"In 1931 more than forty countries had been on the gold standard; by 1937 virtually none were. Both the United Kingdom and then the United States, the two anchors of the international monetary system, were forced to float their currencies, allowing their central banks to focus on lowering domestic interest rates without worrying about how changes in their gold reserves or capital flows would affect the exchange rate. At the same time, government deficits rose, as a result of increased public spending and collapsing revenues; this happened well in advance of the breakthrough in economic theory represented by Keynes's General Theory of Employment, Interest and Money (1936), though only two countries ran deficits sufficiently large to provide an economic stimulus."

"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and through its Board of Governors manipulates the credit of the United States."

"Comprehending the role played by the transmission of information (or of factual knowledge) opens the door to understanding the extended order. Yet these issues are highly abstract, and are particularly hard to grasp for those schooled in the mechanistic, scientistic, constructivist canons of rationality that dominate our educational systems - and who consequently tend to be ignorant of biology, economics, and evolution."

"So far as we know, the extended order is probably the most complex structure in the universe - a structure in which biological organisms that are already highly complex have acquired the capacity to learn, to assimilate, parts of suprapersonal traditions enabling them to adapt themselves from moment to moment into an ever-changing structure possessing an order of a still higher level of complexity."

"There is the important point that an order arising from the separate decisions of many individuals on the basis of different information cannot be determined by a common scale of the relative importance of different ends. […] Here, however, it is appropriate to discuss in a general way the advantages of the differentiation that an extended order makes possible. Freedom involves freedom to be different – to have one's own ends in one's own domain; yet order everywhere, and not only in human affairs, also presupposes differentiation of its elements. Such differentiation might be confined merely to the local or temporal position of its elements, but an order would hardly be of any interest unless the differences were greater than this. Order is desirable not for keeping everything in place but for generating new powers that would otherwise not exist. The degree of orderliness – the new powers that order creates and confers – depends more on the variety of the elements than on their temporal or local position."

"To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection — the comparative increase of population and wealth — of those groups that happened to follow them."

"It is no accident that many abstract rules, such as those treating individual responsibility and several property, are associated with economics. Economics has from its origins been concerned with how an extended order of human interaction comes into existence through a process of variation, winnowing and sifting far surpassing our vision or our capacity to design."

"This evolution [of extended order] came about, then, through the spreading of new practices by a process of transmission of acquired habits analogous to, but also in important respects different from, biological evolution. I shall consider some of these analogies and differences below, but we might mention here that biological evolution would have been far too slow to alter or replace man's innate responses in the course of the ten or twenty thousand years during which civilisation has developed - not to speak of being too slow to have influenced the far greater numbers whose ancestors joined the process only a few hundred years ago."

"In a free market, supply and demand would cause prices to rise where goods are in short supply and fall where they are abundant, providing incentives to move things from regions where there is a surplus to regions where there is a shortage. But where prices are fixed by law, no such price movements occur and there is no incentive to move goods between the two regions. Theoretically, a government planning commission could either issue orders to move these goods or change the prices in order to provide incentives for others to move them."

"The West has unfortunately already started to go along this path. I know, to many it may sound ridiculous to suggest that the West has turned to socialism, but it's only ridiculous if you only limit yourself to the traditional economic definition of socialism, which says that it's an economic system where the state owns the means of production. This definition in my view, should be updated in the light of current circumstances. Today, states don't need to directly control the means of production to control every aspect of the lives of individuals. With tools such as printing money, debt, subsidies, controlling the interest rate, price controls, and regulations to correct so-called market failures, they can control the lives and fates of millions of individuals. This is how we come to the point where, by using different names or guises, a good deal of the generally accepted ideologies in most Western countries are collectivist variants, whether they proclaim to be openly communist, fascist, socialist, social democrats, national socialists, Christian democrats, neo-Keynesians, progressives, populists, nationalists or globalists. Ultimately, there are no major differences. They all say that the state should steer all aspects of the lives of individuals. They all defend a model contrary to the one that led humanity to the most spectacular progress in its history."

"Many American and British supporters of price control are fascinated by the alleged success of Nazi price control… These men who want to fight Nazism by adopting its methods do not see that what the Nazis have achieved has been the building up of a system of socialism, not a reform of conditions within a system of market economy."

"While price controls make it illegal for buyer and seller to make some transactions on terms that they would both prefer to the shortages that price controls entail, bolder and less scrupulous buyers and sellers make mutually advantageous transactions outside the law. Price controls almost invariably produce black markets, where prices are not only higher than the legally permitted prices, but also higher than they would be in a free market, since the legal risks must also be compensated. While small-scale black markets may function in secrecy, large-scale black markets usually require bribes to officials to look the other way."

"A few weeks ago, a journalist devoted a substantial part of a profile of yours truly to my failure to pay due attention to the "Austrian theory" of the business cycle—a theory that I regard as being about as worthy of serious study as the phlogiston theory of fire."

"Professor Mises and Dr. Hayek have advanced theories which, though they fall into the general category of monetary explanations, yet seem altogether free from those deficiencies which have marked monetary explanations in general. They explain the effects of fluctuations in the supply of money not so much in terms of fluctuations of the general price level as in terms of fluctuations of relative prices and the consequent effects on what may be called the ‘time-structure’ of production."

"Very few people these days know the works of the Mises-Hayek school; unfortunately, I am old enough to have been an early follower of Professor Hayek, and even translated one of his books, and there is nothing like having to translate a book, particularly from the German language, to force you to come to grips with an argument."

"For Hayek, the causes of the Depression lay in earlier central bank policies of cheap money, which resulted in large-scale misallocation of capital. Because no central authority could grasp the shifting pattern of relative scarcities and prices, only the market could determine the right allocation. Accordingly, believing that misguided investments had to be liquidated, Hayek argued in the 1930s for policies that were more contractionary than those that were actually pursued. The task of government was to get out of the way and let the process of adjustment run its course. If they had been adopted while the crash was under way, Hayek’s prescriptions would have made the Depression even worse than it proved to be – a fact he later admitted. But he never accepted Keynes’s core insight that large-scale economic discoordination could be the result of the workings of the market itself. For him it was always government intervention that accounted for market disequilibrium. More sceptical as well as more radical in his turn of mind, Keynes questioned the self-regulating powers of the market. His work on the theory of probability disclosed insuperable gaps in our knowledge of the future; all investment was a gamble, and markets could not be relied on to allocate capital rightly. There were booms and busts long before the emergence of modern central banking. Left to its own devices, the free market can easily end up in a dead end like that of the 1930s."

"In brief the Austrian theory of the business cycle was never refuted or even rejected at the London School, but simply forgotten despite the efforts of Hayek and subsequently Lachmann (as noted below) to improve the theory (Hayek, Profits, Interest, and investment [1939; reprint; New York: Augustus M. Kelley, 1969]). With the Keynesian revolution, macroentities had replaced the action of individuals. Subjectivism and individual causation had been superseded by functional relations among objectified aggregates, which had few if any real world referents in the actions of economizing individuals. A whole tradition transplanted to British soil vanished. When Lachmann had arrived in London during the early 1930s, everybody was a Hayekian, but by the beginning of World War II the only consistent and thoroughgoing Hayekians left were Lachmann and Hayek himself."

"Hayek’s later monetary work constitutes some of his most creative practical policy suggestions. His ideas of competing and private currencies may come into existence during coming years for technological reasons."

"The question of the value of Hayek’s work in technical economic theory from the middle 1920s through early 1940s is one over which there is considerable dispute in the academic economic community. Some, such as contemporary Austrian economists Roger Garrison, Mark Skousen, and Gene Callahan, consider this work to be of vital, continuing relevance. Others, such as Nobel Prize winners Milton Friedman, James Buchanan, and Ronald Coase, while they have the highest opinion of Hayek, do not consider his work in technical economic theory to be of much worth."

"Market power and externalities are examples of a general phenomenon called market failure—the inability of some unregulated markets to allocate resources efficiently. When markets fail, public policy can potentially remedy the problem and increase economic efficiency. Microeconomists devote much effort to studying when market failure is likely and what sorts of policies are best at correcting market failures. As you continue your study of economics, you will see that the tools of welfare economics developed here are readily adapted to that endeavor. Despite the possibility of market failure, the invisible hand of the marketplace is extraordinarily important."

"The problem with Neoclassicals is that the model they fell in love with does not map reality, so they put down their mistakes to supposed market failures rather than reviewing the premises of the model. Under the pretext of a supposed market failure, regulations are introduced. These regulations create distortions in the price system, prevent economic calculus, and therefore also prevent saving, investment and growth. This problem lies mainly in the fact that not even supposed libertarian economists understand what the market is because if they did understand, it would quickly be seen that it's impossible for there to be market failures. The market is not a mere graph describing a curve of supply and demand. The market is a mechanism for social cooperation, where you voluntarily exchange ownership rights. Therefore based on this definition, talking about a market failure is an oxymoron. There are no market failures. If transactions are voluntary, the only context in which there can be market failure is if there is coercion and the only one that is able to coerce generally is the state, which holds a monopoly on violence. Consequently, if someone considers that there is a market failure, I would suggest that they check to see if there is state intervention involved. And if they find that that's not the case, I would suggest that they check again, because obviously there's a mistake. Market failures do not exist."

"We need to recognise that the entire information sector—from music to newspapers to telecoms to internet to semiconductors and anything in-between—has become subject to a gigantic market failure in slow motion. A market failure exists when market prices cannot reach a self-sustaining equilibrium. The market failure of the entire information sector is one of the fundamental trends of our time, with far-reaching long-term effects, and it is happening right in front of our eyes."

"The recognized "man of a vocation" ... neither inquires about nor finds it necessary to inquire about the meaning of his actual practice of a vocation within the whole world, the total framework of which is not his responsibility but his god's."

"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."

"As against the "invisible hand" of Adam Smith, there has to be a visible hand of politicians whose objective is to have the kind of society that is caring and humane."

"No People can be bound to acknowledge and adore the invisible hand, which conducts the Affairs of men more than the People of the United States. Every step, by which they have advanced to the character of an independent nation, seems to have been distinguished by some token of providential agency."

"[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity...they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species."

"Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

"What Galbraith understood, and what later researchers (including this author) have proved, is that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered markets often produce too much of some things, such as pollution, and too little of other things, such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect – that is, always – markets are inefficient; hence the need for government action."

"Hayek’s theory of evolutionary rationality shows how traditions and customs (those surrounding sexual relations, for example) might be reasonable solutions to complex social problems, even when, and especially when, no clear rational grounds can be provided to the individual for obeying them. These customs have been selected by the ‘‘invisible hand’’ of social reproduction, and societies that reject them will soon enter the condition of ‘‘maladaptation,’’ which is the normal prelude to extinction."

"Honor sets all the parts of the body politic in motion, and by its very action connects them; thus each individual advances the public good, while he only thinks of promoting his own interest."

"The reason that the invisible hand often seems invisible is that it is often not there."

"The net effect of increasing scale, centralization of capital, vertical integration and diversification within the corporate form of enterprise has been to replace the 'invisible hand' of the market by the 'visible hand' of the managers."

"Adam Smith was the first to perceive that we have stumbled upon methods of ordering human economic cooperation that exceed the limits of our knowledge and perception. His `invisible hand' had perhaps better have been described as an invisible or unsurveyable pattern. We are led - for example by the pricing system in market exchange - to do things by circumstances of which we are largely unaware and which produce results that we do not intend. In our economic activities we do not know the needs which we satisfy nor the sources of the things which we get."

"When the classical worldview was applied to social science, the dominant notions turned out to be struggle for survival, the profit of the individual, with at best an assumed automatic coincidence of individual and societal good (through Adam Smith's "invisible hand"). When the systemic vision inspires the theories of social science, the values of competition are mitigated by those of cooperation, and the emphasis on individualistic work ethos is tempered with a tolerance of diversity and of experimentation with institutions and practices that foster man-man and man- nature adaptation and harmony."

"A man is of no use to this world, of no use to society or the neighborhood in which he lives, who has no other object in view than making a fortune for himself and his family, little caring what becomes of those around him."

"To understand the economy then is to comprehend how it is driven by the animal spirits. Just as Adam Smith’s invisible hand is the keynote of classical economics, Keynes’ animal spirits are the keynote to a different view of the economy — a view that explains the underlying instabilities of capitalism."

"Writers after Coase have referred to the authority structure of the firm as a "visible hand" that works in combination with Smith's invisible hand. The everyday fact that employers exercise power over their employees — not news to most employees — had been a central theme in Marx's economics, but it was (and generally continues to be) overlooked by most neoclassical economists. Early in his studies Coase noted the similarity between the hierarchical organization of capitalist firms, with their reliance on command relations, and the then-existing system of centralized economic planning in the Communist countries, where production was carried out in accordance with orders from higher authorities and where market competition played little role."

"Suppose our social planner tried to choose an efficient allocation of resources on his own, instead of relying on market forces. To do so, he would need to know the value of a particular good to every potential consumer in the market and the cost of every potential producer. And he would need this information not only for this market but for every one of the many thousands of markets in the economy. The task is practically impossible, which explains why centrally planned economies never work very well. The planner’s job becomes easy, however, once he takes on a partner: Adam Smith’s invisible hand of the marketplace. The invisible hand takes all the information about buyers and sellers into account and guides everyone in the market to the best outcome as judged by the standard of economic efficiency. It is, truly, a remarkable feat. That is why economists so often advocate free markets as the best way to organize economic activity."

"...that every individual spontaneously tries to find the place and the trade in which he can best increase National gain, if laws do not prevent him from doing so."

"This it is that gives a majesty so pure and touching to the historic figure of Christ; self-abandonment to God, uttermost surrender, without reserve or stipulation, to the guidance of the Holy Spirit from the Soul of souls; pause in no darkness, hesitation in no perplexity, recoil in no extremity of anguish; but a gentle unfaltering hold of the invisible Hand, of the Only Holy and All Good; — these are the features that have made Jesus of Nazareth the dearest and most sacred image to the heart of so many ages."

"I am very liberal on social issues, but I don’t believe we can have personal liberty, which is what that means, without having economic liberty. We have economic tyranny when you add in Obamacare, we have about 50 percent of the U.S. GDP in the public sector. That means that you have a tyrannical and overregulating, and politicized economy, not a market economy, not the invisible hand."

"Knowledge is one of the most scarce of all resources, so that one of the most important differences among alternative ways of organizing an economy is in how effectively they use what knowledge exists. In a market economy, it is not necessary that the innumerable decision-makers understand the costs entailed by their decisions. It is only necessary that they be confronted with those costs in the prices charged. In a “planned” economy, however, those who plan the production and distribution have to be able to understand and quantify the costs their decisions entail— a far more formidable task, if actually done, but a task that can be evaded with rhetoric or with estimates whose validity the public is usually unable to judge at the time, and which will usually be forgotten by the time the real costs become clear, often years later."

"Knowledge is one of the scarcest of all resources in any economy, and the insight distilled from knowledge is even more scarce. An economy based on prices, profits, and losses gives decisive advantages to those with greater knowledge and insight. Put differently, knowledge and insight can guide the allocation of resources, even if most people, including the country’s political leaders, do not share that knowledge or do not have the insight to understand what is happening. Clearly this is not true in the kind of economic system where political leaders control economic decisions, for then the limited knowledge and insights of those leaders become decisive barriers to the progress of the whole economy. Even when leaders have more knowledge and insight than the average member of the society, they are unlikely to have nearly as much knowledge and insight as exists scattered among the millions of people subject to their governance."

"Knowledge and insight need not be technological or scientific for it to be economically valuable and decisive for the material well-being of the society as a whole. Something as mundane as retailing changed radically during the course of the twentieth century, revolutionizing both department stores and grocery stores— and raising the standard of living of millions of people by lowering the costs of delivering goods to them."

"Knowledge is one of the most scarce of all resources and a pricing system economizes on its use by forcing those with the most knowledge of their own particular situation to make bids for goods and resources based on that knowledge, rather than on their ability to influence other people in planning commissions, legislatures, or royal palaces."

"When I look back, it seems so have all begun, nearly thirty years ago, with an essay on “Economics and Knowledge” in which I examined what seemed to me some of the central difficulties of pure economic theory, Its main conclusion was that the task of economic theory was to explain how an overall order of economic activity was achieved which utilized a large amount of knowledge which was not concentrated in any one mind but existed only as the separate knowledge of different individuals. But it was still a long way from this to an adequate insight into the relations between the abstract rules which the individual follows in his actions and the abstract overall order which is [thereby] formed....It was only through a reexamination of the age-old concept of freedom under the law, the basic conception of traditional liberalism, and of the problems of the philosophy of the law which this raises, that I have reached a tolerably clear picture of the nature of the spontaneous order of which liberal economists have so long been talking."

"The dilemma of a socialized system is that the information flow overwhelms a centralized system if it is open to new ideas and data, that closing the system and forcing the plan to work forecloses alternatives and risks unhedged mistakes, and that decentralizing without real markets poses the problems discussed by Hayek. These information problems permeate virtually all economic processes."

"Knowledge is one of the scarcest of all resources. Glib generalities abound, but specific hard facts about particular places and particular things at particular times that are relevant to economic decisions are something entirely different and much more scarce. In some respects, governments are better able to assemble vast amounts of knowledge, but the kind of knowledge involved is often in the form of statistical or verbal generalities known as “expertise,” which is no substitute for the kind of concrete knowledge that someone in the middle of a particular economic situation has. Just picking the right location for a particular business in a particular community can be the difference between profits and bankruptcy, even though that kind of knowledge may not be exciting from an intellectual standpoint. Experts may indeed have far more knowledge than the average amount of knowledge among individuals in the general population but the total amount of knowledge among millions of people in the general population vastly exceeds the total knowledge that any group of experts can assemble."