WikiPortallus: Friedrich von Hayek.html

Hayek was born in Vienna, Austro-Hungarian Empire, the son of a doctor in the municipal health service. Hayek's grandfathers were prominent academics working in the fields of statistics and biology, and the paternal line had recently gained the title of aristocratic for its services to the state. Somehow Hayek's father managed to turn his sideline work on regional botany into a highly esteemed botanical treatise, continuing the family's scholarly tradition.

On his mother's side, Hayek was second cousin to the philosopher Ludwig Wittgenstein. His mother often played with Ludwig's sisters. Inspired by the accident of this family connection, 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.

As a teenager, at his father's suggestion, Hayek was reading the genetic and evolutionary works of Hugo de Vries and the philosophical works of Ludwig Feuerbach. In school Hayek was much taken by one instructor's lectures on Aristotle's ethics.

In 1917 he joined an artillery regiment in the Austro-Hungarian Army and fought on the Italian front. Much of Hayek's combat experience was spent as a spotter in an airplane. He survived the war without serious injury and was decorated for bravery.

Hayek decided to pursue an academic career with the determination to avoid the mistakes that led to World War I. Said Hayek 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. ⁴

Student & Economist

At the University of Vienna, he earned doctorates in law and political science in 1921 and 1923 respectively, and he also studied philosophy, psychology and economics with a keen interest. For a short time, when the University of Vienna closed, Hayek studied in Constantin von Monakow's Institute of Brain Anatomy, were 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 Hayek's first intellectual project, eventually published as "The Sensory Order" (1952), a work which turned Mach on his head, locating connective learning at the physical, neurological levels in a direct rejection of the "sense data" associationism of the naive empiricists and logical positivists.

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.

Refugee

Unwilling to return to Austria after the Anschluss brought it under the control of Nazi Germany in 1938, Hayek remained in Britain and became a British subject in 1938, a status he held for the remainder of his life.⁵

The Road to Serfdom

It was during this time that The Road to Serfdom was written. Hayek was concerned about the general view in Britain's academia that Fascism was a capitalist reaction against socialism. A chapter in the book is entitled, "The Socialist Roots of Nazism." The book was to be the popular edition of the second volume of a treatise entitled "The Abuse and Decline of Reason".⁶ It was written between 1940-1943. The title was inspired by the French classical liberal thinker Alexis de Tocqueville's writings on the "road to servitude".⁷ 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.⁸ The book was favorably reviewed by George Orwell among others. 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. 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 libertarian economist Walter Block has observed critically that while the The Road to Serfdom makes a strong case against centrally-planned economies, it appears only lukewarm in its support of pure laissez-faire capitalism, with Hayek even going so far as to say that "probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all of the principle of laissez-faire capitalism" ⁹. In the book, Hayek writes that the government has a role to play in the economy through the monetary system, work-hours regulation, social welfare, and institutions for the flow of proper information.¹⁰

In 1950, Hayek left the London School of Economics for the University of Chicago, becoming a professor in the Committee on Social Thought. Hayek's position was unpaid and he was not invited to join the Economics faculty. For his livelihood he depended on donations from private philanthropists. At Chicago, he found himself among other prominent economists, such as Milton Friedman, but, by this time, Hayek had turned his interests towards political philosophy and psychology – although he continued to work on economic issues. Most of his economic notes from this period have yet to be published.

The Constitution of Liberty

After editing a book on John Stuart Mill's letters he planned out two books on the liberal order. He completed The Constitution of Liberty in May 1959, with publication in February 1960. Hayek was disappointed that the book did not receive the same enthusiastic general reception as The Road to Serfdom had fifteen years before.

From 1962, until his retirement in 1968, he was a professor at the University of Freiburg, where he wrote most of Law, Legislation and Liberty. This was intended for a technical audience, and it was published in three volumes in 1973, 1976 and 1979. He became professor at the University of Salzburg from 1969 to 1977; he then returned to Freiburg, where he spent the rest of his days.

Work

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 have an impact on social life as well, and because the knowledge required for central planning is inherently decentralized.

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. 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 used 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".^{citation needed} 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 neurophysiology¹.

Investment & Choice

Perhaps more fully than any other economist, Hayek investigated the choice theory of investment involving 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."¹¹ Hayek's work on the microeconomics of the choice theoretics of investment, non-permanent goods, potential permanent resources, and economically adapted permanent resources mark a central dividing point between Hayek's work on central planning, trade cycle theory, the division of knowledge, and entrepreneurial adaptation and that of most all other economists, most especially that of the macroeconomic "Marshallian" economists in the tradition of John Maynard Keynes and the microeconomic "Walrasian" economists in the tradition of Abba Lerner.

The business cycle

Capital, money, and the business cycle are prominent topics in Hayek's early 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 became known as the "Austrian Theory of the Business Cycle". 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.

This business cycle theory was criticised by Keynes, Sraffa and then Kaldor after it was published¹². Since then, 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 a position held by other theorists of the Austrian School, such as Mises and later Rothbard, by beginning to shun the wholly monetary theory of the business cycle in favor of an understanding based more on profits than on interest rates. Hayek explicitly notes that most of the more accurate explanations of the business cycle place greater emphasis on real than on nominal variables.^{citation needed} He also notes that this model of the business cycle cannot be wholly reconciled with any specific "Austrian" theory.^{citation needed}

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 knowledge¹³, and the idea of spontaneous order in social institutions. He argues in favor of a society organized 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.

In his philosophy of science, which has much in common with that of his good friend Karl Popper, Hayek was highly critical of what he termed scientism: a false understanding of the methods of science that has been mistakenly forced upon the social sciences, but that is contrary to the practices of genuine science. Usually scientism involves combining the philosophers' ancient demand for demonstrative justification with the associationists' false view that all scientific explanations are simple two-variable linear relationships. Hayek points out that much of science involves the explanation of complex multi-variable and non-linear phenomena, and that the social science of economics and undesigned order compares favorably with such complex sciences as Darwinian biology. These ideas were developed in The Counter-Revolution of Science: Studies in the Abuse of Reason, 1952 and in some of Hayek's later essays in the philosophy of science such as "Degrees of Explanation" and "The Theory of Complex Phenomena".

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 which he first conceived in 1920, prior to his study of economics. Hayek's expansion of the "Hebbian synapse" construction into a global brain theory has received continued attention^{citation needed} in neuroscience, cognitive science, computer science, behavioral 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 dévotée 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.”¹⁴ 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, David Stockman, Ronald Reagan’s most influential financial official in 1981 was an acknowledged follower of Hayek. ¹⁵

Hayek wrote an essay titled Why I Am Not a Conservative¹⁶ (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^{citation needed}, 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 its original definition, and the term "libertarian" has been used instead. However, for his part Hayek found this 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".¹⁷

Influence and recognition

Hayek's profound influence on the development of economics can at this point be universally acknowledged. Hayek is the second most frequently cited economist in the Nobel lectures of the Nobel Prize winners in economics, after only Kenneth Arrow. Hayek is widely recognized for having introduced the time dimension to the equilibrium construction, and for his key role in helping to inspire the fields of growth theory, information economics, and the theory of spontaneous order. Perhaps a deeper indication of Hayek's influence can be found in the "informal" economics presented in Milton Friedman's massively influential popular work "Free to Choose" (1980), which is explicitly Hayekian in its account of the price system as a system for transmitting and coordinating knowledge. This is hardly an accident -- Friedman taught Hayek's famous paper "The Use of Knowledge in Society" (1945) in his graduate seminars.

A number of Nobel winners -- such as Vernon Smith and Herbert Simon -- recognize Hayek as the greatest economist of the modern period.

Harvard economist and former Harvard University President Lawrence Summers explains Hayek's place in modern economics this way: "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." ¹⁸

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. He was also instrumental in the founding of the Institute of Economic Affairs, the free-market think tank that inspired Thatcherism. 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).

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."¹⁹ Popper also participated in the inaugural meeting of the Mont Pelerin Society. Their friendship and mutual admiration, however, do not change the fact that there are important differences between their ideas.²⁰

Hayek heavily influenced Margaret Thatcher's economic approach, and some of Ronald Reagan's economic advisers such as Martin Anderson and his director of OMB David Stockman. After the fall of Communism Hayek became one of the most-respected economists in Eastern Europe. It was reported²¹ that during one of her first Conservative Party executive meetings as leader, Thatcher said: "When people ask what we stand for ..." then she reached into her briefcase and took out a book. It was 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.²²

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 (cf. 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 postmodernism²³

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, the Oxford Libertarian Society was previously known as the Hayek Society. The Cato Institute 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.

Hayek's work on price theory has been central to the thinking of Jimmy Wales about how to manage the Wikipedia project.²⁴

Criticism of Hayek

Richard Posner has criticized Hayek's legal theory.²⁵ Posner defended cost-benefit judicial decision-making that has no place in Hayek's theory.

In his 1944 book review, George Orwell called The Road to Serfdom "an eloquent defence of laissez-faire capitalism" and praised Hayek's criticism of contemporary left-wing and conservative thought.²⁶

He then expressed the following opinion of Hayek's solutions: "But he does not see, or will not admit, that a return to 'free' competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them. Professor Hayek denies that free capitalism necessarily leads to monopoly."

The problem to Orwell was: "Capitalism leads to dole queues, the scramble for markets, and war."

Pinochet

In the early 1980s, Hayek was connected with the Centro de Estudios Publicos, a market-oriented think tank in Chile. In a 1981 interview, the Chilean newspaper El Mercurio asked "What opinion, in your view, should we have of dictatorships?" Hayek responded roughly as follows (this is one person's translation from the Spanish text, which was itself a translation from Hayek's spoken English, which has been lost to history):

Selected bibliography

Notes

^ Edward Feser (edt), The Cambridge Companion to Hayek, Cambridge University Press (2007), ISBN 0521849772, p.13
^ Bank of Sweden (1974). "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1974".
^ George H. W. Bush (1991-11-18). "Remarks on Presenting the Presidential Medal of Freedom Awards".
^ http://www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show01.html
^ Samuel Brittan, "Hayek, Friedrich August (1899–1992)", Oxford Dictionary of National Biography, (1984)
^ Alan Ebenstein, Friedrich Hayek. A Biography (New York: Palgrave, 2001), p. 107.
^ Ibid., p. 116.
^ Ibid., p. 128.
^ Hayek, Constitution of Liberty, U. Chicxago Press (1960) pp. 502-3
^ Block W. (1996). "Hayek's Road to Serfdom". Journal of Libertarian Studies.
^ "The Pure Theory of Capital", Chicago: U. of Chicago Press, 1941/2007 (Vol. 12 of the Collected Works): p. 90.
^ ECONOMY PROFESSOR | Friedrich Hayek
^ The Use of Knowledge in Society
^ John Ranelagh, Thatcher's People: An Insider's Account of the Politics, the Power, and the Personalities (1991), p. ix.
^ Kenneth R. Hoover, Economics as Ideology: Keynes, Laski, Hayek, and the Creation of Contemporary Politics (2003) p. 213
^ Why I Am Not a Conservative
^ E. H. H. Green, Ideologies of Conservatism. Conservative Political Ideas in the Twentieth Century (Oxford: Oxford University Press, 2004), p. 259.
^ Lawrence Summers, quoted in The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World, by Daniel Yergin and Joseph Stanislaw. New York: Simon & Schuster. 1998, pp. 150-151.
^ See Weimer and Palermo, 1982
^ See Birner, 2001
^ in the book and documentary series Commanding Heights: The Battle for the World Economy
^ John Ranelagh, Thatcher's People: An Insider's Account of the Politics, the Power, and the Personalities. London: Harper Collins, 1991.
^ e.g., Wolin 2004
^ Katherine Mangu-Ward: http://www.reason.com/news/show/119689.html Wikipedia and Beyond. Jimmy Wales´ sprawling vision, June 2007
^ Posner, Richard (2005). "Hayek, Law, and Cognition" (PDF). NYU Journal of Law & Liberty 1: 147–165. http://www.nyujll.org/articles/Hayek/Richard_Posner.pdf. Retrieved on 24 August 2008.
^ Orwell, George "The Road to Serfdom by F. A. Hayek, The Mirror of the Past by K. Zilliacus", London, 1944
^ Liberty - The Fatal Deceit

Friedrich von Hayek.html

Contents

Early life