controversy. His emphasis on spontaneous order and his work on complex systems has been widely influential among many Austrians. Others have preferred to stress Hayek’s work in technical economics, particularly on capital and the business cycle, citing a tension between some of Hayek’s and Mises’s views on the social order. (While Mises was a rationalist and a utilitarian, Hayek focused on the limits to reason, basing his defense of capitalism on its ability to use limited knowledge and learning by trial and error.) Business-cycle theory. Hayek’s writings on capital, money, and the business cycle are widely regarded as his most important contributions to economics (Hicks, 1967; Machlup, 1976). Building on Mises’s Theory of Money and Credit (1912), Hayek showed how fluctuations in economy-wide output and employment are related to the economy’s capital structure. In Prices and Production (1931) he introduced the famous “Hayekian triangles” to illustrate the relationship between the value of capital goods and their place in the temporal sequence of production. Because production takes time, factors of production must be committed in the present for making final goods that will have value only in the future after they are sold. However, capital is heterogeneous. As capital goods are used in production, they are transformed from general-purpose materials and components to intermediate products specific to particular final goods. Consequently, these assets cannot be easily redeployed to alternative uses if demands for final goods change. The central macroeconomic problem in a modern capital-using economy is thus one of intertemporal coordination: how can the allocation of resources between capital and consumer goods be aligned with consumers’ preferences between present and future consumption? In The Pure Theory of Capital (1941), perhaps his most ambitious work, Hayek describes how the economy’s structure of production depends on the characteristics of capital goods--durability, complementarity, substitutability, specificity, and so on. This structure can be described by the various “investment periods” of inputs, an extension of Böhm-Bawerk’s notion of “roundaboutness,” the degree to which production takes up resources over time. In Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933a) Hayek showed how monetary injections, by lowering the rate of interest below what Mises (following Wicksell) called its “natural rate,” distort the economy’s intertemporal 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. The Austrian theory, as developed by Mises and Hayek, focuses 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’ intertemporal 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’ intertemporal 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 e xpansion, 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’ intertemporal preferences. Knowledge, prices, and competition as a discovery procedure. Hayek’s writings on dispersed knowledge and spontaneous order are also widely known, but more controversial. 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, p. 78). 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.” 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, 1968a), by which this information is unknowingly transmitted throughout the economy as an unintended consequence of individuals’ pursuing their own ends. Indeed, Hayek’s (1948b) 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 (Kirzner, 1973; Machovec, 1995). 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, pp. 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 firm 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” (D. H. Robertson, quoted in Coase, 1937, p. 35). Most commentators view Hayek’s work on knowledge, discovery, and competition as an outgrowth of his participation in the socialist calculation debate of the 1920s and 1930s. The socialists erred, in Hayek’s view, in failing to see that the economy as a whole is necessarily a spontaneous order and can never be deliberately made over in the way that the operators of a planned order can exercise control over their organization. This is because planned orders can handle only problems of strictly limited complexity. Spontaneous orders, by contrast, tend to evolve through a process of natural selection, and therefore do not need to be designed or even understood by a single mind. Hayek and Austrian Economics Clearly, the Austrian revival owes as much to Hayek as to anyone. But are Hayek’s writings really “Austrian economics”--part of a separate, recognizable tradition--or should we regard them, instead, as an original, deeply personal, contribution? Some observers charge that Hayek’s later work, particularly after he began to turn away from technical economics, shows more influence of his friend Sir Karl Popper than of Carl Menger or Mises: one critic speaks of “Hayek I” and “Hayek II”; another writes on “Hayek’s Transformation.” It is true that Popper had a significant impact on Hayek’s mature thought. Of greater interest is the precise nature of Hayek’s relationship with Mises. Undoubtedly, no economist has had a greater impact on Hayek’s thinking than Mises--not even Wieser, from whom Hayek learned his craft but who died in 1927 when Hayek was still a young man. In addition, Mises clearly considered Hayek the brightest of his generation. Yet, as Hayek (1978a) noted, he was from the beginning always something less than a pure follower: “Although I do owe [Mises] a decisive stimulus at a crucial point of my intellectual development, and continuous inspiration through a decade, I have perhaps most profited from his teaching because I was not initially his student at the university, an innocent young man who took his word for gospel, but came to him as a trained economist, versed in a parallel branch of Austrian economics [the Wieser branch] from which he gradually, but never completely, won me over.” Much has been written on Hayek’s and Mises’s views on the socialist calculation debate. The issue is whether a socialist economy is “impossible,” as Mises charged in 1920, or simply less efficient or more difficult to implement. Hayek (1992, p. 127) maintained later that Mises’s “central thesis was not, as it is sometimes misleadingly put, that socialism is impossible, but that it cannot achieve an efficient utilization of resources.” That interpretation is itself subject to dispute. Hayek is arguing here against the standard view on economic calculation, found for instance in Schumpeter (1942, pp. 172-186) or Bergson (1948). This view holds that Mises’s original statement of the impossibility of economic calculation under socialism was refuted by Oskar Lange, Fred Taylor, and Abba Lerner, and that later modifications by Hayek and Robbins amounted to an admission that a socialist economy is possible in theory but difficult in practice because knowledge is decentralized and incentives are weak. Hayek’s response in the cited text, that Mises’s actual position has been exaggerated, receives support from the primary revisionist historian of the calculation debate, Don Lavoie, who states that the “central arguments advanced by Hayek and Robbins did not constitute a ‘retreat’ from Mises, but rather a clarification directing the challenge to the later versions of central planning . . . Although comments by both Hayek and Robbins about computational difficulties of the [later approaches] were responsible for misleading interpretations of their arguments, in fact their main contributions were fully consistent with Mises’s challenge” (Lavoie, 1985, p. 20). Kirzner (1988) similarly contends that Mises’s and Hayek’s positions should be viewed together as an early attempt to elaborate the Austrian “entrepreneurial-discovery” view of the market process. Salerno (1990a) argues, by contrast, in favor of the traditional view--that Mises’s original calculation problem is different from the discovery-process problem emphasized b y Lavoie and Kirzner. Furthermore, Hayek’s later emphasis on group selection and spontaneous order is not shared by Mises, although there are elements of this line of thought in Menger. A clue to this difference is in Hayek’s (1978a) statement that “Mises himself was still much more a child of the rationalist tradition of the Enlightenment and of continental, rather than of English, liberalism . . . than I am myself.” This is a reference to the “two types of liberalism” to which Hayek frequently refers: the continental rationalist or utilitarian tradition, which emphasizes reason and man’s ability to shape his surroundings, and the English common-law tradition, which stresses the limits to reason and the “spontaneous” forces of evolution. Recently, the relationship between Mises and Hayek has become a full-fledged “de-homogenization” debate. Salerno (1990a, 1990b, 1993, 1994) and Rothbard (1991, 1995) see Hayek’s emphasis on knowledge and discovery as substantially different from Mises’s emphasis on purposeful human action. Salerno (1993), for example, argues that there are two strands of modern Austrian economics, both descended from Menger. One, the Wieser-Hayek strand, focuses on dispersed knowledge and the price system as a device for communicating knowledge. Another, the Böhm-Bawerk-Mises strand, focuses on monetary calculation (or “appraisal,” meaning anticipation of future prices) based on existing money prices. Kirzner (1995a, 1995b, 1996, 1997) and Yeager (1994, 1995) argue, by contrast, that the differences between Hayek and Mises are more matters of emphasis and language than substance. Regardless, there is widespread agreement that Hayek ranks among the greatest members of the Austrian school, and among the leading economists of the twentieth century. His work continues to be influential in business-cycle theory, comparative economic systems, political and social philosophy, legal theory, and even cognitive psychology. Hayek’s writings are not always easy to follow--he describes himself as “puzzler” or “muddler” rather than a “master of his subject”--and this may have contributed to the variety of interpretations his work has aroused. Partly for this reason, Hayek remains one of the most intriguing intellectual figures of our time. References Bellante, Don, and Roger W. Garrison. 1988. “Phillips Curves and Hayekian Triangles: Two Perspectives on Monetary Dynamics.” History of Political Economy 20 (Summer): 207-34. Bergson, Abram. 1948. “Socialist Economics.” In Howard S. Ellis, ed., A Survey of Contemporary Economics. Vol. 1. Homewood, Ill.: Richard D. Irwin, pp. 412-48. Blaug, Mark. 1993. “Hayek Revisited.” Critical Review 7, no. 1: 51-60. Boettke, Peter J. 1997. “Economic Calculation: The Austrian Contribution to Political Economy.” Advances in Austrian Economics, forthcoming. Caldwell, Bruce J. 1988. “Hayek’s Transformation.” History of Political Economy 20 (Winter): 513-41. Caldwell, Bruce J. 1995. “Introduction.” In Hayek, 1995, pp. 1-48. Caldwell, Bruce J. 1997. “Hayek and Socialism.” Journal of Economic Literature 35, no. 4 (December): 1856-90. Coase, Ronald H. 1937. “The Nature of the Firm.” Economica (N.S.) 4: 386-405. Reprinted in idem., The Firm, the Market, and the Law. Chicago: University of Chicago Press, 1988, pp. 33-55. Craver, Earlene. 1986. “The Emigration of the Austrian Economists.” History of Political Economy 18, no. 1: 1-32. Dolan, Edwin G., ed. 1976. The Foundations of Modern Austrian Economics. Kansas City: Sheed & Ward. Ekelund, Robert B. 1986. “Wieser’s Social Economics: A Link to Modern Austrian Theory?” Austrian Economics Newsletter 6 (Fall): 1-2, 4, 9-11. Farrell, Joseph, and Patrick Bolton. 1990. “Decentralization, Duplication, and Delay.” Journal of Political Economy 98, no. 4: 803-26. Fehl, Ulrich. 1986. “Spontaneous Order and the Subjectivity of Expectations: A Contribution to the Lachmann-O’Driscoll Problem.” In Israel M. Kirzner, ed., Subjectivism, Intelligibility, and Economic Understanding. New York: New York University Press, pp. 72-86. Foss, Nicolai J. 1994. The Austrian School and Modern Economics: A Reassessment. Copenhagen: Handelshøjskolens Forlag. Garrison, Roger W. 1978. “Austrian Macroeconomics: A Diagrammatical Exposition.” In Spadaro, 1978, pp. 167-204. Garrison, Roger W. 1984. “Time and Money: The Universals of Macroeconomic Theorizing.” Journal of Macroeconomics 6, no. 2 (Spring): 197-213. Garrison, Roger W., and Israel M. Kirzner. 1987. “Hayek, Friedrich August von.” In John Eatwell, Murray Milgate, and Peter Newman, eds., The New Palgrave Dictionary of Economics. Vol. 2. London: Macmillan, pp. 609-14. Gray, John. 1984. Hayek on Liberty. Second edition. Oxford: Basil Blackwell, 1986. Grossman, Sanford J. 1980. “On the Impossibility of Informationally Efficient Markets.” American Economic Review 70, no. 3 (June): 393-408. Grossman, Sanford J. 1989. The Informational Role of Prices. Cambridge, Mass., and London: MIT Press. Grossman, Sanford J., and Joseph E. Stiglitz. 1976. “Information and Competitive Price Systems.” American Economic Review 66, no. 2 (May): 246-53. Hayek, F. A. 1931. Prices and Production. London: Routledge & Sons. Second revised edition, London: Routledge & Kegan Paul, 1935. Hayek, F. A. 1933a. Monetary Theory and the Trade Cycle. London: Jonathan Cape. Hayek, F. A. 1933b. “The Trend of Economic Thinking.” Economica 13: 121-37. Reprinted in Hayek, 1991, pp. 17-34. Hayek, F. A. 1937. “Economics and Knowledge.” Economica N.S. 4: 33-54. Reprinted in Hayek, 1948a, pp. 33-56. Hayek, F. A. 1939. “Price Expectations, Monetary Disturbances, and Malinvestments.” In Hayek, Profits, Interest, and Investment. London: Routledge and Kegan Paul, pp. 135-56. 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. “The Use of Knowledge in Society.” American Economic Review 35 (September): 519-30. Reprinted in Hayek, 1948a, pp. 77-91. Hayek, F. A. 1948a. Individualism and Economic Order. Chicago: University of Chicago Press. Hayek, F. A. 1948b. “The Meaning of Competition.” In Hayek, 1948a, pp. 92-106. Hayek, F. A. 1952. The Sensory Order. Chicago: University of Chicago Press. Hayek, F. A. 1956. “In Honour of Professor Mises.” In Hayek, 1992, pp. 129-36. Hayek, F. A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press. Hayek, F. A. 1963. “The Economics of the 1930s as Seen from London.” In Hayek, 1995, pp. 49-73. Hayek, F. A. 1966. “Personal Recollections of Keynes and the ‘Keynesian Revolution.’” In Hayek, 1995, pp. 240-46. Hayek, F. A. 1968a. “Competition as a Discovery Procedure.” In Hayek, 1978b, pp. 179-90. Hayek, F. A. 1968b. “The Confusion of Language in Political Thought.” In Hayek, 1978b, pp. 71-97. Hayek, F. A. 1973-79. Law, Legislation, and Liberty. Three volumes. Chicago: University of Chicago Press. Hayek, F. A. 1975. “Two Types of Mind.” In Hayek, The Trend of Economic Thinking. Edited by W. W. Bartley III and Stephen Kresge. Vol. 3 of The Collected Works of F. A. Hayek. London: Routledge, and Chicago: University of Chicago Press, 1991, pp. 49-55. Hayek, F. A. 1976. Denationalisation of Money : An Analysis of the Theory and Practice of Concurrent Currencies. London: Institute of Economic Affairs. Hayek, F. A. 1978a. “Coping with Ignorance.” Imprimis 7, no. 7 (July): 1-6. Reprinted in Champions of Freedom. Hillsdale, Mich.: Hillsdale College Press, 1979. Hayek, F. A. 1978b. New Studies in Philosophy, Politics and Economics. Chicago: University of Chicago Press. Hayek, F. A. 1988. The Fatal Conceit: The Errors of Socialism. Edited by W. W. Bartley III. Vol. 1 of The Collected Works of F. A. Hayek. London: Routledge, and Chicago: University of Chicago Press, 1989. Hayek, F. A. 1991. The Trend of Economic Thinking: Essays on Political Economists and Economic History. Edited by 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. 1994. Hayek on Hayek: An Autobiographical Dialogue. Edited by Stephen Kresge and Leif Wenar. Chicago: University of Chicago Press, and London: Routledge. Hayek, F. A. 1995. Contra Keynes and Cambridge: Essays, Correspondence. Edited by Bruce Caldwell. Vol. 9 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge. Hayek, F. A. 1997. Socialism and War: Essays, Documents, Reviews. Edited by Bruce Caldwell. Vol. 10 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge. Herbener, Jeffrey M. 1991. “Ludwig von Mises and the Austrian School of Economics.” Review of Austrian Economics 5, no. 2: 33-50. Herbener, Jeffrey M. 1996. “Calculation and the Question of Arithmetic.” Review of Austrian Economics 9, no. 1: 151-62. Hicks, Sir John. 1967. Critical Essays in Monetary Theory. Oxford: Clarendon Press. Hoppe, Hans-Hermann. 1996. “Socialism: A Property or Knowledge Problem?” Review of Austrian Economics 9, no. 1: 143-49. Hutchison, T. W. 1984. “Austrians on Philosophy and Method (since Menger).” In idem., The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians. New York and London: New York University Press, pp. 203-32. Kirzner, Israel M. 1963. Market Theory and the Price System. Princeton: Van Nostrand. Kirzner, Israel M. 1966. An Essay on Capital. New York: Augustus M. Kelley. Kirzner, Israel M. 1973. Competition and Entrepreneurship. Chicago: University of Chicago Press. Kirzner, Israel M. 1988. “The Socialist Calculation Debate: Lessons for Austrians.” Review of Austrian Economics 2: 1-18. Kirzner, Israel M. 1995a. “Introduction.” In idem., ed., Classics in Austrian Economics: A Sampling in the History of a Tradition. Vol. 3. London: William Pickering, pp. vii-xvii. Kirzner, Israel M. 1995b. Review of Jack Birner and Rudy Van Zijp, Hayek, Co-ordination, and Evolution. Southern Economic Journal 61, no. 4 (April): 1243-44. Kirzner, Israel M. 1996. “Reflections on the Misesian Legacy in Economics.” Review of Austrian Economics 9, no. 2: 143-54. Kirzner, Israel M. 1997. “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach.” Journal of Economic Literature 35, no. 1 (March): 60-85. Klein, Peter G. 1992. “Introduction.” In Hayek, 1992, pp. 1-15. Klein, Peter G. 1996. “Economic Calculation and the Limits of Organization.” Review of Austrian Economics 9, no. 2: 51-77. Lachmann, Ludwig. 1956. Capital and Its Structure. Kansas City: Sheed Andrews and McMeel. Lavoie, Don. 1985. Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. Cambridge: Cambridge University Press. Lucas, Robert E. 1977. “Understanding Business Cycles.” In idem., Studies in Business-Cycle Theory. Cambridge, Mass.: MIT Press, 1981. Machlup, Fritz. 1976. “Hayek’s Contributions to Economics.” In idem., ed., Essays on Hayek. Hillsdale, Mich.: Hillsdale College Press, pp. 13-59. Machovec, Frank M. 1995. Perfect Competition and the Transformation of Economics. London: Routledge. McCormick, Brian J. 1992. Hayek and the Keynesian Avalanche. New York: St. Martin’s Press. Mises, Ludwig von. 1912. The Theory of Money and Credit. New Haven: Yale University Press, 1953. Mises, Margit von. 1984. My Years with Ludwig von Mises. Second enlarged edition. Cedar Falls, Iowa: Center for Futures Education. O’Driscoll, Gerald P., Jr. 1977. Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City: Sheed Andrews & McMeel. Rothbard, Murray N. 1956. “Toward a Reconstruction of Utility and Welfare Economics.” In Mary Sennholz, ed., On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: Van Nostrand, pp. 224-62. Rothbard, Murray N. 1962. Man, Economy, and State. Auburn, Ala.: Ludwig von Mises Institute, 1993. Rothbard, Murray N. 1963a. America’s Great Depression. Second revised edition. New York: Richardson and Snyder, 1983. Rothbard, Murray N. 1963b. What Has Government Done to Our Money? Auburn, Ala.: Ludwig von Mises Institute, 1990. Rothbard, Murray N. 1991. “The End of Socialism and the Calculation Debate Revisited.” Review of Austrian Economics 5, no. 2: 51-76. Rothbard, Murray N. 1994. Review of Bruce Caldwell and Stephan Boehm, eds., Austrian Economics: Tensions and New Directions. Southern Economic Journal 61, no. 2 (October): 559-60. Rothbard, Murray N. 1995. “The Present State of Austrian Economics.” In idem., The Logic of Action. Cheltenham, U.K.: Edward Elgar, 1997, vol. 1, pp. 111-72. Salerno, Joseph T. 1990a. “Ludwig von Mises as Social Rationalist.” Review of Austrian Economics 4: 26-54. Salerno, Joseph T. 1990b. “Postscript: Why a Socialist Economy Is ‘Impossible.’” In Ludwig von Mises, Economic Calculation in the Socialist Commonwealth. Auburn, Ala.: Ludwig von Mises Institute, pp. 51-71. Salerno, Joseph T. 1993. “Mises and Hayek Dehomogenized.” Review of Austrian Economics 6, no. 2: 113-46. Salerno, Joseph T. 1994. “Reply to Leland B. Yeager.” Review of Austrian Economics 7, no. 2: 111-25. Salerno, Joseph T. 1996a. “A Final Word: Calculation, Knowledge, and Appraisement.” Review of Austrian Economics 9, no. 1: 141-42. Salerno, Joseph T. 1996b. “Why We’re Winning: An Interview with Joseph T. Salerno.” Austrian Economics Newsletter 16, no. 3 (Fall): 1-8. Schumpeter, Joseph A. 1942. Capitalism, Socialism, and Democracy. New York: Harper & Row. Spadaro, Louis M., ed. 1978. New Directions in Austrian Economics. Kansas City: Sheed Andrews & McMeel, 1978. Van Zijp, Rudy. 1993. Austrian and New Classical Business Cycle Theories: A Comparative Study Through the Method of Rational Reconstruction. Brookfield, Vt.: Edward Elgar. Vanberg, Viktor J. 1994. “Spontaneous Market Order and Social Rules: A Critical Examination of F. A. Hayek’s Theory of Cultural Evolution.” In idem., Rules and Choice in Economics. London and New York: Routledge, pp. 75-94. Vaughn, Karen I. 1996. Austrian Economics in America: The Migration of a Tradition. Cambridge: Cambridge University Press. White, Lawrence H. 1996. “Hayek’s Pure Theory of Capital.“ Unpublished manuscript. Department of Economics, University of Georgia. White, Lawrence H. 1997. “Why Didn’t Hayek Favor Laissez-Faire in Banking?” History of Political Economy, forthcoming. Williamson, Oliver E. 1991. “Economic Institutions: Spontaneous and Intentional Governance.” Journal of Law, Economics and Organization 7 (special issue):159-87. Yeager, Leland B. 1994. “Mises and Hayek on Calculation and Knowledge.” Review of Austrian Economics 7, no. 2: 93-109. Yeager, Leland B. 1995. “Rejoinder: Salerno on Calculation, Knowledge, and Appraisement.” Review of Austrian Economics 9, no.1: 137-39.
7784	dbpedia	2	55	https://www.sourcewatch.org/index.php/Friedrich_Hayek	en	Friedrich Hayek			[ "https://www.sourcewatch.org/resources/assets/licenses/cc-by-nc-sa.png", "https://www.sourcewatch.org/resources/assets/poweredby_mediawiki_88x31.png" ]	[]	[]	[ "" ]	null	[]	null		en	/resources/assets/favicon.ico		null	Friedrich August von Hayek (1889-1992) was an economist of the Austrian School noted for his defense of free-market capitalism against left-wing economic thought. Hayek and his close associate Ludwig von Mises were seen as the counter-point to the prevailing economics of John Maynard Keynes in the immediate post-war era, who was seen by them as a 'socialist'. The interest here for SourceWatch readers, is that Hayek and von Mises became elevated to the level of (almost) infallible gurus among the Libertarian think-tanks which grew exponentially from the 1980s on through the financing of millionaires like Antony Fisher (Buxted Chickens and the Institute of Economic Affairs) and other wealthy free-market fanatics and large corporations. Hayek turned in 1944 to the political arena with his Road to Serfdom, a polemical defense of laissez-faire capitalism against socialism, which influenced people across the political spectrum. His subsequent political activities include the foundation of the libertarian Mont Pelerin Society with von Mises in 1947, whose original membership included several socialists. Hayek's work was initially ignored in the Keynesian mainstream which then dominated economics, but interest in his writings began to increase after his 1974 Nobel award and became prominent during the 1980s and 1990s with the triumph of economically neo-liberal right-leaning governments and leaders in the United States (Ronald Reagan) and Great Britain's (Margaret Thatcher, the British prime minister from 1979 to 1990 (she was an outspoken devotee of Hayek's writings). Corporate funding Hayek's work has had huge political impact, serving as the intellectual underpinning of many of the right-wing and libertarian think tanks that have formed since 1947. However, Hayek sought to distance himself from the political right in his essay Why I am not a Conservative (1960): he was politically progressive, but believed fervently in less government and particularly in less power for the government regulatory agencies. Libertarians believe that market-forces should determine what is sold, and that it is the buyer's responsibility to check before buying. More importantly, the ultra-freemarket philosophy that emerged under the names of Hayek and von Mises, became used by large corporations and industries with poisoning and polluting problems as a rationale for less regulation and the emasculation of the US regulatory agencies (EPA, OSHA, CPSP and FDA). Most notably was the network of libertarian think-tanks known as the Atlas Group established by the UK millionaire Sir Antony Fisher in the USA, following his success with the Institute of Economic Affairs in London. It now claims to have over 400 associated corporate-funded think-tanks around the world. Hayek's work has inspired the establishment of The Hayek Center.[1] and there was a Ludwig von Mises Institute established in 1982 by Llewellyn Rockwell, Burton Blumert and Murray Rothbard. Rothbard, had been one of the founders of the Cato Institute. Organisations with close ties to Hayek, either via the Mont Pelerin circle, or less directly, include: Atlas Economic Research Foundation & Atlas Group State Policy Network Competitive Enterprise Institute Cato Institute & Heritage Foundation Institute of Economic Affairs Fraser Institute & Institute for Humane Studies Persons with close ties to Hayek Antony Fisher Ludwig von Mises Ayn Rand Biography Hayek has been subject to many biographies, but there is one outstanding comparison between Keynes and Hayek in Keynes - Hayek: The Clash that Defined Modern Economics, by Nicholas Wapshott.[1] Hayek's father was a doctor of medicine and part-time university lecturer in botany at the University of Vienna, and his father-in-law was Franz von Juraschek, a prominent Austrian economist. Hayek was inducted into the Austrian army in March 1917 towards the end of World War I, and after the armistice (Nov 11 19818) he returned to Vienna suffering from malaria. This was at a time when the old Austro-Hungarian empire was breaking up, and the League of Nations enforced the separation of Austria from Germany. Along with most Austrians he became an enthusiastic supporter of John Maynard Keynes, who, as economic advisor to the British government, led the fight against the draconian reparation payments that the victorious Allies tried to extract from the defeated Central Powers. These reparation payments made it almost impossible for Austria to reconstruct industry or re-establish their old society after the devastation of war, and led to a long period of hyper-inflation, as Keynes had predicted. [See The Economic Consequences of the Peace].[2] In 1921-20 when the University of Vienna was closed during the winter (they couldn't afford the required heating), he moved to Switzerland, which gave his some temporary relief from the poverty of Austria and some experience with an economy not destroyed by war. He then came under the influence of Ludwig von Mises, a lecturer in economics at the University of Vienna who promoted a form of market-economics which held that the amount of money in the economy determined the inflation rate. Von Mises was also stridently against the prevailing socialist ideas that were developing in Hungary and Eastern Europe. Von Mises found Hayek a job with the government body established to settle the war debt in late 1921 where he had first-hand experience as runaway inflation; ie second monthly salary was 3-times that of his first just to compensate for 40 days of hyperinflation. He had 200 pay-rises in the first eight months. In 1922 he was introduced to Professor JW Jenks a visiting economist from the New York University, and was invited to visit New York and act as a researcher and translator on a project to help the German economy get back on its feet. He arrived there in March 1923 (and stayed a year) and began to develop his ideas on what led to business cycles of boom and bust. The business cycle became the foundation of his later theories. References Wikipedia entry on Hayek Bruce Caldwell, Hayek's Challenge: An Intellectual Biography of F.A. Hayek, The University of Chicago Press, 2003 Curriculum Vitae, Nobel e-museum, accessed January 2004 What academics and supporters of Hayek say about his legacy: http://www.hayekcenter.org/friedrichhayek/hayekquote.htm An important new addition to the current explosion of Hayek-inspired scholarship is Bruce Caldwell's Hayek's Challenge. Resources and articles Related Sourcewatch International Conference on the Unity of the Sciences
7784	dbpedia	2	43	https://www.libertarianism.org/publications/essays/worst-top-biography-friedrich-hayek	en				[]	[]	[]	[ "" ]	null	[]	null					null
7784	dbpedia	1	16	https://thebreakthrough.org/journal/no-13-winter-2021/what-would-hayek-do-about-climate-change	en	What Would Hayek Do About Climate Change?	https://thebreakthrough.…mtime=1614287189	https://thebreakthrough.…mtime=1614287189	[ "https://thebreakthrough.imgix.net/person/mark-sagoff/DSC_3838_28129_180709_235943.jpg?auto=format&dpr=3&crop=faces%2Ccenter&fit=crop&w=168&h=168&ixlib=react-7.2.0 3x", "https://thebreakthrough.imgix.net/joanna_shoot_2017.jpg?auto=format&dpr=1&crop=faces%2Ccenter&fit=crop&w=56&h=56&ixlib=react-7.2.0", "https://thebreakthrough.imgix.net/Journal-Cover-Winter-2021_v1.png?auto=format&dpr=1&crop=faces&fit=fill&w=400&h=1&ixlib=react-7.2.0", "https://thebreakthrough.imgix.net/Screenshot-2024-01-31-at-3.46.42-PM.png?auto=format&dpr=1&crop=top&fit=crop&w=500&h=600&ixlib=react-7.2.0" ]	[]	[]	[ "environment", "energy", "agriculture", "nuclear" ]	null	[ "Mark Sagoff" ]	2021-03-01T05:00:00-08:00	Steve Rayner memorably observed that one deals with climate change in the same way one eats an elephant, one part at a time. Hayek would have agreed.	en	/favicon.ico	The Breakthrough Institute	https://thebreakthrough.org/journal/no-13-winter-2021/what-would-hayek-do-about-climate-change	“‘Groundbreaking’ device turns sunlight into CO2-free gas”; “Crystalline nets . . . turn carbon dioxide into liquid fuel”; “New chemical approach converts carbon dioxide to valuable fuel”; “Synthetic biologists [engineered] a bacterium . . . that builds its cells by absorbing carbon dioxide (CO2)”; “LLNL scientist researching hydrogen energy from solar water splitting”; “New reactor could halve carbon dioxide emissions from ammonia production”; “Bezos-backed fusion startup raises $100 Million for demo system”; “Novel phase-change material acts as thermal battery”; “ARPA-E [announced] Breakthroughs Enabling Thermonuclear-fusion Energy (BETHE)”; “First U.S. wave energy test facility to be built off Oregon coast”; “Improving carbon-capturing with metal-organic frameworks,” not to mention “Hanging bricks, a simpler way of storing energy.” Climate change is often characterized as a “wicked” problem, that is, a problem that is poorly formulated, is deeply contested, involves puzzling information, has innumerable causes, and hence has no single right answer. And yet, despite many questions and controversies, there is a near-consensus about the source of the problem and the needed response. The combustion of coal, gas, and oil is the principal cause of anthropogenic climate change. A technical fix — cheap and abundant clean energy — would solve the problem. There are as many right answers as there are clean and inexpensive kinds of useful energy. But each answer depends upon a godsend of technology. Where that godsend will come from is a different question, one that mainstream economists have struggled with for decades. Mainstream economic theory cannot explain massive investments in gee-whiz technologies, such as those described above, to replace fossil fuels. Mainstream theory is predicated upon the notion that when a resource becomes scarce, its price rises, leading markets to use the resource more sparingly or to substitute more plentiful resources to do the same job. Markets have no inherent mechanism to handle climate change because climate change presents a problem not of scarcities but of consequences. There is plenty of coal, gas, and oil, and the atmosphere will soak up as much CO2 as we wish to produce — and a great deal more. Future generations, however hot and miserable, will have lots of coal, gas, and petrol. In any scenario, however awful, these fuels will still burn, and there will be plenty of them. The punchbowl of fossil fuel seems bottomless. Acknowledging this, mainstream economic theory hypothesizes that the necessary innovations will appear, like rabbits, from the hat of a globally enforced carbon price. This belief requires magical, that is, theoretical, thinking. There is no evidence that an emissions “cap” or tax leads to clean energy technologies. Fiat prices get finagled. Regulations may be only as good as the last election or administration. Powerful industries may be less inclined to invest in new technologies than to wheedle exceptions or wrangle loopholes to dodge carbon “caps” or taxes. Firms may hire lobbyists before they hire engineers. Nonetheless, and contrary to mainstream theory, individuals, organizations, firms, and agencies avidly work on inventions to substitute for coal, gas, and oil despite low fossil fuel prices and in the absence of a carbon price. If these efforts at innovation are profitable, so much the better; but that is not the point. These projects respond less to the profit motive than to the allure of solving major problems and the hope of doing big things. Entrepreneurs who are piling on to create clean energy sources exemplify the creative and dynamic nature of markets, as management guru Peter Drucker describes it, to organize and apply knowledge to knowledge to get things done. This is not price competition, efficiency, or a “pareto optimized” equilibrium. This is creative entrepreneurial energy. “It is the new things that humanity has discovered which makes its history exciting; and the new things that may be found in the future, before humanity blows itself up, or settles down to some ghastly ‘equilibrium’, make a future worth praying for, and worth working for,” the British economist John Hicks observed half a century ago. How do entrepreneurs acquire the knowledge they need to create those things? “The economic problem of society,” Friedrich von Hayek wrote, is “not merely a problem of how to allocate ‘given’ resources, it is a problem of the utilization of knowledge not given to anyone in its totality.” Hayek continued, “It is through the mutually adjusted efforts of many people that more knowledge is utilized than any one individual possesses or than it is possible to synthesize intellectually; and it is through such utilization of dispersed knowledge that achievements are made possible greater than any single mind can foresee.” Along with others of the Austrian School, especially Joseph Schumpeter, Hayek differed from mainstream neoclassical economists, according to whom markets allocate resources to those willing to pay the most for them and therefore (tautologously) maximize social welfare. According to Schumpeter, perfect competition, in which profits disappear as markets drive prices down to costs, is not what counts, but rather “the competition from the new commodity, the new technology, the new source of supply, the new type of organization . . . which strikes not at . . . the profits . . . of the existing firms but at their foundations.” For Hayek and others of the Austrian School, economic problems arise with and are resolved by the discovery and coordination of bits of knowledge and know-how, which are dispersed across society and are not available to any one agency, authority, or individual. The entrepreneurial effort to develop and deploy clean energy technologies disrupts the “givens”: for example, the kinds of resources that are or can become available, at what cost, and how they may be used to make fossil fuels obsolete. The economic problem for Hayek — this would apply to climate change — is never a maximization problem, that is, a problem of how to direct given resources efficiently to satisfy given wants. It is always a discovery problem, that is, a problem of how people may act not on the knowledge they have but on the knowledge they find, create, and apply to change both their wants and the resources they need to satisfy those wants. 1. In his 1974 Nobel Prize acceptance speech, Hayek observed that our confidence that we shall overcome resource depletion “rests on an act of faith. We are generally confident that, by the time the resource is exhausted, something new will have been discovered which will either satisfy the same need or at least compensate us for what we no longer have.” Hayek’s act of faith comports with standard mainstream economics. In his speech, Hayek took aim at the Club of Rome projections, published two years earlier, which had predicted, among other things, the collapse of the global economy within decades because of the depletion of natural resources. In the 1960s and 1970s, mainstream economists, including William Nordhaus, Robert Solow, and James Tobin, developed a theory based on persuasive empirical evidence that when a resource becomes scarce, higher prices will lead to the substitution of more plentiful resources. Solow wrote that “higher and rising prices of exhaustible resources lead competing producers to substitute other materials that are more plentiful and therefore cheaper.” Solow observed that there have been and “there will be prolonged and substantial reductions in natural-resource requirements per unit of real output.” He asked, “Why shouldn’t the productivity of most natural resources rise more or less steadily through time, like the productivity of labor?” While Hayek generally agreed with this, he differed from mainstream economic theory in three profound ways. First, mainstream economists have typically defined their discipline as the study of the allocation of scarce resources among unlimited wants. According to this mainstream view, in efficient or “perfectly competitive” markets (i.e., those without “externalities”), buyers and sellers — who are assumed already to possess all relevant information, such as their preferences, the terms of exchange, the amount and quality of assets, where they are found and how they are transported, and so on — by trading goods bring prices down to costs and extract all the benefits of trade. This framework is foreign to Hayek. Hayek lambasted the Neoclassical economist’s fixation on perfect competition because it ignores the epistemic and institutional context in which competition takes place — a context in which discovery, invention, innovation, bargaining, collaboration, entrepreneurship, investment, opinion, regulation, social movements, and so forth arise, all of which motivate economic activity and make it possible. Hayek described the economic problem in terms of the institutional arrangements in which individuals are most likely to acquire, discover, and coordinate bits of relevant knowledge to be found in all these contexts about what goods might become available, of what quantity and quality, and on what terms and what other information people need to accomplish their plans or, more likely, continually to adjust and revise them. Second, mainstream economists associate price with value, that is, the intersection of 1) the demand for (and thus the economic value of) the next or incremental unit of a good and 2) the cost of producing it. Hayek did not consider price as a measure of value; he saw it as a conduit of information that firms and individuals need to choose, refine, and accomplish their plans. Information always changes, and new knowledge is constantly discovered. Hayek wrote that "decentralization has become necessary because nobody can consciously balance all the considerations bearing on the decisions of so many individuals. . . . because all the details of the changes constantly affecting the conditions of demand and supply of the different commodities can never be fully known, or quickly enough be collected and disseminated, by any one center, what is required is some apparatus of registration which automatically records all the relevant effects of individual actions." According to Hayek, the price system, the “apparatus of registration,” coordinates the activities of individuals and firms but says nothing about the value of anything. To be sure, welfare economists define “value” or “benefit” in terms of psychological or subjective constructs, e.g., “preferences” or “satisfactions” they believe they can measure; they then try to second-guess market prices by aligning them to these made-up conceptual constructs. Hayek fulminated against Utilitarianism or welfarism, which had infected economists with the “fatal conceit” that they could outsmart market players and get the prices “right.” By chanting a ritual “market failure” abracadabra over social problems, economists would replace a free-market economy with cost-benefit analysis, the better to achieve a figment of their mathematical imagination, i.e., welfare, being better-off, or utility, which they expect to be paid to measure. While Hayek recognized that doctrinaire socialism associated with the Soviet Union was defunct in the Western world, he feared that economic freedom and, with it, productivity would die of a thousand cuts as governments constantly intervened in markets to promote “efficiency,” a theoretical construct, by “correcting” prices. An official price on carbon, for example, might encourage bets about the likelihood of continued enforcement, which is not useful knowledge to those who are looking for climate solutions. Driven by noble intentions, reformers “impose more and more central control over economic decisions . . . until we get that very system of central planning which few now consciously wish to see established,” Hayek wrote. Third, Hayek disagreed with mainstream Neoclassical economists about the function and purpose of markets. For mainstream economists, individuals engage in economic activity to promote their self-interest; they want to maximize the satisfaction of “given” preferences they are said already to know. According to this standard view, in a liberal society, the rule of law — which enforces contracts, respects property, and requires consent — transforms the pursuit of self-interest into the promotion of the social interest or the interest of society as a collective whole. Under liberalism, as Adam Smith wrote, the individual is ‘‘led by an invisible hand to promote an end which was no part of his intention’’ – the interest of society. On this view, market prices orchestrate our interests. As Smith continued, ‘‘It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love.’’ Hayek did not regard people as psychological egoists or as satisfaction-maximizers (nor did Smith in other writings) but as individuals organized in many ways, for example, in firms, in civic and religious associations, and in households with overall plans or ends-in-view subject to change in response to further information and learning-by-trying. The institutions of a liberal society, with their respect for the rights of person and property and their emphasis on consent, enable those who are ignorant of most things — i.e., everyone — to coordinate their activities in ways that use or apply bits of knowledge and know-how dispersed across society and cannot be assembled by any individual or by a scientific committee. The principal function of markets, then, is to develop, discover, distribute, and deploy knowledge, often tacit knowledge implicit in social customs and practices and know-how that cannot be theorized. Markets are for discovery not for utility. Hayek believed that the institutions of liberalism are justified because they are the rational response to our ignorance and to our need constantly to adjust our beliefs, desires, hopes, ambitions, plans, and predictions to changing possibilities and conditions of which actual market prices make us aware. Liberty is the antidote to ignorance. Hayek wrote, "Liberty is essential in order to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it." 2. Hayek wrote that the “curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” He thought that prices solve the division of knowledge problem in the same way they solve the division of labor problem. The economic task is one of coordination in relation to information implicit in actual prices, rather than one of valuation in relation to policy objectives. The principle applies whether the objectives are specific, like lower carbon emissions, or nebulous and abstract, like welfare, utility, consumer surplus, efficiency, and net or aggregate willingness to pay. By contrast, contemporary economists, dazzled by their uncanny ability to analyze any problem, including global warming, as a market failure, propose that political authorities, whom they are eager to advise, “correct” the failure by taxing fossil fuel, for example, or by setting a “cap” under which industries must trade emission allowances. These economists tout their theoretical fixes — “caps” or “taxes” — but know nothing about case-by-case, problem-by-problem technological fixes, which are required. The economist Albert O. Hirschman criticized the penchant of his discipline to announce theoretical fixes or “shortcuts to the understanding of multifarious reality that must be coped with and controlled and therefore be understood at once.” Carbon pricing offers a quick theoretical fix, a kind of magical pathway or shortcut, which takes attention and effort away from piece-by-piece, one-step-at-a-time innovation. From Hayek’s perspective, interventions are wrong-headed if they are based on abstraction not on practice: if they represent the ruling theory of an academically trained nomenklatura rather than the trial-and-error lessons learned by those outside the academy who get things done. Efforts to “correct” market prices misconceive the function prices serve, which is to coordinate bits of knowledge and information dispersed across society, rather than to indicate or correlate with the value of anything. Consider a carbon tax. “Among economists, this is not controversial,” according to Greg Mankiw, chair of the Council of Economic Advisers under President George W. Bush. “The politics is complicated, the international relations is complicated, but the economics is really simple.” One could draw an analogy with the theory of energy storage, the theory of fusion, the theory of releasing hydrogen from water, and so on. The theory is simple; the problem is always one of engineering and scaling up. How do we know whether it is easier to engineer and scale-up a carbon “price” than any of many more direct deus ex machina clean energy technologies? At what level of production or consumption would a carbon tax be levied? It might be most convenient to levy it at the mine or wellhead, i.e., at the source of production. But suppliers are not emitters. The only experience we have with excise taxes, moreover, is intranational; thus, the legal authority that imposes the tax also enforces it and collects the revenue. To suppose that international negotiators could agree upon the amount of a tax and a way of collecting it and dividing the proceeds is truly to “assume the can opener” in the jargon of economics. People will pay only the taxes intelligible to them. If the government taxes petrol to pave the roads, most do not object to this use tax, because it makes sense to those who pay it. If the government, in response to its armchair-economist whisperers, taxes petrol to save the planet, it may salve the conscience of urban elites and cosmopolitan bicyclists, but folks in rural areas, who depend on tractors and trucks, may riot, as the Yellow Vests did in France starting in 2018. One can see the connection between a gas tax and road repair, but the relation between it and planet repair is more conceptual, abstract, indirect, theoretical, and conjectural. “Higher taxes on energy have always been a hard sell, politically,” Mankiw acknowledged. “The members of the American Economic Association are convinced of their virtue. But the median citizen is not." The cap-and-trade strategy inaugurated under the UN Intergovernmental Panel on Climate Change (IPCC) framework offers a cautionary tale. Any competent economist, not just Hayek, would hear in a top-down attempt to price carbon a cattle call for scamming, creative accounting, rent-seeking, subterfuge, dishonesty, deception, special pleading, fraud, resistance, unrest, and every kind of perverse, not just unintended, consequence one can think of and others not yet imagined. This in fact is what happened. The carbon markets created under the IPCC and Kyoto framework — the Clean Development Mechanism (CDM), Joint Implementation (JI), and International Emissions Trading (IET) — have issued a humongous amount of carbon credits, known derisively as “hot air,” which in an international context suffocate any further carbon trading. Credit supply vastly exceeds demand. According to a Carbon Market Watch study, in December 2019 CDM had available for bidders a total potential supply of around 4.6 billion emission credits (representing 4.6 GtCO2e). The JI offers credits for 220 million tonnes. But, “both systems are dwarfed by the number of Assigned Amount Units (AAUs)” from IET. The study continued, “There are still 14.1 billion AAUs available from the Protocol’s first commitment period, and, if the second commitment period were to enter into force, this would create an extra surplus of around 1.7 billion.” In addition to all this, the study noted, “countries could potentially create between 18.7 and 28.3 GtCO2e worth of credits — or ‘hot air’ — that they can sell without reducing a single tonne of greenhouse gas emissions.” Credits exceed emissions. Global emissions of CO2 were projected at 37.1 gigatonnes (Gt) in 2018. Carbon credits are now so cheap that they do not justify the time, effort, and expense needed to claim them. The number of credits that overhang carbon markets today, however humongous, are billions fewer than the number that would become available if they had monetary value and those who could claim them bothered to do so. These credits stymie any further trading. Now negotiators must spend their time trying to undo what they have done. Any competent economist — not just Hayek — could have predicted that a fiat market that cuts “credits” out of political whole cloth will distribute them accordingly. Actual markets, which have evolved over centuries, are able to rely on systems of entrenched and trusted methods of accounting, accountability, contract, and exchange. When prices are set artificially, market players game the likelihood of enforcement, while actual prices emerge from consensual activity and do not need to be enforced. Ultimately, markets rely on trust and therefore on voluntary exchange and cooperation within legal and institutional frameworks that are entrenched in social consciousness. Coercion does not buy cooperation; it is not coordination. Panels of economic experts eager to set carbon prices have not created norms, processes, and protections that engender public faith and trust; however rational and scientific their authority may seem to them, these expert panels override rather than engage market and legal processes that discover and disperse the knowledge and information on which people rely and that no central committee or planning agency can command. Mainstream economists tout pricing carbon, which creates a return to them for their theories and services. Experience teaches, however, that solutions to social problems emerge through social learning, experimentation, trial and error, and evolution. In Aesop’s famous fable, a council of mice agree to bell the cat to protect themselves, but then not one of them is willing to do it. The concept of belling the cat, like the concept of taxing or trading emissions, is simple: “Good council’s easily given, but the effect / Oft renders it uneasy to transact.” The point is that carbon markets are technologies like any other — energy storage, nuclear fission, fusion, hydrogen, etc. — the basic science or theory of which may be simple. The problems are always the same: engineering, scaling up, and cost. What we have learned is that carbon trading or taxing may be harder to engineer and scale, cost more, and raise more enforcement questions than other technologies that have as good a chance of pinning the tail on the climate crisis donkey. What is worse, attempts to “price” dirty fuel may distract from and compete with urgent and necessary efforts to underprice it with clean energy technologies. Market forces must be enlisted in the pursuit of clean, inexpensive, and deliverable energy to substitute for fossil fuel in many or most of its uses. How this will happen, however, depends on the specific use, e.g., industrial, household, transportation, and an infinite number of contingencies of time and place, such as how to transmit abundant wind energy to where it is needed. What is crucial, Hayek wrote, is “concrete and often unique knowledge of the particular circumstances of time and place.” Those with this kind of knowledge may act as entrepreneurs to design climate-friendly processes or methods, which may more often depend on clearing regulatory hurdles than on erecting them. Ideas applied successfully in one context may be adopted in another. Entrepreneurs who arbitrage opportunities for clean technologies must operate within the epistemic environment of actual prices; otherwise, as we have seen post-Kyoto, chicanery may become more profitable than creativity. 3. Mainstream economic theory has been a disaster in its framing of the problem of global warming because it assumes that market players compete in a static system and know the givens in advance: what resources are available, who has and who wants them, and what are the terms of exchange. These facts are never given but always discovered. “Any approach,” Hayek states, “such as that of much of mathematical economics with its simultaneous equations, which in effect starts from the assumption that people’s knowledge corresponds with the objective facts of the situation, systematically leaves out what is our main task to explain.” Hayek would not have opposed government-funded initiatives to promote clean energy and other “disruptive” technologies. The crucial distinction is this: governments must act within markets (e.g., by purchases, subsidies, or other means) rather than upon them (e.g., by setting prices). Governments, in other words, must participate in markets on the same terms as everyone else. “It is the character rather than the volume of government activity that is important,” Hayek explained. A free society “demands not only that the government have the monopoly of coercion but that it has the monopoly only of coercion and that in all other respects it operates on the same terms as everybody else.” Hayek was an enemy of fixed prices but not of Big Government. Hayek described laissez-faire as “a highly ambiguous and misleading description of the principles on which a liberal policy is based.” He advocated the use of funds raised by general taxation to support education, public health, a minimum wage and income, research, parks, infrastructure, cultural activities (including sports), and insurance against catastrophic events. He wrote that “far from advocating . . . a minimal state, we find unquestionable that in an advanced society government ought to use its power of raising funds by taxation to provide a number of services which for various reasons cannot be provided, or cannot be provided adequately, by the market.” Hayek explained, “The basic principle of the liberal tradition, that all the coercive action of government must be limited to the enforcement of general rules of just conduct, does not preclude government from rendering many other services for which, except for raising the necessary finance, it need not rely on coercion. . . . I am the last person to deny that increased wealth and the increased density of population have enlarged the number of collective needs which government can and should satisfy.” When public laboratories, research facilities, funding agencies, etc. enter markets by stimulating innovation, taking risks that exceed private means, enriching the knowledge base, or just banging heads together at conferences, panels, and public–private partnerships, they play the same entrepreneurial role as firms in the private sector. The government does not pretend to know more than other market players about the “value” of anything; it does not claim to “correct” prices to “internalize” social costs. It is a price-taker. It may try to lower prices for climate-friendly goods by favoring them in procurement, by “crowding in” advances likely to achieve them, and by indulging promising start-ups and small businesses, as it has for many years, with tax breaks and subsidies. A mixed economy in which public and private actors together build the knowledge base, including knowledge of local circumstances, customs, needs, culture, and legal and other institutions, would be acceptable to Hayek. He wrote that “an active government that assists the spontaneous forces of the market is preferable to a less active one that does the wrong things.” 4. What will it take for clean energy technologies to scale up and to pan out? It takes money, and it takes knowledge. Entrepreneurs who invest in climate-friendly technologies — what else would you do with your billions? — trust only market prices, though they also like tax credits and subsidies. Market prices help discover and convey changes in knowledge and know-how relevant to each time and place. These are communicated to those who develop the haptic capacities of skin in the game. Doctrinaire Marxists and doctrinaire Neoclassical economists alike promote production for use rather than for exchange. The “exchange” value of a good is its market price; this typically reflects how much it costs to supply. The “use” value of a good is defined as the utility or benefit it provides. Neoclassical economists believe they can measure this. For Hayek, there is little difference between a Neoclassical and a Socialist calculation of “use” value. Neoclassical economists “correct” prices to assure the proper valuation of “external” outputs of production. They would set fossil fuel prices, therefore, to account for the harmful emissions they cause. Socialist economists set prices to assure the proper valuation of labor and other inputs to production. Either way, social scientists assume the commanding heights, in Lenin’s useful phrase, which is probably the whole point anyway, i.e., the will to hegemony and power. If the American Economic Association (AEA) had its way, it would set prices in terms of its calculus of the social cost of carbon. Entrepreneurs would then plan not around market prices but around AEA “prices,” which float in the doctrinal and political winds. This would turn investment into speculation — bets on what the next administration or central committee will do. No one would know when to jump into the market and from how high. Entrepreneurs, who seek now to compete with the market price of fossil energy, would have to readjust their efforts to the artificial price, leaving their disruptive and dramatic ambitions behind. By supposing that academic adepts can know enough to set prices in terms of social benefits, Neoclassical economists ignore the vast amount of contextual information, including social norms, customs, practices, expectations, and opportunities, available to entrepreneurs engaged in problem-solving in a given industry or at a given place and time. In their recommendation that governments set prices to internalize externalities and thus to capture value-in-use, Neoclassical economists falsify the very information about value-in-exchange that entrepreneurs need to understand the realities of energy and related markets. The “consumer surplus” analysis of welfarism and the “surplus value” analysis of Socialism both rely on comparative statics (that is, models frozen in time) that assume an equilibrium to be managed from the commanding heights of economic theory. Neither see the dynamic processes that constantly upend these models. They both miss the information processes, contextual and particular to time and place, that keep readjusting prices to the dynamic, creative, and disruptive role entrepreneurs play in resolving the shortfalls of markets. There is never an equilibrium, only a process of equilibration. Hayek understood that we are not sure even about the “intended” consequences of our actions until we see how things work out in experience — “what we shall want when we see it.” 5. There is no such thing as business as usual. A business-as-usual scenario cannot happen because the only economic constant is change. In June 2020, Shell wrote down its value by $22 billion in response to tanking oil prices; BP took a $17.5 billion write-down. What were reservoirs of wealth had become stranded assets virtually overnight. Only the paranoid, the hyperdynamic, the novel, and the unusual businesses survive. Because there is no such thing as business as usual, climate science can tell us what levels of atmospheric CO2 correlate with what dire consequences, but it is utterly unprepared to say what those levels might be 50 or 100 years from now. In that time, a global pandemic may reduce all economic activity to a mere nubbin, or a breakthrough fusion technology may give the world clean energy as great as any star. Or both. Climate change presents the latest challenge to the faith that ingenuity will overcome environmental challenges to economic growth. The application of knowledge to knowledge makes all the difference. In an influential article, Steve Rayner pointed out that “different actors have very different motivations for action and capabilities to contribute to the climate change challenge.” The problem is to release the needed knowledge wherever it can be found, which is often in the most unexpected places. Rayner advocated a climate strategy that avoids the “top-down” assume-the-can-opener approach of the Kyoto Protocol and instead originates “from the ‘bottom up’ within nations, based on their own institutional, technological, economic and political capacities but which cumulatively will lead to a fundamental technological shift in global patterns of energy and land use.” Rayner wrote that the world is full of “unknown knowns,” by which he meant tacit knowledge, knowledge implicit in skills and know-how, and contextual and specialized knowledge of people who know what they are doing. Rayner like Hayek thought that what works is the concrete and often unique knowledge of the particular circumstances of time and place. Hayek wrote, “The wider aspect of the problem of knowledge with which I am concerned is the knowledge of the basic fact of how the different commodities . . . are actually obtained and used.” This kind of knowledge is unknown to policy analysts, climate savants, and erudite economists, because they do not need practical, local, and dispersed knowledge but only their general abstractions to contribute to the academic literature and make public pronouncements, which they confuse with speaking truth to power. They mostly refine their theoretical apparatus for the edification of each other. They can be ignored. Entrepreneurs, investors, inventors, managers, engineers, and other actors, however, use concrete, specific, implicit, and often local know-how to get things done. The problem is often to coordinate the knowledge that exists — the “unknown knowns” in Rayner’s sense — as well as to find new knowledge and to grasp surprising concatenations of different kinds of information. According to Hayek, the “solution of the economic problem of society is in this respect always a voyage of exploration into the unknown, an attempt to discover new ways of doing things better than they have been done before.” Knowledge, Hayek argued, is always embodied in the context of its discovery and use. It is always knowledge of the process, practice, or opportunity that arises at a time and place. It is always knowledge and know-how that occur within institutional settings that allow discovery, collaboration, and experiment. In that sense, all knowledge like all politics is local: its use depends on the circumstances in which it is applied. Top-down planners have no access to this kind of information. These planners talk in abstract shibboleths — “price carbon!,” “internalize externalities!,” “make polluters pay!”— which express the self-righteousness of the theory class but contain nothing relevant to the solution to any problem. The AEA membership delight in these nostrums; their magical assume-the-can-opener thinking has produced little but hot air. To solve problems, one must take up one technological challenge at a time. This requires knowledge of concrete and specific ways information and know-how can be applied industry by industry, processes by process, use by use, and place by place. Rayner memorably observed that one deals with climate change in the same way one eats an elephant, one part at a time. Hayek would have agreed.
7784	dbpedia	2	14	https://lawliberty.org/features/who-was-hayek/	en	Who Was Hayek? – Law & Liberty	https://lawliberty.org/a…95736329501.jpeg	https://lawliberty.org/a…95736329501.jpeg	[ "https://www.facebook.com/tr?id=870957719969858&ev=PageView&noscript=1", "https://www.facebook.com/tr?id=395487868558560&ev=PageView&noscript=1", "https://lawliberty.org/app/uploads/2023/09/BS-Hayek-e1695736329501-1060x530.jpeg", "https://lawliberty.org/app/uploads/2023/10/BS-Hayek-Quote-1060x445.jpeg", "https://lawliberty.org/app/uploads/2020/01/trump-231x135.jpg 231w, https://lawliberty.org/app/uploads/2020/01/trump-300x175.jpg 300w, https://lawliberty.org/app/uploads/2020/01/trump-540x315.jpg 540w, https://lawliberty.org/app/uploads/2020/01/trump-100x58.jpg 100w, https://lawliberty.org/app/uploads/2020/01/trump.jpg 600w", "https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-270x135.jpg 270w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-300x150.jpg 300w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-1024x512.jpg 1024w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-768x384.jpg 768w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-1536x768.jpg 1536w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-2048x1024.jpg 2048w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-700x350.jpg 700w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-100x50.jpg 100w, https://lawliberty.org/app/uploads/2022/08/shutterstock_1931450612-1-scaled-e1661202436801-1060x530.jpg 1060w" ]	[]	[]	[ "" ]	null	[]	2023-10-02T10:00:00+00:00	G. Patrick Lynch writes about his conversation with Bruce Caldwell about Friedrich Hayek, one of the most important economist.	en	https://lawliberty.org/a…020/03/16x16.png	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.
7784	dbpedia	0	76	https://defense.info/interview-of-the-week/the-career-of-dr-harald-malmgren-learning-and-influencing-america-in-change/	en	The Career of Dr. Harald Malmgren: Learning and Influencing America in Change	https://defense.info/wp-…17677165831.jpeg	https://defense.info/wp-…17677165831.jpeg	[ "https://defense.info/wp-content/uploads/2018/01/defense-logo.png", "https://defense.info/wp-content/themes/asenka/imgs/envelope.png", "https://defense.info/wp-content/uploads/2024/05/1517677165831.jpeg", "https://defense.info/wp-content/uploads/2024/08/dreamstime_m_231773420.jpg", "https://defense.info/wp-content/uploads/2024/04/5046-SirRWilliams18-copy-scaled.jpg", "https://defense.info/wp-content/uploads/2024/08/8581925-scaled.jpg", "https://defense.info/wp-content/uploads/2024/08/Wynne-Discussing-Concurrency.jpg-scaled.webp", "https://defense.info/wp-content/uploads/2024/08/Cover-scaled.jpeg", "https://defense.info/wp-content/uploads/2024/08/71dDuvYfw0L._SL1500_.jpg", "https://defense.info/wp-content/uploads/2022/04/Screen-Shot-2022-04-14-at-7.22.43-AM.png", "https://defense.info/wp-content/themes/asenka/imgs/sirwilliams.png" ]	[]	[]	[ "" ]	null	[ "Robbin Laird", "Jennifer Parker", "Marine Rotational Force - Darwin", "Justin Katz" ]	2024-06-07T10:23:20+00:00	To provide an overview of the perspective and approach of Harald Malmgren, I talked with him along with his daughter Pippa Malmgren this year while working on a book to be published later this year which brings together the essays he has written for us over the years on global developments. I wanted to put […]	en	https://defense.info/wp-…se-fav-32x32.png	Defense.info	https://defense.info/interview-of-the-week/the-career-of-dr-harald-malmgren-learning-and-influencing-america-in-change/	To provide an overview of the perspective and approach of Harald Malmgren, I talked with him along with his daughter Pippa Malmgren this year while working on a book to be published later this year which brings together the essays he has written for us over the years on global developments. I wanted to put together the essays Harald had written for us in honor of our friendship and to highlight the range of thinking which Harald has done in the area where our Venn diagrams in thinking overlap. He will be 89 on his birthday in July and this book is a recognition of the breadth of his thinking. He has written much more in the economic domain but as his daughter, Pippa Malmgren, has noted: “He does not think in silos. He has no analytical fences in his mind. He is a systems level thinker.” I can certainly attest to that. And for readers of the forthcoming book, they will rapidly learn that as well. We discussed his career and its evolution over the years and how his career intersected with the evolution of the U.S. and the global syseem. In broad terms, he trained as an economist in the U.S. and in England and then began a promising academic career at Cornell. He then was invited to become a Whiz Kid in the Kennedy Administration by McGeorge Bundy, Director of the National Security Council. He worked on various defense issues in the Pentagon orbit through the Cuban missile crisis and then entered the Johnson Administration working on trade issues which he did through the Nixon into the Ford Administrations. He later left the Administration but became involved on the Hill side in working trade issues as an advisor to the Congress. Thus, he had the chance to work both the Administration and Hill side on various defense and trade issues. The next phase of his career tracked with the changes in the U.S. position in the global economy. He established a consulting company and worked with a number of CEOs for American corporations notably working abroad. In that process, he began working with Toyota and worked closely with the CEO and his team in “in-sourcing” Toyota into the United States as they would become one of the most important American car manufacturers. As the global economy shifted, his work changed as well and his clients became the big financial groups, again focusing on the global economy. His unique brand of work on domestic and global issues, his background on defense and economics, has allowed him to see trends one would not see if more narrowly focused and that continues to the current day. Phase One: Academia, 1953-1962 This period in Harald’s career has been described in biographical terms as follows: Malmgren initially studied Physics at Rensselaer Polytechnic Institute, 1953–54. Offered a full scholarship to Yale University, he transferred to study economics, where he also became Research Assistant to Nobel Laureate Professor Thomas Schelling. In 1956 he was selected as Yale Scholar of the House for his senior year, graduating B.A summa cum laude from Yale University in 1957, and awarded Yale’s Howland Fellowship for study and travel abroad. Upon graduation from Yale Malmgren was invited by the Provost of Queen’s College to study at the University of Oxford 1957–58. In autumn of 1958 he moved to Harvard University on invitation from the Dean of Graduate Studies but returned to Oxford on his appointment as Student of Nuffield College, Oxford University, 1959–61 and Fellow of the Social Science Research Council, 1959–61. At Oxford he studied under Professor Sir John Hicks and was ultimately awarded degree of Doctor of Philosophy from Oxford in early 1962. During graduate studies at Oxford, Malmgren research was inspired by the historically important debate on markets vs. central planning between Ludwig von Mises and Oskar R. Lange, and by his subsequent personal interaction with Friedrich von Hayek and Oskar Lange. While writing his Doctoral thesis, Malmgren authored several theoretical papers which were published in major peer-reviewed academic journals, including an historically noted academic paper, “Information, Expectations, and the Theory of the Firm”. That paper was republished in several collections of historically significant papers in economic science. In this latter 2004 compendium of advances in institutional economics, composed of seven-volumes of historically important essays, the 1961 Malmgren paper is positioned chronologically as one of the first four classical foundation pieces from 1732 to 1961 underlying the emerging scholarly field “New Institutional Economics” which developed subsequently. This 1961 paper and Doctoral Dissertation were also given central attention in a recent historical analysis of the hundred years’ evolution of Oxford University economics and business studies from Alfred Marshall to the establishment of the Said School of Business at Oxford. On the occasion of the retirement of Sir John Hicks from the Drummond Professorship of Economics at Oxford, an essay by Malmgren which was included in a 1968 festschrift of papers of world recognized economists, including favorite students of Hicks, published as Value, Capital, and Growth,four years before Sir John Hicks was made Nobel Laureate in 1972. At the start of his academic career Malmgren was appointed to the Galen Stone Joint Chair in Mathematical Economics in the Department of Engineering and in the College of Arts and Sciences, Cornell University, serving 1961–62.1 Reflections of Harald In our discussion, he looked at this period as framing his initial cluster of interests in physics, mathematics, mathematical economics, political economics, and defense. The point was that the interactive issues he worked on during his professional life were the focus of his academic period. As F. Scott Fitzgerald once said: “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.” Harald underscored that he learned the mathematical approach to economics in the United States but at Oxford he was told that “forget everything that you have learned about economics, because everything about real world economics is political and behavioral, not mathematical.” While at Oxford, he focused on a major issue of the day, namely the contest between a centralized approach to economic growth and development and a decentralized approach. In this context, he had a chance to meet and study with major European economists who anchored this debate in the West, namely the Noble Prize winning Sir John Hicks, the liberal economist Friedrich von Hayek and the noted Polish economist Oskar Lange who advocated for market socialism. The economic issue of centralization or decentralization was a key part of the debates both in the West and in the East and became core part of East-West conflict as well. Throughout the 1960s and 1970s in particular, the market socialism idea was part of the political conflict in the East and part of the conflict in the West as more conservative politicians like Thatcher and Reagan came to power in the 1980s. In any case, Harold was working at the center of a major intellectual but also political and economic issues from the beginning of his career and this intellectual engagement would serve him well in the years to come. When it came time to return to the United States, an opportunity opened at Cornell University where a new chair in mathematical economics was created for him. As Harald noted: “They asked me to take the chair. I did not have to be an assistant professor and progress that way. During the year I was at Cornell, I stayed in the house of the Russian novelist Vladimir Nabokov who was absent from the university that year.” Phase Two: Joining the Whiz Kids: 1962-1964 This period in his Harald’s career has been described in biographical terms as follows: In the summer of 1962 senior White House and Defense Department officials invited him to join the Administration of President John F. Kennedy. He moved to Washington, D.C., to join the Institute for Defense Analyses (advisers to the Office of the Secretary of Defense), serving as as head of the Economics Group of the U.S. Joint Chiefs of Staff, Weapons Systems Evaluation Group (WSEG), in the Pentagon, and as aide to Secretary of Defense,, Robert McNamara Functioning as liaison to the White House National Securi Security Council’ He became known at that time as one of Defense Secretary Robert McNamara’s “Whiz Kids.”2 Reflections of Harald “When I got a personal call from the White House by McGeorge Bundy (National Security Advisor to President Kennedy) to invite me to come to work for the Administration as part of McNamara’s team. “I was immediately excited to be asked to join JFK’s team of young new faces to help craft the launch of a new government aimed at putting World War II behind us and crafting a new agenda for America’s role in the world. “In formal paper work I was hired to work at the Institute for Defense Analyses, but that was a formality as my assignments were to do official tasks for the Joint Chiefs and the Secretary of Defense on a variety of defense issues. “It was an exciting time. I saw from the inside how decisions are made, how one can influence policy and how an intellectual advisor can have an impact. “Given my youth relative to the military and civilian officials I would be working with, I was mentored by a senior member of the Administration not to assert answers and lecture senior officials about the validity of my answers. Instead, I was urged to frame new questions.” “A good example was the Cuban missile crisis, where the Administration had to confront difficult life and death questions. In the course of my involvement with very senior military officers, I focused discussions on the importance of rethinking about threat of nuclear weapons and negotiation. “The problem was specific to threat from Soviet nuclear weapons in a threatening space. Would this warrant unlimited nuclear war? Why would you strike Moscow and risk mutually assured destruction of the two nations? Who then would you negotiate with? Why would the Russians want to strike Washington? Whom would they have to negotiate with? “It became obvious that less than all out military responses would be required and we should begin to contemplate escalation and negotiation in a more limited military response. As a result of intense debate we found ourselves in need for incremental decisions dependent on the specific nature of the specific challenges. “After the Cuban missile crisis a whole new range of analytical work was generated to deal with escalation management and deterrence on a scale far less than all or nothing MAD.” “After the Cuban missile crisis, I was part of small team which began looking at the potential role of defense against ballistic missiles. “Here I raised the key question of the cost of the competition: as you built defenses, what would it cost the adversary to assure that they could overcome the defenses you deployed? “By building defenses, you raised the cost significantly in terms of building offensive forces. As part of that effort, we travelled around Europe to meet with senior European defense officials, and thus began my government role in dealing with European officials which would intensify later.” Phase Three: Working Trade Issues in Three Administrations: Johnson, Nixon, and Ford This period in his Harald’s career began with a request of the President’s National Security Advisor for him to join senior staff of the Office of the U.S. Trade Representative (USTR), Executive Office of the President. Initially he served as senior economist and Executive Assistant to the Special Representative, Christian Herter (formerly Secretary of State, Governor of Massachusetts, and Member of Congress). In 1965 he was appointed as the first U.S. Assistant Special Representative for Trade Negotiations, directly responsible for leading international negotiations on non-tariff barriers to trade, reconciliation of national agricultural policies which determined world food trade, and broader rules on taxation of imports and exports in relation to domestic tax policies.. He resigned in 1969 and accepted an advisory role with Congress, specifically with the Senate Finance Committee. In late 1971 President Richard Nixon asked Malmgren to serve as a special adviser to him on international economic policy, and in early 1972 appointed him Principal Deputy U.S. Trade Representative, with the rank of Ambassador, and his appointment was confirmed by the United States Senate in February 1972. He served in this role as the chief U.S. trade negotiator with all nations, until mid-1975 when he resigned for family reasons. The Senate Finance Committee Chairman immediately asked him to help oversee continuing activities of USTR agency. In early 1972 Malmgren was designated by President Nixon to be the first U.S. official to call for the creation of a Transpacific economic cooperation organization. In 1973 at the behest of President Nixon and French President Pompidou, Malmgren worked directly with French Finance Minister Valéry Giscard d’Estaing to devise, and subsequently launch the Tokyo Round of world trade negotiations. In 1974 President Nixon asked him to take up leadership of the drafting of the Trade Act of 11974. This comprehensive legislation was intended to be historically the first major revision in U.S. trade law since 1934. That law was approved by Congress late that year, opening the way for a new global round of negotiations with almost all nations. When President Ford took office in late 1974, he was also asked to add to his activities the role of special adviser on global economic and security issues to President Ford and to William Seidman, Assistant to the President for Economic Affairs. His first primary assignment was to review and suggest reformulation of the intelligence process which provided support to the President. Reflections of Harald “When Johnson became President, his key concerns were domestic. He wanted trade issues off his desk so to speak so was looking for an experienced problem solver to do so. The person put in charge of this was Christian Herter, the former Secretary of State of Eisenhower. He was from Massachusetts which is how he became familiar to the Kennedys. He was also heir to a fortune involved in the breakup of Standard Oil, making him broadly influential. “When Chris Herter first met with me, he noticed I was from Boston as well. But I pointed out that I was from the wrong part of Boston from a social standing point of view. He pointed that I had managed to graduate at the head of my class from the patrician Yale University. No on would care no one would care about on what side of Boston I was born. “He taught me a lot about politics and about dealing with Europeans and how important individual personalities were in terms of European politics. And as well, I began to learn how to deal with Congress, as its role in trade was crucial. Congressmen and Senators all had economic constituencies involved in and affected by trade, so one had to become familiar with their individual concerns as well. “I worked in the office of the Special Trade Representative (STR) for Johnson and then left to work with the Congressional committees but came back after Nixon became President. “This was an interesting path for sure. When I was working at STR, a Nixon aide came to see me, Murray Chotiner. He had a checkered record for sure but had been close to Nixon for three or more decades.. When Nixon became President, Chotiner was a special assistant and a rival to Haldeman. “Chotiner contacted me and said that Nixon needed a problem solver for trade issues, and he had suggested me. He arranged a meeting. Early on Nixon said his staff demanded to know if I was a Republican or a Democrat. I said: “yes.” Nixon asked “What does that mean?” I responded “I am a problem solver. “I understood that he needed someone like me to work trade issues and keep them off his desk. He suggested that when I had an idea of how to deal with a particular issue, I communicate that to Chotiner who would give it to him and he then will give me a decision directly, rather than going through the Administration and its bureaucratic interagency decision system. “This meant that I could get decisions on issues rapidly, and really this process would not be visible to the rest of the Administration, making my quick decisions seem like magic to them.” This did raise an issue which I discussed with Harald, namely, how to write a memo for a senior policy maker. In fact, my first meeting with Harald in 1980 involved precisely such a task, and he wrote the speech I needed for my boss in about 50 minutes! I was impressed, but obviously that was the result of much practice with major politicians. Harald told the story about learning what to do. “The first time I was asked to write a memo for the President was for President Johnson. An aide to Johnson described the process this way: ‘Your memo has a letterhead, then you leave scribble space for the President on the memo, and begin with why it is vital to the President to stop what he is doing and read what you have to say. So that are your first two paragraphs You tell him he needs to do something about this or something really bad will happen if he doesn’t. Then you are done. It is not an essay; you are not an academic!” Phase Four: Working Trade Issues in the Congress This entailed two points in his career, the first being the gap years between Johnson and Nixon and the second after his time working for Nixon. This period in his Harald’s career has been described in biographical terms as follows: After resigning from USTR in mid-1969, he became director of research at the Overseas Development Council, 1969–71, Special Adviser to Senator Abraham A. Ribincoff and the Senate Finance Committee, 1970–71.and Adjunct Professor at Georgetown University, 1970–71. In 1974 Malmgren personally worked interactively with Senate Finance Committee Chairman Russell Long and Senator Herman Talmadge to draft the historically innovative “fast track trade negotiations”provision which became embodied in the Trade Act of 1974 – the first major revision of US trade law since the Reciprocal Trade Agreements Act of 1934.3 Reflections of Harald As Harald underscored, “Congress has a key role on trade, which is specified by Article 1 of the Constitution. Trade issues decisively affect the constituencies of Congressmen and Senators and are therefore important. It is the one foreign policy issue which is not simply a debating point. “I dealt a good deal with Congress when in various Administrations and then worked directly for Congress on these issues. This was a period also where Japan was becoming a central trade player and working how to shape the “rules-based order” with the Japanese was a key effort and concern. “When Clinton became President, he and his Secretary of State Albright did not put together the network necessary to engage the Chinese in working the “rule-based order.” The President was too concerned for various reasons on simply opening up China to American business. “The key person for me to get engaged with the Congress was Senator Ribincoff, the Chairman of the Finance Committee. He asked if I would work with them as an advisor on trade issues. I got deeply involved with that effort and learned the nature of Congressional maneuvering to pass bills and protect interests. This learning process plus what I had learned within Administrations linked together created the foundation for the next phase of my career.” Phase Five: Working Trade Issues as a Global Consultant: 1977-Present In 1977 he founded the Malmgren Group (international economic consultancy and advisory services on corporate and financial strategies to several CEOs of major U.S. and foreign corporations and banks, and consultancy services to the European Union Commission), and in 1979 also founded the UK company, Malmgren, Golt & Kingston Ltd., 1979 to 1995, consultants to multinational companies, financial institutions, and the Commission of the European Union on European business and regulatory affairs. He continues today as President of Malmgren Global LLC, advisers to global financial institutions and sovereign wealth funds, and as partner with Nicholas Glinsman, a recognized hedge fund trader, advising major investors and hedge funds on their trading activities. In recent decades Malmgren served as strategist and risk advisor to many CEOs, CFOs, and CIOs in some of the world’s biggest sovereign wealth funds, banks, insurers, asset managers, electronic trading platforms, stock exchanges, automotive and electronics manufacturers, and computer services enterprises in Asia, Europe, and North America. He has also been asked to brief many boards of directors. In the mid-1980s former Japanese prime minister Takeo Fukuda asked Malmgren to serve as policy adviser to the UN sponsored Interaction Council, the independent association of former heads of government of all nations.He continued in this role with Fukuda’s successor, Interaction Council Chairman Helmut Schmidt, former Chancellor of Germany. Since the late 1960s Malmgren also acted as an adviser to Several Presidential Commissions, Special Adviser to the OECD Secretary General, the OECD’s Wise Men’s Group on Global Economic and Financial Reform, the Secretary General of the United Nations Conference on Trade and Development, and to several Heads of Government and other political leaders in Europe and Asia. He was also Co-Founder with Former Secretary of State Lawrence Eagleburger of the Cordell Hull Institute in 1998, serving as its chairman until 2008. Reflections of Harald “After I left government and then worked with the Congress, I had met several CEOs of major U.S. corporations and worked with several European leaders. To continue that work. I set up a consulting practice and worked initially with CEOs during the years when setting up trade practices abroad was a key priority. “Later, I worked with major financial groups in the United States globalizing their practices. My career thus intersected with the nature of the changing U.S. economy.” He told the story of an early meeting with Henry Ford (the son) in which Ford asked him to Dearborn but did not indicate why. As Malmgren recalled: “I got to the board room and the first person to greet me was Lee Iacocca, who ran Ford’s operations. Next in was the head of Ford’s international operations and then Henry Ford entered. “Ford then asked Iacocca to present his plan for building cars in Europe and asked me to then comment. He presented his plan to build cars in Britain and then export to the continent. Ford then asked: Well Hal what do you think? “I commented that it was a very bad idea. Europe would not import British cars and you needed a significant supply chain in Europe for such a Ford venture to be successful. “Naturally, Iacocca was furious. When he left, Ford told me: “That was great. I have not been able to tell him he was wrong for a long time. And you helped me do it. Thanks. “I commented: So it was a set up job? “Ford answered: Yes.” Harald also discussed his role with Toyota in setting up their “insourcing” strategy for the United States which have made them a major U.S. car maker. He underscored: “The CEO of Toyota, who was the son of the founder, involved in a great many of the corporation’s operations, so I got to know their business. He was interested in exporting cars to the United States but I persuaded him that insourcing would be much more successful then exporting. And Toyota did so.” In other words, each and every phase of Malmgren career has enabled the next one. And my engagement with Harold through the years has been precisely to discuss the intersection of defense with economics and politics to shape the world we live in, which has led to the writing by him of the essays included in the forthcoming book entitled, Assessing Global Change: Strategic Perspectives of Dr. Harald Malmgren. 1. https://en.wikipedia.org/wiki/Harald_Malmgren 2. https://en.wikipedia.org/wiki/Harald_Malmgren
7784	dbpedia	3	23	https://www.drkps.com/books/john-hicks-his-contributions-to-economic-theory-and-application.html	en	drkps: JOHN HICKS – HIS CONTRIBUTIONS TO ECONOMIC THEORY AND APPLICATION			[ "https://www.drkps.com/books/fileadmin/templates/drkps/imgs/logo.png", "https://www.drkps.com/books/uploads/tx_templavoila/book_26.png" ]	[]	[]	[ "" ]	null	[]	null		en			null	The development of economic ideas from ancient to the medieval period, then, ideas during the period of classical economists like Adam Smith, Thomas Robert Malthus, David Ricardo and their critics were a good beginning to thinkers in economics. During the period when capitalism and socialism were the main themes for writers and their critics, it was yet a better period for economists to ponder over new ideas. The Das Capital and the Ricardian theories swept all paths and led to the modern period. The works of Ricardo and Marx are the starting milestones and laid the foundation to the present day thoughts, to a large extent. It was during the modern period predominated by the development of the new economic ideas, neoclassical economics and, as an offshoot of that, the recent economic thought, which we may term as new economics came to stay. Starting from Principles of Economics by Alfred Marshall and Economic Welfare by A. C. Pigou, it was J. M. Keynes who through his General Theory (1939) tried to influence economics through his various ideas including areas concerning micro and macro economics, the Theory of Employment, consumption and investment and the concept of marginal efficiency of capital and many more concepts including Theory of Price and Trade Cycles. John Maynard Keynes is, in fact, the important stand point in the annals of modern economic theory. Later, R. G. Hawtrey, D. H. Robertson and Lord Lionel Robbins tried to develop their own ideas based on the General Theory. The General Equilibrium Theory was well set by J. M. Keynes and the strength of the English economists lie under the writings of Keynes and his predecessors. Sir John Hicks was one economist who was considered as the eminent economist in England after J.M.Keynes. He was undoubtedly the greatest economist after Marshall and Keynes. It is Hicks who gave further orientation to the General Theory of Keynes by his wide ranging contributions. He is the first British Economist to win the Nobel Prize in Economic Science (1972) for his wide ranging contributions in general and Value and Capital in particular. Hicks shared this Nobel Prize with Prof. Kenneth J. Arrow for his pioneering contributions in the General Equilibrium Theory and Welfare Theory. Sir John Hicks has contributed to this fundamental areas in no less a measure. Prof. Paul A. Samuelson has aptly put it in his paper: 'My John Hicks' and has said, referring to Value and Capital that it "was a major intellectual stimulus for me. I went over his contributions with a powerful microscope, a much more intensive analysis than he ever gave either to my own work or to that of any other economist. That was the way Hicks was. Always he preferred to do things his way. And that was the source both of his creative originality and prolific scientific productivity". He has further said that "Value and Capital is a scientific epic saga and a jewel among his works". Prof. Samuelson has further rightly mentioned that: "if J.M. Keynes was the greatest economist of the World (J936), J.R.Hicks was the greatest young economist of the time". Hicks later became one of the greatest economist, in fact, a World economist by his contributions which are listed at the end of this Volume (the list is reprinted from Puttaswamaiah, K. Nobel Economists - Lives and Contributions, Vol. I, Ch. VII, pp 333-343). Prof. Samuelson has done much research work on Keynes and his praise on Hicks in his paper and quoted from the New Pal grave Dictionary of Economics (1997) - is the real description which one has to keep in mind while recognising Hicks as a British pioneer in new ideas in economics which made him great. While Prof. Paul A. Samuelson has quoted from Christopher Bliss about Value and Capital as above, I am tempted to quote a few more lines from the same source. It is stated that "Value and Capital is a work so rich in ideas that a short account of it cannot hope to do it justice. It showed that the basic results of consumer theory could be obtained from ordinal utility; it expounded what became known as the 'Hicksian substitution effect', obtained by varying income as relative prices changed so as to maintain an index of utility constant; it developed the parallel results for production theory; and it popularized among English speaking economists the notion of a general equilibrium of markets" (1939, p.60). The Value and Capital (1939, 46) was written when the author was 35 and is described by Prof. Samuelson "as a scientific epic saga -full of new and beautiful things and a springboard toward future advances". The appreciation of the works of Hicks, the first British Nobel Laureate, by Prof. Paul A. Samuelson, the first American Nobel Laureate, has established more credibility in the hard work of Hicks, which, one is afraid, even the British economists have rarely done. It is noteworthy that Prof. Samuelson himself has said "no single misprint mars its mathematical text; and the one major omission in its first edition, he was able to repair by altering a few pages only". The Value and Capital which is undoubtedly the monumental work of Hicks came out as it did just after three years of the publication of the General Theory of Keynes which, in fact, revolutionized the entire fabric of economic science and became a starting point for the subsequent micro and macro economic theories in Britain and United States too, thanks to the pioneering efforts by Prof. Paul A. Samuelson, who revolutionized economics and led to further research on the General Theory and many others followed. Prof. Samuelson's abiding interest in General Theory may be amplified by the fact that when the copies of it were not available, when published, he managed to borrow one from his teacher and summarised it in a few days. The summary prepared in short duration, will certainly have covered the crest areas of Keynes's 'General Theory' and would be an invaluable piece if that could be traced and printed. He is the first American economist who has evinced such great interest in the works of Keynes and created himself and scope for others a World of research pieces which might be called "Keynes ramified World created by Professor Samuelson" and he himself became popular among economists as the 'American Keynes'. It is with this background that Professor Samuelson took interest in the works of John Hicks and studied them 'microscopically' and appreciated his works and became so intimate that he has aptly given the title My John Hicks to his paper. The idea of bringing out this volume on 'John Hicks' occurred to me because of the following reasons: - i. Prof. Hicks, Prof. Ursula Hicks and their family friends and colleagues were known to me eversince 1975 when I started translating Value and Capital into an Indian language, and since then, they have been very affectionate; ii. Hicks, as a great thinker, by his varied contributions including Value and Capital which is termed by one and all as the 'Jewel' of his works was translated by me, published by the University of Mysore and released by Hicks himself in 1979 at the campus of University of Mysore, India; iii. Hicks by nature is a brilliant British economist without whose effort the present day economist would not have grown in such dimension by now and the Value and Capital is a work which revolutionised the science of economics and, probably, such of these works prompted the Royal Swedish Academy to institute the Nobel Prize lo 'Economics' recognising it as a 'Science' in 1969; iv. Prof. Samuelson has taken very keen interest in the works of Keynes iv. Prof. Samuelson has taken very keen interest in the works of Keynes and Hicks and there is no part of Hicks' works which is not touched by him by one way or the other and he has presented his frank and fair views. He has so much of admiration to Hicks that he has titled his paper: 'My John Hicks'; v. There was an overwhelming enthusiasm when I requested the Keynesian economists and those who were friends of Hicks, colleagues and students, and they agreed to contribute papers in the areas of Hicks in which they were very familiar and they informed me of the title even before they started writing; vi. When I thought of a work on 'John Hicks' and contacted the right men who could contribute, about 25 in number, all of them happily contributed and lent their support to bring out this volume. The authors are very eminent in areas of 'Hicksian Economics', each one of them specialised in some aspect or the other in the contributions of Hicks; vii. Personally. I had become part of Hicks' family and we were in good correspondence till the Hicks Couple passed away; and viii. The works of Hicks after Keynes have definitely created land marks which became the basis for further research for economists later and, therefore, the current thinking was felt necessary. Keeping the above points in view, it was felt necessary to bring out this volume in memory of Hicks, and contrary to expectations, the overwhelming enthusiasm among authors resulted in receiving about 25 papers (all authors requested sent their papers) -depicting various aspects of Hicks's works and personality. Some of the facts contained in the articles, probably may throw new light to economists on the works of Hicks. Before we go into the details of this 'Contents' in this book, based on Chapter 7 of Volume 1 of Nobel Economists - Lives and Contributions authored by Puttaswamaiah,K., pp.309-343, and 'Foreword' by Jan Tinber-gen, the first Nobel Laureate in Economics, I would like to briefly summarise Hicks and his works. The chief characteristic of Hicks's works was that he moved away from the partial equilibrium approach of Alfred Marshall back towards the older continental Walrasian General Equilibrium approach. He also introduced a dynamic dimension with his work on period analysis and his theory of elasticity of expectations. His book Value and Capital in which his approach to general equilibrium theory really is one of the rarest books in economic science which marked a definite stage in the advance of a science. It may be pertinent to quote that "Everything Prof. Hicks writes bears the hallmark of quality and connoisseures will pick up his book on Value and Capital expecting authentic, desiccated thrill which can be got only from the contemplation of abstract reasoning. They will not be disappointed". His work in developing concepts in the theory of value is built on the writings of Edgeworth, Parcto and Slutsky. This led to an original exposition of the roles of income elasticity of the elasticity of substitution in determining the elasticity of demand. He later drew heavily on the great Swedish School, led by Myrdal and Lindhal in working out his ideas on income and the role of expectations. Further, modern and demand theory substitutes indifference curves for marginal utility. More than any other economist, he rehabilitated and extended the indifference curve apparatus. The book contains, in its first 52 pages, the best exposition of contemporary theory. Before the General Theory of Keynes appeared in 1936, Hicks had already acquired the necessary background through his well-known papers. Hicks's reaction to General Theory of Keynes was therefore valuable. Hicks in his paper The General Theory: A First Impression has approached Keynes's work in a typically Hicksian style. He has said: "The reviewer of this book is best by two contrary temptations. On the one hand, he can accept Mr.Keynes' elaborate disquisition about his own theory, and its place in the development of economics; praising or blaming the alleged more than Jevonian revolution. Or, on the other hand, he can concentrate upon investigating these disquisition, and tracing (perhaps) a pleasing degree of continuity and tradition, surviving the revolution from the ancient regime. But it seems better to avoid such questions, and try to consider the new theory on its merits .... The new theory is a theory of employment, in so far as the problem of employment and unemployment is the most urgent practical problem to which this sort of theoretical improvement is relevant".' With the General Theory behind him, Hicks completed Value and Capital, which may be regarded as his greatest work, perhaps which was more successful intellectually. Harrod wrote in 1939: "Prof. Hicks, his place in the first rank of economic theorists long since secure, establishes by this volume his claim to admission to a narrow circle-the economists with a distinctive and distinguished style of writing. Take up any page of Pigou, Macgregor, Keynes, Robertson; you do not need to be told the author. And, henceforth, I think the Hicks' manner will be unmistakable".2 "Value and Capital is sometimes misrepresented as an attempt to bridge the gap between micro and macro propositions, in a comparison between it and the General Theory. However, a much more reasonable interpretation would be as an attempt to bridge the gap between statics and dynamics, and in particular to extend static methods to dynamic cases. Just as consumer theory had been unrealistic in employing cardinality assumptions, so economic theory was in general unrealistic in being 'out of time'. Value and Capital should be perceived more as an attempt to drop the latter assumption"³. To quote Dieter Helm, "What did Hicks make of the new theory in his first attempts at reviewing it? Analytically he broke down its components in a fashion that would enable the Keynesian theory to be compared and contrasted with the position that it purported to attack, the Classic view".4 F.A.Hayek, has evaluated Hicks Value and Capital in the following words: "absolutely first-class work in his time. So far as there is a theory of value proper, which does not extend beyond this and which doesn't really analyze it in terms of directing production, I think it's the final formulation of the theory of value"5. Ordinal utility in terms of indifference curves and budget lines could derive the same conclusions as cardinal utility in terms of justifiable marginal utilities. However, the former achieved the ends with greater precision. Hicks appears to have tacitly accepted Marshall's neglect of the income effect so long as the commodity in question forms a small part of the consumer's budget. The other pioneering works are The Social Framework and A Revision of Demand Theory. Pigou writing about 'The Social Framework' has said that "beginner coming to this book will find concepts with which he has long been familiar in a vague way clarified and given a more significant meaning and he will also acquire a good deal of actual knowledge. Hicks's experiment is an enterprising and ingenious one'. While praising this book, Harrod has observed that 'it is an introduction to economics written by an economist of the highest calibre. His style is easy and popular.... the presentation is straight forward and dignified'. Hicks explains that the ideas with which economics is concerned are chiefly those which arise, not in connection with one industry only, but with most of all industries, such ideas as capital, income, cost, arise in all business problemsthese are the sort of ideas we have particularly to study. Economic theory tends to shape itself into a system of thought, for the questions we want to ask turn out to be inter-related." His contribution to the Theory of Trade Cycle has been regarded as one of the major contributions to trade cycle theory. It is apt to quote. "A beautiful theory of the cycle is here built up with an admirable economy of means.... Undoubtedly a tour de force." His book on A Revision of Demand Theory has received academic acclamation, being "A superb exercise to exposition" and "Probably the last word there is to be said on this aspect of demand theory". He explains that the law of demand does apply, with full force, to the behaviour of groups as much as to the behaviour of individuals. The theory of the demand for a single commodity is only the beginning of demand theory. The general theory of demand is a theory of the relation between the set of prices, at which purchases are made, and the set of quantities which are purchased. The foundations of demand theory have deserved careful definition, mainly because we are thereby enabled to get significant results in this wider field also. The generalised law of demand, when properly stated, is a symmetrical relation between price changes and quantity changes. It can accordingly be interpreted into a "price into quantity" or in a "quantity into price" manner. In his book on Essays in World Economics, the problems of the underdeveloped countries are discussed. The problem of inflation has also been discussed. The problem is severe in most of the underdeveloped countries. One of the most crucial difficulties of monetary theory is to distinguish between temporary changes in conditions and permanent conditions and to make adjustments that are appropriate to each. The countries have been classified into two groups viz., manufacturing countries and primary producing countries. The first depending mainly on manufactured exports and the second upon the export of raw materials and foodstuffs. Though the under-developed countries are primary producers, but there are primary producers which arc not underdeveloped. There are countries which have natural resources that are so abundant, relatively to their population, that they can do better by exploiting those resources than they could do if they turned to manufacturing. The under-developed countries are primary producers which are not in this happy position, their natural resources are insufficient for them to be able to achieve a full prosperity by the exploitation of those resources alone. It is futile to tell such countries to rely for development on the further exploitation of their natural resources. Of course they will only harm themselves if they neglect to do what they can in that direction, but they are right in thinking that the only way in which they can break out of their impasse is by industrialising. In Capital and growth. Hicks assumes that prices are determined exogenously. The flex price/fix price bifurcation of markets is adopted. The former refers to the price flexibility of competitive markets; the later to the 'stickness' of prices in some types of markets. This distinction has vital and different implications for stocks and flows. In his analysis of the bond market. Keynes, according to Hicks, realised the essentiality of this distinction. The multiplier process is dependent on supply adjustments in fix price markets. Critical Essays in Monetary Theory is a collection of papers published in journals right from 1935. Though not a monetary economist, the book is the result of his original thinking on the subject. Two of the papers viz., A Suggestion for Simplifying the Theory of Money and Mr.Keynes and the Classics are well known in the World of economists and monetary thinkers. The book contains gist of the contributions to monetary theory of three economists-Henry Thornton (Paper and Credit), Keynes (Treatise), and Hayek (Prices and Production). The equilibrium is determined by subjective factors like prices, when we are looking for policies which make for economic stability, we must not be led aside by a feeling that monetary troubles are due to bad economic policy. He emphasises that money is a human institution. A fully developed monetary system is very sensitive and is therefore unstable. The famous 'Hicks- Hansen' effect in interest theory is an acknowledged improvement in the Keynesian framework. A Theory of Economic History (1969), in this, he introduces the concept of an impulse, a shock which can be traced through a sequence of consequences flowing from the potential of a major new invention. It is the same impulse which Capital and Time attempts of model. In his Theory of Economic History Hicks delves into the past to analyze the effects of operations of merchants in the flex price market-merchants were the price sellers depending on the stock positions of goods. He emphasises the transformation of the economy through different stages. The poorer a country, the narrower will be its range of technological opportunities, the more likely, therefore, it is that it will suffer long-lasting damage, now and then, from a backwash of improvements that have occurred elsewhere. Even in already industrialised countries, mobility of labour is not perfect. It is a motive for protectionism. But it is an obstacle. Temporary use of such measures is defensible. The symptoms are inflation, balance of payments deficits, a variety of monetary and exchange disorders. These will change their forms by technical adjustments, purely monetary adjustments and changes in monetary policy. So long as the resources of the richer countries are kept under strain, what they have to spare for furthering the growth of the world economy is bound to be restricted. The book Capital and Time-A Neo Austrian Theory was published after he secured the coveted award in 1972. This is the third book that Hicks has written about Capital, the first two being Value and Capital, and Capital and Growth. Value and Capital was a product of the Keynesian thirties. It is deeply influenced by Keynes. The second book Capital and Growth is critical and expository, rather than constructive. The concept of full employment is emphasised in this volume. With the given techniques and given employment of labour, production and distribution are entirely separated. The movement of productivity will fairly reflect the movement of wages. The Crisis in Keynesian Economics elaborates on the 'fix price' and 'flex price' market systems described earlier. In the context of high transaction costs, prices arc geared to absorb 'permanent' market conditions. Transaction dominating assets emerge the highest being money which substitutes for all, at the margin. There is a lucid plea for a wider portfolio composition than the narrow choice of money versus bonds. In the last chapter, the lack of a coherent wage theory in the Keynesian tradition is pinpointed. The Theory of Wages was originally published in 1932 and revised in 1963. While the first edition was an extension of the thinking of Marshall in his principles, Clark in his Distribution of Wealth and Pigou in his Economics of Welfare, the second edition contains his revised views on the subject. Section 3 contained in the book entitled 'Commentary' is a piece written exclusively for the new edition. Hicks pays highest recognition to all the critical reviews of his book published in 1932 and says that "I am very anxious that my readers who ever now are tempted to take the 1932 volume literally should read Shove's criticism." Thus Section 3 of this book contains "pre-natal as well as the post-natal vicissitudes" of his earlier edition of this book. The book is a valuable contribution in the theory of wages. The concept of elasticity of substitution was introduced to demonstrate its usefulness in highlighting relative factor shares. Inventions are autonomous and induced and can be neutral, labour-saving or capital saving. With a given capitallabour ratio, a labour-saving change reduces labour's share of national income. Autonomous inventions are likely to be neutral; induced inventions, are in developed countries, likely to labour saving with upward shifts in the supply price of labour. These concepts saw the rise of prolonged debate with Harrod, Samuelson and other savants on the nature of inventions. The way relative factor prices change, determines the isoquant chosen by the firm. He emphasises that despite high interest rates inflation is not controlled and there is a real threat to recession and unemployment. The supply of commodities is concentrated in a small group of countries for this he has given the example of the recent oil crises. There is a major shift in distribution of international income, without it leading to corresponding changes in consumption since the oil consuming countries have failed to reduce their consumption or to generate savings for the required transfer of income and the oil producing countries have failed to reduce their consumption or investment in keeping with their higher income. In this context, he has made an important contribution to the study of Keynesian economics. Economic Perspectives contains several refreshing ideas. His concept of long-term growth approximates to that of Kuznets. The Ricardo-Wicksell effects in monetary theory are examined. The quantity approach of Friedman is decried. He favours a credit squeese to control inflation. Causality in Economics is developed from his stock flow analysis. Three relationships are identified-static, contemporaneous and sequential. It is difficult to trace out causal relationships when stock and flow relationships have to be dovetailed. Relations must be deduced in sequential form. There is an intermediate stage between cause and effect where decisions are made. Prior and posterior lags should be understood as also reactions to signals. An integrated general theory of the multiplier process and liquidity spectrum is attempted. Regarding Causality in Economics (1979), it may be quoted that: "It was a brave book to write; it strays on to others' territory, and it contains a particular view as to the nature of economics as distinct from science, history, and other areas of social concern, yet requiring all three types of consideration. But its importance for the student of Hicks' work lies with the critique which it provides of the possibility of economic theory. In particular it provides careful reasons as to why prediction is not a strong possibility, and thus it explains Hicks' dislike of econometric practice. The book provides careful categorisation of different kinds of 'cause' from two dimensions; first with regard to time in terms of contemporaneous sequential and static causality, and second in terms strength of influence. This later division is between 'strong' and 'weak' causality, where to claim that A strongly causes B is to say that A is the only cause of B. If A is a weak cause, then it is one of potentially many, and in explanation must be protected by a series of ceteris paribus clauses. Now it is only in cases of strong causality that prediction is possible, and it is unlikely, Hicks points out, that there are many cases of strong causality in economics. Economists are doomed to deal with weak causality, and are thus limited in their ability to predict. Falsification, at least in its naive form, is inapplicable, as the ceteris paribus clauses cannot be tested for. And the evolution of economic theory is not to be perceived as the rationalistic programme encapsulated by the philosophers of science such as Lakatos and Popper." Wealth and Welfare (Vol.1) is a collection of earlier pieces having a penetrating one on social income. The other two of his collected works are Money, Interest and Wages (Vol. II) and Classics and Moderns (Vol.III). The Wealth and Welfare (Vol. I) brings together into a coherent whole certain essays which are already justly celebrated and others, often of no less importance, which have been relatively neglected, perhaps because till then, they were not readily accessible. These essays on welfare economics are not represented in any previous collections of the author's works, although it was for some of them that Sir John received the Nobel Prize for Economics in 1972. Again in volume Wealth and Welfare, the economist has observed that: ".. .much of what is taken for granted in the subject has its point of departure in Sir John's writings. Moreover, a good deal which seems obvious to commonsense turns out to be extremely problematic when subject to the critical scrutiny of a Hicks. In this connection, it is very much to his credit that so much of what he has had to say on the theory of value and welfare is incorporated into the main body of the economics and is now taken for granted with scarcely a reference to its origin....Sir John is an extremely careful and rigorous thinker." The Money, Interest and Wages, the second volume of the collection, has centered upon the monetary discussions and shows that the author is not merely an interpreter of Keynes but has views of his own, which owe as much to other of Keynes' contemporaries as to Keynes himself. This second volume of Hicks's Collected Essays traces the evolution of his thinking over five decades. Five highly original papers, published before he saw Keynes's General Theory, show that he anticipated certain aspects of the Keynesian revolution. The story of this early work is set out in an introductory paper written especially for this book. The essays which follow show how subsequently his thinking was modified and expanded. Robert M. Solow, who became a Nobel Laureate later, has said as follows about this volume: "Here are both the classic paper of 1937 and after thoughts of 1980, together with Hicks's review of the General Theory on its appearance. These, and other references reprinted in this fascinating collection, will help the contemporary reader to understand both the depth of the Keynesian revolution and the importance of John Hicks as an economic theorist." In the third volume, Classics and Moderns, John Hicks discusses the various classical traditions, the nature of revolutions in economics, and, indeed, the nature of economics itself. He has also presented his contributions to our understanding of competition, monopoly and international trade. All the essays are distinguished by the clarity and elegance which is characteristic of his approach to economic problems.Talking about Classics and Moderns, Milton Friedman, the other Nobel Laureate has said thus: "There can be no doubt that Sir John Hicks is one of the most distinguished theorists of the twentieth century. He has had a tremendous influence on economic thought…... ". Besides, the above books, Hicks has contributed countless numbers of articles to the various journals of repute in the world like Econometrics, Review of Economic Studies Economica, Economic Journal, etc. His article on A Suggestion for simplifying the theory of money is a masterpiece. Three decades after his eloquent call for a marginal revolution in monetary theory, our students still detect that their mastery of the presumed fundamental theoretical apparatus of economics is put to very little test in their studies of monetary and aggregative models. As Hicks complained, anything seems to go in a subject where propositions do not have to be grounded in some one's optimising behaviour. Mechanics or thermo-dynamics take the place of inferences from utility and profit maximisation. From the other side of the chasm, the student of monetary phenomena can complain that pure economic theory has never delivered the tools to build a structure of his brilliant design. The utility maximising individual and the profit maximising firm know everything relevant about the present and future and about the consequences of their decisions. His prescription for monetary theory in 1935 was in much the same spirit as the approach of Lavington and Pigou. His strictures were nonetheless timely. The spirit of the original Cambridge theory had become obscured by the mechanical constant-velocity tradition. Macro-economics texts have immortalised Hicks' decomposition of the Keynesian system into sub-models. One of these tells what asset stock equilibrium corresponds to any tentative assumption about aggregate real income and the commodity price level. In this conditional equilibrium, the interest rate equates the demand and supply of money and clears the markets for other assets. Two of his articles viz., Preface and a manifesto and The Rehabilitation of Consumer's Surplus have been included in one of the books edited by Arrow and Scitovsky entitled Readings in Welfare Economics. These two papers stress the narrowness of traditional welfare economics and warn against the aridity into which it might too easily fall. Hicks has eminently argued that the increasing affluence renders wealth relatively unimportant. These papers are quite in tune with the present policies of the Government of India where equal opportunities for all and equalisation of wealth among the different people of the society are emphasised. The most well-known contribution by Hicks to welfare theory are his analysis of criteria for comparisons between different economic situations and his revision of the concept of consumer's surplus. Pigou had correlated economic and general welfare and he had made freely interpersonal comparisons. He had identified the sum of consumer surpluses with the real value of the national dividend. Hicks has advocated certain steps to rectify these measures. To mention a few, he suggested changes in tax structure and alternations in tariff schedules. Later, he felt that there could be gains to some when tariff schedules are altered and he felt vital to identify the gains and losses. Modern welfare economics thus became the process in the precise identification of the conditions of maximum welfare. Some other imporatnt articles of Hicks are: Mr. Keynes and the Classics, Public Finance in the National Income, Distribution and economic progress: a revised version, Marginal productivity and the principle of variation, Wages and interest-the dynamic problem, Marshall and the indeterminates of wages, Maintaining capital intact: a further suggestion, Mr.Hautrey on bank rate and the long term rate of interest, and Theory of uncertainties and profits. Hicks has contributed abundantly on various aspects of economic theory. However, his major contributions are in the field of equilibrium theory which culminated in his book Value and Capital. This immortal book has been translated into a number of other languages in the world and the author of this present volume has had the fortune of translating it into Kan-nada, one of the important languages in India, at the instance of the University of Mysore which has published it. By his brilliant contributions in the field of economic theory, Hicks has joined the rank of immortals like the earlier economists like Alfred Marshall and Keynes. He has a language of his own and his style and diction are uncommon among other economists. His language is full of profundity of sense and the real meaning could be available at times at a farther distance. He has been outstanding as a clear and tireless thinker, a widely read scholar and a lucid expositor. He is the pioneer who has laid theoretical ground-work for the renewal of the equilibrium theory. His books on Value and Capital and The Theory of Wages are the masterly works in the field of economic science. For the most part, he has worked with labour and capital only. He correctly perceived that capitalism has shown greater growth of capital than of labour. Even more important is his analysis of how technical invention affects progress. Hicks' Causality in Economics published in 1979 examines the heart of the problem. Questions like why economics? Is it a science? Kinds of causality and its theory of application are the subject matters of contemporaneous causality in Keynes as well described. Hicks says that as a youngster he started reading history and went into philosophy which provided him thinking the causality in Economics. Certain other questions like macro and micro economics are discussed. Although it is over five or six decades that the author started dositing, in this treatise, he has examined Causality in Economics as one case of causality in general. The book contains an unconventional approach which sheds new light on some of the old basic concepts of economics. The role of statistics and economics is examined. Hicks has rightly observed that "the economist is concerned with the future as well as with the past; but it is with the past that he has to begin. It is the past that provides him with the facts, the facts which he uses to make his generalisations; he then uses his generalisations as bases for predictions and for advice on planning."7 According to Schumpeter (1954), "Economics does not possess scientific status, nor can this be attained….Economics is for Hicks's discipline, not a science, and it might be added, a pluralistic one. It is the discipline of which Hicks has become a master." The last book of Hicks is The Status of Economics. It is said that, at the time of his death, the manuscript of this title was still to be published and was published in September 1991. This volume brings together the selection of work spanning the late Sir John Hicks' entire career, highlighting his concern with the status of economics as a science and the controversies between economists. This concern with the validity of the discipline led Hicks to consider subjects traditionally outside the boundaries of economics, in particular political theory and cultural history. In the concluding, previously unpublished, essay, Hicks reflects on his own role as an economist. The volume as a whole stands as a magnificent testament to a remarkable career. According to Hicks, "theory should be the servant of the applied economics, but I have also been aware that theory gives one no right to pronounce on practical problems unless one has been through the labour, so often the formidable labour, of mastering the relevant facts."9 This observations of Keynes shows that he was aware that theories alone would not help, unless they are applied to the practical problems with formidable labour. Royal Swedish Academy in its official announcement has said that General equilibrium theory had earlier essentially the character of formal analysis which was brought to light in his celebrated work Value and Capital. The construction of the model relating to the general equilibrium theory included a number of innovations, i.e., a further development of older theories of consumption and of production, the formulation of conditions for multimarket stability, an extension of the applicability of the static method of analysis to include multiperiod analysis and the introduction of a capital theory based on profit maximization assumptions. By being deeply anchored in theories of the behaviour of consumers and of entrepreneurs Hicks' model offered far better possibilities to study the consequence of changes in externally given variables than earlier models in this field and Hicks succeeded in formulating a number of economically interesting theorems. Hicks model became of great importance also as a connecting link between general equilibrium theory and current theories of business cycles... As his mathematical tool Hicks used traditional differential analysis. When later on more modern mathematical methods were introduced in economic sciences, Arrow applied these methods in his studies of general equilibrium systems. In a series of papers, which preferentially treated the properties of solubility and stability of such systems, he provided the basis for a radical reformulation of the traditional equilibrium theory. Though this reformulation, which was based on the mathematical theory of convex sets, the general equilibrium theory gained both in generality and in simplicity. The pioneering work, a paper from 1954, was written together with Gerard Debreu. The model presented in this paper became the starting point for the major part of further research in this field. Among Arrow's many important contributions should also be mentioned his development of the theory of uncertainty and its incorporation within the frame of general equilibrium theory and, furthermore, his analysis of the possibilities for decentralized decisions in a society where the price system is fixed by the central authority. This analysis was made in collaboration with Leonid Hurwicz."10 Ragnar Bentzel of the Royal Academy of Sciences, in his speech on the occasion of prize awarding function has said about Hicks thus: "When in 1939 John Hicks published his book Value and Capital, he breathed fresh life into general equilibrium theory. He constructed a complete equilibrium model, which was systematically built up, to a much greater extent than previous efforts in this field, on assumptions about the behaviour of consumers and producers. This gave greater concreteness to the equations included in the system and made it possible to study the effects produced within the system by impulses coming from outside it. For example, the model could show how changes in phenomena such as the harvest yield, the consumers' taste and the price expectations of business enterprises had consequences which spread throughout the whole economic system and affected prices, production, employment, interest rates, etc. However, Hicks could not have got as far as this if he had not, on several points, himself created the necessary foundations for his model construction, amongst other things, by developing earlier theories of consumption and production and by constructing a theory of capital on the basis of assumptions about profit maximization”." Hayek has expressed in Economics and Knowledge about Hicks thus: "Maximising behaviour is a characteristic of Hicks of the making of choices; in that sense it is a priori true, but its truth is also argued to derive from intuitive appeal. There can be no micro/macro distinction for Hicks; macro propositions cannot be allowed to float without foundation. He is never to be found picking out observations, in the manner of Keynes, such as 'a man's habitual habits having first claim on his income' or, in the long run, 'as a rule, a greater proportion of income (will be) saved as real income increases', without first deriving the result from simple principles. These have to be explained within the framework of rational behaviour. Value and Capital is completed by a mathematical appendix in which the amenability of the arguments in the book to this type of reasoning is demonstrated. But it is more than that; mathematical arguments are used to prove the generality of the propositions to n commodities. It is in the appendix where Hicks demonstrates the general equilibrium method to its full potential. While I got in touch with Prof. Jan Tinbergen in 1977, I had the fortune of establishing intimate contacts with Sir John Hicks and Prof. Ursula Hicks in 1975 itself. Though I was very familiar with his works as an economist and a researcher, I was fortunate that the University of Mysore in Karnataka, India, through a resolution of the Syndicate requested me through the Institute of Kannada studies of the University to take up translation of one of the two books under the Government of India funded textbooks series in the local language. A History of Economic Thought by Eric Roll (1938) and Value and Capital of John R. Hicks were suggested to me to take up one of them. I chose the latter as Value and Capital is a landmark text in the history of economic thought. It is very terse in its presentation of the fundamental ideas of Hicks, making it difficult to find equivalent words. I thought I should try out Value and Capital only. I came in touch with Hicks and Ursula Hicks by writing to them to ensure that the Oxford University Press released the copyright so that my work would not be delayed. Though the letter from Oxford University Press came later, there was already a letter from Hicks to go-ahead. At that time, I was working in the United Nation's Asian Institute at Bangkok and in afternoons, I used to devote to identifying equivalent words for tough technical words in economics contained in Value and Capital and also used my leisure hours in developing parameters for identifying or demarketing backward and forward areas with particular reference to Karnataka, a major state in South India, which work, of course, was later used by the Indian Planning Commission for identifying backward areas in India. Sri.B.Shivaraman, a well-known planner and a Member of the Planning Commission at that time mentioned this book and its utility in several meetings and in all parts of India. After completing my tenure with the United Nation's Asian Institute, I concentrated, in addition to my official work which was abundant, on Hicks's Value and Capital. The experience of translating this work was thrilling. The Kan-nada version of Value and Capital was released at the University of Mysore on February 7, 1979 in a function organised by the University. Prof. Hicks and Ursula Hicks came to India at that time. It was our fortune that he received in a public function organised by the University of Mysore his own Value and Capital translated into Kannada. This function was very largely attended from all economists who could afford to reach Mysore and of course by the Mysore citizens. It was one of the grandest function, that I have ever seen. I was given the task of introducing Hicks to the audience - it was a task to talk about Hicks and his contributions in his own presence. Prof. John Hicks in his reply said that he wrote Value and Capital and as days passed, he went on changing his ideas and now many of the concepts mentioned in that work have undergone some changes in his mind which could be seen in his later books. He was surprised to hear from 12. Hicks, John. The Economics of John Hicks. Selected and with an Introduction by Dieter Helm. Basil Blackwell, 1984. pp.9-10. Economica. 1937, pp.33-54; reprinted in his Individualism and Economic Order, 19481212 l me that my translation was the eleventh language to which Value and Capital was going. He said that he was not himself aware that it had gone to so many languages. Prof. Ursula Hicks mentioned on this occasion that it was the first instance that she and her husband were found on the same platform in a public function of that kind. Prof. V.K.R.V. Rao, my well-wisher, who was the first professor to estimate national income of India in the 1940's said that "Value and Capital does not make easy reading, especially Parts I and II and the reader has to keep alert all the time lest he miss a step in the intricate but continuous logic that characterises this work and Dr. Puttaswamaiah has done an excellent job. It is now possible for Kannada students to obtain in their own language access to a key book in economic theory, and in turn this should enable production in Kannada of books and articles on practical problems of both macro-economic and micro-economic policy by using the logical apparatus and the lucid analysis of economic inter-relations and economic causes and consequences that Prof. Hicks has contributed in this pioneering treatise. I count it as a piece of good fortune and should mark the beginning of a new era of Kannada literature in economics". I have described some of the outstanding works of Hicks. There are many books and research articles and right from his early days, each one of them created a landmark. Value and Capital - A Inquiry into Some Fundamental Principles of Economic Theory (1939, 1946), Capital and Growth (1965) and Capital and Time (1973), which may be called 'Hicks's Triology of Capital', are the most important of his contributions which have created landmarks after the General Theory and provided opportunity to several economists to do further research on these works. These three works of Hicks relating to 'Capital' are the three 'Avataras' of 'Capital' of which consider Value and Capital as the Jewel among them and even among his works. This Volume in Memory of John Hicks consists of 24 papers. Prof. Paul A. Samuelson's paper identifies the land marks in Hicks's life. He considers "Value and Capital as a scientific epic saga - full of new and beautiful ideas and a springboard toward future advances, as said earlier. He goes on saying that even before the General Theory, if Keynes was considered as the greatest economist of the world, J.R.Hicks was the greatest young economist at that time. - Hicks's works are immortal". Thus, Samuelson has briefly but aptly described Hicks's works and I am extremely grateful to him for his immediate response in sending this paper under the title: My John Hicks. The title itself shows what an amount of affection Prof. Samuleson has had for Hicks and how his works were held in esteem. Prof. Colin Simkin who describes vividly his close association with Prof. Hicks and his wife gives a vivid account of their inner life which makes the reader want to read it more than once. Prof. Colin Simkin tells that he had the good fortune of knowing two men who are something of genius, both of whom became lifelong friends. He derived intellectual benefits from them and feels that he cannot forget them and also their two exceptionally friendly wives. These two exceptional friends are Sir John Hicks and Karl Popper. Simkin has given a separate paper on Karl Popper also, since these three had a close association in academic work discussions and even in travels. Prof. O.F.Hamouda in his paper: Hicks, a World Economist has tried with great difficulty to condense as best he can all he has to say about Hicks and his works. The paper presents a scholarly and comprehensive analysis of Hicks's economics. The paper is an offshoot of his ambitious work: John R. Hicks - The Economists' Economist (Basil Blackwell, 1993). Prof. Michio Morishima, Sir John Hicks Professor of Economics in London School of Economics and Political Science writing under the title "Mr. Keynes in Hicks's Value and Capital deals with the theory of firm and ideas of Hicks's IS and LM curves and his views on it. He gives a vivid account of Keynes and Value and Capital - how they are related and in the process identifies some inconsistencies. Syed Ahmad, McMaster University, Canada, while, writing about Hicks on Capital briefly writes about Hicks and classifies capital into three ways: (i) exactly like any other factor, (ii) as a produced means of production and (iii) as representing the role of time in the production process and Hicks contributed to theories in all these frameworks. After describing under these three main heads, he comes out with the significance of the Theory of Capital. Prof. Frank Hahn in his paper: Hicks and Economic Theory vividly and with brevity writes about his views on major works of Hicks and he has been a balanced critic without loss of appreciation whereever necessary in the paper. Harald Hagcmann has chosen the area of Monetary Causes of the Business Cycles and Technological Changes: Hicks vs. Hayek tries to distinguish between the works of Hicks and Hayek. While Hicks was a pure economist, Hayek was not only an economist but a social thinker. Harald Hagcmann has brought out very well in his paper a critical analysis of the works of these two great thinkers, both Nobel Laureates. The rest of the authors like Professors Michael Emmett Brady, Joseph Halevi, J.W.Nevile, B.B.Price, John Lodewijks, Carlo Benetti, Kunibert Raffer, Mauro Ba-ranzini, Michael Rosier and Christian Tutin, John Luc Gaffard with other authors, Keith Griffin, Surajit Sinha, R.S.Dhananjayan with N.Sasikaladevi have chosen different areas of Hicks's works - sometimes confining themselves to a single work of Hicks and have given a vivid account of their own thoughts on selected Hicks's works. These papers are invaluable to any economist and to all those senior professors and students who are concerned with Hicks's works in relation to his earlier thinkers and the present day thinking. Since each paper contains the summary of one work or the other of Hicks and their views, I do not wish to elaborate further as the papers speak for themselves. Sir John Hicks started the Sienna Workshop and he attended the first two workshops during 1987 and 1988 and he was to attend the third in 1989 but could not do so as he had by then passed away. Proceedings of the first two workshops have been published. We are fortunate in getting a small piece in the form of a "memoriam" of John Hicks by Axel Leijonhufvud. He goes to Sienna to attend the Third Summer Workshop. He was earlier anticipating that he would listen to the presentation of Hicks; instead he had to present a memoriam containing the life and works of Hicks and, to some extent, the main events of Hicks' life and works in economics. Though the memoriam provides the necessary material which gives more and more of Hicks inner life, yet, I am tempted to, draw attention to a few points. He was dedicated and determined in his life when he thinks of a academic life. Axel Leijonhufvud checklists three important points as reflections on the achievement of Hicks: (i) He has, of course, been enormously, amazingly influential. His ideas have seeped into the ways economists think and work to the point where the very familiarity of many Hicksian ideas make it difficult for us rightly to assess the contribution. Yet, it is parts of his work that has had this influence - and some of it has not had quite the influence that he originally intended or would later have wished. Hicks, more than most authors, had to experience in his life time how the readers wrest control of the text from the author. So it was part of the Suggestion for Simplifying Monetary Theory', most of ‘Mr.Keynes and the classics, only the first eight chapters of ‘Value and Capital ‘, and so on- that went into the foundations on which post-world War 11 economic theory was built . (ii) Economic theory to John Hicks was always more an exercise in judgment than in deduction. The economist constantly makes choices - among methods or approaches, among assumptions, and among 'facts'. Hicks, even 55 years ago, always discussed his choices with the reader. You always know the reasons for all his choices and, if you disbelieve his conclusions, it is possible to track back and find where you differ with his judgment, (iii) Over the years he developed a style of writing that is really quite remarkable. It is clean, spare, direct with a simple conversational tone that is quite engaging - but can be in equal measure misleading, if the apparent simplicity lulls you into overlooking the depth at which he is penetrating very complex problems. It is clear that whatever Hicks has said is not final and he would go on thinking time after time and change his views. Ex: At the Mysore Function on the occasion of the release of the translated Value and Capital, he said that he had changed his views on several concepts contained in it. His nature was one of churning, meaning he would go on brooding over something till he saw the ultimate reality. In this connection, I will not be wrong if I quote: "John Hicks was a Ulysses among economists; his life is a journey in economics of a striver, seeker, a finder and a non-yielder. The paths are hewed by him; and the tools designed by him. The strange and fascinating aspect of his journey is that he is always going forward and back, back and forward. The greatest critic of Hicks is Hicks himself. And he has left a complete record of these introspections and forward thrusts. He is thus both a contributor and a commentator, a player and a sports critic, the latter of himself. The other qualities of Hicks are those which relate to his nature as an economist and a man. He gave away the entire Nobel Prize money to the Library of London School of Economics. He phrased it as a gift of gratitude lo that institution but it was also a declaration of his dedication to a life of strictly limited material ambitions. He was always thoughtful and thought provoking. He would profess on his own some ideal and not allow himself to be detracted from it. In Sienna Workshop II, Hicks with his few friends including Axel Leijonhufvud was eating in a grape arbor at a restaurant outside town, Axel asked Hicks whether he still did a number theory which was a pet for him, "No" he said, "I stopped doing that a couple of years ago. Now, I have this game I play with myself to go to sleep. I try to remember at least one stanza of poetry from each century from about 500 BC to the present." And he started to tell about what centuries were the most difficult and so on. Before they left that place, they had heard John Hicks quote poetry from memory for atleast a couple of hours. Hicks on the occasion of the function at Mysore for releasing the Kannada version of Value and Capital said that "I have changed my emphasis of ideas quite a good deal. My book Theory of Economic History was of quite of different kind from Value and Capital; but there is change to make a sort of statement from our point of view and of a much less formal kind.... I should perhaps say that in my very last published book of essays called Economic Perspectives-Further Essays on Money and Growth (1977), there is a process which is what is called a survey and it is from my own point of view on the development on my ideas. I tried to stress there what things seem to be important where my emphasis is drastically changed. All, I can say is on this happy occasion that I am glad to receive the Kannada version of Value and Capital. My blessings to the Translator". Finally to end with the words of Prof. Paul A. Samuelson "Sir John Hicks was as he had been throughout his life: a loner scholar, for whom the sun rose in the morning when first he opened his eyes. His works constitute his immortality". Coming to the acknowledgement, I cannot express in mere words the blessings of Prof, Paul A. Samuelson, the Nobel Laureate who has given an excellent piece under the title: My John Hicks spontaneously which shows the utmost affection to the Editor of this book. I wish to place on record my affectionate and highest regards to him. I am extremely grateful to him for writing his "Foreword' also to this work. It is again a brief piece of literature on economic history and his views on Hicks is true and remarkable which runs thus: "He was part of no school, John Hicks was his own school." Prof. Samuelson has thus said that Prof. Hicks did not belong to any school of thought and he had his own independent thinking in his works. The other Professors who are also members of the Editorial Advisory Board of the International Journal of Applied Economics and Econometrics (formerly Indian Journal of Applied Economics) have supported me in large measure by writing papers, like Profs. Nevile, Keith Griffin, and many others also refereed the articles. I was happy to have received the articles from many others including Prof. Frank Hahn and Prof. Michio Morishima. It is really fortunate to have received two papers from Prof. Colin Simkin who has given us the real insight into Hicks' way of working and life style. It is good that Prof. Axel Leijonhufvud has given a brief memoriam in which he has pointed out Hicks as a great traveller and has appreciated him which throws lot of light about Hicks to the readers. Prof. O.F.Hamouda, the author of book entitled: John R. Hicks - The Economist's Economist has summarised Hicks's works and called him a World Economist. The paper from Prof. B.B.Price, is also an excellent contribution of Hicks's works. Many British economists including Prof. G.C.Harcourt have supported and encouraged me to great extent. The status of economics today would have been something far behind what it is. It is the work of earlier economists which has really prompted the Royal Swedish Academy to recognize Economics as a Science and institute the Nobel Prize Award. In a work of this nature it is always likely that we miss somebody or the other who should have been mentioned. If I have erred in any way, I hope I will be forgiven; but I wish that the readers will take all the good contained in this work. I am happy that most of the authors are eminent professors from all parts of the World and some of them are students of Hicks and many of them are intimate colleagues and friends. I am glad that this book, which is based on the special issue published in three parts in the Indian Economic Journal, which is now retitled as International Journal of Applied Economics and Econometris, has now come out. I lack words to express my gratitude to Dr. Irving Louis Horowitz, Chairman and Editorial Director, and Ms. Mary E. Curtis, President and Publisher, Transaction Publishers, RUTGERS, The State of University of New Jersey, for all the support and co-operation in bringing out this publication in such a short time and so well. I wish lo record my appreciation in this context. I also thank Ms. Anne Schneider, Associate Editor and other staff connected with this publication.
7784	dbpedia	0	21	https://oll.libertyfund.org/pages/hayek-a-bibliography-of-his-writings	en	Friedrich Hayek: A Bibliography of his Writings	https://oll.libertyfund.…es-autograph.jpg	https://oll.libertyfund.…es-autograph.jpg	[ "https://oll.libertyfund.org/assets/oll-logo-stacked-a38794da269bcdab15520fcbdfb162c49c5a7e99b89771daa1c33dc89b653a02.svg", "https://oll.libertyfund.org/assets/oll-logo-white-on-dblue-ba4bbd4ded0c0d231428daa06f140dfbd96a23168a33ac95018e34c1235b4e74.svg" ]	[]	[]	[ "" ]	null	[]	null	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.				https://oll.libertyfund.org/pages/hayek-a-bibliography-of-his-writings	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
7784	dbpedia	3	74	https://link.springer.com/article/10.1007/s40797-015-0009-4	en	Samuelson, Keynes and the Search for a General Theory of Economics	https://media.springernature.com/full/springer-static/cover-hires/journal/40797	https://media.springernature.com/full/springer-static/cover-hires/journal/40797	[ "https://link.springer.com/oscar-static/images/darwin/header/img/logo-springerlink-39ee2a28d8.svg", "https://media.springernature.com/w72/springer-static/cover-hires/journal/40797?as=webp", "https://media.springernature.com/w92h120/springer-static/cover-hires/book/978-1-349-95189-5?as=webp", "https://media.springernature.com/w92h120/springer-static/cover-hires/book/978-3-030-47206-1?as=webp", "https://media.springernature.com/w92h120/springer-static/cover-hires/book/978-1-349-95189-5?as=webp", "https://link.springer.com/oscar-static/images/logo-springernature-white-19dd4ba190.svg" ]	[]	[]	[ "" ]	null	[ "Roger E" ]	2015-02-12T00:00:00	Responding to the claims Keynes made in his “General Theory”, economists debated whether Keynesian economics or classical economics was more ge	en	/oscar-static/img/favicons/darwin/apple-touch-icon-92e819bf8a.png	SpringerLink	https://link.springer.com/article/10.1007/s40797-015-0009-4	The most influential book on economics in the twentieth century bore the title, A General Theory of Employment, Interest and Money (Keynes 1972 [1936]). In that book, John Maynard Keynes argued that the theory he was proposing was more general than the classical theory that he was criticising. As he explained in the Preface, he was integrating traditional value theory into a theory of a monetary economy: A monetary economy, we shall find, is essentially one in which changing views about the future are capable of influencing the quantity of employment and not merely its direction. But our method of analysing the economic behaviour of the present under influence of changing ideas about the future is one which depends on the interaction of supply and demand, and is in this way linked up with our fundamental theory of value. We are thus led to a more general theory, which includes the classical theory with which we are familiar as a special case. (Keynes 1972 [1936], pp. xxii–xxiii) The analogy he drew was between Euclidian and non-Euclidian geometry, the latter encompassing the former. Readers also noted the implicit comparison with Einstein’s general theory of relativity, of which Newtonian mechanics was a special case [e.g., Pigou (1936, p. 115) commented that “Einstein actually did for physics” what Keynes believed himself to have done for economics]. Whereas the Newtonian theory is the special case that is relevant to most of the physical problems encountered by human beings, the classical theory of economics, Keynes argued, is simply not relevant to a world in which we know very little about the future. Though Keynes wrote in terms of his theory being more general than the classical, he did not argue in terms of formal models: though others claimed that all the elements needed to construct such a model were found in his book, he refrained from taking this step. Though he was trained as a mathematician and his arguments were suffused with mathematical ideas, the most important ideas (for example concerning decision making under uncertainty) were formulated verbally.Footnote 2 Thus when discussing the long-run policy implications of his theory, he simply wrote about the circumstances under which his theory and the classical theory would apply. If our central controls [over the level of investment] succeed in establishing an aggregate volume of output corresponding to full employment..., the classical theory comes into its own again... then there is no objection to be raised against the classical analysis of the manner in which private self-interest will determine what in particular is produced, in what proportions the factors of production will be combined to produce it, and how the value of the final product will be distributed (Keynes 1972 [1936]: 378–379). Despite his arguments about his theory being more general than the classical theory, he did not derive his conclusions about the applicability of the two theories from a formal mathematical model but provided a verbal argument about how the two theories related to each other. There was thus scope to debate whether Keynes was correct to claim his theory was the more general one. However, in this very large literature, little attention has been paid to the question of why Keynes believed it was desirable to have a general theory. Given his view of economics as a moral science, merely copying the natural sciences would not have been sufficient reason. It is only slightly less plausible to claim that his preference for a general theory reflected his training in mathematics, a discipline in which a more general theory, dependent on less restrictive assumptions and applicable to a larger range of case, is desirable. However, that is still a weak explanation given that Keynes was, at that point in his career far from living in an ivory tower, thoroughly immersed in the practical worlds of journalism, finance and government policy making. The reason has to be sought in his economics. The canonical statement of the classical theory was found in Alfred Marshall’s Principles of Economics (Marshall 1920) together with the theory of monetary economics that he had taught for many years at Cambridge and which had been developed by his followers. It was not “general equilibrium” theory in the strict Walrasian sense, but a theory of competitive equilibrium with many distinctive Marshallian qualifications and modifications, which provided a general framework within which to analyse economic problems. Marshall’s long run might be difficult to pin down at all precisely, and the theory might need modifying to take into account local conditions, such as the nature of the product, production conditions, and whether the market was competitive, but supply and demand, with the theories of consumer and producer behaviour on which they were based added up to a general theory. It was, moreover, a theory with clear welfare implications. Marshall’s doctrine of maximum satisfaction sought to demonstrate that, except where some industries were subject to increasing returns to scale, the price and quantity generated by competitive behaviour would maximise the sum of consumer’s surplus. Though the analytical apparatus was new, this resulted in a conclusion of which Mill (2006, p. 945) had provided the canonical statement, when he had written that “Laissez-faire, in short, should be the general practice: every departure from it, unless required by some great good, is a certain evil”. Keynes presumably had Mill’s book in mind when he wrote in his last chapter about the social philosophy towards which his theory might lead. In arguing that his was the more general theory, he was implicitly questioning Mill’s judgement that the theory of competitive markets constituted the general case and hence that laissez-faire produced the best outcome for society. At one level the reason why Keynes chose to talk in terms of a general theory is obvious: the classical theory rested on the assumption that people could correctly anticipate the future and Keynes believed that this was a special case of a theory in which the future is imperfectly known. However this does not answer the question of why Keynes chose to emphasise the generality of his theory rather than simply presenting it as a new theory of employment, interest and money that was relevant to the specific circumstances of the time. There are several possible answers to this question. 1. Keynes wanted to demonstrate that the cause of unemployment was not to be found in wage inflexibility. The dislocation of the economy that the world experienced in the early 1930s was not the result of workers holding out for wages that were too high. Cutting wages—a difficult and unjust process—would not solve the problem of unemployment: on the contrary, it would make the situation worse for a large number of reasons (outlined in Chapter 19). To show this he needed to construct a new theory that was demonstrably superior to the traditional theory. This is true but it still does not go far enough, for it does not explain why a general theory would perform this task better than a new and more appropriate local theory. 2. Offering a theory that was more general than the “classical” theory made it easier for his fellow economists, to whom the book was addressed, to accept his arguments than if he had rejected the “classical” theory in its entirety, because it meant that they did not have to abandon their old ideas completely. They could still use the traditional theory of competitive equilibrium in the specific circumstances where it was applicable. This begs the question of why he thought that offering a general theory would make it easier for his fellow economists to accept his argument than if he had presented it as an extension of already-accepted ideas. 3. Carabelli (1991), in a rare discussion of this problem, argues that had Keynes offered a special theory, Keynes would have had to produce persuasive empirical evidence for it, a task that would have been particularly difficult given that the classical theory had such a long history and was so well established. 4. A further reason is that, even had he been able to adduce persuasive empirical evidence that his theory offered an accurate diagnosis of what was happening, his critics would have been able to argue that the world should be changed so that his theory was no longer applicable. It would have been what Peter Clarke has called an “imperfectionist” theory, to which critics would respond that the imperfection should be removed. This had happened in the 1920s when, faced with an uncompetitive exchange rate, policy makers had refused to accept Keynes’s argument that the difficulty in reducing wages, caused by labour market institutions, should be taken as a constraint on monetary policy. Instead, the view had been taken that measures should to be taken to reduce wages. In contrast, if his theory were more general, this way of defending orthodoxy would not work: it would be necessary to challenge his arguments directly. Keynes thus sought to argue that his theory was a more general theory, encompassing the theory of competitive supply and demand represented by Mill and Marshall. Keynes’s claim to be proposing a general theory of employment laid the foundations for the debate over what Hicks (1937) called “Mr. Keynes and the classics”. Keynes’s argument over the generality of his theory meshed perfectly with the Walrasian approach preferred by many members of the rising generation of mathematical economists inspired by Hicks, for the simultaneous equations of Walrasian theory were seen as providing a general theory of economics. The “Keynes and the classics” literature offered complete algebraic models from which “Keynesian” and “classical” results could be derived by making different assumptions about parameters or functional forms. However, the use of such formal models of general equilibrium inspired by Walras (different from the Marshallian theory in which Keynes had been trained) of which the IS–LM model was the most popular variant, led inexorably to the conclusion that Keynesian unemployment rested on the assumption that wages did not adjust flexibly to clear the market for labour. Economists might resist that conclusion, positing reasons why the interest rate might fail to equilibrate saving and investment, but the Walrasian logic left no route by which unemployment could be explained unless there were some reason why wage rates did not adjust. Such arguments led to the conclusion that, the “classical” theory was the general case and Keynesian theory the “special” case. The definitive summary of this view was provided by Don Patinkin in Money, Interest and Prices (Patinkin 1956, 1965). Keynesian economics was the economics of disequilibrium, a sort of special case resulting from slow adjustment of prices and wages, because it would not last indefinitely, and classical economics—which defined the equilibrium to which the economy would eventually move—was the general case. However, once the theory was formulated in this way, it could be turned on its head. It was possible to argue that what happened out of equilibrium was the general case, and it was equilibrium that was the special case. This was the brilliant twist to Patinkin’s argument made by Axel Leijonhufvud in On Keynesian Economics and the Economics of Keynes (Leijonhufvud 1968). There was a Walrasian dimension to this argument in that he associated being in equilibrium with the existence of an auctioneer. Given that such an entity is fictitious, except for highly organised markets, disequilibrium was the general case. What made this so significant was that the disequilibrium configuration of such a system was not the disequilibrium of Walrasian theory. Drawing on an argument by Clower (1965), which turned out to have a parallel, un-noticed at first, in Money, Interest and Prices, Leijonhufvud argued that if there were no auctioneer, demand and supply functions would not have the form posited by Walrasian theory. Demands and supplies would depend not just on endowments and prices but also on the trades that took place out of equilibrium—on disequilibrium transactions. Although there was a Walrasian dimension to Leijonhufvud’s thesis, his vision of how markets operated was very un-Walrasian. Though he and Clower later turned to Marshall, in his book he suggested a parallel with Friedrich Hayek’s conception of markets—always out of equilibrium. The difference was that, where Hayek drew on his vision to explain how only a decentralised market could possibly coordinate economic activities of millions of agents in a world where tastes and technology, the givens of Walrasian theory, were changing all the time, Leijonhufvud concluded that the inevitable information problems meant that markets could not possibly operate smoothly. By the 1970s, though it was still central to many textbooks, the question of whether Keynes or the classics offered the more general theory had lost its rhetorical force, though there was a fascinating throwback in a debate over Milton Friedman’s monetary framework (Gordon 1974) in which all sides laid claim to the general case in which IS and LM curves were neither horizontal nor vertical. Instead, attention became focused on the putative trade-off between inflation and unemployment and a different conception of generality. Though they may not have used this terminology, for Robert Lucas and the “new classical” macroeconomists, a general theory was one derived explicitly from individual optimisation. What he called “free parameters”, not grounded in individuals’ optimising behaviour, might represent local conditions well—he conceded that such models might fit the data better than models without free parameters—but they were of limited use. The Lucas critique, which contended that models not grounded in the fundamentals of tastes and technology would not survive changes to the policy regime, meant that free-parameter models based on empirically observed regularities could be of no more than local validity.Footnote 3 Samuelson, in Foundations of Economic Analysis (1947) also sought a general theory but the basis for it being a general theory was very different.Footnote 4 He sought to establish a common mathematical structure underlying different branches of economic theory. The way he claims to have come to this was very pedestrian: working in different branches of economics, he had found himself proving the same theorems time and time again. It was more efficient to understand the mathematical structure common to all of these economic problems and then to apply it. The common mathematical structure that lay beneath much economics was constrained optimisation. Using this and linear algebra, needed to derive results from systems of simultaneous equations, he could cut through the puzzles that had confronted previous generations of economics and derive comparative statics results relating to the firms and consumers, operationalising economic theory. The key figure in leading Samuelson to this conception of the unification of economic theory was his mathematical economics teacher, Edwin Bidwell Wilson. Wilson was a polymath, trained as a mathematician and, as Samuelson never tired of pointing out, a protégé of the great American physicist, Willard Gibbs. He had solved problems in aeronautics, writing a prominent textbook on the subject, before becoming Professor of Vital Statistics in Harvard’s Institute of Public Health. In alternate years he taught graduate courses in mathematical statistics and mathematical economics, both of which Samuelson took. Wilson did not just teach these topics, but would stay on for an hour or more after lectures, talking about anything and everything. One of the subjects he covered was thermodynamics, no doubt inspiring Samuelson to take a course in the subject, possibly from Percy Bridgman, who offered a course under that title at Harvard. One of the lessons Wilson taught Samuelson was that different systems might share a common mathematical structure. He introduced Samuelson to the Le Chatelier Principle, governing the way in which chemical equilibrium changes when a system is subject to external changes. It was possible to work out certain results concerning chemical interactions without knowing anything about the substances concerned simply by knowing that the system was in equilibrium. The Le Chatelier principle, though derived in chemistry, could be generalised to apply to any equilibrium system, whether chemical, thermodynamic or economic. Generality lay in the underlying mathematical structure. However, and here comes the difference from the “Keynesian” search for generality, even if Samuelson would have liked it to do so, it did not result in the construction of a general theory of economics. Leaving aside the extent to which applying the methods of optimisation to the consumer and the firm meant that those theories were encompassed within a single general theory, there was a profound gap between Samuelson’s static analysis of individual agents and his analysis of dynamics. In both cases results were derived from the assumption that a system was in equilibrium but the nature of that equilibrium was very different: in the case of individual agents, the equilibrium was defined by optimum conditions; in the case of dynamic systems, it was stability conditions. The latter was the realm where the “correspondence principle”, a term that he introduced between writing his thesis in 1941 and publication of Foundations in 1947, came in. The correspondence principle involved using the assumption of stability to derive comparative static results, the justification for this being that comparative static analysis of how an equilibrium changed when parameters changed would be of little value if the equilibrium were not stable. Deriving such results was central to his project of operationalising economic theory. Samuelson’s use of the term, “the correspondence principle”, can be read as suggesting a parallel with physics, where the term had been used by Niels Bohr to describe the idea that the predictions of quantum mechanics correspond to those of classical mechanics when the systems become sufficiently large. It is possible to see here an implied parallel with Keynes’s claim that his theory was more general than the classical. However, in that theories of the individual rested on static, optimising behaviour whereas theories of the market were dynamic and did not involve optimisation. In that sense, and contrary to the goals of economists such as Patinkin, Samuelson failed to link static and dynamic theories. He derived results from equilibrium systems but it was not a single system: in the terminology adopted after the war, macroeconomics was not reducible to microeconomics. Had Samuelson believed that all economic models could be derived from optimisation, the correspondence principle might have been unnecessary, because second order conditions for an optimum would have been sufficient to ensure stability. However, he did not believe this. He drew a distinction between “(1) theorems proceeding from the assumption of maximizing behavior on the part of individuals, and (2) stability conditions relating to the interaction between economic units” (Samuelson 1947, p. 258). When dealing with examples from “economic theory”—supply and demand in one or more markets—he did not even address the possibility that the second order conditions might render the correspondence principle redundant, because he did not wish to model the economy using a single representative agent. As a student of Haberler and Leontief, he will have been familiar with with index number and aggregation problems and at the wartime National Resources Planning Board his major research topic had been how the distribution of income across households affected consumption: he knew that heterogeneity mattered. When he turned from “economic theory” to business cycles, he started with the Keynesian system as defined by James Meade, John Hicks and Oskar Lange, taken to be a three-equation system involving a consumption function, the marginal efficiency of investment and liquidity preference, all of which were assumed to depend on both the rate of interest and the level of income. This was presented as if it were a distinct system from the ones that he had previously analysed. As Samuelson made clear in the book’s conclusion, “only a part of economic theory is concerned with the maximising action within an economic unit” (Samuelson 1947, p. 351). Although it would have been a short step from the maximisation found in the early chapters of Foundations to a theory of rational choice in which it is taken as axiomatic that human agents conform to certain norms of rationality, Samuelson chose not to make that step. Foundations did not offer anything more than a methodological unification of economic theory, for there was no presumption that the whole of economics could be derived from a common theory. Generality involved finding a common mathematical structure, enabling results from one problem be be applied to other problems. Though this would be an exaggeration, one might argue that the application of the Le Chatelier principle to economics unified it no more than it unified economics and physics. The previous sections already establish at least two notions of what it means to have a general theory of economics. However, I want to argue that Samuelson’s “neoclassical synthesis” represents yet another conception of a general theory. The term “neoclassical synthesis” was introduced in the third edition of Economics: An Introductory Analysis (1955). In this textbook, Samuelson made no claim to be providing a general theory of economics. He did begin by talking about “universal economic conditions but this involved little more than the claim that all societies faced certain very general problems. Societies might face limits on what they could produce, and the dynamics of population might be similar in all societies, but he did not suggest was sufficient to construct a general theory. To see how different the “neoclassical synthesis” that he presented in Economics was from the general theory to which he alluded in Foundations, consider his most detailed definition, contained in two paragraphs set in italics for emphasis. Neoclassical synthesis: by means of appropriately reinforcing monetary and fiscal policies, our mixed-enterprise system can avoid the excesses of boom and slump and can look forward to healthy, progressive growth. This fundamental being understood, the paradoxes that robbed the older classical principles dealing with small-scale “microeconomics” of much of their relevance and validity—these paradoxes will now lose their sting. In short, mastery of the modern analysis of income determination genuinely validates the basic classical pricing principles; and—perhaps for the first time—the economist is justified in saying that the broad cleavage between microeconomics and macroeconomics has been closed. (Samuelson 1955, p. 360). More succinctly, he argued that “if modern economics (shorthand for the theory of income determination) does its task so well that unemployment and inflation are substantially banished from democratic societies, then its importance will wither away and the traditional economics (whose concern is with the wise allocation of fully employed resources) will really come into its own—almost for the first time” (ibid., p. 11). Even more succinctly, he argued that “successful income stabilization validates the classical principles of economics” (ibid., p. 666, n. 2). These definitions clearly echo the view Keynes proposed in the final chapter of the General Theory that was discussed earlier. Samuelson’s definition of the neoclassical synthesis posits a clear distinction between “modern economics” and “classical” theory, which deals with the efficient allocation of fully-employed resources. The synthesis was described as “neoclassical” on the basis of its being a combination of modern and ancient (classical) ideas, but there was no implication that these two sets of ideas were necessarily derived from a common theoretical framework. Indeed, if he held the views expressed in Foundations, they could not be. Samuelson’s argument was that there was a need for one theory to tackle problems of unemployment and another theory to tackle problems of full employment. This view that different types of theory were needed for different situations was echoed in the literature on what were then called “underdeveloped countries”—different types of economics were needed for countries at different stages of development (see Backhouse 1985, chapter 27). It took wise policy, guided by one type of economics, to render another type of economics relevant. Samuelson claimed that this neoclassical synthesis represented a consensus viewpoint, accepted by most American economists. In recent years 90 % of American economists have stopped being “Keynesian economists” or “anti-Keynesian economists.” Instead they have worked toward a synthesis of whatever is valuable in older economics and in modern theories of income determination. The result might be called neoclassical economics and is accepted in its broad outlines by all but 5 % of extreme left-wing and right-wing writers. (ibid., p. 212) Three points can be made about this synthesis. The first is that, though it has clear roots in Keynes, Samuelson’s presentation of it has roots in American institutionalism. When writing the book he repeatedly described it, apologetically, to his friends, as “very institutional”. Obviously, this meant that the book was elementary, not focusing on abstract theory, but it is impossible to believe that an American economist, well read in the interwar literature, used the word “institutional” without realising its connotations. Being “institutional” meant that it was a book that, unlike Foundations, focused on the local. His accounts of households, firms, government, labor markets and so on were rooted on the contemporary United States. Offering a thoroughly local, context-specific body of ideas was entirely consistent with the institutionalists’ empiricist conception of science. He drew extensively on data created during the New Deal era by government agencies and by economists who would generally be considered closer to institutionalism than to neoclassical economics. Such a perspective is not surprising for someone who was introduced to economics through the textbooks of Richard Ely and Sumner Slichter, and who admitted to being profoundly influenced by reading John Maurice Clark. However, the strongest link with institutionalism came through his second mentor, Alvin Hansen. They met after Hansen came to Harvard in the fall of 1937 after which they quickly became very close. Samuelson’s most well known articles on multiplier-accelerator interaction (Samuelson 1939a, b) arose from translating Hansen’s numerical examples into algebra. In his thinking about macroeconomics and policy, Samuelson was Hansen’s disciple. During the war years, when Samuelson worked part-time at the National Resources Planning Board, they remained close, debating fiscal policy, and in 1947 they produced a joint report. In his macroeconomics, Samuelson, still a young economist (aged 25 in 1940), was very much a disciple of Hansen. This challenges the common view that Hansen was by then a Keynesian, having famously converted to Keynes in between the two reviews he wrote of the General Theory in 1936.Footnote 5 Hansen was one of the leading exponents of institutionalist business cycle theory in the United States, developing a dynamic theory of investment and the cycle centred on the acceleration principle. Investment was driven by technology, population dynamics and structural factors rather than by the short term expectational factors stressed by Keynes. It can be argued that Hansen came to accept Keynes, perhaps after reading his article in the Eugenics Review (Keynes 1937) because he realised that key Keynesian ideas could be incorporated into his own theory. Thus Hansen–Samuelson multiplier–accelerator model should be seen not an as application of Keynesian theory but as the incorporation of the multiplier into a pre-existing theory of the cycle. For most of the war years, Hansen and Samuelson both distanced themselves from Keynes, offering very un-Keynesian explanations of investment and the cycle, though taking on board the multiplier. It is also relevant to note the political context in which the “neoclassical synthesis” was developed. Used in no fewer than twelve index entries, scattered throughout the book, it was not only the product of an intellectual position that attached great importance to the local but it was also a response to very “local” circumstances. In the previous displayed quotation, Samuelson sought to distance the theory of income determination from Keynesianism. In saying that the theory was accepted by everyone except the extreme left and extreme right, Samuelson recognised that the terms “Keynesian” and “anti-Keynesian” were politically charged. The neoclassical synthesis was thus a political consensus. Furthermore, there was the implication that, if traditional “classical” theory were seen as conservative, then so too was the neoclassical synthesis, for Samuelson presented it not as a justification of Keynesian economics but as a vindication of “real classical truths” (ibid., p. 569). Those “truths” were not just theoretical propositions but involved statements about the real world that were relevant for policy—“classic truths and principles of social life” (ibid., p. 733). Thus the neoclassical synthesis—the use of proper monetary and fiscal policy—could render valid John Stuart Mill’s claim that imports, not exports, add to a nation’s well being (ibid., p. 623). The neoclassical synthesis validated the case for free trade, undermining the argument that tariff protection was needed to cure unemployment for it was more efficient to use monetary and fiscal policy for this purpose (ibid., p. 659). It made it possible to solve the challenging problems of international economics (ibid., p. 676). When Samuelson turned to the problem of economic growth, after claiming that twenty years earlier it might have been difficult to answer “the neo-Marxian theory of imperialism”, he wrote, Perhaps we should be thankful that the Russian economists have not mastered modern elementary economics; that they do not yet understand the “neoclassical’ synthesis which, combining modern income determination with the older economic theories of resource allocation, clearly demonstrates the ability of resolute free societies to dissipate the ancient fear of mass unemployment. (Ibid., p. 709) The political dimension of the neoclassical synthesis, as a body of ideas that could help the United States fight the Cold War against communism, could hardly have been any clearer. The neoclassical synthesis was also rooted in a specific economic context. Samuelson’s fullest definition of the term came in a short Epilogue to a chapter, “Fiscal policy and full employment without inflation”, in which he explained how the cycle could be controlled. In the first two editions, the emphasis had been on the difficulty of creating a healthy economy. The recently passed Employment Act of 1946 affirmed the responsibility of the government to fight mass unemployment and inflation, but the measures it proposed might not be sufficient, for it was also necessary to attend to “the proper relations of prices and different branches of production” Samuelson (1948, p. 436; 1951, p. 419). He did no more than hint at the possibility that the problem of effective demand might be cured, ending his discussion of the Employment Act with the sentence, “If ever the curse of general inflation or deflation has been banished, there will rise to the top of our national policy agenda—and properly so—the true and abiding universal economic problems which every economic society has had to face since the Garden of Eden” (ibid.). In the third edition the tone was completely different. When the first edition had been published, unemployment was around $3.5\,\%$ and rising.Footnote 6 Wartime controls had only just been removed and the outlook was far from clear. The Employment Act was recent legislation and no one knew how it would work out in practice. When the second edition appeared, unemployment had been at or over 5 % for two years. Unemployment did fall in 1951, but even if Samuelson had anticipated this by the time the book went to press, it could be attributed to the Korean War, which was also contributing to high inflation. There were no grounds for confidence about the normal level of peacetime activity. In contrast, by the time of the third edition, there had been two years of low unemployment (2.7 and 2.4 %) and, though Samuelson thought it would be much higher in 1954, there was evidence that even Republicans were committed to the goal of full employment. The relevant chapter opened with a quotation from the Republican President, Dwight Eisenhower: “I give you this assurance: every legitimate means available to the Federal Government that can be used to sustain prosperity will be used” (Samuelson 1955, p. 336). Samuelson replaced the sentence referring to the Garden of Eden with the much more positive, “This chapter’s Eisenhower quotation affirms that full-employment policy is bipartisan in American politics” (ibid., p. 360). Continuing full employment had changed from being a distant hope to a reality. The neoclassical synthesis can thus be interpreted as both a defensive move against conservative attacks on policies Samuelson believed to be important, and a response to a changed economic situation in which, for the first time since the war, it seemed possible that mass unemployment might be eliminated. The United States could turn its attention from demand management to microeconomic issues. The neoclassical synthesis explained that there was no inconsistency in this shift of emphasis. In making such arguments, Samuelson was engaging in what he described, when he came to reflect on “Economists and the history of ideas” (Samuelson 1962) in his Presidential Address to the American Economic Association, as “political economy”. Such work was, he recognised, subject to different standards from economic analysis. For example, Marx could be a great, and highly influential political economist despite, in terms of his contribution to economic analysis, being merely “a minor post-Ricardian” (ibid., p. 12). However though that address accepted the difference between economic analysis and political economics, recognising that different audiences were being addressed, it did not tackle the problem of how the two should be related (Samuelson 1966).Footnote 7
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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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7784	dbpedia	3	62	http://faculty.fortlewis.edu/walker_d/econ_307_-_the_subjectivist_revolution_-_menger_and_his_followers.htm	en	The Subjectivist Revolution			[ "http://faculty.fortlewis.edu/walker_d/hayek%20poster135.jpg", "http://faculty.fortlewis.edu/walker_d/Keynes.jpg" ]	[]	[]	[ "" ]	null	[]	null					null	ECON 307 - Outline Eighteen Carl Menger and His Followers - The Major Contributions of the Austrian School What are the major cornerstones of the Austrian School? Subjectivism, Individualism, Uncertainty (emphasis on knowledge), Processes vs. End States (change) Because of the emphasis on these cornerstones: METHODOLOGY: Why are they "radical" - not in the mainstream? 1. Methodological individualism: Only individuals act -- and we study human action as economists. Only individuals have purposes. Purposeful human action -- individuals act purposefully. They act to remove a "felt uneasiness" (von Mises). 2. Methodological subjectivism: Individual's values, knowledge and understanding of history, of the physical world and the way it works, expectations, plans of action, etc. are the individual's own and may be and often are different from those of others. Individuals respond to incentives based upon their own subjective values, tastes, knowledge, etc. Individual value, therefore, cannot be measured! Not only is value subjective to the individual, what an individual values today, he or she might not value tomorrow. So people basically value something because it can meet an end for that individual. One does not value a piece of bread for its own sake, a person values it because the bread can fulfill an end (such as "remove hunger" ). So market prices reflect the values that people have relative to the scarcity (or availability) of a good. As we have seen, this is what Carl Menger added in the 1870s -- market prices were finally understood. 3. Emphasis on Uncertainty (as the world really is): And individuals act in the world of uncertainty. That is why institutions that decrease uncertainty are so important. So what is relevant to an individual's action and to another individual's understanding of that action is not the physical reality surrounding the actor and the action, but the subjective perceptions of that reality. So human beings act purposefully - they wish to attain ends or goals. Since they wish to attain these goals, they must be valuable to them; accordingly they must have values that govern choices. And again, these values are subjective to the individual. Therefore, Austrian economists do not "assume away" uncertainty and instead assume perfect knowledge (as many mainstream models do). 4. Processes vs. End States All action in the real world, furthermore, must take place through time; all action takes place in some present and is directed toward the future (immediate or remote) attainment of an end. If all of a person's desires could be instantaneously realized, there would be no reason for him to act at all - and all action would stop. But this is not the case -- action continues - change takes place. The emphasis on these cornerstones is why Austrian economist not limit themselves to mathematics in trying to understand social phenomena. Math cannot capture a) subjectivism, b) change, c) uncertainty as it is demonstrated through purposeful human action of individuals. It is hard to pull out just a few of the major contributions (commentary) - but let's start with capital theory. 1. Austrian Capital Theory: Here we have to start with Eugen von Boehm-Bawerk (1851-1914): Boehm-Bawerk read Menger's Principles as a student, and though he never studied under Menger, he quickly became an adherent of his theories. His main contributions: 1.Time Preferences: In this work, Natural Value, Boehm-Bawerk built upon the time-preference ideas of Carl Menger, insisting that there is always a difference in value between present goods and future goods of equal quality, quantity, and form. Furthermore, the value of future goods diminishes as the length of time necessary for their completion increases. So people prefer something today vs. tomorrow generally speaking. Boehm-Bawerk cited three reasons for this difference in value. a. First of all, in a growing economy, the supply of goods will always be larger in the future than it is in the present. b. Secondly, people have a tendency to underestimate their future needs due to carelessness and shortsightedness. c. Finally, entrepreneurs would rather initiate production with goods presently available, instead of waiting for future goods and delaying production. 2.Diminishing Marginal Utility and Time Preferences: related to the time preferences issue, in Capital and Interest Bohm-Bawerk discusses the famous example of the pioneer farmer faced with decisions about the allocation of his sacks of grain among the various uses-as basic feed for himself, his chickens and his parrots, and as an ingredient for making brandy. The essence of Austrian (Mengers) marginalism is conveyed with his telling the story of what would happen if the farmer were to suffer the loss of one sack of grain (poor parrots). Time preferences will also play a role in forming the marginal utility (what people will choose to do without as something becomes more scarce). This story and many variations on it, told many times by textbook writers over the decades since, stand in contrast to the twice-differentiable total-utility functions that evolved from William Stanley Jevons' marginalism and the general-equilibrium equations that dominate in Leon Walras'. 3.Exploitation Theory Critiqued: Most significant in this early work, and also related to his emphasis on time, is his devastating critique of the exploitation theory, as espoused by Karl Marx and the Socialists we talked about earlier. According to Bohm-Bawerk, capitalists do not exploit workers; they accommodate workers-by providing them with income well in advance of the revenue from the output they helped to produce. He asked:"Is there any justification for the payment of interest to the owners of capital?" The justification, in his view, rests on his time preference theory a simple fact of reality to him: people value present goods more highly than future goods of the same quantity and quality. Future goods trade at a discount, or alternatively, present goods trade at a premium. The payment of interest is a direct reflection of this intertemporal (through time) value differential.This interest, paid to capitalists, allows workers to receive income on a more timely basis than would otherwise be possible. In other words, workers get paid a defined wage today, whereas the capitalist must wait until the product is sold, and also must bear the uncertainty of what it sells for in order to earn anything. 4.The Time Structure of Production: Also related to 1-3, Böhm-Bawerk introduced his bull's-eye figure-a pattern of concentric rings intended to depict the time-structure of production. Production begins in the center with the use of the original means (land and labor); the process emanates outward over time; and the final product emerges at the outermost ring to satisfy the consumers' ultimate ends. Two bull's eye figures appearing on consecutive pages are used to contrast a well-developed economy with a less-well-developed one. This depiction can be seen as a forerunner of the more straightforward representation of the means-ends framework introduced by F. A. Hayek. The Hayekian triangle, which is divided along the time axis into "stages of production," corresponds closely with the bull's eye figure, which is divided along the radius into "maturity classes." Maturity reflecting different stages in the production process each entering the picture at different times. The question is: how do we coordinate these stages through time? Though static by its very construction, the bull's-eye figure, as well as the better known Hayekian triangle, is intended to facilitate the analysis of change. Hayek used this to form the Hayekian triangle: Lengthening of the Capital Structure or "Roundaboutness": (Higher and Lower order goods): The message is clear: An expansion of the capital structure is not to be viewed as a simultaneous and equiproportional increase in capital in each of the maturity classes; it is to be viewed as a reallocation of capital among the maturity classes. Overlooked by his predecessors and largely ignored by the modern mainstream, this is the market mechanism that keeps the economy's intertemporal production plans in line with the intertemporal preferences of consumers. The significance of this market mechanism was at issue in his debate with John B. Clark, who held that once capital is in place, the maintenance of capital is automatic and that production and consumption are, in effect, simultaneous. So for Austrian economists: Capital is a structure (capital must "fit" together -- through time and with the representation of consumer preferences). This all relates to interest rates and time preferences. Hayek, of course also added the element how the rules of the game change or create the capital structure. These rules include laws - but also culture. Therefore, capital from one economy is not necessarily going to work in another country. And in fact, can do more harm than good. 2. Economic Calculation: Most especially Mises -- then followed up by Hayek. Is Socialism Possible? Remember first the definition of socialism (which is why this term is used quite frequently in this discussion): Prior to Mises raising the calculation problem in 1920, the critics of socialism concentrated on the incentive problem: According to many socialists the problem was due to the fact that mans nature had been formed and could be changed: Although Mises talked about the incentive issue that was not his main point. What Mises did was to say, OK, assume there is no incentive problem (we have all become the socialism man) if that is the case, then will socialism be a successful economic system. His answer was no. Lets look at his famous writing, Economic Calculation in the Socialist Commonwealth (1920): Mises first talked about: People usually talk about the distribution of consumption goods in the Socialist Commonwealth. Who is to do the consuming and what is to be consumed by each? Socialists emphasize equality in terms of consumer goods we all have the same equal distribution. But, Mises said, this is of secondary importance. Can have exchange among consumption goods under socialism within the narrow limits permitted. But the major problem is that no production goods will ever be exchanged and therefore it will be impossible to determine their monetary value. If we cant determine that then the consumer goods to be distributed will be few (there is no way of economizing on the use of resources and determined haphazardly by planners have nothing to do with the wants of the people.) Money could never fill in a socialist state the role it fills in a competitive society in determining the value of production goods. Calculation in terms of money will be impossible. Henceit then becomes impossible in any socialist state to posit a connection between the significance to the community of any type of labor and the apportionment of the yield of the communal process of production. So remember labor is included here! What should people do? What should they train to become? There are no answers in socialism. The Limits of Monetary Calculations 1.Money is no yard-stick of value! Value is not measured in money, nor is price. They merely consist in money. Money as an economic good is not a stable value its value is determined by S & D like any other commodity and subject to diminishing marginal utility. But these fluctuations are comparatively trivial in regard to its exchange relations. (with good money) 2.Monetary value does not include value outside of exchange relations. Money is the common denominator that makes valuation comparisons possible For example: A resource is worth this much (say $100,000) in market A and this much (say $200,000) in market B it is comparable. But these prices only arise out of exchange. The human mind cannot orientate itself properly among the bewildering mass of intermediate products and potentialities of production. We must have some aid to the human mind for deciding where resources should go. And in order to gain this aid we need exchange which means we need private property rights in the means of production! With private property everybody is a consumer and everybody a producer and thereby resources flow in economically correct directions. Correct meaning towards more highly valued uses, not wasted. A socialist economy will have to be a static economy. There is only groping in the dark! There is no trial and error. There is no entrepreneurial discovery! Conclusion So Mises concludes that in order to have a successful economy (where the basic necessities of life are met), we must have: Economic Calculation: the decision-making ability to allocate scarce capital resources among competing uses. My friend Pete Boettke sums in up this way (quote): 1. Without private property rights in the means of production, there will be no market for the means of production. 2.Without a market for a means of production, there will be no monetary prices established for the means of production. 3.Without monetary prices, reflecting the relative scarcity of capital goods, economic decision makers will be unable to rationally calculate the alternative uses of capital goods. Mises (from Human Action): Every single step of entrepreneurial activities is subject to scrutiny by monetary calculation. The premeditation of planned action becomes commercial precalculation of expected costs and expected proceeds. The retrospective establishment of the outcome of past action becomes accounting profits and losses. So market prices in capital goods (which we have already learned reflect the subjective value of individual consumers) determine the potential costs of production which then determine if a profit will be made or not. Example: Under socialism imagine this scenario: the government owns all means of production. So it owns a plant that makes hamburger patties. It also owns the ranches that produce the cows, the truck company that transports the meat, etc. The planners are trying to decide if this is the best use of this plant - the best use of the trucks, of the land that houses the cow ranch. All they can do is guess. So therefore, they make hamburgers that nobody wants, and they dont make hot dogs that a lot of people want. They use these capital goods in unproductive ways ways that waste resources. Even to the point of not being able to meet the basic necessities of life. So this argument by Mises lead to The Economic Calculation Debate
7784	dbpedia	2	96	https://www.cato.org/policy-report/february-1983/interview-fa-hayek	en				[]	[]	[]	[ "" ]	null	[]	null					null
7784	dbpedia	0	60	https://www.nobelprize.org/prizes/themes/the-sveriges-riksbank-prize-in-economic-sciences-in-memory-of-alfred-nobel-1969-2007/	en	NobelPrize.org	https://www.nobelprize.o…size-496x328.jpg	https://www.nobelprize.o…size-496x328.jpg	[ "https://www.nobelprize.org/uploads/2018/06/lindbeck_intro-1.jpg" ]	[]	[]	[ "" ]	null	[]	null	The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1969-2007	en	https://www.nobelprize.o…avicon-50x50.png	NobelPrize.org	https://www.nobelprize.org/prizes/themes/the-sveriges-riksbank-prize-in-economic-sciences-in-memory-of-alfred-nobel-1969-2007	by Assar Lindbeck* Introduction In conjunction with its tercentenary celebrations in 1968, Sveriges Riksbank (the central bank of Sweden) instituted a new award, “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” on the basis of an economic commitment by the bank in perpetuity. The award is given by the Royal Swedish Academy of Sciences according to the same principles as for the Nobel Prizes that have been awarded since 1901. The procedures for selecting the Laureates are also the same. Each year the Academy receives some 200-300 nominations, usually covering a little more than one hundred nominees. (Unsolicited suggestions from persons who have not been asked to submit nominations are not considered.) The Economics Prize Selection Committee of the Academy (with five to eight members) commissions expert studies of the most prominent candidates, sometimes by Swedish experts but usually by foreigners. The Prize Committee presents its award proposal to the Social Science Class of the Academy (Class IX) in the form of a report, with an extensive survey of the main candidates that are considered for a Prize. The report motivates the proposal and includes all the solicited expert studies. On the basis of this material the class suggests a Laureate (or a shared Prize between two or, at most, three Laureates) regularly following the committee’s proposal. Finally the entire Academy meets to take the final award decision, usually in October. What criteria have guided the awards so far? And what have been the main problems when selecting the Laureates? It is useful to start a discussion of these issues with a rough classification of the various types of economics prize awards given so far. It should be kept in mind, however, that all such classifications are rather arbitrary since the multidimensional nature of scientific contributions makes it difficult in avoid overlaps. A classification of prizes for the first 38 years General equilibrium theory Obvious examples of this type of award are the Prizes to Paul Samuelson (1970) for having “developed static and dynamic economic theory;” to Kenneth Arrow and John Hicks (1972) for “their pioneering contributions to general economic equilibrium theory and welfare theory;” to Gerard Debreu (1983) for “his rigorous reformulation of the theory of general equilibrium;” and to Maurice Allais (1988) “for his pioneering contributions to the theory of markets and efficient utilization of resources.” (See this table for an attempt to classify the awards into various fields of research.) Contributions in this category have dealt largely with the analytical structures of theoretical economic models, often highlighting the formal similarity of these structures, and clarifying the conditions for consistency, equilibrium, stability and efficiency of the economic system. Often, these contributions also have included important comparative static experiments, i.e., analyses of how equilibrium positions change in response to changes in various exogenous factors (parameters). It is largely due to the above-mentioned theorists that general equilibrium theory has become the basic approach in theoretical economic analysis. For instance, Hicks formulated conditions for multimarket stability, and extended the applicability of the static method of analysis to several periods. He also initiated rigorous dynamic analysis of capital accumulation. Because it was deeply anchored in microeconomic theories of the behavior of individual consumers and firms, the models developed by Hicks offered far better ways to study the consequences of changes in various parameters than did earlier general equilibrium models (such as Léon Walras’ general equilibrium system of equations). Hicks also presented a celebrated aggregate general equilibrium model with four markets – commodities, labor, credit and money – the so-called IS-LM model. Samuelson’s work was not only a continuation of the contributions by Hicks; it also represented a discontinuity, i.e., a break-through, in terms of analytical sophistication. This is recognized in the Prize citation, which declares that Samuelson “actively contributed to raising the level of analysis in economic science”. It is hardly an exaggeration to say that he single-handedly rewrote considerable parts of central economic theory: microeconomic theory, static and dynamic, partial and general equilibrium theory, as well as welfare-economics. By extracting interesting inferences from simple mathematically formulated models, exploiting effectively the second-order conditions of maximization procedures, he derived results which still today rank among the classical theorems of economics. Arrow’s and Debreu’s main contributions to general equilibrium theory were to achieve greater generality by applying more powerful mathematical methods, such as the theory of convex sets. The generality allowed them to define the concept of a good so broadly that the same theory may be used not only in static equilibrium analysis but also in analysis of the spatial distribution of production and consumption activities, intertemporal analysis and the analysis of decision-making under uncertainty. Arrow also highlighted the difficulties of deriving social welfare functions from individual preferences – Arrow’s so called “impossibility theorem”. Maurice Allais’ contributions, made largely in the 1940s, have great similarities both with Paul Samuelson’s (contemporaneous) work and Arrow’s and Debreu’s (later) contributions. A special feature of Allais’ work is that he describes the economy’s path to equilibrium as a process by which competition removes all “surpluses” in firms. Allais’ analysis also covers the case where returns to scale in production give rise to natural monopolies. His contributions thereby laid the foundation for a school of Post-War French economists who analyzed the conditions for an efficient use of resources in large public monopolies (such as Electricité de France and SNCF, the state railway system,). Allais also anticipated parts of the modern theory of economic growth. Macroeconomics Numerous prizes has been given to macroeconomics, i.e., that branch of economic analysis that explains the behavior of the national economy as a whole in terms of a number of broad aggregates, such as private consumption, investment, exports, imports, government spending of goods and services, etc. Some of the awarded contributions in this field concern sectors (“submodels”) of national economies, while others deal with an entire national economy. An award in macroeconomics that refers both to special sectors and to the entire national economy is the 1976 Prize to Milton Friedman. The Prize citation referred to his contributions to “consumption analysis, monetary history and theory.” Milton Friedman’s book A Theory of the Consumption Function in 1957 is a successful attempt to combine formal theory and its empirical application for a specific sector of the economy. His extensive empirical study of the monetary history of the United States (together with Anna Schwartz) may be regarded as an example of rather “pure” empirical research, even though the study clearly was based on a theoretical framework emphasizing a monetary interpretation of macroeconomic fluctuations. Franco Modigliani (awarded in 1985) developed two important building blocks in macroeconomic models, namely submodels of private consumption and the financial sector. In particular, in his life-cycle theory of saving Modigliani studied the consequences for household saving of changes in demography and economic growth. Together with Merton Miller he also laid the foundation for the field “corporate finance”. The Modigliani-Miller theorem states the conditions under which the value of a firm in the stock market is influenced (or not influenced) by the dividend policy of the firm, and the way the firm finances its investment, e.g., via equity capital or borrowing. The Prize to James Tobin (1981) is another example of an award for theoretical contributions concerning specific sectors of a national economy – the award being given for his analysis of “financial markets and their relation to expenditure decisions, employment, production and prices.” Tobin’s way of modeling interactions between financial and real sectors quickly became an integrated part of macroeconomic models for national economies, with an important role played by the relation between the market value of a capital asset and its reproduction costs – the so-called “Tobin’s q”. Adding the stock of real assets – land, buildings, inventories and claims on raw materials – Tobin’s portfolio model also becomes the natural analytical tool with which to analyze direct effects on product prices of changes in the supply of money. The shared Prize to James Meade and Bertil Ohlin (1977) for their contribution to “the theory of international trade and international capital movement” is another example of a contribution concerning a specific sector of a national economy: the sector of foreign transactions. In the case of Ohlin, the award referred to his development of a theory of international and interregional trade, designed to explain both the causes and the consequences of trade – known as the Heckscher-Ohlin model. Ohlin showed that the trade patterns of individual countries depend on their proportions of available factors of production (capital and labor), and that international trade tends to equalize the returns to these factors among countries. James Meade analyzed trade policy in a world with various market distortions, hence anticipating the theory of “second best” allocations of resources. He was also a pioneer in the field the theory of open-economy macroeconomics. Of particular importance was Meade’s analysis of the relation between internal and external balance, and the relation between targets and instruments of economic policy. However, the foundations for today’s theory of open-economy macroeconomics were constructed by Robert Mundell, the so-called Mundell-Fleming model. We may say that Mundell introduced foreign trade and capital movements into Hick’s IS-LM model for a closed economy. He showed that the effects of monetary and fiscal policy hinge crucially on the degree of international capital mobility. He also demonstrated the far-reaching importance of the exchange rate regime: under a floating exchange rate, monetary policy becomes powerful and fiscal policy tends to become rather powerless, whereas the opposite is true under a fixed exchange rate. The analysis was inspired by David Hume’s classic mechanism of international price adjustment focusing on monetary factors and changes in stock variables. Mundell is also pioneer in the analysis of optimum currency areas, which deals with the advantages and disadvantages for countries of relinquishing their monetary sovereignty in favor of a common currency. Lawrence Klein (awarded in 1980) also made important contributions to macroeconomic research – in this case for entire national economies and even the interaction among several national economies. The Prize citation emphasized “the creation of econometric models and their application to the analysis of economic fluctuations and economic policies.” One of Klein’s main achievements was to analyze the effects of economic policies by way of statistical model simulation. He also made important contributions in developing forecasting techniques. His analysis originally ran in the framework of Keynesian-type macro-theories, but his models tended to become more eclectic over time. They also became more and more detailed, ultimately covering more than one hundred estimated equations. Robert Lucas, awarded the Prize in 1995, has also furthered macroeconomic model building in a fundamental way. In particular, he has emphasized the role of expectations in macroeconomic analysis. He is particularly renowned for developing the consequences of “rational expectations” among economic agents, according to which these exploit all available information and do not make systematic expectational mistakes. Lucas also analyzed the consequences for the macroeconomy of changes in the “economic policy regime”, i.e., the way government and central bank policies respond to changes in the economy. In particular, he has shown how conventionally statistically estimated macroeconomic behavior functions for the private sector may become unreliable after a change in the policy regime – the so-called “Lucas Critique” of traditional macroeconometric estimations. He has also suggested ways of avoiding this problem. While the awards to macroeconomics discussed above referred to contributions concerning short-term macroeconomic fluctuations, Robert Solow was rewarded (in 1987) for his contributions to the theory of long-term macroeconomic growth. His main contribution was to build a mathematical model (in the form of a simple differential equation) describing how the process of capital accumulation generates rising productivity. The capital intensity of production – the volume of capital per worker – is determined by the prices of capital and labor. Due to diminishing return to capital, the economy in this model will in the long run approach a situation where labor-productivity growth is driven only by technological progress. Solow also developed a model of economic growth in which new technology was embedded in newly produced capital goods, the so-called “vintage model” of economic growth. Based on his theoretical models, Solow also pioneered in empirical research on the determinants of economic growth – so-called “growth accounting”. The shared Prize to Arthur Lewis and Theodore Schultz (in 1979) also referred to economic growth, though at a less abstract level than the work by Solow. The Prize citation referred to their research on “economic development with particular consideration of the problems of developing countries”. The award to Lewis recognized particularly his two long-term growth models for less developed countries – emphasizing the consequences for economic growth of an elastic supply of labor, and the determinants of the terms of trade for countries that export tropical products. The award to Schultz honored his analysis of the role of investment in human capital for economic development, particularly in agriculture. Both Lewis and Schultz were concerned with combining their theoretical reasoning with empirical data, though they used the traditional expository techniques of economic history rather than formalized statistical or econometric testing techniques. Schultz emphasized the apparent efficiency in the agricultural sector in less developed countries, considering existing constraints with respect to resources and knowledge available in these countries. Lewis instead focused on the tensions between a large and stagnant agricultural sector, with a low marginal product of labor, and a dynamic industrial (“capitalist”) sector, which is sometimes in the nature of an economic enclave. Finn Kydland and Edward Prescott, awarded the economics prize in 2004, further developed the insights of Robert Lucas and Robert Solow. In particular, they showed that economic policies are often plagued by problems of time consistency. More specifically, if economic policy makers are not able to commit their policy measures in advance to a specific policy rule, later on they will often, in fact, not pursue the policy which they initially regarded as the best one. For instance, national economies may become trapped in high inflation even though price stability is the stated objective of monetary policy. Kydland and Prescott’s contribution has made the issue of the credibility and political feasibility of economic policy a main issue in economic research. Another result of this contribution is a shift of the discussion of economic policy away from isolated policy measures towards the institutional setup of policy making. Kydland and Prescott have also combined the analysis of short-term macroeconomic fluctuations with analysis of long-term economic growth – two research areas that were earlier regarded as separate fields. In particular, they emphasized the role of productivity disturbances (“supply shocks”) not only when analyzing economic growth, but also in studies of short-term macroeconomic fluctuations. Subsequent studies by other scholars have integrated this insight with the role of shifts in aggregate demand, and price- and wage-rigidities, when explaining short-term and long-term economic development. In 2006, Edmund Phelps was awarded another Prize in macroeconomics. We may say that he supplied a number of important, previous missing pieces to the macroeconomic puzzle. In particular, he deepened our understanding of the relation between short-run and long-run effects of economic policy. Phelps was the first economists who in a rigorous way challenged the view that there was a stable tradeoff between inflation and unemployment, the so-called Phillips curve. He showed that the long-run rate of unemployment is not affected by aggregate demand management and inflation but only by the structure, and hence the functioning of the labor market. Phelps also highlighted inter-temporal trade-offs in the case of policies determining the rate of capital formation. However, he also showed under what circumstances all generation may gain from changes in the saving rate. In this context, Phelps clarified the importance of human capital for the diffusion of new technology and, hence, for economic growth. Microeconomics A number of awards have also been given for contributions in microeconomic theory, dealing with decision-making by individual households and firms, and the allocation of resources among different uses and production sectors in the economy. One example is the Prize to George Stigler (1982) for his studies of “industrial structures, functioning of markets and causes and effects of public regulation” He also analyzed how economic regulations, in reality, are conducted by politicians and public-sector administrators. He showed, for instance, that regulators often become dominated by those that are supposed to be regulated – so called “regulatory capture”. In a similar vein as Friedman, Stigler represents a pronounced positivist tradition, emphasizing analytical simplicity and the importance of empirical application. Stigler was also one of the pioneers in the field of “information economics”, introducing information costs explicitly in his analysis. Other Prizes have also been given to this field. James Mirrlees and William Vickrey (award in 1996) made pioneering work about the consequences of various limitations in information of individuals, including “information asymmetries” among economic agents. It turns out that such information asymmetries are of great importance for the functioning of markets such as insurance and credit markets. Mirrlees also did fundamental work on the consequences for taxation of asymmetric information between the government and private agents. Vickrey’s clarified the properties of various types of auctions. His insights have been crucial for developing efficiently functioning auctions of rights to broadcast, landing permits at airports, television rights as well as sales of government assets (“privatization”). A more general theory of asymmetric information was developed by George Akerlof, Michael Spence and Joseph Stiglitz. George Akerlof studied markets where sellers of products have more information than buyers about product quality. He showed that low-quality products may squeeze out high-quality products in such markets, and that prices of high-quality products may suffer as a result. The analysis helps explain, for instance, extremely high borrowing rates in poor countries and the difficulties for broad markets for health-care insurance to emerge. Michael Spence and Joseph Stiglitz analyzed various types of spontaneous adjustment mechanisms in such markets. Spence showed how better informed agents may improve the market outcome by taking costly actions for the purpose of transmitting information to poorly informed agents. Important examples of such “signaling” are education as a signal of individual productivity in labor markets, and dividend payments to signal high profitability of individual firms. Stiglitz instead analyzed the role of “screening” in markets with asymmetric information. Important examples are attempts by insurance companies to partition contracts into risk classes, hence offering different types of contracts among which customers can choose. Stiglitz has also shown how a number of market phenomena may be explained by the theory of asymmetric information, important examples being unemployment, credit rationing and sharecropping contracts in the agricultural section in some developing countries. The role of information asymmetries has been further analyzed by theorists studying alternative allocation mechanisms. This approach has several roots. One is Leonid Hurwicz, who defined allocation mechanisms as a game in which the participants act as if they send messages to each other, or to a hypothetical “message center”. Hurwicz also emphasized the importance that an allocation mechanism is “incentive compatible” in the sense that the predicted, or desired, outcome is consistent with all agents’ economic incentives to act. Other important roots of the theory of mechanism design are James Mirrlees’ optimization analysis and William Vickrey’s analysis of auction markets. A number of authors, in particular, Roger Myerson and Eric Maskin, have generalized and developed the insights of Hurwicz, Mirrlees and Vickrey. Through a calculation algorithm denoted the “revelation principle”, they have simplified the analysis of alternative allocation mechanisms. Generally speaking, this mechanism states that the researcher can restrict the attention to a subset of hypothetical mechanisms, denoted “direct mechanisms” that satisfy the condition of incentive compatibility. Roger Myerson has applied the method, for instance, to auction markets and regulation. Since one and the same mechanism in some cases turns out to generate several different equilibria (“multiple equilibria”), the task remains to develop methods to find an optimum equilibrium. Eric Maskin has developed analytic tools for this purpose, what he calls “implementation theory”. He has also clarified the importance of monotonicity of the preference ordering among individuals when trying to generate efficient allocation mechanisms. These various contributions to the theory of allocation mechanisms by Hurwicz, Myerson and Maskin are the background for their joint reward in 2007. Though financial economics relies on similar analytical techniques as traditional microeconomics, over time it has become a field of its own, with a huge expansion during the last two decades. As mentioned above, Tobin and Modigliani constructed important financial building blocks to macroeconomic theory. However, the field financial economics is today build mainly on foundations laid in the 1950s and 1960s by Harry Markowitz, Merton Miller and William Sharpe (jointly awarded in 1990). While Markowitz’ contribution was to construct a microtheory of portfolio management of individual wealth holders, Merton and Sharpe developed equilibrium analysis in financial markets. More specifically, Sharpe developed a general theory for the pricing of financial assets. Miller made important contributions in the field of corporate finance (to begin with, partly in cooperation with Frances Modigliani). In particular, Miller clarified which factors determine share prices and capital costs of firms. Subsequently, Robert Merton and Myron Scholes were given the Prize (in 1997) for their analysis of price formation of so-called derivative instruments such as options, which are claims on underlying financial instruments including shares and foreign exchange. (The late Fisher Black, cooperating with Scholes, was also instrumental for this achievement.) These contributions were a necessary condition for the subsequent development of today’s huge markets for various types of derivative instruments. These markets have increased the possibility for individual agents to choose adequate risk levels according to their own preference, regardless of whether they choose low or high exposure to risk. Interdisciplinary research Several Prizes have also been awarded economists who have widened the domain of economic analysis to new areas. James Buchanan got his Prize (in 1986) for his research on the boundary between economics and political science, or more specifically, “for his development of the contractual and constitutional basis for the theory of economic and political decision-making”. This research made him one of the founding fathers of the “public choice” school, which analyzes the driving forces behind political decisions and tries to endogenize political behavior in models of national economies. Rather than looking at politicians as individuals that are supposed to take care of the “general good” in society, the public choice school assumes that politicians are motivated by considerations similar to those explaining the behavior of other agents, including the strive for personal benefit and a desire for power. Gary Becker (awarded in 1992) has instead worked on the borderline between economics and sociology, in particular in his research about the family. For instance, he has studied the household’s role as a combined producer and consumer of goods and services. He has, however, not only analyzed the “economic” behavior of families – labor supply, consumption, household production and household saving – but also behavior that has not earlier been much considered by economists, such as education, marriage, childbirth, and divorce. He has both shown how economic considerations influence choice in these areas, and analyzed “social interaction” between individuals outside the market system, reflected in the Prize citation: “for having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior”. Becker’s influence today extends far outside economies, in particular to the so-called “rational choice” school in sociology. Ronald Coase (awarded in 1991) has instead made important contributions on the borderline between economics, law and organization. In particular, he showed which factors determine the size of firms. He also clarified the condition under which voluntary contracts between private agents can resolve problems with “external effects” of production, an important example being pollution. These contributions are reflected in the Prize citation: “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy”. Coase’s concept of transaction costs has become an important foundation for the theory of contracts and for the whole field “law and economics”. The Prize to Herbert Simon (in 1978) may also be regarded as an interdisciplinary award. The Prize citation referred to his research on “the decision-making process within economic organizations.” In particular, Simon challenged some basic building blocks of microeconomic theory, in particular, the maximization principle and the assumption about full (“unbounded”) rationality. On the basis of both empirical evidence and psychological theory, Simon argues that decision-makers usually do not try to choose a “best” alternative, as assumed in traditional microeconomic theory, but that they are content with a “satisfactory” outcome, i.e. they try to find acceptable solutions to acute problems. This has made Herbert Simon a main contributor in the field administrative (management) science. Simon Kuznets (1971) has instead made empirical research on the borderline between economics and history, reflected in the Prize citation “for his empirically founded interpretation of economic growth.” This prize is an example of an award for inductive rather than deductive analysis. Kuznets’ ambition was to make empirical generalizations from data interpreted with a minimum of formal models and without relying on complex statistical techniques. Important examples include the celebrated “Kuznets’s curve” of the U-shaped relation between GDP and income inequality, as well as his findings that the long-run average propensity to consume out of income tends to be constant in time-series data, whereas it tends to be fall in cross-section data. More generally, Kuznets has exploited data for very long periods of time to extract regularities, in particular, by characterizing economic growth and the distribution of income in different nations at different times. The Prize to Robert Fogel and Douglass North (in 1993) is another award on the boundary between economics and history. The Academy cited them “for having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change”. Fogel’s main contributions have been to clarify the role of the railways for the development of the national economy in the United States, and the economic role of slavery. By comparing the factual development with a counterfactual benchmark, Fogel concluded that previous studies of economic growth in the United States had vastly overestimated the importance of railways. He also concluded that slavery was not abolished because of falling profitability of the slave system, but rather because of humanitarian considerations. Douglass North has shed new light on the economic development in Europe and the United States before and in connection with the industrial revolution, including the roles of sea transport and changes in the pattern of regional specialization and interregional trade. He has also been a pioneer in analyzing the role of institutions, such as property rights, for economic development, as well as the importance of different types of transaction costs. In these fields he developed and applied the ideas initially launched by Ronald Coase. Research on the borderline between economics and philosophy was honored with the Prize to Amartya Sen (in 1998) “for his contributions to welfare economics”. Sen scrutinized the philosophical foundations of collective decisions and welfare evaluations, including problems of evaluating the distribution of income and wealth. He has also constructed influential indices to measure income distribution and poverty. Sen has also analyzed the determinants and consequences of starvation in a number of less developed countries. These empirical studies of actual famines show that reduced aggregate supply of food has not always been the most important factor for starvation catastrophes, which, in some cases, have instead been caused by redistribution of income to the disadvantage of the poor. The award to Friedrich von Hayek and Gunnar Myrdal (in 1974), too, had a strong interdisciplinary flavor. While their early contributions on business cycles and monetary phenomena in the 1930s comprised quite abstract (though non-mathematical) economic-theory structures, their works from the early 1940s instead deal with the interrelations between economic, social and political processes. Hayek is perhaps known among economists mainly for emphasizing the information and incentive content of the price system. However, he has given particular attention to the importance for individual behavior of the institutional framework for economic decisions, including the political constitution and the legal rules that define contracts and property rights. In these fields, Hayek’s work parallels the work by Buchanan and Coase. Hayek has also emphasized the importance of “spontaneous” social order by contrast to planned institutional designs. Gunnar Myrdal has combined economic analysis with a broad sociological perspective in order to show how social, economic and political forces interact, often generating vicious or virtuous circles. In fact, Myrdal has described his methods of analysis of “mutual causation” as a generalization of Knut Wicksell’s “cumulative process” in monetary theory. The most important example is Myrdal’s study of the “Negro Problem” in the United States in his book An American Dilemma (1944). This work not only influenced social science research. It also played an important part in the political discussion on segregation and integration of ethnic groups in various countries. The Supreme Court in the United States referred to Myrdal’s book when outlawing segregation. Myrdal applied a similarly approach with “mutual causation” in his subsequent work on poverty and economic development in South Asia. In recent years, economic analysis has been increasingly influenced by research in psychology. The award of the Prize to Daniel Kahneman in 2002 is a reflection of this development. Daniel Kahneman, in cooperation with Amos Tversky (died in 1996) has made particularly important contributions to decision-making under uncertainty. They have also shown how individuals’ specific perceptions of alternatives systematically influence their choice, and how the exact “framing” of those alternatives are important for their choice. Kahneman and Tversky also developed an alternative to the traditional theory of choice under uncertainty, “prospect theory”. New methods of economic analysis Though several of the awards discussed above could perhaps be regarded as “method awards”, there are more clear-cut examples. One case in point is the joint Prize to Ragnar Frisch and Jan Tinbergen (the very first award in 1969) for their pioneering work on econometric model building, i.e. the integration of economic theory and statistical methods. The Prize citation was “for having developed and applied dynamic models for the analysis of economic processes.” While Frisch developed general methods of dynamic and econometric analysis, Tinbergen pioneered in applying such methods empirically. Tinbergen’s main achievement was to make rigorous statistical tests of the realism of alternative business cycle theories. Frisch and Tinbergen were also instrumental in developing a formalized theory of the relation between instruments and targets of economic policy – a contribution paralleling Meade’s analysis of similar issues. Frisch and Tinbergen gave these theories a form that was favorable for empirical quantification and statistical testing. Frisch based his analysis partly on a system of national accounts for Norway, the so-called “oekosirk system” (income and expenditure flows), while Tinbergen pursued much of his empirical policy analysis in the context of econometric macro models for the Netherlands. The Prize to Frisch’s countryman Trygve Haavelmo (in 1989) honored further development of Frisch’s work. More precisely Trygve Haavelmo was awarded “for his clarification of the probability theory foundations of econometrics and his analysis of simultaneous economic structures.” Haavelmo showed how methodology of mathematical statistics could be applied to draw stringent conclusions about complex economic relations from a random sample of empirical observations. These methods could then be used to estimate relations derived from economic theories and to test these theories. He also showed that misleading interpretations of partial relations between economic variables due to interdependencies can be avoided if these relations are estimated simultaneously. Another important breakthrough in econometrics was achieved by James Heckman’s and Daniel McFadden’s development of new methods in empirical analysis of individual and household behavior – microeconometrics. Their contributions (awarded in 2000) have greatly improved the possibilities to analyze data about large groups of individual agents – households as well as firms. Heckman has developed methods to avoid biased statistical estimates in situations when the analyzed sample of data is no random – the well-known Heckman correction (the Heckit method). Such situations often occur when only some agents, often with characteristics that are unobservable to the researcher, do not appear in the sample. Important examples are studies of wage formation and the return on education, since individuals who do not work and do not have the type of education that is studied are often not included in the sample. McFadden has developed methods to analyze the choice by individual agents among a limited (finite) number of alternatives, so-called discrete choice. Important examples are the choice of profession, occupation, residence and means of transportation. A seminal contribution by McFadden is his so-called conditional logit analysis. The method utilizes not only observable facts about characteristics associated with individual agents and information about each available alternative choice. Unobservable differences among individuals and among alternatives are also exploited; they are represented by random error terms. While Heckman and McFadden mainly dealt with microeconometrics, i.e. statistical analysis of the behavior of individual agents, Robert Engle and Clive Granger, rewarded in 2003, have developed and applied statistical methods for studying the developing over time of markets and entire national economies. In particular, they have analyzed data in the form of time series, i.e., chronological sequences of numerical observations. Engle developed methods to study the volatility properties of many time series in economics, for instance in financial markets. In particular, he applied the concept of “autoregressive conditional heteroskedasticity” (ARCH) for this purpose. His method could, in particular, clarify market developments where turbulent periods, with large fluctuations, are followed by calmer periods, with modest fluctuations. Granger has instead developed and applied new statistical methods, based on so-called “cointegration”, to differentiate between, and combine the analysis of, short-term fluctuations and long-term trends. This is a particularly difficult task when temporary disturbances, say in aggregate production, has long-lasting effects (i.e., when time series reflect a “stochastic trend”). Such, so-called “non-stationary”, time series were difficult to analyze properly before Granger’s contributions, which partly was made in cooperation with Engle. Today, cointegration is a central aspect in time series analysis in economics. Another example of an award for important methodological developments is the Prize to Wassily Leontief (in 1973) “for the development of the input-output method.” This methodology highlights the interdependencies between different sectors of the economy in quantitative form. The analysis is also well suited to an analysis of the short-term effects of shocks in one sector on other sectors of the economic system. The candidacy of Leontief was greatly enhanced by the fact that he also pioneered in applying his method to empirical data. There is a parallel between Tinbergen’s contribution to make macroeconomic theory empirically operational and Leontief’s inter-industry analysis. The Prize to Richard Stone (in 1984) for “having made fundamental contributions to the development of systems of national accounts” similarly awarded important new methods. It is hard to think about empirical analysis in macroeconomics today without comprehensive systems of national accounts. General equilibrium theory, as formulated by Arrow and Debreu, has created a general theoretical system helping us to grasp the idea of the interaction of billions of economic transactions in millions of different markets. Without the modern system of national accounts, however, we could not obtain an empirical registration of these transactions in comprehensive aggregates. The idea of national accounts harks back over several centuries, and theoretical and empirical work on national accounts flourished in the 1930s, as reflected in the works by Ragnar Frisch, Erik Lindahl, Colin Clark and Simon Kuznets. But Richard Stone was the leading architect of the modern system of national accounts, which married the principles of macroeconomic bookkeeping and aggregate macroeconomic models. Leontief-style input-output tables also became a useful component of this type of work. These methodological Prizes referred to advances in empirical analysis. Methodological contributions in theory have also been rewarded. One example is the shared Prize to Leonid Kantorovich and Tjalling Koopmans (in 1975). Kantorovich defined, as early as 1939, the concept of efficient resource use in individual enterprises and later developed similar efficiency conditions for the economy as a whole. He also demonstrated the theoretical connection between the allocation of resources and the price system, both at a certain point of time and in a growing economy. Koopmans’ so-called activity analysis, in a similar vein, clarified the correspondence between efficiency in production and existence of a system of “accounting prices.” Both showed how the theoretical possibility of decentralized decision-making in a planned economy is connected with the existence of an efficient price system, including a uniform accounting price of capital on which to base investment decisions. This analysis was, in fact, closely related to the earlier discussed achievements in general equilibrium theory by Arrow and Debreu. Though both Laureates have also made important contributions to the mathematical technique of linear programming, this was not what they were honored for; instead they received the Prize for enriching our understanding of basic economic issues in normative allocative theory by applying new tools of analysis. One of the most important theoretical methods development in recent decades is game theory. While John von Neumann and Oskar Morgenstern did pioneering work in this field as early as the late 1940s, the analytical breakthrough was spawned by John Harsanyi, John Nash and Reinhard Selten, who were awarded (in 1994) “for their pioneering analysis of equilibrium in the theory of non-cooperative games.” John Nash introduced the distinction between cooperative games, in which binding agreements can be made, and non-cooperative games, where binding agreements are not feasible. Nash also developed an equilibrium concept for predicting the outcome of non-cooperative games that later came to be called the Nash equilibrium. Reinhard Selten was the first to refine the Nash equilibrium concept for analyzing dynamic strategic interaction among different agents and to apply these refinements in the analyses of competition with only a few sellers. These refinements made it possible to exclude a number of theoretically possible but unstable or irrelevant equilibria. John Harsanyi showed how games can be rigorously analyzed in the case of incomplete information. In this way he provided a theoretical foundation for predicting the outcome of strategic interaction between agents imperfectly informed, for instance, about the objectives of other individuals. Hence, Harsanyi gave an important impetus to further development in the field of information economics, after the pioneering work of Stigler, Vickrey and Mirrlees. Another Prize in game theory was awarded to Robert Aumann and Thomas Schelling in 2005. While Aumann was awarded for theoretical work, Schelling was awarded for his creative application of game theory to important social, political and economic problems. There is, however, a common denominator for the contributions by these scholars, since both analyzed conflict and cooperation through game-theoretic methods. Robert Aumann was the first to make a comprehensive formal analysis of so-called infinitely repeated games, emphasizing what types of outcomes can be upheld over time in the context of long-run economic relations. His analysis has been applied, for instance, to price wars among firms and trade wars among nations. By this analytical approach, it also becomes easier to understand the emergence of institutions such as merchant builds, institutions for wage negotiations and international trade agreements. By applying game theory to a broad range of society problems Thomas Schelling has helped make game theory a unifying framework for the social sciences. For instance, Schelling showed that an agent may strengthen its position in bargaining by overtly worsening its own options, and that the capacity to retaliate can be more useful than the ability to resist attack. He also showed how under certain circumstances uncertainty about retaliation creates a more powerful situation in bargaining than certainty about retaliation. His analysis of strategic commitments has turned out to explain a wide range of phenomena, from competitive strategies of firms to the delegation of political decision power to administrative agencies. Like meteorology, economics has traditionally been a non-experimental discipline. This has changed to some extent by the emergence, and expansion, of laboratory experiments in economics. Vernon Smith, who shared the 2002 Prize with Kahneman, has developed methods for laboratory experiments in economics, which has helped our understanding of economic behavior. He also found that the prices that emerged via the interaction of sellers and buyers in laboratory experiments often were very close to the market prices predicted by traditional demand-supply theory, even though the agents in the experiments lacked the information and analytical tools required to calculate in advance the price predicted by theory. He has also clarified how prices of specific products are influenced by the institutional framework in particular markets, such as different types of auction markets. Problems and difficulties What then are the main problems and difficulties in choosing Laureates in economics? It may be useful to discuss this issue in connection with four questions: (a) How should “economics” be interpreted in the context of the awards? (b) What criteria should be used when judging whether a candidate merits a prize? (c) In what order should worthy candidates be selected? (d) When and for what reason should prizes be shared? The scope of economics The Prize Committee, and the Academy, has decided to give wide interpretation to the term “economic sciences,” so that prizes may be awarded to scholars making important scientific contributions also in neighboring disciplines, in so far as these concern economic issues. In other words, “interdisciplinary research” has been regarded as important. Indeed, as mentioned above, several awards have been given for contributions on the borderline between economics, political science, sociology and history. Scholars with traditional training in economics have increasingly been “trespassing” into neighboring territory by applying the methods of economic theory and econometrics to problems not previously analyzed much by economists. These various trespassing tendencies have led George Stigler (1982), as well as other economists, to talk about economics as “The Imperial Science.” It is also true, however, that research in other social sciences has recently influenced research in economics. An important example is the application of research in empirical psychology to economics, for instance as a result of contributions by Kahneman and Tversky. Though the Academy, and its selection committee, has followed the same general principles as applied to the prizes in the natural sciences, i.e., to award specific contributions, the degree of “specificity” of the awards has varied considerably. Examples of prizes with high specificity are the awards to Wassily Leontief and to contributions to econometric methods, as well as the prizes to game theory and financial economics. Other prized are characterized by quite small degrees of specificity, such as the prizes to Paul Samuelson, Milton Friedman, Friedrich von Hayek, Gunnar Myrdal and Amartya Sen. In the case of Paul Samuelson, reference was made to his contribution to “raising the level of analysis in economic science”. The Prize citation to Milton Friedman mentioned his contributions to consumption analysis and to monetary history and theory as well as “his demonstration of the complexity of stabilization policy.” The latter referred to Friedman’s stress on how time lags, conflicts of goals, uncertainty and endogenous expectations among economic agents greatly complicat stabilization policy. In the Prize citation for Gunnar Myrdal and Friedrich von Hayek the Academy mentions both their “pioneering work in the theory of money and economic fluctuations” and “their penetrating analysis of the interdependence of economic, social and institutional phenomena.” In the case of Amartya Sen, much of the contributions referred to his clarification of the philosophical foundations of economics. Moreover, his empirical studies of starvation in a number of poor countries integrated political and sociological factors with more narrowly economic ones. Simon Kuznets was awarded for his lifetime contributions to the empirical analyses of economic development. Thus, the Academy has awarded not only narrowly defined specific contribution but also clusters of such contributions, including lifetime achievements if these consist of major contribution to economic science, widely interpreted. Criteria for awards Prizes have been awarded for a specific contribution (such as new analytical methods in finance and econometrics), two or several specific contributions (such as the Prizes to Friedman and Modigliani) and for life-time contributions (such as the Prize to Samuelson, Kuznetz and Allais). Life-time contributions have dominated, although the classification is ambiguous since life-time contributions may have consisted of specific themes (such as in the case of Leontief). When considering what should be regarded as a “worthy” contribution, it is probably correct to say that the selection committee has looked, in particular, at the originality of the contribution, its scientific and practical importance, and its impact on scientific work. To provide shoulders on which other scholars can stand, and thus climb higher, has been regarded as an important contribution. To some extent, the committee has also considered the impact on society at large, including the impact on public policy. An issue is whether the contributions by a scholar should be treated as gross ornet. In other words, should the Prize awarding authority make deductions for “bad” (low-quality) research? It is obvious that no such deductions have been made. Moreover, how does one deal with people who, in addition to their scholarly work, have participated in the political debate with policy recommendations which sometimes may reflect strong ideological commitments. Friedman, Hayek, Myrdal, Tinbergen, Tobin, Modigliani, and Solow are obvious examples. In conformity with the basic idea of the prize as a scientific award, such activities have been neglected. When deciding who should be regarded as worthy of a Prize, the scrutiny of time has helped the committee considerably. Because the Prize was initiated as late as 1969, time has sorted out worthy candidates, for whom the risk of “premature fame” is minimal. During the first decade of the Economics Prize, the committee largely had the task of working with a heavy backlog of rather obvious candidates. Indeed, some of the honored contributions were made several decades ago, even as far back as the thirties, examples being the awards to Frisch, Tinbergen, Hicks, Ohlin and Kantorovich. Moreover, it usually takes a longer time in economics (and social sciences in general) than in the natural sciences to find out if a new contribution is solid or if it is just a fad. In other words, it is important to wait for scrutiny, criticism and repeated tests of the quality and relevance of a contribution. The reason is not only that economic behavior, like human behavior in general, is complex but also that it varies over time and place. This is partly because individuals learn from previous experience, which may make empirically estimated behavior patterns unstable. Thus, new results may turn out to be relevant only to a transient conjuncture of circumstances, having much less generality than was supposed at first. Another reason to be particularly careful is that relevant empirical tests usually take time to pursue, partly because such tests usually rely on non-experimental data. It is, however, noticeable that laboratory experiments have become much more usual in recent decades, largely thanks to the influence of results in experimental psychology and the development and application of methods in experimental economics. What, then, have been the main criteria for choosing the orderof worthy candidates? There is an unavoidable subjectivity and arbitrariness in this choice. Two dominant criteria seem to have been: (i) to give early Prizes to particularly important contributions, and (ii) to adhere to a pluralist view of economic research, by shifting over the years between candidates in different fields, using different methods of analysis, and reflecting different views of the world. There has also been (iii) a tendency to give Prizes in chronological order of discovery. When trying to define a Prize-worthy contribution, the selection committee has not relied much on quantitative indicators such as the number of nominations or the frequency of citations, even though the Prizewinners usually rank very high on both accounts. Indeed, there are a number of exceptions of Prizewinners who have received quite few nominations and who also rank quite low in citation indices, pronounced examples being Kantorovich, Stone, Haavelmo, Allais, Meade and Ohlin (though the Heckscher-Ohlin model is frequently referred to in the literature). There are also some economists who consistently rank very high on citation indices, but who have not received Prizes. Sharing of prizes Another important issue is when, and how, awards should be shared. According to the rules laid down for the Nobel Prizes, the Prize can be shared among a maximum of three persons. A shared Nobel Prize is just as honorable as a single Prize, and each Laureate has to be worthy of the Prize alone. For receiving a shared award, there has to be some “common denominator” of the Laureates. Shared awards in economics have been given either when the contributions are the results of actual cooperative work, or when the contributors are so closely related that a sharing is important to demonstrate the connection and to be “fair” to contributors. So far, sixteen Prizes out of thirtynine have been shared, which is somewhat less frequent than in the natural sciences during the last three decades. The Prize-awarding authority has interpreted the common denominator of shared Prizes in economics in different ways for different awards. For instance, the contributions of Ragnar Frisch and Jan Tinbergen were strongly linked by intellectual influence, in particular from the older Laureate (Frisch) to the younger. The shared Prize between John R. Hicks and Kenneth Arrow also reflected the work of two different generations working in the same field, more specifically in general equilibrium and welfare theory. In the words of the press release of the Academy, Hicks “initiated” a profound transformation of general equilibrium theory, while Arrow “provided it with fresh nourishment.” The prize in game theory was also an award to two generations of contributions, with Nash being a pioneer and Harsanyi and Selten making Nash’s concepts of non-cooperative game theory more applicable. The Prize shared between Hurwicz, Maskin and Myerson follows a similar pattern. The Prize shared between Tjalling Koopmans and Leonid Kantorovich reflected instead similarity of mutually independent contributions in the field of normative economic theory, or more specifically a normative theory of the optimum allocation of resources. The shared Prizes in the theory of information economics to Vickrey and Mirrlees, the shared prize in economic psychology and experimental economics to Kahneman and Smith, and the shared prize in game theory to Aumann and Schelling were of a similar nature. The Prize sharing between Hayek and Myrdal was, again, of a different nature. Both were pioneers in macro and monetary analysis in the thirties – the Austrian School and the Stockholm School, respectively. They both used the concepts of aggregate savings and investment to explain macroeconomic fluctuations. Both later broadened the scope of economic analysis, by emphasizing the institutional, legal, political and ideological framework of economic and social processes. The fact that they are often regarded as political “antipoles” did not bother the committee, since the Prize is a purely scientific award. This is probably the shared award for which the common denominator of the Laureates’ achievements was the smallest. Some shared prizes have instead been awards for complementary contributions. The common denominator for the shared Prize to Bertil Ohlin and James Meade was their analysis of international trade and capital movements. The contributions of Arthur Lewis and Theodore Schultz were also largely complementary. The common denominator is that their research has dealt with long-term economic development for less developed countries. Another complementary prize was the shared award between Fogel and North, which was designed to honor the two most important pioneers in “new” economic history, in which modern tools of economic and statistical analysis is applied to issues in economic history. The shared Prize to Markowitz, Miller and Sharpe was also an award for complementary contributions, in this case in financial economics, though the latter two had the advantage of standing on the shoulders of Markowitz. The Prize to Merton and Scholes may be regarded as a “follow up” of this Prize, since they (with the late Fisher Black) developed a theory of price formation for one specific type of important financial asset, namely “derivative financial instruments”, such as options and futures. This is one of the clearest cases of a “joint” contribution in the sense that the Laureates cooperated in the research that lead to their achievement. The Prizes to Heckman and McFadden, as well as to Engle and Granger, in econometrics were also shared for complementary contributions. The same holds for the shared Prize to Akerlof, Spence and Stiglitz, who together, although working separately, created a unified approach to an important area in information economics (situations of asymmetric information). Do the prizes reflect new trends in economic analysis? The awards that have been made so far obviously reflect some characteristic features of economic analysis during the last half-century. First of all, the awards clearly reflect the dominant role of the United States in economic research during this period. Out of 58 Laureates, 40 (approximately 69 percent) have been United States citizens. However, although all of these had been working in the United States for a long time, it may be worth noting that some of them – Leontief, Koopmans, Debreu, Harsanyi and Kahneman – were born and largely trained in other countries. Moreover, more than 70 percent of the Laureates worked at US universities when they received the awards. The only other countries that have received prizes (as defined by citizenship) are the United Kingdom (7 awards), Norway (3 awards), Sweden (2 awards), France, Germany, India, Israel, the Netherlands and the Soviet Union (one each). The universities where faculty members have received more than a single award are Chicago: 10 awards; Berkeley: 5; Harvard, Cambridge, Princeton and Columbia: 4; MIT and Stanford: 3; and Oslo, Yale, New York University and George Mason University: 2 awards. Turning to the content of the awarded contributions, the emphasis on deductive rather than inductive methods in economic analysis shows up strongly. The increased role of mathematical formalization is also strongly reflected in the awards, important examples being the Prizes to Samuelson, Hicks, Arrow, Koopmans, Kantorovich, Debreu, Allais, as well as the Laureates in mechanism design, financial economics and game theory. Another characteristic trend in economics during the second half of the 20th century is the growing importance of quantitative methods including systematic statistical testing or estimation, i.e., econometrics. This development is reflected notably in the awards to Frisch, Tinbergen, Leontief, Klein, Stone, Heckman, McFadden, Engle, Granger, Kydland and Prescott, and Phelps. Indeed, the huge volume of quantitative research during the last decade, often involving large masses of data, would hardly have been possible without the development of analytical techniques such as econometrics, input-output analysis, programming, as well as the development of powerful computers. The awards also illustrate the important role of macroeconomics during the postwar period, (in particular, Friedman, Klein, Tobin, Modigliani, Solow, Lucas, Kydland and Prescott, and Phelps). New ways of looking at the economic system have also been recognized by the awarding authority, as reflected in the awards to economics of information, human capital and game theory as well as the role of economic institutions. A final but difficult question: Has the selection committee viewed the award as a chance to influence the direction of new research in economics? The answer is “no” in the sense that the committee has tried to be broad and pluralistic of outlook in its decisions about awards, and to emphasize the multidimensional nature of economic research. Somewhat paradoxically, such an eclectic approach could, of course, be regarded in itself as a way to influence views about fruitful research, by recognizing research fields and methods that may not for the moment be in the focus of interest. It may also be argued that the Prize-awarding authority has demonstrated that there are many different ways to advance a science like economics: rigorous deductive theorizing, whether by way of verbal or mathematical techniques; the development and application of new concepts and methods of analysis; rigorous empirical testing of existing hypotheses, as well as less formalized confrontation of various hypotheses with empirical fact; or “simply” profound observation and nonformalized innovative thinking about economic issues. Table listing the Prize in Economic Sciences 1969–2006 Bibliography Stigler, George. Economics – The Imperial Science?, Mimeo, April 1984. Ståhle, Nils K. Alfred Nobel and the Nobel Prizes, Stockholm: The Nobel Foundation and The Swedish Institute, 1978. * Published as a chapter of the book: “The Nobel Prize: The First 100 Years”, Agneta Wallin Levinovitz and Nils Ringertz, editors, Imperial College Press and World Scientific Publishing Co. Pte. Ltd., 2001. Assar Lindbeck was born in 1930. He is currently Professor of International Economics at the Institute of International Economic Studies, University of Stockholm, Sweden. His publications include: A Study of Monetary Analysis (1963), Swedish Economic Policy (1975), The Insider-Outsider Theory of Employment and Unemployment (with Dennis J. Snower) (1988), Unemployment and Macroeconomics (1993), The Swedish Experiment (1997), as well as numerous articles in different areas of economic theory. He was chairman of the Prize Committee for the The Sveriges Riksbank (Bank of Sweden) Prize in Economic Sciences in Memory of Alfred Nobel 1980-1994. He also served as chairman of the Government-appointed Economics Commission on the Swedish Economy (the “Lindbeck Commission”) in 1992. First published 18 April 1999 (updated in December 2007)
7784	dbpedia	3	35	https://oll.libertyfund.org/publications/liberty-matters/peter-boettke-hayek-epistemic-liberalism	en	Peter Boettke, “Hayek’s Epistemic Liberalism” (September 2017)	https://oll-resources.s3…e05ec33bd45e.jpg	https://oll-resources.s3…e05ec33bd45e.jpg	[ "https://oll.libertyfund.org/assets/oll-logo-stacked-a38794da269bcdab15520fcbdfb162c49c5a7e99b89771daa1c33dc89b653a02.svg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/4d0a2af88e999262bc6fdc00895ad40c.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/a79e36ff88c6167fca2d66e189b19533.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/a4b95270d94fecb2d0867f23935e14c8.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/3351cbb79512a9b52369a7e4440d2ad7.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/0838a3a0cabc647800891e922b2418cc.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/a00451f4ce764656518f4447e786d7dd.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/15e5e9f7f39e775be97b8775d39a25a5.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/ada1741352de7a350ac2b6228e52d9a8.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/287f450efaee62248a680e5f5a830d85.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/2f1ad01e3c3789fc7e63d5e01cd239b0.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/3515904c32fed6cbd6727aaa08e3ec5f.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/7c528ad4913877f838c7d009c5bcc590.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/a02f627beab3d2a9fc44e22007c97d92.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/748147e4b9356893f6b9e5a7d034fac4.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/c2e06ab2cf9855616f16fea6f816a5d2.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/a03095c63899ba4d5557dffef4292e1e.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/501e85526de96f7307917f247b73a43e.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/6cf1e9c04ab2a9282f9b82e54384f29a.jpg", "https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/posts/3e323b400ecf482f81f08d925164e63a.jpg", "https://oll.libertyfund.org/assets/oll-logo-white-on-dblue-ba4bbd4ded0c0d231428daa06f140dfbd96a23168a33ac95018e34c1235b4e74.svg" ]	[]	[]	[ "" ]	null	[ "Steven Horwitz", "Peter J. Boettke", "Roger Koppl", "Adam G. Martin" ]	2017-09-02T07:00:00-04:00	Peter J. Boettke, Professor of Economics and Philosophy at George Mason University, argues that is a common trope to claim that F. A. Hayek experienced a crushing defeat in technical economics during the 1930s. At the beginning of the decade, Hayek emerged in the British scientific community as a leading economic theorist. Yet by the end of the decade Hayek was supposedly defeated in his debate both with Keynes and with Oskar Lange and Abba Lerner over market socialism. However, this narrative reflects a fundamental misunderstanding of the teachings of economics from the classical to the early neoclassical economists. Economic life from Adam Smith to J. S. Mill never was treated as taking place in an institutional vacuum. Instead, law, politics, and social mores all constituted the institutional background against which economic life played out. As Boettke argues in the Lead Essay, Hayek’s epistemic institutionalism, as articulated in the 1930s and 1940s, provided the foundation for his own reconstruction and restatement of liberal political economy as evidenced in The Constitution of Liberty (1960) and Law, Legislation and Liberty (1973-79). Recognizing this aspect of Hayek’s thought is a first step to recognizing his broader contributions to economic science and the art of political economy. Boettke is joined in this discussion by Steven Horwitz, the John H. Schnatter Distinguished Professor of Free Enterprise in the department of economics at Ball State University, Roger Koppl, professor of finance in the Whitman School of Management of Syracuse University, and Adam Martin is a Political Economy Research Fellow at the Free Market Institute and an assistant professor in the department of Agricultural and Applied Economics at Texas Tech University.				https://oll.libertyfund.org/publications/liberty-matters/peter-boettke-hayek-epistemic-liberalism	Peter J. Boettke, Professor of Economics and Philosophy at George Mason University, argues that is a common trope to claim that F. A. Hayek experienced a crushing defeat in technical economics during the 1930s. At the beginning of the decade, Hayek emerged in the British scientific community as a leading economic theorist. Yet by the end of the decade Hayek was supposedly defeated in his debate both with Keynes and with Oskar Lange and Abba Lerner over market socialism. However, this narrative reflects a fundamental misunderstanding of the teachings of economics from the classical to the early neoclassical economists. Economic life from Adam Smith to J. S. Mill never was treated as taking place in an institutional vacuum. Instead, law, politics, and social mores all constituted the institutional background against which economic life played out. As Boettke argues in the Lead Essay, Hayek’s epistemic institutionalism, as articulated in the 1930s and 1940s, provided the foundation for his own reconstruction and restatement of liberal political economy as evidenced in The Constitution of Liberty (1960) and Law, Legislation and Liberty (1973-79). Recognizing this aspect of Hayek’s thought is a first step to recognizing his broader contributions to economic science and the art of political economy. Boettke is joined in this discussion by Steven Horwitz, the John H. Schnatter Distinguished Professor of Free Enterprise in the department of economics at Ball State University, Roger Koppl, professor of finance in the Whitman School of Management of Syracuse University, and Adam Martin is a Political Economy Research Fellow at the Free Market Institute and an assistant professor in the department of Agricultural and Applied Economics at Texas Tech University. It is a common trope to claim that F. A. Hayek experienced a crushing defeat in technical economics during the 1930s. At the beginning of the decade, Hayek emerged in the British scientific community as a leading economic theorist. From 1932 to 1950, Hayek was the Tooke Professor of Economic Science and Statistics at the London School of Economics (LSE), and along with Lionel Robbins spearheaded a perspective in economic science that challenged the dominance of economic thinking at Cambridge. Not only was the Marshall-Pigou hegemony challenged by the LSE economists, but the emerging new economics of John Maynard Keynes and his colleagues such as Joan Robinson and Richard Kahn was subjected to fundamental critique. Yet by the end of the decade Hayek was supposedly defeated in his debate both with Keynes and with Oskar Lange and Abba Lerner over market socialism. As the Great Depression lingered throughout the decade and World War II broke out, Hayek lost his important ally Robbins to government work, and even his best students and his former junior colleagues, such as Lerner, G. L. S. Shackle, John Hicks and Nicholas Kaldor, all abandoned him intellectually. So the common trope of the "Hayek story" begins. His crushing defeat was then followed by his abandoning technical economics and spending the rest of his career -- post-The Pure Theory of Capital (1941) – on philosophical speculations, political theory, psychology, law, history, and an ideologically inspired social theory. It's true that colleagues and former students increasingly distanced themselves from Hayek's ideas in economics – so much so, in fact, that Hayek within a short time was almost forgotten as an economic thinker – and he did devote his writing primarily to those other areas. Compare the titles of his books in 1920s and 1930s – Monetary Theory and the Trade Cycle (1929), Prices and Production (1931), and Profits, Interest and Investment (1939) – to the titles from 1950 and forward – The Counter-Revolution of Science (1952a), The Sensory Order (1952b), Capitalism and the Historians (1954), The Constitution of Liberty(1960), Law, Legislation, and Liberty (1973, 1976, 1979), and The Fatal Conceit(1988). This does tell a story, as does Hayek's own repeated statement that while his interests were once purely technical, he was now drawn to broader questions in philosophy and social theory during the preparation of Collectivist Economic Planning (1935) and his subsequent debate with his colleagues at the LSE over socialist economic planning and market socialism. However, this narrative reflects a fundamental misunderstanding of the teachings of economics from the classical to the early neoclassical economists. Economic life from Adam Smith to J. S. Mill never was treated as taking place in an institutional vacuum. Instead, law, politics, and social mores all constituted the institutional background against which economic life played out. Consider Adam Smith's analysis of the behavior of professors in Oxford, who were paid from an endowment, and those in Glasgow who were paid from student fees. The professors' attentiveness to students differed dramatically not because – Smith postulated – the professors' character was different, but because of the incentives they faced under alternative institutional arrangements. "Incentives matter" has been a mantra of economists since the first systematic treatments in the discipline, and the structure of incentives that economic actors face is a byproduct of different institutional contexts. We must always remember that Smith argued that the only difference between the street porter and the philosopher resided in the mind of the philosopher. As my colleague David Levy likes to say, Smith was an analytical egalitarian. The basic approach of the analytic egalitarian is to insist on the symmetry of behavioral assumptions across institutional contexts, and to study the impact on human behavior of variations in that context. Same players under different rules produce different games. Economic analysis flows from the recognition of scarcity and the fact that all choices are made within given constraints. For analytical tractability, the institutional context can be taken as part of the background constraints. Thus, during the first decades of the neoclassical refinements of economic theory, the analysis proceeded against a given institutional environment of fully defined and strictly enforced private property rights and freedom of contract embodied in the rule of law. My point is simple: the classical political economists and the early heirs to that intellectual tradition saw economic activity as embedded within an institutional context and never as acontextual. In fact, it shouldn't have to be pointed out that Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations was an exercise in comparative institutional analysis of economic development, with the main contrast being between the mercantilist system of state-led development versus the system of natural liberty with its more trade-led model of development. Smith "derived" his famous "invisible hand" theorem from the self-interest postulate via institutional analysis. It is relatively easy to see why, as economic theory went through technical refinements in the early 20th century and its critics tended to target the historical and institutional context, theorists sought to strive for an institutionally antiseptic theory. Math is math, after all. The relationship between averages and the marginal is true independent of whether we are talking about student test scores or the costs a factory faces. That relationship also holds whether we are talking about students and factories in China or in the United States. And it is true independent of the motivation of the different actors. The static optimality conditions of a competitive equilibrium possess this math quality. Profit-maximizing requires MR = MC; cost-minimizing requires production at the minimum point on the average cost curve, etc. All least-cost technologies must be deployed, and all opportunity costs in production and consumption must be taken into account. If so, all the opportunities for mutually beneficial exchange that could be pursued will have been pursued, and all technological efficiencies will have been realized. As the terms imply, the pattern of resource utilization will be optimal. Logic conquers historical context, and economic theory is indeed a science on par ontologically with any of the hard sciences, including physics. This understanding of economic theory transformed it from a branch of social philosophy to a new social physics, and the epistemological claims about economics transformed as well. Mises had first issued the challenge that, due to the inability to engage in rational economic calculation, socialist planning could not deliver on its stated goals of rationalizing production and producing both a burst of productivity and harmony among the classes. What economic calculation achieves is the system's ability to sort out from an array of technologically feasible production projects those which are economically viable from those that are not. Economic calculation is a waste-identifier and -eliminator. By definition, the rationalization of production requires that the waste of resources be eliminated, and the consequences of rationalization of production in terms of a burst of productivity that will deliver man from the Kingdom of Necessity to the Kingdom of Freedom -- such that class distinctions will disappear and harmony between men will reign -- also necessitates the elimination of waste and errors in the pattern of resource use. So Mises's criticism was decisive and cut to the core of the promise of socialism. This was also purely a point of positive economics. Mises did not question the socialists' ends. Socialism meant something at the time of his original article (1920) – the rationalization of production through the abolition of private property and commodity production. So Mises simply asked if abolition of private property and commodity production was coherent with respect to the rationalization of production, and he demonstrated it was not. Without private ownership in the means of production, there will be no market in those means, and without a market, no exchange ratios, or relative prices, will be established. Therefore, without relative prices, decision makers will be unable to engage in rational economic calculation. In short, decision makers will not know whether to build railroad tracks out of steel or platinum. Technological efficiency is not enough to answer the economic question of the efficiency of resource use. Prices without property are an illusion. In an ironic twist of argument, Oskar Lange actually accused Mises of being an institutionalist for making this point. But the fact that Lange said this should alert you to the changes that were taking place in the economic theorist's self-understanding from 1900 to 1930. Since math is math and institutions don't matter, if someone invokes institutional differences to explain comparative performance, then he has failed to appreciate the universal nature of economic theory. But to Mises, it was precisely the universality of economic theory that enabled him to understand why institutions matter for economic performance. In addition to Mises's strict adherence to an analysis of the efficiency of chosen means to given ends in his analysis of socialism, he also assumed the best intentions on the part of all actors. This was necessitated by the dialogue at the time and also demonstrated the decisiveness of his critique. One of the oldest arguments in all of intellectual history, dating from at least Aristotle's critique of Plato, is that collective ownership will have perverse incentive effects on individuals in their decision making. Economists had made this incentive-based argument against various proposals for socialism for decades before Mises, and he was clearly aware of them, as any close reading of his 1920 article and 1922 book will reveal. But socialist thinkers had put forth a proposition that man's spirit would be transformed by the transformation of the material conditions of economic life. Man's more cooperative nature would emerge, and his base self-interested perspective would be pushed aside. To a socialist thinker who was working from this assumption, the old incentive-based argument would have no impact. That might have been true, they could reason, in a world of private property and commodity production, but in the world of collective ownership and rational economic planning, such questions of initiative can be dismissed. So Mises met his intellectual opponents on their turf and granted for sake of argument the assumption that these questions of motivation are irrelevant. The question Mises emphasized was how even the most-motivated and best-intentioned planners would be able to rationally plan the economy if they were unable to engage in rational economic calculation. They couldn't, he argued, and so they couldn't achieve what the advocates of socialism desired. They would have to abandon either their ends or their means to make the socialist project coherent. But if they abandoned their ends, then what appeal would their social movement have? If they abandoned their means, then what would the term socialism mean? Either Marx's aspiration or his analysis must be abandoned, and perhaps both; but if both, then we are back to the aspirations and analysis of the classical political economists from Smith to Mill. Hayek had a different set of arguments to contend with in the English-language debate of the 1930s than Mises had in the German-language debates of the 1920s. But they both faced the challenge of granting for sake of argument as much ground to their intellectual opponents as possible to show that the supposed answer to Mises's challenge was no answer at all. Like Mises before him, Hayek certainly was aware of and agreed with the incentive-based argument against socialist arrangements of economic affairs. But as with Mises, Hayek's intellectual opponents merely dismissed such criticisms as "psychological" concerns. Leaving aside the confusion in these thinkers between individual motivation and systemic incentives, the point for Mises and Hayek was to demonstrate to their opponents that even if one were to assume that economic planners were motivated only by the public interest and workers were willing to work for the good of society rather than their own narrow self-interest, rational economic planning would be impossible under socialism. To counter the Mises-Hayek position, socialist economists attributed not only a sort of moral perfection to state actors (the public-interest assumption), but also an intellectual perfection. Economic planners were not just benevolent, but omniscient, and once these two assumptions were made, then clearly state planners could outperform erring entrepreneurs in the market. Planning would be the essence of rationality in the economic policy sphere. Mises and Hayek quickly responded in Human Action(1949) and Individualism and Economic Order (1948), respectively, but the main argumentative burden now fell more or less on Hayek in the eyes of his professional peers. Thus Hayek, beginning in the late 1930s, began to articulate his knowledge-problem critique of an array of policy proposals for social betterment. Unique to his approach was the close connection he drew between the institutional context of economic activity and the knowledge that economic actors could discover, utilize, and communicate to others. In "Economics and Knowledge" (1937), Hayek argued that while the pure logic of choice was a necessary component of any explanation of market clearing, it was not sufficient. What was required was an examination of how economic actors learn the relevant knowledge so they may coordinate their plans with one another and realize the gains from trade and innovation through the market. Hayek argued that this required an examination of how alternative institutional arrangements impact the social learning that constitutes the market and that ultimately this is an empirical project rather than a purely theoretical exercise. In short, Hayek reasserted the basic claim that context matters. If you can imagine economic explanations as scissors, Hayek was claiming that one blade was the pure logic of choice and the other the circumstances of that choice. The explanation constitutes the logic of situational analysis. And since Hayek did not relax the public-interest assumption, the situational analysis had to focus on learning, or epistemics. Whereas subsequent developments in the 1950s and beyond, such as law and economics, property-rights economics, and public-choice analysis, would emphasize the incentive issues associated with alternative institutional arrangements, Hayek focused on the knowledge issues. Once this is understood, we see that Hayek didn't move away from economics in the decades after his disputes with Keynes and the market socialists. He was instead delving deeper into the institutional conditions that would permit the sort of mutual learning required for social cooperation under the division of labor and the complex coordination which constitutes a modern economy. The devil is always in the institutional details, and the mechanism is the mutual learning of opportunities for gains from trade and innovation, as well as the discovery of best ways to pursue those opportunities. Economic actors in the private sector as well as the public sector face a knowledge problem, and the institutional framework in each respective arena of social interaction provides answers to what we can learn, how we will learn, and who will learn. The market economy based on property, prices, and profit-and-loss solves the knowledge problem by alerting individuals to profit opportunities by guiding them in decisions through relative price adjustments and disciplining them through the penalty of loss. The underlying pattern of resource ownership provides the background, but it constantly changes as a reflection of the process of learning or failing to learn through market competition. Politics is an entirely different learning mechanism, and to study politics from this knowledge-problem perspective requires that the theorist examine the how, what, and who within a context different from property, prices and profit and loss. Instead, we have voting, campaign contributions, bureaucracies, budgets, etc. Learning no doubt takes place, but what is learned, how it is learned, and who is learning are significantly different in politics than in the market. The problem for economic policy that Hayek's challenge presented is that for the policy intervention to be "rational," it should achieve what the market could achieve if it operated ideally. We should be able to see some sort of "invisible hand" process at work in politics that will transform voter preferences into policy outcomes that serve the best interest of society as a whole. But if what is learned is not what would be required for such an exercise in social alchemy, then the process will fall short on its own terms. Hayek gives us a tragic tale of government failure in his story of unintended and undesirable consequences in public policy. Of course, in the 1950s and 1960s the theory of government failure developed in public-choice analysis would stress the incentives faced by voters, politicians, bureaucracies, etc. But Hayek stood fast with the assumption of public interest and sought to demonstrate that the public interest could not be realized because the economic actors would lack the requisite knowledge to pursue the public interest even if they wanted to do so. Liberalism to Hayek, therefore, must provide an institutional environment that unleashes the creative powers of individuals. He clearly understood this required that their initiative and ambitions be marshalled so that they would benefit the most by best satisfying the demands of others. But his challenge was to demonstrate that the institutions of governance in a liberal order could both provide the stable and predictable framework within which economic activity transpired and permit the adaptability and adjustments to constantly changing circumstances. It is this environment of constant learning that is the source of human improvement and flourishing. Adam Smith famously argued that the greatest improvements in the productive capacity of mankind were due to the expansion and ever-greater refinements in the division of labor. Hayek simply pointed out that the division of labor implies also a division of knowledge. Just as the private-property market economy provides the mechanism through which individuals realize productive specialization and peaceful social cooperation, this economy, with its constellation of relative prices and profit-and-loss accounting, guides decision makers, lures them in certain productive directions, and disciplines them when they go in other less-productive directions. Hayek never abandoned economics. He simply returned to his roots. Economic education in Vienna was situated within the law-school faculty. Hayek had the good fortune to study economic theory at one of the leading centers of economic theory of its time, and he began his career understandably working on technical economic problems. But the institutional framework was never far behind – whether that be law, politics, or social mores. Unfortunately, as economics evolved in the first half of the 20th century, this institutional background was forgotten and economists postulated theoretical worlds which left unexamined the institutional context of economic behavior and the administration of economic affairs in the public sector. Hayek's epistemic institutionalism, as articulated in the 1930s and 1940s, provided the foundation for his own reconstruction and restatement of liberal political economy as evidenced in The Constitution of Liberty and Law, Legislation and Liberty. Recognizing this aspect of Hayek's thought is a first step to recognizing his broader contributions to economic science and the art of political economy. References Hayek, F.A. 1929 (1933). Monetary Theory and the Trade Cycle. London: Jonathan Cape. _________. 1931. Prices and Production. London: Routledge & Kegan Paul. _________, ed. 1935. Collectivist Economic Planning. London: Routledge & Kegan Paul. _________. 1937. "Economics and Knowledge." Economica 4: 33-54 _________. 1939. Profits, Interest, and Investment. London: Routledge & Kegan Paul. _________. 1941. The Pure Theory of Capital. London: Macmillan. _________. 1948. Individualism and Economic Order.Chicago: University of Chicago Press. _________. 1952a. The Counter-Revolution of Science. Glencoe: Free Press. _________. 1952b. The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology.Chicago: University of Chicago Press. _________., ed. 1954. Capitalism and the Historians. Chicago: University of Chicago Press. _________. 1960. The Constitution of Liberty. Chicago: University of Chicago Press. _________. 1973. Law, Legislation and Liberty Volume 1: Rules and Order. Chicago, IL: University of Chicago Press. _________. 1976. Law, Legislation and Liberty Volume 2: The Mirage of Social Justice. Chicago: University of Chicago Press. _________. 1979. Law, Legislation and Liberty Volume 3: The Political Order of a Free People. Chicago: University of Chicago Press. _________. 1988. The Fatal Conceit: The Errors of Socialism. Edited by W.W. Bartley III.Chicago: University of Chicago Press. Mises, Ludwig von. 1920. "Economic Calculation in the Socialist Commonwealth," Archiv für Sozialwissenschaften 47. Reprinted in F. A. Hayek, ed., Collectivist Economic Planning.London: Kegan & Paul, 1935. _________. 1922 (1936). Socialism: An Economic and Sociological Analysis. London: Jonathan Cape. _________. 1934 (1912). The Theory of Money and Credit. London: Jonathan Cape. _________. 1949. Human Action: A Treatise on Economics. New Haven: Yale University Press. Response Essay Minds and Markets Perhaps unsurprisingly, I find little to disagree with in Pete Boettke's summary of Hayek's "epistemic liberalism." I think Pete is correct to emphasize the role of knowledge in Hayek's version of liberalism, especially as it contrasts with the centrality of incentives in many other discussions of the advantages of the market and the liberal order more broadly. How Hayekians talk about prices and profits differs from many other economists' and liberals' emphasis on the role of prices and profits as surrogates for knowledge that enable us to coordinate our behavior. Prices and profits don't just serve as incentives to elicit the "right" choices. Moreover, prices are not valuable because they capture all of the relevant information that enables market actors to maximize utility or profits. Rather, prices are important because they serve as surrogates for the imperfect, contextual, and often unarticulated knowledge of other market actors. Prices are necessary not because they solve coordination problems by enabling everyone to know everything, but because they make possible more economic coordination than would take place in their absence. That is, rather than enabling us to reach the state of being in which we are able to access everyone else's knowledge, prices enable us to engage in the process of learning through their ability to both inform our choices ex ante and provide us feedback about those choices ex post. This emphasis on learning in Hayek is a theme that permeates his whole career. He grew up in a family of scientists, and one of his first, and eventually lifelong, fascinations was with psychology and the human brain. That interest was fully realized in The Sensory Order, his 1952 book on theoretical psychology (or the theory of cognition). However, that book's roots were in a 1920 paper in which he outlined many of the ideas that would form the core of his book 32 years later. And even after the publication of The Sensory Order (hereafter, TSO), Hayek continued to write about the issues it raised and their relevance for the liberal order. The lasting importance for Hayek of these questions about the brain, the mind, and how humans learn can help us see why his liberalism would have a distinct epistemic flavor. There is much that could be said about the role of TSO in Hayek's system. Viktor Vanberg's long introductory essay (2017) to the Collected Works edition of the book does a masterful job in covering that ground. I want to focus on two points here that relate to Pete's argument, especially what he has elsewhere called Hayek's "epistemic institutionalism." The question concerns the role TSO might play in understanding how Hayek's social theory came to differ from the direction mainstream economics began to take between the world wars. The growing focus on equilibrium rather than market processes, and the increasingly behavioristic and positivistic method that came to define mainstream economics, were strongly at odds with Hayek's thought. His cognitive theory can help us understand the particular positions he took on both the substance of economics and the appropriate method for studying human action. Summarizing the contribution of TSO is a challenging task. In short, Hayek argued that what we call mind is a system for classifying the external world in such a way that we are able to construct a model of that world which enables us to form reasonably reliable expectations about the way in which the world actually works. Although all human beings are born with some common biological features and dispositions from our evolutionary past, much of the structure of our brains comes from our specific interactions with the world. The people we interact with, the languages we speak, and the situations we find ourselves in all contribute to forming the neural connections that determine how the brain classifies incoming sensory data and creates the model of the world that guides our expectations and actions. Hayek is clear to argue that those connections are contingent and therefore can change as we learn from experience what works and what does not. In this way, Hayek's theory of mind is a spontaneous order story: our minds are the unintended outcome of our interactions in the world, guided by the "profit and loss" signals of success and failure in accomplishing our goals. Importantly, Hayek argues that the mind can never fully understand itself, as understanding any classifying system requires a classifying system more complex than the one being understood. Therefore we are limited in our ability to understand the mind. At best we can offer an "explanation of the principles" by which mind operates, much in the same way that we cannot make specific predictions about events in the market, but only broad causal statements of the underlying laws by which it functions. As Pete notes in his opening piece, it is in Hayek's 1937 article "Economics and Knowledge" that he first truly describes the market as a learning process. He asks the empirical question about how humans come to learn what others want and how best to provide it for them such that our expectations can become more consistent with each other. He also notes that this consistency of expectations includes not just our knowledge of "external events" but also of other actors' expectations. Within economics, this Hayekian question has been answered by Israel Kirzner's theory of the entrepreneur. Kirzner took the theory of the entrepreneur developed by Ludwig von Mises and demonstrated how it could answer this Hayekian question. The entrepreneur is alert to opportunities for profit and acts to exploit them. Having noticed that apples are selling for $2 on one side of the street and $4 on the other, the entrepreneur expects she can profit by buying them for $2.50 and selling them for $3.50. Trying out this set of expectations informs the $2 sellers that their expectations about much they could get for their apples were mistaken, and it informs those buying at $4 of their mistaken expectations about how little they had to spend to get apples. Entrepreneurs spread knowledge and, when they are successful, thereby correct errors and enable people to have more accurate expectations about the actions of others. This is how economics can describe the learning process of the market. Within that emergent order of the marketplace is the emergent order of the minds that are engaged in this learning process. Hayek's cognitive theory (2017 [1952]: 240) stresses that we "live as much in a world of expectation as in a world of 'fact,' and most responses to a given stimulus are probably determined only via fairly complex processes of 'trying out' on the model the effects to be expected from alternative courses of action." Note the parallel to what the entrepreneur does. For Hayek, it's learning and expectation formation and correction all the way down. His view that markets are learning processes rests on a foundation about how humans learn in all of the situations in which we find ourselves. Where the liberal order comes in, as Pete rightly notes, is with respect to what sorts of institutions best facilitate the formation of these emergent orders in such as way as to promote human progress. That is, what sorts of economic, political, and social institutions give maximum scope to entrepreneurial alertness to discovery and error-correction? What sorts of institutions ensure that errors are knowable and that actors have at least partial information to correct them? What sorts of institutions reward error-correction that better coordinates expectations? What sorts of institutions give humans the ability to deploy their own knowledge in ways that are accessible to others? The institutional context matters for learning, and therefore for economic coordination and social progress. From minds to markets, epistemic questions are central for Hayek. But there's a second element to his cognitive theory that's relevant for his epistemic liberalism. Hayek's theory of mind also provides, as Bruce Caldwell (1994) has noted, a scientific foundation for his subjectivism. In the last chapter of TSO, Hayek discusses the philosophical implications of his theory. There he says (2017 [1952]: 303), in response to the behaviorists, "The recognition of the fact that for our understanding of human action familiar mental entities must always remain the last determinants to which we can penetrate, and that we cannot hope to replace them by physical facts, is, of course, of the greatest importance for all of the disciplines which aim at an understanding and interpretation of human action." We cannot understand the social world without making use of concepts of perception, intention, goals, and preferences. That is, we must start our analysis with the subject's perceptions of the world. As Hayek says in The Counter-Revolution of Science, also published in 1952 (44, emphasis in the original): "So far as human action is concerned the things are what the acting people think they are." It is not mere coincidence that Hayek published a book on theoretical psychology and a book on the method of the social sciences in the same year and in the wake of his perceived defeat in the debates with the market socialists and Keynes. In both debates it became clear to Hayek that his differences with his interlocutors were primarily epistemological and methodological. They had a different view of the nature of knowledge and how to engage in social science. TSO and Counter-Revolution constitute a two-pronged epistemic response to those debates. As Hayek reported in his 1977 retrospective on TSO (2017 [1977]: 384-5), it was during his work in the early 1940s on the essays that eventually became Counter-Revolution that he "had been driven both to rely in some measure on the results of my unpublished work in psychology and to think further about some of the problems with which I had dealt in it." That in turn led him to revisit those issues while writing TSO. The importance of TSO is that it provided a scientific response to those, such as the behaviorists and positivists, who said subjectivist approaches to the social sciences were unscientific. A correct understanding of human cognition indicates that we must make use of the "familiar mental entities" and take human perceptions and intentions as the starting point of our analysis. To get people to grasp that markets are a learning process and that understanding markets requires a subjectivist economics, Hayek had to make this stronger epistemic turn in the 1940s. "The Use of Knowledge in Society" (1945) was the first step, as he made the case that key function of prices was epistemic. But that was not enough. TSO, along with Counter-Revolution, enabled him to make a more comprehensive argument for the nature of human learning and what that means for the doing of economics. Those projects also led to the institutional questions that are at the heart of Pete's opening essay. If the twin processes of evolution and spontaneous order are learning processes, and if they are at work at every level, from the molecular to the mental to the market to large-scale biological evolution, then it is incumbent upon us to understand the conditions under which the evolutionary processes at work in the social world are best able to contribute to human progress. That requires we recognize that these are, in fact, epistemic processes and that we must study them through the lens of social theories that start from the perceptions of individuals and how the institutional contexts in which humans choose determine the consequences of those choices. As Pete rightly notes, this is what pushed Hayek towards his study of the liberal order in his work in the 1960s and 70s. If human society is an emergent order of learning that rests on the emergent order we call mind, and if human progress depends upon maximizing that capacity to learn, under what institutional conditions will that potential best be realized? The answer to that epistemic question is the set of institutions that comprise the liberal order. References Caldwell, Bruce. 1994. "Hayek's Scientific Subjectivism," Economics and Philosophy 10: 305-13. Hayek, F. A. 1937. "Economics and Knowledge," in Individualism and Economic Order, Chicago: University of Chicago Press. __________. 1945. F. A. Hayek. "The Use of Knowledge in Society," American Economic Review, 35(4): 519–30. Reprinted in Individualism and Economic Order,(Chicago: University of Chicago Press, 1948). __________. 1952. The Counter-Revolution of Science, Indianapolis, IN: Liberty Press. __________. 2017 [1952]. The Sensory Order, reprinted in The Collected Works of F. A. Hayek Volume 14: The Sensory Order and other Writings on the Foundations of Theoretical Psychology, Viktor J. Vanberg, ed., Chicago: University of Chicago Press, 2017. __________. 2017 [1977]. "The Sensory Order after 25 Years," reprinted in The Collected Works of F. A. Hayek Volume 14: The Sensory Order and other Writings on the Foundations of Theoretical Psychology, Viktor J. Vanberg, ed., Chicago: University of Chicago Press, 2017. Vanberg, Viktor J. 2017. "The 'Knowledge Problem' as the Integrating Theme of F. A. Hayek's Oeuvre: An Introduction to The Sensory Order," editor's introduction to The Collected Works of F. A. Hayek Volume 14: The Sensory Order and other Writings on the Foundations of Theoretical Psychology, Viktor J. Vanberg, ed., Chicago: University of Chicago Press, 2017. Response Essay Defeating Hayek Peter Boettke's essay provides vital logical and historical context for appreciating Hayek's contribution. Hayek's epistemic project led him to consider the institutional background of economic activity, not to abandon economics. And the project remains incomplete. The most popular contemporary economics textbook, Greg Mankiw's Principles of Microeconomics, only has three index entries for "property rights," each pointing to a brief passage: one arguing that government is necessary to provide them (pp. 10-11), another about patents in industrial policy (p. 209), and the last at the end of his discussion of common-pool resources (p. 237). While Mankiw's textbook is quite good overall, it gives short shrift to the very rules that constitute markets. Until the institutional setting of market activity again occupies the foreground of economics research and education, Hayek's counter-revolution remains incomplete. Since Boettke's essay is not only correct but also important, I want to examine two argumentative strategies against Hayek's approach that are common in the literature. The particular works I have chosen are exemplary both in that they embody these anti-Hayekian arguments and that they are sophisticated and powerful pieces. Nonetheless, as is clear from the groundwork Boettke lays out in his essay, they both fail in their attempt to defeat Hayek. Strategy 1: Defeating "Arrow" First, consider Jack Knight and Samuel Johnson's The Priority of Democracy (2011). The main thrust of their book is that democratic institutions deserve prima facie priority over other types of institutions because they are reflexive. Democratic debate allows us to critically examine the quality of the institutions that shape the various spheres of our social lives and to reform those institutions deliberately. Because of this possibility, there is a presumption in favor of democracy over other institutional forms, including markets. Not everything should be democratic, but democracy should determine its own boundaries. Along they way they offer some compelling arguments. But early in the text, Knight and Johnson recognize that they have to grapple with Hayek (pp. 52-55). Hayek's work seems to create a presumption in favor of decentralized institutions (such as markets and federalism) rather than mass deliberation. Unfortunately, they don't actually grapple with Hayek. Instead, they grapple with (a caricature of) Kenneth Arrow (pp. 55-61). Their argument against the priority of markets is simply a rehash of the possibility of market failure in standard neoclassical theory. In neoclassical theory, markets "work"—they achieve efficiency—under certain conditions, such as (but not limited to) the perfectly competitive equilibrium that market socialists appealed to. The classic treatment of these conditions is in Arrow's work. And it is easy to imagine deviations from these conditions that generate inefficiency. Formally, these claims are correct. But they are irrelevant as a critique of Hayek, because his theory of markets is not the same as that of neoclassical economists. In fact, Hayek strongly criticizes using perfect competition as a benchmark for understanding how real markets operate.[1] Though the name comes later, the "market process theory" of Menger, Mises, Hayek, and later Kirzner differs in crucial respects from the standard neoclassical theory. Market-process theorists tend to focus on the dynamic coordination of economic activity through time rather than the static efficiency of snapshot equilibria. And the economic problem is understood as discovering new knowledge and adapting to change rather than allocating given means among given ends. So a critique of Hayek based on the possibility market failure misunderstands both (a) how he thinks markets work and (b) why he thinks they are valuable. Strategy 2: The Nirvana Fallacy More recently, Samuel Bowles, Alan Kirman, and Rajiv Sethi (2017) have recently taken issue with Hayek's general policy stance in the Journal of Economic Perspectives. They are not wholly critical: they sympathize with and offer additional support for Hayek's critique of equilibrium theory. Bowles et al. are careful to distinguish Hayek's market-process theory from a standard neoclassical approach and relate it to various advances in agent-based modeling and information economics. But they argue that Hayek's theory, while powerful, does not justify his defense of "laissez-faire" policies. Markets operating in an open-ended, dynamic theory can internally generate bubbles and economic crises. Individuals acting on their own peculiar knowledge of time and place may contribute to chaos rather than coordination. A deeper dive into the particular models and experiments that Bowles et al. cite might reveal some important differences with Hayek's approach. But the general trajectory of their argument in fact provides some Hayekian reasons to doubt the efficacy of markets for securing coordination. It is a strong piece that merits careful reading. Nonetheless, their critique fails because it offers only a cursory nod to the institutional setting of market activity.[2] Hayek's argument in favor of a strong presumption for market institutions is both epistemic and comparative, as Boettke's essay makes clear. These two features of Hayek's vision go together. "The mind can never foresee its own advance" (Hayek 1960, p. 75). How can a social scientist understand a process of social learning, since by definition learning means uncovering hitherto unknown knowledge? Just as we study choice: by analyzing its institutional antecedents and social consequences. But by refusing to treat human action and imagination as mechanistic, a market-process approach loses the ability to posit a definite optimum outcome against which the real world can be compared. Instead, we are left only with comparative institutional analysis. We cannot judge whether a market outcome is the best outcome. All we can do is make reasonable guesses—Hayek called them pattern predictions—about how such outcomes stack up against those that would likely occur under alternative rules. Knight and Johnson, to their credit, are thoroughly comparative (see especially chapter 6). Ultimately their comparative analysis does not defeat Hayek, but they have the standard of proof right. They need to show that democracy outperforms markets in some specific and important way. But they only offer a convincing case that deliberation can outperform static models of markets. Bowles et al. suffer from a different problem. They aim at the right target, but misunderstand what would count as a fatal blow. Dynamic markets are susceptible to the problems they cite. But they do not examine whether (a) alternative institutional arrangements do any better in avoiding crises or (b) whether political agents are more likely than market agents to design rules that avoid the potential crises they are rightly concerned about. Their argument largely amounts to a Nirvana Fallacy, finding markets wanting and calling for government regulation because they are not perfect.[3] Hayek's claim is not that markets are sufficient to avoid bad outcomes, but that in practice they usually do a better job than the alternatives. So while they are right to note that market-process theory does not necessarily lead to a laissez-faire policy prescriptions, they fail to defeat Hayek's strong, comparative presumption in favor of market institutions. The point of the above is not to immunize Hayek from criticism, but to point out why certain common arguments against his positions fail. Defeating Hayek would require explaining either (a) why his theory of markets is unsatisfactory, (b) why standard market-failure arguments do in fact apply to market-process theory, or (c) why, even according to Hayek's approach, nonmarket institutions can predictably do a better job than market institutions in some definite sphere. When such challenges materialize, they can provide both defenders and detractors of Hayek's ideas with a valuable opportunity to engage in constructive debate. References Bowles, Samuel, Alan Kirman, and Rajiv Sethi. 2017. "Retrospectives: Friedrich Hayek and the Market Algorithm." Journal of Economic Perspectives Vol. 31, No. 3: 215-230. Demsetz, Harold. 1969. "Information and Efficiency: Another Viewpoint." The Journal of Law and Economics, Vol. 12, No. 1: 1-22. Hayek, F.A. 1948. Individualism and Economic Order. Chicago: University of Chicago Press. Hayek, F.A. 1960 [2011]. The Constitution of Liberty: The Definitive Edition. Ed. Ronald Hamowy. Chicago: University of Chicago Press. Knight, Jack and James Johnson, 2011. The Priority of Democracy: Political Consequences of Pragmatism. Princeton: Princeton University Press. Mankiw, N. Gregory. 2008. Principles of Microeconomics, 5th ed. Mason, OH: South-Western Cengage Learning. Endnotes [1.] See especially "The Meaning of Competition" in Hayek (1948). [2.] The only evidence they offer in favor of intervention is to (a) point out the relatively strong performance of Nordic social democracies and (b) argue that the mix of state and market institutions probably represents evolutionary fitness. This is a far-too-casual treatment of institutions to merit much response, but (a) it is not obvious that Nordic countries are less market-oriented than the United States (the Doing Business Index ranks Denmark and Norway higher than the United States), and (b) there is no hint in Hayek that evolutionary pressures are strong enough to favor the most effective institutions over a time scale of few decades, especially when the relevant countries are all relatively market-friendly. [3.] See Demsetz (1969) for a fuller explanation of this point. While his argument is couched in terms of efficiency, the same basic point holds for a market-process approach concerned with coordination. Response Essay SELECT Knowledge Peter Boettke makes a fundamental point about Hayek's supposed movement away from economics. "Hayek didn't move away from economics in the decades after his disputes with Keynes and the market socialists. He was instead delving deeper into the institutional conditions that would permit the sort of mutual learning required for social cooperation under the division of labor and the complex coordination which constitutes a modern economy." The key word here is "learning." In his famous 1937 article on "Economics and Knowledge," Hayek identified learning as a problem of economic theory. "Clearly," Hayek said, "there is here a problem of the division of knowledge, which is quite analogous to, and at least as important as, the problem of the division of labor." If Hayek was right about the division of knowledge in society, then economics is at least as much about how economizers learn as it is about how they allocate resources. Economics is – or at least should be – largely about how people acquire the knowledge that guides and informs their concrete choices as participants in the division of labor. The theory of such knowledge acquisition processes is a kind economic theory of learning that Boettke has dubbed "epistemic institutionalism." Epistemic institutionalism is quite distinct from the sort of thing many readers may think of as a "theory of learning." The issue is not what's going on in one person's head when "learning" occurs. That sort of question is important in general, and it can be important in economics too as McCabe et al. (2001) nicely illustrates. But epistemic institutionalism is more often concerned with processes that are robust to particular models of individual cognition. Israel Kirzner's theory of entrepreneurship illustrates this property of epistemic institutionalism. Kirzner (1973) has shown that entrepreneurial discovery drives equilibration in more or less competitive markets. It is a story about learning. But it requires essentially no cognitive psychology. All we need assume is a general propensity to discover and act on opportunities. This assumption is empirical. As Hayek notes in "Economics and Knowledge," the "empirical element in economic theory -- the only part which is concerned not merely with implications but with causes and effects and which leads therefore to conclusions which, at any rate in principle, are capable of verification -- consists of propositions about the acquisition of knowledge." Presumably, we could imagine a world with people who have zero "alertness" in Kirzner's sense without thereby falling into logical contradictions. Such a world would be so different from that of our ordinary experience, however, that we would have to doubt our guesses about what it would look like. Thus, while the existence of Kirznerian alertness is an empirical assumption, Kirzner's arguments are robust across models of human cognition. And that robustness is characteristic of epistemic institutionalism. The issue in epistemic institutionalism is how different social arrangements (institutions) affect the way dispersed knowledge is used, what sorts of facts people are likely to discover, and so on. How do alternative institutions influence the epistemic performance of the social system? Boettke discussed the salient example of socialism. Without a stock market, the economy cannot allocate capital well and things will go badly. Socialism is perfectly possible, but rational economic calculation under socialism is quite impossible. So-called capitalism, on the other hand, has a stock market. It has, therefore, market prices for capital goods and capital combinations. Rational economic calculation is therefore possible under "capitalism." Under "capitalism" people can learn which capital combinations have greater value and which have less value. Capital therefore tends to move toward higher valued used and away from lower valued uses. Hayek seems to have only slowly arrived at a full understanding of the importance of epistemic institutionalism. Late in his career he said, "Together with some later related papers reprinted with it in Individualism and Economic Order, ['Economics and Knowledge'] seems to me in retrospect the most original contribution I have made to the theory of economics (Hayek 1994, p. 68)." But in his 1937 paper he says, curiously, "I do not mean to suggest that there opens here and now a wide field for empirical research. I very much doubt whether such investigation would teach us anything new." I think, instead, that his insights into dispersed knowledge open many wide fields for empirical research. Any of the standard sub-disciplines within economics can be studied from the perspective of epistemic institutionalism. The Mises-Hayek argument on socialist calculation should be at the center of comparative systems theory (Boettke 2001). Easterly (2013) has brought Hayekian epistemics to development economics. Kirzner (1973) showed the centrality of epistemic institutionalism to the core of microeconomic theory. And so on. Coyne (2008) studies war from just this perspective. Horwitz (2015) has brought this perspective to the study of the family. My coauthors and I have looked at criminal justice (Koppl and Sacks 2013), forensic science (Koppl 2005, 2010) and experts (Koppl 2012, 2015, 2018) as problems in epistemic institutionalism. We should be bold and creative in applying Austrian epistemics to diverse topics such as art history, the administrative state, child protective services, medicine, and espionage. For such empirical research to teach us anything new, however, we need a reasonable idea of what "dispersed knowledge" means. The business and economics literature is thick with references to Hayek and dispersed knowledge. But it seems to me that relatively few of these references get beyond the banality that different people know different things. This rather obvious fact is understood by children as young as three or four (Lutz and Keil 2003, Keil et al. 2008). Hayek's insight was not just that different people know different things, but that this humble fact is of central importance to social science. Hayek also gave us some insight into the nature of the knowledge that is dispersed in the economy. Rather than citing chapter and verse, I will offer my own description without worrying if I have, perhaps, deviated in some way from Hayek's own vision. The knowledge guiding economizers is embedded in the system and in practice. Such "knowledge" is not necessarily justified or even true in some philosophical sense. It may be flat wrong, demonstrably false. But if it in fact guides action, then is it "knowledge" in the sense of epistemic institutionalism. It is knowledge existing within the division of knowledge and emergent from the division of labor. The knowledge guiding the actions of participants in the division of labor co-evolved with the division of labor. Each refinement in the division of labor produces new specialized knowledge that, in turn, enables further changes and refinements in the division of knowledge propelling the co-evolutionary process forward. The division of knowledge co-evolves with the division of labor such that each enables the other. Such knowledge is "constitutive" in more or less Hayek's sense (1952 pp. 36-37). It is "constitutive" because it constitutes a part of the phenomenon. The fisher's knowledge is constitutive of fishing, for example, no matter how much or little of it can be found in books propounding theories of fishing. Constitutive knowledge is often tacit, because it exists in our habits and practices rather than in any formula or recipe. We "know how" to ride a bicycle without "knowing that" we are following this or that rule to keep our balance. We often use external objects to help us "know" what to do and when to do it. The indicators on an automobile's dashboard tell us when to change the oil, get gas, or slow down. I don't know when to remove the eggs from the boiling pot. That knowledge exists "exosomatically" in the egg timer. Finally, knowledge is synecological if the knowing unit is not an individual, but a collection of interacting individuals. As Leonard Read (1958) taught us, no one person knows how to make a pencil. The pencil-making knowledge exists in the system; it is synecological. I borrow the term "synecological" from ecology, where "synecology" means "The study of the relationships between the environment and a community of organisms occupying it. Also: the relationships themselves." (That's from the OED.) Etymologically, the root "syn" means "same." Thus, etymologically, the word means "same ecology." The interacting elements are in the same ecology. The term "synecological" is meant to suggest that knowledge is generated by the interactions of elements in an environment and is not separable from these elements, their interactions, or their environment. The knowledge corresponding to the division of labor is evolutionary and "constitutive." It may also be tacit, exosomatic, and synecological. When put in the right order these labels give us the acronym SELECT, which represents the idea that knowledge may be Synecological, EvoLutionary, Exosomatic, Constitutive, and Tacit. The epistemic institutionalism Boettke advocates should, of course, build on Hayek's notion of "dispersed knowledge." But this notion should not be restricted to the rather obvious idea that different people know different things. Rather, we should embrace the larger vision of Austrian epistemics, which includes the idea of SELECT knowledge. This bottom-up model of knowledge contrasts with the top-down epistemics of so many of today's scholars and intellectuals. This bottom-up epistemics supports the view that knowledge should emerge from the system. If knowledge is imposed on the system, it is imposed by someone who thereby imposes upon and dominates others. The persons imposed upon are not in a relation of equality with those imposing a knowledge scheme on society. The view of emergent knowledge I develop in Expert Failure (Koppl 2018) shows, I think, that we need not impose a unitary scheme of knowledge on society. We can let knowledge emerge and flourish without attempting to control or systematize it. If we are to be free, we must let knowledge emerge freely. And we cannot be free unless we are free of the domination and tyrannizing of those who would impose a uniform system of knowledge on others. In other words, we cannot be free unless we are equal. References Boettke, Peter J. 2001. Calculation and Coordination: Essays on Socialism and Transitional Political Economy, London: Routledge. Coyne, Christopher. 2008. After War: The Political Economy of Exporting Democracy. Stanford: Stanford University Press. Easterly, William. 2013. The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor. New York: Basic Books. Hayek, F.A. 1952. The Counter Revolution of Science: Studies in the Abuse of Reason, Chicago: University of Chicago Press. _________. 1937 [1948]. "Economics and Knowledge," in Hayek, F. A. Individualism and Economic Order. Chicago: The University of Chicago Press, pp. 33-56. Horwitz, Steven. 2015. Hayek's Modern Family: Classical Liberalism and the Evolution of Social Institutions, New York: Palgrave Macmillan. Keil, Frank C., Courtney Stein, Lisa Webb, Van Dyke Billings, and Leonid Rozenblit. 2008. "Discerning the Division of Cognitive Labor: An Emerging Understanding of How Knowledge Is Clustered in Other Minds," Cognitive Science, 32(2): 259-300. Kirzner, I. M. 1973. Competition and entrepreneurship. Chicago: University of Chicago Press. Koppl, Roger. 2018. Expert Failure, Cambridge, UK: Cambridge University Press, forthcoming. _________. 2015. "The Rule of Experts," in Boettke, Peter and Christopher Coyne (eds.) Oxford Handbook of Austrian Economics, Oxford: Oxford University Press. _________. 2012. "Information Choice Theory," Advances in Austrian Economics, 17: 171-202. _________. 2010. "Organization economics explains many forensic science errors," Journal of Institutional Economics, 2010, 6(1): 71-81. _________. 2005. "How to Improve Forensic Science," European Journal of Law and Economics, 20(3): 255-86. Koppl, Roger and Meghan Sacks. 2013. "The Criminal Justice System Creates Incentives for False Convictions," Criminal Justice Ethics, 32(2): 126-162. Lutz, Donna J. and Frank C. Keil. 2003. "Early Understanding of the Division of Cognitive Labor," Child Development 73(4): 1073-84. McCabe, Kevin, Daniel Houser, Lee Ryan, Vernon Smith, and Theodore Trouard. 2001. "A functional imaging study of cooperation in two-person reciprocal exchange," Proceedings of the National Academy of Sciences, 98(20): 11832-35. Read, Leonard E. [1958] 1999. I, Pencil: My Family Tree as told to Leonard. E. Read, Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc. Online version: Leonard E. Read, I Pencil: My Family Tree as told to Leonard E. Reed (Irvington-on-Hudson, New York: Foundation for Economic Education, Inc., 1999). </titles/112>. Conversation Comments Knowledge Lost in Information My title is a play on the title of a new book by Philip Mirowski and Edward Nik-Khah, The Knowledge We Have Lost in Information (2017). Their book is a social history of the concept of information in the evolution of modern economics, and, of course, Hayek plays a central role in their narrative. But a subtle reading of Hayek both drives their narrative and complicates it. There should be little doubt that the challenge Mises and Hayek put forth in the socialist-calculation debate inspired much of the original research on information economics as seen in Leonid Hurwicz's mechanism design theory, Joseph Stiglitz's comparative institutional analysis, and all the technical work in between. For tractability reasons, though, when Mises's and Hayek's ideas were translated into modern models of the communicative properties of decentralized markets, the "Hayek hypothesis" was understood as positing prices as sufficient statistics to ensure a competitive equilibrium outcome. This is not the right place to work through the problems with this argument with the analytical rigor required, but suffice it to say it is precisely with this intellectual move that the knowledge Hayek talked about was lost in the models of information. Our professional understanding of the price system has been significantly distorted ever since. In Hayek's "The Use of Knowledge in Society" (1945) he described as a "marvel" the continuous adaptation and adjustments in the market due to changing circumstances guided by price movements. As he says, "I have deliberately used the word 'marvel' to shock the reader out of the complacency with which we often take the working of this mechanism for granted." (101) It is important to remember this paper wasn't published in the New York Times or Reader's Digest, but in one of the leading specialized journal in the scientific field of economics – The American Economic Review. In other words, the readers were his peers. Yet he had to shock them out of complacency so they would appreciate the price system's role in coordinating plans of demanders and suppliers, enabling the gains from trade and innovation to be realized. As he not-so-subtlety concluded, an approach to economic theory "such as that of much of mathematical economics with its simultaneous equations" (104) systematically distorts our understanding of the basic task of economic science. It does so by assuming that the knowledge people hold corresponds perfectly with the objective facts and that the unique price and quantity vector that clears the market already has been determined. What's lost are the learning by economic actors, the multiple margins of adaptation and adjustment guided by relative prices, and the market process. By squeezing out the social process of learning, mid-20th-century equilibrium economics misled economic thinkers and policymakers into falsely believing the equilibrium model could serve as a normative benchmark and planning guide for practical affairs – from comprehensive central planning to regulation of industry to price controls. From Adam Smith to Hayek, it was understood that political economy and economics studied exchange relationships and the institutions within which those exchange relationships are formed and transactions take place. This emphasis was also lost in the system of simultaneous equations, where pre-reconciliation of all plans was required by model construction. Not only the market process, but also the institutions that framed the market process, were lost. So the knowledge lost in information was significant and, I would argue, devastating for science. Hayek argued in his Nobel Prize address, "The Pretense of Knowledge" (1974) that in the study of man, the approaches that appear to be the most scientific are in fact the least scientific and that to demand of a science more than it is capable of achieving leads to "charlatanism and worse." (371) The student of society, Hayek argued, must resist the urge to commit the error of scientism and instead adopt a more humble stance, eschewing the social-engineering mindset. If not, the student runs the risk of "becoming an accomplice in men's fatal striving to control society," a "tyrant" over fellow citizens, and a "destroyer" of civilization. (372) The stakes, as Hayek saw it, involved in the knowledge lost in information are not trivial scientifically or socially. Steve Horwitz, Adam Martin, Roger Koppl, and I are all in essential agreement with Hayek on these arguments. We each have our own unique points of emphasis, but if we keep the conversation at an abstract level we are in agreement. Horwitz's calling our attention to The Sensory Order is both expected and critically correct. Hayek's challenge to central planning is often taken to be merely one of computational complexity – that the objective information was "out there" but too difficult to collect and marshall effectively. This is precisely not Hayek's argument. The Sensory Order describes the operation of the mind, but from a social-science perspective we learn much about human decision-making. Hayek can be read as making an argument that aligns with ideas later developed by thinkers such as Gerd Gigerenzer (2008), the rules of thumb or heuristics in decision-making, and what has been dubbed "ecological rationality." As Hayek stressed in a variety of his writings, man has reason because he followed rules; he has not designed rules because he has reason. What this implies for decision-making is that our choices are best understood as the play between our cognitive capabilities and the circumstances in which we choose. We rely on evolved rules to enable us to cope with our cognitive limitations and our ignorance as well as to navigate the vagaries of changing circumstances. Again, the link between Hayek's "knowledge problem" and the institutional ecology within which we act and learn permeates his work, from theoretical psychology to philosophical anthropology, and it reflects his economics as well. Perhaps one of the discussions we can have is whether -- given the nature of Hayek's enterprise in the social sciences and the humanities, and the way economics evolved in the 20th century and now in the 21st century -- economics is the right scientific community for Hayekians. Adam Martin insightfully raises the spectre of "defeating Hayek" that permeates the literature and is reflected in two areas --- democratic theory and economic theory. He concisely argues that the arguments in neither democratic theory nor economic theory effectively meet Hayek on his own terms and thus ultimately miss their target. I agree with Martin that, to effectively critique Hayek, this literature needs to address his epistemic arguments about the limits of agreement in democratic decision-making and the nature of the price system and market economy on his own terms. Hopefully, a conversation that addresses Hayek's epistemic institutionalism can take place in the leading political science and economics journals. Until that happens, the knowledge lost in information will again be illustrated. Roger Koppl makes the important distinction between learning by individuals -- the cognitive processes going on in their own heads -- and the sort of social learning on which epistemic institutionalism strives to focus analytical attention. Of course, as I just discussed with respect to Horwitz's comments, I believe one can see a connection between these two aspects of social ordering, but Koppl is right to stress their distinctiveness. A promising direction for research that follows from Koppl's comment is a more-detailed articulation of the knowledge assumptions used in economic theory. In The Counter-Revolution of Science (1952, 99) Hayek distinguished between the knowledge used within a system and the knowledge we develop about a system. Knowledge within the system is constitutive of the phenomena, while our theoretical exercises result in our knowledge about the system. Consider what I would argue is the subtle but important difference between Hayek and Robert Lucas, who revolutionized economic theory in the 1970s and 1980s with his demand for a shift in economists' assumptions about knowledge. Lucas in effect argued that economic actors within a system had to be assumed to have knowledge of the theories that economists were deploying to explain the operation of the system (and its control). The Keynesian policy agenda had assumed that the economic-policy expert could stand outside of the system and know how actors within the system would behave if they had the theorists' knowledge, and thus the expert could manipulate policy variables to get the passive actors to behave in ways that would improve the operation of the system. Lucas countered that the actors within the system are neither passive nor ignorant, that they were instead rational actors who could anticipate the consequences of policy changes and act strategically to position themselves for the best response. This was a particularly powerful corrective with respect to policies that were directed at addressing unemployment through inflation. Lucas's rational-expectations revolution transformed the discipline, even after the initial invariance proposition in public policy was no longer widely accepted. (This is the proposition that rational actors fully anticipate the effects of public policy and orient their behavior accordingly in such a way that policy becomes ineffective. <https://en.wikipedia.org/wiki/Policy-ineffectiveness_proposition>) From the 1970s onward, economic modeling insisted on rational-actor microfoundations and equilibrium theorizing in macroeconomics. For our purpose, the key issue is how Lucas used the knowledge assumptions to constrain the modeling exercise. A generation earlier Hayek had sought to get his fellow economist to also accept a constraint on their theorizing about knowledge within and about systems. The theorist could never be assumed to be in possession of the contextual knowledge of time and place that actors within the system were using in their decisions, discovering in their interactions, and learning from in their competitive experimentation to improve their lot in life. The theorist can obtain abstract knowledge of the patterns about the system and can cultivate in others an appreciation of the spontaneous order that emerges in the market as individuals strive for productive specialization and peaceful social cooperation. But a theorist is never in the position of the entrepreneur within the system. Mises made a significant point along these lines when in his original article on the problems of socialist economic calculation he stated: "It is not a knowledge of bookkeeping, of business organization, or of the style of commercial correspondence, or even a dispensation from a commercial high-school, which makes the merchant, but his characteristic position in the production process, which allows of the identification of the firm's and his own interests." (1920, 121) The Mises-Hayek knowledge problem is characterized, as Koppl points out, by SELECT knowledge, and is grounded in the recognition that alternative institutional arrangements not only structure incentives differently, but also generate different types of knowledge, lead to different discoveries, and shape the environment of learning. The question that I hope we can explore with Koppl is what forms of empirical investigation are appropriate to the discovery and use of SELECT knowledge. References Gigerenzer, Gerd. Rationality for Mortals. New York: Oxford University Press, 2008. Friedrich August von Hayek, "The Use of Knowledge in Society," American Economic Review, XXXV, No. 4; September, 1945, pp. 519–30. </titles/92>. Hayek, F.A. 1974. "The Pretense of Knowledge," reprinted in The Collected Works of F. A. Hayek. Vol. 15: The Market and Other Orders, ed. by Bruce Caldwell. Chicago: University of Chicago Press, 2014, 362-72. <https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1974/hayek-lecture.html>. Mirowski, Philip and Edward Nik-Khah. 2017. The Knowledge We Have Lost Lost in Information. New York: Oxford University Press. [Wikipedia], "Policy-ineffectiveness proposition," Wikipedia, <https://en.wikipedia.org/wiki/Policy-ineffectiveness_proposition>. Conversation Comments No Methodological Holds Barred Boettke asks what "forms of empirical investigation" are best suited to understanding a social world in which SELECT knowledge guides and shapes human action. I am tempted to merely invite readers to decide for themselves and leave it at that. Two of my most beloved graduate professors, Fritz Machlup and Leland Yeager, used to quote Percy Bridgman. "The scientific method, as far as it is a method, is nothing more than doing one's damnedest with one's mind, no holds barred." (Apparently, this quote can be found in Bridgman 1955, p. 535.) You, the reader, may successfully employ a form of empirical investigation that the rest of us mistakenly "know" to be inappropriate. Hayek thought that experimental economics would be useless to test the theory of competitive markets. "We can test it on the conceptual models, and we might conceivably test it in artificially created real situations, where the facts which competition is intended to discover are already known to the observer. But in such cases it is of no practical value, so that to carry out the experiment would hardly be worth the expense." (Hayek, 1968 [2014], p. 305) Vernon Smith and others have shown, however, that experimental economics can test market theory and, indeed, support a very Hayekian research program. Let that be an object lesson to those who would limit the methods used by other souls wrestling with the truth. I would not declare any ethical method of inquiry taboo. I will, however, say a few words about complexity, verstehen, and bounded rationality. Boettke criticized "mid-20th-century equilibrium economics" rather than complexity economics. Complexity theory gives us economics with heterogeneous agents, bounded rationality, and local knowledge, which is far more Hayekian than mid-20th-century equilibrium economics. As Vriend (2002), Colander and Kupers (2014), and Arthur (2015) illustrate, serious engagement with complexity theory tends to move economists closer to Hayek. (People who like to represent intellectual history as a Manichean struggle between good guys and bad guys must deal with the fact that Kenneth Arrow was an important figure at the founding of the Santa Fe Institute who suggested Brian Arthur be named a visiting fellow at the nascent institute. See Waldrop 1992.) Rosser (1999, p. 185, n. 11) recognized Hayek as "an early and independent developer of complexity theory in something resembling its current form." Vried (2002) has asked whether Hayek was an agent-based computational economist. I have described Hayek as a complexity theorist (Koppl 2000, 2009). If Hayek was a complexity theorist, then those of us who admire his ideas should engage modern complexity theory seriously. At least one important modern complexity theorist has built on the listing problem (O'Driscoll and Rizzo 1985) to conjecture that we will never be able to fully mathematize social evolution. Stuart Kauffman and his coauthors (Felin et al. 2014, Koppl et al. 2015) have drawn on recent developments in the theory of biological evolution (Longo et al. 2012, Kauffman 2014) to show that the "phase space" of evolutionary systems is not generally stable and that, consequentially, they are "lawless" in a specific sense. They are "lawless" because there are no fixed "laws of evolution" for the system such that the future is entailed (up to a stochastic error term, perhaps) in some initial moment. Rather, evolution is "creative" in the sense that over time it generates new forms. It generates innovations that cannot be anticipated. Thus, modern complexity theory seems to imply limits to the power of mathematics to describe or predict the evolution of complex adaptive systems. It shows that evolutionary systems are creative is a sense close to that of Henri Bergson, but reaches this result by a very different path, one that may seem more "scientific" and less "philosophical" than that of Bergson. Kauffman and his coauthors emphasize the difference between algorithmic and non-algorithmic choice. In my view, Kirzner's theory of entrepreneurship is "really" a theory of non-algorithmic choice. If "learning" is frame change, if it is the acquisition of new knowledge rather than new information, then there can be no learning in algorithmic choice, whereas learning is entrepreneurial discovery. Whatever other limits mathematics may or may not have, we cannot apply it to social theory without "interpretation" in the sense of the old verstehen, or "understanding," tradition of Dilthey, Weber, Schutz, and Mises (Koppl 2010). Mathematics itself is always an empty calculus, pure syntax. To use it in social theory, we must give its terms meanings. We need semantics. We must "interpret" the calculus. For the social sciences (with the partial exception of demographics) such interpretation is the understanding of what Schutz and Machlup called "meant meanings." Thus, even on the most optimistic view of the role of mathematics in economics and other social sciences, we must preserve a role for "interpretation" in the sense of classical hermeneutics. (See Albert 1985 on the difference between classical and universal hermeneutics.) This is not the place to express my dissatisfaction with the "universal hermeneutics" of Heidegger and his followers. I will merely record my opinion that Alfred Schutz has given us the best available account of "understanding" in the classical hermeneutic tradition. We can find, in my opinion, incoherent statements in hermeneutics figures coming both before and after Schutz, whereas Schutz always maintains clarity, coherence, and scientific rigor. Even Weber and Mises, though free of absurdities and gross incoherence, are not as clear, thorough, or deep as Schutz on the understanding of meant meanings. If I celebrate Schutz on interpretation, I would not wish to suggest that we can stop there and rest contented. We must continually connect our existing tradition and framework to recent developments and current science. I have attempted to link hermeneutics to modern cognitive psychology (Koppl 2010). Felin, Koenderink, and Krueger (2016) draw on both the 19th-century biologist Jakob von Uexküll and modern psychology (Koenderink 2014) to criticize standard models of "bounded rationality" for assuming an "all-seeing eye." When we consider what "forms of empirical investigation" to use, we should not be tyrants. It's no holds barred, and let a hundred flowers bloom. This open attitude does not alter the fact, however, that any method has its limits. Nor does it disbar us from challenging implicit assumptions or calling out over-claiming by others. References Albert, Hans. 1988. "Hermeneutics and economics – A criticism of hermeneutical thinking in the social sciences," Kyklos, 41: 573–602. Arthur, Brian W. 2015. "All Systems Will Be Gamed: Exploitative Behavior in Economic and Social Systems," in Arthur, Brian W., Complexity and the Economy, Oxford University Press, pp. 103-18. Bridgman, Percy. 1955. Reflections of a Physicist. New York: Philosophical Library. Colander, David and Roland Kupers. 2014. Complexity and the Art of Public Policy: Solving Society's Problems from the Bottom Up. Princeton and Oxford: Princeton University Press. Felin, Teppo, Jan Koenderink, and Joachim I Krueger. 2016. "Rationality, Perception and the All-Seeing Eye," Psychonomic Bulletin & Review pp. 1-20. Hayek, F. A. 1968 [2014]. "Competition as a Discovery Procedure," in Caldwell, Bruce, ed. The Market and Other Orders, vol. 15 of The Collected Works of F. A. Hayek, Chicago and London: The University of Chicago Press, pp. 304-13. Kauffman, Stuart. 2014. "Prolegomenon to Patterns in Evolution," BioSystems, 123: 3-8. Koenderink, J. 2014. The All Seeing eye? Perception 43: 1-6. Koppl, Roger. 2010. "Some Epistemological Implications of Economic Complexity," Journal of Economic Behavior and Organization, 76: 859-72. _________. 2009. "Complexity and Austrian Economics," in J. Barkley Rosser, Jr, ed. Handbook on Complexity Research. Cheltenham, UK: Edward Elgar. _________. 2000. "Teaching Complexity: An Austrian Approach," in Colander, David, ed. The Complexity Vision and the Teaching of Economics, Edward Elgar. Longo, Giuseppe, Maël Montévil, and Stuart Kauffman. 2012. "No Entailing Laws, But Enablement in the Evolution of the Biosphere," arXiv:1201.2069 http://arxiv.org/abs/1201.2069. O'Driscoll, Gerald and Mario Rizzo. 1985. The Economics of Time and Ignorance, Oxford: Basil Blackwell. Rosser Jr., J.B., 1999. On the Complexities of Complex Economic Dynamics. Journal of Economic Perspectives 13, 169–92. Vriend, N.J., 2002. Was Hayek an ACE? Southern Economic Journal 68, 811–40. Waldrop, M. Mitchell. 1992. Complexity: The Emerging Science at the Edge of Chaos, New York: Simon & Schuster. Conversation Comments Liberal Institutions as Nodal Points of Plan Coordination As the four of us do seem to agree on the fundamental issues that Pete's opening essay raised, it seems most valuable to continue to do what we have already started to do, which is to explore some of its implications. In this comment, I want to revisit some ideas I explored in an earlier paper in which I compared Hayek's theory of mind with the Austrian theory of capital. Here, I want to emphasize the idea of "the plan" that was so central to Ludwig Lachmann's 1956 book Capital and its Structure. I then want to argue that liberal institutions are crucial for the ability to formulate, execute, and coordinate human plans in the way Lachmann discusses them. In Lachmann's account, entrepreneurs formulate a production plan by bringing together physical capital goods and human capital that they think will complement each other in executing the plan. For Lachmann, "the plan" is the fundamental unit of human action, and it rests on the underlying expectations of the plan formulators. As actors attempt to execute those plans, some will succeed and others will fail. Those plans that fail, as measured by profit and loss, will have to be revised in light of that information. Entrepreneurs will substitute other physical and human capital for pieces of the old plan, formulating a new plan that they believe will now succeed. Even successful plans might undergo a process of revision if entrepreneurs believe that the underlying data have changed. This, of course, is a learning process not unlike how individual human actors learn in Hayek's cognitive theory. The argument in The Sensory Order (2017 [1952]) is that humans act based on a "model" of the world which is used to "try out" various courses of action to imagine their consequences before action is taken. Hayek proposed that we then act based on which of those possibilities appears to best accomplish our goals. This is akin to a firm's budgeting process. This is the source of his argument that we live as much in a world of expectation as a world of fact. Our actions are based on the expectations produced by the implicit theories that are embedded in the model. In addition, the success or failure of our individual actions feeds back in ways that change the model as we come to learn more about the causal structure of the world and our role in it. This is the individual analogue to profit and loss. Though the process that happens within the brain is not something we can consciously control in the way an entrepreneur can with a production plan, both seem to be examples of the twin processes of evolution and spontaneous order at the heart of Hayek's social theory. Hayek (2017 [1977]) himself recognized this when he pointed to his work on capital as prompting him to think about the mind as a similarly structured spontaneous order. Hayek too emphasized the importance of the plan, especially in his 1937 paper "Economics and Knowledge," which put the coordination of plans at the center of what market processes do. In "The Use of Knowledge in Society," Hayek (1945) emphasized that his criticisms of planning are not criticisms of any or all planning, just the idea of one centralized plan. What the market price system does is to enable us to coordinate decentralized plans and thereby make more complete use of the various kinds of knowledge people possess. And it is here that liberal institutions matter. As Lachmann pointed out in his 1971 book The Legacy of Max Weber, social institutions are nodal points for plan coordination. Their stability enables us to have more certainty about the accuracy of our expectations and thereby formulate better plans. This applies both to the plans of entrepreneurs and the models we all make use of in all of our action. The rule of law, well-defined and enforced property rights, and sound money, perhaps the three core liberal framing institutions, all provide the stability necessary for better plan formulation and the increased likelihood of successful plan execution. Put differently: for Hayek's twin processes of evolution and spontaneous order to work successfully at the level of the individual, the firm, and society as a whole, they have to be embedded in institutions that work as knowledge surrogates to both facilitate more successful plan formulation and provide feedback when those plans fail. Liberal institutions do so at all three levels far better than any alternatives. References Hayek, F. A. 1937. "Economics and Knowledge," in Individualism and Economic Order, Chicago: University of Chicago Press. __________. 1945. "The Use of Knowledge in Society," in Individualism and Economic Order, Chicago: University of Chicago Press. __________. 2017 [1952]. The Sensory Order, reprinted in The Collected Works of F. A. Hayek Volume 14: The Sensory Order and other Writings on theFoundations of Theoretical Psychology, Viktor J. Vanberg, ed., Chicago: University of Chicago Press, 2017. __________. 2017 [1977]. "The Sensory Order after 25 Years," reprinted in The Collected Works of F. A. Hayek Volume 14: The Sensory Order and other Writings on the Foundations of Theoretical Psychology, Viktor J. Vanberg, ed., Chicago: University of Chicago Press, 2017. Horwitz, Steven. 2008. "Analogous Models of Complexity: The Austrian Theory of Capital and Hayek's Theory of Cognition as Adaptive Classifying Systems," Explorations in Austrian Economics, Roger Koppl, ed., volume 11 of Advances in Austrian Economics, Bingley, UK: Emerald Publishing, 143-66. Lachmann, Ludwig M. 1956. Capital and its Structure, Kansas City: Sheed Andrews and McMeel. Online version: Ludwig M. Lachmann, Capital and its Structure (Kansas City: Sheed Andrews and McMeel, 1978). </titles/96> ___________________. 1971. The Legacy of Max Weber, Berkeley: The Glendessary Press. Conversation Comments How Misesian is the Hayekian Epistemic Turn? Hayek often said his 1937 paper – "Economics and Knowledge" -- was a subtle rebuke of Mises's apriorism. It was not, as many might want to believe, a root and-branch rejection, but one only in the realm of applied theory, which included the study of the market economy. The realm of pure theory – or what Hayek calls the "Pure Logic of Choice" or in other places "The Economic Calculus" – the essential Misesian position on the epistemological status of praxeology was upheld. And remember, Mises did not claim he was unique: In asserting the a priori character of praxeology we are not drafting a plan for a future new science different from the traditional sciences of human action. We do not maintain that the theoretical science of human action should be aprioristic, but that this it is, and always has been so. (1949, 40; 2007, vol. 1, p. 40) I believe the most scientifically productive reading of Hayek's 1937 paper is as a clarification of the Misesian project with respect to the study of the market economy – or what both Mises and Hayek called "catallactics." In catallactics the pure logic of choice is a necessary, but not a sufficient, component for a full explanation. We must, in our quest for a full explanation, explore how alternative institutional arrangements impact the learning of individuals. In this way we move from the pure logic of choice to the situational logic of organizations to the study of the exchange order, with its productive specialization and peaceful social cooperation, and the entrepreneurial function as an agent of change. This is how I would read the passages in Hayek (1937 34ff) where he argues that the pure logic of choice is not directly applicable to the explanation of social relations. Equilibrium for individual choosers, in other words, is quite different from equilibrium achieved by dispersed and diverse individuals. The first is a necessary part of the explanation, but to achieve the sort of dovetailing of plans that defines the equilibrium state in the social relations of the market, we must be able to explore how "under certain conditions, the knowledge and intentions of the different members of society are supposed to come more and more into agreement, or, to put the same thing in less general and less exact but more concrete terms, that the expectations of the people and particularly of the entrepreneurs will become more and more correct." (1937, 45) It is in this manner that economics, Hayek argues, ceases to become purely an exercise in pure logic and becomes in a sense an empirical science. It is the study of how alternative institutional environments influence the behavior of individuals and how that in turn impacts the ability of these individuals to realize the gains from social cooperation under the division of labor. And what we must focus our analytical attention on is how they acquire and utilize the knowledge dispersed throughout the system; in other words, how they learn how best to orient their actions with others so as to achieve a coordination of plans that defines the equilibrium of the system. Mises, not Hayek, was the first to argue that socialism would have to forgo the intellectual division of labor in society and that this was the decisive objection to socialism. (See 1927, 50) Consider the following lengthy passages from Human Action (1949, 692; 2007, vol. 3, pp. 691-92): All older social reformers wanted to realize the good society by a confiscation of all private property and its subsequent redistribution; each man's share should be equal to that of every other, and continuous vigilance by the authorities should safeguard the preservation of this equalitarian system. These plans became unrealizable when the large-scale enterprises in manufacturing, mining, and transportation appeared. There cannot be any question of splitting up large-scale business units and distributing the fragments in equal shares. The age-old program of redistribution was superseded by the idea of socialization. The means of production were to be expropriated, but no redistribution was to be resorted to. The state itself was to run all the plants and farms.This inference became logically inescapable as soon as people began to ascribe to the state not only moral but also intellectual perfection. The liberal philosophers had described their imaginary state as an unselfish entity, exclusively committed to the best possible improvement of its subjects' welfare. They had discovered that in the frame of a market society the citizens' selfishness must bring about the same results that this unselfish state would seek to realize; it was precisely this fact that justified the preservation of the market economy in their eyes. But things became different as soon as people began to ascribe to the state not only the best intentions but also omniscience. Then one could not help concluding that the infallible state was in a position to succeed in the conduct of production activities better than erring individuals. It would avoid all those errors that often frustrate the actions of entrepreneurs and capitalists. There would no longer be malinvestment or squandering of scarce factors of production; wealth would multiply. The "anarchy" of production appears wasteful when contrasted with the planning of the omniscient state. The socialist mode of production then appears to be the only reasonable system, and the market economy seems the incarnation of unreason. In the eyes of the rationalist advocates of socialism, the market economy is simply an incomprehensible aberration of mankind. In the eyes of those influenced by historicism, the market economy is the social order of an inferior stage of human evolution which the inescapable process of progressive perfection will eliminate in order to establish the more adequate system of socialism. Both lines of thought agree that reason itself postulates the transition to socialism. It is important to note a few themes in this passage. First is the for-the-sake-of-argument assumption of benevolence. This actually follows from a strict adherence to Weberian value-free analysis: assuming the proponent of reforms X, Y, Z only intends to promote the general welfare, not their individual or group interest. Second is the damage done positively and normatively by assuming omniscience in economic and political economic analysis. Third is the necessity to challenge the "abuse of reason" by way of rational analysis. There is no gaping divide between Mises and Hayek methodologically, analytically, or ideologically. Hayek is simply the most talented Misesian thinker we have seen, and in developing that Misesian system he pushed in creative and productive ways that Mises may not have been able to see during his scientific era. But it is not as though Hayek hasn't told us this in private and public pronouncements. In a letter to Mises in 1931, as Hayek was being well received at the London School of Economics, Hayek wrote (Hülsmann, 635): Some of the junior (rank-wise, not age-wise!) colleagues—in particular Hicks, Benham, or Toysonby —are excellent, too. There is much opportunity for me to learn, and I am hindered in doing so only because Robbins presented me as an eminent authority, so that people always want to hear my opinion on all matters.I am aware, for the first time, that I owe to you virtually everything that gives me an advantage as compared to my colleagues here and to most economists even outside my narrow field of research (here my indebtedness to you goes without saying). In Vienna one is less aware of [this intellectual debt to you] because it is the unquestioned common basis of our circle. If I do not deceive too many expectations of the people here at LSE, it is not to my credit but to yours. However, [my] advantage [over the others] will disappear with your books being translated and becoming generally known.…I must tell you this because I here feel more indebted to you than anytime before. Moreover, given that Robbins and Plant provide excellent support to championing your ideas, I hope to have some success. And much later in the 1970s, during his interviews for the UCLA oral history project, Hayek would say about his relationship with Mises: I just learned he was usually right in his conclusions, but I was not completely satisfied with his argument. That, I think, followed me through my life. I was always influenced by Mises's answers, but not fully satisfied by his arguments. It became very largely an attempt to improve the argument, which I realized led to correct conclusions. But the question of why it hadn't persuaded most other people became important to me; so I became anxious to put it in a more effective form.... In my interests, I've been very much guided by him. Both the interests in money and industrial fluctuations and the interest in socialism comes very directly from his influence.... Being for ten years in close contact with a man with whose conclusions on the whole you agree but whose arguments were not always convincing to you was a great stimulus. Friend and foe of the Austrian school of economics have made an error in not seeing the shared research program of Mises and Hayek for the humanities and the social sciences, and how Hayek's institutional and epistemic turn in the 1940s and 1950s was presaged by the work of Mises in the 1920s and 1930s. There are very subtle and important differences, no doubt, but a plausible and productive reading of their work provides us, I'd argue, with a more formidable analytical framework to take on the excessive formalism and excessive aggregation which gripped the economics profession mid-20th century and has yet to let fully go, and which has resulted in the alliance of statism and scientism that has both distorted economics, political economy, and social philosophy and made a mess of practical affairs. I wanted to lay this out clearly because my further responses will be focused on the implications for doing economics guided by epistemic institutionalism, and I didn't want us to lose sight of the essential Misesian nature of this project. References Hülsmann, Jörge Guido. 2007. Mises: The Last Knight of Liberalism. Auburn, AL: Ludwig von Mises Institute. Ludwig von Mises, Human Action: A Treatise on Economics, in 4 vols., ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007). </titles/1892>. Conversation Comments The Hard Challenge of Dumb-Dumb Economics Humans have limited intelligence. Basically, we're dumb. That's obvious enough. And yet most economists struggle with this simple fact. The old-fashioned "hydraulic" Keynesian models assumed that the economic experts were smart. (Phillips 1950) These were dumb-smart models. Entrepreneurs are dumb; economists are smart. Dumb-smart economic theory was relatively easy because the economy was viewed as a simple machine. The "Lucas critique" says this asymmetry in smartness gives you the illusion that you can fine tune the economy by twiddling a few dials. It's not that easy, however, because private actors will react when policy changes. (Lucas 1976) Today's standard ("DSGE") macroeconomic models try to avoid the Lucas critique by assuming everyone is smart. They are smart-smart models. Both private and public actors are smart because they have "rational expectations." They are so smart, in fact, that they can compute the uncomputable. (Spear 1989) The hard thing with DSGE models is the math. But the economics is still relatively easy. If there are no frictions, the economy is efficient because smart people can always glide smoothly into the perfectly calculated optimal action. Add in some friction, and policy may have some role at least in the short run. The game for economists is to discover or, perhaps, invent frictions that will justify your prior policy preference. Paul Romer (2010) calls that sort thing "mathiness," though in t
7784	dbpedia	2	4	https://plato.stanford.edu/entries/friedrich-hayek/	en	Friedrich Hayek (Stanford Encyclopedia of Philosophy)			[ "https://plato.stanford.edu/symbols/sep-man-red.png", "https://plato.stanford.edu/symbols/sepman-icon.jpg", "https://plato.stanford.edu/symbols/sepman-icon.jpg", "https://plato.stanford.edu/symbols/inpho.png", "https://plato.stanford.edu/symbols/pp.gif" ]	[]	[]	[ "" ]	null	[]	null		en			null	1. Price Signals and Spontaneous Order 1.1 Order Can Be Undesigned Over hundreds of millions of years, order emerged in the natural world. How? It is only human to wonder. “Design arguments” come to mind, but like most philosophers, Hayek considers such arguments fallacious as arguments that we need to posit a designer to explain the emergence of order in nature. (See the entry on teleological arguments for God’s existence.) Hayek, however, was frustrated to find the same fallacy in arguments that we need to posit a designer to explain the emergence of order in society (Hayek 1960, 59). Just as no one had to invent natural selection, no one had to invent the process by which natural languages evolve. A language is a massively path-dependent process of unending mutual adjustment. Language evolves spontaneously. It would make no sense to call any language optimally efficient, but it does make sense to see languages as highly refined and effective adaptations to the evolving communication needs of particular populations (Hayek 1945, 528). It would be no exaggeration to say that social theory begins with—and has an object only because of—the discovery that there exist orderly structures which are the product of the action of many men but are not the result of human design. In some fields this is now universally accepted. Although there was a time when men believed that even language and morals had been invented by some genius of the past, everybody recognizes now that they are the outcome of a process of evolution whose results nobody foresaw or designed (Hayek 1973, 37). 1.2 Order Can Be Unpredictable Natural selection operates on mutations, making the path of natural selection unpredictable, regardless of how well we understand the underlying principles. To Hayek, social and cultural evolution are much the same: driven by innovation, fashion, and various shocks that “mutate” people’s plans in unpredictable ways with unpredictable results. The system may be more or less logical. Most things seem in retrospect to have happened for a reason. Yet, however logical the system may be, its logic does not render the system deterministic. We can make predictions in the broadest sense, such as when we say that increasing the money supply causes prices to rise, other things equal, but we have no basis for predicting the fine details. The system is technically chaotic, to such a degree that even something as straightforward as next week’s stock prices will always remain a matter of guesswork even for experts. (See the entry on chaos.) 1.3 Order Can Embody Essentially Decentralized Information To Hayek, prices are like languages. How do we know what it will take to get our product to whomever wants or needs it most? Maybe we take bids. As we (and our rivals) take bids for x, x comes to have a price. As with language, prices enable people to form mutual expectations. Free-floating prices help people coordinate in intricate and mutually considerate ways as they individually decide what to produce or consume. To think that an authority needs to decide what the price of rice ought to be is like thinking that an authority needs to decide what sound people should make when they want to refer to rice. It is a mundane yet intriguing fact that price signals induce people to respond to information they do not possess: such as the changing cost of drilling, or the discovery of a cheap substitute, or that political unrest has made a key input harder to acquire. Having no inkling of those variables, buyers nevertheless respond to them in a rational way, because they know the one thing they need to know: namely, the price (Hayek 1978a, 4). Assume that somewhere in the world a new opportunity for the use of some raw material, say, tin, has arisen, or that one of the sources of supply of tin has been eliminated. It does not matter for our purpose—and it is very significant that it does not matter—which of these two causes has made tin more scarce. All that the users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere and that, in consequence, they must economize tin (Hayek 1945, 526). 1.4 Communities Tend To Be Spontaneous Orders What emerges from the haggling is not only a deal, but something larger: a community. There was no central decision about who should produce tin, or whether anyone should; no central decision about who should consume tin, or whether anyone should; no central decision about what should be given in return for tin. All that happened is that some people guessed that if they were to produce tin and bring it to market, it would be worth something to customers—enough to make the venture worthwhile. When some of these guesses prove correct and trades are consummated, a market in tin emerges and becomes part of what brings people together as partners in mutually beneficial ventures. Price signals thus economize on information. In the process, they induce patterns of cooperation that involve multitudes. Cooperation evolves among people who need not share a language, need not be aware of each other’s existence, and need not be aware of their mutual dependence. They are only vaguely aware of the thousands of jobs that need doing so as to supply inputs that enable them to have a finished product to sell. Particular agents seldom if ever have more than a glimpse of the big picture, yet they manage to come together to form a community, and almost all are vastly better off as a result. 2. Progress Technological progress extends the frontiers of the possible. To Hayek, it is the freedom of the few to do something novel that matters most, not the freedom of the many to do something familiar. Accordingly, the freedom I exercise myself often is not the freedom that has the most bearing on my future (Hayek 1960, 32). Consider that early adopters finance research that brings down production costs and thus finances a dispersion of products and services at falling prices that eventually bring late adopters like me to the market. I may never trade with early adopters, yet even so I depend on them, for they help to finance the invention and ongoing re-invention of products whose marginal cost eventually falls to a point where I can afford them. Often, technological progress consists of innovations that lower transaction cost: steam boat, railroad, air travel, telegraph, telephone, internet, bar code reader, “apps” that make possible such businesses as Uber and AirBnB, along with innovative organizational structures and business models such as Federal Express or container ships (which, after a ten-year legal battle with trade unions, reduced from days to minutes the time that a truck’s contents would spend at the dockyard before being transferred to a ship). In many cases, the cost of transacting concerns the cost of information. As the frontier of knowledge expands, the slice that a given individual can grasp inevitably becomes a smaller fraction of the whole. Prices become an increasingly indispensable window to a world of tacit knowledge. In summary, technological innovation shocks economies. Formerly profitable investments become relics of a bygone age and must be liquidated. Workers get laid off until they find some other way to produce goods wanted by today’s customers. Transitions are tough, miscalculations abound, but the upshot is that we grope toward heights made possible by a given innovation. Innovative ways of lowering transaction cost spread throughout a community, and failures (including once-useful but now obsolete innovations) are discarded. More precisely, failures are discarded if and when decision makers are innovators on the ground, learning to avoid losing their own money on ideas that fail to bear fruit in a given time and place. Hayek denies that resources will ever be used at theoretical peak efficiency (1945, 527). Humans being what they are, waste is ubiquitous. Mistakes are ubiquitous. The “marvel” of markets is that people make mistakes, get burnt, learn fast, and make corrections. By contrast, if decision makers are bureaucrats in large organizations, their focus is not on avoiding mistakes but on avoiding budget cuts. If bureaucrats acknowledge that their plan is failing, the consequences is not that they retrench and divert their own resources to better purposes but that their supervisors cut their budgets. Note: what cuts their budget is not the mistake so much as someone learning from the mistake. Bureaucratic structure makes new information a threat that needs to be suppressed, or smothered in propaganda (1944, 126ff, 153ff). Bureaucrats and their expert advisors experience mistakes not as events from which they need to learn but rather as events that they need to cover up. Their mistakes are with other people’s money, so bureaucrats learn to say with a straight face, when confronted, that their budget was not large enough, or that things would have been worse without their policies.[1] They may even believe what they are saying, but they do not know and have every incentive to avoid learning. 3. Planned Orders Are Inferior If we understand the principles that drive the logic of the system, we may be able to predict that a population of insects will evolve resistance to a pesticide. We may be able to predict that a society that declares war on drugs will lose. Beyond the question of what we can predict, then, Hayek has a further and more precise target: however much we can predict, there is a drastic limit to what we can simply decide.[2] No one can decide that people won’t respond in predictable ways to perverse incentives unintentionally created by a central plan, in the same way that no one can decide that insects will not become resistant to an insecticide. This point, as Adam Smith observed, is not obvious. There is a class of technocrats who will not appreciate the difficulty. As Smith famously observed, and as Hayek quotes approvingly, the “man of system” seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder (Smith 1790, 234). The system has a logic. Planners cannot change that logic. Their main decision is whether to work with that logic or against it (which Smith regards as a choice between harmony and misery). Smith holds that planners who disregard economic logic are deciding in effect to sacrifice their “pawns,” something that a person of true benevolence would not do. When Hayek explains the obstacle to effective central planning, his claim is not merely the Smithian point that information is widely dispersed and therefore hard to acquire. Rather, it is impossible to acquire (Hayek 1973, 51). When prices are set periodically by a central planner, rather than instantaneously by consumers and producers who are the first and typically the only people to have that information in reliable and timely form, prices inevitably carry less reliable, less timely information. As Hayek notes, 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. That is, the answer to the question of what is the best use of our available means is implicit in our assumptions. This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the “data” from which the economic calculus starts are never for the whole society “given” to a single mind which could work out the implications and can never be so given (Hayek 1945, 519). Soviet central planners made decisions by checking prices on international markets, but suppose there were no information about supply and demand to be had anywhere. Suppose you are a planner, but all you know is that demands are coming in for wire and for jewelry. How do you decide whether to direct factories to make wire out of copper or platinum, or whether smiths should make jewelry out of gold or silver? How do you decide who should get silver jewelry and who should get gold? How do you decide whether anyone at all should get jewelry, as opposed to reserving all such metals for use as wire? When consumers are not paying for what they receive, their demand is effectively infinite. Inevitably, a central planner’s task becomes one of cost containment. Worse yet, a planner with no measure of cost has only a limited basis for deciding what to count as containing cost. If a given ton of steel can make one car or ten refrigerators, which way of using steel is economical? How does a planner decide whether to invest in upgrading water supplies or nuclear reactors? If all you know as a producer is that people are asking for infinitely more than you can give, then eventually you turn a deaf ear, deliver your quota, and pay no attention to whether demands from below (from customers) are being met. The only demands that have consequences are demands from above (that is, those which come to you through your supervisors). Suppose that prices are set by planners. Hayek says with a thought more characteristic of neoclassical economists: “Only prices determined on the free market will bring it about that demand equals supply” (Hayek 1960, 63). Price controls—floors and ceilings—make buyers and sellers less able to respond to the signals they would send each other if they could raise their offer or lower their asking price. If price cannot rise, then buyers cannot signal producers that demand has increased and that producers would sell more if they were to increase supply. And if producers do not increase supply, rising demand results in shortages rather than economic growth. (See especially Zwolinski 2008 for further elaboration.)[3] A central planner could have the world’s most powerful computer, beyond anything imagined when Hayek published “Use of Knowledge” in 1945. No computer, however, could solve the problem that Hayek was trying to articulate. The problem is not lack of processing power so much as a lack of access to the information in the first place. That much seems clear enough, but the problem has a deeper level. Hayek may not have said this in so many words, yet it seems the most charitable way of reconstructing his more fundamental point. That is, the problem is not merely lack of access to information; rather the information does not exist. There is no truth about what prices should be, accessible or otherwise, except to the extent that prices represent what customers are paying for a given service. This is the precise way in which prices are of service to a community (1944, 51–52). For example, suppose that a manufacturer figures out how to make an “epipen” that can save the lives of consumers otherwise at risk of fatal allergic reaction to bee stings. Suppose the manufacturer can produce a limited supply of epipens for a little less than a hundred dollars each, and proceeds to offer them for sale for a hundred dollars. Suppose that the manufacturer finds that buyers line up by the thousands wanting to buy the pens, and suppose that there emerges a group of “scalpers” willing to stand in line for weeks, who buy all the pens for a hundred dollars each, then resell the pens for two hundred dollars, then three hundred, then four, and demand remains strong. Hayek would predict that if we let the price signals be the marvels that they are, then other producers will jump in and begin to manufacture pens for one or two hundred dollars each. Eventually the demand is met, and the scalpers go away. Meanwhile, new producers drawn by the spike in profitability invent a new process that enables them to produce the pens for ninety dollars, then eighty, and again the price will fall, as competition leads the price signal to track the falling cost of production. Of course, if we issue a patent or a licensing scheme or some other way of preventing rival producers from entering the market, then this will not occur. By the same token, if we impose a price ceiling of a hundred dollars, then no signal is sent to prospective rivals, unless scalpers send the signal to rivals willing to produce for the black market. Or if there is some other reason why it is impossible to increase the supply, then prices may drift up toward the limits of a customer’s willingness to pay. Barring this, there are many ways for kings, legislators, or other planners to interfere, but price signals, if left alone, are an inimitably rapid and incomprehensibly vast generator of information: supply and demand tend to equilibrate, and to converge on a price in the neighborhood of the cost of production. To a uniquely reliable degree, a product will tend to end up in a consumer’s hands just in case that particular consumer wants the product enough to pay what it cost to produce it. Although computers cannot solve the problem, Hayek thought radically dispersed decision making by buyers and sellers can and does solve the problem, so far as it can be solved. Sellers who charge too much end up without customers; they learn to be more efficient or else find some other line of work. [4] Buyers who want x but consider it overpriced stay home for a while, waiting for the price to fall, but when they see x flying off the shelves, some of them learn something about themselves: that they would rather have the product at that price than not have it at all. To Hayek, only a price mechanism can process changing information almost instantaneously. Ironically, the most efficient thing a central planner could possibly do would be to set a price right where it would have been without the planner’s intervention. 3.1 Trucking, Bartering, Community, Esteem Insofar as society is a cooperative venture for mutual advantage, learning to survive—not just physically but as full members of a community—will involve learning to cooperate. Learning to cooperate involves learning to become a trading partner. In other words, cooperation begins with having something to offer: a way of making people better off. Clearly in Smith, who inspired Hayek, but also in Hayek himself, one infers that the driving motivation is not greed or even well-being so much as a propensity to truck and barter, where this deal-making is not only a means to an end but somehow also something we do for its own sake, because making deals is what our kind of social animal was born to do. Neither, Hayek thought, is the objective for buyers and sellers to coordinate on a price that a central planner might stumble on, but to coordinate, period. Mutually satisfying coordination, the ongoing equilibration of supply and demand, constantly evolving in response to changing conditions, is itself the achievement. There is no need for that coordination to be tracking anything beyond itself. To Hayek, the value that we hope to see realized in a marketplace is not so much that the correct volume of goods gets exchanged at the correct price. Rather, the genesis and point of the division of labor is not only a prospect of realizing gains from trade but trade per se. The valued result is buyers and sellers responding to each other, becoming more attuned to what people around them want, and helping to create a community in which their role in an important one. Such sensitivity is good, but there is little that central planners can do to encourage it. Central planners replace what could be a complex, decentralized network of interdependence and mutual responsibility with something more like a society of spokes tethered to a central distributor at the hub but otherwise dangling. It is no substitute for real community. 3.2 Law As An Ecological Niche In nature, for biological adaptation to culminate in better-adapted populations over time, the niche to which a population is adapting must be relatively stable. Likewise, under a rule of law, the aim of government is not to win but to provide a stable ecological niche that enables the game’s true players to evolve strategies apt for success within that niche. An elaborate crystal structure cannot form unless the medium in which crystals form is left undisturbed. Hayek’s ideal is a legal “medium” of society, liberal enough to permit creativity, stable enough to reward creativity, and constraining enough (in the right ways) to steer creativity away from zero-sum and negative-sum games and toward positive-sum games: that is, wealth creation, not wealth capture. Here, then, in a few sentences, is one way of understanding Hayek’s point. Not everything that happens in an evolving community is foreseen or intended. Actions have more than one consequence, and more than the intended consequence. This is especially so when there is more than one decision maker. No one follows a planner’s plan simply because the planner intends that they do so. People adjust to the planner’s plan in service of their own plans rather than those of the planner, and the result is too chaotic to be safely predictable. Further, the rule of law itself is an evolving product of ongoing decision making, so it likewise takes a shape not intended by any legislator. Does this mean that every order is tautologically a spontaneous order? The answer: it is a universally true empirical generalization, not a tautology, that every social organization, even a dictatorship, is partly an ongoing product of ordering processes that are to some degree spontaneous. However, while the degree to which outcomes are unintended is a continuum, there remains a point in categorizing communities as centrally planned versus spontaneous. A central plan is designed to yield an end-state. The plan aims to bring about particular outcomes—what roles people will play, what they will achieve in those roles, and what they will win by so achieving. By contrast, in what we should call spontaneous order, government provides a stable and known framework of rules, aiming not to realize a particular outcome so much as to realize a particular process (Hayek 1944, 113). Although this ideal can never be fully achieved in practice, a government under rule of law acts as referee and provider of the rule book (Hayek 1960, 114) and operates as much as possible by an ideal of “letting the players play.” Is letting the players play good? Necessarily good? Adam Smith might have said no, as might Hayek. A praiseworthy rule of law—a praiseworthy market process— facilitates mutually beneficial trade by internalizing externalities, by minimizing transaction cost (especially when it comes to acquiring information), by minimizing opportunities to acquire people’s goods without their consent (thereby encouraging people to trade on agreeable—thus typically beneficial—terms), and by being extremely cautious about trying to do more than that. When a government succeeds in doing that much, and further succeeds in restraining itself from trying to do more, progress is the likely result, which is not to say progress is guaranteed. Hayek had no particular complaint about providing public education or the minimal elements of a welfare state, but not because such institutions are essential. Hayek would simply have said that such institutions need not devolve into central planning and thus need not be antithetical to a free society. Issuing vouchers, for example, to subsidize the purchase of epipens or education would to some extent distort markets in the subsidized products (having an inflationary impact on prices for those products) but it would not distort to the extent that price controls would. 4. Justice as Impartiality, Politics As Entrepreneurship Without Restraint Hayek was a consequentialist of sorts, as was Adam Smith, and yet Hayek’s defense of economic freedom, like Smith’s, hints at a contractarian or deontological moral sensibility that regards the separateness of persons as morally fundamental. Thus, for example, Hayek says, “the test of the justice of a rule is usually (since Kant) described as that of its universalizability” (Hayek 1969, 168). As John Gray sees it, Hayek commended the laws of justice “as being the indispensable condition for the promotion of the general welfare” but Hayek held, at the same time, that “an impartial concern for the general welfare is itself one of the demands of universalizability” (Gray 1984, 65). In service of the overall project of fostering the general welfare, the point of law and legislation is to craft a framework such that a market order is a history of pareto-improving trades.[5] A primary role of law and (when necessary) legislation is to narrow people’s options so as to limit opportunities to get rich at other people’s expense.[6] So long as the rule of law can internalize external cost and thereby steer innovation in mutually beneficial rather than parasitic directions, an evolving order will be an order of rising prosperity. By contrast, in a planned order, even astute and conscientious decisions by men of system are damaging in a particular way. Namely, to the extent that men of system become micro-managers, they are players rather than umpires. If bureaucrats start playing the game—responding to ephemeral events with centralized fine tuning—then even if they play as cleverly as bureaucrats could possibly play, the fact remains that in consequence, the dispersed and tacit knowledge of ordinary buyers and sellers ends up on the sidelines watching. People who would have been job creators become mere spectators, hamstrung by uncertainty, waiting to see what the plan is going to be. Until they know the plan, they have no way to know, or even intelligently guess, something as simple as whether their staff is too small or too large. Government provides the framework for interaction. Ideally, as mentioned, government operates only within a stable and known framework of rules (Hayek 1944, 113). This is Hayek’s ideal of good government. Is it realistic? Could any government be expected to act as an impartial umpire? Hayek saw the rule of law as the market’s exogenous ecological niche, and thought that this niche, the rule of law, must be properly constructed if the process of spontaneous order is be a good thing. However, Hayek seemingly came to doubt there could be any such thing as properly constructed rule of law, for the following reason. Law-making is a process driven by processes more or less indistinguishable from market process except that benefits to legislators of their law-making are concentrated while costs are widely dispersed, that is to say, external, and at best only dimly understood even after the fact.[7] This is not only a moral hazard but an information problem. A piece of legislation may be thousands of pages. No one intends the bill as a whole. Indeed, there is no overall point to the bill, known or otherwise, because, prior to passage, literally no one has even read more than a few pages of it, not even the hundreds of legislators who each added a few pages of earmarks as the price of securing their vote. Common law, by contrast, is a body of practice and tradition that sometimes needs to be supplemented by legislation. Crucially, however, by virtue of passing the test of time as a device for settling disputes, common law cannot be seen as mere prejudice or superstition. On the contrary, it will have a decided advantage over ongoing legislation, given that legislation is driven by untested ideas about how to respond to the crises of the day, needing to be passed without anyone knowing the larger and lasting consequences. Hayek never doubted the need for legislation but lamented our propensity to be oblivious to its inevitably unintended consequences and to radically discount its inevitably unseen cost (Hayek 1973, 86). 5. Hayek Against Justice To Hayek, it matters far more that the law be a framework for coordination than exactly what the coordination points are (Hayek 1960, 118). Hayek realizes that many coordination points have distributive implications, which leads Hayek to lament our tendency to evaluate distributions by asking whether they are just. (Yet, Hayek concedes, at least in principle, the legitimacy of a minimum income or welfare safety net of some sort. See Tebble 2015 for a sympathetic yet acute argument that this concession on Hayek’s part is a “fatal ambivalence.” In fact, Tebble argues, Hayek’s repudiation of social justice leaves him with no room to make any such concession.) Hayek says, “one of my chief preoccupations for more than 10 years” has been coming to terms with the idea that social justice is a mirage (Hayek 1978b, 57).[8] By social justice, Hayek seems to mean distributive justice, and more specifically what Nozick called end-state principles of distributive justice, which treat justice as a feature of outcomes rather than of procedures. Why would justice so conceived be a mirage? Hayek says, “there can be no distributive justice where no one distributes” (Hayek 1978b, 58 or 1976, 68–69). In Hayek’s words, “considerations of justice provide no justification for ‘correcting’ the results of the market” (1969, 175). So long as traders are voluntarily making pareto-superior moves, there is nothing else that can be said or needs to be said by way of justification. Why resist applying conceptions of justice and injustice to situations where no one distributes? What is haunting Hayek here is not the idea that one person might be more deserving than another, but that a “merit czar” might presume to intervene so as to correct markets that fail to give people what the czar thinks people deserve. Fearing the potential for tyranny, Hayek argues not that markets are just but that they are not the kind of thing that can be just or unjust. Where no one distributes, there may be something lamentable about the result, but the result will not be an injustice in the way that engineering such a result would be. Outcomes that would have been unjust if deliberately imposed (such as being born with a cleft palate) sometimes simply happen. As Rawls says, “The natural distribution is neither just nor unjust; nor is it unjust that persons are born into society at some particular position. These are simply natural facts.” Hayek would agree. Rawls, however, immediately adds what Hayek would call a non sequitur: “What is just and unjust is the way that institutions deal with these facts” (Rawls, 1971, 102), where resigning ourselves to the facts is the paradigmatically unjust way of dealing with them (ibid). If Rawls is right to deem the natural distribution neither just nor unjust, then when institutions “deal with natural facts,” they are, to Hayek, not undoing wrongs. Hayek would never deny that cleft palates are bad or that fixing them is good, but would insist that fixing what is not unjust cannot count as rectifying injustice. If we feel called upon to help children with cleft palates, it will be because having a cleft palate is bad, not because having it is unjust. When we help, we are not fixing an improper distribution of cleft plates. We are simply fixing cleft palates. When we respond to the problem, we take a stand not against injustice but against suffering (Hayek 1976, 87). As Hayek knew, he was profoundly at odds with much thinking about social justice. He expected to be vilified (1944, vii), and he was. Although he was as responsive to misfortune as anyone, and seemed to embrace the same package of duties to children as any social justice theorist would, he also saw the free world at a crossroads between a defeasible presumption that normal adults have agreed to share each other’s fate (Rawls, 1971, 102) and a defeasible presumption that normal adults have the right and the responsibility to play the cards that nature has dealt. Hayek seems to worry that our sense of justice can make it harder for us to live together, and make progress together. To Hayek, if people cannot claim that a starting point is unjust, then whatever we do must be justified as an improvement, not as rectification. If there is no injustice needing rectification, then the improvement we have a right to strive for is pareto-improvement, or in any case, improvement by mutually acceptable means. By contrast, if (contra Rawls) the natural distribution were unjust, that would open the field to all of the zero-sum and negative-sum moves that people feel warranted in imposing on each other under the guise of being fair. The right to make such moves with other people’s money becomes an overwhelmingly lucrative political football, luring a society’s entrepreneurial talent into politics, where instead of creating new social capital, entrepreneurs spend their time inventing clever new ways of dividing it. (Rawls could note that money being in the possession of others does not entail that the money is rightfully theirs, but Hayek is doing social science here. Hayek would not deny the plain fact that people can and often do treat other people’s possessions as a political football, and sometimes even invent theories according to which they have a right to do so. Hayek is talking about the actual empirical cost of treating other people’s possessions as a political football, not the theoretical possibility.) In Hayek’s mind, we should want a system of justice to be a framework that helps us to coordinate on a set of mutual expectations that we each find useful in helping us stay out of each other’s way as we each set a course for our individually chosen destinations. No principle of justice would pick our destination for us. Neither would it require us to justify our destination to others. Indeed, the premium would be on people not needing to justify themselves. If we operated by end-state principles of justice (Nozick 1974), we would need to justify every move that bore on how goods would be distributed in the evolving end-state, which is to say we would need to justify virtually every trade we contemplate, which would gridlock us rather than facilitate our inventing new ways of making ourselves more valuable to the people around us. Perhaps Hayek is overreacting here. In any case, some philosophical interpretation is unavoidable, but this, arguably, accounts for Hayek’s seemingly dogmatic dismissal of end-state principles of justice. For reasons reminiscent of Nozick’s, Hayek finds such principles unaffordable, and incompatible with autonomous agents minding their own business in a free society. Indeed such principles make it impossible to say what could count as minding one’s own business. In that respect, in trying to carve out a coherent realm of individual autonomy, Hayek is, as he often claimed, paradigmatically a liberal, not conservative. 5.1 Input, Output, and What It Means To Economize Merit, as Hayek understands it, concerns the character of the action as opposed to the nature of the achievement (Hayek 1960, 94). In other words, to Hayek, claims of merit concern the inputs one brings to a process, not the output. In Hayek’s mind, nothing good can come of that. In a free society, to Hayek, we are rewarded for our output, not our input (Hayek 1960, 98). Hayek has an important point. Among his core concerns is the “mirage” of thinking that justice requires rewarding people for supplying inputs rather than for supplying outputs. Admittedly, if we leave customers to their own devices, output is what they will reward, which is what Hayek wants. By the same token, when people left to their own devices choose to reward us for our output, their behavior will not be utterly insensitive to merit. The tendency of market rewards to track merit will be merely a tendency, but meritocracy being merely a tendency is not the same as meritocracy being a mirage. A key element of the success of a system in promoting prosperity will be that in rewarding excellent output, it will be rewarding the hard work, courage, alertness, and commitment that makes for excellence. It will be rewarding luck too, to be sure, but typically not sheer random fluke.[9] Hayek speaks as if merit has everything to do with trying hard, and nothing to do with achieving excellence. Hayek says we want to economize on merit (Hayek 1960, 96). If merit were tied exclusively to supplying inputs, then Hayek would be right. But even so, saying we economize on hard work is another way of saying hard work is important. It is not evidence that we are in the grip of a mirage when we imagine that we have reason to reward hard work that culminates in excellent output. In sum, a merit theorist might concede to Hayek that rewards ought to track actual performance, not inner merit. Customers can judge your product’s merits without needing to know whether you were lucky. The crucial point is that wherever it is more rewarding to work hard than not, more rewarding to do excellent work than not, more rewarding to be alert to customer needs than not, a system is tending to reward the right things. In that system, output will tend to be increasingly excellent over time. Products will tend to work. People will tend to prosper, and will tend to aim at being meritorious to boot. 5.2 The Right To Distribute As noted, Hayek’s critique of social justice is more specifically a critique of centrally planned distribution according to merit. He thinks a merit czar would be intolerable. However, what Hayek found nightmarish about this vision clearly had more to do with an abhorrence of central planning than of the idea that it would be good to have a way of rewarding merit. If Hayek is right that there is no place for centralized decisions about meritoriousness in a good society, then, contra Hayek, the implication is not that merit does not matter but precisely that it does (Hayek 1976, 64). The problem with merit czars in the world we know, Hayek seems to assume, is that, in a merit-based system, if you cannot prove you deserve G, that licenses merit czars to redistribute from the less to the more deserving. The point is crucial not because it refutes Hayek but because it reveals the exact nature of Hayek’s real concern. Hayek’s core concern is not the mirage ofthinking merit does matter, but the mirage of thinking entitlement doesn’t.[10] 5.3 Fair Practices Note the similarity between Hayek’s view and the view expressed by John Rawls in “Two Concepts of Rules” (1955). Hayek and Rawls both understood what is involved in a practice having utility. To use Rawls’s example, the practice of baseball is defined by procedural rules rather than by end-state principles of distributive justice. To have a practice at all, we must be dogmatic (Hayek would say) about how many strikes a batter should get. Imagine changing the concept of the game so that the umpire’s job is to make sure the good guys win. What would that do to the players? What would become of their striving? The result of the change would not be baseball. If we end up with a game where the umpire is making sure the favored side wins, then the players are sitting on the sidelines watching, hoping to be favored. Hayek’s insight (and Rawls’s insight at that stage of his career) is that genuine fairness is not about making sure prizes are properly distributed.[11] It is not even about making sure outcomes are not unduly influenced by morally arbitrary factors such as how well the players played or how hard they worked to develop their talent. True fairness is about being impartial, nonpartisan—proverbially, “letting the players play.” One of Hayek’s problems with the kind of justice that amounts to making sure the good guys win is that it tends to turn society’s basic structure into a political football, which tends to squander gains from trade. To Hayek, again, true justice is about letting the players play, in the same way as pareto-improving economic coordination is about letting the players play.[12] 5.4 Just Price Whether we realize gains requires only that we trade, not that we trade at any particular price. Thus, we don’t want to focus on price when the wealth of nations has everything to do with gains from trade and nothing to do with price. Indeed, Hayek observes, being obsessed with just price would make trading less likely, which would tend to squander some of the cooperative surplus. Much of Hayek’s aversion to justice stems from a sense that (for thousands of years) talk of justice has had a way of turning into talk of just price (Hayek 1976, 73). This makes prices appear morally important, which to Hayek is a mirage.[13] Of Adam Smith’s butchers and bakers, Hayek says, Precisely because they were interested only in who would offer the best price for their products, they reached persons wholly unknown to them, whose standard of life they thereby enhanced much more than they could have that of their neighbors… (Hayek 1978b, 60). Hayek’s dismissal of social justice as a mirage is a gratuitously tendentious way of packaging his actual view. However, the motive for his dismissal is understandable: namely his dread of the prospect of licensing a justice czar to intervene to make sure prices are fair, thus derailing the wealth-creating spontaneous trading of a free society within the rule of law. Paraphrasing Michael Munger (2013), the closest thing we have to an omniscient social planner are the twin forces of supply and demand, but those forces speak to people through prices. When the state makes it a crime to charge what the market will bear, it can thereby become illegal for insulin users to respond to a power failure by outbidding beer drinkers for insulin-preserving ice as supply runs short. In a case like that, the law has struck dumb the only voice that could give people reliable, timely advice on how resources need to be allocated right now. This is Hayek’s ultimate concern throughout his writings, and it also underlies his otherwise ill-fitting polemic against social justice. To Hayek, it is simply a mirage to think fairness has anything to do with stopping the price mechanism from telling us where our services are most in need. Hayek never doubts that we sometimes need legislation, but he thinks the aim of legislation should be to make things better, not fairer; to make things more productive, not more level; to channel innovative thinking in the direction of wealth creation, not wealth capture. Hayek in fact endorses norms of pure procedural justice, and would agree that there is such a thing, after all, as fairness. True fairness, he would say, is about letting players play on a more or less level playing field, but he would insist that this is not about making sure everyone wins their share. Hayek saw a free society as one where people stand or fall on the basis of how well they perform, not how hard they try—what they produce, not what they intend. 6. The Austrian School Hayek’s economic education at the University of Vienna was within the law faculty. Hayek’s degrees were in political science, jurisprudence, and economics. His dissertation work was on the technical topic of the imputation of value in a capital-using economy, and his early professional work focused on monetary theory and business cycle statistics. As with other scholars of the Austrian School of Economics, the institutional framework within which economic activity takes place was never far from the foreground of even the most technical economic analysis. Law, politics, and social mores all are critical to the way Austrian economists see economic forces playing out in the real world. Critical to the Austrian examination of the operation of the competitive market process is the primacy placed on property rights, relative prices, and profit-and-loss accounting. The emphasis on institutional infrastructure informed Austrian perspectives on price theory and the market system, on monetary and capital theory, and on obstacles to socialist economic planning in particular and to interventionism more generally. To Hayek, the idea of prices without property is a grand illusion, and efforts to control economic activity through prohibitions and regulations are plagued by unintended consequences and unforeseen costs. Hayek’s growing frustration with the conversation among elite economists during the 1930s and 1940s was born out his utter surprise that the institutional wisdom passed down from classical political economists to the early neoclassical economists was being lost. He saw wanted to know why. He explored the rise of formalism and an emerging shift toward macro-theory emphasizing relationships between aggregate variables unconnected to the choices of individuals. To Hayek, these shifts were technical in part, but the technicality was masking (and partly driven by) a deeper philosophical shift from seeing the human condition as complex as a relatively simple machine that a good mechanic could tinker with and perfect. The whole idea of studying the human condition as a complex spontaneous order came to seem unscientific. Thus, in “The Use of Knowledge in Society”, Hayek says the maximizing and equilibrium thinking of mathematical economics “habitually disregards” essential parts of the phenomena to be explained, and in so doing “misleads some of our leading thinkers” (1944, 91). The issue Hayek concerns himself with in The Counter-Revolution of Science was the wrong turn in the philosophy and history of ideas that confused the current generation about the nature of the social sciences and the institutions of liberalism and the principles of justice. His sustained explorations of legal philosophy and political theory sought to counter excessive formalism, excessive aggregation, and a naïve empiricism that in his mind conspired to produce the intellectual dead-end of scientism: that is, an inappropriate and uncritical application of the methods of the natural sciences to the problems of social science. In articulating his critique, Hayek would stress over the next several decades the case for methodological dualism, and the method and approach for the sciences of complex phenomena. 6.1 Subjectivism As a student of the Austrian School of Economics, Hayek was a subjectivist as well as a marginalist in his approach to studying human decision making. The value of goods and services resides in the judgment of the individual chooser, and is not inherent in the goods and services themselves. Neither are prices posted in the market merely a summation of costs of production. Value, costs and the expectations of individuals choosers are driven individual buyers and sellers assessing tradeoffs. (To give a concrete example, owners of gas stations may hike the retail price of gasoline in response to breaking news of a supply problem in the middle east. The news does not affect the price of gas already in their storage tanks, but it does affect their assessment of what the wholesale price of gasoline will be next time they are buying new supplies so that they can stay in business. Retail customers see the hike as gouging because they don’t understand that profit from current sales is what has to pay for new supplies.) Thus, Hayek’s point in calling the valuation process subjective is not to say it is a matter of opinion. Rather, it is a process of perceiving reality as needing one response rather than another. Economic science begins with purposeful human action. And, as social scientists we can interpret human action in terms of beliefs, desires and intentions. “To employ a useful metaphor,” Hayek argued, “while in the world of nature we look from the outside, we look at society from the inside; while, as far as nature is concerned, our concepts are about the facts and have to be adapted to the facts, in the world of society at least some of the most familiar concepts are the stuff from which the world is made” (1948, 76). Hayek’s mentor, Ludwig Mises, stated the argument as follows in his treatise of economics, Human Action (1949, 92): “Economics is not about things and tangible material objects; it is about men, their meanings and actions. Goods, commodities, and wealth are all the other notions of conduct are not elements of nature; they are elements of human meaning and conduct. He who wants to deal with them must not look at the external world; he must search for them in the meaning of acting man.” A favorite example among Austrian School economists was to imagine a scientist from Mars studying patterns in the New York subway Our scientific Martian will observe that at 8:00am that there will be bodies and boxes, and the boxes will pick up the bodies and move. Then, at 5:00pm, those boxes will come back to the same places and bodies will leave the boxes. This observer could develop a study of moving boxes and bodies and offer predictions. But can our observer truly understand the phenomena under investigation without reference to the purposes and plans of the actors involved, and thus rather than seeing boxes and bodies, we come to understand the pattern of action associated with commuting to work. Fritz Machlup tried to capture this idea when he penned an essay under the title: “What if Matter Could Talk?” The social sciences are indeed engaged in scientific inquiry, but the subject of study was radically different because we are what we study. 6.2 Complexity In addition to the uniqueness of the human sciences, the Austrian School of Economics emphasized the passage of time, the uncertainty inherent in human decision making, and the complexity of the economic order. The complexity aspect is not new to the Viennese economists, but can be seen in Adam Smith’s discussion at the beginning of The Wealth of Nations of the division of labor and the spontaneous far-flung patterns of cooperation required to such mundane things as a worker’s woolen coat. The number of exchanges, Smith states, exceeds all computation. The Austrian School added to this computational complexity the idea of ceaseless change that requires constant adaptation and adjustment to the shift in circumstances, including changes in tastes, technology and resource availability. The understanding of the price theory and the market system from the early development by Menger and Bohm-Bawerk, and the more mature formulation in Mises and Hayek argued that a proper understanding of the market economy did not strive to depict the efficiency properties of the end-state, but the adaptive and learning aspects of the system. Hayek’s intellectual adversaries shifted in the second half of his career, though of course there are common themes. But the German Historicist and the Collectivist Positivist were no longer the animating force they were in the first half of the 20th century. Logical positivism was also transformed. One of the remnants from the influence of Scientism, however, was in Hayek’s mind a failure to address the essential complexity of the social world. As a consequence, his methodological writings in the 1960s and 1970s tend to stress not subjectivism and the human sciences, but the differences between the sciences of simple phenomena and the sciences of essential complexity. 6.3 Toward a Science of the Open Society Again, Hayek was born in 1899, and born in Vienna. That is to say, Hayek grew up in a glorious age of Viennese culture only to see it evaporate before his eyes with WWI, the Great Depression, the rise of socialism and fascism, WWII, and the Cold War. Hayek fought in WWI. He was among those who left Vienna in the early 1930s never to return. He experienced WWII in his adopted home of Great Britain. Like others of his generation, these experiences were pivotal. He saw totalitarianism distorting science and scholarship, as did two of his philosophical friends: Michael Polanyi and Karl Popper. Despite their differences, Hayek drew inspiration from and helped promote the work of Polanyi and Popper. Totalitarian systems inevitably end up being hostile to the critical attitude at the heart of scientific inquiry. Hayek, Polanyi and Popper all saw this in the 1930s and 1940s, and in their separate ways sought to describe and defend the science of a free society.
7784	dbpedia	0	17	https://austrianeconomics.fandom.com/wiki/Friedrich_Hayek	en	Friedrich Hayek	https://static.wikia.nocookie.net/ucp-internal-test-starter-commons/images/a/aa/FandomFireLogo.png/revision/latest?cb=20210713142711	https://static.wikia.nocookie.net/ucp-internal-test-starter-commons/images/a/aa/FandomFireLogo.png/revision/latest?cb=20210713142711	[ "https://static.wikia.nocookie.net/6a181c72-e8bf-419b-b4db-18fd56a0eb60", "https://static.wikia.nocookie.net/6c42ce6a-b205-41f5-82c6-5011721932e7", "https://static.wikia.nocookie.net/464fc70a-5090-490b-b47e-0759e89c263f", "https://static.wikia.nocookie.net/f7bb9d33-4f9a-4faa-88fe-2a0bd8138668" ]	[]	[]	[ "" ]	null	[ "Contributors to Austrian Economics Wiki" ]	null	"A claim for equality of material position can be met only by a government with totalitarian powers." F.A.Hayek, Law, Legislation, and Liberty Friedrich August von Hayek is one of the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig...	en	/skins-ucp/mw139/common/favicon.ico	Austrian Economics Wiki	https://austrianeconomics.fandom.com/wiki/Friedrich_Hayek	"A claim for equality of material position can be met only by a government with totalitarian powers." F.A.Hayek, Law, Legislation, and Liberty Friedrich August von Hayek is one of the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian school theorists, Hayek was very successful in spreading Austrian ideas throughout the English-speaking world. "When the definitive history of economic analysis during the 1930s comes to be written," said John Hicks in 1967, "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".[1] Unfortunately, Hayek's theory of the business cycle was eventually swept aside by the Keynesian revolution. His work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes. Life and Work[] Hayek's life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge, England). Though he was enrolled as a law student, his primary interests were economics and psychology, the latter due to the influence of Mach's theory of perception on Wieser and Wieser's colleague Othmar Spann, and the former stemming from the reformist ideal of Fabian socialism so typical of Hayek's generation. Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions--the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. "To none of us young men who read the book when it appeared," Hayek recalled, "the world was ever the same again". Socialism, an elaboration of Mises's pioneering article from two years before, argued that economic calculation requires a market for the means of production; without such a market there is no way to establish the values of those means and, consequently, no way to find their proper uses in production. Mises's devastating attack on central planning converted Hayek to laissez-faire, along with contemporaries like Wilhelm Röpke[2], Lionel Robbins, and Bertil Ohlin. It was around this time that Hayek began attending Mises's famed Privatseminar. Regular participants, who received no academic credit or other official recognition for their time, included Hayek, Gottfried von Haberler[3], Fritz Machlup[4], Oskar Morgenstern, Paul Rosenstein-Rodan, Richard von Strigl[5], Karl Schlesinger, Felix Kaufmann, Alfred Schütz[6], Eric Voegelin, Karl Menger, Jr., and others not so famous. For several years the Privatseminar was the center of the economics community in Vienna, attracting such visitors as Robbins from London and Howard S. Ellis from Berkeley. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. Mises had done earlier work on monetary and banking theory, successfully applying the Austrian marginal utility principle to the value of money and then sketching a theory of industrial fluctuations based on the doctrines of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this as a starting point for his own research on fluctuations, explaining the origin of the business cycle in terms of bank credit expansion and its transmission in terms of capital malinvestments. His work in this area eventually earned him an invitation to lecture at the London School of Economics and Political Science and then to occupy its Tooke Chair in Economics and Statistics, which he accepted in 1931. There he found himself among a vibrant and exciting group: Robbins, J. R. Hicks, Arnold Plant, Dennis Robertson, T. E. Gregory, Abba Lerner, Kenneth Boulding, and George Shackle, to name only the most prominent. Hayek brought his (to them) unfamiliar views, and gradually, the "Austrian" theory of the business cycle became known and accepted. At the L.S.E. Hayek lectured on Mises's business-cycle theory, which he was refining and which, until Keynes's General Theory (text) came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes's Treatise on Money. As one of Keynes's leading professional adversaries, Hayek was well situated to provide a full refutation of the 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. 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 thought a better course would be to produce a fuller elaboration of Böhm-Bawerk's capital theory, and he began to devote his energies to this project. Unfortunately, The Pure Theory of Capital (pdf) was not completed until 1941, and by then the Keynesian macro model had become firmly established. The fortunes of the Austrian school have suffered a dramatic reversal with the next few years. First, the Austrian theory of capital, an integral part of the business-cycle theory, came under attack from the Italian-born Cambridge economist Piero Sraffa and the American Frank Knight, while the cycle theory itself was forgotten amid the enthusiasm for the General Theory. Second, beginning with Hayek's move to London and continuing until the early 1940s, the Austrian economists left Vienna, for personal and then for political reasons, so that a school ceased to exist there as such. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek's generation became prominent in the U.S.--Gottfried von Haberler[3] at Harvard, Fritz Machlup and Oskar Morgenstern at Princeton, Paul Rosenstein-Rodan at MIT--but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group: the economics department, led by Knight, Milton Friedman, and later George Stigler, was one of the best anywhere, and Aaron Director at the law school soon set up the first law and economics program. But economic theory, in particular its style of reasoning, was rapidly changing; Paul Samuelson's Foundations had appeared in 1947, establishing physics as the science for economics to imitate, and Friedman's 1953 essay on "positive economics" set a new standard for economic method. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and Austrian economics entered a prolonged eclipse. Important work in the Austrian tradition was done during this period by Rothbard, Kirzner, and Lachmann[7], but at least publicly, the Austrian tradition lay mostly dormant. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian school was suddenly and unexpectedly revived. While this was not the first event of the so-called "Austrian revival," the memorable South Royalton conference having taken place earlier the same year, the rediscovery of Hayek by the economics profession was nonetheless a decisive event in the renaissance of Austrian economics. Hayek's writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. There are several institutions founded in Hayek's name, including the Hayek Institute in Austria, the Friedrich A. von Hayek-Gesellschaft in Germany and F.A.Hayek Foundation in Slovakia. References[] Please consult the original text by Peter G. Klein for more references; reprinted with generous permission from the Mises Institute. []
7784	dbpedia	3	15	https://en.wikipedia.org/wiki/John_Hicks	en	John Hicks	https://upload.wikimedia…n_Hicks_1972.jpg	https://upload.wikimedia…n_Hicks_1972.jpg	[ "https://en.wikipedia.org/static/images/icons/wikipedia.png", "https://en.wikipedia.org/static/images/mobile/copyright/wikipedia-wordmark-en.svg", "https://en.wikipedia.org/static/images/mobile/copyright/wikipedia-tagline-en.svg", "https://upload.wikimedia.org/wikipedia/commons/thumb/2/26/John_Hicks_1972.jpg/220px-John_Hicks_1972.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/8/8f/Ec_8_%2826088200676%29_%28cropped%29.jpg/220px-Ec_8_%2826088200676%29_%28cropped%29.jpg", "https://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Bills_and_coins.svg/16px-Bills_and_coins.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/16px-Emblem-money.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/4/4a/Commons-logo.svg/30px-Commons-logo.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/8/8a/OOjs_UI_icon_edit-ltr-progressive.svg/10px-OOjs_UI_icon_edit-ltr-progressive.svg.png", "https://upload.wikimedia.org/wikipedia/commons/thumb/f/fa/Wikiquote-logo.svg/34px-Wikiquote-logo.svg.png", "https://upload.wikimedia.org/wikipedia/en/thumb/8/8a/OOjs_UI_icon_edit-ltr-progressive.svg/10px-OOjs_UI_icon_edit-ltr-progressive.svg.png", "https://login.wikimedia.org/wiki/Special:CentralAutoLogin/start?type=1x1", "https://en.wikipedia.org/static/images/footer/wikimedia-button.svg", "https://en.wikipedia.org/static/images/footer/poweredby_mediawiki.svg" ]	[]	[]	[ "" ]	null	[ "Contributors to Wikimedia projects" ]	2003-03-15T17:20:25+00:00		en	/static/apple-touch/wikipedia.png		https://en.wikipedia.org/wiki/John_Hicks	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
7784	dbpedia	0	56	https://ideas.repec.org/p/sfu/sfudps/dp20-05.html	en	Who's Who and What's What at the LSE, Then and Now? A Review Essay of The Palgrave Companion to LSE Economics	https://ideas.repec.org/cgi-bin/twimage.cgi?p&sfu:sfudps:dp20-05	https://ideas.repec.org/cgi-bin/twimage.cgi?p&sfu:sfudps:dp20-05	[ "https://ideas.repec.org/ideas4.jpg", "https://ideas.repec.org/ideas4.jpg", "https://ideas.repec.org/images/mastodon.svg" ]	[]	[]	[ "LSE; Review Essay" ]	null	[ "Richard G. Lipsey" ]	2020-07-30T00:00:00	Downloadable! This valuable discussion of LSE economics runs from the Schoolâ€™s inception in 1895 to the present. I review the whole, including where relevant, observations and criticisms based on personal knowledge from the my time as a graduate student, then a staff member of the LSE, from 1953 to 1963. Part I contains excellent essays on what the editor says are â€œâ€¦the contributions made by a centre [LSE in this case] where these contributions are considered to be especially importantâ€¦â€ . These cover econometrics, economic history, accounting, business history, social policy, and the LSEâ€™s house journal Economica. The notable absence is economic theory despite the LSE having had notable theorists throughout its entire history. For an early example, in the 1930s the School had Lionel Robbins, Friedrich Hayek, John Hicks, R. D. G. Allen, James Meade, Ronald Coase, Abba Lerner, and Nicky Kaldor. Also absent is an essay on methodology in spite of the LSE having had Carl Popper, Irme Lakatos and Joseph Agassi, all of whom had a major influence on economics at the LSE and worldwide. Part II presents essays on 29 economists who had been or still are on the Schoolâ€™s staff. It is organised in chronological order of birth dates, from 1861 for Canaan to 1948 for Pissarides. The coverage is quite comprehensive, although a few important staff members are omitted. The essays are excellent and mostly honour the important work of these staff members. The one exception is James Forderâ€™s rather critical essay on Bill Phillips, on which I offer some criticisms.	en	/favicon.ico		https://ideas.repec.org//p/sfu/sfudps/dp20-05.html	Corrections All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sfu:sfudps:dp20-05. See general information about how to correct material in RePEc. If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about. We have no bibliographic references for this item. You can help adding them by using this form . If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation. For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Working Paper Coordinator (email available below). General contact details of provider: https://edirc.repec.org/data/desfuca.html . Please note that corrections may take a couple of weeks to filter through the various RePEc services.
7784	dbpedia	3	54	https://www.elgaronline.com/abstract/book/9781784715489/C26.xml	en	Hicks, John R., on Ricardo	https://www.elgaronline.…781784715489.jpg	https://www.elgaronline.…781784715489.jpg	[ "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-mobile.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-mobile.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/fileasset//fileasset/appbar/Elgaronline-desktop.png", "https://www.elgaronline.com/coverimage?doc=%2Fbook%2F9781784715489%2F9781784715489.xml&width=200", "https://www.elgaronline.com/fileasset/footer/Elgaronlinepublishing-footer.png" ]	[]	[]	[ "" ]	null	[ "Carlo Casarosa" ]	2015-05-28T00:00:00	Hicks’s interest in classical economics arose in the 1960s in the context of his work on growth theory and, more generally, on the methods of dynamic economics. In fact, Hicks considered the theories of growth of Smith and Ricardo as outstanding examples of the use of the static method in dynamic economics. In the following years the Oxford economist widened his interests in classical theory to monetary topics and to other economists, like Cantillon, the Physiocrats and Mill. However, Ricardo’s theory of distribution and growth remained Hicks’s main concern in classical economics.	en	/fileasset/fileasset/assets/favicon.ico	Elgar Online: The online content platform for Edward Elgar Publishing	https://www.elgaronline.com/edcollchap/book/9781784715489/C26.xml	You are not authenticated to view the full text of this chapter or article. Access options Get access to the full article by using one of the access options below.
7784	dbpedia	2	18	https://mises.org/articles-interest/biography-f-hayek-1899-1992	en	Biography of F. A. Hayek (1899-1992)	https://cdn.mises.org/st…pg?itok=ITApaJtO	https://cdn.mises.org/st…pg?itok=ITApaJtO	[ "https://cdn.mises.org/styles/responsive_4_3_650w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=ex6AkYmU 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=MZm8BjW_ 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=smqhJAMI 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=BQieFl6c 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/static-page/img/F%20A%20Hayek.jpg.webp?itok=iZRc7PPy 1530w", "http://mises.org/images4/Hayek6.jpg", "http://mises.org/images4/Hayek4.jpg", "http://mises.org/images4/Hayek2.jpg", "http://mises.org/images4/Hayek3.jpg", "http://mises.org/images4/Hayek5.jpg", "http://mises.org/images4/Hayek7.jpg", "https://cdn.mises.org/styles/responsive_4_3_650w/s3/peter-klein_2023.jpg.webp?itok=lti7bAcc 650w,https://cdn.mises.org/styles/responsive_4_3_870w/s3/peter-klein_2023.jpg.webp?itok=ITN9Zzvt 870w,https://cdn.mises.org/styles/responsive_4_3_1090w/s3/peter-klein_2023.jpg.webp?itok=XMh1xxxp 1090w,https://cdn.mises.org/styles/responsive_4_3_1310w/s3/peter-klein_2023.jpg.webp?itok=iHxbzBgc 1310w,https://cdn.mises.org/styles/responsive_4_3_1530w/s3/peter-klein_2023.jpg.webp?itok=CffTksmJ 1530w", "https://cdn.mises.org/styles/responsive_650w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=_yN9d85Q 650w,https://cdn.mises.org/styles/responsive_870w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=4mMxN_Nl 870w,https://cdn.mises.org/styles/responsive_1090w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=6MtQxVYY 1090w,https://cdn.mises.org/styles/responsive_1310w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=GcnJ_GBM 1310w,https://cdn.mises.org/styles/responsive_1530w/s3/images/2024-04/Mises-Institute_Sign_20240418.jpg.webp?itok=iB7UWEt8 1530w", "https://mises.org/themes/custom/mises/components/elements/element-footer-charity/charity-navigator.png" ]	[]	[]	[ "" ]	null	[ "Peter G. Klein" ]	2007-08-01T01:00:00-05:00		en	/themes/custom/mises/favicon.ico	Mises Institute	https://mises.org/articles-interest/biography-f-hayek-1899-1992	“A claim for equality of material position can be met only by a government with totalitarian powers.” F. A. Hayek is undoubtedly the most eminent of the modern Austrian economists. Student of Friedrich von Wieser, protégé and colleague of Ludwig von Mises, and foremost representative of an outstanding generation of Austrian school theorists, Hayek was more successful than anyone else in spreading Austrian ideas throughout the English-speaking world. “When the definitive history of economic analysis during the 1930s comes to be written,” said John Hicks in 1967, “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, p. 203). Unfortunately, Hayek’s theory of the business cycle was eventually swept aside by the Keynesian revolution. Ultimately, however, this work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes. Life and Work Hayek’s life spanned the twentieth century, and he made his home in some of the great intellectual communities of the period. Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals, Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 just after World War I, when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge, England). Though he was enrolled as a law student, his primary interests were economics and psychology, the latter due to the influence of Mach’s theory of perception on Wieser and Wieser’s colleague Othmar Spann, and the former stemming from the reformist ideal of Fabian socialism so typical of Hayek’s generation. Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions--the poverty of postwar Vienna serving as a daily reminder of such a need. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. “To none of us young men who read the book when it appeared,” Hayek recalled, “the world was ever the same again” (Hayek, 1956, p. 133). Socialism, an elaboration of Mises’s pioneering article from two years before, argued that economic calculation requires a market for the means of production; without such a market there is no way to establish the values of those means and, consequently, no way to find their proper uses in production. Mises’s devastating attack on central planning converted Hayek to laissez-faire, along with contemporaries like Wilhelm Röpke, Lionel Robbins, and Bertil Ohlin. It was around this time that Hayek began attending Mises’s famed Privatseminar. Regular participants, who received no academic credit or other official recognition for their time, included Hayek, Gottfried Haberler, Fritz Machlup, Oskar Morgenstern, Paul Rosenstein-Rodan, Richard von Strigl, Karl Schlesinger, Felix Kaufmann, Alfred Schütz, Eric Voegelin, Karl Menger, Jr., and others not so famous. For several years the Privatseminar was the center of the economics community in Vienna, attracting such visitors as Robbins from London and Howard S. Ellis from Berkeley. Later, Hayek became the first of this group to leave Vienna; most of the others, along with Mises himself, were also gone by the start of World War II. Mises had done earlier work on monetary and banking theory, successfully applying the Austrian marginal utility principle to the value of money and then sketching a theory of industrial fluctuations based on the doctrines of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this last as a starting point for his own research on fluctuations, explaining the origin of the business cycle in terms of bank credit expansion and its transmission in terms of capital malinvestments. His work in this area eventually earned him an invitation to lecture at the London School of Economics and Political Science and then to occupy its Tooke Chair in Economics and Statistics, which he accepted in 1931. There he found himself among a vibrant and exciting group: Robbins, J. R. Hicks, Arnold Plant, Dennis Robertson, T. E. Gregory, Abba Lerner, Kenneth Boulding, and George Shackle, to name only the most prominent. Hayek brought his (to them) unfamiliar views, and gradually, the “Austrian” theory of the business cycle became known and accepted. At the L.S.E. Hayek lectured on Mises’s business-cycle theory, which he was refining and which, until Keynes’s General Theory came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression. Hayek and Keynes had sparred in the early 1930s in the pages of the Economic Journal, over Keynes’s Treatise on Money. As one of Keynes’s leading professional adversaries, Hayek was well situated to provide a full refutation of the 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, p. 91). 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, p. 60; Hayek, 1966, pp. 240-41). Hayek thought a better course would be to produce a fuller elaboration of Böhm-Bawerk’s capital theory, and he began to devote his energies to this project. Unfortunately, The Pure Theory of Capital was not completed until 1941, and by then the Keynesian macro model had become firmly established. Within a very few years, however, the fortunes of the Austrian school suffered a dramatic reversal. First, the Austrian theory of capital, an integral part of the business-cycle theory, came under attack from the Italian-born Cambridge economist Piero Sraffa and the American Frank Knight, while the cycle theory itself was forgotten amid the enthusiasm for the General Theory. Second, beginning with Hayek’s move to London and continuing until the early 1940s, the Austrian economists left Vienna, for personal and then for political reasons, so that a school ceased to exist there as such. Mises left Vienna in 1934 for Geneva and then New York, where he continued to work in isolation; Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. Other Austrians of Hayek’s generation became prominent in the U.S.--Gottfried Haberler at Harvard, Fritz Machlup and Oskar Morgenstern at Princeton, Paul Rosenstein-Rodan at MIT--but their work no longer seemed to show distinct traces of the tradition founded by Carl Menger. At Chicago Hayek again found himself among a dazzling group: the economics department, led by Knight, Milton Friedman, and later George Stigler, was one of the best anywhere, and Aaron Director at the law school soon set up the first law and economics program. But economic theory, in particular its style of reasoning, was rapidly changing; Paul Samuelson’s Foundations had appeared in 1947, establishing physics as the science for economics to imitate, and Friedman’s 1953 essay on “positive economics” set a new standard for economic method. In addition, Hayek had ceased to work on economic theory, concentrating instead on psychology, philosophy, and politics, and A ustrian economics entered a prolonged eclipse. Important work in the Austrian tradition was done during this period by Rothbard (1956, 1962, 1963a, 1963b), Kirzner (1963, 1966, 1973), and Lachmann (1956), but at least publicly, the Austrian tradition lay mostly dormant. When the 1974 Nobel Prize in economics went to Hayek, interest in the Austrian school was suddenly and unexpectedly revived. While this was not the first event of the so-called “Austrian revival,” the memorable South Royalton conference having taken place earlier the same year, the rediscovery of Hayek by the economics profession was nonetheless a decisive event in the renaissance of Austrian economics. Hayek’s writings were taught to new generations, and Hayek himself appeared at the early Institute for Humane Studies conferences in the mid-1970s. He continued to write, producing The Fatal Conceit in 1988, at the age of 89. Hayek died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. Contributions to Economics Hayek’s legacy in economics is complex. Among mainstream economists, he is mainly known for his popular The Road to Serfdom (1944) and for his work on knowledge in the 1930s and 1940s (Hayek, 1937, 1945). Specialists in business-cycle theory recognize his early work on industrial fluctuations, and modern information theorists often acknowledge Hayek’s work on prices as signals, although his conclusions are typically disputed. Hayek’s work is also known in political philosophy (Hayek, 1960), legal theory (Hayek 1973-79), and psychology (Hayek, 1952). Within the Austrian school of economics, Hayek’s influence, while undeniably immense, has very recently become the subject of some controversy. His emphasis on spontaneous order and his work on complex systems has been widely influential among many Austrians. Others have preferred to stress Hayek’s work in technical economics, particularly on capital and the business cycle, citing a tension between some of Hayek’s and Mises’s views on the social order. (While Mises was a rationalist and a utilitarian, Hayek focused on the limits to reason, basing his defense of capitalism on its ability to use limited knowledge and learning by trial and error.) Business-cycle theory. Hayek’s writings on capital, money, and the business cycle are widely regarded as his most important contributions to economics (Hicks, 1967; Machlup, 1976). Building on Mises’s Theory of Money and Credit (1912), Hayek showed how fluctuations in economy-wide output and employment are related to the economy’s capital structure. In Prices and Production (1931) he introduced the famous “Hayekian triangles” to illustrate the relationship between the value of capital goods and their place in the temporal sequence of production. Because production takes time, factors of production must be committed in the present for making final goods that will have value only in the future after they are sold. However, capital is heterogeneous. As capital goods are used in production, they are transformed from general-purpose materials and components to intermediate products specific to particular final goods. Consequently, these assets cannot be easily redeployed to alternative uses if demands for final goods change. The central macroeconomic problem in a modern capital-using economy is thus one of intertemporal coordination: how can the allocation of resources between capital and consumer goods be aligned with consumers’ preferences between present and future consumption? In The Pure Theory of Capital (1941), perhaps his most ambitious work, Hayek describes how the economy’s structure of production depends on the characteristics of capital goods--durability, complementarity, substitutability, specificity, and so on. This structure can be described by the various “investment periods” of inputs, an extension of Böhm-Bawerk’s notion of “roundaboutness,” the degree to which production takes up resources over time. In Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933a) Hayek showed how monetary injections, by lowering the rate of interest below what Mises (following Wicksell) called its “natural rate,” distort the economy’s intertemporal 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. The Austrian theory, as developed by Mises and Hayek, focuses 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’ intertemporal 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’ intertemporal 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 e xpansion, 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’ intertemporal preferences. Knowledge, prices, and competition as a discovery procedure. Hayek’s writings on dispersed knowledge and spontaneous order are also widely known, but more controversial. 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, p. 78). 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.” 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, 1968a), by which this information is unknowingly transmitted throughout the economy as an unintended consequence of individuals’ pursuing their own ends. Indeed, Hayek’s (1948b) 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 (Kirzner, 1973; Machovec, 1995). 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, pp. 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 firm 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” (D. H. Robertson, quoted in Coase, 1937, p. 35). Most commentators view Hayek’s work on knowledge, discovery, and competition as an outgrowth of his participation in the socialist calculation debate of the 1920s and 1930s. The socialists erred, in Hayek’s view, in failing to see that the economy as a whole is necessarily a spontaneous order and can never be deliberately made over in the way that the operators of a planned order can exercise control over their organization. This is because planned orders can handle only problems of strictly limited complexity. Spontaneous orders, by contrast, tend to evolve through a process of natural selection, and therefore do not need to be designed or even understood by a single mind. Hayek and Austrian Economics Clearly, the Austrian revival owes as much to Hayek as to anyone. But are Hayek’s writings really “Austrian economics”--part of a separate, recognizable tradition--or should we regard them, instead, as an original, deeply personal, contribution? Some observers charge that Hayek’s later work, particularly after he began to turn away from technical economics, shows more influence of his friend Sir Karl Popper than of Carl Menger or Mises: one critic speaks of “Hayek I” and “Hayek II”; another writes on “Hayek’s Transformation.” It is true that Popper had a significant impact on Hayek’s mature thought. Of greater interest is the precise nature of Hayek’s relationship with Mises. Undoubtedly, no economist has had a greater impact on Hayek’s thinking than Mises--not even Wieser, from whom Hayek learned his craft but who died in 1927 when Hayek was still a young man. In addition, Mises clearly considered Hayek the brightest of his generation. Yet, as Hayek (1978a) noted, he was from the beginning always something less than a pure follower: “Although I do owe [Mises] a decisive stimulus at a crucial point of my intellectual development, and continuous inspiration through a decade, I have perhaps most profited from his teaching because I was not initially his student at the university, an innocent young man who took his word for gospel, but came to him as a trained economist, versed in a parallel branch of Austrian economics [the Wieser branch] from which he gradually, but never completely, won me over.” Much has been written on Hayek’s and Mises’s views on the socialist calculation debate. The issue is whether a socialist economy is “impossible,” as Mises charged in 1920, or simply less efficient or more difficult to implement. Hayek (1992, p. 127) maintained later that Mises’s “central thesis was not, as it is sometimes misleadingly put, that socialism is impossible, but that it cannot achieve an efficient utilization of resources.” That interpretation is itself subject to dispute. Hayek is arguing here against the standard view on economic calculation, found for instance in Schumpeter (1942, pp. 172-186) or Bergson (1948). This view holds that Mises’s original statement of the impossibility of economic calculation under socialism was refuted by Oskar Lange, Fred Taylor, and Abba Lerner, and that later modifications by Hayek and Robbins amounted to an admission that a socialist economy is possible in theory but difficult in practice because knowledge is decentralized and incentives are weak. Hayek’s response in the cited text, that Mises’s actual position has been exaggerated, receives support from the primary revisionist historian of the calculation debate, Don Lavoie, who states that the “central arguments advanced by Hayek and Robbins did not constitute a ‘retreat’ from Mises, but rather a clarification directing the challenge to the later versions of central planning . . . Although comments by both Hayek and Robbins about computational difficulties of the [later approaches] were responsible for misleading interpretations of their arguments, in fact their main contributions were fully consistent with Mises’s challenge” (Lavoie, 1985, p. 20). Kirzner (1988) similarly contends that Mises’s and Hayek’s positions should be viewed together as an early attempt to elaborate the Austrian “entrepreneurial-discovery” view of the market process. Salerno (1990a) argues, by contrast, in favor of the traditional view--that Mises’s original calculation problem is different from the discovery-process problem emphasized b y Lavoie and Kirzner. Furthermore, Hayek’s later emphasis on group selection and spontaneous order is not shared by Mises, although there are elements of this line of thought in Menger. A clue to this difference is in Hayek’s (1978a) statement that “Mises himself was still much more a child of the rationalist tradition of the Enlightenment and of continental, rather than of English, liberalism . . . than I am myself.” This is a reference to the “two types of liberalism” to which Hayek frequently refers: the continental rationalist or utilitarian tradition, which emphasizes reason and man’s ability to shape his surroundings, and the English common-law tradition, which stresses the limits to reason and the “spontaneous” forces of evolution. Recently, the relationship between Mises and Hayek has become a full-fledged “de-homogenization” debate. Salerno (1990a, 1990b, 1993, 1994) and Rothbard (1991, 1995) see Hayek’s emphasis on knowledge and discovery as substantially different from Mises’s emphasis on purposeful human action. Salerno (1993), for example, argues that there are two strands of modern Austrian economics, both descended from Menger. One, the Wieser-Hayek strand, focuses on dispersed knowledge and the price system as a device for communicating knowledge. Another, the Böhm-Bawerk-Mises strand, focuses on monetary calculation (or “appraisal,” meaning anticipation of future prices) based on existing money prices. Kirzner (1995a, 1995b, 1996, 1997) and Yeager (1994, 1995) argue, by contrast, that the differences between Hayek and Mises are more matters of emphasis and language than substance. Regardless, there is widespread agreement that Hayek ranks among the greatest members of the Austrian school, and among the leading economists of the twentieth century. His work continues to be influential in business-cycle theory, comparative economic systems, political and social philosophy, legal theory, and even cognitive psychology. Hayek’s writings are not always easy to follow--he describes himself as “puzzler” or “muddler” rather than a “master of his subject”--and this may have contributed to the variety of interpretations his work has aroused. Partly for this reason, Hayek remains one of the most intriguing intellectual figures of our time. References Bellante, Don, and Roger W. Garrison. 1988. “Phillips Curves and Hayekian Triangles: Two Perspectives on Monetary Dynamics.” History of Political Economy 20 (Summer): 207-34. Bergson, Abram. 1948. “Socialist Economics.” In Howard S. Ellis, ed., A Survey of Contemporary Economics. Vol. 1. Homewood, Ill.: Richard D. Irwin, pp. 412-48. Blaug, Mark. 1993. “Hayek Revisited.” Critical Review 7, no. 1: 51-60. Boettke, Peter J. 1997. “Economic Calculation: The Austrian Contribution to Political Economy.” Advances in Austrian Economics, forthcoming. Caldwell, Bruce J. 1988. “Hayek’s Transformation.” History of Political Economy 20 (Winter): 513-41. Caldwell, Bruce J. 1995. “Introduction.” In Hayek, 1995, pp. 1-48. Caldwell, Bruce J. 1997. “Hayek and Socialism.” Journal of Economic Literature 35, no. 4 (December): 1856-90. Coase, Ronald H. 1937. “The Nature of the Firm.” Economica (N.S.) 4: 386-405. Reprinted in idem., The Firm, the Market, and the Law. Chicago: University of Chicago Press, 1988, pp. 33-55. Craver, Earlene. 1986. “The Emigration of the Austrian Economists.” History of Political Economy 18, no. 1: 1-32. Dolan, Edwin G., ed. 1976. The Foundations of Modern Austrian Economics. Kansas City: Sheed & Ward. Ekelund, Robert B. 1986. “Wieser’s Social Economics: A Link to Modern Austrian Theory?” Austrian Economics Newsletter 6 (Fall): 1-2, 4, 9-11. Farrell, Joseph, and Patrick Bolton. 1990. “Decentralization, Duplication, and Delay.” Journal of Political Economy 98, no. 4: 803-26. Fehl, Ulrich. 1986. “Spontaneous Order and the Subjectivity of Expectations: A Contribution to the Lachmann-O’Driscoll Problem.” In Israel M. Kirzner, ed., Subjectivism, Intelligibility, and Economic Understanding. New York: New York University Press, pp. 72-86. Foss, Nicolai J. 1994. The Austrian School and Modern Economics: A Reassessment. Copenhagen: Handelshøjskolens Forlag. Garrison, Roger W. 1978. “Austrian Macroeconomics: A Diagrammatical Exposition.” In Spadaro, 1978, pp. 167-204. Garrison, Roger W. 1984. “Time and Money: The Universals of Macroeconomic Theorizing.” Journal of Macroeconomics 6, no. 2 (Spring): 197-213. Garrison, Roger W., and Israel M. Kirzner. 1987. “Hayek, Friedrich August von.” In John Eatwell, Murray Milgate, and Peter Newman, eds., The New Palgrave Dictionary of Economics. Vol. 2. London: Macmillan, pp. 609-14. Gray, John. 1984. Hayek on Liberty. Second edition. Oxford: Basil Blackwell, 1986. Grossman, Sanford J. 1980. “On the Impossibility of Informationally Efficient Markets.” American Economic Review 70, no. 3 (June): 393-408. Grossman, Sanford J. 1989. The Informational Role of Prices. Cambridge, Mass., and London: MIT Press. Grossman, Sanford J., and Joseph E. Stiglitz. 1976. “Information and Competitive Price Systems.” American Economic Review 66, no. 2 (May): 246-53. Hayek, F. A. 1931. Prices and Production. London: Routledge & Sons. Second revised edition, London: Routledge & Kegan Paul, 1935. Hayek, F. A. 1933a. Monetary Theory and the Trade Cycle. London: Jonathan Cape. Hayek, F. A. 1933b. “The Trend of Economic Thinking.” Economica 13: 121-37. Reprinted in Hayek, 1991, pp. 17-34. Hayek, F. A. 1937. “Economics and Knowledge.” Economica N.S. 4: 33-54. Reprinted in Hayek, 1948a, pp. 33-56. Hayek, F. A. 1939. “Price Expectations, Monetary Disturbances, and Malinvestments.” In Hayek, Profits, Interest, and Investment. London: Routledge and Kegan Paul, pp. 135-56. 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. “The Use of Knowledge in Society.” American Economic Review 35 (September): 519-30. Reprinted in Hayek, 1948a, pp. 77-91. Hayek, F. A. 1948a. Individualism and Economic Order. Chicago: University of Chicago Press. Hayek, F. A. 1948b. “The Meaning of Competition.” In Hayek, 1948a, pp. 92-106. Hayek, F. A. 1952. The Sensory Order. Chicago: University of Chicago Press. Hayek, F. A. 1956. “In Honour of Professor Mises.” In Hayek, 1992, pp. 129-36. Hayek, F. A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press. Hayek, F. A. 1963. “The Economics of the 1930s as Seen from London.” In Hayek, 1995, pp. 49-73. Hayek, F. A. 1966. “Personal Recollections of Keynes and the ‘Keynesian Revolution.’” In Hayek, 1995, pp. 240-46. Hayek, F. A. 1968a. “Competition as a Discovery Procedure.” In Hayek, 1978b, pp. 179-90. Hayek, F. A. 1968b. “The Confusion of Language in Political Thought.” In Hayek, 1978b, pp. 71-97. Hayek, F. A. 1973-79. Law, Legislation, and Liberty. Three volumes. Chicago: University of Chicago Press. Hayek, F. A. 1975. “Two Types of Mind.” In Hayek, The Trend of Economic Thinking. Edited by W. W. Bartley III and Stephen Kresge. Vol. 3 of The Collected Works of F. A. Hayek. London: Routledge, and Chicago: University of Chicago Press, 1991, pp. 49-55. Hayek, F. A. 1976. Denationalisation of Money : An Analysis of the Theory and Practice of Concurrent Currencies. London: Institute of Economic Affairs. Hayek, F. A. 1978a. “Coping with Ignorance.” Imprimis 7, no. 7 (July): 1-6. Reprinted in Champions of Freedom. Hillsdale, Mich.: Hillsdale College Press, 1979. Hayek, F. A. 1978b. New Studies in Philosophy, Politics and Economics. Chicago: University of Chicago Press. Hayek, F. A. 1988. The Fatal Conceit: The Errors of Socialism. Edited by W. W. Bartley III. Vol. 1 of The Collected Works of F. A. Hayek. London: Routledge, and Chicago: University of Chicago Press, 1989. Hayek, F. A. 1991. The Trend of Economic Thinking: Essays on Political Economists and Economic History. Edited by 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. 1994. Hayek on Hayek: An Autobiographical Dialogue. Edited by Stephen Kresge and Leif Wenar. Chicago: University of Chicago Press, and London: Routledge. Hayek, F. A. 1995. Contra Keynes and Cambridge: Essays, Correspondence. Edited by Bruce Caldwell. Vol. 9 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge. Hayek, F. A. 1997. Socialism and War: Essays, Documents, Reviews. Edited by Bruce Caldwell. Vol. 10 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge. Herbener, Jeffrey M. 1991. “Ludwig von Mises and the Austrian School of Economics.” Review of Austrian Economics 5, no. 2: 33-50. Herbener, Jeffrey M. 1996. “Calculation and the Question of Arithmetic.” Review of Austrian Economics 9, no. 1: 151-62. Hicks, Sir John. 1967. Critical Essays in Monetary Theory. Oxford: Clarendon Press. Hoppe, Hans-Hermann. 1996. “Socialism: A Property or Knowledge Problem?” Review of Austrian Economics 9, no. 1: 143-49. Hutchison, T. W. 1984. “Austrians on Philosophy and Method (since Menger).” In idem., The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians. New York and London: New York University Press, pp. 203-32. Kirzner, Israel M. 1963. Market Theory and the Price System. Princeton: Van Nostrand. Kirzner, Israel M. 1966. An Essay on Capital. New York: Augustus M. Kelley. Kirzner, Israel M. 1973. Competition and Entrepreneurship. Chicago: University of Chicago Press. Kirzner, Israel M. 1988. “The Socialist Calculation Debate: Lessons for Austrians.” Review of Austrian Economics 2: 1-18. Kirzner, Israel M. 1995a. “Introduction.” In idem., ed., Classics in Austrian Economics: A Sampling in the History of a Tradition. Vol. 3. London: William Pickering, pp. vii-xvii. Kirzner, Israel M. 1995b. Review of Jack Birner and Rudy Van Zijp, Hayek, Co-ordination, and Evolution. Southern Economic Journal 61, no. 4 (April): 1243-44. Kirzner, Israel M. 1996. “Reflections on the Misesian Legacy in Economics.” Review of Austrian Economics 9, no. 2: 143-54. Kirzner, Israel M. 1997. “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach.” Journal of Economic Literature 35, no. 1 (March): 60-85. Klein, Peter G. 1992. “Introduction.” In Hayek, 1992, pp. 1-15. Klein, Peter G. 1996. “Economic Calculation and the Limits of Organization.” Review of Austrian Economics 9, no. 2: 51-77. Lachmann, Ludwig. 1956. Capital and Its Structure. Kansas City: Sheed Andrews and McMeel. Lavoie, Don. 1985. Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. Cambridge: Cambridge University Press. Lucas, Robert E. 1977. “Understanding Business Cycles.” In idem., Studies in Business-Cycle Theory. Cambridge, Mass.: MIT Press, 1981. Machlup, Fritz. 1976. “Hayek’s Contributions to Economics.” In idem., ed., Essays on Hayek. Hillsdale, Mich.: Hillsdale College Press, pp. 13-59. Machovec, Frank M. 1995. Perfect Competition and the Transformation of Economics. London: Routledge. McCormick, Brian J. 1992. Hayek and the Keynesian Avalanche. New York: St. Martin’s Press. Mises, Ludwig von. 1912. The Theory of Money and Credit. New Haven: Yale University Press, 1953. Mises, Margit von. 1984. My Years with Ludwig von Mises. Second enlarged edition. Cedar Falls, Iowa: Center for Futures Education. O’Driscoll, Gerald P., Jr. 1977. Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City: Sheed Andrews & McMeel. Rothbard, Murray N. 1956. “Toward a Reconstruction of Utility and Welfare Economics.” In Mary Sennholz, ed., On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: Van Nostrand, pp. 224-62. Rothbard, Murray N. 1962. Man, Economy, and State. Auburn, Ala.: Ludwig von Mises Institute, 1993. Rothbard, Murray N. 1963a. America’s Great Depression. Second revised edition. New York: Richardson and Snyder, 1983. Rothbard, Murray N. 1963b. What Has Government Done to Our Money? Auburn, Ala.: Ludwig von Mises Institute, 1990. Rothbard, Murray N. 1991. “The End of Socialism and the Calculation Debate Revisited.” Review of Austrian Economics 5, no. 2: 51-76. Rothbard, Murray N. 1994. Review of Bruce Caldwell and Stephan Boehm, eds., Austrian Economics: Tensions and New Directions. Southern Economic Journal 61, no. 2 (October): 559-60. Rothbard, Murray N. 1995. “The Present State of Austrian Economics.” In idem., The Logic of Action. Cheltenham, U.K.: Edward Elgar, 1997, vol. 1, pp. 111-72. Salerno, Joseph T. 1990a. “Ludwig von Mises as Social Rationalist.” Review of Austrian Economics 4: 26-54. Salerno, Joseph T. 1990b. “Postscript: Why a Socialist Economy Is ‘Impossible.’” In Ludwig von Mises, Economic Calculation in the Socialist Commonwealth. Auburn, Ala.: Ludwig von Mises Institute, pp. 51-71. Salerno, Joseph T. 1993. “Mises and Hayek Dehomogenized.” Review of Austrian Economics 6, no. 2: 113-46. Salerno, Joseph T. 1994. “Reply to Leland B. Yeager.” Review of Austrian Economics 7, no. 2: 111-25. Salerno, Joseph T. 1996a. “A Final Word: Calculation, Knowledge, and Appraisement.” Review of Austrian Economics 9, no. 1: 141-42. Salerno, Joseph T. 1996b. “Why We’re Winning: An Interview with Joseph T. Salerno.” Austrian Economics Newsletter 16, no. 3 (Fall): 1-8. Schumpeter, Joseph A. 1942. Capitalism, Socialism, and Democracy. New York: Harper & Row. Spadaro, Louis M., ed. 1978. New Directions in Austrian Economics. Kansas City: Sheed Andrews & McMeel, 1978. Van Zijp, Rudy. 1993. Austrian and New Classical Business Cycle Theories: A Comparative Study Through the Method of Rational Reconstruction. Brookfield, Vt.: Edward Elgar. Vanberg, Viktor J. 1994. “Spontaneous Market Order and Social Rules: A Critical Examination of F. A. Hayek’s Theory of Cultural Evolution.” In idem., Rules and Choice in Economics. London and New York: Routledge, pp. 75-94. Vaughn, Karen I. 1996. Austrian Economics in America: The Migration of a Tradition. Cambridge: Cambridge University Press. White, Lawrence H. 1996. “Hayek’s Pure Theory of Capital.“ Unpublished manuscript. Department of Economics, University of Georgia. White, Lawrence H. 1997. “Why Didn’t Hayek Favor Laissez-Faire in Banking?” History of Political Economy, forthcoming. Williamson, Oliver E. 1991. “Economic Institutions: Spontaneous and Intentional Governance.” Journal of Law, Economics and Organization 7 (special issue):159-87. Yeager, Leland B. 1994. “Mises and Hayek on Calculation and Knowledge.” Review of Austrian Economics 7, no. 2: 93-109. Yeager, Leland B. 1995. “Rejoinder: Salerno on Calculation, Knowledge, and Appraisement.” Review of Austrian Economics 9, no.1: 137-39.
7784	dbpedia	1	36	https://kids.kiddle.co/Friedrich_Hayek	en	Friedrich Hayek facts for kids	https://kids.kiddle.co/i…yek_portrait.jpg	https://kids.kiddle.co/i…yek_portrait.jpg	[ "https://kids.kiddle.co/images/wk/kids-robot.svg", "https://kids.kiddle.co/images/wk/kids-search-engine.svg", "https://kids.kiddle.co/images/7/7f/Friedrich_Hayek_portrait.jpg", "https://kids.kiddle.co/images/thumb/b/b0/Friedrich_von_Hayek_signature.gif/150px-Friedrich_von_Hayek_signature.gif", "https://kids.kiddle.co/images/thumb/4/43/Wien_-_Universit%C3%A4t_%282%29.JPG/240px-Wien_-_Universit%C3%A4t_%282%29.JPG", "https://kids.kiddle.co/images/thumb/7/77/LSE_main_entrance.jpg/300px-LSE_main_entrance.jpg", "https://kids.kiddle.co/images/thumb/9/93/The-Road-to-Serfdom-First-Edition1.jpg/300px-The-Road-to-Serfdom-First-Edition1.jpg", "https://kids.kiddle.co/images/thumb/1/1a/Harper_Midway_Chicago.jpg/330px-Harper_Midway_Chicago.jpg", "https://kids.kiddle.co/images/thumb/9/95/Freiburg_Breisgau_um_1900.jpg/260px-Freiburg_Breisgau_um_1900.jpg", "https://kids.kiddle.co/images/thumb/6/69/BuildingUniversitySalzburg1.jpg/260px-BuildingUniversitySalzburg1.jpg", "https://kids.kiddle.co/images/thumb/2/2f/Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg/300px-Friedrich_August_von_Hayek%2C_27th_January_1981%2C_the_50th_Anniversary_of_his_first_lecture_at_LSE%2C_1981_%284303825588%29.jpg", "https://kids.kiddle.co/images/thumb/a/a2/Business_cycle.jpg/200px-Business_cycle.jpg", "https://kids.kiddle.co/images/thumb/a/a0/World_Business_Cycle.png/200px-World_Business_Cycle.png", "https://kids.kiddle.co/images/thumb/2/27/Neustifter_Friedhof_-_Friedrich_August_Hayek_%28cropped%29.jpg/300px-Neustifter_Friedhof_-_Friedrich_August_Hayek_%28cropped%29.jpg", "https://kids.kiddle.co/images/thumb/5/5f/Kids_robot.svg/60px-Kids_robot.svg.png", "https://kids.kiddle.co/images/wk/kids-search-engine.svg" ]	[]	[]	[ "" ]	null	[]	null	Learn Friedrich Hayek facts for kids	en	/images/wk/favicon-16x16.png		https://kids.kiddle.co/Friedrich_Hayek	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
7784	dbpedia	2	63	https://www.iedm.org/75439-friedrich-hayek-superstar-austrian-economics/	en	Friedrich Hayek: The superstar of Austrian Economics – IEDM	https://www.iedm.org/wp-…avicon-32x32.png	https://www.iedm.org/wp-…avicon-32x32.png	[ "https://www.facebook.com/tr?id=1235510690297453&ev=PageView&noscript=1", "https://www.facebook.com/tr?id=7182224685137155&ev=PageView&noscript=1", "https://www.iedm.org/wp-content/themes/iedm/images/logos/logo-en.png", "https://www.iedm.org/wp-content/uploads/2019/08/logo-IEDM-en-white.png", "https://www.iedm.org/sites/default/files/web/oped_files/friedrich-hayek.jpg", "https://www.iedm.org/wp-content/themes/iedm/images/logos/logo-en-white.svg" ]	[]	[]	[ "" ]	null	[]	2017-10-26T00:00:00-04:00	It is safe to say that Hayek's ideas will continue to exert enormous influence for many decades to come.	en	https://www.iedm.org/wp-…avicon-32x32.png		https://www.iedm.org/75439-friedrich-hayek-superstar-austrian-economics/	Op-ed published exclusively on our website. The 20th century was one of the most violent in the history of humanity. In addition to the millions of deaths caused by international conflicts, anti-liberal ideologies manifested themselves throughout the world for long periods: communism in the USSR, China, Eastern Europe, and elsewhere; Nazism in Germany; fascism in Italy and Spain; etc. In Western societies, this rise of anti-liberalism led to the questioning of the benefits of the market economy and the rise of socialism and the interventionist state. Economist Friedrich A. Hayek was born on May 8, 1899 and died on March 23, 1992. He spent his entire career defending liberalism and opposing these collectivist ideologies. As a young economist in Austria, Hayek distinguished himself through his work on business cycles. He tried to explain why economies have “ups and downs.” During these years, he also developed the idea that the market economy was an essential component of a free society. Having emigrated to Britain, Hayek experienced the Second World War as a traumatic period. Terrified by the rise of fascism and socialism, he popularized his political thought in the book that made him famous: The Road to Serfdom. His argument was simple: Nazism, fascism, communism, and socialism share the same basic assumption according to which the state is above the individual. According to Hayek, this assumption adopted by many individuals lead to the atrocities that occurred at the time, even if these individuals had good intentions. He argued that the interventionist tendencies of Western governments, far from preserving democracy and freedom, would lead instead to the very authoritarianism that they were trying to avoid. Published in 1944, this book enjoyed great success around the world, and became a bestseller in the United States. However, it represents only a small part of Hayek’s work, which, in economics as well as in philosophy and political science, lays the foundations for a free and prosperous society. One of the pillars of Hayek’s thought is his explanation of the role of prices in a free economy. Hayek established his reasoning in his most cited scientific article, “The Use of Knowledge in Society,” which is considered one of the twenty most influential articles in economics. Prices help to allocate scarce resources, informing us of alternative uses that can be made of them. And this price system cannot be planned. Prices emerge from the bottom up, and not the other way around. Indeed, every person in society possesses a tiny fraction of the total knowledge that allows the economy to function. It is at the individual level that economic calculation happens. An economic agent such as an entrepreneur or a consumer is guided in his or her choices by the relative prices of different goods and services. Prices therefore contain valuable information, and in order to play their role of coordinating the decisions of economic actors, a decentralized system is needed—namely, a free market. Every time an individual discovers new information, he or she influences prices and gives rise to a new way of organizing scarce resources in order to maximize the well-being of all. Since it is impossible to impose prices from the top, any attempt at planning leads to inefficiencies, shortages, surpluses, deficiencies, and failures. The more a central planner plans, the more these failures multiply, and the more the authoritarian grip must be tightened. Following upon his idea that information is dispersed, Hayek subsequently developed the idea of spontaneous order. He observed that the economy, without any dominant authority, succeeds in being orderly. The invention of the automobile did not come about because of a central plan in Washington, just as the invention of dental floss did not come about due to a bureaucratic plan in some distant capital. Evoking Adam Smith’s invisible hand, Hayek argued that individuals create this order by pursuing their own interests. In this way, markets serve not only to coordinate large-scale actions, but also to bring people of different religions, cultures, countries, etc., closer through trade. His work in economics earned Hayek the Nobel Memorial Prize in Economics in 1974. In his last book, The Fatal Conceit, he returned once again to the role of prices, human action, and spontaneous order from an evolutionary perspective to explain why socialism and state planning threaten the free and complex societies in which we live today. It is safe to say that Hayek’s ideas will continue to exert enormous influence for many decades to come. Jasmin Guénette is Vice President of Operations at the Montreal Economic Institute. The views reflected in this op-ed are his own.
7784	dbpedia	0	95	https://osf.io/ajdnq/download/%3Fformat%3Dpdf	en	OSF			[]	[]	[]	[ "" ]	null	[]	null		en			null
7784	dbpedia	3	78	https://contemporarythinkers.org/friedrich-hayek/bibliography/essays/	en	Friedrich Hayek			[ "https://contemporarythinkers.org/friedrich-hayek/wp-content/themes/contemporary/images/home-page.png", "https://contemporarythinkers.org/friedrich-hayek/wp-content/themes/contemporary/images/svg/icon-facebook.svg", "https://contemporarythinkers.org/friedrich-hayek/wp-content/themes/contemporary/images/svg/icon-twitter.svg", "https://contemporarythinkers.org/friedrich-hayek/wp-content/themes/contemporary/images/svg/icon-search.svg" ]	[]	[]	[ "" ]	null	[]	2014-01-10T21:22:15+00:00		en		Friedrich Hayek	https://contemporarythinkers.org/friedrich-hayek/bibliography/essays/	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).
7784	dbpedia	3	81	https://www.goodreads.com/book/show/7038864-conversations-with-great-economists	en	Conversations with Great Economists: Friedrich A. Hayek, John Hicks, Nicholas Kaldor, Leonid V.Kantorovich, Joan Robinson, Paul A.Samuelson, Jan Tinbe	https://images-na.ssl-im…117i/7038864.jpg	https://images-na.ssl-im…117i/7038864.jpg	[ "https://i.gr-assets.com/images/S/compressed.photo.goodreads.com/siteheaderbannerimages/1722529892i/425.jpg", "https://images-na.ssl-images-amazon.com/images/S/compressed.photo.goodreads.com/books/1348808117i/7038864.jpg", "https://images-na.ssl-images-amazon.com/images/S/compressed.photo.goodreads.com/books/1348808117i/7038864.jpg", "https://i.gr-assets.com/images/S/compressed.photo.goodreads.com/nophoto/user/u_700x933.png", "https://i.gr-assets.com/images/S/compressed.photo.goodreads.com/users/1514449107i/75621072.jpg", "https://i.gr-assets.com/images/S/compressed.photo.goodreads.com/users/1461963163i/21602393._UY200_CR33,0,200,200_.jpg", "https://dryofg8nmyqjw.cloudfront.net/images/[email protected]", "https://dryofg8nmyqjw.cloudfront.net/images/[email protected]" ]	[]	[]	[ "" ]	null	[ "Diego Pizano" ]	null	Read 2 reviews from the world’s largest community for readers. "Depressions are not the result of the operation of the market. They are the result of gover…	en	/favicon.ico	Goodreads	https://www.goodreads.com/book/show/7038864-conversations-with-great-economists	"Depressions are not the result of the operation of the market. They are the result of government controls, particularly in the sphere of monetary policy".Professor F.A.Hayek, Nobel Prize winner in Economics. "It is because I want to make economics more human that I want to make it more time conscious." Professor Sir John Hicks, Nobel Prize winner in Economics. "The most important challenge facing the world economy is the need to strengthen the adjustment mechanism between the growth of supply and demand for primary products".Professor N.Kaldor, Cambridge University. "Many people in the Soviet Union are aware that our economic system is not perfect...It is true that the Soviet economy's growth rate has decreased".Professor L.V.Kantorovich, Nobel Prize Winner in Economics. "The unemployment of developing economies arises because productive capacity and effective demand have never been at an appropriate level".Professor J.Robinson, University of Cambridge. "Schumpeter was wrong when he thought there is a timetable for the disappearance of capitalism".Professor P.Samuelson, Nobel Prize winner in Economics. "I am not as optimistic as Keynes in the sense the economic problem will disappear as a result of compound interest and technical progress."Professor J.Tinbergen, Nobel Prize Winner in Economics. ----------------------------------------------------------------------------------------------------------- "A useful and important book".Professor P.Samuelson, MIT, Nobel Prize winner in economics. "A lively addition to the economics literature".Professor A.Hirschman, Institute for Advanced Study, Princeton, New Jersey. "You will have read, studied or taught the work of these outstanding economists.Now you get a chance to meet them.Through the work of Diego Pizano we learn about how they thought and not just what they thought". Professor R.Bates, Harvard University. "Through penetrating and well structured questions, Colombian economist Diego Pizano manages to reveal the thought processes of five of the first Nobel Prize winners in Economics and two who could have obtained it, Joan Robinson and N.Kaldor.This book has to be read by all researchers interested in the history of economic thought and by all persons interested in economics as a discipline." Professor D.Hueth, University of Maryland ___________________________________________________________________________________________________ DIEGO PIZANO was economic advisor to the President of Colombia between 1982 and 1986.He is the Chairman of the Board of the University of the Andes(Bogotá, Colombia) and the President of the Common Code for the Coffee Community Association(Bonn, Germany).
7784	dbpedia	2	22	https://www.federalreserve.gov/newsevents/speech/quarles20191101a.htm	en	Speech by Vice Chair for Supervision Quarles on Friedrich Hayek and the price system	https://www.federalreser…ge-opengraph.jpg	https://www.federalreser…ge-opengraph.jpg	[ "https://www.federalreserve.gov/images/USAGov%402x.png", "https://www.federalreserve.gov/images/OpenGov%402x.png" ]	[]	[]	[ "" ]	null	[]	null	I am delighted to be back in New Haven and particularly to be in the company of so many students interested in thinking rigorously about ideas. And I am honore			Board of Governors of the Federal Reserve System	https://www.federalreserve.gov/newsevents/speech/quarles20191101a.htm	I am delighted to be back in New Haven and particularly to be in the company of so many students interested in thinking rigorously about ideas. And I am honored to be participating in the William F. Buckley, Jr., Program's conference today on Friedrich Hayek and the future of classical liberalism.1 Over the course of this afternoon, you will hear a series of presentations that put Hayek's thinking in the context of contemporary developments and that offer a variety of perspectives on his intellectual legacy. Hayek was a prolificâsome might even say profligateâthinker. He was at various times, and in various modes, an early neuropsychologist, an epistemologist, a theoretical economist, a political philosopher, a moral philosopher, a philosopher of science, a historian of ideas, a public intellectual, and a social polemicist. This vast range has caused some to undervalue his contributions as an economist, notwithstanding his eventual Nobel Prizeâwhen Hayek moved to the United States in 1950, the University of Chicago Economics Department would not hire him because, as Milton Friedman said, "At that stage, he really wasn't doing any economics," and Paul Krugman famously said that "the Hayek thing is almost entirely about politics, not economics."2 Others believe his broader thought, while seminal, was inconsistent across these various areas, and Hayek himself never demonstrated how it all hung together. In my contribution to the discussion today, I want to examine a particular example of the lasting effect that Hayek has had on economic thinkingâone pertaining to the importance of freely determined prices for producing efficient economic outcomesâand consider how Hayek's insights in this area can, in fact, tie together the various strands of his larger philosophy. So as not to appear entirely out of touch with more immediate developments, I will end by descending from the empyrean to the terrestrial with a discussion of the economic outlook and the Federal Open Market Committee's (FOMC) policy decision from earlier this week. Hayek and Economics Hayek's contributions to economics ranged widely, and many were important and of lasting influence. Among them were his studies of the relationship between the economic and political arrangements of a society. That body of work included, of course, his celebrated book The Road to Serfdom, which was published 75 years ago this year and is a focus of this event, as well as his later monograph, The Constitution of Liberty.3 In addition, Hayek contributed prominently to monetary analysis. His work in this area included the theory of the business cycle that was part of the thinking of the Austrian school of economics.4 It also included Hayek's studies of the feasibility and implications of private-sector currency issuanceâcontributions that have informed modern-day analyses of the repercussions of electronic money.5 Today, however, I will be concerned instead with still another key contribution that Hayek made to economic analysis: understanding the operation of the price system. This contribution was formalized in his most famous paper in the economic-research literature: his article "The Use of Knowledge in Society," which was published in the American Economic Review in September 1945.6 Hayek (1945) Revisited It is worth outlining the basis for the high esteem in which economists hold Hayek's 1945 contribution. In 1974, the press release by the Royal Swedish Academy of Sciences that announced Hayek's Nobel Prize in Economics stated: "The Academy is of the opinion that von Hayek's analysis of the functional efficiency of different economic systems is one of his most significant contributions to economic research in the broader sense. ...His guiding principle when comparing various systems is to study how efficiently all the knowledge and all the information dispersed among individuals and enterprises [are] utilized. His conclusion is that only by far-reaching decentralization in a market system with competition and free price-fixing is it possible to make full use of knowledge and information."7 In the research that the academy described, Hayek's 1945 paper was the key article. More recently, this paper received further prominent acclaim when it was categorized by an expert panel as being one of the top 20 articles ever published in the American Economic Review.8 With regard to the paper's contribution to the understanding of economic processes, an illuminating discussion was provided in 2005 by Oliver Williamsonâhimself later a Nobel laureate in economics. Williamson cited Hayek's 1945 paper, along with Adam Smith's The Wealth of Nations from the eighteenth century, as forming the core of a "venerated tradition in economics" of studying the notion of "spontaneous order" arising from a freely operating market system.9 How does Hayek's case for the price system fit in alongside the other work that Williamson mentioned? As Paul Samuelsonâyet another Nobel Prize winnerâhad occasion to note, the argument for the price system that Hayek articulated in 1945 was complementary with, but distinct from, the argument that Adam Smith espoused in The Wealth of Nations.10 Smith focused on how market mechanisms guide producers toward satisfying consumers' wants. Hayek instead stressed how the market mechanism makes, as he put it, "fuller use...of the existing knowledge" than a directed economy is able to do.11 Hayek emphasized that the signals transmitted by the various individual prices in the economy could, together, serve as a useful means of guiding overall resource allocation. The reason is that prices convey messages to consumers and producers even when the information that drives prices is not aggregated or directly observed.12 For example, a large increase or decrease in the price of gasoline conveys information that influences consumer behavior and that also affects the behavior of energy producers, even when neither of these sets of market participants are aware of the precise factor initiating the price change. As a related matter, Hayek recognized that prices transmit information even in a situation in which much of that information is not explicitly disclosed by one market participant to another, or even consciously articulable by any market participant at all. Hayek believed that all of us "know" many things that we cannot articulate but that we nevertheless act on in practical situations, and the price system can therefore aggregate and transmit that knowledge which we could not otherwise convey. Hayek's analysis had implications for the viability of different economic systems. With regard to centrally planned economic systemsâwhich had considerable support in the West in 1945, in light of the increased use of government economic controls in many countries during World War II and the dismal performance of market economies during the Great DepressionâHayek's analysis suggested that these systems would likely exhibit great inefficiency. To Hayek, it was totally unrealistic to expect an economy to operate efficiently if it was based on the "direction of the whole economic system according to one unified plan," as such a plan lacked the valuable information embedded in market-determined prices.13 The economist Gregory Mankiw has elegantly summed up Hayek's insight here: "Information is very, very dispersed among the population. ...Nobody can possibly know all the information you need to run a centrally planned economy."14 Hayek's economic analysis therefore complemented the philosophical and political arguments he marshaled against centrally planned economies in The Road to Serfdom. Again, it is important to recognize that this is not a contingent or technological problem. It is not only that the dispersion of knowledge makes it hard to gather, although that is certainly trueâbut if that were the only issue, then perhaps future advances in technology such as quantum computing would remove that obstacle. Rather, as already mentioned, we all know many important things that we cannot articulate; and many of these things we come to know precisely through our participation in trade and exchange through the market. This type of knowledge (a) is by its nature not conveyable to a central planner because we are not fully aware of all we know, and (b) would not even exist apart from the social interactions facilitated by the market which a central planner would replace. The flip side of Hayek's analysis was that, while there are insurmountable obstacles to economic efficiency via a central plan, an efficient economy may still be obtainable by letting the price system work. To quote Mankiw again, Hayek's analysis implies that "markets figure out a way to aggregate, in a decentralized way, dispersed information into desirable outcomes."15 Furthermore, this mechanism does not require the government or any one individual to process that dispersed information into a central network or to be able to aggregate the information into a statistical series. It is, instead, sufficient for the proper operation of the price mechanism that the relevant information be embodied implicitly in the economy's multiplicity of prices of individual goods and factors of production. This information is recorded in such prices because they respond to the behavior of individual buyers and sellers in the economy.16 Consequently, as longtime Hayek scholar Gerald O'Driscoll has observed: "What particularly recommends the price system to Hayek is the 'economy of knowledge' with which it operates. It is [in Hayek's description] nothing short of a 'marvel.' "17 How Hayek (1945) Has Influenced Economics Hayek's 1945 paper has had a great influence on subsequent economic research. It has been found to be highly relevant to a variety of areas of economic inquiry. For example, Hayek's analysis has proved valuable in the development of standard microeconomics, since his contribution deepened economists' understanding of the working of the price system and promoted further investigation of the question of how decentralized information is transmitted by markets.18 Hayek's emphasis on prices as processors of information has also had applications to international trade theory.19 And in macroeconomics and monetary theory, Milton Friedman's Nobel lecture, published in 1977, cited Hayek's 1945 paper when arguing that, because it disrupted the signals arising from relative-price movements, inflation both lowered the efficiency of the economy and led output to deviate from its natural (or full-employment) level.20 Hayek likened the price mechanism to a "system of telecommunications," and Friedman's description of inflation as a form of "static" interrupting price signals was in keeping with this analogy.21 Hayek's ideas on prices influenced Joseph Stiglitz in his analysis of markets with asymmetric information and Roger Myerson's insights on mechanism design theory. Each of these bodies of work earned a Nobel Prize.22 Qualifications and Extensions I do not want to leave the impression, however, that all of the conclusions in Hayek's 1945 paper have become unchallenged principles chiseled into the economic consensus. On the contrary, one of the reasons why the paper has been so influential is that it remains a benchmark reference for understanding the case for relying primarily on a market system, based on freely determined prices, for determining the production and allocation of resources. The paper has therefore set a high bar for preempting the price system or for other interventions in the market: When economists point to cases in which market mechanisms can be improved on by regulation or other public-sector intervention, or to instances in which price signals do not appear to be operating effectively, they need to identify a specific market failure as the source of the inefficiency. Essentially, they need to establish instances in which the price system can be improved on as a means of processing information.23 Even Hayek acknowledged that the price mechanism works within an ecosystem of laws and social institutions, and those may evolve in ways that interfere with the signaling of prices. For example, one of the important events that raised doubts about the functioning of the private market's pricing process occurred in the years leading up to the financial crisis. This period featured pricing by financial markets that seemed, in some prominent cases, not to be adequately reflecting information about actual risks. Spreads on risky private-sector debt reached very low levels, and damaging spillovers to the nonfinancial sector occurred in the form of unduly high real estate prices and excessive leverage by borrowers in the housing market. One of my predecessors at the Federal Reserve Board, Donald Kohn, has noted the seeming herd-like behavior of financial markets in the pre-crisis period that generated this situationâan "underpricing of risk."24 The financial crisis, and the deep recession that followed it, prompted changes in the United States' regulatory framework. These changes have been designed to make the financial system more resilient than it was before the crisis. By creating appropriate incentives and rules, they should also encourage financial markets to price risk more appropriately than they did in the years leading up to the crisisâfor example, by reducing the danger of investor complacency regarding the riskiness of their investments and the possibility of adverse scenarios. If we follow Hayek and regard the price system as like a telecommunications network, and then apply that metaphor to the financial sector, we can think of the institutional and regulatory changes to the financial system over the past decade as designed to improve the reliability and signal quality of the transmissions.25 How does all of this relate to the larger questions of philosophy and social order to which Hayek devoted much of his thought? Hayek's insights about the price system depend importantly on his theory of knowledge: The information that is available to us as a society is the aggregate of the highly dispersed and sometimes inarticulate knowledge possessed by each of us individually. It is not only hard to convey that information to a central authority for processing into a rational decisionâit is also conceptually impossible given the nature of that knowledge. And, indeed, important parts of that knowledge will not even be generated except through our interaction with each other through the mechanism of the market. Trying to centralize economic decisionmaking, then, is not just too hard to do as a practical matter. It would actually reduce the amount of knowledge available to us as a society, by replacing those myriad individual interactions in a free marketplace. Thus, even if some technological way to aggregate information other than through prices could be invented, it would lead to less efficient, less humane outcomes because it would be based on less total human information. The price mechanism, then, is not just a matter of economicsâit is a matter of social and, indeed, civilizational progress. As Hayek says in The Constitution of Liberty, "[C]ivilization begins when the individual in pursuit of his ends can make use of more knowledge than he himself acquired and when he can transcend the boundaries of his ignorance by profiting from knowledge that he himself does not possess."26 I think this ties together the various threads of Hayek's thought throughout a long life: his early work on psychology ("How do we know?"), his later epistemology ("What do we know, and what does it mean to know it?"), his economics ("How do we make knowledge usable?"), and his social and political theory ("What institutions will ensure that the greatest amount of human knowledge will be usable in the pursuit of their human fulfillment?"). Contrary to those polemicists across the ideological spectrum whose tendentious simplifications of Hayek's thought would turn him into a crude icon rather than a complex thinker, this is a deeply human, and a deeply humane, project. I will look forward to the contributions of the others you will hear from today in how Hayek elaborated it and how we can further these principles today. Economic Outlook and Monetary Policy Now I would like to turn to the current economic scene and this week's FOMC decision. Let me start by saying that the U.S. economy is doing well, and I am optimistic about the outlook. Economic conditions are currently very close to meeting ourâthat is, the FOMC'sâdual-mandate objectives of maximum sustainable employment and price stability. A particular source of strength has been the labor market. Setting aside the monthly volatility and, specifically, the effects of the recent strike at General Motors, labor market indicators are as strong as they have been in quite some time. The unemployment rate has been running near a 50-year low, and the proportion of the population currently employed is close to its highest level in a decade. Encouragingly, labor force participation has held up, as the tight labor market has motivated workers to either join or remain in the labor force, halting, at least for the time being, a long-standing downward trend. Although the pace of job gains has slowed this year, we expected some deceleration because of how low the unemployment rate has fallen. A strong job market and high employment have in turn supported economic growth. Personal consumption expenditures (PCE) grew 2-1/2 percent over the past four quarters, a healthy pace by historical standards and a major contributor to overall growth since consumption represents over two-thirds of economic activity. Because the labor market remains tight, I expect wage growth to pick up, which would then in turn underpin further strength in consumption and overall growth. For the other half of our mandate, inflation as measured by the PCE index was 1.3 percent over the 12 months ending in September, while core PCE inflation, which excludes increases in the prices of food and energy, was 1.7 percent. While these readings are below our 2 percent inflation objective, they are fairly close, and my assessment is that inflation will inch toward our objective in the coming months. Outside the near term, I am also optimistic about the longer-term potential of the U.S. economy. I am heartened by a recent pickup in labor productivity growth. A notable development of the post-crisis period has been the abysmal pace of labor productivity growth. After averaging about a 2-1/4 percent pace in the two decades leading up to the crisis, labor productivity growth has been closer to 1 percent, on average, since 2011. While there has been much speculation, it remains to be seen what has driven this slowdown. Consequently, the slowdown could resolve unpredictably. Although the quarterly data are volatile, I have been encouraged by a pickup in labor productivity in the first half of this year, when it grew at a 3 percent annual rate. Further out, I admit to being a bit of techno-enthusiast, and I see the potential for many emerging technologies, including 5G communications, artificial intelligence and machine learning, and 3-D printing, to further boost productivity growth in the coming years. Having established my optimism, I will now circle back to some more worrying signs in the recent data that suggest some headwinds are holding back growth. One prominent factor weighing on a relatively robust domestic economy has been weak growth among our trading partners. The International Monetary Fund projects that global economic growth in 2019 will be the slowest since the financial crisis. Partly as a consequence of weak foreign growth, U.S. exports have been flat over the past year. Another weak spot has been investment. After a strong 2017 and start to 2018, business fixed investment has tailed off this year and fallen outright in the second and third quarters. I find the weakness of investment to be of particular concern because increasing investment and the capital stock are important for raising the potential capacity of the economy. It is likely that some of the weakness in capital spending is a result of elevated uncertainty, for foreign growth generally but also specifically for trade developments. Against this backdrop, at our meeting earlier this week, we decided to lower our target range for the federal funds rate for the third time this year. We took this action to help keep the U.S. economy strong in the face of global developments and to provide some insurance against ongoing risks. By lowering the federal funds rate this year, we are supporting the continued expansion of the economy. Overall, with these policy adjustments, I believe that the economy will remain in a good place, with the labor market remaining strong and inflation staying close to our 2 percent objective. We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy continues to be broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2 percent objective. References Arrow, Kenneth J., B. Douglas Bernheim, Martin S. Feldstein, Daniel L. McFadden, James M. Poterba, and Robert M. Solow (2011). "100 Years of the American Economic Review: The Top 20 Articles," American Economic Review, vol. 101 (February), pp. 1â8. Arrow, Kenneth J., and Gerard Debreu (1954). "Existence of an Equilibrium for a Competitive Economy," Econometrica, vol. 22 (July), pp. 265â90. Bernhofen, Daniel M., and John C. Brown (2004). "A Direct Test of the Theory of Comparative Advantage: The Case of Japan," Journal of Political Economy, vol. 112 (February), pp. 48â67. Board of Governors of the Federal Reserve System (2019). "Minutes of the Federal Open Market Committee, July 30â31, 2019," press release, August 21. Brainard, Lael (2019). "Digital Currencies, Stablecoins, and the Evolving Payments Landscape," speech delivered at "The Future of Money in the Digital Age," a conference sponsored by the Peterson Institute for International Economics and Princeton University's Bendheim Center for Finance, Washington, October 16. Brunnermeier, Markus K., Harold James, and Jean-Pierre Landau (2019). "The Digitalization of Money," paper presented at "The Future of Money in the Digital Age (PDF)," a conference held at the Peterson Institute for International Economics, Washington, October 16. Caldwell, Bruce (2004). Hayek's Challenge: An Intellectual Biography of F.A. Hayek. Chicago: University of Chicago Press. âââ (forthcoming). "The Road to Serfdom after 75 Years," Journal of Economic Literature. Cassidy, John (2000). "The Price Prophet," New Yorker, February 7, pp. 44â51. Dasgupta, Partha (1980). "Decentralization and Rights," Economica, vol. 47 (May), pp. 107â23. Fernández-Villaverde, Jesús, and Daniel Sanches (2019). "Can Currency Competition Work?" Journal of Monetary Economics, vol. 106 (October), 1â15. Friedman, Milton (1977). "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, vol. 85 (June), pp. 451â72. Friedman, Milton, and Rose Friedman (1980). Free to Choose: A Personal Statement. New York: Harcourt Brace Jovanovich. Hayek, Friedrich A. (1935). Prices and Production, 2nd ed. London: G. Routledge and Sons. âââ (1944). The Road to Serfdom. Chicago: University of Chicago Press. âââ (1945). "The Use of Knowledge in Society," American Economic Review, vol. 35 (September), pp. 519â30. âââ (1960). The Constitution of Liberty. Chicago: University of Chicago Press. âââ (1976). "Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies," Hobart Paper 70. London: Institute of Economic Affairs, October. Kohn, Donald L. (2009). "Comments on 'Financial Intermediation and the Post-Crisis Financial System,' " speech delivered at the Eighth BIS Annual Conference 2009, Financial System and Macroeconomic Resilience: Revisited, Basel, Switzerland, July 10. Krugman, Paul (2011). "Things That Never Happened in the History of Macroeconomics," New York Times, The Conscience of a Liberal (blog), December 5. Lucas, Robert E., Jr. (2004). "Keynote Address to the 2003 HOPE Conference: My Keynesian Education," History of Political Economy, vol. 36 (supplement), pp. 12â24. Mankiw, N. Gregory (2017). "N. Gregory Mankiw: America's Economy and the Case for Free Markets," Conversations with Bill Kristol, interview, April 9, YouTube video, 1:06:03, https://www.youtube.com/watch?v=QY4M6a56nFs. Myerson, Roger B. (2008). "Perspectives on Mechanism Design in Economic Theory," American Economic Review, vol. 98 (June), pp. 586â603. O'Driscoll, Gerald P., Jr. (1977). Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek. Kansas City, Mo.: Sheed Andrews and McMeel. Quarles, Randal K. (2019). "The Financial Stability Board at 10 YearsâLooking Back and Looking Ahead," speech delivered at the European Banking Federation's European Banking Summit, Brussels, October 3. Royal Swedish Academy of Sciences (1974). "Economics Prize for Works in Economic Theory and Inter-Disciplinary Research," press release, October 9. Samuelson, Paul A. (1983). "My Life Philosophy," American Economist, vol. 27 (Fall), pp. 5â12. Serrano, Roberto (2002). "Decentralized Information and the Walrasian Outcome: A Pairwise Meetings Market with Private Values," Journal of Mathematical Economics, vol. 38 (September), pp. 65â89. Smith, Adam (1776). An Inquiry into the Nature and Causes of the Wealth of Nations, 5th ed., Edwin Cannan, ed., 1930. London: Methuen and Co. Stiglitz, Joseph E. (2000). "The Contributions of the Economics of Information to Twentieth Century Economics," Quarterly Journal of Economics, vol. 115 (November), pp. 1441â78. Taylor, John B. (2012). "Why We Still Need to Read Hayek (PDF)," speech delivered at the Hayek Lecture, New York, May 31. Williamson, Oliver E. (2005). "The Economics of Governance," American Economic Review, vol. 95 (May, Papers and Proceedings), pp. 1â18. Woodford, Michael (2003). Interest and Prices: Foundations of a Theory of Monetary Policy. Princeton, N.J.: Princeton University Press. Yellen, Janet L. (2017). "Financial Stability a Decade after the Onset of the Crisis," speech delivered at "Fostering a Dynamic Global Economy," a symposium sponsored by the Federal Reserve Bank of Kansas City, held in Jackson Hole, Wyo., Aug. 24â26. 1. All of my remarks today represent my own views, which do not necessarily represent those of the Federal Reserve Board, the Federal Open Market Committee, or the Financial Stability Board. I would like to thank Ed Nelson for his assistance in preparing these remarks. Return to text 2. See, respectively, Cassidy (2000) and Krugman (2011). Return to text 3. See Hayek (1944, 1960). For an extensive analysis of these books, see Caldwell (2004) and, more recently, Caldwell (forthcoming). Return to text 4. See, for example, Hayek (1935). For an examination of this body of work, see O'Driscoll (1977). Return to text 5. See especially Hayek (1976). For recent formal investigations of the topic, see Brunnermeier, James, and Landau (2019) and Fernández-Villaverde and Sanches (2019). My Board colleague, Lael Brainard, has recently discussed the policy implications of electronic money. See Brainard (2019). The potential implications of privately issued currency in the form of stablecoins are under active consideration by the Financial Stability Board, which I chair, in work to be delivered to the Group of Twenty later next year. Return to text 6. See Hayek (1945). Return to text 7. See Royal Swedish Academy of Sciences (1974, paragraph 10). Return to text 8. See Arrow and others (2011, p. 4). Return to text 9. See Williamson (2005, p. 1). This discussion referred to Smith (1776) and Arrow and Debreu (1954) alongside Hayek (1945). Return to text 10. See Samuelson (1983, p. 6). Return to text 11. The quotation is from Hayek (1945, p. 521). Return to text 12. Hayek's analysis therefore differed from general equilibrium approaches to economic problems, exemplified by the work of Arrow and Debreu (1954). Such approaches tend to evaluate market outcomes in terms of their ability to reproduce the allocation decided on by a hypothetical social planner who possesses complete knowledge of all information in the economy and who is charged with maximizing the welfare of the community. Return to text 13. See Hayek (1945, p. 521). Return to text 14. See Mankiw (2017). Return to text 15. See Mankiw (2017). See also Taylor (2012, p. 1). Return to text 16. The process is interactive, with market participants not only influencing prices, but also responding to price signals. Return to text 17. See O'Driscoll (1977, p. 27). Return to text 18. See, for example, Serrano (2002). Return to text 19. For example, an article in the area of international trade noted (Bernhofen and Brown, 2004, p. 49): "The insight that prices contain the relevant information about underlying economic fundamentals goes back to the pioneering work of Hayek (1945)." Return to text 20. See Friedman (1977, pp. 456â67). The notion that distortions to relative-price patterns lead the economy's output level to deviate from its natural value would be formalized by Woodford (2003). Return to text 21. See Hayek (1945, p. 527), and, for Friedman's use of the analogy between inflation and static, see Friedman and Friedman (1980, pp. 17, 274). Return to text 22. Shortly before he received the prize, Stiglitz (2000, p. 1468) noted that the 1945 Hayek paper recognized that "the central problem of economics was a problem of knowledge or information"âand so it anticipated the field of the economics of information. And in his Nobel lecture, Myerson (2008, p. 586) credited Hayek's "widely influential paper" with helping spur mechanism-design researchâby characterizing alternative institutional frameworks as different mechanisms for "communicating widely dispersed information about the desires and the resources of different individuals in society." Return to text 23. For example, while Stiglitz (2000) agreed that the price system is a means of collecting and transmitting dispersed information, he took issue with the notion that this system always produced the most efficient economic equilibrium. Specifically, Stiglitz argued that incomplete information could lead to unnecessarily high unemployment and other undesirable outcomes that could be improved on by government intervention. In a similar vein, Dasgupta (1980, p. 115) noted in response to Hayek's (1945) position: "It can immediately be argued that the fact that much information is private is not on its own sufficient to warrant the unfettered play of market forces to be judged the best possible resource allocation mechanism." Return to text 24. See Kohn (2009). See also Yellen (2017, p. 4). Return to text 25. I recently discussed post-crisis reform to financial regulation in Quarles (2019). Return to text
7784	dbpedia	1	20	https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/hicks-john-r	en	Encyclopedia.com			[ "https://www.encyclopedia.com/themes/custom/trustme/images/header-logo.jpg" ]	[]	[]	[ "Hicks", "John R. 1904-1989\nBIBLIOGRAPHY" ]	null	[]	null	Hicks, John R. 1904-1989 BIBLIOGRAPHY Source for information on Hicks, John R.: International Encyclopedia of the Social Sciences dictionary.	en	/sites/default/files/favicon.ico		https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/hicks-john-r	Hicks, John R. 1904-1989 BIBLIOGRAPHY Sir John R. Hicks, a British economist and author of twenty books, was knighted in 1964 and received the 1972 Nobel Prize for his contributions to general equilibrium theory and welfare economics. After graduating from Oxford University in 1925, he taught at the London School of Economics (LSE), where he formulated concepts on the elasticity of substitution, relative income shares of labor and capital, and liquidity. At LSE Hicks came under the influence of Lionel Robbins and Friedrich Hayek but broke away from their thinking in his book The Theory of Wages (1932), in which he considered unions as monopolies in the sense of rigid wages in a discrimination setting. He joined Cambridge University (1935–1938), where he was swayed by John Maynard Keynes’s (1883–1946) writings. Afterward, he was chair of political economy at the University of Manchester. He became a fellow at Nuffield College, Oxford, in 1946 and was the Drummond Professor of Political Economy from 1952 until his retirement in 1965. Hicks continued his work in the areas of fixprice and flexprice markets, liquidity, and inventions. Hicks’s contributions stand out in the areas of applied economics, Keynesian economics, value theory, and technological progress. His method was to modify a theory to fit the facts. Facts are linked to events of the day and have a history that can become dramatic at times. According to Hicks, these dramatic facts are like blinkers waiting to be simplifed, theorized about, and selected to explain topical events. Hicks continually revised his theories because economic facts are less permanent and less repeatable than facts in the natural sciences. Hicks viewed welfare economics as an application of demand theory, focusing on efficient and optimal cost and use of the social product. An efficiency test for welfare benefits tells us how to acquire more of one thing without having less of another thing. Demand theory makes sure that what we are getting more of is not detrimental. A welfare optimum may not be attained in a market with uniform prices, making room for cost-benefit analysis. Hicks’s IS and LL curves represent Keynes’s ideas of equilibrium in the goods and money markets, respectively. Alvin Hansen later suggested the label LM for LL (Hansen 1953, p. 144). Darity and Young (1995, pp. 1–14, 26–27) clarified that Hansen’s contribution emphasized one sector, while Hicks’s contribution emphasized two sectors. Hicks developed a four-equation system representing liquidity preference, M = L (r, Y ); investment, I = I (r, Y ); savings, S = S (r, Y ); and saving-investment equilibrium, S = I, where M is money, I is investment, S is savings, Y is income, and r is the rate of interest. The first equation yields the LM curve. If the interest rate rises, the alternative cost of holding money relative to other assets becomes higher, lowering the demand for money. A rise in income will increase the demand for money. The other three equations yield the IS curve, which shows how income and interest rates adjust to make savings equal to investments. By making unsold inventories depend on the future, the model accommodates short period expectations. In the short term, such as a day, expectations do not change, so the condition for saving to equal investment in the model is achieved. The IS-LM curves can take on special shapes that would prevent automatic adjustments from occurring. Hicks later thought that the IS curve represents a flow concept, and the LM curve, a stock concept. In his Capital and Growth (1965), he proceeded to show that a stock equilibrium over a period would require a flow equilibrium over that period. Hicks argued against the cardinal view, where utility is added, and for the ordinal view of value, where consumers rank their tastes and preferences. Alfred Marshal and the founders of the marginal revolution examined value with a given utility function. They required a utility surface for consumer maximization. Hicks’s value theory examined “what adjustments in the statement of the marginal theory of value are made necessary by Pareto’s discovery” (Hicks 1981, p. 7). Vilfredo Pareto postulated a scale of preferences concept, which represented value only by indifference curves. Hicks transformed the cardinal concept of total utility to the marginal rate of substitution between two commodities on an indifference curve. Similarly, he transformed the idea of diminishing marginal utility to diminishing marginal rate of substitution measured by the convex shape of the indifference curve. Following Hicks’s work, comparative static analysis that allows prediction from demand analysis can be performed. One of his predictions states that if demand shifts from good 1 to good 2, then the relative price of 2 in terms of 1 would increase, except if 2 is a free good. On the technology side, Hicks classified inventions as neutral, labor saving, or capital saving. When inventions change the marginal productivity of labor and capital in the same proportion, the invention is called neutral. Hicks predicted that if wages increase, labor’s share of output would rise, and that would encourage inventions to replace labor, making them labor saving. In an analogous manner, the same can be argued for capital-saving inventions. In general, when changes in relative prices of factors occur, they induce inventions; otherwise inventions are autonomous. Autonomous inventions are likely to be randomly distributed, while induced inventions are likely to be labor saving. SEE ALSO Capital; Economics; Economics, Keynesian; Economics, Nobel Prize in; IS-LM Model; Technological Progress, Economic Growth; Utility, Subjective; Value; Value, Subjective; Welfare Economics BIBLIOGRAPHY Darity, W., and W. Young. 1995. IS-LM: An Inquest. History of Political Economy 27 (1): 1–41. Hansen, Alvin H. 1953. A Guide to Keynes. New York: McGraw-Hill. Hicks, John R. 1932. The Theory of Wages, 2nd ed. London: Macmillan, 1963. Hicks, John R. 1937. Mr. Keynes and the Classics: A Suggested Simplification. Econometrica (April): 147–159. Hicks, John R. 1939. Value and Capital : An Inquiry into Some Fundamental Principles of Economic Theory, 2nd ed. Oxford: Clarendon Press, 1946. Hicks, John R. 1956. A Revision of Demand Theory. Oxford: Clarendon Press. Hicks, John R. 1965. Capital and Growth. New York: Oxford University Press. Hicks, John R. 1980. IS-LM: An Explanation . Journal of Post Keynesian Economics 3 (2): 139–154. Hicks, John R. 1981. Wealth and Welfare. Vol. 1 of Collected Essays in Economic Theory. Oxford: Basil Blackwell. Hicks, John R. 1982. Money, Interest and Wages. Vol. 2 of Collected Essays in Economic Theory. Oxford: Basil Blackwell. Hicks, John R. 1983. Classics and Moderns. Vol. 3 of Collected Essays in Economic Theory. Oxford: Basil Blackwell. Hicks, John R., and R. G. D. Allen. 1934. A Reconsideration of the Theory of Value. Economica 1: 52–76. Lall Ramrattan
6656	dbpedia	2	7	https://www.amazon.co.uk/Fury-At-Smugglers-Bay-DVD/dp/B00009P9O9	en		https://m.media-amazon.c…CB600084585_.png		[ "https://fls-eu.amazon.co.uk/1/batch/1/OP/A1F83G8C2ARO7P:260-6363244-1234635:ZPWQ618RMXY1TBHA34SY$uedata=s:%2Frd%2Fuedata%3Fstaticb%26id%3DZPWQ618RMXY1TBHA34SY:0", "https://m.media-amazon.com/images/G/02/gno/sprites/nav-sprite-global-1x-reorg-privacy._CB600084585_.png", "https://m.media-amazon.com/images/I/41LcKO8z6ML.jpg", "https://m.media-amazon.com/images/I/51NIqJgPruL.__AC_SX300_SY300_QL70_ML2_.jpg", "https://m.media-amazon.com/images/I/51NIqJgPruL._AC_SR38,50_.jpg", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/transparent-pixel._V192234675_.gif", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/grey-pixel.gif", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/grey-pixel.gif", "https://images-eu.ssl-images-amazon.com/images/S/amazon-avatars-global/default._CR0,0,1024,1024_SX48_.png", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/grey-pixel.gif", "https://images-eu.ssl-images-amazon.com/images/S/amazon-avatars/default._CR0,0,1024,1024_SX48_.png", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/grey-pixel.gif", "https://images-eu.ssl-images-amazon.com/images/S/amazon-avatars-global/default._CR0,0,1024,1024_SX48_.png", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/grey-pixel.gif", "https://images-eu.ssl-images-amazon.com/images/S/amazon-avatars-global/default._CR0,0,1024,1024_SX48_.png", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/grey-pixel.gif", "https://images-eu.ssl-images-amazon.com/images/S/amazon-avatars-global/12e90829-69fc-4389-b250-339c04e5b6fb._CR0,20.0,292,292_SX48_.jpg", "https://images-na.ssl-images-amazon.com/images/G/01/x-locale/common/grey-pixel.gif", "https://images-eu.ssl-images-amazon.com/images/S/amazon-avatars/9f8c14c2-6ac9-4c36-9470-cddf009f14e0._CR0,0,212,212_SX48_.jpg", "https://m.media-amazon.com/images/G/02/personalization/ybh/loading-4x-gray._CB485916908_.gif", "https://fls-eu.amazon.co.uk/1/batch/1/OP/A1F83G8C2ARO7P:260-6363244-1234635:ZPWQ618RMXY1TBHA34SY$uedata=s:%2Frd%2Fuedata%3Fnoscript%26id%3DZPWQ618RMXY1TBHA34SY:0" ]	[]	[]	[ "" ]	null	[]	null		en			null	Select your cookie preferences We use cookies and similar tools that are necessary to enable you to make purchases, to enhance your shopping experiences and to provide our services, as detailed in our Cookie notice. We also use these cookies to understand how customers use our services (for example, by measuring site visits) so we can make improvements.
6656	dbpedia	0	14	https://www.derekwinnert.com/fury-at-smugglers-bay-1960-peter-cushing-john-fraser-bernard-lee-william-franklyn-june-thorburn-miles-malleson-michele-mercier-george-coulouris-liz-fraser-classic-movie-revie/	en	Fury at Smugglers’ Bay *** (1961, Peter Cushing, John Fraser, Bernard Lee, William Franklyn, June Thorburn, Miles Malleson, Michèle Mercier, George Coulouris, Liz Fraser) – Classic Movie Review 4175	https://www.derekwinnert…s/2016/08/1F.jpg	https://www.derekwinnert…s/2016/08/1F.jpg	[ "http://derekwinnert.com/wp-content/uploads/2013/03/derekwinnert12.png", "http://derekwinnert.com/wp-content/uploads/2016/08/1F-300x224.jpg", "http://derekwinnert.com/wp-content/uploads/2016/08/2F.jpg", "http://derekwinnert.com/wp-content/uploads/2013/03/derekwinnert2.png" ]	[]	[]	[ "" ]	null	[]	2016-08-15T09:20:37+00:00	Writer-director John Gilling’s fun 1961 period adventure stars Peter Cushing as a Cornish squire who tries to keep the smugglers at bay. Gilling’s British sea saga about a gang of shipwreckers’ rei…		https://www.derekwinnert.com/wp-content/themes/suburbia/images/favico.ico	Derek Winnert	https://www.derekwinnert.com/fury-at-smugglers-bay-1960-peter-cushing-john-fraser-bernard-lee-william-franklyn-june-thorburn-miles-malleson-michele-mercier-george-coulouris-liz-fraser-classic-movie-revie/	Writer-director John Gilling’s fun 1961 period adventure stars Peter Cushing as a Cornish squire who tries to keep the smugglers at bay. Gilling’s British sea saga about a gang of shipwreckers’ reign of terror in 1790 is bright, lively and colourful. It is propelled by the jovial acting turns from Cushing, young Fraser as Cushing’s son Christopher Trevenyan, Lee as the chief pirate Black John and William Franklyn as a daring highwayman known as The Captain, as well as Gilling’s sprightly direction with a fast pace and a good smuggling atmosphere. All that brightens this close relative of Jamaica Inn, and it’s no worse than Hitchcock’s movie Jamaica Inn, based on Daphne Du Maurier’s novel. Squire Trevenyan has three main problems to overcome. (1) Black John knows Trevenyan’s darkest secret so what can the Squire do against the pirate’s ship wrecking and smuggling spree? (2) Then his son Christopher falls in love with Louise Lejeune (Michèle Mercier), the pretty daughter of a smuggling local merchant. (3) And finally there is the pesky villain called The Captain hwo is robbing any stagecoach that travels through his Cornish territory. Also in the cast are June Thorburn as Jenny Trevenyan, Miles Malleson as the Duke of Avon, George Coulouris as François Lejeune, Liz Fraser, Tom Duggan, Katherine Kath, Humphrey Heathcote, Maitland Moss, Christopher Carlos, Alan Browning, Patrick Diamond, James Liggat, Bob Simmons and Jouma. © Derek Winnert 2016 Classic Movie Review 4175
6656	dbpedia	0	43	http://www.toplessreview.altervista.org/RareFilms8.htm	en	Rare Film Reviews M			[]	[]	[]	[ "" ]	null	[]	null					null	Joseph Rearden is an American agent who is assigned to work with British intelligence. He travels to London and meets at the undercover offices of MI5 chief Mackintosh. Rearden is briefed on his assignment by Mackintosh and his secretary Mrs Smith, a young French woman who has Mackintosh's complete trust. Rearden is to intercept a consignment of diamonds being sent incognito via the regular mail. His job is to waylay the postman and make it seem like a mugging then pass the package discreetly to Mrs Smith. Rearden achieves his objectives and is getting ready to return home when the police come to arrest him after receiving an anonymous tip off. Rearden has false papers for his cover identity and cannot prove who he really is. He is tried in the courts and sentenced to twenty years imprisonment for robbery with violence. Chelmsford Prison is a high security institution and included amongst its many inmates is Ronald Slade, a communist sympathiser who spied for the Russians. After many months of incarceration Rearden is approached by an inmate named Soames-Trevelyan who informs Rearden he represents a network known as the Scarpers who can break anyone out of prison for a suitably large fee. They will guarantee to get that person out of the country and to a place of safety and have a 100% record of successes. Ronald Slade is going to be liberated by the Scarpers very soon and Rearden is offered a place too. Rearden agrees and arranges the payment from his secret bank account. The operation is meticulously planned and during an arranged diversion in the courtyard, Rearden and Slade are hoisted over the wall on a crane and sped away by motorbikes and into a van. They are rendered unconscious with drugs so that they don't learn of the secret destination where they will be held for several weeks until the police search dies down. When Rearden next wakes he finds himself in a country manor house at an unknown location. He meets country squire Brown who masterminds the operation. The escape of the traitor Slade is big news and very embarrassing for the government. Rearden's simultaneous escape is just a minor footnote to the story. Opposition MP Sir George Wheeler is a fierce opponent of the government's security policies and makes plenty of reactionary political capital over their latest appalling blunder. Sir George and Mackintosh are old friends who served in the war together. Mackintosh takes Sir George discreetly aside and tells him that for the sake of their friendship he is breaking security and advising him that the recent escape was a planned operation and Slade's co-escapee is a planted agent whose assignment is to penetrate the organisation arranging the prison escapes. Mackintosh wishes to avoid Sir George the embarrassment of having to later retract his harsh criticisms when it is revealed that whole affair was orchestrated. Mackintosh confirms the operation is highly secret and no one besides himself knows that Rearden is really an undercover agent. Very soon after that Rearden finds that his cover has been unaccountably blown and Squire Brown holds him prisoner and tortures him for information on who else knows about the operation. Rearden confirms that only Mackintosh knows the truth. Soon afterwards Mackintosh is the victim of a hit-and-run driver and is rushed to hospital where he remains unconscious in a coma. Rearden manages to escape from the manor house and discovers he is in Ireland. He phones Mackintosh's office and speaks to Mrs Smith who tells him about Mackintosh's accident. Mrs Smith knows all about the operation too and tells Rearden she will fly to Ireland and meet him. When she arrives she tells Rearden that Mackintosh has left a letter to be opened in the event of his death which will tell the prime minister of Rearden's innocence and the full details of the operation. She also reveals that Mackintosh is her father who had met her French mother during the war and that is why he trusts her so implicitly. She cannot figure out how Rearden's cover was blown because security was watertight with only the three of them knowing about it. She knows that on the day of his accident Mackintosh had been to see his old friend Sir George Wheeler at the Houses of Parliament but there was nothing remarkable about that. The worst thing about the failed operation is that now Slade is at large and the plan had always been for him to be recaptured or killed. Then they discover that the very same Sir George Wheeler is holidaying in Ireland on his yacht and they realise with a shock that he must be part of the lucrative Scarper gang with his yacht used to pick up the escapees and ferry them to a safe haven - Slade is probably currently secretly on board pending transportation to Wheeler's next destination. It becomes obvious that Mackintosh must have suspected his friend of being corrupt and deliberately broken security to prove it - although Mackintosh clearly didn't reckon on being targeted himself. Rearden and Mrs Smith follow Sir George to Malta where he is supposedly reviewing the British troops and holding a gala party on his yacht. Rearden tries to convince the local Maltese police to search Sir George's boat for the convict, but Sir George is such a well-respected, regular visitor to these parts that the police laugh off the crazy allegations. Mrs Smith joins the party and goes aboard the yacht herself to try to confirm Slade is present - but she is captured by Sir George who still believes he can contain the situation if he disposes of her and Rearden. Then word comes through that Mackintosh has died and Sir George knows that the incriminating letter will be released and there is no way back for him other than into prison. So he will have to avail himself of his own escape route to a foreign clime. Rearden comes to rescue Mrs Smith and there is a standoff with Sir George holding Mrs Smith hostage. Sir George negotiates with Rearden that he will release Mrs Smith if he and Slade are allowed to leave. Rearden agrees and is a man of his word. But as soon as Mrs Smith is free she picks up a gun and cold-bloodedly shoots Sir George and Slade dead as they are leaving as avengement for the death of her father. Valerie Marshall is an unmarried single mother with a young baby. She lives in a flat with her mother who is housebound with multiple sclerosis and increasingly dependent on Valerie. Valerie also holds down a job as a telephone exchange operator where she works with her friend June. Valerie takes her responsibilities seriously but has little joy in her life. A newly appointed parish priest called Father Dyson with a proactive approach to his pastoral duties pays her a visit to see how she and her mother are coping. He offers to arrange some care help for Mrs Marshall and to give Valerie a break he invites her to accompany him as a supervisor on an organised trip of the church youth club to Brighton. Valerie and baby Scott have their day out in Brighton and while walking around she sees a outdoor event where a pop star is being interviewed for a radio show. His name is Mike Preston a hippy singer known for some outspoken views on society and his disbelief in any kind of god. She finds herself in agreement with some of the things he says. Later on while she is sitting on the beach Mike happens to be walking by and they get talking and find they have an empathy on their viewpoints on relationships - she is touched by his caring nature and he remarks on her love for her little baby saying she should be happy because the baby's happiness depends on hers. They go back to his hotel room and sleep together and she feels she has found in him a kindred emotional spirit. But Mike's busy promotional tour means has to move on and she returns home to her dull life. Once she gets home she finds her mother has taken a turn for the worse and has been taken to hospital. Valerie feels trapped by her circumstances and her mother makes her feel guilty for trying to have a life of her own and not being there for her. During this period of hospitalisation tragedy strikes when Valerie's friend June is caught up in a football supporter's riot while looking after Valerie's baby whilst she is at the hospital - the rioters accidentally tip baby Scott's pram and he is killed. Valerie tries to carry on with her traumatised life and sometime soon after Mike the pop star comes back into her life when he is nearby on a local leg of his tour. His compassionate and sympathetic nature is comforting for her. She gets a call from the reverend to come to the hospital to be with her mother but she delays going to be with Mike for longer as she knows her mother always seems to be at death's door and pulls through. But this time her mother does die while she was having fun with Mike and she feels terrible. Mike soon has to go away again and she has no idea if he will ever come into her life again. She now has no one to care for and responsible to no one but herself but seems unable to snap out of her reverie and change her humdrum life in any way. Some time later she is doing some ironing and the new song by Mike Preston is played. It is called "The Social Casualty" and as the lyrics progress they touch a sad melancholy chord with her and then the chorus mentions her by name with sentiments like "Valerie's future left her behind" and lines about a baby's tragic death and death of a mother and she realises the song is about her - he has totally captured the sadness and desperation of her life and she breaks down into floods of tears. As the film end we leave her contemplating the lyrics. An animated director introduces and links a series of comedy sketches that he has made all of which follow the themes of the Seven Deadly Sins. Avarice (by: John Esmonde and Bob Larbey) 13 mins Starring: Bruce Forsyth (as Clayton) Clayton the chauffeur works for a mean, penny pinching boss. When Clayton spots a dropped 50p on the street his boss insists it is his and when Clayton accidentally drops it down a drain he makes Clayton go down into the sewers to find it. Envy (by: Dave Freeman) 13 mins Starring: Harry Secombe (as Stanley) The wife of a newly rich football pools winner Stanley fancies buying a house she likes the look of. But it is not up for sale so she tells Stanley to go and make the owners an offer but they are not selling at any price. So Stanley dresses up in various disguises inventing all sorts of reasons why they should move but all his efforts are in vain. Until eventually Stanley gets a mock newspaper printed saying a motorway is being built through their house - and this persuades the owners to eagerly sell their idyllic property. But on the day Stanley and his wife move in the bulldozers arrive and the motorway story turns out to be true. Gluttony (by: Graham Chapman and Barry Cryer) 17 mins Starring: Leslie Phillips (as Dickie Clements), Julie Ege (as Ingrid Fenton) Dickie Clements is the advertising manager of a slimming products company that likes its staff to use its products and appear slim and healthy. Dickie makes a show of eating only slimming biscuits but in fact has a veritable feast of snacks secreted away in his office. He overdoes it and the company doctor puts him on a strict diet of two slimming biscuits a day. So when he is invited round to his managing director Ingrid Fenton's house for dinner (and probably a bit of the other too if he's lucky!) he is not officially able to sample her sumptuous meal - but manages to sneak most of it while she is out of the room. He collapses with heartburn and the company doctor arrives and all the goodies get taken by him whilst Dickie is laid up in bed. Lust (by: Graham Stark, from a story by Marty Feldman) 16 mins Starring: Harry H. Corbett (as Ambrose Twombly) Ambrose is fed up with having no success with women and is making a concerted effort to go out this evening and pull. He decides to go to a train station and chat up any girl who gets stood up. The one he least fancies remains but he decides he can't be choosy so when she goes to a phone-booth to make a call he gets into the one beside her and phones her booth pretending to be a wrong number. They get chatting and with his foreknowledge of things he can see about her he is able to dazzle her with some inspired guesses. She is impressed enough to agree to meet up with him - only one problem she says:- she first has to get rid off this repulsive man in the next booth who keeps looking at her! Pride (by: Alan Simpson and Ray Galton) 15 mins Starring: Ian Carmichael (as Mr Ferris), Alfie Bass (as Mr Spencer) Two cars are travelling in opposite directions down a narrow country lane with no room to pass alongside each other. Ferris and Spencer come from different ends of the class spectrum with cars to match and reach a stubborn impasse on who has the right of way. Eventually a policeman settles it for them with a toss of a coin and lower-class Spencer is chosen to reverse. Pleased with his victory Ferris asks the policeman for directions to his destination and finds he has taken a wrong turn and needs to reverse his car anyway. Sloth (by: Spike Milligan) 9 mins Starring: Spike Milligan (as a Tramp) A series of mini-incidents in which people are too lazy to do anything for themselves and wait for someone else to do it for them instead. Wrath (by: Barry Cryer and Graham Chapman) 13 mins Starring: Ronald Fraser (as George), Stephen Lewis (as Jarvis) Retired army captain George is a regular user of his local park with his friend Kenneth but they are hounded by the park keeper Jarvis who enforces all the park's rules to petty extremes. So they scheme to kill him but all their elaborate efforts come to nought as Jarvis manages, through continued unknowing good fortune, to avoid all the pitfalls prepared for him. Eventually George and Kenneth mine the gents lavatory and lure Jarvis inside - but they get killed in the blast themselves. Now sitting in Heaven they feel at last free of petty rules until also-dead Jarvis turns up still enforcing the rules in the new place and reveals it is in fact Hell. Eric and Ernie are two travelling salesmen who specialise in toy soldiers. They are on their way by train to the small town of Camp Grande in the South American state of Parazvellia where they hope to try their luck selling their merchandise. Unbeknown to them also on the train is a revolutionary hero of Parazvellia called Fernando Torres returning home after a long absence in England to help free his country from the current president's corruption. Torres' mode of dress and general appearance are flukishly similar to Eric's. Government forces learn that Torres is trying to return and start searching the train and whilst trying to evade them Torres falls from the train to his death. When Eric and Ernie arrive in Camp Grande the revolutionary bandit waiting for Torres assumes that Eric is their man and is a bit puzzled by his strange behaviour and his unexpected companion. Eric and Ernie are equally puzzled why a complete stranger keeps saying the word "Torres" to them and assume it must be a local form of greeting. Eric and Ernie soon find themselves in the middle of a firefight between police and bandits and when it is over the police arrest the hapless pair on suspicion of being possible rebel collaborators. Meanwhile the Red Star Rebel's military commander, Carillo, and his deputy, General Carla Marin, discover Torres' dead body by the railway tracks. This is a devastating blow to their movement because Torres was the son of a former great president and was therefore an inspirational figure whose return was going to signal the birth of a new era. But then they receive a bizarre report from their man at the railway station that Torres has been arrested by the police. It seems clear that the arrested man is a dead ringer for the real Torres and Carillo figures that he may be of use to them. So Carillo organises a raid on the police station and liberates Eric and Ernie. Only Carillo and Carla know the truth and they allow everyone else to think Eric is the real Torres home at last. Carillo offers Eric a large fee for impersonating Torres and performing certain presidential duties once they have taken over. Eric thinks it all sounds a bit dangerous and is ready to decline until he meets the gorgeous Carla and suddenly he is all keen to do it to impress her. Eric and Ernie are both wowed by the women in the revolutionary camp who share all facilities with the men including the showers. Carla is the commander of the women's army and does not see why the women should get any special treatment because they are all in the struggle for freedom together. The rebels launch their surprise attack on the city and take over. President Diaz goes into hiding and his location is unknown. His three young children are captured by the rebels but they refuse to say where their father has gone. In his role as the new "president", Eric is asked to make a live television broadcast announcing the intentions of the new republic and Carillo supplies an autocue with the exact script he must follow. But during the broadcast the autocue fails and in panic Eric begins improvising and makes generous pledges that delight the citizens but flabbergast Carillo and his cabinet. The rash promises made by "Torres" cannot be afforded and would bankrupt the country and Carillo realises that Eric has become a liability and it would be best if he were disposed of. But Carillo knows Carla is fond of Eric and he still needs the support of her and the forces she commands, so he devises a convoluted plan to trick them both. Thusly Carillo persuades Carla to seduce Eric into agreeing to help stage his own fake assassination at a public event. Carla tells Eric that once "dead" he will be secretly smuggled away and can return home with his promised fee. Eric agrees to go along with it because it is Carla asking him. He is told the assassin's bullet will be a blank and Eric should fall to the ground and play possum when he hears the noise. But what Carillo has not told Carla is that the bullet will actually be deadly real. Eric is formally dressed by Juan who was once dresser to Torres' father and he outfits Eric in the same formal attire that the great President always wore in public. Eric attend the public event and when the shot comes Eric goes down hard from the impact of a real bullet. He is pronounced dead by a stooge doctor as planned but it seems to his puzzled friends that he is not faking it when he cannot later be roused. Carla realises that Carillo tricked her and knows that he has become dangerous and they have replaced corruption with tyranny. Ernie privately mourns his friend's death until he discovers that Eric is not dead after all because Juan had dressed him in a bulletproof vest as he always routinely did for Torres' father. Instead the impact had merely knocked Eric out cold for a time. Carla helps Eric and Ernie get away from the presidential palace and asks them to take with them the ex-President Diaz's children who are themselves due to be executed. But their car breaks down on the way and the children decide to lead them to a place of safety. It is an old army museum in the country where their father is secretly hiding with a small number of his trusted men. But Carillo is able to track them and sends his forces in pursuit triumphant that soon he will be able to capture the ex-president too. Ernie puts to good use the tactics he has picked up playing toy soldiers and organises a defence using the old museum equipment. This holds Carillo's forces off for a while but they eventually storm the museum and take everyone prisoner. Meanwhile Carla has been alerted that the president's children are in danger and sends her women's forces to engage Carillo's men. The men are more heavily armed and in a better defensive position and Carillo scoffs at Carla's defiance knowing his men can mow Carla's forces down with ease. But Carla knows this too and decides to employ a highly atypical tactic. She orders all her women to strip off and march upon the museum dressed only in their skimpy underwear. The male soldiers whoop and holler as they ogle the fantastic display of female flesh and refuse to shoot at sexy half-naked women despite Carillo's increasingly frenzied orders that they do so. By exploiting this male weakness Carla's women quickly take over and arrest Carillo and save Eric, Ernie and the children. Carla is installed as the new president and vows to her people that she will oversee a new age of peace and justice for all - most especially for women in the newly-named Women's' Republic of Parazvellia. Eric and Ernie decide to stick around and join the women's army knowing when they are on to a good thing! Nicholas Urfe is a teacher who has come to the Greek island of Phraxos to take up a teaching post at a small local school. He has just ended a relationship with a French air stewardess called Anne because she wanted a greater commitment than he could bring himself to offer. He is escaping from the responsibilities he does not feel ready to assume in an effort to try and rediscover himself. Whilst out walking in the woodlands Nicholas comes across a villa that at first seems deserted but then he is greeted by the white-haired owner who introduces himself as Maurice Conchis and tells Nicholas he has been expecting him. Conchis claims to be a psychic and everything about him is mysterious. He invites Nicholas to stay the following weekend and Nicholas is intrigued enough to agree. Before his return to the villa Nicholas does some research on Conchis only to discover that the man is listed as having died in 1944. When Nicholas quizzes Conchis about this he only gets vague answers. Conchis tells Nicholas about his first sweetheart called Lily who died during the First World War while working as a nurse. Soon after that Nicholas begins to see a mysterious woman whom Conchis tells him is Lily's ghost keeping an eye on him although Nicholas finds this claim far-fetched. Nicholas soon discovers that in this villa things are never as they appear and Conchis' ghostly tales were just a small deception for some harmless amusement. Conchis now reveals he is in fact a psychiatrist and "Lily" is his patient whose real name is Julie and the playacting is part of her treatment. However when Nicholas speaks to Julie alone she tells him an entirely different story. She is an actress who was hired by Conchis to be in a movie which would be made in a unique way with all the cameras hidden whilst she improvised her way through a loose storyline. Nicholas finds himself attracted to Julie and wants to see more of her. When Nicholas asks Conchis to tell him the real truth about what is going on the older man tells him that Julie's actress story is one of the many delusions for which she is receiving treatment. Conchis tells Nicholas about a key incident in his life when his island was occupied by a Nazi garrison during the Second World War and Conchis found himself being appointed as town mayor. When some partisans killed a group of German soldiers the garrison commandant rounded up eighty local Greeks to kill in retribution even though the culprits were caught. Conchis was forced to help interrogate the partisans in an attempt to save his innocent brethren. But it was to no avail and the eighty men were killed anyway and Conchis was branded a German collaborator. This incident shaped Conchis and was the reason he had to fake his death and start anew all those years ago. Eventually Nicholas is forcefully drugged by Conchis and finds himself in a kind of courtroom where he discovers that everything that has been happening to him and all the people he has met on the island are actors playing a role. Conchis is a millionaire and for the amusement of himself and his friends they regularly put on real-life dramas in which there is one central player who does not know the truth of what is going on. There is no set plot or dialogue and no audience except the performers for whose benefit it is undertaken. Nicholas is irked at being an unpaid puppet and refuses to cooperate any further. Nicholas wakes up in a hospital bed with Conchis by his side. Nicholas asks for how long his life has been manipulated like this - but as ever he gets no proper reply from the enigmatic man. Conchis departs and when Nicholas leaves the room he finds he is not in a hospital at all but on an unfinished set. He is still on the island where he sees his ex-girlfriend Anne. Was she in on it too - does it all go back to before he met her? He gets no further answers because the villa is now deserted with all the fixtures and fittings removed leaving just an empty shell. Set in a France of the recent past. Solange and Claire Le Mercier are sisters who work as maidservants to a rich and glamorous middle-aged woman referred to only as Madame. The two sisters are resentful of the luxurious lifestyle of their mistress and hold a secret yearning to live in her accustomed manner without a care in the world and escape the drudgery they despise. Whenever Madame is present they are dutiful and courteous, mindful of their subservient positions. However when Madame is out for the evening Solange and Claire tangibly act out their bitterness with one of them dressing in Madame's finest attire and playacting an exaggerated interpretation of a haughtily eccentric mistress, whilst the other behaves insolently towards her in the manner they would wish to in real life. These scenarios always conclude with the maid gaining natural justice by "murdering" the mistress. Recently however their joint resentment has boiled up to a point where they are actively considering punitive action against their subjugator. Madame has a younger lover (known only as Monsieur) and to take a delicious revenge on Madame, Claire has written an anonymous letter of denunciation regarding Monsieur's conduct which she has sent to the police. This has resulted in the police taking Monsieur away in handcuffs in an early morning raid. The sisters are gleeful of the distress this causes Madame and believe anything that sullies her perfect world is justified. While Madame is out trying to have her lover freed, the sisters play their wish fulfilment "game" yet again. But this time they decide that they should take their reprisals a stage further and later will poison Madame's tea. Madame returns full of woe at the terrible situation into which her lover has been cast and she wonders who could have written such a horrible letter. We discover that the sisters' hatred of their mistress is staggeringly unjustified. Madame treats her two maids with kindness and thinks of them as part of the family like the daughters she never had. They are both generously allowed the pick of Madame's discarded clothing and are allowed dispensations unthinkable in other households. Madame is so agitated by the current state of affairs that she leaves her poisoned tea undrunk. When Madame learns that Monsieur has been released on bail she heads off out again to be with him. The sisters are severely downcast that their efforts to kill Madame failed but their hatred of her remains along with the immeasurable shame they feel at being so lowly in status. Morose overwhelms them and Claire wants to play the "game" again straight away. Claire adopts the role of Madame and Solange the murderous maid. Solange becomes so immersed in her deliverance of justice that once she starts strangling Claire she does not stop until she believes she has really killed her. Solange's reason has deserted her and reality and fantasy merge. She soliloquises her exalted triumph at Madame's death and considers how she will become legendary and she will be rewarded with the riches and power she craves for her infamous act of defiance. But Claire is not dead and hears her raving sister's fantastical self-aggrandising notions effecting from her imagined death, that Claire decides to administer herself with the poison from the abandoned tea. Claire lays down into a deep sleep and dies and Solange feels joyfully free ensnared in her belief that it is Madame who is dead. Solange celebrates her freedom on the second floor balcony ledge raising her arms in surrender to the fates - and as the film ends we are unsure whether or not she has hurled herself to her own death. Eddie is an American drifter who is wandering Europe on his way to nowhere in particular. He has a talent for singing and along the way he takes jobs in bars and restaurants performing for the customers. He is a bit of a hot-head and usually ends up getting the sack and being forced to move on. Currently Eddie is working in an Italian restaurant and gets into a fight with a boisterous customer. The owner fires him but a patron called Gina takes a shine to his looks and his talent and offers him a job with the circus she works at. Gina is in her forties and has a hankering for younger men who can make her feel as if she still young and vital. Part of the arrangement is that Eddie will share her trailer and her bed and in return he will get paid work at the circus helping her in her ventriloquism act as a dashing minstrel that her cheeky manikin "Godiva" takes a liking to for the audience's entertainment. Another circus act is the equestrian Moreno Trio who perform daring horse-riding stunts. The trio consist of husband and wife Ricco and Elenora Moreno and also Tessa who is Elenora's younger sister. Tessa is young and pretty and takes quite a shine to Eddie who likes her in return. However Gina is very possessive and dislikes Eddie being around the younger woman. Ricco too is not keen on Tessa finding romance because he secretly fancies her himself although his desire is not reciprocated by Tessa who is respectful of her sister. Gina's jealousy eventually gets out of hand and she wields a knife which Eddie wrestles from her grasp - but Gina's ex-husband Bozo the clown is nearby and hears the commotion and jumps to the wrong conclusion that Eddie is attacking Gina (whom he still adores). The two men fight and Bozo ends up being stabbed in the stomach and falls down seemingly dead. Eddie knows he cannot stick around because no one will believe it was an accident and he quickly departs town on the next bus to escape whatever justice might be forthcoming. He is surprised to find Tessa on the same bus - she too is running away so that her presence will not ruin her sister's marriage. The bus is heading for Innsbruck over a snowy mountain road. When they come to a police checkpoint Eddie assumes it is for him and gets off the bus and starts making his way on foot across country - Tessa decides to go with him. They walk for ages and eventually find an isolated log cabin in a snowy mountain pass. The cabin shows signs of recent habitation but seems to have been mysteriously abandoned so they make themselves comfortable for the night. However what they do not know is that the real reason for the roadblock was to turn vehicles back because of the danger of an avalanche which this area is prone to at this time of the year. The next morning the army are due to be firing cannons into the mountains to force the accumulated snow to dislodge before it builds to dangerous levels and so the area has been evacuated as a precaution. Eddie and Tessa spend a blissful night together falling in love and next morning set out early unaware of the army's plans. When the cannon's are fired they are almost caught by the tide of avalanching snow but just manage to find cover. Tessa decides to return to the circus after Elenora and Ricco persuade her that there is no need for her to run away. Eddie also decides he must return and face whatever punishment is in store for him for Bozo's death. Upon his return he finds he had been running for nothing because Bozo is not dead after all and is on the road to recovery from the knife wound. Eddie is ever so happy and rejoins the circus act and he and Tessa soon decide to get married. In a previous century in Holland a ship makes port and the sailors have a day of shore leave. For one handsome sailor called Jan it is his home port from which he has been away for many years. What Jan does not know is that he is being observed by a couple of shifty characters who seem very interested in his arrival. Jan travels to his home but finds it has gone, collapsed, and abandoned long ago. He knows not what has become of his family, especially his dear sister Nancy and looks desperately around town for her. He thinks he sees her go into a tavern and follows but it is someone else. He gets into a fight that one of the shifty men stage-managed and comes off the worse losing consciousness. When he comes to he is in a bed and being looked after by Nancy. She tells him he has been brought to their Uncle Cassavius' home of Malpertuis where she now lives. Jan is horrified at this for he believes Malpertuis to be an evil place. It is a huge house full of labyrinthine corridors with locked doors and many unfathomable secrets. It is occupied by all manner of strange people - family and servants who all have a healthy fear of the head of the household Quentin Cassavius even though he is bedridden and close to death. They are just waiting for him to die so they can be free of this place. Before his death Cassavius gathers his family and household servants around his bedside for his will to be read to them. He has gathered an extraordinary fortune and has generously bequeathed an equal share of it to each and every beneficiary. However he has a codicil - each beneficiary must from this moment on live at Malpertuis and never leave the grounds. They must stay until they die and the last remaining man and woman should marry and inherit everything. Cassavius hopes that will be Jan and his cousin Euryale. After Cassavius has died Jan is determined to discover the house's secrets and embarks on a systematic search of all the rooms. He finds that Cassavius was a schooner captain and had been a keen scientific experimenter in the area of genetic engineering of strange new life forms looking to create some sort of perfect being - but always meeting with failure. Jan's quest is held up by a manipulative cousin called Alice who wants him to become her lover and she succeeds although his main interest is in the mysterious and enigmatic Euryale Eventually as most of the rest of the household seem to be turning dangerously against Jan, Euryale decides it is time he learnt the real secret of Malpertuis. She and the others are the gods of Ancient Greece who, having been forgotten by the world, were living in solitude on an island of the Ionian sea waiting to die of neglect. But Cassavius had captured them and herded them like cattle in his ship to these shores and into this house. He saw the gods as the perfect specimens he was so keen to recreate in his experiments and his intention was to create a new master race of demi-gods. All the other gods are now dead because people no longer believe in them and only she, Euryale, remains immortal - or to give her her proper name The Gorgon. She looks directly into Jan's eyes and he turns to stone. Epilogue. Jan is in the present day in a psychiatric hospital and the doctor has declared him fit to leave. During his stay he had written an incredible story fuelled by his deranged fertile imagination of the kidnapped Greek gods - and his story is what we have been watching. His wife Jane is waiting to take him home and she leads him down the brightly lit hospital corridor and through a door which leads into a dark corridor - he recognises it instantly as one of the gloomy corridors of Malpertuis, he turns to go back but all that is behind him now is a brick wall. In the 1500s during the reign of King Henry VIII, Sir Thomas More lives a privileged life as a High Council judge after a career as a skilled lawyer. Sir Thomas is a deeply religious man whose fairness and incorruptibility are legendary. He is also a friend of the King. King Henry is married to Catherine of Aragon who has borne him no sons to continue his line - she has only borne a daughter. Henry's frustration has brought him to the point where he has instructed his chancellor Cardinal Wolsey to find a way to end his current marriage so he can marry again. His marriage to Catherine, his late brother's widow, needed a special dispensation from the Pope and Wolsey knows the likelihood of the Pope now rescinding that exemption is nil. Wolsey goes through the motions to placate the King but knows he is not going get anywhere. When Wolsey dies, the King appoints his friend Sir Thomas as his new chancellor believing that he will now have an ally in his endeavours who also possesses an intimate knowledge of the law. But Sir Thomas now finds himself in a terrible dilemma because he holds steadfast the complete authority of the Pope to rule on such matters. However he is wise enough to keep his opinions private for he knows how injudicious words can be used to condemn a man. The King becomes impatient and forces a bill through parliament disconnecting England from Rome and making himself leader of the church in England. He proceeds to institute a full-scale reformation of religious practices and thus grants himself approval for a divorce from Catherine. Sir Thomas expresses no disapproval, but because he is such a publicly admired figure his failure to express approval is viewed as a damning indictment. Sir Thomas gives up his position of office and retires. He is careful to make no inflammatory statements to anyone - not even his wife or daughter in private. Henry orders that an Oath of Allegiance be drawn up that must be signed by all men of importance to signify their approval of the King's new status and that they accept that only his new wife's children have right of succession. Sir Thomas declines to sign but makes it clear that no significance can be drawn from that refusal. His family urge him to sign and pretend he approves but his high principles won't allow him to lie because God would know. The King orders his new chancellor Thomas Cromwell to find a way to discredit More. Cromwell has Sir Thomas arrested and put into the dungeons where he stays for years. Every couple of months he is brought before a board to give him the chance to sign the oath. But each time he steadfastly refuses to sign or make any sort of statement giving his reasons. Sir Thomas's legal training enables him to avoid the various verbal ploys Cromwell uses to attempt to entice an opinion from him. Eventually Cromwell is forced to resort to using the false testimony of a former friend of Sir Thomas who is willing to put his ambition before friendship and describe to the court a damning conversation he claims to have had with Sir Thomas concerning his disapproval of the King's actions. This evidence although stringently denied by Sir Thomas is enough to condemn him. With his death now decreed Sir Thomas uses the opportunity to at last give voice to his opinion on the travesty that he thinks has befallen England's religious system because of the King's presumptions of authority over the Holy Church which he considers to be based on an act of parliament which is contrary to the law of God. His words are heard and then he is taken to the Tower of London and executed. Set in Paris in 1890. Dr Georges Bonnet is a surgeon who runs a private clinic and is also an artist and sculptor. He sculpts nudes and with his charming manner has no difficulty having relationships with beautiful woman who are only to happy to pose for him. Georges holds a private party to display his latest paintings for sale - however he never sells his sculptures. An ex-lover of his called Janine DuBois turns up unexpectedly whom he knew in Italy and was sad when he suddenly left her without warning. She is with a new man now called Dr Pierre Gerard who is also a surgeon. Georges still loves Janine and has done a sculpture of her for his collection. Georges is very edgy as he notices the time and quickly ushers his guests away. He goes to his laboratory where his skin starts turning green and he urgently takes a dose from a beaker of steaming fluid that he keeps locked in his safe. This returns him to normal. He must take a dose every six hours lest something awful happen to him. He is desperately awaiting the arrival of an elderly friend of his called Professor Ludwig Weiss who will be able to perform an operation that will end his dependency on the potion. Ludwig eventually arrives. He is a well-respected scientist in his late eighties and the only man who knows how to perform the life-saving operation Georges needs. He and Ludwig were once working colleagues and their research led to an astonishing medical discovery - the secret to eternal life! Georges decided to undergo the experimental procedure himself. This was 70 years ago and at the time Georges was Ludwig's senior by fifteen years. Now Ludwig is 89 and Georges still looks 35 although he is in fact 104-years-old. They have never published their findings because immortality for everyone would upset the balance of nature - so their long-term experiment has continued in secret. The only shortcoming is that Georges needs an operation every ten years to renew his uter-parathyroid gland in a transplant operation. After ten years have elapsed he can survive for a further six weeks by taking a special fluid every six hours. After that (or if he misses a dosage) he would die. The other downside is that every ten years Georges must abandon his life and friends and start a new life in another country so that his agelessness does not arouse suspicion. That is why he creates the sculptures to remind himself of the beauty of the women he has loved through the ages. Ludwig has performed the operation many times but now in his advanced years his hands have developed the shakes and he is unable to do it. Ludwig uses the influence of his reputation to persuade Janine's friend Pierre to carry out the operation under his supervision without telling him the real purpose. Pierre agrees to do it the next day. In the meantime however Ludwig learns that Georges has been murdering people to harvest the transplant glands and has not been using revitalised organs from dead cadavers as he had believed. Ludwig says the experiment must end and smashes Georges supply of fluid making the urgency of the operation paramount. In his rage Georges kills Ludwig and manages to scoop only enough fluid from the floor for one final six-hour dosage. Georges tells Pierre that Ludwig was called away suddenly - but without the revered professor's supervision Pierre refuses to do the operation even when Georges confides in him the real reason it needs to be done. So Georges abducts Janine and holds her hostage at a secret location to force Pierre to cooperate. Pierre needs Georges to tell him where Janine is being held so he must go through with it. Georges is anaesthetised and Pierre makes the necessary incision - but then he stitches it back up without doing the transplant. Georges recovers believing he is good for another ten years and goes to release Janine. However when the six-hour effectiveness of his last fluid dose runs out he begins to age and realises that the operation was not done. He falls into a murderous rage as he starts to turn green and age. Pierre rescues Janine as Georges dies a painful death as all the years finally catch up with him. Harold Pelham is a smart efficient business executive working for a Marine Engineering company where he is highly respected and regarded for his good judgement. He lives his life in perfect order as a family man with a wife called Eve and two young sons. Although successful he has allowed his life to fall into a dependable but drab routine and his wife fears for the future of their marriage that has no excitement left in it for her. One evening while driving home and strictly observing, as always, the speed limit, a kind of madness comes over him and he starts speeding in a reckless manner, abandoning any sense of safety as he revels in the sheer thrill of weaving through the traffic. Eventually he crashes and is rushed to hospital for a life or death operation. During the operation his heart stops and he has to be revived - and for a few moments the surgeons are puzzled by an anomalous reading of two heartbeats showing on the monitor until it reverts to normal. The operation is successful and after a period of recuperation and a foreign holiday he returns to work. The topic up for discussion in the boardroom is the proposed takeover offer from a rival electronics company EGO (Electronics Group). Harold is against the deal and feels it may have been prompted by EGO getting wind of an exciting technical innovation his company have secretly been developing. If true then this would mean there was a high-level leak of sensitive commercial information. Around this time Pelham has some strange exchanges with various colleagues who refer to conversations he never had with them or social gatherings he knows he didn't attend. He begins to wonder if some elaborate practical joke is being played upon him. He meets a woman called Julie who claims to be having an affair with him and he is later contacted by a representative of EGO wondering why the deal is not going as smoothly as he had promised. Pelham cannot understand why all these people seem so convinced it was him since he knows full well it wasn't. Pelham fears he might be going mad and consults a psychiatrist who books him into a clinic for a few days of complete bed rest to cure him of this psychosis in which he seems to be unknowingly acting out another life. Meanwhile WE see another Pelham carrying on with Pelham's life. With supreme confidence he conducts secret negotiations with EGO to smooth through the deal in return for an executive position in the new merged company and then successfully convinces his own board on what a good deal it is. He wines and dines his wife giving a new zest to their stale marriage and generally enjoys the lifestyle that his position and wealth permits him. When the real Pelham comes out of the clinic he hopes his "double-life" is over. But of course it is not and once he returns to work he discovers all the changes that "he" has supposedly made. Increasingly agitated about his own state of mind he phones home and is amazed to find he is talking to "himself". He rushes home to confront the impostor. But Pelham is now a nervous wreck and when the two Pelham's meet face to face in front of friends and family it is the new confident self-assured Pelham whom everyone believes and the overwrought original is decried as the impostor as he hurls hysterical accusations around. Left alone together the new Pelham explains to his counterpart that when Pelham died on the operating table the new persona emerged and when the old Pelham was revived it left both of them in existence with two sides of their personality split. The old Pelham rushes out of the house and into his car determined to fetch the police and the new Pelham gives chase with a steely determination to run the unwanted original off the road. Eventually he succeeds and old Pelham's car crashes off of a bridge into a river - but as he does so he vanishes from the driver's seat. And as the new Pelham triumphantly surveys the wreckage below he feels a heart flutter with a few moments of a double heartbeat as his counterpart's spirit re-merges with him and the original combined Pelham personality comes back. Set in the American Wild West in the 1800s. Catherine Crocker is a refined lady of dainty bearing who is aimlessly riding her gelding looking very out of place in the vast deserted Great Plains punctuated only by a railroad track. She is hoping to board a train when she comes across a gang of outlaws who blow up the track with dynamite and hold up the train. The gang of four outlaws get away with $100,000 in cash and Catherine witnesses the whole thing. Their leader is a man called Jay Wesley Growbart and he realises they must take the woman with them so she cannot describe them to the authorities. They ride out into the desert region taking Catherine with them despite her protestations. Two of the outlaws, Dawes and Bowen, relish the presence of a woman whom they feel they have a right to enjoy as they see fit. But their leader Growbart has a gracious manner and keeps the others' lecherous appetites in check. It soon becomes clear to Catherine that Growbart is made of a different mettle to the others and his influence is all that is protecting her from unpleasant treatment. It is unclear to her what Growbart is doing associating with such ruffians and it seems he must have his own undisclosed reasons from embarking on this course of action. Catherine admits to Growbart that she had been running away. Her betrothal to rich mining executive Willard Crocker was a marriage of convenience to help save her father from financial ruin. But she never loved him and is trying to escape his possessive and controlling ways. Meanwhile a Wells Fargo agent called Harvey Lapchance organises a posse to try and recover the stolen money and capture the culprits. Lapchance knows Growbart from old and is surprised he has stooped to this level of lawlessness. He used to be in the army and had an immaculate record. Several years ago he fell in love with an Indian Squaw called Cat Dancing who is now dead. Growbart had two children with her and was living a happy and contented life. One day he killed a man whom he discovered laying with Cat Dancing and he consequently served time in prison. Willard Crocker joins the posse determined to get vengeance on the men that abducted his wife and inflicted who knows what indignities upon her. The outlaws are attacked by a small group of Indians who kill two of them and try to rape Catherine - the other outlaw Dawes runs off. Growbart saves Catherine and the two of them head off together on Growbart's personal mission. Growbart wants to take custody of his two children who are currently being cared for by the tribe of Cat Dancing's brother. Growbart stole the money so he would have funds to look after them properly. Little by little Catherine grows to trust Growbart and see in him noble qualities that allow her to believe that he won't turn on her like an animal should she lower her defences. During the days of their journey across the plains and Rockies she starts to fall in love with him and they become lovers. Eventually they reach the village of the peaceful Shoshoni tribe where the tribal chief allows Growbart to state his case. Cat Dancing's brother Iron Knife speaks against Growbart's request. He reveals that his late sister Cat Dancing was killed by Growbart in his blind fury at finding her with another man. But Cat Dancing had been innocent for the man had been raping her but Growbart had been too enraged to listen and killed them both. As Growbart listens to this truth it comes back to him and he realises he had been in denial and accepts his guilt. He knows he does not deserve his children since he was the one that killed their mother. He no longer needs the money so he leaves it behind and rides off. Catherine is sad he has left her and wishes she could have gone with him. Lapchance and the posse arrive in the village and find Catherine safe and well. Lapchance is prepared to let matters rest now he has recovered the stolen money but Willard Crocker has a bloodlust to get vengeance on the man with the audacity to take his wife. Lapchance agrees to continue the search for another day. Growbart's young son Dream Speaker sees how much Catherine loves his father and offers to use his tracking skills to take her to him. Catherine is reunited with Growbart and stays with him overnight in a mountainside cave where they start making plans for their future. Next morning the posse catch up and Willard shoots Growbart with his long-range rifle. Catherine is bereft not knowing how badly injured her lover is. In her fury she picks up Growbart's revolver and shoots her husband dead as he rushes to the scene to jubilantly celebrate his marksmanship. Lapchance disliked Willard's manner towards his wife and decides to overlook her actions and allow her and Growbart their freedom. As the story ends it seems that Growbart may recover from his wound and he and Catherine will continue with a life together. Set in the 1800s. Peachy Carnehan and Daniel Dravot are two English ex-soldiers who have remained in India as civilians after their tour of duty ended. Both are swindling rogues who apply their skills of duplicity to their own financial advantage. Now they have conceived their most audacious venture yet and seek the counsel of Northern Star journalist Rudyard Kipling for some advice. Their scheme is to travel to the backward country Kafiristan and provide their soldiering skills to a tribal leader. They will train the locals with advanced warfare techniques to help them vanquish their enemies and capture its territories. Then the English duo will depose the local leader and become the country's kings and make off with all its wealth. Kipling cautions them that the journey to Kafiristan is treacherous and no white man since Alexander the Great in 300BC has ever returned. But they are determined to go so Kipling gives Daniel a pendant bearing Alexander's emblem for good luck. Peachy and Daniel persevere across the hundreds of miles of hazardous terrain through Afghanistan and across snow covered Himalayan mountains enduring harsh freezing conditions. Their trek is almost halted by an impassable crevasse until a fortuitous avalanche fills it in with snow and they are able to cross. They reach Kafiristan and come upon the village of Urheb where they are fortunate to find an ex-Indian army comrade of theirs called Billy Fish, the only survivor of an ill-fated geographical expedition. He acts as their translator and they are introduced to the ruler Ootah. Their offer to train his men and supply them with rifles with which to conquer his people's many enemies is heartily accepted by Ootah. The two Englishmen teach Ootah's men the skills of warcraft and battlefield discipline and eventually they are ready to begin their campaign. The new skills and equipment outclass their opponents whose resistance crumples and the Urheb people conquer many villages. At one point Daniel leads his recruits into battle and charges the enemy. He is hit by an enemy arrow but does not bleed because it struck a thick belt he was wearing under his tunic. But the people do not know this and are awestruck - they believe he is a god and fall into subservient worship of him. Peachy and Daniel realise that this unexpected turn of events can be put to their advantage and is an even better outcome than they had envisioned. So they play along with the notion that Daniel is a god. Soon the country's most holy man Kafu Selim bids Daniel come to his city populated by monks. Kafu has reservations about Daniel's claim to be a god and is intending to stab him to test whether he bleeds - but when he sees Daniel's pendant all his doubts evaporate because the pendant displays their city's holy symbol. Daniel is exalted as the son of Alexander with the official sanction of Kafu Selim. Daniel is given access to the stored treasures of Alexander which are now his to do with as he pleases. With their objective achieved beyond their wildest expectations Peachy wants to leave with as much as they can carry while their luck is still in. But Daniel has become accustomed to the godlike reverence to which he is treated. He now believes it was his destiny to come here and lead these people and does not want to abandon them now. He has even selected a bride, although this causes disquiet since the people believe a mortal woman will suffer immediate conflagration should she be intimate with a god. Daniel uses his divine authority to override their concerns. Peachy agrees to stay for his friend's wedding ceremony and then leave afterwards with his share of the treasure. But at the wedding ceremony his bride Roxanne is so terrified of her anticipated fate that she bites Daniel when he kisses her and everyone sees Daniel bleed. They know therefore that he is no god and rise up in anger against him for deceiving them. He and Peachy flee but they are caught. Daniel is executed and Peachy is horribly tortured. Peachy is freed after surviving his torture against the odds although it leaves him a broken man. Three years later he returns to Rudyard Kipling's office to recount the tale and gives Kipling a gift of the golden crown of Alexander that Daniel had also worn. In the mid-1800s in the Southern United States the ownership of black slaves is a way of life for rich white landowners. They believe that black people are a lower species without souls and that enslavement of them is a right ordained by God. The treatment that black slaves receive varies considerably by owner - some treat them no better than animals whilst others allow them a modicum of dignity and welfare consideration. Hammond Maxwell of the Falconhurst plantation is such an owner. He never treats his black workers with unnecessary cruelty although he can be harsh if the need to quash troublemakers arises. Hammond enjoys the company of young black women as his bed wenches and treats them kindly. Hammond's father Warren wants an heir and urges Hammond to get himself a white wife. Warren suggests Hammond's cousin Blanche would be an ideal candidate - and she would agree because her father is looking to borrow some money. Hammond and Blanche get married and almost immediately their relationship is on rocky ground - he suspects her of not being a virgin and she becomes resentful of his continued use of black wenches to whom he shows what she considers undue affection. Hammond sees nothing wrong in his own actions but finds her undisclosed loss of maidenhood to be a vile betrayal and refuses to sleep with her again until she reveals who it was. Meanwhile Hammond buys himself a strong black slave called Mede from the African Mandingo tribe. Hammond intends to train Mede as a prize-fighter and enter him into bare knuckle fighting contests against other owners' slaves. Blanche becomes increasingly contentious about Hammond's continued obstinacy and eventually admits it was her own brother with whom she had sex when she had been very young. Warren becomes impatient for a grandchild and decides to force the couple to be man and wife together and locks them in their bedroom until they have been intimate - and this they do. Soon Hammond has to go away for a few weeks to sell some slaves and while he is gone Blanche decides she will make use of slave fighter Bede in the same way that Hammond uses the black girls. She commands Bede to come to her bedchamber on several occasions threatening to claim he raped her if he does not obey. When Hammond returns nothing is said to him of this illicit dalliance. Blanche soon announces she is with child and Hammond is pleased at the prospect of having a son. Blanche clearly hopes that the child is his and not the result of her unions with Bede. But unfortunately for her the baby is black and her shocking disgrace is exposed. The baby is allowed to die. What she has done is considered by everyone as an unforgivable sin even though she tries to assert that her conduct was no different to her husband's. Hammond disguises his fury long enough to calmly administer to the unsuspecting Blanche a beverage mixed with a potion normally used to humanely euthanize old black slaves who can no longer work, thereby sending her into a sleep from which she will never wake. Hammond then vents his full fury on Bede, killing the valuable slave in the most painful way he can devise, despite Bede's futile protests that Blanche gave him no choice in the matter and he was only obeying her orders. Another slave is so furious at this injustice that he picks up a discarded rifle and is about to shoot Hammond when Warren tries to intervene and gets shot instead. The film ends there with Hammond's father and wife both dead. Jeff Farrell is an American who has ended up in a provincial town in Southern France after splitting with his girlfriend. He stays at an off-season hotel run by Eve Beynat and her 19-year-old stepdaughter Annette. Four years ago Annette's father Georges was committed to an insane asylum after using a blowtorch to kill a man who had raped Annette. Eve continues to visit her husband Georges every two weeks. Jeff is attracted to both Annette and Eve and although he initially favours the company of the younger Annette, it is Eve who makes the stronger play for him. Jeff falls in love with Eve and they end up as a couple. Eve tells Jeff more about Georges and how he is actually no longer insane and that it was a temporary madness that overcame him in the wake of what was done to Annette. She tells Jeff that Georges has a plan to escape so he can be with his daughter again and she persuades Jeff to help by driving the getaway transport. After that Eve says she will be free of him forever with no ties or responsibility to look after Annette and she and Jeff can move away together. Jeff agrees to help and after Georges escapes they help drive him to the port. Later on however Jeff discovers a body in the boot of the car which seems to be that of a prison guard that Georges killed during his escape. To cover up their involvement Eve and Jeff dispose of the body into a river. It turns out the prison guard had been Georges' accomplice in the escape. A few days later Jeff notices some activity in Georges' old workshop. He investigates and is knocked out. When he regains consciousness he finds himself tied up and the prisoner of Georges who has returned along with the retrieved body of the dead guard. Georges says that he does not want to be forever on the run so he is going to blowtorch the guard's dead face in the manner of his previous crime and then set the acetylene tanks to explode. Jeff will be killed and when his body is found with the dead and mutilated guard the police will be forced to conclude from the "signature" methodology that it was Georges who died in an accident whilst carrying out a mad atrocity - and they will stop looking for him. (The action then skips forward a few hours so we miss seeing what happens next) (When we return) The explosion has happened and Georges' plan seems to have worked. Eve spreads the word that Jeff suddenly left to go back to America before the incident. But Annette guesses the truth and says she will tell the police that she thinks it was Jeff who died in the explosion and not Georges. Eve says she will drive her stepdaughter to the police station to report it but instead takes a detour to a derelict warehouse where Georges is waiting. However (in a twist) it turns out that this man is not Georges at all but the prison guard. Eve hated her husband and during her fortnightly visits had fallen in love with the guard and planned this whole deception with him using Jeff as a convenient unwitting pawn. Georges was in fact the dead man believed to be the guard. Eve and the guard plan to run away together once both he and "Georges" were considered to be officially dead. Now the only loose end is for "Georges" to kill Annette because she knows too much. However what Eve did not know was that Jeff is actually still alive after being pulled to safety by a hotel handyman before the explosion. The police suspected Eve and therefore told her a lie that two men had died in the explosion so she would think the plan had worked. Jeff has since been staying out of sight while the police played along with the deception waiting for Eve to make her move and rendezvous with "Georges". Annette flees in terror onto to a high balcony shelf pursued by "Georges" - luckily he loses his footing and she pushes him to his death. The police then arrive to arrest Eve, and Jeff comforts Annette. Steve Ventura is the senior officer for law enforcement at the US Embassy in Paris. Several of his officers have been killed while investigating the activities of a drug baron named Jacques Brizard who masquerades as a distinguished citizen and remains seemingly untouchable by the French authorities. Ventura takes his case to Inspector Briac of the Paris police but the French detective's hands are tied by orders from on high and he is unable to take any action to curtail Brizard's activities. Ventura is stymied and comes to the conclusion the only way to stop the drug lord's activities is to kill him. Briac unofficially provides Ventura with the contact details of a professional hitman called John Deray whom they have previously investigated. Ventura meets with Deray whom it turns out he already happens to know and had no idea he was a hitman. Deray conducts himself in an amiable manner and has no traits that betray his ruthless streak. He treats his line of work in a very business-like way and for the right price will kill anyone his client wishes. When Ventura gives him Brizard's name as the intended target Deray knows how tough it will be. Brizard is one of the best-protected men in the country living in a well-guarded mansion in Marseilles with his grown-up daughter Lucienne. Deray realises he must work his way into Brizard's clique in order to get close enough to dispose of him. Deray therefore proceeds to wile himself into the company of Brizard's voracious daughter by posturing himself as an endearing thrill-seeker calculated to appeal to her similar disposition. Deray thereby gains an invite to the Brizard Mansion as her companion. Brizard accepts Deray at face-value as his daughter's latest conquest but nevertheless makes some enquiries and finds out he works as a killer-for-hire. Brizard of course has no idea Deray is currently on-the-job and assumes he is in off-duty mode. Brizard decides to put him on his own payroll and Deray accepts the offer in order to remain close to his target while waiting for an opportunity to discharge his commission. But Brizard has his own reasons for hiring Deray. He has fed bogus intelligence to the police about a shipment of drugs into the country and he sends Deray off to act as a fall guy to be caught by the police. Deray manages to evade capture and knows he cannot afford to underestimate Brizard again. Meanwhile Steve Ventura has been having second thoughts about the wisdom of hiring a hitman and realises he should have done the job himself rather than trusting a third-party. He heads to Marseille to make contact with Deray in order to call him off. But Deray refuses to cancel the contract out of professional pride although he does permit Ventura to accompany him. Brizard is staging a charity gala and Deray has learnt that Brizard has arranged to slip away from the event to personally supervise the arrival of a drug shipment. Ventura and Deray observe the meeting in a rundown alley and Ventura is astonished to see Paris detective Inspector Briac present. Briac is heavily involved in the drugs operation and as events unfold he pulls a gun on Brizard intending to kill him in a double-cross and take the shipment for himself. He figures that Brizard's death will be blamed on the hitman Deray whom Briac sent his way via the fortuitous folly of the American Ventura. A gunfight ensues in which Deray and Ventura also become involved. Briac and Deray are both killed and Brizard gets away and returns to his gala. Ventura is the only other survivor and he is determined not to let the drug kingpin get away scot-free yet again. He takes one of the fallen guns with a silencer attachment and heads off to gala venue. He asks a lone woman for a dance and manoeuvres them over to where Brizard is dancing with his daughter. Ventura then fires the gun from inside his pocket directly into the crimelord's back without providing any warning. No one notices the slight noise of the silenced weapon over the music and Ventura makes a quick exit as Brizard slumps to the ground dead in his daughter's arms. Ventura leaves town to head back to Paris feeling satisfied that an evil man is now out of the picture. Prologue: In 17th century Moldavia a high inquisition sentences Princess Asa of the House of Vajda to death for practicing witchcraft. Her own brother is her accuser. She and her accomplice Igor Javutich are branded as servants of the devil and now their vile deeds are to be punished by gruesome death. Ornate bronze devil masks studded on the inside with sharp spikes are to be hammered onto their faces and then their bodies burnt at the stake to cleanse the earth of their foulness. Before the sentence is carried out Asa curses her brother and all his future bloodline vowing that one day she will rise again and destroy his kin. The death sentence is carried out and the evildoers are executed by placement of the Masks of Satan. But just as their lifeless bodies are to be burnt a sudden eerie rainstorm extinguishes the flames. The full decree is never carried out and the still masked bodies of the abominable evildoers are instead interred - Javutich is buried in unconsecrated ground and Asa placed in a casket in the family crypt. As caution against any mystical resurrection the casket lid incorporates a glass window above her face through which she would see an anathematic stone cross standing sentinel over her, thwarting any would-be resurrection with its sacred power. End of prologue Exactly two centuries later in the 1800s two doctors are travelling to a medical conference in Moscow by coach. They are medical professor Dr Thomas Kruvajan and his younger assistant Dr Andre Gorobec. As they are passing through some Moldavian woods, on their way to a local stopover inn, their coach throws a wheel. Whilst the coachman carries out repairs the two men wander off to explore a nearby ruined chapel. They find its underground crypt and discover to their amazement that it is the resting place of the witch Asa who is still part of local folklore. Through the intact casket glass window they see the mask still fastened to her head. Suddenly a bat flies around and as the professor lashes out to defend himself he hits the now ancient stone cross which collapses and shatters the glass. The professor inquisitively removes the mask from the corpse's face to find that the flesh underneath remains remarkably preserved with her pockmarked and eyeless face still recognisably human - he accidentally cuts his finger on some broken glass and a few drops of his blood fall onto Asa's face. Elsewhere in the coffin Andre finds a pictograph which contains strange pictures and writings which he keeps. Then the coachman tells them the wagon is repaired and they can continue their journey. Outside they meet a woman walking her dogs. She is the Princess Katia Vajda and this chapel is on her father's land. They assure her they meant no harm and were just looking around before they went on to the local inn. Andre is spellbound by Katia's compelling beauty and amazed by how much family resemblance she has to the dead witch in the coffin. The two men continue on their way to stay overnight at the inn. Meanwhile in the crypt the witch's body is beginning to reverse its decay with her eyes reforming! In the castle Katia rejoins her brother Prince Constantine and their father Prince Vajda. Strange unexplained howling noises are heard from outside and above the fireplace the portrait of their notorious ancestor Princess Asa seems somehow to have changed as if it is no longer as it was painted. Katia has always felt unnerved by the picture and her own uncanny resemblance to the woman accused of being a witch two centuries afore. Prince Vajda has his own private concerns about this portentous day - the two hundredth anniversary of Asa's unholy demise when she had been but 21 years of age. The same age as is now attained by his beautiful and innocent daughter Katia. Vajda believes in the curse and thinks it is the reason that his family have fallen into decline over the years. His only comfort, as he makes his way to his bed, is a belief that the power of Christ's sacred cross will protect them from any stirring evil. In the crypt Asa's body continues its restitution to the extent that the professor's drop of life-renewing blood will allow. She is still immotile but able to utter words to invoke the dark powers at her disposal. And in response to her call, life returns to the body of her former lover Igor Javutich and he rises from his grave and walks the Earth once more to do her bidding. Javutich enters the castle intent on killing Price Vajda. The old man is terrified by the deathly intruder but holds the attacker at bay with his cross. Javutich is forced to depart with his task unaccomplished leaving the old man merely in a state of shock when Katia rushes in to see why he cried out. Javutich listens in as he hears Katia send the house servant Boris to the local inn to fetch one of the doctors she met earlier. Javutich disposes of Boris and finds Professor Kruvajan who is taking a midnight stroll alone. Javutich represents himself as a servant of the royal family communicating the urgent summons for medical assistance. Kruvajan is easily lured into Javutich's carriage not suspecting anything amiss. Javutich takes the professor to the castle but instead of taking him to the prince's bedchamber leads him down a passage into the witch's crypt where her power overwhelmingly besets him and turns him into her dutiful undead minion. Professor Kruvajan, now in the grip of his new evil mistress, presents himself to the royal family in answer to their medical summons. He declares that the elderly prince is merely in shock and needs rest and undertakes to sit with him through the night to ensure his wellbeing. But once alone the professor looks upon the prince with sinister intent... Next morning Katia and Constantine are shocked to find their father dead and the doctor nowhere to be seen. At the inn Andre looks for the professor and is surprised to be told by the innkeeper's daughter Sonja that she saw him being summonsed to the castle to attend the prince. Andre goes up to the castle and finds out the tragic overnight news but is perplexed by the strange unprofessional behaviour of his mentor in abandoning a patient and then vanishing in the night. Andre is worried for Professor Kruvajan's welfare. Then the villagers come up to the castle having found the body of Boris. Sonja is amongst them and when she looks at the various portraits hanging on the walls she announces with complete conviction that the man who fetched Professor Kruvajan from the village was the image of Igor Javutich. Andre finds it hard to believe her because the man shown in the painting has been dead for centuries. The local priest begins preparations for Prince Vajda's funeral. Andre shows him the pictograph he took from the witch's casket and the priest says he will try to decipher the Cyrillic writings. Andre tries to comfort Katia to whom he feels a strong attraction. He tries to persuade her to leave this place with such unhappy memories but she tells him she is bound here by forces she does not understand to live out this purposeless existence. Prince Constantine accidentally discovers the entrance to a series of secret passageways behind the fireplace in the main hall. He and Andre go in to explore and find it leads to the same witch's crypt which Andre entered the previous night through the front entrance. The witch is still lying in state but her face is now fresh and reformed and they see she is not dead anymore but sleeping with breathing evident. Something clearly unnatural has occurred and Andre decides to go back and summon a priest to deal with it leaving Constantine to watch over the body. But after Andre has gone Constantine is attacked by Javutich and seemingly killed after a titanic struggle. Andre finds the priest who has now translated the inscriptions which give the method by which slaves of the devil may be released from their torment - by piercing the left eyeball with a knife and giving them eternal rest. This theory is soon tested when they encounter the undead resting body of Andre's colleague Professor Kruvajan and despatch him to a restful peace. Andre and the priest work out that the witch's power is growing stronger but her centuries' dead body cannot sustain her life for long - in order to completely renew her life she must possess the body of her look-alike descendant Katia. To stop that happening Andre must re-enter the witch's crypt and pierce her left eye while there is still time. Meanwhile back at the castle Javutich abducts Katia and brings her into the tomb so the witch can take over her perfect body and live once again to practice her evil. The witch considers the life of Katia to be hers by rights consecrated to her by Satan. That demonic bind was what prevented Katia from ever leaving the castle grounds. But then as Asa begins to assimilate Katia's life she is thwarted part way through the process when she finds the girl is wearing a crucifix which she cannot touch or her skin will burn. The half-completed transfer gives Asa more freedom of movement but she is unable to finalise it. When Andre enters the passages he is accosted by the witch's protector Javutich and almost killed until the badly injured Constantine manages to push the witch's evil accomplice to his death down a pit. The effort is too much for Constantine and he dies but in doing so he has given Andre a chance to save his sister's soul. When Andre arrives in the crypt he finds the witch prone in her coffin and Katia sitting nearby urging Andre to kill the witch quickly. But as Andre raises a knife to the left eye of the body lying there he sees it is wearing a crucifix which should burn her flesh were she really the profane witch. Andre realises that Asa has placed Katia in the casket hoping that Andre would mistakenly kill her. Now that the full body swap cannot take place Asa wanted the consolation of fulfilling her age-old edict of eradicating the Vajda bloodline. Now that too has failed the witch tries to subdue Andre with her hypnotic powers - but then she is overcome when a mob of villagers led by the priest rush in and drag her to a stake where they proceed to burn her - properly this time with no intervention from bad weather. With the witch finally irrevocably dead and the curse lifted, Katia recovers to full health and no longer has any phobic fears about leaving as she and Andre kiss to cement their growing love for one another. Set in Italy in a previous century (1800s?). Leonardo is a rich Italian nobleman in his early 30s who finds ordinary life very dull and can only enliven his existence through pleasure seeking, drinking and gambling. He is a successful gambler and many of his neighbours are in debt to him, but despite the urging of his bookkeeper Viola he can never be bothered to collect. His latest winnings include the services of a troupe of travelling players that a local duke had hired for his son's birthday and put up as collateral in a losing bet. Leonardo lets the performance go ahead on his grounds since they have already encamped but finds the act dreary. That is until the leading lady comes on - she is called Iris and is 17-years-old. Leonardo finds her beauty remarkable and after she has finished he attempts to woo her expecting her to be easily overawed by the attentions of a man of his nobility. But instead she is wilful and speaks her mind telling him that she finds him an arrogant oaf who lacks even the good grace to have invited the boy whose birthday their show had been originally intended. Next day the travellers depart. Leonardo is reeling at her rebuff but cannot shake the feeling of attraction he felt towards her - however he knows that he has firmly squandered any chance of penetrating her negative judgement of his character. Leonardo decides his only hope is to resort to artifice and present himself in a different guise. He visits a master craftsman called Elia whose trade is the making of disguises for masked balls. Leonardo purchases some of Elia's unique creations and then begins his pursuit of the fair Iris. He follows the trail of the travelling players' wagon and at their camp makes contact with Iris in the woods wearing the mask of a woodland elf. He represents himself as a mysterious and enigmatic denizen of the forest who speaks in serenely elegant tones. Iris is fascinated by the charismatic stranger who does not give his name and whose face she cannot see. Over the next few weeks he adopts various guises and although she knows it is always the same intriguing man she has no inkling it is Leonardo. She falls in love with him despite never having seen his face and eventually they consummate their love in a gazebo by a lake. Then in the morning he has gone. Iris does not understand why he has abandoned her so unexpectedly. Leonardo has returned home disgusted at himself for taking advantage of the girl and blames the masks for corrupting him. He descends into a pit of despair and remains in bed wallowing in his shame. He eventually sees himself for what he has become and decides to reform and live up to his responsibilities as a nobleman and stop neglecting the upkeep of his estate. He writes a letter to Iris confessing to being the masked man and explaining why he did it. He says he loves her but knows that she finds him repulsive. After reading the letter Iris realises her initial judgement had been hasty and a soulful man lay beneath that brash exterior. She returns to his estate and forgives him for everything and as the film ends they kiss passionately. (In a prologue an old woman is seen walking through a forest and chancing upon a mysterious cowled figure in red robes who tells her that the time of their deliverance is at hand. This prophecy is passed on to her villagers as a hopeful sign that the days of misery under their evil ruler may be close to an end, however as the story progresses it is soon clear the man in red meant something entirely different ... ) It is medieval Europe and a feared ruler called Prince Prospero governs his province with a cruel lack of compassion taking pleasure in toying with his subjects' emotions as he wields life and death decisions over them on a whim. In the village of Catana (where the old woman from the prologue lives) wedding preparations are underway between a young woman called Francesca and her lover Gino when the Prince turns up wishing to feast among the villagers. Francesca's father and Gino speak out defiantly against his unwelcome presence and for their insolence Prospero orders them garrotted. Francesca begs for mercy and so the Prince, with an eye for some creative sadism, tells her that he will allow one of the men to live but she must decide which is to die. Francesca is frozen in a quandary for she dearly loves both men - one as her father and the other as her lover. To hopefully divert Prospero's focus away from playing out this particular cruel whim Gino goads him about the deliverance prophecy just as a scream is heard from a tent where the old woman lives - inside they discover the old woman's face has become crimson - a symptom which everyone recognises and fears as the scourge of the incurable Red Death! It is a disease which is deadly but fortunately only communicable by touch. The Prince orders the village burnt to the ground and, after establishing that they did not touch the woman, takes Francesca, Gino and Ludovico (Francesca's father) with him to his castle so he can continue his cruel games with them. He orders a quarantine lock-down of the castle such that no one may enter or leave until the plague has passed. Once at the castle the two men are sent to the dungeons but Francesca is given the royal treatment and provided with grand quarters and fine dresses to wear although she is forbidden to wear her Christian crucifix - for the Prince considers God to be a long dead deity and worships instead a new master - The Devil. He believes his association with Satan will protect his castle from the pestilence of the Red Death. The Prince finds pleasure in his mastery over all and enjoys humiliating the noble men and women in his court forcing them to make abase fools of themselves at his whim. The Prince decides that there will be a Masque costume ball the following day although forbids the wearing of red. In the dungeons Gino and Ludovico have been trained to fight each other to the death - but they refuse to fight and the matter is decided when Ludovico makes a lunge for the Prince and is killed. The surviving Gino is then ejected from the castle to survive amidst the devastated communities hit by the Red Death. Later, under cover of darkness, Gino climbs back into the castle intent on rescuing Francesca - but on the parapet he meets the stranger in the red robes who tells him to wait there. The Masque is in full swing and the Prince is pleased with the entertainment until he sees the stranger dressed in crimson and believes it to be a guest who is wearing red against his express command. He follows the stranger into a side room and confronts him but soon realises that he is addressing a supernatural being and believes his Lord Satan has come to personally speak to him. But when the stranger shows his face it is that of Prince Prospero himself and the stranger reveals he is a Messenger of Death who bears the face of the one about to die. Prospero becomes infected with the Red Death as do all the partygoers in the grand hall and everybody dies except for Francesca and Gino who are spared the pestilence because their souls were not corrupt. The Red Stranger makes his way back to the forest and rejoins his brethren - other Messengers of Death similarly dressed in various different coloured robes as they swap notes on how many they have killed and then move on to another area to harvest. Set in 1944 in German-occupied Rome during the Second World War. The Germans have a measured military presence in Rome which is under their military control although they allow the Italian politicians to remain in nominal charge of day-to-day governance. General Kurt Maelzer is in overall charge of the German occupation although he is rankled by the need to negotiate compromises with the Italians when he would much prefer to rule with an iron fist. Unfortunately he does not have the manpower at his disposal to enforce such a crackdown because the best troops are needed on the frontline in a war that is going badly. So the best he can do is have a platoon of men march through the streets every day as a show of force. However, the Italian partisans find any level of German presence provocative and do everything they can to make life difficult for the occupying forces. Their latest deed is to decimate the German platoon by exploding a bomb as the soldiers march past. Thirty-two German soldiers are killed and General Maelzer is incandescent with fury at this outrage. He wants to take immediate retaliatory action by laying waste to a whole city block but he finds that his officers and superiors are wary of taking such disproportionate action. The SS head of security Lt Col Herbert Kappler is mindful that such a response would be viewed as a war crime if Germany were to lose the war which he believes is seeming likely. He counsels that they should adhere to the rules of the Haig Convention which allows fair reprisals to be carried out for actions against occupying forces. Maelzer reluctantly agrees and settles on a figure of 10 Italian executions for every dead German. He gives Kappler the task of compiling the list of the 320 who are to die and then carrying out the executions. Kappler finds the nature of his task utterly repellent but he has no choice but to accede. In an effort to assuage his guilt he wants to be sure that the list should only contain the names of contemptible men who are already the dregs of Italian society including those in prison convicted of serious crimes. Even then it is hard to find enough names to fill the quota and Kappler is forced to resort to filling up the shortfall with Jews. An Italian priest called Father Pietro Antonelli becomes involved when the partisans seek sanctuary in his institute. Antonelli goes to see Kappler to try and persuade him to cancel the planned slaughter while he makes an appeal to the Pope to intervene. But Kappler can do nothing - the decision has been made and he is merely a cog in the machine carrying out the orders of his superiors. Kappler briefs his officers and men about the heinous task they have been handed. The site selected for the executions is in some caves where the limestone will quickly help with the decomposition of the bodies. The executions will be done in an efficient production line manner with each officer being obliged to personally pull the trigger at least once using a handgun to the back of the prisoner's head as they kneel. Father Antonelli fails to get the Pope to intervene because the Holy Father is concerned about jeopardising ongoing negotiations for the salvation of Rome when the Germans pull out. Father Antonelli feels powerless at his inability to stop the massacre and so he joins the line of condemned men being led into the caves and disposes himself for execution. As it happens Kappler is the one set to deliver the fatal bullet to Antonelli. The priest turns and gives Kappler a long judgemental stare daring him to examine his conscience and refuse to kill him. But Kappler has been put into an impossible situation and has no choice but to pull the trigger and kill the honourable priest. Set in Turkey in 1923 where Abdi Aga is the owner of a small peasant village that he rules as his own personal kingdom, collecting taxes and dishing out his own brand of justice. He is a hated man although none will openly defy him for he has the militia under his command. Currently Abdi Aga's concern is with a young local man called Memed who is causing him grief on a number of fronts. Memed is disdainful of his leadership and even worse he is the sweetheart of beautiful village girl Hatche whom Abdi has decided will be wed to his imbecilic slob of a nephew. Memed and Hatche have been friends and then sweethearts all their lives and they decide to run off together to avoid the differing fates Abdi has in mind for them both. But Abdi is not about to let them go so easily and employs a tracker called Lame Ali to follow them. Memed and Hatche are eventually pinned down on a mountainside and Memed's only option is to shoot it out as Abdi and his nephew approach mistakenly thinking their quarry are weaponless and surrendered. Abdi's nephew is killed and Memed escapes - but Hatche surrenders herself unable to cope with the pressure of being on the run. Memed has previously made contact with a band of brigands in the mountain region led by a man called Mad Durdu. Meanwhile Abdi decides that since he did not capture Memed he will instead place Hatche on trial for his nephew's murder and swears to a magistrate that he personally saw her fire the gun that killed him. No one dares dispute his evidence and so Hatche is held in custody pending a full murder trial. Memed does not yet know of this development as he joins in the banditry and thieving activities associated with being a brigand. However he soon finds Mad Durdu's barbaric ways too much to bear and leaves the rebel group. Memed blames Abdi for all his troubles vows to kill him. He makes an unsuccessful attempt on Abdi's life whilst he is staying in a nearby town and Abdi consequently seeks sanctuary with a powerful and wealthy landowner called Ali Safa. Abdi suggests that they move Hatche to a more secure location lest Memed attempt to liberate her. Although ironically her transfer under inadequate armed escort provides Memed with the ideal opportunity to act and Hatche is rescued. The Turkish government has declared a general amnesty towards brigands because of the mounting cost of countering their resistance. Locally however, area governors seize upon this as an opportunity to arrest the rebel ringleaders and they have drawn up their own secret "exception" list should those individuals come forward during the amnesty. Memed is considering utilising the amnesty but he is fortunately forewarned it is a trap by a police sergeant called Asim who has decided to join with him. Together they hunt down the location of Abdi Ali in town and Memed shoots him decisively dead. The villagers who had been subject to Abdi's harsh rule celebrate his demise and the freedom they believe they now have. The story breaks off here with things appearing to have reached a positive note for all - although it is unclear whether their happiness is misplaced or will be short-lived as they will soon have a new more powerful ruler to deal with in the shape of Ali Safa who is quick to appropriate Abdi's properties into his own small but burgeoning empire. Set in an English city in the aftermath of some sort of war that has devastated the normal infrastructure of society. City dwellers are left to fend for themselves with utility services suspended or sporadic. Rubbish is piled up in the streets and food is scarce leading to scavenging. Looting is rife and law and order is virtually non-existent. Most people nevertheless maintain themselves according to the responsible good order they once knew and continue with their everyday lives as best as they can as they readjust to the diminished amenities. This includes a woman known as "D" who lives in a block of flats. She lives alone and conducts herself in an ordered fashion as she goes about her daily routine of collecting standpipe water and maintaining her day-to-day existence. She is one of the few who still remain in her tower as many other city dwellers have abandoned the area. One day D hears voices from one of her walls and finds that she can pass through it into a large Victorian mansion which is unoccupied and being decorated. (It is unclear if her transportation is real or just in her imagination - perhaps a sign of encroaching madness?) Back in the real world D finds herself billeted an evacuee called Emily Cartwright when she and her escort mysteriously turn up out of the blue in her living room. D is given no chance to question the man who delivers her before he is just as mysteriously gone. Emily is a bright and cheerful teenage schoolgirl who is eager to help D around the house. Meanwhile D continues to explore the mansion (in her mind's eye it sometimes seems) and each time she visits things seems to have moved on a bit until it is furnished and occupied by a family. The young daughter of the family is a 7(ish) year old girl called Emily who always looks a bit sad and appears to be neglected by her parents for being so difficult and demanding. On later visits D finds the house unoccupied and neglected with the place trashed and weeds encroaching into the house. Meanwhile back in the present Emily takes up with a group of youths and children who have started a commune at an ex-old people's home and live off the land. Their leader is a young man called Gerald who has a kind heart with a willingness to see good in everybody and take them into his small community. Emily joins and becomes his girlfriend and soon finds herself as the mother figure of the group whom all the little ones respect and look up to as she finds herself having to take a firm hand. In contrast, respect for Gerald's authority begins to wane as he starts to make poor choices. His well-meaning open door policy starts to cause problems with more mouths to feed than the community can support. Several times Emily leaves the group in despair and returns to the security of D's flat and each time she is persuaded back by her new friends to give the community another chance because they need her. Finally Gerald goes too far and brings home a group of ragamuffin young kids that have become like savages living in the underground stations. With no one to look after them they have turned wild and feral but Gerald believes that if they are shown kindness and generosity they can be tamed - but instead they run amok and destroy everything the community has worked so hard to build up. Emily returns to D's flat with her optimism shattered. Meanwhile D's dreamlike explorations have shown her the idyllic mansion gardens and inside the house a huge egg around which she sees lots of young children playing. She takes this as some sort of sign and shows Emily and Gerald how to get through. Gerald fetches the ragamuffin children and leads them back into the simpler past era where they can live in the bountiful garden - and finally D follows them. Set in the dukedom of Theseus in Athens in times past in the run up to a wedding between Theseus and his bride-to-be Hippolyta. Nobleman Egeus wishes his daughter Hermia to marry Demetrius and he is keen to do so. However Hermia is not so keen for she loves Lysander. But Egeus insists it must be Demetrius and so Hermia and Lysander plan to run off together. Hermia's friend Helena has strong feelings for Demetrius too but feels jaded that he only has eyes for her prettier friend. Helena decides to tell Demetrius about Hermia and Lysander's secret plans to elope hoping he will be grateful to her. This results in all four making their way to the forest grove that night. The forest is inhabited by the fairy folk on a plane of existence not visible to humans and they use their magic to help the humans with good deeds. Currently fairy king Oberon and fairy queen Titania have fallen out over who should have guardianship of a particular servant boy. Oberon decides to enspell Titania with a potion that will make her fall in love with the first person she sees upon waking - he believes with her attention diverted thus he can appropriate the boy from her. Oberon's servant Puck sees some actors rehearsing for a play in the woods and is so appalled at the oafish Bottom's performance that he turns the man's head into an ass. Bottom's friends run off in fear and Bottom wanders off. He stumbles across sleeping Titania who awakens and the enchantment makes her fall in love with him. She becomes totally infatuated with Bottom and finds his every utterance enthralling as she dotes upon his every need. Meanwhile Oberon sees the plight of the four humans and decides to lend a hand by making Demetrius fall in love with Helena using some of the potion. He gives this task to his servant Puck who gets it wrong and makes Lysander fall for Helena instead. Later Demetrius too is enchanted and both men become infatuated by Helena and ignore their previous preference to Hermia. Helena thinks they are all treating her with derision by playing a scornful jest upon her. Hermia too cannot understand the behaviour of either men and the whole situation becomes unbearable with everyone falling out with one another. Eventually Oberon sees what a mess his servant has made of his good intentions and sends the foursome to sleep so they will wake and believe it was all a dream. When they awaken remnants of the night before remain. Lysander and Hermia love one another once again, but Demetrius now sees Helena in a new light and relinquishes his claim upon Hermia in preference to Helena. The duke decrees
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6656	dbpedia	2	21	https://screenbounddirect.co.uk/product/fury-at-smugglers-bay/	en	Fury at Smugglers Bay	https://screenbounddirec…ped-sbdirect.png	https://screenbounddirec…ped-sbdirect.png	[ "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/cropped-cropped-sbdirect.png", "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/P-SBF681_0-800x1133.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/P-BLB027_0-450x638.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/P-BLB016_0-450x638.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/P-SBF568_0-450x638.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2023/11/P-SBF615B_0-450x563.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/P-SBF620_0-450x638.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/P-SBF585_0-450x638.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2024/08/P-SBF631B_0-1-450x575.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2024/07/P-NUC0037_0-1-450x562.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2024/03/P-SBF622B_0-450x585.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2024/03/P-SBF623B_0-1-450x572.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2024/03/P-SBF624B_0-450x585.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2024/03/P-SBF625B_0-450x585.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2023/11/P-SBF615B_0-450x563.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2023/11/P-SBF616B_0-450x585.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2023/11/P-SBF613B_0-450x585.jpg", "https://screenbounddirect.co.uk/wp-content/uploads/2022/02/sbdirectWhite.png", "https://screenbounddirect.co.uk/wp-content/uploads/2022/02/New-Footer.png", "https://screenbounddirect.co.uk/wp-content/uploads/2022/11/P-SBF681_0-450x638.jpg", "https://www.facebook.com/tr?id=589382103046410&ev=PageView&noscript=1" ]	[]	[]	[ "" ]	null	[]	2022-11-09T17:18:00+00:00	Pirate wreckers ravage a small seaside community while the ineffectual local squire tries to discourage his son's romance with a smuggler's pretty daughter. #woocommerce_price	en	https://screenbounddirec…rners3-32x32.png	Screenbound Direct - Screenbound Direct	https://screenbounddirect.co.uk/product/fury-at-smugglers-bay/	Description Pirate wreckers ravage a small seaside community while the ineffectual local squire tries to discourage his son’s romance with a smuggler’s pretty daughter. Additional information Weight 0.1 kg
6656	dbpedia	0	38	http://www.toplessreview.altervista.org/RareFilms12.htm	en	Rare Film Reviews U			[]	[]	[]	[ "" ]	null	[]	null					null	Wilbur Gray is an author who specialises in writing books that uncover fantastical unsuspected theories about unexplained events. He has just completed the research on his latest book and the implications of his discovery have made him very nervous and jumpy. He takes his manuscript to his publisher Frank Richards who is very sceptical and asks him to talk him through the details of three of his case studies ... Case 1 - London 1912 Elderly Miss Malkin has decided to change her will to disinherit her ungrateful nephew Michael and leave her fortune to her dozens of beloved cats instead. The maid Janet overhears her new arrangement and tells Michael with whom she is having a relationship. Michael persuades Janet to steal the new will from the safe. But Miss Malkin catches Janet in the act and Janet has to kill the old woman when she threatens to call the police. But before Janet can destroy the new will the cats turn on her and eventually kill her after subjecting her to several days of terror. Days later Michael and the police find the two bodies which have been half-eaten by the cats. Michael sees the new will and tries to destroy it but the cats kill him as well. (It is believed the cats became murderous because they were so hungry). Case 2 - Quebec Province 1975 Newly orphaned youngster Lucy comes to live with her aunt Joan's family. She brings her beloved pet cat Wellington, much to Aunt Joan's annoyance because she dislikes cats. Joan's own daughter Angela is a bit older than Lucy and mercilessly bullies her believing it's not fair that Lucy is allowed to have a cat when she is not. Lucy's mother was into witchcraft and the distressed girl uses her old books to cast a spell that shrinks Angela to mouse size so that Wellington can terrorise her instead. Then Lucy steps on little-Angela and squashes her dead like a bug. (Angela's disappearance is never solved). Case 3 - Hollywood 1936 Valentine De'ath is movie actor in horror films. His wife is the leading lady but she is tragically killed when a medieval torture stunt goes wrong. In fact Valentine had rigged the accident so that he could replace his wife with his new young mistress Edina in both the film and his personal life. At home Valentine tries to get rid of his wife's cat Scat but the cat proves elusive and a battle of wills commences. The cat seems to haunt Valentine who becomes obsessed with its destruction until eventually whether by accident or design the cat's actions cause the death of Edina and Valentine. (The deaths go unexplained). Back in the present - Wilbur's conclusion is that the common factor in all these unsolved cases is the cats. Wilbur adamantly believes that man has been fooled by these seemingly aloof and innocent creatures who are welcomed into homes as pets where they listen and observe without really being noticed. It is Wilbur's postulation that cats are the true masters who always get their way in the end with patience, cunning and guile. Wilbur leaves his documents with Richards to read and on his way home he is attacked and killed by a mob of cats (evidently to make sure he doesn't reveal to the world the secret truth he has discovered). And back at Richards' house the publisher decides it's all nonsense and puts the manuscript on the fire under the watchful gaze of his own pet cat whom Richards dotes upon. A young high-class prostitute called Nicole is abducted from her house by some masked intruders whose faces are covered because underneath they have grotesque deformities. This leads to a retired operative called Roy Bain being recalled by his former crime boss Hugo Motherskille who now claims to be working legitimately as an industrialist. Although Bain is reluctant to resume his former line of work, Nicole is a former friend of his and Motherskille uses this connection to persuade him to apply his considerable skills in trying and find her. Bain checks the girl's bedroom and discovers a vial of white powder beneath her pillow - he follows a lead to a Doctor Savary but meets with a dead end when the doctor refuses to discuss the matter. Meanwhile we see Nicole has been captured by a group of people who all have facial abnormalities and among them is a scientist called Nygaard. They are all addicted to a drug they call "White Man" which gives one a euphoric feeling and provides incredible dreams but has the side effect of over time creating gruesome deformities. Nicole is also an addict and Nygaard is running tests on her to try and establish why she is uniquely immune to the ravages that the others have all fallen victim to. Bain sneaks into Savary's office at night and finds a file explaining more about the drug. Savary catches him at it and holds him at gunpoint while he explains that the drug called Lactrus Iozinine which he invented is powerfully hallucinogenic but is also highly addictive and has unpredictable side effects. By the time this deficiency was identified it was too late for those already addicted and they are now totally reliant on him for more supplies. He was obsessed by the prostitute Nicole who had the ability to make dreams seem real and so he made her an addict so she would become dependant on him but curiously she remained untouched by the side effects. Savary intends to now inject Bain to make him reliant on him too but Bain manages to get away. Bain sees one of the "creatures" flee down a manhole and follows discovering that they live underground - he is soon captured by the other Underworlders who are not pleased that their lair has been discovered - but Nicole speaks up for him and prevents him from harm although he remains as their prisoner. One of Motherskille's flunkeys called Fluke who was following Bain reports back to his boss that the lair has been found. Motherskille had not been interested in Nicole and had wanted Bain to find the Underworlders' lair for him so he could annihilate them. The Underworlders are running out of the drug and they go to Savary to get some more - but Motherskille's men are laying in wait to ambush them and a gunfight ensues. Bain manages to free himself and joins the fight on the side of the Underworlders. Motherskille and his villains are eventually all killed including Savary within whom Nicole induces a dream so powerful that it causes him to self-combust. Bain wants her to come with him back to the surface but she tells him her work here has only just begun and with one surviving Underworlder she takes her leave and returns into the maze of tunnels and Bain returns alone to the surface. Ryker is a military consultant who in his recent past has worked as a mercenary in war torn trouble spots around the world and has seen a lot of action. Two years ago he retired from the profession but has been lured back for another job with the promise of a large pay-day by an exiled black African leader called Mbote living in the UK who wants to arm the revolutionaries in his county. Ryker's task will be to advise on the weaponry to buy and then go out and train Mbote's men in their use with his team of white mercenaries including his good friend Jesse Jones. Ryker completes the first part of his job as they visit the UK's largest arms manufacturer and purchase guns and military equipment. As for the export licence Mbote says he has that "in hand" and the lorry loads of arms are driven to the docks awaiting shipment. But the experience of being around and testing weaponry again has brought back deep scarred memories for Ryker and reminded him just why he retired in the first place - he no longer has the stomach for the butchery of war and the horrors that he's seen done on innocents in the pursuit of a war leader's political aims. So without telling anyone his plans Ryker departs the scene and rents a small suburban flat in London determined to live a normal life. He goes to a party with his landlady and there he meets a young girl called Chrissie and they start a relationship in which he begins to be content and happy and seems to have found the sort of life that he really wants. But his friend Jesse has no idea what's happened to him and is having problems with Mbote's people - they are demanding Ryker complete on the deal he agreed to and won't tolerate any excuses. Jesse manages to track down Ryker's whereabouts and warns him that Mbote's men will be able to do the same if he doesn't show up for a meeting the next day when the arms shipments are ready to leave. So that night Ryker and Jesse take pre-emptive action and hijack the lorries from the docks and hold them to ransom to firmly indicate to Mbote that they are no longer interested in dealing with him. Mbote "buys" back the arms for a ransom and the two friends depart. But Mbote's men have tracked them down and later as they are walking by a roadside a limousine pulls up and two shots are fired at them. (This is the final moment and the shots are heard over a freeze frame of the two men and then the end credits roll - so it is not clear if they are hit/killed or not). John Ebony is a young married man who has decided to change careers and become a schoolteacher. His first position is at the Chantry Boys Boarding School where he is filling in for the remainder of the current term following the tragic death of a schoolmaster called Mr Pellam. The school is situated near the sea and Mr Pellam had accidentally fallen down the cliff while out hill walking. John moves into a nearby cottage with his wife Silvia as he prepares to take over Pellam's class of fifth form boys which he is told is one of the most difficult in the school. John is determined to make a good impression and bring them to order. However whilst being superficially good-mannered, the boys display a staunch group solidarity when he tries to lay down any new rules or punishments. Their defiance takes a sinister turn when they tell John that if he doesn't do things their way he will suffer a similar fate to the late Mr Pellam whom they claim to have murdered. John thinks they are making it up and are just wickedly exploiting an unfortunate accident to try and spook him - but the boys supply sufficient detail that he starts to believe them and he falls into line with how they want the lessons to be conducted along with other such requirements such as putting bets on for them at the bookmakers. However he is just playing along whilst he tries to find out who the ringleader was. He attempts to put pressure on individuals into telling him more but he finds it impossible to penetrate their inscrutability. When he is told by the headmaster that his contract won't be extended into the next term he decides they are not worth it and gives up on the boys completely letting them run riot during lessons as he reads his newspaper and refuses to do their errands. The boys decide to teach him a lesson by threatening his wife and they put her through a terrifying ordeal with the horrifying prospect of a gang rape which she only narrowly averts. Only one boy called Wittering seems appalled at what was being contemplated. He is the weakest boy in the class who is a bit backward academically and subject to bullying by the other boys. The next day Wittering has gone missing and the remaining boys appeal to John to help them find him. John is furious at them for what they put his wife through but they seem to be so dolefully desperate for his help and full of concern that Wittering will tell someone about Pellam's murder that John agrees to help them search because he still wants to learn the truth of whose idea the murder was. Wittering's body is found at the foot of the cliffs with a suicide note explaining that it was he who had proposed the idea to kill the strict and sarcastic Mr Pellam. He did this as a way of impressing his classmates and gaining their respect and although they all carried it out he takes full responsibility for giving them the idea to do it. This is where the film ends with John finding that knowing who suggested the murder has actually gained him no greater understanding of what actually made them do it. Dave Kelly is a clean-cut Australian singer who arrives in England on a passenger liner hoping to make it big. He also has ambitions to meet and marry the famous poster model Melissa who is "Everybody's Dream Girl". His first task is to find an agent and he goes to the offices of Wilkinson, Doherty and Lever telling them he would like to become a rich and successful entertainer. Dave sings for Mr Lever who assesses his pop star potential using an array of scientific measuring gadgets and a teenage girl whose level of scream is a vital indicator. The results show that Dave's singing was passable but he needs to come up with a new sound. Mr Lever tells Dave he will call him if something comes up. While he is waiting for the call Dave looks for somewhere to live. He finds a letting agent called Harry King who tasks his beautiful daughter Patsy with showing Dave around the possible accommodation flats in his portfolio. Unknown to his daughter, Harry is criminally inclined and he and his associates are preparing for a robbery. One of King's empty properties is situated above a jeweller's shop and while it is closed on a Saturday their plan is to break into it from the floor above and steal £2million pounds worth of diamonds from the safe. But just as they are ready to begin they realise that Pasty has let that very flat to Dave Kelly. And Dave is staying in all day so he won't miss any calls from Mr Lever. King thinks fast and tells his daughter to persuade Dave to go out with her and see the sights. And big-hearted King tells Dave he will flat-sit for him and take any phone messages. Dave and Patsy enjoy a pleasant afternoon out together and a romantic association develops. The only thing coming between them is Dave's highly motivated ambition to be a star which for him is more important than any other consideration. Meanwhile King and his men break through the floorboards into the shop below and start trying to crack the safe. Dave and Patsy come back before they are finished and to get rid of them again King pretends Dave's agent Mr Lever called and offered Dave a gig at a rich debutante's coming out ball (which he had just read about in the newspaper). Dave rushes to attend and discovers the debutante is none other than dream girl Melissa Smythe-Fury. Because Dave is not expected he is considered a gatecrasher and made to wash the dishes but afterwards he dances with Melissa. Unfortunately he finds her to be very toffee-nosed with no interest in him whatsoever. Back at the shop Dave and his gang eventually find out the safe contained only an old library book and the shopkeeper always took his entire stock home with him every night. Then it gets surreal:- Dave returns home and finds the hole in his floor. He climbs down and is arrested by the police as a suspect. He runs for it and is shot and wounded. He then staggers into a house which turns out to be a court presided over by Mr Lever. Dave is accused of being arrogantly self-centred without a single redeeming feature - although Dave claims that isn't true because he's got good teeth. Dave is found guilty and when asked if he has anything to say before sentence is passed he sings a song. He is sent to prison until he gets a message from Pasty and he is let out and they get married. Dave is now a member of the King family and he leads a market singsong of Waltzing Matilda as the film ends. Lurcio is a slave in ancient Pompeii of 79AD who works in the household of Senator Ludicrus Sextus and his wife Ammonia. As the story begins Lurcio is at the market purchasing supplies for Ludicrus' orgy that evening when he has a run in with a newly arrived Roman centurion called Captain Bilius and certain belongings of the two men get mixed up. When Lurcio gets back to his kitchens he finds a scroll amongst his shopping and puts it to one side not knowing what it is. Bilius is an emissary of Emperor Nero but is secretly plotting against him and meets with his ally, the pro-consul of Pompeii Prosperus Maximus. Bilius says he has a scroll containing a list of 100 important Romans who will support a revolt and proclaim Maximus as the new emperor once Nero is dead. But as Bilius gets out his scroll it turns out instead to be a cucumber! Bilius realises what happened and organises a hunt for the slave he bumped into in the market who must have the scroll which if it were to fall into the wrong hands would make all the conspirators' lives forfeit. Meanwhile Lurcio's master Ludicrous is to give an important speech at the senate and before leaving he comes to the kitchens to talk to his slave and puts down the scroll containing his speech and then inadvertently takes the unopened Bilius' scroll instead when he departs. Bilius soon tracks Lurcio down and recovers his scroll until he realises it is the wrong one. He hopes to get it back from Ludicrous but the senator has already read it and realises there is a conspiracy afoot involving the pro-consul. Ludicrous visits Maximus to insist he resign but the pro-consul has anticipated this move and has asked his glamorous wife to seduce Ludicrous when he arrives so that Maximus can catch them "at it" and kill Ludicrous on the pretext of protecting his wife's honour. But Lurcio has discovered this plan to kill his master and substitutes himself at the critical moment and the angry Maximus throws him into prison slated for execution. Emperor Nero arrives at Pompeii and for some entertainment suggests that Maximus pit a fighter against his ferocious champion, Gorgo. Not wishing to anger Nero by beating him Maximus selects the weedy condemned slave Lurcio to fight on his behalf. But against the odds Lurcio wins and becomes Nero's new champion. Nero sends Lurcio to some steam baths to pre-emptively assassinate Maximus whom he knows is plotting his downfall. At the same time Lurcio is told to assassinate Nero by Maximus on pain of death if he refuses. And both parties plan that their henchmen should murder Lurcio as a political assassin once he has done the deed. But the henchmen end up accidentally killing each other in the hazy obscurity of the steam room. Finally as Ludicrous is about to expose Maximus in a senate speech the nearby mount Vesuvius erupts and everyone in Pompeii is killed forever frozen by death in their final actions as witnessed many centuries later when a tour guide is showing some visitors around the historical site. In the middle of the 12th century a baby boy is born to good Queen Anne. But a wicked and ambitious baron called Sir Braggart de Bombast opposes the succession and quickly orders the baby be taken from its nurse and abandoned in the forest to die. However the queen unexpectedly has twins and the baron is unable to repeat the deed with the second child. This baby grows up the become King Richard I known as the Lionheart. The forsaken baby did not die however and was found by a sow pig who sustained him until he was found and adopted into the household of Sir Coward De Custard where he was named Lurkalot. No one, not even himself, knew his royal origins and Lurkalot grew up to be a serf in Sir Coward's castle. It is now 40 years later in 1197. King Richard is away in the Holy Lands fighting in the Crusades where he has been ever since he turned from boy to man. Lurkalot remains a lowly servant whose background remains a mystery to him. Lurkalot has an inventive mind and one of his most useful and marketable inventions is a line of chastity belts worn by women to ensure they remain chaste while their menfolk are away at the Crusades. Sir Coward allows Lurkalot certain latitude because the income from his products is the only thing that keeps the castle going. But even that is not enough and Sir Coward is in a financial pickle. Sir Braggart wants to buy Sir Coward's castle and land to increase his own power and influence but Sir Coward proudly refuses to sell. The two noblemen then come to blows over the matter of their respective royal allegiances - Coward is loyal to absent King Richard, but Braggart is a supporter of the king's upstart brother Prince John. A joust is held between their respective champions to settle a matter of honour and although Sir Coward's champion Lurkalot is victorious using his new invention of a magnet, Sir Braggart claims victory because Lurkalot was an ineligible competitor not being of noble birth. Sir Braggart takes possession of Sir Coward's beautiful daughter Lobelia for his letch, but before she is handed over Lurkalot makes sure she is fitted with his most impregnable chastity belt for which he has the only key. When Sir Braggart finds out how he has been fettered he lays siege to Castle Coward to get the key from Lurkalot. But the wily serf uses his new invention of flying wings to soar over the soldiers and escape. Lurkalot decides he must go to the Holy Land and persuade King Richard to return and restore order. But when he arrives in the hot desert land he discovers the reason why the Crusades are so popular with noblemen. The Saracen leader Saladin has set up a paradise centre where every vice imaginable can be satisfied. The brave English knights live it up in a pleasure den of wine and women whilst sending back to England made-up reports of all the fierce fighting that is going on. Lurkalot finds King Richard and is struck by how similar in appearance are he and the king. He tries to tell the king how important it is he return immediately to England. But the king is an ardent hedonist who has been enjoying the pleasures of the flesh for the last twenty years and has no desire to return to England whilst an inexhaustible supply of pretty girls are on hand. Lurkalot decides he must do something drastic to frustrate Richard's complacent contentment, so he manufactures a batch of his impregnable chastity belts and gets all the harem women to wear them. With his fun sequestered King Richard reluctantly agrees to accompany Lurkalot back to England. But it is slow going because Richard cannot resist gallivanting with all the local European lasses along the way and in Germany their journey comes to a lusty halt when Richard finds an irresistible fräulein and stymies Lurkalot's efforts to move on. Richard tells Lurkalot that since they look uncannily alike Lurkalot should go back to England alone and pretend to be him if he thinks it is so important for the king to return. So Lurkalot assumes Richard's identity and accoutrements and arrives back in England full of grandiose expectations of welcome. But unfortunately Richard has been away so long no one remembers what he looks like and no one believes Lurkalot is the king. Instead he is accused of being a witch and put to the flame in a burning. Fortunately he is rescued by the famous outlaw Robin Hood and his Merrie Men. Robin Hood and his men are not the indomitable men of legend but a fay assortment more interested in their immaculate appearances than rough and tumble activities - although they occasionally practice a bit of do-gooding on the side. Robin agrees to help Lurkalot take back Castle Coward from the evil Sir Braggart who has still not managed to overcome Lobelia's chastity belt despite engaging countless locksmiths. Lurkalot is joined by the exiled Sir Coward and together they manage to sneak into the castle and get to Lurkalot's laboratory. Whilst seeking inspiration on how to open the portcullis for Robin's men to storm the castle, Lurkalot accidentally invents gunpowder. This wondrous powder proves decisive in achieving victory over the evil baron who finally reveals to Lurkalot the truth about his royal heritage and that he is the king's older twin brother. Order is established and the real King Richard returns after his fräulein's angry husband arrived back home in Germany and Richard was forced to flee. King Richard bestows a knighthood on Lurkalot and awards himself the hand of fair Lobelia. On their wedding night Lobelia regrets she is still wearing the unconquerable chastity belt. But all is well because King Richard is actually Lurkalot and he has the key. The real King Richard was happy to secretly exchange places with his brother, who is in any event the rightful king, so he can return to the Holy Land and continue having fun. Polly Dean is a young woman from the rich side of London who has decided that she wants nothing to do with the privileged lifestyle she was brought up in and wants instead to live an "ordinary" life. She goes to Battersea and gets a job in a sweet packing factory where she finds the no-holds barred gossip and banter among the working class women workers a delight. Her cultured accent immediately marks her out as someone out of place and her co-workers find it hard to figure out what she could possibly be doing here. But she does make some friends in two sisters called Rube and Sylvie who show her the ropes and accept her into their circle of friends. Polly decides to move to the area and gets a small flat and buys some furniture from a second hand shop where she meets Peter the shopkeeper's assistant who helps take her purchases home. He is a pleasant and genuine young man with a nice, easygoing manner and when he tentatively asks her out, fully expecting her to decline since he realises she's way out of his league, she accepts. She shows off her new apartment to Rube and Sylvie and they can hardly believe how dingy it is - even they live better than that although they try to be polite. She goes out with Peter, but rather than let him take her somewhere up in town she just wants to wander around the streets looking at the views which she thinks are beautiful but he just sees as dirty rows of old houses that no one really wants to live in. She explains to him she wants to be happy with the simple things in life with no pre-decided life all set out for her in advance by rich parents. She finds the lives of the rich hypocritical and disgusting and no longer wants any part of it and from now on will spend only what she earns. Their relationship progresses and they become more serious and Peter asks Polly away for the weekend. He wants to impress her and hires an expensive sports car and takes her to the finest hotel and restaurant and really pampers her although she tells him she'd much rather have kept things cheap and simple. They spend the night together and declare their love for each other. Next morning they have a row when they discuss marriage and although delighted by the prospect she tells him he would have to get a better job if they did. He finds her comments strange because he knows she must have money behind her and when they are married she can stop this pretending and they can go and live somewhere nice. But she tells him she means it about wanting to live an ordinary life - it is not some sort of game she's playing and she has no wish to live like a parasite or to marry one - she believes money destroys people and she wants no part of it. He just cannot understand her attitude because the lifestyle she has turned her back on is the very thing he aspires to - there is no suggestion that he's a money-grabbing opportunist but he wants to be comfortable enough to take the sweat out of life and move away from the slums of London. He thinks she is selfish to do nothing with her money when she could be spending it to help people and make them happy. He storms out and drives off in the sports car. On the way home he is stopped by the police for speeding and it turns out he stole the car and did not hire it after all. He is given six months in prison for motor theft. Polly attends court for she still loves him and after he is sentenced she asks him why he did it for she'd have much rather have gone by bus - and he tells her that that's her trouble - and we leave the story as she is crying, watching the prison van taking him away. Set in the United States starting at about 1919. Rudolph Valentino had come to the United States as an Italian immigrant with ambitions of becoming a landscape gardener after getting the necessary diplomas. However his handsome good looks and skill at dancing made him ideal in the role of a ballroom gigolo working at establishments where matronly women paid to dance with and be flattered by a good-looking young man. Rulpolph Valentino (Rudi) falls in love with a young woman called Bianca De Saulles who had been an immigrant like himself and they want to get married. Unfortunately she is already married to a powerful and violent man called Jack De Saulles who is insanely jealous if she talks to other men although he himself has many mistresses. Rudi tries to help her get proof of his infidelity so she can sue him for divorce. But Jack sends his hoodlums round to beat Rudi up and show his conniving wife that she cannot hope to defy him. Bianca is so distraught that she shoots Jack dead. Rudi loses his job over the ensuing scandal and moves on to work in a dance hall cabaret act where he and his female-impersonating male partner perform a comic dance routine where "she" is an intentionally poor dancer. It is at one of these performances that Rudi meets Jean Acker who is a starlet in the newfangled movie business. She tells Rudi how she was plucked from obscurity and now lives a champagne lifestyle for acting in movies where they can't even hear your voice. The glitz and glamour appeal to Rudi's sense of showmanship. Jean and Rudi get married and she introduces him to the movie business and he gets a few small parts in some films at an independent studio. The marriage proves a disaster and the couple soon go their separate ways but Rudi's screen performances come to the attention of June Mathis who is a producer at a big Hollywood studio. She recognises his potential and offers him a contract. Valentino quickly becomes a huge star of romantic melodramas with women everywhere idolising his smouldering screen presence. Rudi is not grandiose about his success and is just placidly grateful to be doing something he likes. But then he meets and falls in love with set designer Natasha Rambova who pushes him to become more ambitious. She thinks he is wasting his talent working for a studio and should have a greater say in his own films. Rudi therefore asks the studio head for a huge pay rise and script approval. This is steadfastly refused so Rudi and Natasha walk out and refuse to work. The studio boss in turn refuses to release Rudi from his contract and takes out an injunction to prevent him acting for anyone but him. So Rudi and Natasha take an enforced break from the business intending to wait until the contract has expired. But after a year living a carefree lifestyle out of the limelight, their money is running low. Rudi is also concerned that perhaps the public will have forgotten him. So he and Natasha start making personal appearances in music halls where they perform a dance act which does not break the injunction because he is not acting. The tour is a massive success because everyone wants to see the great Valentino in the flesh. The publicity convinces the studio head to ask Valentino to return to work giving him and Natasha the pay rise and script approval they demanded. When the contract ends Rudi and Natasha decide not to renew but instead enter into negotiations with United Artists. The famous studio wants to sign up Rudi but make it absolutely clear they do not want Natasha in any capacity because it is perceived she is a disrupting influence. For the sake of his career Rudi and Natasha agree to split up and go their separate ways. It is now 1926 and Valentino's movie career continues to be successful. But now in his early 30s he has started to have some health problems with a stomach pain. Also he has been getting some bad press with one reporter mocking his aloof air and questioning his masculinity. Rudi takes great exception to this and publicly demands to fight the journalist in a boxing ring and prove he is a real man. The said journalist is not fit enough but another called Rory O'Neil takes up the challenge. Unfortunately O'Neil is an ex-navy heavyweight champion who takes great relish in the prospect of humbling such a pretentious upstart. Valentino is not a fighter and cannot throw a proper punch and in the first two rounds he is roundly thrashed as O'Neil treats him like a punching bag. The bout only lasts that long because O'Neil is holding back to make it last by playing up to the baying crowd who are thoroughly enjoying the humiliating rout. But then in the third round Rudi lets rip with a last gasp effort and catches O'Neil with a lucky pile driver. O'Neil is stunned and goes down for the count and unexpectedly Valentino is the winner. The crowd cheer him, as if they had known all along that he would win in the end, and he is their hero again. O'Neil expresses no hard feelings and instead challenges Rudi to a rematch in the pub to see who can down the most shots of liquor. And again Rudi wins but only after imbibing an excessive amount of alcohol. He staggers home with his body suffering from the punishing beating and the alcohol abuse. His stomach complaint flares up and he collapses and dies. He was only 31 years old. In Mexico in the early 1900s TJ Breckenridge is the female star and owner of a touring Wild West show which combines rodeo with circus acts. But the popularity of the galas is waning and TJ knows she needs something new to pull in the crowds and fortuitously she has been gifted a miniature wonder that might just achieve that ... Elsewhere Tuck Kirby, TJ's former partner and lover who walked out on her some years ago to pursue other opportunities, is heading back her way. He is returning to try and persuade TJ to sell out and settle down with him. On the way Tuck meets an English palaeontologist called Professor Horace Bromley who is conducting research in the desert area. He shows Tuck a fossilised footprint he has found that was made by an extinct Eohippus. The Eohippus, or Dawn Horse, was a miniature one-foot high horse, the ancestor of the modern horse which died out 50 million years ago. TJ is angry with Tuck at first for deserting her but his charm soon works its magic on her and she welcomes him back. She shows him her new acquisition which one of her employees found at the mouth of the Forbidden Valley in the desert a few miles away, although the exact location is unknown. It is a miniature horse and Tuck realises straight away that it must be an Eohippus which the English professor was recently telling him about - but this one is very much alive! Tuck brings the professor in to examine it and the Englishman shows great excitement at the kudos he will gain for this amazing scientific discovery. The professor wants to take it away and study it, but to his chagrin TJ refuses because she plans to use it in her show as a crowd-pleasing wonder. Meanwhile a superstitious old gypsy woman warns of terrible calamity if the creature is not returned to where it belongs. The professor reasons to himself that where there is one Eohippus there must be others so in an act of cunning he tells the gypsy woman where the Eohippus is kept knowing that she will steal it to return it home. He then plans to follow her and find the location of the Forbidden Valley and capture others of its kind. That way, he rationalises, TJ can have her attraction and he can have his specimen and everyone will be happy. The old woman and her kin steal the Eohippus and ride out into the desert. The professor follows pleased that his ruse seems to be working. Tuck realises what is going on and gives chases followed shortly afterwards by TJ and her men who believe Tuck has betrayed them and helped the professor steal their attraction. At the mouth of a valley the gypsies release the Eohippus back into the wild and it scampers off. The other parties arrive and begin efforts to recapture it. They find their way to a narrow crevice through a rock wall and on the other side find an undiscovered valley where all manner of strange and thought-to-be extinct prehistoric creatures roam. One particularly fearsome creature is the gigantic carnivorous Allosaur whom the gypsies call Gwangi. The cowboys realise that if they could capture it the creature would eclipse the appeal of the tiny horse and be the greatest attraction ever exhibited. They use all their corralling skills to try and bring the beast under their control. But its belligerence and strength prove too much and they have to flee for their lives. However the Gwangi chases them as they exit through the narrow fissure and using brute strength forces its way through. But this activity dislodges some large boulders which fall onto the beast and render it unconscious. The cowboys seize their chance and transport the Gwangi back to their rodeo arena. They lock the creature in a large metal cage and begin making preparations for the public unveiling of their astounding new attraction. They ignore the gypsy woman's warnings that the Gwangi is an evil creature. The public's interest in seeing the Gwangi is huge and TJ knows she is onto a money-spinner. Tuck is disappointed that TJ has rejected his appeal to sell out while she's doing well. As the big moment of the unveiling approaches one of the Gypsy woman's men sneaks into the cage and releases the restraining bolts. As the veil around the cage is removed to the audience's awed gasps, Gwangi becomes enraged and breaks out of the cage - the professor is crushed to death by the falling bars. Gwangi rampages around the arena as the crowd flee in utter panic. Gwangi chases the people out into the town square and into the cathedral where they thought they would be safe. Tuck manages to trap it in the cathedral as the people rush out of the rear exit. A fire is started and takes hold and Gwangi is caught in it, roaring its fury at the painful flames it cannot defeat. The crowds gather outside as they watch their cathedral burn down and hear the agonised death roars of the Gwangi as it eventually succumbs to the inferno. In the present day Castle Dracula in Transylvania is run as a tourist attraction hotel with the guests being offered themed dinners with a tour guide Dracula as their host. To the public at large Dracula is a legend and no one knows if he ever really existed - but he does exist and the real Count Dracula is the one behind the scenes running the whole enterprise and cashing in on his own name. His faithful human butler Maltravers acts as the tour-Dracula and they employ actresses to be the vampire waitresses. However Dracula has set up this tourist "trap" with one specific purpose in mind - he is desperately searching for someone with the rarest blood group in the world which can be used to provide the catalyst that will re-energise his beloved wife Vampira who has been in an undead coma for the past fifty years after drinking some poisoned peasant blood. Guests are routinely drugged and during their sleep have some blood extracted and analysed for that elusive group before they leave - remaining completely unaware of what happened to them. The next guests expected at the castle are a party from Playboy magazine UK whose award winning article writer, Marc Williams, is doing a feature on the Dracula legend. He has brought along four models to photograph - there are three white models and one who is black. After dinner the models retire to bed and fall into a drugged sleep. Dracula and his servant take blood samples and when they analyse them they find they have at last found that elusive match! As long as the special blood catalyst is present then any other blood type will do to bulk-out the quantity and so all the samples taken are combined and used to give Vampira a transfusion. The process seems to be working and Dracula's wife awakens from her long slumber - but then a strange thing happens and her white skin turns black. Dracula is appalled at this development and can't imagine what people would think - although Vampira herself kind of likes it and thinks it suits her. Maltravers speculates it may be like mixing colours in the wash and the "black" blood contained in the batch has somehow affected her pigmentation. They know the special blood did not come from the black model but due to a label mix-up Dracula and Maltravers aren't sure which of the three white girls the special blood came from - and now the models have returned to England. So Dracula, Vampira and Maltravers head off to London in pursuit to get more samples and discover which of them had the special blood. They are then anticipating that if they give Vampira another transfusion to clean out her system she will turn back to her normal colour. Once in England Dracula rents a suitably gothic mansion and invites Marc Williams to visit knowing that he will have access to all the models. He hypnotises Marc into acting as his agent and commands him to take blood samples whenever he hears the codeword "Vampira". Marc then has dates with the models and in a trance is forced to extract blood from them for analysis. After a time Marc begins to become suspicious that he is under some from of control and tries to fight it but Dracula exerts his will forcing him to obey. Things culminate at a Playboy party where the final model to be tested is present and she is confirmed to be the match after the first two girls' results were negative. Dracula mixes the white-only blood up and gives Vampira another transfusion - but it doesn't work as expected - instead she stays black and feels such a surge of need that she bites into her husband's neck. This has an unforeseen effect on him as he too turns into a black person. Dracula is most embarrassed by this and decides to head back to Transylvania as quickly as possible before he is seen. In the village of Stetl in a European country during the nineteenth century the villagers live in fear of the mysterious Count Mitterhaus who resides in his fortified castle nearby. Several villagers' children have gone missing and although the Count is suspected they are unwilling to confront him afraid of the supernatural legends that surround him. But when a schoolteacher called Albert Mueller spots his own wife Anna leading a young innocent little girl into the castle he cannot understand what she is doing and assumes she must be under some unholy influence. He bands together the villagers and persuades them that they should at last take some action against the evil Count and save both his wife and the young girl Jenny. They enter the castle and soon discover Jenny dead from a vampire's bite - but Anna is in the Count's bedchamber as his willing lover. Count Mitterhaus is a vampire and Anna is his human concubine who has been luring innocent victims for him to feed upon. The villager's angrily attack the Count determined to rid themselves of his evil - they fight hard but the Count is supernaturally strong and cannot be harmed by conventional means - several villagers die but eventually the Count is subdued with a stake to his heart. As the Count lays dying he issues a curse on the assembled head villagers declaring that their children will suffer - that at some point in the future their offspring will die to restore his life. Anna is dragged from the castle and flogged for her treachery and the castle is set ablaze. Anna pulls free, and grieving for her lover she runs back into the burning castle and drags his body down into the cellar caves and into his coffin where in his dying moments he tells her to find his cousin Emil who will know what to do. She departs down an underground passageway and escapes to carry out his dying wishes... Fifteen years later the same village is in the grip of an unknown plague that has caused the neighbouring villages to forcibly blockade access in or out to maintain it in quarantine. The head villagers are at a loss to know what to do and morale is very low. Then a circus troupe arrives in town mysteriously breaking the cordon without any difficulty. The circus is named "The Circus of Nights" and is run by an unnamed Gypsy Woman whose right hand man is Emil. He is secretly a vampire and has the ability to transmute into a black panther. Other circus performers are also vampires and they have arrived to put into motion the curse of Emil's cousin Mitterhaus from fifteen years previously. The village folk are delighted at first with the distraction that the entertainment of the circus brings to their miserable situation. But when children of some of the elder villagers go missing and are found dead memories of the Count's curse come flooding back. The villagers band together once more to destroy the circus vampires and attempt to prevent the Count's resurrection from being fulfilled. But the situation is too far gone and the Count is reborn - but only temporarily as he is finally destroyed for good while still in a weakened state. Set in the early 1800s in a European country. General Von Spielsdorf is holding a grand celebratory ball for his young niece's birthday when some newcomers to the area arrive to introduce themselves. They are a Countess and her daughter Marcilla and are warmly welcomed. The Countess then receives an urgent message and is called away to visit a sick relative and she asks if she could impose upon the General to allow Marcilla to stay with him whilst she is away. The General agrees knowing that the young woman would be good company for his niece Laura. Over the days that follow the two young women make friends and become close - but then Laura begins to get ill, becoming tired and listless. The doctor can do nothing for her and after a couple of days she simply dies for no good reason, although the doctor discovers two odd puncture marks above her left breast. The General is grief stricken and goes away intent on finding some answers to his niece's sudden decline. Nearby live the rich Morton family, they had been at the General's ball as well but had left the party early and so never met Marcilla - but they are all very sad at the death of Laura. Roger Morton lives with daughter Emma and the girl's governess Mademoiselle Perrodot. While out riding Roger Morton comes across a matronly damsel in distress whose stagecoach has had a mishap. The lady is travelling with her niece and because of the delay she asks if her charge could possibly stay with Morton whilst she continues on alone to visit a sick relative and Morton agrees thinking it would be excellent company for Emma. Her niece is called Carmilla (when we see her on screen we know she is Marcilla, although none of the Morton household know of her involvement in the nearby events at the General's house). Morton soon has to depart on business to Vienna and whilst he is away a similar pattern of events play out in this household as seen before and the mysteriously enigmatic Carmilla becomes good friends with Emma making overtures of something more than just friends when opportunity presents itself although Emma is too naïve to understand her close intimate contact is anything other than special friendship. Emma becomes listless during the day and her governess becomes increasingly concerned as to her well-being. Emma has strange puncture marks above her left breast which Carmilla explains away to the Governess as being made by a broach - but the Governess is only partly convinced and so Carmilla weaves her alluring spell on the woman who feels compelled to follow her to her room where a romantic liaison ensues. After this the Governess is a changed woman - she is no longer concerned about Emma's wellbeing and puts obstacles in the path of the worried butler Renton who thinks they should send for the Doctor. But Renton is anxious enough to go against the Governess' instructions and send for the doctor anyway. With suspicions of a vampiric predator around because of several mysterious deaths in the area, the doctor puts a crucifix around Emma's neck and has her room garnished with garlic flowers - Renton is given instructions by the doctor to make sure these safeguards are kept in place. Then on his way home the suspicious doctor is attacked by Carmilla and her vampiric nature is openly seen displayed (if there was any doubt) as she kills him with a bite to his neck before he can report anything of his findings in the village. Back at the house again Carmilla is thwarted from entering Emma's room by the defensive measures but she needs the girl to snack upon to satiate her cravings. Then Renton makes a fatal mistake when he confides in Carmilla that he thinks the Governess might be a vampire because of the way she has been trying to undermine the precautions made to keep Emma safe. Carmilla extorts her powers of mesmeric seduction over him and in her thrall he removes the charms for her and then she kills him. Roger Morton returns from his business trip and, terrified at his daughter's weak condition, he heads to the village to try and find the doctor (not knowing he is dead). On the way he meets the General who has just returned from his time away and has with him a man he found who knows all about the dangers of this area. His name is Baron Hartog and he has a story to tell ... (His story - some of which is seen in the film's prologue) Several years beforehand back in 1794 Baron Hartog's sister Isabella had been killed by a vampire of the Karnstein clan. The Karnsteins were a family who were evil both in life and in un-death and Hartog is determined to avenge his sister's death. He goes to the Karnstein castle where the vampires sleep buried in their coffins to occasionally rise when they need sustenance. He finds each coffin and stakes the occupants as they sleep. He only misses one whose tomb he could not locate and he was too overwrought by the horror of it all to continue searching any longer. So now Morton, the General and the Baron return to the castle to complete the task. They search around and in an overgrown area find the missed tomb bearing the name of Mircalla Karnstein (1527 - 1545) and when they see her portrait both local men recognise her as the woman they recently allowed into their homes to befriend their young ones. However they discover that the tomb is empty of the actual coffin which has evidently been hidden elsewhere. Back at the Morton house Carmilla has become thwarted in her efforts to further feed from Emma by a local estate manager Carl Ebhardt (who was the beau of Laura) and she decides to give up and return to her coffin since she is reasonably sated as she has recently fed from the Governess whom she has just killed. Back at the castle the three men see her come back and discover the hidden location of her coffin and the General proceeds to stake her sleeping form and then beheads her to finally destroy her evil menace. Five men get into an elevator at separate floors on their way down to the ground floor of an office building - but the lift oddly bypasses the ground floor and goes to the basement where they get out and find food and refreshments laid out. The lift doors close and there is no recall button so they decide to wait it out and make the best of it until someone comes for them and soon get around to telling one another about some strange dreams they've each recently had. Their dreams are the stories we then see ... Story 1 - Midnight Mess Harold Rogers is searching for his sister Donna whom he has not seen for a long time. He hires a private detective whom he promptly strangles to death once he has discovered her address. He goes to her village and finds everyone is strangely afraid of the approaching dark. He knocks on his sister's door and she tells him that there are killers who roam at night. Then he tells her the reason for his visit - their father died four weeks beforehand and she is the sole-named heir - for as long as she lives! - and he proceeds to stab her to death. It is now dark outside and he goes to a nearby restaurant which seems to be doing a bustling trade despite the locals' supposed fear. But the menu is strange in that all the items are blood related and then in the mirror he sees that he is the only person in the packed dining room who has a reflection. His sister then walks in still alive and they all reveal themselves as vampires as they proceed to have him for dinner. Story 2 - The Neat Job Ageing Arthur Critchit has taken a new young wife called Eleanor to share in all the fortune and luxury he has accumulated in his life. Arthur is an obsessively neat and tidy person and needs everything to be in the right place and although she tries her best Eleanor finds it very hard to conform to the rigid system of order he has come to live by over the years and she keeps getting things wrong. When he comes home one day to find that her clumsiness has ruined the meticulous arrangements in his workroom she snaps and kills him with a hammer. But she preserves him as he would want to be by placing all his body parts in separate jars all neatly labelled and placed on a shelf. Story 3 - This Trick'll Kill You Sebastian is a stage magician who is holidaying in India with his wife Inez who is also his stage assistant and together they are looking for new ideas for their act. They are watching a fakir and his daughter perform street magic and Sebastian takes great pleasure in exposing his "magic" as mere trickery in front of the assembled crowd. Sebastian prides himself in his ability to work out how any trick is done and so he is intrigued when later on he sees the daughter performing an Indian rope trick which even though she lets him examine it closely he cannot fathom the secret of. He offers to buy the secret of the trick from her but she refuses saying it a magic rope that has been handed down through the generations. So Sebastian tricks her into coming to his hotel room on the ruse of demonstrating the trick to Inez who he says is ill in bed - then he kills the young woman and tries the trick himself. He plays the music that she played and the rope rises and Inez practices climbing up it - but at the top she screams and vanishes and then the rope takes of a life of its own and attacks and kills Sebastian. And in the market place the Fakir and his still-alive daughter carry on their act having taken revenge on Sebastian for earlier humiliating them. Story 4 - Bargain In Death Maitland has devised an insurance scam with his friend Alex. Maitland takes a drug that will slow down his metabolism so much it will fool any doctor into believing him to be dead of a sudden heart attack. The plan is that soon after he is buried Alex will dig him up and together they will share the Life Assurance money. But Maitland plans to double cross Alex by killing him after the money has been collected - and Alex intends to double cross Maitland by not even digging him up. Meanwhile two medical students are bemoaning the fact that they have so little chance to practice on real dead bodies that they decide to get one themselves. Maitland is now underground buried in his coffin wondering what is taking Alex so long when at last he is dug up - it is not Alex though, but the two students, and they get a nasty shock when the "corpse" sits up gasping for air. But the gravedigger they have hired responds by slicing Maitland's head off with his shovel. Story 5 - Drawn and Quartered A painter called Moore has gone to live in seclusion on the island of Haiti after his artwork was strongly condemned by an art critic and considered worthless by a gallery owner. He is shocked therefore to discover that his art is now selling for record amounts back in London. He realises he has been conned by three people he trusted - the critic, art dealer and a friend called Lawrence Diltant who had bought up his work from him at rock bottom prices before he emigrated. Moore decides to have his revenge and visits a voodoo witch doctor and buys some magic to give his painting hand special powers and upon his return to London he paints portraits of the three men. He then defaces them and the men suffer similar injuries to those he has depicted for them. But Moore has also completed a self-portrait with his special painting hand and when that gets accidentally damaged a nasty death befalls him. Back to framing sequence - The lift doors open again onto a graveyard and the men file out and we learn that this storytelling is a regular occurrence that these dead men are compelled throughout all eternity to repeat - every night retelling the terrible things they did while they were alive. Set in the 1920s(?). In China, Fu Manchu and his daughter Lin Tang return to their ancestral homeland in the Northern Province of Kwang-su. Once ensconced in his palace Fu Manchu begins plotting his vengeance on the man who is forever thwarting his plans - Nayland Smith of Scotland Yard. To do this he sends his agents to kidnap a world-renowned plastic surgeon called Dr Lieberson and his daughter Maria. By means of the threat of harm to Maria, the doctor is forced to operate on a hypnotised prisoner and change his features into an exact double of Nayland Smith. Meanwhile Nayland Smith himself has just helped found an international organisation of police chiefs called INTERPOL with which to combat the growing threat of world-wide criminal networks. After this he goes on a well-earned holiday to Ireland with his good friend Dr Petrie. Whilst on holiday Fu Manchu's men make the switch - kidnapping the real Smith and leaving the double in his stead. The impostor is gaunt, silent and Petrie thinks his friend has been struck down by a sudden illness that has turned him into a virtual living zombie so he quickly takes him home. Once home in England the fake Smith murders the household maid and is arrested. Smith's great reputation is publicly ruined - he is put on trial for murder, found guilty, and condemned to death by hanging in four weeks time. The real Smith has been crated up and shipped to China to be delivered to Fu Manchu's palace so that the criminal mastermind can revel in his vengeance by murdering his adversary, the real Smith, at the same time as the double is executed. Meanwhile Smith's loyal police chief friends (still unaware of the switch) plan a mission to Fu Manchu's palace believing that their colleague's massive fall from grace is the work of the evil Chinese criminal and hope to find evidence that will exonerate Smith and save him from the hangman's noose. Journey times to the remote Chinese province are long and by the time they arrive it is only a few hours until the execution. They infiltrate the palace and join up with the real Smith who has managed to free himself from a cell and begin to organise his own escape attempt. In London the fake Smith is executed and Fu Manchu calls for the real Smith to be brought before him. But unknown to Fu Manchu the guards accompanying Smith are now Smith's associates and they turn the tables on the criminal. A dynamite truck is set alight in the ensuing battle and the heroes flee leaving Fu Manchu and his daughter in stunned shock at the sudden downturn of events. The palace explodes and no one knows if Fu Manchu survived or not but Nayland Smith has the feeling that the world shall hear from him again. (We don't see Smith return to England and clear his name but must assume that once he explains what happened his reputation is quickly restored in time for the next film). {Comment] There is a secondary interwoven plot in which the major criminal organisations of the world decide to unite and ask Fu Manchu to be their leader if he can help them defeat the threat posed by the world's law enforcement agencies. This dovetails into the specific plot to discredit Nayland Smith but doesn't expand much beyond the basic premise. Fu Manchu's extended plan was to repeat the same replacement-double tactic with all of the world's major police chiefs until they were all discredited and confidence in law enforcement was eroded so much that the criminal gangs could operate more freely. A beautiful young girl called Carol swims out to a private yacht about to weigh anchor and stows-away. The vessel is owned by George Carter who is holidaying with his wife Sheila and their friend Philip. When they discover Carol they are well on their way to their next destination and too late to turn back so she is treated as a guest. Carol is unable or unwilling to explain why she is there and Philip in particular finds her intriguing. At night Carol has bad dreams and calls out a name "Ayesha". Philip hears her and she tells him that in her dreams people call her this but she doesn't know what it means. Still on route George receives a radio telegram with some disturbing news which causes him to change his destination. As the boat steers away Carol is racked with severe head pains and implores George to turn back to the original heading and when he refuses she jumps into the sea. George dives in to save her but his strenuous efforts give rise to a heart attack and he dies. With Carol safely back on board the boat heads to the nearest port at North Africa for an inquest. Elsewhere in a secret society of ancient scholars called the Maji we see how the destiny of the woman called Carol is being manipulated from afar. They believe her to be the reincarnation of their once-queen Ayesha, and her former lover Killikrates wants her back. Killikrates is immortal - he was made undying by the eternal flame that burns only once in a lifetime - at the same time as the once-immortal Ayesha perished in the same flames. His adviser Men-Hari is adept at mind control powers and has been influencing Carol from afar - using pain to guide her direction so she will find her way to them when she follows the route that causes her least discomfort. Killikrates intends to make Ayesha immortal once again and has promised he will do the same for Men-Hari if he succeeds in bringing Ayesha to him - but the time of the flame approaches soon with the correct alignment of the stars and they anxiously await Ayesha's arrival. Another adviser named Za-Tor is suspicious of Men-Hari's true motives and believes he has a secret agenda of his own to take control once he gains immortality. After the shipmates have reached port Carol heads off on her own into the desert. When Philip finds her gone he follows fearing for her life or her sanity. Eventually, after some run-ins with Arab slave traders they are reunited and Carol's unwavering course leads them to a hidden pass within a mountain that comes out into a temple of the lost city of Kuma where time and tradition has stood still and the people dress like ancient Romans. Carol is welcomed as Ayesha and treated as royalty and taken to see Killikrates whilst Philip is shut away in imprisoned luxury. The mind powers of Men-Hari still influence Carol and she raises little objections to the assertions of her true identity. As the moment of the flame's renewal draws close Za-Tor speaks with Philip about his concerns and Philip advises him to organise an uprising amongst his people who fear the return of Ayesha who is remembered as a ruthless ruler, and Za-Tor fears even more the immortality of Men-Hari whom he believes will try and take over the world. Philip is released by a female servant jealous of the returning Ayesha as she has her own secret love for Killikrates, and he goes looking for Carol. Killikrates takes Carol to a hidden chamber as the starlight hits the mystical crystal from which the eternal flame springs. They must wait for the flame to turn cold and then Carol can walk through it to become immortal. The flame's powers have some rules:- the person must enter of their own volition and with the consent of another immortal, and the only way an existing immortal can die is to enter the flame a second time. Philip finds them and tries to talk Carol out of it - he plants doubt in her mind that cause her to waver and Killikrates tells Men-Hari to walk her through the flame giving himself immortality too. This is what Men-Hari wanted all along and has been building to this point. Za-Tor tells Killikrates that Carol is not the true Ayesha and Men-Hari has found someone who resembles her using his mind powers to make it appear she was SHE so that he could gain immortality with Killikrates' consent. Devastated at this deception Killikrates rescinds his permission to Men-Hari and tells Carol and Philip they are free to leave. Then after a fight in which Men-Hari and Za-Tor are both mortally wounded, Killikrates feeling unfulfilled without his true Queen Ayesha walks the eternal flame once more to end his lonely existence. A dying Za-Tor then calls on the flame to destroy the accursed city whose people have taken the dark path and it obeys bringing the temple crumbling to the ground with Carol and Philip only just managing to escape in time. Philip Hopkins is a 10-year-old American boy living in a London townhouse with his mother Ruth and grandfather Howard who was an ex-big game hunter. They are well-off and have a live-in maid called Louise and a chauffeur called Dave. Philip is asthmatic and the house is centrally heated to keep the temperature at a constant 75°F which is also ideal for some of the exotic pets Philip keeps. Ruth is going away to Rome for a visit with her husband and is leaving Philip in the care of Howard and Louise. However Louise is not the innocent and trustworthy employee she seems and she is in league with her German boyfriend Jacques Müller waiting for the right opportunity to carry out a plan. She has recruited the gruff and brutish chauffeur Dave with sexual favours and the three of them are now ready to act. Their plan is to abduct Philip and receive a ransom for his safe return. With Ruth now away the ideal time to put their plan into operation has arrived. The intention is that Jacques will pose as a taxi-driver to take Philip on a treat and instead take him to their pre-prepared safe house. But unexpectedly Philip leaves on an errand of his own to pick up an African house-snake from a nearby exotic pet importer. The shopkeeper's short-sighted wife is on duty and gives Philip his boxed-up order. Meanwhile at the London Institute of Toxicology Dr Marion Stowe is expecting a dangerous Black Mamba snake to study but instead her delivery turns out to be a harmless African house-snake. She contacts the importer and it is soon clear there has been a mix-up. Dr Stowe contacts the police to tell them that a young boy has taken delivery of the most deadly and ferocious snake in the world. Its venom can kill in minutes if no anti-toxin is on hand. Philip returns home and an agitated Louise tries to persuade him to get into Jacques' taxi but the boy is insistent that he must unpack his new snake and put it in its warm serpentarium first. Louise reluctantly agrees and to hurry him up she helps him open the snake's travel box. The deadly Black Mamba leaps out and attacks her injecting her with its lethal venom and then scurries away. Louise quickly feels weak and goes into spasms and soon dies. Jacques and Dave have come into the house to see what is going on and Dave arms himself with a shotgun. Then there is a knock at the door which Dave answers. It is a policeman following up the report of the mixed up snakes but Dave panics thinking the police know about the kidnapping and shoots the policeman in the chest killing him. Jacques is appalled that Dave's impetuous stupidity has placed them in a much more serious situation than they were planning - but he is prepared to use his hostages to negotiate their escape. The police soon arrive and cordon off the street and Commander William Bulloch takes charge. Jacques tells him they want a fast car and lots of money. Dr Stowe arrives on the scene and briefs Bulloch on the situation with the mamba. Bulloch has no choice but to inform the kidnappers of the danger the snake poses to them and their hostages. The Black Mamba is an aggressively ferocious snake that attacks without reason and its venom is deadly. Dr Stowe has a quantity of anti-venom and Jacques tricks her into coming into the house to treat Louise not mentioning she is already dead. Once inside he takes Dr Stowe hostage as well. The mamba has found a comfortable environment in the central heating ducts through which it can make its way to any room in the house. Jacques sends Howard to try to catch it with his safari skills but Howard fails to locate it. Dr Stowe mentions that if they were to turn off the sweltering central heating the snake might naturally go to sleep. Dave is sent to the basement to switch it off but the mamba is there and it attacks him and he dies. Bulloch has stationed snipers on the opposite building to try to take the kidnappers out if the opportunity arises. Jacques ups the stakes by seemingly cutting off one of Dr Stowe's fingers and throwing it out to Bulloch telling him more will follow if their demands are not quickly met (in fact it is a finger from dead Louise although this isn't revealed to Bulloch or the viewer for some time). Whilst Jacques is speaking at the window the stalking mamba attacks him and Jacques is drawn into a battle for his life as he tries to kill the powerful serpent by whipping it around the room. Jacques eventually gets it into a position where he can shoot the mamba's head off with his handgun but in doing so he has become exposed to the police sniper's sights and he is shot dead in a hail of gunfire. All the kidnappers and the snake are dead and the danger is seemingly over with Philip, Howard and Dr Stowe unharmed. Philip's mother Ruth returns and it looks as though life can return to normal. But unbeknown to anyone the black mamba had laid an egg in the warm ventilation ducts and now it has started to hatch ... This is a literary adaptation of the classic novel by Mary Shelley. It begins in the 1820s on an ice flow in the Artic where an ice-stranded schooner takes aboard a lone wanderer called Victor Frankenstein who is near to death from the exposure and tells the captain of the fantastic tale that led him here. It began a few years before in Geneva when the academically bright Victor went off to university full of ambition to solve the mystery of life. He experimented on a recently deceased cadaver to try and revive it with the use of electrical power harnessed from a storm. His efforts are met with a resounding success and the corpse comes back to life. Faced with this reality Victor suddenly becomes appalled at his own handiwork and rejects the creature realising what an abomination against nature he has created. He leaves it to fend for itself as he is taken home to be with his family who are concerned about his state of mind. The creature is a reasonably normal looking man with some facial scarring but possesses a full intelligence and ability to talk - but wherever he goes he is met by fear, rejection and hatred with no one willing to accept him into their community. He feels immense anger towards his creator Victor and heads off to his family home to seek his revenge. He kills Victor's young brother and tells Victor that he will do the same for the rest of his family if he does not create for him a female companion. Victor starts to comply but then reconsiders that he does not want to be responsible for spawning a new race of monsters of indeterminate ethics who might wish to destroy humanity. The creature therefore vows to carry out its threat. On the night of Victor's wedding to his childhood sweetheart Elizabeth, despite Victor's precautions, the creature gets into the house and murders her. The creature tells Victor that he is now satisfied with his revenge and that he is now headed to the ends of the Earth to live alone. For Victor this is no longer good enough and he vows to track him down and kill him. This quest eventually leads him to the Arctic where the story began and as he lays weak on the ship the creature comes to see him for one final time. Victor's heart gives out and he dies and the creature heads off into the desolate wilderness wishing to also die so that he will be a monster no more. Set in the early years of Anno Domini when Britain was under Roman occupation. The many small kingdoms of Britain were placed under the rule of a handful of Roman governor-generals each overseeing several kingdoms and in command of legions of battle-weary soldiers who despised the inclement climate. The Roman Emperor Nero issued instructions that his governors should be as accommodating as possible to the wishes of the local kings to avoid rebellion. One such kingdom was Iceni where the ageing and dying king had written a will that his land shall be jointly owned by Nero and the king's heir. Governor Justinian is temperate and agrees to honour the will to the letter imposing Roman rule in a tolerant and flexible manner. His headstrong first centurion Octavian is at odds with his commander's approach and feels that the might of the Roman sword should rule supreme and hold no quarter to these ignorant peasant people. The old king passes the throne onto his daughter Salina whom he feels best able to take his place even though she is not the natural heir. The kingdom is still dominated by the druid religion despite all practice of this having been forbidden by the Romans. Salina has forsaken that old religion but others in her family still hold it devout. The chief druid Maelgan is particularly loathe to relinquish his power and influence and hopes to turn events so that the Romans can be driven out. Over the coming months Governor Justinian and Queen Salina fall in love and decide they wish to marry but there is little enthusiasm for this idea from their respective advisers. Also Justinian's fair-minded policy of taxing the rich more and the poor less angers the rich merchants and brings about a desire to have Justinian replaced. So Octavian and a merchant called Osiris plot together to turn events to their mutual advantage. Osiris has Maelgan organise a druid uprising in far off Anglesey forcing Justinian, who has jurisdiction, to leave Iceni to take command of the Roman response. Meanwhile Octavian, left in charge of Iceni, begins running the kingdom with the uncompromising iron fist he has always advocated. He restores the former tax policy rescinding all of Justinian's reforms. He also ceases to honour the terms of the old king's will and has Queen Salina publicly flogged when she tries to stand up to him. This action however has the effect of creating hatred towards the Romans where previously there had been grudging acceptance and thus fuels a mass rebellion. Queen Salina bears armour and sword and leads her people against Octavian and in an ambush of his convoy captures him and prepares him for execution on the next full moon according to the druid way. Justinian receives word of this and although he despairs of Octavian's ruthless hard-line attitudes which have precipitated these events he cannot ignore the flagrant insurrection of Roman law. He heads back to Iceni hoping to calm matters down but it has gone too far and a full-scale battle ensues. Although the Britons fight with fury and determination the superior Roman weaponry proves decisive and Justinian regrettably has to order that Queen Salina, whom he loves, is arrested to be taken to Rome for trial. But the Queen knows that this will mean she will end up as a slave and takes her own life rather than suffer that indignity. Army Major Alan Bernard is talking on the phone to his brother-in-law Professor Gordon Zellaby who lives in the village of Midwich. When things suddenly fall silent at Zellaby's end and Alan is unable to get any sort of reply from any Midwich numbers he becomes concerned and drives down to investigate. (As the camera looks around the village for us we see that everyone has mysteriously collapsed with no warning in the middle of whatever they were doing). When Major Bernard reaches the outskirts of the village he discovers that there is a kind of boundary point surrounding the village inside of which any living thing immediately passes out. This situation lasts for several hours and then suddenly it is lifted as swiftly as it began and all the villagers come around with seemingly no adverse affects. But after a few months it becomes clear that all the village women of childbearing age have become pregnant, including Professor Zellaby's wife Anthea. The babies are all born within a short time of each other and as they grow up they mature much faster than normal children and show signs of high intelligence. They seem to share a group mind and once something is learned by one they all know it. They are able to read the thoughts and intentions of the "normal" humans and have the ability to control their actions and force them to commit suicide. The children behave politely towards their "parents" but show no signs of emotion or love. They are feared by the villagers who are wary of angering them and becoming victim to their eerie mind powers. The military are aware of a similar group of children who were born in Russia on the same day and the authorities there eventually felt it was necessary to deal with them by blanket bombing their entire hometown in order to kill them. Professor Zellaby hopes that they will not have to act so drastically over here and can teach their children a set of moral values that will enable their huge intellects to be of use to all mankind - he persuades the government to allow him time to study the children more. The boy born to the professor's wife is called David and is the leader of the children. Because of this they allow Professor Zellaby a special status as their teacher as they live together in the schoolhouse while they learn and grow until they are ready to disperse into the wider world. The children are aware of what happened to the Russian children and tell Zellaby they will not allow that to happen to them - they will survive no matter what the cost. The professor realises he has misjudged the situation and there is no choice but to kill them - but now any military attempts to act against them will be detected and prevented by remote mind powers before it is started. So the professor decides he must act alone and he prepares a bomb which he puts in his briefcase on a short timer. He then blanks his mind and concentrates as hard as he can on a brick wall blocking out thoughts of anything else. When he enters the schoolroom the children realise he is deliberately keeping something important hidden and they surround his desk breaking away at his mind. The imagined brick wall slowly cracks and crumbles as it yields to their unrelenting power - but as the children at last reveal the image of the bomb behind the professor's mental wall it is too late and the briefcase explodes killing all the children and the professor. As the schoolhouse burns there is a visual depiction of the children's disembodied glowing eyes seeming to fly away from the destroyed building as if to suggest that some part of their quintessence survives. Vic Dakin is a violent London gangster who runs a protection racket with the local night-clubs. He rewards loyalty but comes down hard on anyone who is suspected of talking to the police. He has a sadistic streak and enjoys personally dishing out beatings to anyone he suspects of disloyalty. He is also a homosexual and he likes to rough his partners up as a prelude to sex. His one tender spot is his elderly mother whom he dotes upon and couldn't be kinder or more considerate towards. A night-club owner hoping for a small reward gives Dakin some information he has heard about a disgruntled employee at a nearby factory who is willing to supply details of his company's wage delivery. Dakin and his gang (his "firm") check out the route and the prospects of a hold-up and things seem favourable. The factory is on the patch of another gangster called Frank Fletcher so Dakin brings him in on the job as well and Fletcher involves his brother-in-law Edgar Lowis who suffers from gastric ulcers. The robbery of the wage couriers on route from bank to factory is successful although goes less smoothly than hoped and Fletcher is injured. But they get away with the money and once at a safer point decide they should split up to appear less conspicuous - Dakin and his henchman make off on foot and Fletcher and Lowis continue on with the haul with arrangements made to rendezvous and divide the cash later on. But the police investigating the robbery find clues that lead them to Fletcher and he and Lowis are soon arrested. The money is not recovered as the pair of them had managed to hide it somewhere safe. Dakin realises he will be arrested soon so he sends for a former-partner of his called Wolfe Lissner. Wolfe has distanced himself from Dakin to go it alone as a small-time con man but Dakin still wields a strong intimidating influence over him and he has little choice but to agree to manufacture a strong alibi for Dakin for the time of the robbery. Wolfe has previously provided girls for an MP he knows called Gerald Draycott who frequents a certain type of party at a mutual friend's home in the country for which Draycott is always very grateful. Wolfe supplies him with a new girl but this time secretly photographs their bedroom activities. He then confronts Draycott with the evidence and threatens to expose his shameful proclivities unless he provides Vic Dakin with an alibi. Dakin is arrested on suspicion of involvement in the wage robbery but has to be released when no less than Gerald Draycott MP tells the police that the man was with him at the time. Once released Dakin is determined to get to Fletcher or Lowis to divulge the location of the unrecovered money. The night-club owner from earlier gives Dakin a new snippet he has overheard from a punter that Edgar Lowis is to be transferred to a hospital for an operation. What Dakin doesn't know is that the night-club owner is now working as a police informant and has been told to pass on this information. Posing as doctors Dakin's men enter the hospital and abduct Lowis from under the police's very noses not realising that security had intentionally been kept minimal. When Dakin has been informed of the successful capture he and Wolfe drive to an abandoned factory where his men have taken Lowis and Dakin beats the location of the money out of the man. They go to that location but the police have been tailing them and they are all arrested although Dakin in his utter contempt for the police and the judiciary has delusions that no jury will ever convict him for fear of his reputation for reprisal violence. Irishman Sean Rogan is an IRA member serving a term in an English prison for crimes committed while acting in pursuit of his political beliefs. He is an explosives expert and by day he is put to work mining rocks from a quarry. Sean has done eight years of a fifteen-year sentence but is expectant of an imminent early remission for good behaviour. But then a message is conveyed to him via unofficial channels from his good friend and mentor Colum O'More that his remission is going to be declined. Sean is appalled at the prospect of another seven years of incarceration. Colum's message also indicated that if Sean can make it out of the prison then a fast car will be waiting for him every night at 7:30pm at a set rendezvous point. Sean's specialist skill as an IRA operative was his ability to successfully infiltrate secure facilities to make political statements with explosives. He puts that expertise to use in reverse by working out a way of escaping using some explosives he managed to purloin from the quarry site. He makes it out and finds the car waiting for him as promised. It is driven by Hannah Costello who is Colum's secretary and sympathetic to the cause. She hands him over to two English mercenaries called Austin and Fletcher whom Colum has hired to get Sean out of England and back to Ireland. Undercover of being Austin's chauffeur Sean makes it onto the ferry and returns to Ireland. He is delighted to be reunited with Colum and pleased to be free at last. In Ireland he cannot be extradited back to England for political crimes and he has decided to give up the struggle and settle down. However the fiercely patriotic Colum has other ideas and tells Sean that he needs him to do one last job for him in return for organising his escape route. Colum warns that it would be easy to have Sean delivered to the police in Northern Ireland from where he can be extradited to complete his sentence. Sean feels he therefore has little choice but to cooperate. Colum wants to reignite the struggle for Irish independence by making a big political statement. Nearby is an important electronics factory that Colum feels is betraying the nation by working on contracts for the British army. He wants Sean to infiltrate the security there and plant a bomb that will destroy their control mechanisms and put the plant out of commission for a long time. He has hired Austin and Fletcher who have expressed willingness to help even though they are not IRA members. Sean goes to the site to check out the locale and notices a weakness in the way the plant receives its electricity from a sub-station on the lip of an escarpment. A carefully placed explosive charge on the escarpment face will cause the sub-station to slip and cut power enabling the infiltrators to get in and plant some timed explosives in the control area. Meanwhile Inspector Sullivan of the Irish police is suspicious of why Rogan is here. He speaks to Colum wondering what was so urgent that Rogan needed to escape only a few months away from his remission which would have been forthcoming because Sullivan saw the release papers. Colum gives nothing away but is privately devastated because he was told the news of the refused remission by Austin and Fletcher and was passing on what he thought was correct information. Colum wonders why the two Englishmen lied to him. The operation begins and the escarpment explosive successfully outages the power. Rogan and the two English mercenaries cut their way in to the factory whilst the guards are all off investigating the sub-station explosion. The trio enter the unmanned control area and Rogan tells them where to plant the explosives for the maximum effect. But when the English pair start placing the explosives against the wrong wall Rogan realises they have another agenda entirely. The plant also has a vault that holds vast quantities of cash and Austin and Fletcher have planned all along to steal that and have no interest in political struggles. But they had needed Rogan's unique expertise to gain entry and that is why they lied about the remission so that he would be provoked to escape. They knock Rogan out so that he will be found at the scene and the IRA will be blamed for the robbery - then they make their escape. They head for the coast where they plan to hire a boat and travel back to England with the stolen money. Fortunately Rogan quickly comes around and makes his exit before the guards return. Rogan does not think of himself as a criminal and wants no part in common larceny and also knows he could be arrested and extradited for non-political crimes. He sends Hannah to fetch Inspector Sullivan while he follows after the pair of criminals to try and catch them before they leave the country. Fletcher and Austin hire a trawlerman's boat although they have to wait a few hours for the tide to turn. This gives Rogan time to find them and as the trawler is making its way out of the harbour he intercepts it with a small bomb-laden rowing boat timed to explode. The trawler is sunk and the villains have to swim for it and are arrested when Inspector Sullivan arrives. Rogan is also arrested but Sullivan believes he will only get a suspended sentence for catching the crooks and helping to recover the money. In the 1920s sisters Yvette and Lucille return home from a French finishing school as young ladies ready to start adult life. Home is in the North of England in a small rural community where they are the daughters of the local Rector. They live in the rectory with their brother's sister Cissie and her husband Fred, and their grandmother. Lucille is content to fit in with the rural way of life and soon finds a job. But Yvette is discontented, she finds living here in sleepy Colgrave a dreary prospect with no likelihood of excitement or joy. Things that the family enjoy contentment with, like sitting around the hearth of an evening, she finds unbearable and the family have no understanding of why she is always being so contrary. Her mother abandoned her father, and therefore the entire family, many years before by divorcing him and is held in such disgrace that her name is forbidden to be mentioned. But Yvette begins to understand what she must have felt like and shares her mother's urge for excitement which she knows she will never find here where nothing ever happens. She feels she may need to fall in love but there is no one amongst the local lads that give her that special feeling. A group of friends take Yvette and Lucille on a day out. Leo Wetherell has a motor car and he takes them for a spin down the country roads. They stop to admire the magnificent dam which has been built to hold a water reservoir upstream from them where some workers are carrying out some routine maintenance. Next they come across a Gypsy encampment and stop so the girls can have their fortunes told by the Gypsy wife. While waiting her turn Yvette can't help but be intrigued by the ruggedly handsome Gypsy man whose piercingly penetrating eyes bore into her like she's the only woman he desires and she feels an immense sense of attraction towards him. Next day the Gypsy man comes round to the Rectory to sell some of his produce and he confirms their unspoken attraction by saying she should come back to his encampment alone soon. The next day she cycles over and while alone with him in his wagon as she washes her hands after a campfire side meal she feels an electrifying pull towards him and they almost kiss but are broken from it by the arrival of some new neighbours. The newcomers are Mrs Fawcett and Major Eastwood who are a couple - although Mrs Fawcett is still married and awaiting a divorce from her rich husband. She is friendly and perennially cheerful and the couple are clearly very much in love. They take to Yvette who finds them a fascinating pair who have done what they want against the will of society. They have rented a nearby cottage to live together and Yvette takes to visiting them regularly - for to her they are the only "normal" people she knows whose company she really enjoys. But as far as her stodgy family are concerned they are monstrous inhuman pariahs who are living in sin and are therefore considered shameful outcasts from society. The rector finds her association with them disgraceful and tells her she's like a mad stray dog who has to sniff around indecent people because no decent folk will have her. She knows her father will never understand her because he finds her too like his own wife of whom he will never speak. The film approaches its conclusion when one day Yvette is left alone in the house to mind grandmother while the rest of the family are out at work or socialising. She idly walks the grounds and looks down into the stream. She cannot understand why suddenly the current flow seems to increase and the level curiously and noticeably rises, but then she hears the Gypsy man galloping towards her on his horse shouting out an urgent call for her to run. The nearby dam has burst and a destructive tidal surge of water is fast approaching which she hadn't noticed. The Gypsy takes charge and gets her into the Rectory and upstairs to safety as the water surges through the downstairs rooms causing horrendous damage and destruction in its wake and demolishing the wooden staircase mere moments after they'd climbed it. They are unable to save the grandmother. The house is sturdy and the water not powerful enough to flatten it but the flood waters take many hours to recede and Yvette and the Gypsy, who had been soaked through, undress and get into a bed to keep warm and they share a tender night of sexual passion. Next morning Yvette awakes and finds he has gone. The waters have receded and her cut-off family have come back desperately hoping she is safe and are immensely relieved when they find she is well. But as she climbs down a ladder they are astonished that she barely acknowledges them and instead walks past them and gets into a car with Mrs Fawcett and Major Eastwood and drives off with them on their way to pastures new. The End. Set in Singapore in 1951 in an army camp where a group of conscripted men are undertaking their two year period of national service. Amongst them is Private Brigg who in civilian life is a desk clerk in Kilburn and is not happy at being stuck out here without any girls and with the distinct possibility of being killed before he has a chance to really make his mark as a man. He and his buddies frequent the local town bar where oriental prostitutes are willing to oblige but Brigg hankers after a proper relationship with a homegrown girl. Phillipa Raskin is the daughter of the company sergeant major who lives in the fenced-off marriage quarters which is off-limits to the men. Phillipa hates the camp life which prevents her having a normal life for a girl of her age and despises her father's job that means she is forced to live here. She has a low opinion of young soldiers who are forever pestering her for dates and she refuses to participate in camp activities such as dances in which the men let their hair down and dance with the small number of servicewomen and officers wives in the area. Phillipa's father is frustrated by his daughter's attitude and wishes he could order her around as he can his men. When she once again refuses to attend the next dance evening he tries to imply there is a rumour going around that she is a lesbian and she reacts strongly to that and decides she'll show him. And after making a token appearance at the dance she leaves and impulsively sleeps with Sergeant Driscoll to whom she loses her virginity. Moving on:- when the locals begin to riot Brigg volunteers to protect the married quarters and takes Phillipa and her mother into the surrounding jungle to hide out from the bandits and overnight the two young people find comfort together while the mother sleeps off her exhaustion. After the immediate danger of civil disturbance has passed the conscripts are transferred by train to a safer place to continue their training and administrative duties. On route they are accompanied by Sgt Wellbeloved who boasts of his military jungle prowess and his bravery in the face of danger. When the train is ambushed and crashes on the track sabotaged by jungle bandits the men find themselves pinned down by enemy forces firing from the jungle. Sgt Driscoll takes command and organises a response as the inexperienced British soldiers fire back to hold their position against overwhelming odds. Sgt Wellbeloved turns out to be a coward and hides away in the train toilet. Private Brigg sees some of his squaddie friends around him die and becomes too paralysed with fright to fight back and wanders off into the jungle fortunately avoiding any enemy forces. Daylight comes and still wandering around in a state of shock Brigg finds himself further down the train line where he flags down another troop train and warns them of the ambush - the commander of those troops immediately heads for the attack area and with the arrival of these reinforcements the bandits flee and the soldiers in Brigg's company who are still stoically defending their position are saved. Sgt Driscoll realises that Brigg deserted in the face of danger but lets his cowardice pass since he ended up saving them by bring back reinforcements - but he is not so understanding with Wellbeloved whom he beats to a pulp for his cowardice. When the two year period of service is at last over the men pack their kit bags happy and ready to resume their normal lives back home while remembering those of their squad-mates who did not make it - and we see them leaving the compound in the troop lorry. Special Spoiler Alert for twist ending (prologue) Robert and Claire are a couple with a young 6-year-old son called David. Whilst on a boating holiday on a river they moor near a weir and while the couple have a bit of quality time together below decks they let David go off and play. Later on David is nowhere to be found and after a desperate and frantic search in the local surrounds and by the river patrol it is assumed he must have fallen in the water and drowned. Some unspecified amount of time later (possibly several years) Robert and Claire are travelling by car on a cold foggy evening to spend time together at an old isolated house in the country that she inherited. Claire floundered in her grief following David's death - wracked with guilt she was driven to attempt suicide and was eventually committed to a hospital for psychiatric help. She is now better and has just been discharged from hospital and this trip is an attempt at a renewal of their strained relationship. The car journey is difficult because of the dense fog and hazardous with the oncoming traffic hard to see resulting in several close calls. Eventually they have decided it would be safer to walk and they arrive at the house on foot with most of their luggage left behind in the car. The house is large, cold, and empty with no power and no running water and Robert lights the fireplace to help keep them warm. After a short time there Claire begins to hear strange chuckles and eventually clear voices coming from nowhere. Robert can hear nothing and begins to fear she is losing her mind again. He becomes angry with her and their relationship becomes ever more strained but since they cannot leave due to the fog and onset of darkness they have to make the most of it and spend the night. Claire has a problem being intimate with Robert because she is forever reminded of what they were doing on that boat when their son went missing. As the night progresses the voices continue and then Claire begins to see people too - a family group of a mother and her two children - dressed in period clothing, ghosts of a bygone era - although they are oblivious to her as they continue their play and merriment. As morning approaches Robert starts to see and hear the family as well and realises Claire has been telling the truth all along. They decide to leave the haunted house as quickly as possible and Robert goes to fetch the car now that it is daylight and the fog has lifted. Left alone with the ghosts Claire shouts at them infuriated and suddenly they hear her - but think she is a ghost haunting them. Claire then runs out of the house and through the woods after Robert and finds him standing at the roadside looking at the wreck of a car. Inside the car they see their own dead bodies. They come to the realisation that in the fog the previous night they did have an accident and died in the crash and have been ghosts ever since without even knowing. In May 1939 a few months prior to the eventual start of World War II a passenger liner full of 937 oppressed German Jews are allowed to leave Germany to start a new life in South America. Their exile is called a humanitarian gesture of goodwill by the Nazi authorities but secretly the German High Comma

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