Economists From The United Kingdom

"There were many Hayeks: Hayek, the political scientist; Hayek, the economist; Hayek, the philosopher of social science; Hayek, the psychologist. Even in these different roles, he played many parts."

"Why did his interest in the concept of spontaneous order and the history of the doctrine of unintended social consequences undergo very little development after the 1960s? All of his political writings are in fact amazingly repetitious, exploring a small number of big themes which, however, are not further refined or extended in new contexts. As organizing concepts, they held, I am convinced, enormous potentialities but nevertheless Hayek himself failed to realize them."

"Hayek’s research programme is grounded in the teaching of Adam Smith and Carl Menger, who sought to understand social order not as the result of conscious design, but as the unintended consequences of individual human action. In addition to the emphasis on spontaneous order, Hayek learned from Menger that individual human action is guided by the subjective valuations of individuals, and that the relevant valuation that individuals make is on the marginal unit of the good or service that is the object of deliberation. Throughout Hayek’s career the puzzle of how a social system can transform the individual subjective perceptions of some into useful information for others so they may co-ordinate their actions to produce an overall social order which yields benefits far greater than any individual in the system intended was at the centre of his research efforts."

"Hayek’s reasons for holding that planning cannot work are not limited to the problem that the information required for the task of coordinating the plans of a multitude of individuals is too vast to organize effectively. The knowledge utilized within the market by entrepreneurs does not exist outside that local context and thus cannot even be organized in principle. It is not that planners would face a complex computational task; it is that they face an impossible task, because the knowledge required is not accessible to them no matter what technological developments may come along to ease the computational burden."

"I did not call him "Fritz." To me he remained always "Professor Hayek," despite his own graciousness in treating me as a peer. I shall not attempt to evaluate Professor Hayek's monumental contribution to our understanding of the events of this turbulent century, to the influence of his ideas on these events themselves or even to the development of economic theory in a strictly scientific sense."

"In some of their implicit modeling of political behavior aimed at furthering special group or class interests, the Marxists seemed to be closet associates of public choice, even as they rejected methodological individualism. But how was the basic Marxist critique of politics, as observed, to be transformed into the idealized politics of the benevolent and omniscient superstate? This question was simply left glaringly unanswered. And the debates of the 1930s were considered by confused economists of the time to have been won by the socialists rather than by their opponents, Ludwig von Mises and Friedrich Hayek. Both sides, to an extent, neglected the relevance of incentives in motivating human action, including political action."

"I did fully learn from Hayek the distinction between what I later called moral community and moral order and moral anarchy – this is about the sense that our genetic predisposition is all for the insider tribe."

"An essential difference between Hayek and Friedman here was that Hayek was in many ways a dark thinker. If you read Hayek in the 1930s and 1940s, the thinks the world is coming apart. Certainly Hayek's response to the Great Depression was not one that imbued with a great deal of optimism. He thought that to a certain extent you just have to wait things out; if you try to intervene to solve the problem you'll only exacerbate it. Whereas Friedman was this tremendous optimist. Friedman was always emphasizing--he said that what Hayek and Robbins got wrong when they were responding to the Great Depression was precisely that: that they said you shouldn't do anything. He thought that part of what he was doing in monetary theory was to try to come up with a way to say that there was a solution, something that could be done that would prevent this kind of problem. A kind of counternarrative to Keynes. And he always emphasized--instead of dwelling on the catastrophic situation that the world was in, he always emphasized the ways in which those catastrophes could be solved by the market. And so when you reach this moment of deep pessimism that I think a lot of people associated with organizations like the Tea Party felt, Hayek in many ways feels more consonant with that set of views."

"Hayek was no opponent of theory; indeed, he frequently defended it from its historicist detractors. But he also understood the limitations of theory."

"I grant that there is one big defect in the neoclassical approach to imperfect knowledge. But it is a defect that Austrians almost never mention! The problem: Do the probabilities that people assign fit the facts? At least as researchers, most economists assume that beliefs about the world are on average correct. But empirically, this is often not so. Flying is much safer statistically than driving, but many people refuse to accept the fact. A large field known as behavioral economics documents such biases. Or to take more policy-relevant beliefs: Basic economics shows us the benefits of free trade, but few non-economists recognize them. I have a series of papers on systematically biased beliefs about economics that explores this topic. Now what is Prof. Boettke going to tell you? I suspect that he is going to say that merely focusing on people’s erroneous beliefs “makes me an Austrian." I call this the “Hayek said the sky is blue" tactic. If you say the sky is blue, that makes you an Austrian because Hayek defended the sky-is-blue thesis back in the 30s. Hayek talked a bit about mistaken beliefs; therefore anyone who ventures within a thousand intellectual miles of this topic is a “Hayekian.” This is ridiculous. By this standard not only does Hayek get credit for ideas that he did not anticipate; he gets credit for ideas that preceded his birth! Hayek made some contributions here - though frankly he was very repetitious. But he did little to advance modern rational expectations theorizing, and even less to anticipate its empirical weaknesses. Would I have done any better? Probably not, but if I hadn’t done a lot more I wouldn’t want my posthumous admirers showering me with undeserved credit. (Well, maybe I would, but I wouldn’t deserve it)."

"I've long since lost all patience with Hayek. His original, true ideas could have been five good blog posts, his errors and bizarre obsessions are numerous, and his writing style insults every person who ever tried to write a decent sentence."

"In fact, a large part of what we think of as economic activity is designed to accomplish what high transaction costs would otherwise prevent or to reduce transaction costs so that individuals can negotiate freely and we can take advantage of that diffused knowledge of which Friedrich Hayek has told us."

"I will be discussing what happened in economics in England, but these were times when, to a very considerable extent, this was what happened in economics. The first episode I will discuss is local, but the economists involved were among the best in the world. In February 1931, Friedrich Hayek gave a series of public lectures entitled 'Prices and Production' at the London School of Economics … They were undoubtably the most successful set of public lectures given at LSE during my time there, even surpassing the brilliant lectures Jacob Viner gave on international trade theory. The audience, notwithstanding the difficulties of understanding Hayek, was enthralled. What was said seemed to us of great importance and made us see things of which we had previously been unaware. After hearing these lectures, we knew why there was a depression. Most students of economics at LSE and many members of the staff became Hayekians or, at any rate, incorporated elements of Hayek's approach in their own thinking. With the arrogance of youth, I myself expounded the Hayekian analysis to the faculty and students at Columbia University in the fall of 1931."

"For all his brilliance, Hayek didn’t — at the critical time — have a good enough understanding of the dangers of deflation. He didn’t fully realize the extent of sticky wages and prices and, more deeply, he didn’t see that ongoing deflation would render the “calculation problem” of a market economy more difficult. Hayek stressed that a market calculates value in a way that a central planner cannot — but lying behind this ability to calculate is some basic macroeconomic stability. At the key moments, Hayek did not offer the proper recipe for that stability."

"The basic problem is that there are three Hayeks:the--absolutely brilliant--price-system-as-information-aggregator Hayek. the--absolutely bonkers--business-cycle "liquidationist" Hayek. the--absolutely wrong--social-democracy-is-evil Hayek.The first was a genius. The second was a moron--his could never make his arguments cohere either conceptually or empirically, but he kept doubling down on them and wound up in infinite reputational bankruptcy. The third was wrong--I would say blinded ex ante by ideology, others would say proved wrong ex post by events.The problem is that the modern-day Hayekians are by-and-large uninterested in the good Hayek (1), and interested only in the bad Hayeks (2) and (3)..."

"Hayek says that the problem with classical liberalism was that it was not pure enough. The government needed to restrict itself to establishing the rule of law and to using antitrust to break up monopolies. It was the overreach of the government beyond those limits, via central banking and social democracy, that caused all the trouble. A democratic government needs to limit itself to rule of law and antitrust–and perhaps soup kitchens and shelters. And what if democracy turns out not to produce a government that limits itself to those activities? Then, Hayek says, so much the worse for democracy. A Pinochet is then called for to, in a Lykourgan moment, minimalize the state. After social democracy has been leveled and the rubble cleared away, then–perhaps–a limited range of issues can be discussed and debated by a–limited–restored democracy, with some kind of group of right-wing army officers descended from latifundistas Council of Guardians in the background to ensure that property remains sacred and protected, and the government small enough to fit in a bathtub. […] Hayek was formed in Austria. From his perspective the property and enterprise respecting Imperial Habsburg government of Franz Josef eager to make no waves, to hold what it has, and to keep the lid off the pressure cooker appears not unattractive. This is especially so when you contrasted would be really existing authoritarian alternatives: anti-Semitic populist demagogue mayors of Vienna; nationalist Serbian or Croatian politicians interested in maintaining popular legitimacy by waging class war or ethnic war; separatists who seek independence and then one man, one vote, one time. An “authoritarian” after the manner of Franz Josef looks quite attractive in this context–and if you convince yourself but they are as dedicated to small government neoliberalism as you are, and that the Lykourgan moment of the form will be followed by soft rule and popular assent, so much the better. And if the popular assent is not forthcoming? Then Hayek can blame the socialists, and say it is their fault for not understanding how good a deal they are offered."

"Hayek and Marx are similar in their research programs concerning the dynamics of capitalism, its cycles, and the way in which money is vital to capitalism. They both worked a long time to master the problem, but failed to arrive at a neat solution. Hence they both abandoned the program and went on to other, more urgent, concerns. But along the way, they both left a trail of great insights and unsettled debates."

"The human mind, Hayek says, is not just limited in its ability to synthesize a vast array of concrete facts, it is also limited in its ability to give a deductively sound ground to ethics. Here is where the tension develops, for he also wants to give a reasoned moral defense of the free market. He is an intellectual skeptic who wants to give political philosophy a secure intellectual foundation. It is thus not too surprising that what results is confused and contradictory."

"Hayek gave the best exposition ever of the unpopular ideas of economic freedom that somehow triumph anyway, alleviating far more national and global poverty than more fashionable Scandinavia-envy and grandiose plans to "make poverty history.""

"Hayek did not talk about it at the time, but his warnings about the drift toward top-down planning were perhaps most relevant of all in the so-called Third World. It is the misfortune of the field called development economics that it was born at the moment of maximum doubt about individual liberty. As a result, economists conceived of development from the beginning—and to a frightening extent still do today—as a top-down process run by development experts operating on a blank slate."

"Nor does his book offer any real historical setting for Hayek's career. Although often naive in his political judgments, Hayek was intensely concerned with public issues throughout his life. Yet we learn virtually nothing of the development of his views on the affairs of the day. What did he make, for example, of the Dollfuss dictatorship in Austria, where his teacher Ludwig von Mises served its clerical predecessor under Monsignor Seipel, and where Hayek himself planned to return in the 1930s? Mr Ebenstein never even mentions these conservative authoritarian regimes of the period. In later years, he records Hayek's efforts to secure South Tyrol for Austria once again; his organisation of the Mont Pelerin Society, an influential post-war group of free-market intellectuals; his recommendation that West Germany, France and Britain sue for entry as states into the United States; his reception in Verwoerd's South Africa and his admiration for General Pinochet's achievements in Chile; his wish that Iran be bombed in 1979 and Argentina in 1982. Homages from Barry Goldwater, Margaret Thatcher, Ronald Reagan and Yegor Gaidar roll past (the only discordant note comes from Ayn Rand, once Alan Greenspan's muse: "As an example of our most pernicious enemy, I would name Hayek. That one is real poison."; or again: "The kind who do more good to the communist cause than ours"). Yet no coherent picture of Hayek's political commitments ever emerges, still less their relation to such important works as “The Constitution of Liberty” (1960)."

"The great theme of his remarkable explorations in intellectual history is the danger of all constructivism, the belief that we can deliberately design social arrangements which will be better than those we unwittingly hit upon. Paradoxically, however, the drive of Hayek's own work is itself characteristically that of a rationalist construction. Admiring David Hume and detesting Auguste Comte, his genius was to marry the sceptical insights of the one to more than a touch of the compulsive rigour of the other."

"The investigation of this problem — How is spontaneous order possible? — is sometimes referred to as the 'Hayek programme'."

"I think that permanence and stability are the cardinal virtues of the legal rules that make private innovation and public progress possible. To my mind there is no doubt that a legal regime that embraced private property and freedom of contract is the only one that in practice can offer that permanence and stability … In reaching this conclusion, I have been heavily influenced by the work of Friedrich Hayek."

"Though Hayek clearly allows for the possibility of a retreat from socialism, whether of the hot (command planning) or cold (welfare state) variety, and planning, Hayek’s critics, apparently taking Hayek at his word, use 'inevitability' to refer to the outcome (a totalitarian polity) that, according to Hayek, is supposedly generated by the cumulative logic inherent to interventionist policy and welfare state practices. Though taking care to note that a change in policy may occur, Hayek apparently considers the logic of intervention as primarily nudging policy in one direction, necessitating ever-further government intervention."

"Hayek frequently argued that any failure to adequately mend our ways—abandon “our” supposed infatuation with “social justice” and other “high ideals”—would inexorably put us in the hands of the devil. Arguably, “we”—Obama and company clearly included—have yet to change our ways."

"Much as Hayek’s penchant for claiming that "bad" interventionist policy will ineluctably drive us along the road to serfdom—ultimately culminating in full-blown command planning and political tyranny— is clearly apparent in his 1940s writings, the very same sentiments pervade the third part of The Constitution of Liberty."

"Hayek was never blind to the potential difficulties inherent in this political synthesis, nor dismissive of the serious criticisms of capitalist society and liberal theory presented by thinkers of the left. He explicitly disavowed the ideal of laissez faire and distanced himself from the sort of free market utopianism common among more extreme libertarians. He thought it foolish to pretend that capitalism always rewards those who work the hardest or are otherwise deserving, advocated a minimal social safety net for those incapable of supporting themselves in the market, and had no objection to government taking on tasks far beyond those defining the "minimal state" of Nozick’s libertarianism, so long as this did not result in monopoly and private firms were allowed to compete with government for provision of the services in question. Like Marx, he believed that liberal capitalist society has a tendency to produce alienation, insofar as the impersonal rules of conduct upon which it rests necessarily eschew any reference to a common social end or purpose, and thus cannot satisfy the deepest human yearnings for solidarity. Unlike Marx, he also thought we nevertheless simply have no alternative to capitalism if we want to maintain the level of individual autonomy and material prosperity that are the most prized characteristics of modernity, and that it is naive and dangerous to pretend otherwise."

"What of Ronald Reagan and Margaret Thatcher and their battles against government control of the economy? Here Hayek surprises. He does not disapprove of Reagan and Thatcher, but he has no high opinion of modem politicians in general. He does, however, say that Reagan's and Thatcher's policies "are as reasonable as we can expect at this time. They are modest in their ambitions." Modesty. The capacity to understand that well-meaning politicians — and their advisers, the intellectuals — will only wreak mischief if they try to guide economic development: This antipolitical concept is at the heart of Hayek's theory of economic and social development."

"There was someone who is clearly very important who also was not a member of the scientific commission, but whose career and trajectory was ultimately very important for the definition of contemporary neo-liberalism. This is the Austrian von Hayek. He came from Austria and from neo-liberalism; he emigrated at the time of, or just before, the Anschluss. He went to England and also to the United States. He was very clearly one of the inspirations of contemporary American liberalism, or of American anarcho-capitalism if you like, and he returned to Germany in 1962 where he was appointed professor at Freiburg, thus closing the circle."

"I’ve always thought, incidentally, that many of us should welcome the fact that...a particular policy idea we hold does have this adverse effect on the opinions of other people. I think this is a very good thing, because it means that those of us who hold our views have to be better to get recognized than people who hold the other views. And in the long run, what matters is the quality of people who propose the ideas and not their number and not their position. It is because it is the quality of these ideas that matters so much that Hayek’s ideas have been so wide-spread and have had such an influence, and that you are now seeing the rise in the scientific as well as in the other parts of the world of more people of this particular kind of persuasion.... ... I am one of those who has learned a great deal from Hayek. I hope he is as effective as I think he will be in his teaching in Germany, but I also hope that we will see him back here very often indeed."

"Friedrich Hayek's influence has been tremendous. His work is incorporated in the body of technical economic theory; has had a major influence on economic history, political philosophy and political science; has affected students of the law, of scientific methodology, and even of psychology."

"Over the years, I have again and again asked fellow believers in a free society how they managed to escape the contagion of their collectivist intellectual environment. No name has been mentioned more often as the source of enlightenment and understanding than Friedrich Hayek's … I, like the others, owe him a great debt … his powerful mind … his lucid and always principled exposition have helped to broaden and deepen my understanding of the meaning and the requisites of a free society."

"In terms of his personal characteristics, Hayek was a very complicated personality. He was by no means a simple person. He was very outgoing in one sense but at the same time very private. He did not like criticism, but he never showed that he didn’t like criticism. His attitude under criticism, as I found, was to say: "Well, that’s a very interesting thing. At the moment, I’m busy, but I’ll write to you about it more later." And then he never would! On the other hand, he wasn’t like von Mises. He wasn’t intolerant at all. You cannot conceive of Hayek doing the kind of thing that Mises did, when, for example, he wouldn’t talk to Machlup for three years because Machlup had come out for floating exchange rates at a Mont Pelerin meeting. Hayek did not do that. That was, I believe, because of the influence of the London School on him. He was very much tempered by the London School."

"Let me emphasize. I am an enormous admirer of Hayek, but not for his economics. That, again, is subject to misunderstanding. It depends on what you mean by economics. I’m not talking about his understanding of economics, his application of economics to the real world, or anything like that, but his contributions to the science of economics, not to economic practice, not to anything else. I think Prices and Production was a very flawed book. I think his capital theory book is unreadable. I cannot say I’ve read it. [laughter] It’s very unreadable. On the other hand, The Road to Serfdom is one of the great books of our time. His writings in [political theory] are magnificent, and I have nothing but great admiration for them. I really believe that he found his right vocation—his right specialization—with The Road to Serfdom. His earlier works were intended to be part of the literature of technical economics as a science, and, indeed, it was that characteristic of them that impressed Lionel Robbins and led Lionel to bring him from Austria to London. I never could understand why they were so impressed [at the London School of Economics] with the lectures that ended up as Prices and Production, and I still can’t.... these very confused notions of periods of production, different orders of products, and so on."

"There is no figure who had more of an influence, no person had more of an influence on the intellectuals behind the Iron Curtain than Friedrich Hayek. His books were translated and published by the underground and black market editions, read widely, and undoubtedly influenced the climate of opinion that ultimately brought about the collapse of the Soviet Union."

"The [seminar in economic theory conducted by Hayek at the L.S.E. in the 1930s] was attended, it came to seem, by all of the economists of my generation — Nicky [Kaldor], Thomas Balogh, L. K. Jah, Paul Rosenstein-Rodan, the list could be indefinitely extended. The urge to participate (and correct Hayek) was ruthlessly competitive."

"Sixty-two years ago I spent a year in what is known at Harvard as the other Cambridge. It was then in the high pulse of the Keynesian Revolution. Economic discussion was constant, intense, but London also called; once a week I came up to seminars here at the London School of Economics. A major attraction was Friedrich von Hayek, the noted conservative, author of A Road to Serfdom, his widely read analysis of the disastrous but emerging welfare state. He, however, was only slightly heard. The two hours were given over, all but exclusively, to telling him he was wrong. I found myself in support of this correction; it was education by the rebuke of error. (I trust that will not be the tendency on this pleasant and, for me, nostalgic occasion.) Over the years I’ve often presented myself to ardent conservatives as a student of von Hayek; it has added in an agreeable way to their normal confusion."

"Hayek's greatest failure is his neglect of the problem of private power. All his efforts go into the denunciation of state power, but he has little to say about private coercion."

"Hayek's attempt to delegitimize one side of the Western tradition is one of the most significant ideological closures in his work. It prevents him from seeing the close ties which exist between liberalism and socialism."

"Hayek’s lasting achievement was to focus attention on the limited and fragmented nature of knowledge in modern societies and the need for social and economic theorists to make that the cornerstone of their thinking. Yet in some ways he remained trapped in the rationalism he was so keen to reject. If our reason is so feeble, and if knowledge is necessarily imperfect and dispersed, how do we know this to be true? To make that claim Hayek has to take up the privileged status of observer that he is so critical of in constructivist rationalism. If he were not prepared to do so he could not justify his project of social and economic theory at all. Despite his denunciation of the ills of scientism and constructivism, Hayek is closer to the rationalism he criticizes than he might like to acknowledge."

"Hayek was an acute social theorist, but also an ideologue. He developed one of the most sophisticated theories of markets in social science, but he was also a market fundamentalist with a deep-rooted distrust of all forms of state regulation and state intervention, which tended to become more pronounced as he grew older. […] The paradox of Hayek's work however is that he stopped short of advocating either the kind of anarcho capitalism sought by some libertarians, or even the strict minimal state proposed by Robert Nozick. On the contrary he thought that the state needed to retain very strong powers to police the market order and prevent powerful interest groups such as trade unions from subverting it. But he fretted constantly about how this might be achieved, and how democratic governments could be persuaded to cease interfering with markets."

"Hayek's theory of knowledge is his greatest achievement, and offers insights that should be utilised by both right and left, but he failed to apply them to one of the central aspects of the modern era - the way science and technology are utilised in increasingly perverse ways by a deregulated neo-liberal market economy, which if not checked will have devastating consequences for the biosphere and the survival of the human species. It is an example of how his market fundamentalism blinds him to conclusions to which his own analysis of markets should have led him. If he had followed the logic of his own argument, he might have arrived at a rather different view of the appropriate balance between the state and the market, and provided a more searching account of the nature and limits of government action, or as Keynes would have put it, between the agenda and the non-agenda of government. The resources for doing so are there within Hayek's thought, which remains a seminal contribution to modern social theory, but he chose not to develop his ideas in this direction because of his ideological commitment to market fundamentalism. That should not prevent others from doing so. It is increasingly urgent that we should."

"Friedrich A. von Hayek, one of the strongest, and at times one of the few, economic voices advocating the reduction of government's role in the economy, is finally finding himself in the position of a Cassandra who suddenly that discovers people are listening."

"Hayek's work composes a system of ideas, fully as ambitious as the systems of Mill and Marx, but far less vulnerable to criticism than theirs because it is grounded on a philosophically defensible view of the scope and limits of human reason."

"No-one who knows Hayek's work can doubt that his attempt to restate liberal principles in a form appropriate to the circumstances and temper of the twentieth century has yielded a body of insights wholly comparable in profundity and power with those of his forebears in the classical liberal tradition."

"Conservative ideologues have used Smith's insight--that market exchange produces an order in human affairs that no one has designed--to defend their free-market policies. Chief among them was F.A. Hayek, the Nobel Prize-winning Austrian economist who became one of the gurus of the intellectual right in the '80s. Hayek argued that the market evolves as an unintended consequence of human activity, claiming that it embodies wisdom inaccessible to any single generation and insisting that it must therefore be accepted as the basis of society. In a devastating critique of Hayek's views, Rothschild dissects the multiple ambiguities of his notion of social order and shows how removed it is from anything in Smith. Hayek believed that we must submit to the unfathomable workings of the market, but this blinkered reverence for social process was unacceptable to Smith, who viewed the market as a human construction."

"I still see Hayek as the best critic of all forms of centralized economic planning. It is to his merit to have shown scientifically that centralized planning cannot work for an economy because complete knowledge of that economy is never available centrally. As nice as it would be to have one, there is no mastermind who knows and can control everything, and there never will be. This was Hayek's scientific argument for the superiority of the market economy. A planned economy is only a viable means where there is a clear overarching goal – during wartime. A war economy is always a planned economy. Supporters of central economic dreams should therefore hear it once and for all: centralized economic planning is not suitable during peacetime."

"He who states that markets cannot fail, that market failure is always the result of government intervention, is a dogmatist. How the hell would he know? Overall, Hayek was not a dogmatist, although in his writings there can be found traces of such a liberal utopianism. There we encounter the motto: "What is not supposed to be, must not be! And what must not be, is not!" To me, all isms are suspicious anyway. The sceptic in me asks: why should markets be more reasonable than other human institutions? And we can see it every day: markets are also imperfect, prone to error, and in need of repair, like everything else that man has created."

"Hayek watched the interwar collapse with horror, as Keynes did, and shared many of Keynes’s liberal values. What he failed to understand is that these values cannot be renewed by applying any formula or doctrine, or by trying to construct an ideal liberal regime in which freedom is insulated from the contingencies of politics."