The Life & Thought of Friedrich Hayek


The fall of the Berlin wall in nineteen
eighty nine and the rapid collapse of
communist regimes throughout eastern europe and the former soviet union surprised most western scholars and
soviet experts for some however it confirmed what they had suspected all along that communism was a vision of society
ultimately doomed to failure one thinker in particular had spent a
lifetime trying to show why communism couldn’t work and why trying to force it to work would prove disastrous before he was finally
vindicated Friedrich August von Hayek was dismissed ridiculed and ignored yet in the end even defenders of
socialism came to concede that he was right to a remarkable degree Hayek’s personal and professional
fortunes and intellectual battles in which he
found himself are also the story of the twentieth century in his twenty five books and hundreds of
articles Hayek articulated an elaborate and
inspiring vision of the free society his insights continue to shape how we
think about the social and economic problems of our time liberty fund proudly presents a profile in liberty the life and thought of Friedrich August von Hayek .. descended from Austrian nobility Friedrich August von Hayek was born in
eighteen ninety nine in Vienna the heart of the austro-hungarian empire
and one of the leading intellectual capitals of Europe Hayek’s parents were deeply enmeshed in
that world his father was a doctor and an eminent botanist his maternal grandfather had served as
president of Austria’s statistical commission Hayek’s two brothers would both become
professors and physical scientists Hans in anatomy and eric in chemistry his cousin Ludwig Wittgenstein
would become famous as a philosopher Hayek’s first intellectual interest was
in the sciences especially botany as a child he helped his father categorize alpine
plants in addition to scientific pursuits he took up photography and the theater and physical interests such as skiing sailing and mountain climbing in his teens Hayek turned to the study of human
learning and behavior and for a time he considered becoming
a psychiatrist in June nineteen fourteen a single occurrence set in motion a
series of events that would recast the world and the life of young hayek Archduke Ferdinand of Austria Hungary
was assassinated setting the stage for the war to end all wars world war ones effects were
devastating to the old order the long-standing austro-hungarian
dynasty of the Hapsburgs was out of power in russia the romanov dynasty had been destroyed
and communism was the new social order Hayek like many young europeans after
the war was drawn to socialism for Hayek the appeal of socialism lay in its
attempt to solve social ills by applying scientific principles
to government planning and control of the economy Hayek was pulled towards the fabian
variety of socialism which favored peaceful gradual
government interventions rather than the sweeping and violent
revolutions advocated by marxist socialists I never was captured by Marxist socialism on the contrary then I encountered socialism in its marxist frightfully
doctrinaire form and the Vienna socialists marxists were more doctrinaire
than most other places rather repelled me Hayek entered the university of
Vienna a major center of intellectual activity the war had created poor material
conditions but the school was still a vibrant and
exciting place it was here at the university that
Hayek was first introduced to the austrian school of economics this group of scholars extended the
insights of the eighteenth century economist adam smith regarding the workings of a free market
economy in his classic work the wealth of nations smith had sought to explain the
tremendous growth in commerce that had taken place in the west during the
seventeenth and eighteenth centuries in opposition to the dominant views of
his day Smith saw that a prosperous economy
arises not from the actions of governments but through the voluntary actions of
buyers and sellers in the marketplace in Smith’s understanding no one
person or group dictates what the supply and demand of goods will be rather each person acts in his or her own
interest as long as exchanges are allowed to be free and voluntary neither buyer or seller will trade
unless they both stand to gain from the transaction according to Smith the ultimate
consequence of all these various exchanges is a flourishing and orderly
economy Adam Smith was also the first to point
out the fundamental importance of the division of labor as part of a
prosperous economy through division of labor the particular knowledge and skills of
individual men and women contribute to the creation of a vast number of goods this insight continues to be of central
importance to our understanding of a well ordered society smith’s insights were extended by the
austrian school economists beginning with the publication of Carl Menger’s path breaking book Principles of Economics the central point of Menger’s work which
was published in eighteen seventy one was that the value of any given product
is determined not by the amount of labor that went into making it or about the cost of production but by the individual desires of the
buyer and of the seller each consumer determines how much of his
property he is willing to give in exchange for someone else’s product or service likewise each producer determines how much he or
she will accept for their product or service trade will only take place if it
benefits both parties in an exchange and only those individuals involved in
the exchange have complete knowledge of the benefits
they seek and what they are willing to give in exchange this emphasis on the individual and
subjective nature of economic information which was begun by Menger and continued
by the austrian school economists would prove to be the bedrock of Hayek’s own work the austrian school convinced Hayek that
there can be order such as the order that exists in markets without a
centralized designer this idea opened the door to his own insights regarding
spontaneous order the division of knowledge and the role of prices in conveying
vital information and the rule of law these ideas would set him on a collision
course with the dominant political trends of the twentieth century in nineteen twenty one Hayek received his doctorate in law and
two years later was granted a doctorate in political economy while at the university of vienna he had studied philosophy law and
economics it was shortly after taking his formal
degree in political economy that Hayek met Ludwig von Mises for the first time Mises was director of the austrian
chamber of industry and one of the leaders of the austrian
school second generation of scholars he would have a deep influence on
Hayek’s work so I came to him with a letter of
introduction by von Wieser who was my real teacher who described me as a promising economist and Mises looked at me promising economist? I have never seen you in my lectures (laughter) but we became very great friends afterwards Mises book Socialism had a significant impact on
Hayek’s economic thought in it Mises attempted to show that in
economic terms a socialist state was technically
impossible Mises argued that since socialism denied
a system of voluntary exchanges the relative prices that provided
signals for decision making were missing without these signals coordination of
activities within the economy is impossible in nineteen twenty-four Hayek began attending Mises’s private
seminars these events were considered the center
of economic debate in Vienna If I had come to him as a young student I would probably have just swallowed
his views completely as it was I came to him already with a degree I had finished my elementary course so I pushed him in a slightly more critical fashion and… being for ten years in close contact
with a man with whom conclusions you on the whole agree but whoose arguements were not always perfectly convincing too you was a great stimulus in nineteen twenty-seven Hayek and Mises co-founded the
austrian institute for business cycle research the board included prominent economists
young Hayek the institute’s director was beginning to solidify his reputation as a world-class economist in nineteen twenty nine Hayek began his first teaching position at
the university of vienna that year also saw the publication of
his first book monetary theory and the trade cycle in this work Hayek expanded on the austrian schools
theories by developing the idea that the prices of goods and services including
interest rates are information signals which are vital to the independent plans
of consumers and producers the main point of Hayek’s book was that
usually these information signals make possible harmonious and spontaneous overall adjustments
within the economy however government intervention in the economy
can cause faults or distorted signals which can ultimately lead to economic
ruin the core of the argument was simple in a well ordered economy prices convey knowledge and for the economy to function properly that knowledge must not be distorted by
government intervention this basic idea would set Hayek in direct confrontation with
two major trends in economic thinking socialism and keynesianism for Hayek economic knowledge is dispersed among
individuals this division of knowledge as it would
later be called makes the central planning desired by
socialists impossible if prices are a way of coordinating the
plans of individuals those plans can only be known by
those individuals then any order provided by central
planning would simply be arbitrary and most likely destructive economic
prosperity Hayek’s insights were also directly at
odds with government policies designed to enhance consumption either through monetary inflation or through government spending these policies were the very heart of John
Maynard Keynes more moderate interventionism with his first book Hayek had rebuffed the two most dominant
trends in economic thought in England Hayek had come to the attention of
Lionel Robbins who was soon to head the prestigious london school of economics or LSE they LSE was looking for someone
intellectually capable of taking on john maynard keynes at the university of cambridge Robbins invited Hayek to come to England
and give a series of four lectures Hayek literally swept the audience off
its feet he put forward a view of the great
depression that seemed to be both accurate and complete Hayek was invited to become a professor
at the LSE and in nineteen thirty one he and his
family moved to london soon Hayek and Robbins by now a good friend were emulating Mises by holding their own private seminars these lively gatherings attracted many
international economists it was during his time at the LSE that Hayek layed down the basis for his
larger theory of spontaneous order working out the implications of his idea
that prices are information signals he began to extend this insight to the
workings of society in general is the idea that there can be great orderliness in a society even though there is no one doing the
ordering to achieve this orderliness however it was essential that prices be allowed
to fluctuate without interference societies cannot be organized without the signals that come through a free enterprise system using prices and profits Hayek thought that prices and profits
primarily convey information Hayek’s theory of information or knowledge was ground breaking a market is the system of the utilisation of knowledge which nobody can process as a whole which only through the market situation leads
people to aim at the needs of people whom they do not know make use of facilities of which they have no direct information all this condensed in abstract signals and that our whole modern wealth and production could arise only thanks to this mechanism is I believe the basis not only of my economics but of much of my political views his most important contribution is to extend the paradigm or idea of Adam Smith about the division of labor and making it into division of knowledge
you need the market because you need a way in which people can benefit can capitalize on what they know
that’s different from other people and in the course of this capitalizing on their specialized knowledge they share this knowledge with
other people this linking of the dispersed nature of
knowledge with the theory of spontaneous order lay at the core of Hayek’s distrust of
central planning in his view no central planner could gather together
enough knowledge to create the same order and richness that occurs spontaneously in a free market if production had been directed by a
central planning agency would they have directed in the internet technology
which is so revolutionizing human life Hayek argued that central planning
authorities don’t develop that sort of planning ability that their inevitably
bureaucratic and they prevent the new and the creative and the diverse from e
-merging and that what you want to do is have a
society in which individuals are free to do as much as what they want whatever
they want to do it as long as they’re not physically harming someone else to hayek central control over individual economic
decisions leads inevitably to control over what individuals are allowed to do and the ideas they are allowed to
develop he placed a
beautiful quote at the beginning of every chapter of the road to serfdom and there is a quote by belloc he
placed at the beginning of a chapter where he says let me see if memory serves the control of the production of wealth is the control of human life itself these insights led Hayek into a
prolonged debate with the socialist thinkers of his day a complicated dialogue that became known
as the socialist calculation debate on his side Hayek extended Mises earlier argument
that socialism was technically impossible both Hayek and Mises great accomplishment was to
turn the question of socialism from a moral question to a practical question
it wasn’t whether individuals are good enough for socialism it’s a question of
whether or not socialism can practically be the way a society can be organized
Hayek argued that without freely adjusting prices based in private
property there were no signals for socialist
planners to use in calculating the relative values of goods and
services and there was no information for
deciding which production methods were most
efficient but scholars influenced by socialist ideas were not persuaded by the arguments of Hayek or Mises perhaps the most vocal critic of the
austrian school was Oskar Lange a prominent polish
socialist according to a Lange Mises had provided a service to the
socialists by pointing out the need for a more careful system of economic
accounting that would guide production resources in a socialist economy rather than pointing out the
impossibility of socialist calculation said Lange the austrians had merely pointed to a
problem that socialist thinkers could certainly solve The socialists always operated and still do as if international elites can govern society from above and what Oscar Lange did for example was only too switch the elite from say kings and emperors and others benevolent despots of days past into the enlightened economists
that could run and operate the economy from above despite having missed the real point of
Hayek’s criticism Lange’s arguments were persuasive with
both academics and the general public public opinion was firmly on the side of
more government control over economic life and firmly against Hayek’s ideas equally formidable in the arena of
both academic and political opinion would be the ideas of John Maynard
Keynes rather than advocating the complete
nationalization of the economy as the socialists did Keynes and his followers contended that
the government should stimulate economic growth through monetary inflation and through spending on public projects this ran directly counter to Hayek’s
contention that government intervention distorts the information conveyed by
prices Hayek argued that although under Keynes
approach there may be indeed short term stimulation of the economy prices will no longer transmit accurate
information between producers and consumers this would result in the wrong things
being produced in the wrong quantities at the wrong time or what austrian school economists
referred to as malinvestment the debate between Hayek and Keynes would
continue until Keynes death at the age of sixty three in nineteen forty six and it was a debate that at the time Hayek appeared to lose decisively beginning in the early nineteen thirties Keynes and Hayek sparred publicly on how to break the great depression that
held the world in his grip a central issue was what role the
government should play in attempting to increase employment and stabilize the economy for Hayek it was a matter of letting the system which had been actively discoordinated
through government inflation of the money supply recover naturally artificial intervention only postponed and aggravated the
necessary correction Keynes vehemently disagreed Keynes’s view was that now it was the
purpose of government to get the economy rolling again to prime
the pump for there to be government work projects for there to be government
transfer payments whatever could be done to get the economy moving again
underlying these disputes was another point of disagreement between these two
great thinkers Hayek concentrated on individual
transactions between buyers and sellers Keynes however argued that the important
figures were economic aggregates such as total unemployment and gross national
product Hayek held that aggregate figures only hide important
economic information which is necessarily individualized and dispersed Hayek reviewed Keynes treatise on money which had just
coming out just slamming it and then Keynes responded with a review of Hayek’s own book prices and production which Keynes thoroughly demolished in the Keynes debate as in the socialist calculation debate Hayek pressed the notion that government
economic planning was inherently doomed by the knowledge problem no bureaucrat or central planner could
ever possess enough knowledge of individual needs to design and efficiently functioning
and prospering economy for Hayek the myriad calculations government
planners would require in order to address this situation made complete and current knowledge
unachievable in addition and perhaps more important the kinds of information necessary for
successful planning are impossible to centralize this information consists of
non-scientific personal particular knowledge or what Hayek
called knowledge of time and place his alternative was the spontaneous
order of a free market which efficiently and accurately made these
calculations everyday what happens in a modern society is the absolutely unpredictable result of millions of individual decisions going
on all the time I think that’s a very interesting idea and it’s powerful because it’s so
counter-intuitive The Hayek Keynes debate took a decisive turn
in nineteen thirty six with the publication of Keynes famous book the general theory of employment interest and money this work one of the most influential books on
economic policy in the twentieth century defined Keynes attack on classical liberal economics but despite its significance Hayek did not mount a public counterattack he thought the Keynes latest theory would
not succeed and he knew of Keynes habit of frequently
changing his mind Hayek would later admit that his failure
to publicly respond to the general theory was a serious miscalculation he would not get another opportunity to
publicly debate Keynes on these issues the greatest boost to keynes theories
came in America where voters turned out the staid Hoover for the dynamic Roosevelt roosevelt initially gave Keynes ideas
half-hearted support still hoping to balance america’s budget but with the economic situation worsening FDR embraced Keynes ideas and
dramatically expanded the role of government in american life the late nineteen thirties and early
nineteen forties were difficult times for Hayek in addition to losing the popular
verdict on his ideas Hayek watched as the clouds of major
conflict gathered across europe one of the most horrific social forces
of the century was about to plunge the world into its second global war Hayek was especially frustrated by what he
saw as his colleagues misperception of what was unfolding external circumstances of environment made it necessary for me to explain to my English colleagues who firmly believed that the bad German capitalists had started a reaction against the promising socialist developments that they were wrong in their interpretations of the Hitler movement an outspoken opponent of the nazis Hayek charged that the evils of national
socialism were of the same variety as the errors of marxist socialism they resulted from the negation of
liberty and the dehumanization of those who did
not fit the bureaucrats preconceived idea of what society should look like fascism was not as the marxists and leftists tried to assert the result of capitalism it was its very antithesis Hayeks deep concern about the events of
his time were leading him to apply his ideas to a broader social context world war two had the effect of changing Hayek’s focus of interest whereas during the nineteen thirties he
had been primarily a technical economist participating in the technical economic
debates of the day from the nineteen forties onward in his
career and he lived until nineteen ninety two so that’s a half-century he basically moved into the area of
social philosophy and I think that it’s here that his
greatest contributions were in nineteen forty four Hayek was made a fellow of the british
academy that same year a pivotal event would again propel Hayek
onto the international stage the publication in England of his most famous book The Road to Serfdom this was a hugely popular broadside
in which hayek made the claim that even mild government intervention could ultimatly lead to a totalitarian
state Hayek had grave concerns about communism and Russia’s role in the world but he was also targeting socialism
closer to home there was quite a bit of central
planning at that time in fact that’s what the Labour government the Labour government came in immediately after the end of the of the war of the european war the war against Hitler and that’s what they wanted to do they wanted to introduce a form of socialism Hayek’s thesis in The Road to Serfdom was simple enough even piecemeal planning leads to
unintended consequences that require even more planning and eventually can
lead to attempts at central planning and totalitarianism government errors would be compounded when the same planners who made them then tried to set them right leading to even more government
intervention ultimately the people in a society would be made to fit the bureaucrats
plan rather than the other way around if a government goes wrong and enforces the mistake it has made there is no automatic correction of any kind he made it crystal clear to anybody who who was
willing to open up their minds that you couldn’t possibly gather enough information in a central
bureau to direct a vastley complex economic system you can barely do it for
simple village economy but at least there there wouldn’t be egregious errors even well-intentioned states would
eventually claim the power to make any decision necessary for the state’s
well-being and since morality would at some point be
sacrificed to state effectiveness those who found it easy to make such
trade-offs would ultimately rise to the top this further endangered liberty I think people in the west don’t understand this point well because they they thought they have already got the worst politicians in the world but if they live under China they will really know how all your forms of id shooting how the real worst get on the top reactions to the road to serfdom was
swift on both sides of the fence one lecturer told an american audience
that Hayek’s statement about state intervention leading inevitably to
totalitarianism was so obviously untrue that Hayek could not really have
meant it many others expressed a different view one washington post writer has since suggested that the book was the first shot in the intellectual battle that would turn the tide in favor of
conservatism and many believe it had the ultimate
effect Hayek hoped to accomplish The Road to Serfdom was not a prediction it was a warning it was a warning that if we embarked on a certain road there would be unintended consequences the road to serfdom has been published
in more than fifteen languages and has been in active print somewhere in
the world since nineteen forty four although baned behind the iron curtain numerous typewritten copies were in
constant circulation in countries where liberty is not the
norm Hayek’s warnings were especially poignant both Hayek and his critics have never living under a serfdom a totalitarian regime but Hayek has a much better understanding of this kind of society that he never live
under the books popularity proved both a blessing and curse it did get Hayek’s message out as large numbers of the road to serfdom were sold during a frenzied book tour in america Hayek became genuinely famous in both the united states and great britain as a
result of the road to serfdom and he became known as the most prominent classical
liberal or libertarian oriented intellectual or scholar in
the world but the enormous popular appeal of the road to serfdom masked a widely held academic disdain for
its author he had dared to disagree with the
prevailing confidence of academics in socialism and I think that was one of his
outstanding characteristics was that he was willing to take
unpopular views and persevere with them even when he would be ridiculed and
criticized by his colleagues and peers for doing so I think it’s probably one
of the the best examples of well-reasoned
argumentation I have seen in the twentieth century but it was considered
unscientific polemic he’d had such a rough handling I mean he was not widely welcomed uh… I would ask academics to meet him and some would do so but some academics academics would say I don’t want to meet that man Hayek had known that he would suffer
as the result of writing the book it came in America just at the end of the great enthusiasm for the new deal and it was treated even by the academic
community very largely as a malicious effort by a reactionary to destroy high ideals with the result that my reputation was down to bottom even among the academics Labour was elected overwhelmingly in the general elections
of nineteen forty five and proceeded to move in exactly the opposite direction to that which Hayek had recommended
many industries were nationalized a vast welfare state was established on the world stage free-market ideas were rapidly losing
ground to keynesian theories this was in part the result of the
popular perception that economic planning during the war had successfully mobilized resources and could do so in times of peace Hayek however argued that equating a peace time economy with wartime planning was a fundamental error but the tide of academic opinion was
solidly against him Hayek recognized the need to preserve
the ideas of classical liberalism so he decided to create an international
society of scholars to encourage renewed exploration into the political economic and cultural
foundations of a free society this gathering became known as the Mont Pelerin Society Hayek felt like that the whole world was going socialist immediately after world war two and he felt like there was a desperate
need to to at least establish some connections
between those who still held classical liberal notions and so he got the Mont Pelerin Society organized in nineteen forty-seven Hayek through this grand assembly or gathering overcame the isolation of individuals
and united liberal scholars from history political science economics and
philosophy all of whom felt motivated to defend
the free society in nineteen forty seven the group met in a small town in the
swiss alps the first conference lasted ten days that first meeting and the larger one
that followed it in nineteen forty nine brought together intellectuals from a world still devastated by the
recent war this meeting was the first time that germans had met with Americans since the war that some Hollanders Netherland people
had met with germans since they had been in concentration camps there were many emotional events or scenes that took place Hayek served as president of the Mont
Pelerin society until nineteen sixty then as honorary president until his
death his vision of an ongoing formal
gathering of like-minded intellectuals was realized in nineteen fifty five Anthony Fisher whom Hayek had met
almost ten years before asked Hayek for advice on how to affect
change in the direction of increased freedom Hayek said to him that he should emphasize ideas that
ideas were far more important than practical political activity Hayek famously said keep out of politics
that was Fisher’s idea Fisher’s idea was to go into politics and change things government work corrupts I have observed in some of my best friends who as a result of the war got tied up in government work and they have ever since been statesmen rather then scholars as a result of his conversations with
Hayek Fisher founded the Institute of Economic
Affairs in Britain Fisher wasn’t certainly intellectual I mean
he was simple really was a basic practical farmer you know with dirt under his nails and all that kind of stuff and so he eventually got round to meeting me and a few others and putting up a small sum of money to get
the IEA started and we were a child of Hayek absolutely Hayek believed that resources should support
education the institute for economic affairs would
be the first of many international think-tanks inspired by Hayek organizations devoted to research in
publishing on liberty and free market economics the nineteen fifty the university of chicago offered a
Hayek an appointment to the prestigious committee on social thought which he accepted once again he found himself in one of the centers
of economic thought one of the really interesting things
about Hayek is that he was at the university of
Vienna he was at the London School of Economics whe was at at the University of
Chicago all tremendously vital places
intellectually The University of Chicago had taken the
risk of first publishing The Road to Serfdom in America and it was considered a centre for free
market thought the school was also located in the
country considered a bulwark in the effort to contain communism the move to chicago was a good one for Hayek his appointment to the committee on
social thought at the university of chicago enabled him to cut back his teaching and
to do research in areas other than economics he sometimes commented that an economist who only knows economics
really doesn’t know very much he had much more of a holistic approach
to knowledge and one that tried to bring together thoughts from a number of disciplines I announced in chicago a seminar
on scientific method in particular the differences between the natural and the social sciences and it attracted some of the most
distinguished members of the faculty of chicago Enrico Fermi and Sewall Wright and a few people of that quality sitting in my seminar discussing the scientific method and that was one of the most exciting experiences of my life the years in chicago were productive in nineteen fifty two Hayek published a
book on knowledge and the mind entitled The Sensory Order after I had published The Road to Serfdom in
nineteen forty four I wanted to take leave from this sort of subject I so discredited my self with my professional colleagues by writing that book that I thought I would do something
quite different and return to my psychological ideas in the sensory order as in Hayek’s social and economic thought multiple and dispersed connections make
the system work information is spontaneously ordered
through specific signals and trial and error learning is an important basis for the brains
performance not only are people’s brains different we process information
differently everything we do helps to build up a personal classifying system
that will differ in some respect from somebody else’s so i see this sensory
order as being an important issue that he needed to address for his critique of
socialism in nineteen fifty four Hayek tackled yet another field history it was widely believed that the
industrial revolution had impoverished vast numbers of british citizens Hayek challenged that claim in his
introduction to capitalism and the historians a
collection of essays by leading scholars for Hayek the industrial revolution was an example
of spontaneous order in action vast unplanned changes in the economy were
the result of an untold number of individual economic decisions based on subjective values Hayek believed that an impartial
evaluation of the evidence which show that living standards
actually improved with industrialization contrary to the sentimental views of historians who
romanticize the pre industrial age of agriculture Hayek was now ready for his most
ambitious work to date in nineteen fifty five he visited cairo where he lectured on
the rule of law these lectures form the basis for what
some consider his best work the constitution of liberty published in nineteen sixty i would think the book the constitution of liberty that’s is the modern compendium of
liberal ideas nowhere is the importance
of a free society for our civilization as well stated as in this book the constitution of liberty is surely
the most important work that was written in this and the past century and
one can likely say the most important work since John Stuart Mill the constitution of liberty recast the
long-standing ideas of classical liberalism in modern terms Hayek concludes the constitution of liberty
with the word words that john stuart mill used to
preface his work on liberty a century before uh… on liberty century before
that the the grand leading principal toward uh… which every page in this
book leads is the promotion of human diversity in its richest potential according to Hayek the role of the states is to ensure
freedom and human progress through the rule of law in making this claim he was careful to define what law is not We call now Law a great many things which are not law in my sense it is not the will of the rulers which is a governing the society
but the metaphysical doctrines behind the law which is regulating
out daily lives we can’t to make a law we can only discover laws for Hayek law properly understood is based on precedent a system of trial and error in which
the most effective social principals are passed down from one generation to the next he saw some of the great traditions of the anglo-american system to have evolved over generations in
terms of principal such as fair play justice private property contract many of society’s most important laws or rules are not the products of conscious design
according to hayek A sort of cultural evolution passes along the most
effective rules to be refined overtime through custom tradition and experience his theory of spontaneous orders is of extreme
importance languages is a spontaneous
orders nobody invented language no authority ever set the rules for for
for speaking or writing Hayek tells us that Law is like that we are living all the time thanks to the system of rules of conduct
which we have not invented which we have not designed and which we largely do not understand people have tried out over the time different strategies to solve problems and they were able to learn which kind of
generalised strategies work better than others and these experiences they have
condensed in rules these rules of cource are interpreted by our parents our authorities their interpreted by those
with whom we interact so they do change gradually but nevertheless these rules
as are not to have our own making its law that creates freedom by creating a rational framework within
which individuals can lead their life so i think that Hayek’s underlying idea and political
philosophy is that liberty is the supremacy of law Hayek’s understanding of the rule of law
involved two critical points the first was that society’s rules must be general they must not become specific
centralized commands this also keeps them from becoming
instruments for granting special privileges true freedom implies equality under the
law an open society in which I can deal with any person I encounter presupposes that certain basic rules are enforced on everybody within their territory Hayek was concerned about how democratic
governments fail to safeguard this principle by confusing law with legislation Legislation in the strict sense ought to be confined to general rules while what we now call legislation are largely orders commands issued to particular groups granting privileges to some imposing special duties on others Hayek
second point about the rule of law was that Laws should tell individuals
only what they could not do in order to prevent harm to others laws should not tell individuals what they must do these rules and this is the characteristic of general
rules they tell people what strategies they are not allowed to employ in
their efforts to improve their own situation but within the remainder of the open spaces of conceivable actions they are free to choose whatever they consider most appropriate and more
conducive to their interests Hayek did grant that government
might need to guarantee a minimum set of specific protections in areas such as health care the environment and disaster relief but he argued these should be privatized
whenever possible the constitution of liberty has taken
its place among the great works of classical liberal theory such an immense scholarship I have never before discovered that is absolutely surpassing and the ideas there
especially the ideas about the justice about the problem of spontaneous
interaction of ten thousands of people all of them having completely
different value convictions and how we can find people or we can find ways and means to make people with completely
different value convictions to live together in more or less peace and freedom that was something which still fascinates me that is actually for me the quintessence of economics in the early nineteen sixties Hayek unexpectedly received an
invitation to teach in Freiburg West Germany Freiburg was the professional home of
his old friend and mont pelerin society member Walter Eucken who had died in nineteen fifty Ludwig Erhard another mont pelerin society member was soon to become chancellor of west germany after moving to Freiburg Hayek pressed
on with the development of his ideas on spontaneous order by nineteen sixty-nine he had almost
completed the first volume of Law Legislation and Liberty this work which he planned to publish in
three volumes was to expand on the concerns he had addressed in the
Constitution of Liberty in the constitution of liberty I was still mainly attempting to restate for our time
what I regarded as traditional principles I wanted to explain what nineteenth century
liberalism had really intended to do it was only at the time when I practically finished the book that I discovered that the nineteenth century
liberals had no answers to certain questions Law Legislation and Liberty was eventually
to be a work of sweeping scope and substantial importance but before the first volume was finished Hayek began to suffer from a severe
depression years of standing against the academic
and political mainstream were apparently taking their toll even after he finally finished the first
volume in nineteen seventy three Hayek’s outlook had not improved Hayek was feeling so low that he was literally unable to get up from his bed
and when talked to Arthur Seldon he told him that at that time he felt that
his entire lifes work had been a waste then in nineteen seventy four very
unexpectedly Hayek was awarded the nobel prize in
economics ironically his co-recipient was Gunnar Myrdal a socialist thinker from Sweden the nobel prize led to a swift reversal
in Hayek’s reputation as one writer noted he quickly went from goof ball to guru it also seemed to spark a burst of
energy within Hayek resulting in renewed health and a dramatically increased
intellectual output he would say no it was not the nobel prize but the nobel prize was a tremendous shot in the arm in nineteen seventy six Hayek completed volume two of law legislation and liberty when news of its completion was
delivered to a meeting of the mont pelerin society cheering erupted three years later in nineteen seventy
nine the last of the three volumes was published I thought very highly of Road to Serfdom I knew how important it had been
historically but uh… Law Legislation and Liberty was was a revelation Hayek used one volume each for what he
termed three fundamental insights on the preservation of a society of free individuals the first of Hayek’s three insights was
order without commands this was a further clarification of his
concept of spontaneous order Hayek persisted in combating the
misperception that order is equivalent to a single overarching vision or plan he argued that order occurs
spontaneously in society because all of the plans of individuals
are coordinated through various mechanisms the transmit information such
as market prices customary practices values language and tradition it is very exciting to transpose what one thinks of as a vast
network of operations of people exchanging money and goods uh… suddenly to discover that this
really has a totally different aspect altogether and i think that’s a brilliant
Illumination Hayek’s second insight adressed the
concept of social justice for Hayek the term social justice was
without any clear meaning and could be used simply to dress up the political
bias of the user as a standard by which to judge the
economy it was at best useless and at worst harmful since it obscured the real nature of
both justice and social order any deliberate attempt to correct the
distribution according to supposed principle of social justice are ultimately irreconcilable with the free society Hayek believed in what he considered true justice which sprang from the
genuine equality of individuals under the rule of law distributive equality was another matter true justice is impartial and impersonal differing conditions among individuals
and groups which are not the result of interference do not imply a lack of
social justice it’s not facts which are fair it’s
human action which is fair or just and to apply the concept of
justice which is an attribute of human action to a state of affairs which has not been deliberately brought about by anybody is just nonsense the third of Hayek’s trilogy of insights was the democracy did not necessarily
equate to liberty confusing democracy with liberalism was
for him a tragic illusion far more important was a constitutional
order that would limit the power of government to interfere with the
spontaneous order of society to the degree that democracy holds
government officials accountable for their actions it is an essential part of a functioning
political order by itself however democracy is not a sufficient protection
for freedom that of course it’s no longer the will of the majority or the opinions of the majority I prefer to say which determines what the government does but the government is forced to satisfy all kinds of special interests in order to build up a majority it is a process there is not a majority which agrees but the problem of building up a majority by satisfying particular groups in the late nineteen seventies the world was entering a new era and Hayek’s ideas were beginning to have
an influence the simultaneous high inflation and high
unemployment would seem to be the legacy of keynesian economics caused many begin looking for other
answers in England Margaret Thatcher was turning the
British economy around largely through reliance on Hayek’s theories Hayek had great admiration for Mrs Thatcher her adoption of his concepts caused some
to call Hayek her mad professor once she pulled the
constitution of liberty out of her bag placed it on the table and said this is
our program and then extraordinary changes happened in England in the
nineteen eighties an economics sea change occurred in
the united states ronald reagan had come to office with a
new approach based in part on Hayek’s ideas reagan’s administration would bring both
inflation and unemployment under control in nineteen eighty two Hayek was awarded the order of merit by
the austrian government and in nineteen eighty four he became a companion honour a personal award from the queen of
england Hayek’s final book The Fatal Conceit was
published in nineteen eighty eight In it Hayek warned his readers readers against the temptation to assume that social institutions and inherited practices can
simply be altered or abolished to suit the momentary objectives of
would-be reformers in nineteen eighty nine at the age of
ninety Friedrich Hayek witnessed the
dismantling of the berlin wall the victim of unworkable government
economic planning and increasing pressure for freedom this was the first step on the road away
from serfdom and the ultimate affirmation of Hayek’s ideas
about the nature of order in human society if you are a good Hayekian it should’ve been inevitable that
communism was going to fall because it should’ve been inevitable that this
terribly inefficient system was going to at some point just grind
to a crashing halt nowhere is Hayek as popular and as well respected as in the east european countries because those people have seen his theories they have read the Road to Serfdom which gives an accurate account of the police states and of the conditions under centralist economic
planning can be performed and they also see the great promise that he holds out for them president george bush presented the U.S.
medal of freedom to Hayek nineteen ninety one Hayek’s son doctor Lawrence Hayek accepted Friedrich August von Hayek died in
nineteen ninety two his life had essentially come full
circle through two distinct half centuries in which his reputation had risen then fallen and finally risen again even more strongly he had seen the ideas of free markets
and human liberty go from ridicule to being the centerpiece of social thought this is Hayek’s legacy i think that we can divide the twentieth
century into four quarters the first quarter was dominated by
Lenin and the russian revolution the second quarter by Hitler national
socialism and world war the third quarter was dominated by a
Keynesian thinking it was really the quarter of Keynes but the fourth quarter of the twentieth
century was characterised and dominated in some ways by Hayek i think that Hayek will be perceived in
retrospect as the greatest political philosopher of
the twentieth century Hayek I regard as a man for all times




Comments
  1. @grraadd
    It must be it: The Intellectual Portrait Series: The Life and Thought of Friedrich A. Hayek (Indianapolis: Liberty Fund, 2003)

  2. @heathmoor I think Epstien overstates Hayek's position with this quote ''as long as they're not physically harming someone else''. Hayek used the term coercion in a more nuanced definition of coercion then just physical harm, & which may rule out patent rights and intellectual ownership as coercive in themselves. However Hayek was highly dubious about the economic benifits of patents. See Steven Kinsella's posts on the topic on mises.org for the quotes.

  3. Good God! I feel so ignorant watching this! Not because I don't understand it, I do, I just wish I had learned about this so much sooner. I wish I had been taught this in school. I wish more people would know the truth. But true knowledge like this seems like it's going extinct! They don't teach this in High School because they want to keep us dumb and enslaved to the state! The bible says: "My people perish for a lack of knowledge…" God save this land. We must inspire the next generations!

  4. Great video! I'm so curious about Hayek now. I consider myself to be a Neo-Keynesian in terms of technical macroeconomics, but I find his views on political philosophy very interesting. Thanks!

  5. Hayek was succeful explaning theoratically pricing mechnasim on the market and why central planner can not manage an economy efficiently. It is proven that long lasting central planning is inefficient like Hayek's theories. At the same time there are various example that a central planning and legislations has positive effect and benefits on the economy and society. Such as Goverment support for researching and developing new technologies, poor people, health, education, security etc.

  6. ''but what about essential government services like law and fire?'' Hayek would not have advocated that. However if you want to know the answers from anarchists to that question you will have to look at books like David Friedman's 'The Machinery of Freedom'.

  7. "Whatever we do in order to change the world for the better, we always come in counter to the human egoism, and there is nothing we can do about it." Alan Greenspan

    sorry guys but these are sacred words and everyone forgot about this "small" detail

  8. Unfortunately, Hayek's version of the ABCT is all but obsolete. It presupposes a static economy in general equilibrium–an obvious fantasy if there ever was one. If this assumption is taken away, there can be as many natural rates of interest as there are factors of production.

  9. None. All versions of ABCT have failed. The Credit Accelerator is a far better explanation of recessions and depressions.

  10. the explanation seems better. But credit is what cause those disorted expansions and recessions. Its what allowed the normal system of market corrections to become so bloated and overrun with malinvestment and disease that it no longer functions as body.

  11. But the level of the malinvestment would be unachievable without a central bank to allow for the finance of that ponzi scheme. You are putting the horse before the cart. Or simply not stating the prime mover in the situation.

  12. That's not true at all. Banks have been financing Ponzi schemes since the 1500s. They profit from rising levels of debt. If there is not a central bank around to enable their behavior, they find some other way to do it. I doubt it can be stopped. They are too powerful.

  13. I had to stop there for a moment. The Austrian school was not a continuation of Smith work but rather a re-arrangement of Smith and Classical economist errors regarding value, utility, and the price system. The founder of the Austrian school was Carl Menger who properly deduced marginal utility and built a system of economic analysis around it which came to be known as the Austrian school.

  14. state (birocats&politician aristocracy) need to control weapons and currency ..with that they  control minds and people ("law" , "regulation" and "education")
    people do not want freedom  but free "stuff" so free market is not verry popular (socialist serfdom is)
    ps:we have a example (mojo rythm) that people cannot be equal (acording to his ideeas banks in china who has a huge credit expansion are more powerful than birocrat&political class…lol)

  15. We will know when true economic freedom has been achieved, because libertarians will finally own the remaining resources and hence be in a position to give the majority of humanity an eviction notice. Total freedom from politics will be achieved when no democratic institution is left, thru which to contest the action.

  16. You know, I'm a Politician in the Libertarian Party of Canada. Its crazy to see this for the first time and look at my own thoughts saying, 'yeah, I always knew this'. I have always approached situations with a blue-collar approach. If it works, great, if it doesn't, then lets be able to adjust. This is a great video that people need to see in our 'centralized' school system.

  17. And there was a recession that couldve lasted a while, but was cut short not by increasing government intervention, but by reducing it and lowering taxes

  18. As much as one can appreciate Hayek as a great economist and Philosoph, this video is an extremely biased glorification . Its pretending to show his whole biography but kind of forgets about that one time, when Hayek supported Augusto Pinochet, the chilean dictator that murdered thousands of people. Seems like an important fact to me to be honest…

  19. What about services like water or electricity? if the price is not the real one you cannot choose a different provider, they can chrge you whatever they want, that's why those services should be regulated or owned by the whole community, hence statal.

  20. So these theories of Mr. Hayek are the basis of the actual "order", in which democracies are kept away from intervening the corporative order, and governments just there to serve it? Is Hayek the basis of Neoliberalism?

  21. is capitalism really a system of voluntary exchanges? If so, I would like to earn 10.000 euro as a secretary. Quite voluntarily.

  22. Politics is violence no matter the make, model or flavor and yet people persist in voting. Go figure. Someone once said there is not a nickel’s worth of difference between political parties. Amerikan politicians, mostly Democrats, have passed “laws” that impose the 10 Planks of the Commie Manifesto.

    Listen to Ted R. Weiland’s message on the fallacy of politics:
    http://www.kingdompromises.org/kingdompromises_audio/1052.mp3

    Politics is a false god. When people worship false god-politics, they get disasters of wars, recessions, inflation and taxation (murders, economic ruin, theft of wages, debt slavery, welfare “statism” based on looting A to satisfy B and extortion).

    Read Lysander Spooner's No Treason No. 6, The Constitution of No Authority. And then check out The No State Project by Marc Stevens on YouTube where he asks: What factual evidence do you, judge, prosecutor, politician, IRS agent or anyone, have that the constitution and law apply to me just because I am physically present in some state such as commie/socialist Democrat dictatorship corruptifornia? It doesn't exist and never has else we would be stinkin' slaves on the plantation state run by masters/politicians and their overseers/judges/ enforcers in the "land of the free and home of the brave." Why weren’t the Spooner and Stevens points taught in government schools? Conflict of interest? Prejudice? How diabolically ironic is that? Factual evidence would come in the form of a sworn affidavit of truth stating what, when, where, why, how and by whom one was made subject to the jurisdiction thereof. It was never brought up in any school I attended. I have never heard any MSM commentator produce the “factual evidence.” I have asked judges in court and on record to provide the factual evidence and not one of the six I have challenged could produce factual evidence thus failing to provide proof of jurisdiction.

    I recommend Ted R. Weiland’s books:
    Bible Law vs. The United States Constitution: The Christian Perspective
    http://www.missiontoisrael.org/blvc-index.php
    Law & Kingdom: Their Relevance Under the New Covenant
    http://www.missiontoisrael.org/law-kingdom.php

    If Christian Americans ever expect God to fulfill his half of 2 Chronicles 7:14, they must first repent of their national idolatry their love affair with the humanistic, pluralistic, polytheistic, and antichristian United States Constitution.

    I also recommend the Jehovah Witness website publications: https://wol.jw.org/en/wol/lv/r1/lp-e/0/5487

    The hate speaking, commie/socialist, Democrat, SJWs, snowflakes, MSM and politicians are clearly unethical, immoral. They play the emotions game but most people know that the first casualty of emotion is reason, logic and morality.

    Take a look at how Milton Friedman explains to Phil Donahue the fallacy of commie/socialism. This video should be viewed by all and then asked why they are voting for any politician that is commie/socialist.
    http://www.glennbeck.com/2014/01/14/the-blunt-truth-about-greed-and-freedom-was-delivered-over-30-years-ago/?utm_source=Daily&utm_medium=email&utm_campaign=2014-01-14_292717&utm_content=5355076&utm_term=_292717_292724
    http://www.youtube.com/watch?v=E1lWk4TCe4U

  23. 14:48 Hayek interview Hayek on Hayek p.69 邦訳『ハイエク、ハイエクを語る』72頁

    Q5
    (I think the decisive event was that essay I did in about 1937 on “Economics and Knowledge.” Q5: That was a brilliant essay.
    HAYEK: I think that was the decisive point of the change in my outlook. As I would put it now, [it elaborated] the conception that prices serve as guides to action and must be explained in determining what people ought to do—they’re not determined by what people have done in the past. But, of course, psychologically the consequence of the whole model of marginal-utility analysis was perhaps the decisive point which, as I now see the whole thing—)the market as a system of the utilization of knowledge, which nobody can possess as a whole, which only through the market situation leads people to aim at the needs of people whom they do not know, make use of facilities for which they have no direct information; all this condensed in abstract signals, and that our whole modern wealth and production could arise only thanks to this mechanism—is, I believe, the basis not only of my economic but also much of my political views.

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