The curious task of economists is to demonstrate to men how little they really know about what they imagine they can design.
The above is one of many quotes by Friedrich_Hayek, who died 20 years ago this coming Friday, March 23rd, at the age of 92. He remains one of the world’s most influential economists.
NOTE: More of Hayek’s many choice quotes are below in italics, interspersed throughout this article. Readers may note some relevance of those quotes to the U.S.: today including the current campaign, during the earlier 21st century, and during the latter part of the 20th century.
Hayek, whose last name is pronounced hi eck, was born in Austria and was the last of the six greatest Austrian economists*, all of whom were born in the mid-to-late 1800s and educated at least in part at the University of Vienna *(Austrian_School of Economics).
Hayek was the quintessential Germanic scholar who read everything in painstaking detail and traced every footnote. Besides economics, he was well versed in history, political science, philosophy, and law. One can imagine him entering the university’s library early in the morning, then meticulously reading and taking notes as he plodded though materials until the library closed.
To understand Hayek one must remember that when Hayek was a young man he saw Stalin, Hitler, and Mussolini grab power and become ruthless dictators. He watched the world he grew-up in and loved rapidly change into a diabolical nightmare. He used much of his vast intellect to analyze what happened. He tried to make sure:
► People understood why such a world developed;
► What ploys—-however reasonable they sounded at the time--always led towards totalitarian government; and
► Just how very fragile individual liberty is.
Emergencies have always been the pretext on which the safeguards of individual liberty have been eroded.
Hayek saw how each of those dictators rose to power. In Stalin’s case it was by sheer treachery. In the cases of Hitler and Mussolini, it was by taking valued principles and basically turning one or more principles on their heads. They then used these new “principles” to justify their positions. Stalin also did this to justify the power he grabbed.
If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion.
Shortly before the Nazis started their aggression towards other countries, Hayek became an exchange professor at The London School of Economics. He was granted British citizenship and lived there for much of rest of his life.
Hayek left London from1950-62, when he taught at the University of Chicago, most of that time was with the redoubtable Milton_Friedman. While both shared many of the same views, such as less government and lower taxes, they did have some significant differences. There are various versions on just what the relation between them was below the smooth surface. Though loosely speaking associated with it, Hayek was never part of the now famous Chicago_school_of_economics. Friedman, though relatively young, was the patriarch of that group.
Hayek is best known for his 1944 book The Road to Serfdom, which is the bible of modern libertarian thinking. Many people who have read Serfdom, have come away changed persons. Two examples:
Serfdom changed a quite liberal, B movie actor into Ronald Reagan.
Serfdom also changed a British chemist somewhat involved in local politics into Margaret Thatcher. Thatcher went further. When she was Prime Minister, she was attending a meeting where someone was preaching a middle-of-the road approach. Then, as if to again demonstrate why she was nicknamed “The Iron Lady,” Thatcher pulled out her copy of Hayek’s The Constitution of Liberty, held it up for all to see and shouted “This is what we believe!” She then slammed the book down on the table. Some stories have it that Thatcher always had a copy of at least one of Hayek’s books with her.
Hayek was, quite arguably, the father of modern libertarianism, and some of his Austrian teachers were the grandfathers.
In terms of Macroeconomics, he disagreed with the aggregation (summing up of individual economic activities) that is integral to modern macroeconomics. Hayek was concerned that the aggregating of an economy’s economic activities disguises what is happening inside those totals. (Alan Greenspan was famous for saying “Let’s disaggregate these numbers.”)
Hayek also viewed the next business cycle downturn as being rooted in the current prosperity. The late stages of a prosperity lead to speculative bubbles which burst with amazing speed launching a recession. (Sound somewhat like how the current housing slump started?)
I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments.
The influence of Hayek and the other Austrians is prevalent in many ways today, even if indirectly. For instance, this Examiner had four profs whose studies included stints at Harvard where they took courses from some of the many Austrians who immigrated here after Nazi aggression began. Those professors have helped train hundreds of today’s economists. Another example is the late Gerhard (Jerry) Rosegger. Jerry’s training started at Hayek’s alma mater, the University of Vienna. Jerry and his family emigrated to the U.S. where he finished college at the University of Pennsylvania before coming to Cleveland to teach at Case. It was there, in graduate school, that this Examiner had the opportunity to take two courses from Jerry.
Hayek-—and Friedman, et el after him--recognized the need for some “distributive justice.” But We must face the fact that the preservation of individual freedom is incompatible with a full satisfaction of our views of distributive justice.
In Serfdom, Hayek spends a lot of time discussing this point. Hayek repeats his anticipation of the debate over whether and to what extent a redistribution of income is reasonable in a fairly affluent society.
A claim for equality of material position can be met only by a government with totalitarian powers.
Referring respectively to the differences between basic economic security and security to which people think they are entitled, the first two pages or so of Chapter 9 of Serfdom state:
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. ... Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which because of their uncertainty few individuals can make adequate provision.
In that same first section of Chapter 9, Hayek talks about the strong case for the state helping to organize—-not run-—protection against “genuinely insurable risks.” He says depending on particulars this may or may not include a market system and may or may not interfere with basic freedoms.
Hayek was one of the founders of the Mont_Pelerin_Society a worldwide group of classical liberal thinkers. Classical liberalism is what today is called libertarian. For more details on this point, please see Classical_liberalism.
We shall not grow wiser before we learn that much that we have done was very foolish.
NOTE TO READERS:
Most of this Examiner’s articles so far this year have concerned the elections. Please check the following links for his writings as Columbus 2012 Elections Examiner and please check periodically.