Philosophers From Austria

"No one has characterized market mechanisms better than Friedrich von Hayek."

"Friedrich Hayek, who died on March 23, 1992 at age 92, was arguably the greatest social scientist of the twentieth century. By the time of his death, his fundamental way of thought had supplanted the system of John Maynard Keynes — his chief intellectual rival of the century — in the battle since the 1930s for the minds of economists and the policies of governments.""

"[Hayek] became [in his later years] the dominant intellectual influence of the last quarter of the twentieth century."

"Which of Hayek's ideas are now widely accepted? I can't think of any. … Hayek's big idea - basically, that efficient market outcomes are emergent - is absent from most econ (though supported by lab experiments)."

"Hayek, in my view, is the leading economic thinker of the 20th century."

"I first had to discover certain things for myself, and essentially it was the behavior I observed in human subjects in my laboratory study of markets that motivated me eventually to study Hayek seriously. Reading with the eyes of a new mind, I was able to appreciate an enormous depth of understanding in the work of Hayek that would have escaped me if I had not had this personal experience in the laboratory."

"The source of confusion here is that there was a Good Hayek and a Bad Hayek. The Good Hayek was a serious scholar who was particularly interested in the role of knowledge in the economy (and in the rest of society). Since knowledge—about technological possibilities, about citizens’ preferences, about the interconnections of these, about still more—is inevitably and thoroughly decentralized, the centralization of decisions is bound to generate errors and then fail to correct them. The consequences for society can be calamitous, as the history of central planning confirms. That is where markets come in. All economists know that a system of competitive markets is a remarkably efficient way to aggregate all that knowledge while preserving decentralization."

"The Bad Hayek emerged when he aimed to convert a wider public. Then, as often happens, he tended to overreach, and to suggest more than he had legitimately argued. The Road to Serfdom was a popular success but was not a good book. Leaving aside the irrelevant extremes, or even including them, it would be perverse to read the history, as of 1944 or as of now, as suggesting that the standard regulatory interventions in the economy have any inherent tendency to snowball into “serfdom.” The correlations often run the other way. Sixty-five years later, Hayek’s implicit prediction is a failure, rather like Marx’s forecast of the coming “immiserization of the working class.”"

"Mrs. Hayek, I want you each day in the future to address your husband and inquire what his progress has been in what I consider to be one of the most interesting and intriguing fields, the evolution of the work of scholars."

"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."

"Popper's falsification is intimately connected to the notion of an . ...one in which no permanent truth is held to exist; this would allow counter-ideas to emerge. Karl Popper shared ideas with his friend, the low-key economist von Hayek, who endorsed capitalism as a state in which prices can disseminate information that bureaucratic socialism would choke."

"During the following decade [of the 1950s] modern economic history took a dramatic swing away from the liberal-left consensus established by the Hammonds, Tawney and the Webbs. The seminal text for this change of direction was the 1954 collection of essays compiled by F. A. Hayek, "Capitalism and the Historians"."

"Even by the standards of his day Friedrich Hayek’s thought was wide-ranging and covered fields as diverse as economics, psychology, jurisprudence and social and political theory. Yet, despite this heterogeneity, underlying his intellectual contribution is a unifying philosophical approach centred upon a conception of mind and of the nature of reason. It is to this foundational aspect of Heyek’s thought, then, that attention must be paid if one is to understand his wider contributions. Regrettably, in an introductory text, there is only so much in-depth critical appraisal that one can undertake. For this reason, and by setting out his views on a variety of topics and appraising them where possible, the main purpose of this book will be to familiarise the reader with the principal themes of Hayek’s thought and to ascertain the extent to which his contributions may be considered to form a coherent system."

"Our inspiration was less Rab Butler's Industrial Charter than books like Colm Brogan's anti-socialist satire, Our New Masters … and Hayek's powerful Road to Serfdom, dedicated to 'the socialists of all parties'. Such books not only provided crisp, clear analytical arguments against socialism, demonstrating how its economic theories were connected to the then depressing shortages of our daily lives; but by their wonderful mockery of socialist follies, they also gave us the feeling that the other side simply could not win in the end. That is a vital feeling in politics; it eradicates past defeats and builds future victories. It left a permanent mark on my own political character, making me a long-term optimist for free enterprise and liberty."

"Adam Smith, the greatest exponent of free enterprise economics till Hayek and Friedman."

"For Dicey, writing in 1885, and for me reading him some seventy years later, the rule of law still had a very English, or at least Anglo-Saxon, feel to it. It was later, through Hayek's masterpieces "The Constitution of Liberty" and "Law, Legislation and Liberty" that I really came to think this principle as having wider application."

"All the general propositions favouring freedom I had … imbibed at my father's knee or acquired by candle-end reading of Burke and Hayek ..""

"Hayek's analysis of the perils of the planned society and the command economy is, indeed, unrivalled. He shows how attempts to defy markets are doomed to be self-defeating. He warns us that beneath the seductive slogans and the simplistic targets of the utopians who promise heaven on earth there frequently lurks the reality of a totalitarian hell. He reminds us that we must value the habits, rules and institutions of liberty for their own sake if we are to enjoy for long the benefits that freedom brings. And all these messages are as relevant to our own age as when he first spoke to the West about that Road to Serfdom. Perhaps more so. This is because Hayek is still the preeminent modern philosopher of ordered liberty — something that in every continent is today under threat from dark forces of anarchy, hatred, revolution, fanaticism and violence. Against such ideologues, he encourages us to have faith in the peaceful, subtle processes by which people co-operate in fulfilling their requirements under a rule of law; to rely on an extended, spontaneous order; in short, to promote the system generally known as capitalism. Hayek is, therefore, the prophet not of doom and disaster, but of peace and plenty. His is a voice of wisdom for our time, and for all time. We should listen to him."

"The key importance of the amount of information available and the frequent lack of relevant information have been dealt with only in the last decades. L. von Mises and F. A. von Hayek can rightly be regarded as pioneers in this connection."

"It does tend to make Hayek a much more systematic thinker in this area than he was. I am not saying that Hayek thought of himself as a good economist but only a moderately good political scientist or philosopher, but that is the fact. […] To repeat what I said above, Hayek was only a moderately good political scientist or philosopher. (I should say that Hayek's view of my work was much the same: He thought I was a good economist but didn't like my political science.)"

"The most interesting among the courageous dissenters of the 1980s were the classical liberals, disciples of F. A. Hayek, from whom they had learned about the crucial importance of economic freedom and about the often-ignored conceptual difference between liberalism and democracy."

"Everyone in Boston of a certain age knows the story of Rosie Ruiz, the marathoner who crossed the Boston finish line in 1980 at 2:31.56, flabby thighs and all, having barely broken a sweat. Despite mounting skepticism, she basked in the glory of having run the third-fastest female marathon in history – for a few days, that is, until a couple of students remembered seeing her jump out of the crowd half a mile from the finish. Something of the sort has been going on recently with the shade of Friedrich von Hayek. The Austrian economist, who died in 1992 just short of what would have been his ninety-third birthday, never made false claims for himself – far from it: he knew all too well the loneliness of the long distance runner. And scrupulous work as editor by the late W.W. Bartley, interpreter Bruce Caldwell, and biographer Alan Ebenstein, have made it possible to see the man clear. But the claims conservatives are making about the role he played as an economist are beginning to smack of Ruizismus. That is, they have jumped a caricature out of the bushes late in the day and claim that their guy ran a great race."

"Nearly two decades ago, during dinner with the late Nobel laureate Friedrich Hayek, I asked him if he had the power to write one law that would get government out of our lives, what would that law be? Hayek replied he'd write a law that read: Whatever Congress does for one American it must do for all Americans. He elaborated: If Congress makes payments to one American for not raising pigs, every American not raising pigs should also receive payments. Obviously, were there to be such a law, there would be reduced capacity for privilege-granting by Congress and less influence-peddling."

"Coming back to the question in the heading: how should Hayek be seen, after all, as an intellectual hero or an ideologue? In my (European) view, the answer would be: Under the historical condition which Hayek developed his liberal social philosophy, his courageous opposition to a fashionable, pro-socialist Zeitgeist made him an outstanding intellectual. However, as I tried to point out, he misunderstood or did not wish to understand the role of income redistribution in a free society. Instead, his continued crusading against allegedly atavistic ideals of material equality puts income redistribution at par with socialist irrationalism. This one-sided interpretation paved the way for his arguments to be over-simplified for political partisanship in the United States. Hayek’s new adherents fail to account for his intellectual stature and make him appear post mortem like an ideologue."

"All economic activity is carried out through time. Every individual economic process occupies a certain time, and all linkages between economic processes necessarily involve longer or shorter periods of time."

"Questions about the influence of socialism are increasingly more difficult to answer as the word socialism has so many meanings. The idea that the inequalities of incomes can be greatly reduced has come to be recognized as largely impractical. Practically all endeavours at just distribution express more or less arbitrary conceptions of what is just and the central idea of Marxian socialism of a rationalisation of the means of production has been largely abandoned as technically impracticable. I believe that in general the idea of justice is more closely met by a freely competitive market than by any deliberate allocation of income to some imagined ideal of the kind."

"I am now profoundly convinced of what I had only hinted at before, namely, that the struggle between the advocates of a free society and the advocates of the socialist system is not a moral but an intellectual conflict. Thus socialists have been led by a very peculiar development to revive certain primitive instincts and feelings which in the course of hundreds of years had been practically suppressed by commercial or mercantile morals, which by the middle of the last century had come to govern the world economy."

"Altruism is an instinct we've inherited from the small society where we knew for whom we work, whom we serve. When you pass from this, as I like to call it, 'concrete society', where we are guided by what we see, to the abstract society which far transcends our range of vision, it becomes necessary that we are guided not by the knowledge of the effect of what we do, but by some abstract symbols. Now, the only symbol which tells us where we can make the best contribution is profit. And in fact by pursuing profit, we are as altruistic as we can possibly be, because we extend our concern to people who are beyond our range of personal conception. This is a condition which makes it possible to produce what I call an extended order, an order which is not determined by our aim, by our knowing what are the most urgent needs, but by an impersonal mechanism which by a system of communication puts a label on certain things which is fully impersonal."

"I mean, it became particularly acute because Keynes, against his intentions, had stimulated the development of macroeconomics. And I was convinced that not only his particular conclusions, but the whole foundation of macroeconomics was wrong. So I wanted to demonstrate that we had to return to microeconomics, that this whole prejudice supported by the natural scientists that could deduce anything from measurable magnitudes, the effects of aggregates and averages, came to fascinate me much more. I felt in a way, that the thing which I am now prepared to do, I don’t know as there’s anybody else who can do this particular task. And I rather hoped that what I had done in capital theory would be continued by others. This was a new opening which was much more fascinating. The other would have meant working for a result which I already knew, but had to prove it. Which was very dull. The other thing was an open problem: How does economics really look like when you recognize it as the prototype of a new kind of science of complex phenomena which could not employ the simple model of mechanics or physics, but had to deal with what then I described as mere pattern predictions, certain limited prediction. That was so much more fascinating as an intellectual problem."

"Our basic problem is that we have three levels, I would say, of moral beliefs. We have the first instance, our intuitive moral feelings which are adapted to the small, person-to-person society where we act for people whom we know and are served by people whom we know. Then, we have a society governed by moral traditions which, unlike what modern rationalists believe, are not intellectual discoveries of men who designed them, but as a result of a persons, which I now prefer to describe as term of 'group selection.' Those groups who had accidentally developed such as the tradition of private property and the family who did succeed, but never understood this. So we owe our present extended order of human cooperation very largely to a moral tradition which the intellectual does not approve of, because it has never been intellectually designed and it has to compete with a third level of moral beliefs, those which the morals which the intellectuals designed in the hope that they can better satisfy man's instincts than the traditional morals to do. And we live in a world where three moral traditions are in constant conflict, the innate ones, the traditional ones, and the intellectually designed ones, and ultimately, all our political conflicts of this time can be reduced as affected by a conflict between free moral tradition of a different nature, not only of different content."

"The socialist argument continues despite its many defeats―on the impossibility of economic calculation under collectivism, the fallacious claims for the use of markets under socialism, the incompatibility of liberty and state direction of the economy, and many others. The argument is being won by the new liberals of the late 20th century. But many people still do not understand it. And most on the Left continue to resist it."

"Those who suffer from this monopoly should form a libertarian anti-labour union movement of workers directed against what has long become a deceptive farce favouring an elite that has gained dominance in a party wrongly claiming to represent the interest of all workers. Once it is recognized that the unions prevent people from getting jobs, such a movement may readily spread."

"I don't believe that we shall ever have a good money again before we take the thing out of the hands of government, and since we can't take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something they can't stop."

"I don't like criticizing Milton Friedman not only because he is an old friend but because, outside of monetary theory, we are in complete agreement. Our general views on what is desired and what is not are almost identical until we get on to money. But if I told him what I said before, that I very much doubt whether monetary policy has ever done anything good, he would disagree. He personally is convinced that a good monetary policy is a foundation for everything."

"It seems to me that my original plan is right, but I am afraid that I’ve come to the conclusion that politically, it is completely Utopian. Governments will never allow monetary competition, and even bankers do not understand the idea because they have all grown up in the system which is so completely dependent on central banks. So I think we need a roundabout way. After all, in the modern world, currency is no longer the most important money. Credit and credit cards are substitutes. While governments can stop people from issuing money, they can hardly stop them from opening accounts in something unless they introduce a complete system of exchange control. I do not expect that any bank will understand this idea. But I hope that one of the big dealers in raw materials will be prepared to open accounts which will be redeemable in so much of current moneys as are necessary to buy this list of raw materials. Through these accounts he can make his unit—call it the “solid”—the standard unit without it ever being used in circulation. People very soon will begin to keep their accounts in “solids”—the only thing which is trustworthy. Although it’s a thing where many people can compete, most of them will probably choose the same list of raw materials. If one major firm will start this, others will imitate it. So I think we can forget about existing money and existing banks, and gradually open a system of accounts which will displace the government money."

"And since any inflation, however modest at first, can help employment only so long as it accelerates, adopted as a means of reducing unemployment, it will do so for any length of time only while it accelerates. "Mild" steady inflation cannot help—it can lead only to outright inflation. That inflation at a constant rate soon ceases to have any stimulating effect, and in the end merely leaves us with a backlog of delayed adaptations, is the conclusive argument against the "mild" inflation represented as beneficial even in standard economics textbooks."

"It is no exaggeration to say that the central aim of socialism is to discredit those traditional morals which keep us alive."

"All the paradigms of culturally evolved institutions, morals, exchange, and money refer to such practices whose benefits transcend the individuals who practice them in the particular instances. The result is that whole groups may be helped by them to expand into what I shall call extended orders, through the effects of practices of which the individuals are not aware. Such practices can lead to the formation of orderly structures far exceeding the perception of those whose actions produce them. They make possible the adaptation of such actions to unknown circumstances and lead to the formation of an indefinitely expansible order which can develop only through group selection, that is, a selection of groups for common attributes possessed by them."

"The human groups have been selected for the effects of their habitual practices, effects of which the individuals were not and could not be aware. Customs are mostly group properties, beneficial only if they are common properties of its individual members but referring to reciprocal action. Morals have not only been designed by man, but man also usually does not understand their reason."

"I don't know what monetarism is. If monetarism just means a good old-fashioned quantity theory, of course it has not failed. If it means the particular version of Milton Friedman, I think it has because he imagines that he can achieve — ascertain — a clear quantity relationship between a measurable quantity of money and the price level. I don't think that is possible. In fact, just about 40 years ago in the opening sentences of my book, Prices and Production, I wrote that it would be a great misfortune if people ever cease to believe in the quantity theory of money. It would be even worse ever to believe it literally. And that's exactly what Milton Friedman does."

"Our whole modern society, based on a far-ranging division of labour, is, however, essentially dependent on two factors that conflict with our natural instincts. The first is the assumption, implicit but not understood, that we can do more good to unknown people if we follow the impersonal signals of the market, which enable us to serve the needs of people whom we do not know and to make use of opportunities and facilities with which we have no direct acquaintance. The second is that for this purpose we can follow our own individual aims with freely chosen associates and are not bound to serve the concrete ends of the group into which we were born."

"In a sense, we all are socialists. We are still governed by feelings that are based on what was necessary in the small group of known people among whom each had to aim at fulfilling the needs of persons he knew; where he had to collaborate with a definite group of fellows, who were given to him and whom he could not choose, to pursue common purposes. Our instincts still tell us to strive to serve the known needs of known people and that our pleasure in life is derived from the consciousness that we follow a set of common purposes with people whom we know and who share our environment."

"I believe you will be shocked by my stating this so bluntly because we are still guided instinctively by those inherited "natural" emotions. But I think we must recognize that we have become a worldwide, peaceful, and prosperous society by having learned to disregard those natural instincts and to follow instead certain abstract rules of honesty—rules establishing private property and ultimately codified in the form of private law. It is the rules of property and contract on which the growth of a worldwide, peaceful, and prosperous society was based. All these are traditional rules that evolved by a process of selection, which made those groups who followed the new rules more prosperous than other groups, and which thus came gradually to govern the civilised part of the world. Those communities who adopted the new rules and, in doing so, infringed upon deeply embedded natural feelings became the successful ones, the ones who multiplied because they were more prosperous and were able to attract people from other groups."

"Our morality itself is the result of a process of cultural selection. Those things survive which enable the species to multiply."

"We do not owe our morals to our intelligence: we owe them to the fact that some groups uncomprehendingly accepted certain rules of conduct — the rules of private property, of honesty, and of the family — that enabled the groups practising them to prosper, multiply, and gradually to displace the others."

"We have found a method of creating an order of human co–operation which far exceeds the limits of our knowledge. We are led to do things by circumstances of which we are largely unaware. We do not know the needs which we satisfy, nor do we know the sources of the things which we get. We stand in an enormous framework into which we fit ourselves by obeying certain rules of conduct that we have never made and never understood, but which have their reason."

"The social product which is now maintaining a human population of this world four or five hundred times as large as that which man could achieve in the natural hunting and gathering stage is owed only to the division of labor, skills, and knowledge. This division could never have been designed or planned, but it arose through and is now maintained by the guiding service of competitive market prices and wages that tell each person where its efforts can make the largest contribution to the total. These self-generating signals, which inform the individuals about the combined efforts of thousands of events of which they can have no direct information, bring about an adaptation of the individual efforts to the unknown. No central direction could achieve this adaptation because the knowledge of all the facts of which the market takes account is spread among thousands and cannot be known to any central authority. It is, of course, impossible to improve signals when one does not know what determines them. Wealth, which social justice would like to distribute as a reward for merit and need, is, therefore, due to the circumstance that the direction of individual efforts is guided by a choice between returns which depends largely on accidental circumstances of time and place and is effected but not conclusively determined by what the individual can know or do. Thus, the wealth which the advocates of social justice want to redistribute would not exist if social justice reigned. Social justice is a fraud, a promise to distribute what one would not have if one followed its bidding. Wealth just would not be there or would rapidly disappear if the ordering by the principles of the market that now guide its production were replaced by some others which would give to each that to which he imagines himself to be entitled."

"[Milton Friedman] believes in an oversimplified quantitative relationship between a measurable quantity of money and the price level. You must leave it to the discretion of the central bank to so adjust the supply of ultimate cash reserves as to keep the price level stable."

"My life has been dominated by my differences with John Maynard Keynes. That turns almost wholly on the - I believe, false - conviction that there is a simple relationship between aggregate demand for consumer goods and the volume of employment. Keynes was one of the most intelligent people I knew but he understood very little economics. He must not be blamed for his disciples. He knew the danger of inflation."

"On the scale on which [tax cutting] is being tried, I'm a little apprehensive. I'm all for reduction of government expenditures but to anticipate it by reducing the rate of taxation before you have reduced expenditure is a very risky thing to do."