Friedrich August von Hayek CH (May 8, 1899 March 23, 1992) was an Austrian-British economist and political philosopher known for his defence of classical liberalism and free-market capitalism against socialist and collectivist thought in the mid-20th century. He is considered to be one of the most important economists and political philosophers of the twentieth century. 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 Prize in Economics with ideological rival Gunnar Myrdal "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena. He also received the U.S. Presidential Medal of Freedom in 1991. He is considered to be one of the major forces of change from the dominant interventionist and Keynesian policies of the first part of the 20th century back towards classical liberalism after the 1980s.
After being discharged and seeing the horrors of war, he decided to pursue an academic career with the determination to avoid the precursors 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.
Hayek worked as a research assistant to Prof. Jeremiah Jenks of New York University from 1923 to 1924. He then aided the Austrian government with the legal and economic details of the Treaty of Versailles at the close of the First World War. After his work for the government, Hayek founded and served as director of the Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics at the behest of Lionel Robbins in 1931. In the 1930s Hayek enjoyed a considerable reputation as a leading economic theorist, but his models were not received well by the followers of John Maynard Keynes and debate between the two schools of thought continues to this day.
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" . 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.
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 barred from entering the Economics department because of his Austrian economic views. Though Hayek would not name the department member responsible for this setback, many speculate that it was Frank Knight. 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.
From 1962, until his retirement in 1968, he was a professor at the University of Freiburg. It was here that most of Law, Legislation and Liberty was written. This was not intended for a general audience, and it was published in three volumes in 1973, 1976 and 1979.
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.
Hayek attributed the birth of civilization to private property in his book The Fatal Conceit (1988). According to him, price signals are the only means of enabling each economic decision maker to communicate tacit knowledge or dispersed knowledge to each other, in order to solve the economic calculation problem.
This business cycle theory was criticised when published by Keynes, Sraffa and then Kaldor. 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. He also notes that this model of the business cycle cannot be wholly reconciled with any specific "Austrian" theory.
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 in neuroscience, cognitive science, computer science, behavioral science, and evolutionary psychology.
Hayek wrote an essay titled Why I Am Not a Conservative (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 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".
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). 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 (See Birner, 2001).
Having heavily influenced Margaret Thatcher's economic approach, and some of Ronald Reagan's economic advisors such as his director of OMB David Stockman, in the 1990s Hayek became one of the most-respected economists in Eastern Europe.
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. 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 (e.g., Wolin 2004).
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 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.
Hayek was cited many times in the recent BBC TV series The Trap.
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.
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."
The full interview provides more context for Hayek's response.Well, I would say that, as long-term institutions,I am totally against dictatorships. Buta dictatorship may be a necessary system fora transitional period. At times it is necessary fora country to have, for a time, some form or other ofdictatorial power. As you will understand, it ispossible for a dictator to govern in a liberal way.And it is also possible for a democracy to governwith a total lack of liberalism. Personally I prefera liberal dictator to democratic government lackingliberalism. My personal impression and this isvalid for South America - is that in Chile, forexample, we will witness a transition froma dictatorial government to a liberal government.And during this transition it may be necessary tomaintain certain dictatorial powers, not assomething permanent, but as a temporary arrangement.