Essays

"It would clearly not be an improvement to build all houses exactly alike in order to create a perfect market for houses, and the same is true of most other fields where differences between the individual products prevent competition from ever being perfect."

"We can either have a free Parliament or a free people. Personal freedom requires that all authority is restrained by long-run principles which the opinion of the people approves."

"Alchian: Two things you [Hayek] wrote that had a personal influence on me, after your Prices and Production, were 'Individualism and Economic Order' [sic — Alchian certainly has in mind Hayek's 'Economics and Knowledge'] and 'The Use of Knowledge in Society.' These I would regard as your two best articles, best in terms of their influence on me. Hayek: 'Economics and Knowledge' — the '37 one — which is reprinted in the volume, is the one which marks the new look at things in my way. Alchian: It was new to you, too, then? Was it a change in your own thinking? Hayek: Yes, it was really the beginning of my looking at things in a new light. … I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it [i.e. 'Economics and Knowledge'] in print. Alchian: Well, I'm delighted to hear you say that, because I had that copy typed up to mimeograph for my students in the first course I gave here [i.e. UCLA]. And Allan Wallace … came through town one day, and I said, 'Allan, I've got a great article!" He looked at it, started to laugh, and said, "I've seen it too; it's just phenomenal!' I'm just delighted to hear you say that it was exciting, because it was to me, too … that was a very influential article, I must say."

"The Neoclassical school has been the dominant school of economics for the last two generations, so I have also been schooled in it throughout my career. It can provide us with some very useful tools to analyse problems within a given structure, but it is not very good at understanding how the institutions, technologies, politics, and ideas that define that structure evolve over time. In this respect, Hayek is very different from the Neoclassical school, even though many Neoclassical economists mention him in the same breath as Milton Friedman, on the basis that he was one of the most influential advocates of the free market. Unlike Neoclassical economists, however, Hayek does not take the socio-political order underlying the market relationship as given and emphasizes the ultimately political nature of our economic life. This is a big contrast to the Neoclassical view, which thinks that economics and politics can be, and should be, separated. Indeed, if you read Hayek’s book, Individualism and Economic Order, you will see that he is very critical –sometimes even abusive – of Neoclassical economics."

"Hayek's adversaries — Oskar Lange and company — argued that a market system had to be inferior to a centrally-planned system: at the very least, a centrally-planned economy could set up internal decision-making procedures that would mimic the market, and the central planners could also adjust things to increase social welfare and account for external effects in a way that a market system could never do. Hayek, in response, argued that the functionaries of a central-planning board could never succeed, because they could never create both the incentives and the flexibility for the people-on-the-spot to exercise what Scott calls metis. Today all economists — even those who are very hostile to Hayek's other arguments … agree that Hayek and company hit this particular nail squarely on the head. Looking back at the seventy-year trajectory of Communism, it seems very clear that Hayek (and Scott) are right: that its principal flaw is its attempt to concentrate knowledge, authority, and decision-making power at the center rather than pushing the power to act, the freedom to do so, and the incentive to act productively out to the periphery where the people-on-the-spot have the local knowledge to act effectively."

"Hayek’s great contribution is this: Competitive markets without externalities populated by well-informed self-regarding rational individuals generate highly productive outcomes because the market has powerful emergent properties that make it an extremely powerful and incentive-compatible societal mechanism for eliciting the revelation, aggregation, and transmission of information about resources, capabilities, needs and desires."

"Hayek thought that the social sciences are capable of greater knowledge than the natural. He wrote in “The Facts of the Social Sciences” in 1943—after, significantly, his “Economics and Knowledge” essay, which he considered to have constituted his decisive breakthrough and departure from Mises (though Mises, as already noted, did not think this):“While at the world of nature we look from the outside, we look at the world of society from the inside.” Because we look at the world of society from, in Hayek’s view, the “inside,” we are capable of more knowledge of it than of the external world of nature. Similarly, Hayek considered the fundamental divide between the social and natural worlds not to be in kind of phenomena (notwithstanding that we experience the former from the inside and the latter from the outside), but in complexity. [...] From Hayek’s perspective, the natural sciences move from complexity to individual elements; the social sciences move from individual elements to complexity."

"You’ll see the same thing in The Use of Knowledge in Society (1945), where Hayek pits central planning against individuals making use of local knowledge: the tool he uses to explain that individuals acting independently make better use of knowledge than central planners, must also (though he neglects to mention this corollary) “explain” that an individual acting independently in the market must make better use of knowledge than they would within any organization – a large firm, a middle-sized firm, a university, the post office (local knowledge: always better than ZIP codes). We’re accustomed to critiquing Hayek’s antipathy to things collective in the political realm (“he believes in liberty, but not the liberty of workers to act collectively”), but there’s more involved here than his evident animus towards the organized lower orders: he doesn’t seem to understand the collective aspect of discovery at all. To anybody who knows anything about the processes of discovery in organizations or networks, this looks just clueless."

"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."

"Since I shall be indicating my disagreement with some of the points made by Professor Israel Kirzner, let me stress that I am in complete sympathy with his point of departure, namely, the emphasis on the dispersion of information among economic decision-making units (called by him, "Hayek's knowledge problem") and the consequent problem of transmission of information among those units. Much of my own research work since the 1950s has been focused on issues in welfare economics viewed from an informational perspective. The ideas of Hayek (whose classes at the London School of Economics I attended during the academic year 1938-39) have played a major role in influencing my thinking and have been so acknowledged."

"A number of papers emerged which focussed on the role of knowledge in market processes, culminating in the 1945 paper "The Use of Knowledge in Society." These papers were to form the core of Hayek's Individualism and Economic Order (1949). A second series of papers, published during the war, focused on the role of subjectivism in the social sciences, and formed the core of The Counter-Revolution of Science: Studies on the Abuse of Reason (1952). Together these two strands of contributions constitute, in this writer's opinion, Hayek's most profound explorations of the foundations of economic understanding. Taken together with Mises's contemporaneous work, these contributions represented a most significant deepening and extension of the subjectivist Austrian tradition. There can be little doubt that it was this work that was responsible both for the fact that Austrian economics survived the midcentury dominance of Keynesian thought, and for the renewed late-century interest in Austrian economics, despite the dominance of neo-classical equilibrium theory."

"The Austrian School of Economics traditionally underestimates, if not neglects macroeconomics (or at least its importance), and Hayek understood that he was not going to win the debate accepting the Keynesian macro economic playground. He decided to attack the interventionist doctrine of Keynes by moving to microeconomics, to the defence of the irreplaceable role of markets and prices in the economy, and to demonstrating that interventionism makes the efficient functioning of markets impossible. His seminal articles “Economics and Knowledge,” and especially “The Use of Knowledge in Society,” are among the most important contributions to the field of economic science in the whole of the twentieth century. Hayek devoted his analysis to explaining the coordination of human action in a world in which knowledge is inevitably dispersed and he was able to prove that the solution is in the price system, not in central planning."

"Professor Mises' denial of the possibility of economic calculation in a socialist system must be rejected. However, Professor Mises' argument has been taken up recently in a more refined form by Professor Hayek and Professor Robbins. They do not deny the theoretical possibility of a rational allocation of resources in a socialist economy, they only doubt the possibility of a satisfactory practical solution of the problem. […] The position taken by Professor Hayek and by Professor Robbins is a significant step forward in the discussion of the problem. It promises a much more fruitful approach than Professor Mises' wholesale denial of the possibility of economic accounting under socialism."

"Many economists have professed to analyze information; relatively few have considered carefully the problems of knowledge. Among those who have, Hayek is pre-eminent, and he has emphasized the value of a market system in providing encouragement to individuals to find and make use of knowledge, while simultaneously affording checks on its misuse."

"Hayek’s point in his famous essay of 1945, “The Uses of Knowledge in Society”, is that central planning cannot work because it is trying to substitute an individual all-knowing intelligence for a distributed and fragmented system of localised but connected knowledge, much of which is tacit. It is the essence of anti-elitism, of – dare I say it – populism, the prescient harbinger of what is sometimes called “dot communism” – the flattening of human society as a result of the internet."

"If one writing contributed more than any other to the framework in which this work [Sowell's "Knowledge and Decisions"] developed, it would be an essay entitled 'The Use of Knowledge in Society,' published in the American Economic Review of September 1945, and written by F. A. Hayek … In this plain and apparently simple essay was a deeply penetrating insight into the way societies function and malfunction, and clues as to why they are so often and so profoundly misunderstood."

"At the core of the failure of the socialist experiment is not just the lack of property rights. Equally important were the problems arising from lack of incentives and competition, not only in the sphere of economics but also in politics. Even more important perhaps were problems of information. Hayek was right, of course, in emphasizing that the information problems facing a central planner were overwhelming. I am not sure that Hayek fully appreciated the range of information problems. If they were limited to the kinds of information problems that are at the center of the Arrow-Debreu model consumers conveying their preferences to firms, and scarcity values being communicated both to firms and consumers then market socialism would have worked. Lange would have been correct that by using prices, the socialist economy could "solve" the information problem just as well as the market could. But problems of information are broader."

"My concerns are two-fold: First, because Hayek (and his followers) failed to develop formal models of the market process, it is not possible to assess claims concerning the efficiency of that process, and second (and relatedly), in the absence of such modeling, it is not possible to address the central issues of concern here, the mix and design of public and private activities, including alternative forms of regulations (alternative "rules of the game" that the government might establish) and the advantages of alternative policies toward decentralization-centralization."

"This much is certain, that Jesus Christ represents God as the fountain of all goodness, the eternal enemy of pain and evil, the uniform and unchanging motive of the salutary operations of the material world."

"The nature of a narrow and malevolent spirit is so essentially incompatible with happiness as to render it inaccessible to the influences of the benignant God. All that his own perverse propensities will permit him to receive, that God abundantly pours forth upon him. If there is the slightest overbalance of happiness, which can be allotted to the most atrocious offender, consistently with the nature of things, that is rigidly made his portion by the ever-watchful Power of God. In every case, the human mind enjoys the utmost pleasure which it is capable of enjoying. God is represented by Jesus Christ as the Power from which, and through which, the streams of all that is excellent and delightful flow; the Power which models, as they pass, all the elements of this mixed universe to the purest and most perfect shape which it belongs to their nature to assume."

"This, and no other, is justice: — to consider, under all the circumstances and consequences of a particular case, how the greatest quantity and purest quality of happiness will ensue from any action … there is no other justice."

"My neighbour, or my servant, or my child, has done me an injury, and it is just that he should suffer an injury in return. Such is the doctrine which Jesus Christ summoned his whole resources of persuasion to oppose. "Love your enemy, bless those who curse you:" such, he says, is the practice of God, and such must ye imitate if ye would be the children of God."

"The absurd and execrable doctrine of vengeance, in all its shapes, seems to have been contemplated by this great moralist with the profoundest disapprobation; nor would he permit the most venerable of names to be perverted into a sanction for the meanest and most contemptible propensities incident to the nature of man. "Love your enemies, bless those who curse you, that ye may be the sons of your Heavenly Father, who makes the sun to shine on the good and on the evil, and the rain to fall on the just and unjust." How monstrous a calumny have not impostors dared to advance against the mild and gentle author of this just sentiment, and against the whole tenor of his doctrines and his life, overflowing with benevolence and forbearance and compassion!"

"Tacitus says, that the Jews held God to be something eternal and supreme, neither subject to change nor to decay; therefore, they permit no statues in their cities or their temples. The universal Being can only be described or defined by negatives which deny his subjection to the laws of all inferior existences. Where indefiniteness ends, idolatry and anthropomorphism begin."

"We live and move and think; but we are not the creators of our own origin and existence. We are not the arbiters of every motion of our own complicated nature; we are not the masters of our own imaginations and moods of mental being. There is a Power by which we are surrounded, like the atmosphere in which some motionless lyre is suspended, which visits with its breath our silent chords at will. Our most imperial and stupendous qualities — those on which the majesty and the power of humanity is erected — are, relatively to the inferior portion of its mechanism, active and imperial; but they are the passive slaves of some higher and more omnipotent Power. This Power is God; and those who have seen God have, in the period of their purer and more perfect nature, been harmonized by their own will to so exquisite consentaneity of power as to give forth divinest melody, when the breath of universal being sweeps over their frame. That those who are pure in heart shall see God, and that virtue is its own reward, may be considered as equivalent assertions. The former of these propositions is a metaphorical repetition of the latter. The advocates of literal interpretation have been the most efficacious enemies of those doctrines whose nature they profess to venerate."

"Whosoever is free from the contamination of luxury and licence, may go forth to the fields and to the woods, inhaling joyous renovation from the breath of Spring, or catching from the odours and sounds of Autumn some diviner mood of sweetest sadness, which improves the softened heart. Whosoever is no deceiver or destroyer of his fellow men — no liar, no flatterer, no murderer may walk among his species, deriving, from the communion with all which they contain of beautiful or of majestic, some intercourse with the Universal God. Whosoever has maintained with his own heart the strictest correspondence of confidence, who dares to examine and to estimate every imagination which suggests itself to his mind — whosoever is that which he designs to become, and only aspires to that which the divinity of his own nature shall consider and approve — he has already seen God."

"God, it has been asserted, was contemplated by Jesus Christ as every poet and every philosopher must have contemplated that mysterious principle. He considered that venerable word to express the overruling Spirit of the collective energy of the moral and material world. He affirms, therefore, no more than that a simple, sincere mind is the indispensable requisite of true science and true happiness. He affirms that a being of pure and gentle habits will not fail, in every thought, in every object of every thought, to be aware of benignant visitings from the invisible energies by which he is surrounded."

""Blessed are the pure in heart, for they shall see God." Blessed are those who have preserved internal sanctity of soul; who are conscious of no secret deceit; who are the same in act as they are in desire; who conceal no thought, no tendencies of thought, from their own conscience; who are faithful and sincere witnesses, before the tribunal of their own judgments, of all that passes within their mind. Such as these shall see God."

"It is important to observe that the author of the Christian system had a conception widely differing from the gross imaginations of the vulgar relatively to the ruling Power of the universe. He everywhere represents this Power as something mysteriously and illimitably pervading the frame of things. Nor do his doctrines practically assume any proposition which they theoretically deny. They do not represent God as a limitless and inconceivable mystery; affirming, at the same time, his existence as a Being subject to passion..."

"The thoughts which the word "God" suggests to the human mind are susceptible of as many variations as human minds themselves. The Stoic, the Platonist, and the Epicurean, the Polytheist, the Dualist, and the Trinitarian, differ infinitely in their conceptions of its meaning. They agree only in considering it the most awful and most venerable of names, as a common term devised to express all of mystery, or majesty, or power, which the invisible world contains. And not only has every sect distinct conceptions of the application of this name, but scarcely two individuals of the same sect, who exercise in any degree the freedom of their judgment, or yield themselves with any candour of feeling to the influences of the visible world, find perfect coincidence of opinion to exist between them."

"The Being who has influenced in the most memorable manner the opinions and the fortunes of the human species, is Jesus Christ. At this day, his name is connected with the devotional feelings of two hundred millions of the race of man. The institutions of the most civilized portions of the globe derive their authority from the sanction of his doctrines; he is the hero, the God, of our popular religion. His extraordinary genius, the wide and rapid effect of his unexampled doctrines, his invincible gentleness and benignity, the devoted love borne to him by his adherents, suggested a persuasion to them that he was something divine. The supernatural events which the historians of this wonderful man subsequently asserted to have been connected with every gradation of his career, established the opinion."

"An established religion turns to deathlike apathy the sublimest ebullitions of most exalted genius, and the spirit-stirring truths of a mind inflamed with the desire of benefiting mankind. It is the characteristic of a cold and tame spirit to imagine that such doctrines as Jesus Christ promulgated are destined to follow the fortunes and share the extinction of a popular religion."

"No mistake is more to be deplored than the conception that a system of morals and religion should derive any portion of its authority either from the circumstance of its novelty or its antiquity, that it should be judged excellent, not because it is reasonable or true, but because no person has ever thought of it before, or because it has been thought of from the beginning of time."

"Some benefit has not failed to flow from the imperfect attempts which have been made to erect a system of equal rights to property and power upon the basis of arbitrary institutions. They have undoubtedly, in every case, from the instability of their foundation, failed. Still, they constitute a record of those epochs at which a trite sense of justice suggested itself to the understandings of men, so that they consented to forego all the cherished delights of luxury, all the habitual gratifications arising out of the possession or the expectation of power, all the superstitions with which the accumulated authority of ages had made them dear and venerable. They are so many trophies erected in the enemy's land, to mark the limits of the victorious progress of truth and justice."

"Every man, in proportion to his virtue, considers himself, with respect to the great community of mankind, as the steward and guardian of their interests in the property which he chances to possess. Every man, in proportion to his wisdom, sees the manner in which it is his duty to employ the resources which the consent of mankind has intrusted to his discretion."

"The demagogues of the infant republic of the Christian sect, attaining through eloquence or artifice, to influence amongst its members, first violated (under the pretence of watching over their integrity) the institutions established for the common and equal benefit of all. These demagogues artfully silenced the voice of the moral sense among them by engaging them to attend, not so much to the cultivation of a virtuous and happy life in this mortal scene, as to the attainment of a fortunate condition after death; not so much to the consideration of those means by which the state of man is adorned and improved, as an inquiry into the secrets of the connexion between God and the world — things which, they well knew, were not to be explained, or even to be conceived. The system of equality which they established necessarily fell to the ground, because it is a system that must result from, rather than precede, the moral improvement of human kind."

"In proportion as mankind becomes wise — yes, in exact proportion to that wisdom — should be the extinction of the unequal system under which they now subsist. Government is, in fact, the mere badge of their depravity. They are so little aware of the inestimable benefits of mutual love as to indulge, without thought, and almost without motive, in the worst excesses of selfishness and malice. Hence, without graduating human society into a scale of empire and subjection, its very existence has become impossible. It is necessary that universal benevolence should supersede the regulations of precedent and prescription, before these regulations can safely be abolished. Meanwhile, their very subsistence depends on the system of injustice and violence, which they have been devised to palliate."

"When you understand the degree of attention which the requisitions of your physical nature demand, you will perceive how little labour suffices for their satisfaction. Your Heavenly Father knoweth you have need of these things. The universal Harmony, or Reason, which makes your passive frame of thought its dwelling, in proportion to the purity and majesty of its nature will instruct you, if ye are willing to attain that exalted condition, in what manner to possess all the objects necessary for your material subsistence. All men are to become thus pure and happy. All men are called to participate in the community of Nature's gifts. The man who has fewest bodily wants approaches nearest to the Divine Nature."

"Nothing is more obviously false than that the remedy for the inequality among men consists in their return to the condition of savages and beasts. Philosophy will never be understood if we approach the study of its mysteries with so narrow and illiberal conceptions of its universality."

"Before man can be free, and equal, and truly wise, he must cast aside the chains of habit and superstition; he must strip sensuality of its pomp, and selfishness of its excuses, and contemplate actions and objects as they really are. He will discover the wisdom of universal love; he will feel the meanness and the injustice of sacrificing the reason and the liberty of his fellow-men to the indulgence of his physical appetites, and becoming a party to their degradation by the consummation of his own. Such, with those differences only incidental to the age and state of society in which they were promulgated, appear to have been the doctrines of Jesus Christ. It is not too much to assert that they have been the doctrines of every just and compassionate mind that ever speculated on the social nature of man."

"Fame, power, and gold, are loved for their own sakes — are worshipped with a blind, habitual idolatry. The pageantry of empire, and the fame of irresistible might, are contemplated by the possessor with unmeaning complacency, without a retrospect to the properties which first made him consider them of value. It is from the cultivation of the most contemptible properties of human nature that discord and torpor and indifference, by which the moral universe is disordered, essentially depend. So long as these are the ties by which human society is connected, let it not be admitted that they are fragile."

"You ought to love all mankind; nay, every individual of mankind. You ought not to love the individuals of your domestic circles less, but to love those who exist beyond it more. Once make the feelings of confidence and of affection universal, and the distinctions of property and power will vanish; nor are they to be abolished without substituting something equivalent in mischief to them, until all mankind shall acknowledge an entire community of rights."

"In proportion to the love existing among men, so will be the community of property and power. Among true and real friends, all is common; and, were ignorance and envy and superstition banished from the world, all mankind would be friends. The only perfect and genuine republic is that which comprehends every living being. Those distinctions which have been artificially set up, of nations, societies, families, and religions, are only general names, expressing the abhorrence and contempt with which men blindly consider their fellowmen."

"Too mean-spirited and too feeble in resolve to attempt the conquest of their own evil passions, and of the difficulties of the material world, men sought dominion over their fellow-men, as an easy method to gain that apparent majesty and power which the instinct of their nature requires."

"The practice of utter sincerity towards other men would avail to no good end, if they were incapable of practising it towards their own minds. In fact, truth cannot be communicated until it is perceived. The interests, therefore, of truth require that an orator should, as far as possible, produce in his hearers that state of mind on which alone his exhortations could fairly be contemplated and examined."

"Jesus Christ did what every other reformer who has produced any considerable effect upon the world has done. He accommodated his doctrines to the prepossessions of those whom he addressed. He used a language for this view sufficiently familiar to our comprehensions. He said, — However new or strange my doctrines may appear to you, they are in fact only the restoration and re-establishment of those original institutions and ancient customs of your own law and religion. The constitutions of your faith and policy, although perfect in their origin, have become corrupt and altered, and have fallen into decay. I profess to restore them to their pristine authority and splendour."

"Every fanatic or enemy of virtue is not at liberty to misrepresent the greatest geniuses and most heroic defenders of all that is valuable in this mortal world. History, to gain any credit, must contain some truth, and that truth shall thus be made a sufficient indication of prejudice and deceit. With respect to the miracles which these biographers have related, I have already declined to enter into any discussion on their nature or their existence. The supposition of their falsehood or their truth would modify in no degree the hues of the picture which is attempted to be delineated."

"It cannot be precisely ascertained in what degree Jesus Christ accommodated his doctrines to the opinions of his auditors; or in what degree he really said all that he is related to have said. He has left no written record of himself, and we are compelled to judge from the imperfect and obscure information which his biographers (persons certainly of very undisciplined and undiscriminating minds) have transmitted to posterity. These writers (our only guides) impute sentiments to Jesus Christ which flatly contradict each other. They represent him as narrow, superstitious, and exquisitely vindictive and malicious. They insert, in the midst of a strain of impassioned eloquence or sagest exhortation, a sentiment only remarkable for its naked and drivelling folly. But it is not difficult to distinguish the inventions by which these historians have filled up the interstices of tradition, or corrupted the simplicity of truth, from the real character of their rude amazement. They have left sufficiently clear indications of the genuine character of Jesus Christ to rescue it for ever from the imputations cast upon it by their ignorance and fanaticism. We discover that he is the enemy of oppression and of falsehood; that he is the advocate of equal justice; that he is neither disposed to sanction bloodshed nor deceit, under whatsoever pretences their practice may be vindicated. We discover that he was a man of meek and majestic demeanour, calm in danger; of natural and simple thought and habits; beloved to adoration by his adherents; unmoved, solemn, and severe."

"Jesus Christ expressly asserts that distinction between the good and evil principle which it has been the practice of all theologians to confound. How far his doctrines, or their interpretation, may be true, it would scarcely have been worth while to inquire, if the one did not afford an example and an incentive to the attainment of true virtue, whilst the other holds out a sanction and apology for every species of mean and cruel vice."

"Jesus Christ represented God as the principle of all good, the source of all happiness, the wise and benevolent Creator and Preserver of all living things. But the interpreters of his doctrines have confounded the good and the evil principle."