friedrich-hayek

"My basic criticism of F. A. Hayek’s profound interpretation of modern history and his diagnoses for improvement is directed at his apparent belief or faith that social evolution will, in fact, insure the survival of efficient institutional forms. Hayek is so distrustful of man’s explicit attempts at reforming institutions that he accepts uncritically the evolutionary alternative. We may share much of Hayek’s skepticism about social and institutional reform, however, without elevating the evolutionary process to an ideal role. Reform may, indeed, be difficult, but this is no argument that its alternative is ideal."

"Indeed, in its endeavour to explain and predict particular events, which it does so successfully in the case of relatively simple phenomena (or where it can at least approximately isolate ‘closed systems’ that are relatively simple), science encounters the same barrier of factual ignorance when it comes to apply its theories to very complex phenomena. In some fields it has developed important theories which give us much insight into the general character of some phenomena, but will never produce predictions of particular events, or a full explanation—simply because we can never know all the particular facts which according to these theories we would have to know in order to arrive at such concrete conclusions. The best example of this is the Darwinian (or Neo-Darwinian) theory of the evolution of biological organisms. If it were possible to ascertain the particular facts of the past which operated on the selection of the particular forms that emerged, it would provide a complete explanation of the structure of the existing organisms; and similarly, if it were possible to ascertain all the particular facts which will operate on them during some future period, it ought to enable us to predict future development. But, of course, we will never be able to do either, because science has no means of ascertaining all the particular facts that it would have to possess to perform such a feat."

"By the 1960s Hayek was seeing complex orders everywhere. The orders were created as the result of individual elements following simple rules, and the principles at work could be effectively described using an evolutionary (though not Darwinian) metaphor. In the late 1960s Hayek explicitly added the mechanism of group selection to his description of cultural evolution. In the 1970s Hayek published the three volumes of Law Legislation and Liberty, and rules, orders and cultural evolution were all prominently on display. This was equally true of his last book, The Fatal Conceit, though there were also some new ideas to be found there. That Hayek’s health began deteriorating as this book was put together raises some intriguing interpretive issues."

"Hayek was influenced by the biological metaphor of evolution (in contrast to Walras, who was inspired by notions in physics of “equilibrium”). Darwin had talked about the survival of the fittest, and Social Darwinism similarly contended that ruthless competition with the survival of the fittest firms would imply ever-increasing efficiency of the economy. Hayek simply took this as an article of faith, but the fact of the matter is that unguided evolutionary processes may, or may not, lead to economic efficiency. Unfortunately, natural selection does not necessarily choose the firms (or institutions) that are best for the long run. One of the main criticisms of financial markets is that they have become increasingly shortsighted. Some of the institutional changes (such as investors’ focus on quarterly returns) have made it more difficult for firms to take longer-run perspectives. In this crisis, some firms complained that they didn’t want to take on as much leverage as they did—they realized the risk—but if they hadn’t, they wouldn’t have survived. Their return on equity would have been low, market participants would have misinterpreted the low return as a result of lack of innovativeness and enterprise, and their stock price would have been beaten down. They felt that they had no choice but to follow the herd—with disastrous effects over the long run, both to their shareholders and to the economy."

"Regarding social order, Fukuyama writes, "The systematic study of how order, and thus social capital, can emerge in spontaneous and decentralized fashion is one of the most important intellectual developments of the late twentieth century." He correctly attributes the modern origins of this argument to F.A. Hayek, whose pioneering contributions to cognitive science, the study of cultural evolution, and the dynamics of social change put him in the forefront of the most creative scholars of the 20th century. But Hayek's views about the "spontaneity" of social order remain controversial. In their extreme form, they imply that all deliberate efforts to manipulate social order — social engineering — are doomed to failure because the complex nature of our cultural heritage makes a complete understanding of the human condition impossible. Hayek was certainly correct that we have, at best, a very imperfect understanding of the human landscape, but "spontaneous" it is not. What distinguishes human evolution from the Darwinian model is the intentionality of the players. The mechanism of variation in evolutionary theory (mutation) is not informed by beliefs about eventual consequences. In contrast, human evolution is guided by the perceptions of the players; their choices (decisions) are made in the light of the theories the actors have, which provide expectations about outcomes."

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

"The answer to this question, sketched in the first three chapters, is built upon the old insight, well known to economics, that our values and institutions are determined not simply by preceding causes but as part of a process of unconscious self-organisation of a structure or pattern. This is true not only of economics, but in a wide area, and is well known today in the biological sciences. This insight was only the first of a growing family of theories that account for the formation of complex structures in terms of processes transcending our capacity to observe all the several circumstances operating in the determination of their particular manifestations. When I began my work I felt that I was nearly alone in working on the evolutionary formation of such highly complex self-maintaining orders."

"Importantly, Hayek is keen to distance himself from the idea that by invoking the idea of cultural evolution he is drawing any strict analogy with the notion of natural selection in biology. […] Hayek, then, is clearly no believer in social Darwinism."

"Competition is a procedure of discovery, a procedure involved in all evolution, that led man unwittingly to respond to novel situations; and through further competition, not through agreement, we gradually increase our efficiency."

"Hayek’s thought did not emerge in a vacuum, and part of the goal here, particularly in the early chapters, is to trace the intellectual background of his work. The dominating idea in Hayek’s early life was Darwinian evolutionary theory, stemming from his father’s and grand father’s work in botany and biology. Hayek ended his career with an evolutionary account of the growth of civilization."

"Hayek’s writings on cultural evolution are some of his most controversial. Some of the criticisms that have been advanced are:1) that his analysis of the evolutionary process is too pessimistic, leaving little room for attempts to improve the institutional or constitutional setting; 2) that Hayek’s endorsement of group selection as the mechanism by which cultural institutions are selected is inconsistent with his methodological individualism; and 3) that group selection itself has been discredited among biologists on grounds that are germane to its applications in the social sciences."

"The conception that there is some simple correlation between the volume of aggregate demand for final goods and the total volume of employment derives from the experience of the shopkeeper that a strong demand for his goods secures his prosperity. The conception of such a relation as exists between the strength with which one may suck at one end of a pipe and the pull of the suction at the other end is of course the crudest possible misrepresentation that has been periodically reintroduced into scientific discussion, most recently and with devastating effect by Lord Keynes. The incredible crudity of this approach, congenial to the minds for whom scientific method exhausts itself in measuring the connection between changes of two observable magnitudes, ought to have been exposed long ago. The volume of employment is not determined by the relation of total demand to the total supply of goods and services but by the correspondence or non-correspondence between the distribution of demand among the different goods and services and the proportions in which these different things are offered. This applies not only to the horizontal or cross-sectional but equally to the longitudinal or vertical distribution within the stream of goods and services providing for future needs: the degree to which the volume of this stream is filled up or reduced and the corresponding shifts of demand from later to earlier stages of production or vice versa. Both these correspondence can be brought about only by appropriate changes in relative prices of the different means of production and a prompt adaptation of the quantities supplied to quantities demanded. Demand for labor is not a homogenous aggregate but an extremely diversified force with complex interactions among the parts, which defy any helpful summarization by statistics. All that is certain is that any rigidity of wages and any refusal to adjust them promptly to changing conditions must make it impossible for particular workers to find employment at the given wages, which is a condition that by various interconnections is bound to spread. Freezing the relations among the wages of different kinds of labor must produce unemployment."

"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."

"I think the world of both Keynes and Hayek, the former as a wise practitioner whose economic theory is completely ridiculous (it took Hicks, Samuelson, and other serious economists to "make sense" of Keynes' impenetrable prose---"make sense" not by clarification of Keynes' ideas, but rather by offering an alternative analytical framework in which underemployment equilibrium is possible), and the latter as brilliant intellectual who was almost destroyed (despite his Nobel prize) by his adherence to the bizarre and irrelevant doctrines of the Austrian school, whose economic theory was dogmatically dictated by its paranoid fear of state intervention."

"He was so convinced that he was cleverer than all the other people that he thought his instinct told him what ought to be done, and he would invent a theory to convince people to do it. That was really his approach."

"One of the things I’m sure you’ve read are the letters in The Collected Writings of John Maynard Keynes between Hayek and Keynes. Hayek comes out very badly in those letters, in my opinion. Keynes comes out like the kindly, generous uncle, and Hayek comes out like a very arrogant, self-centered young man, which he was."

"Inspired geniuses possessing a great power of conviction are not necessarily a blessing for the society in which they spring up.John Maynard Keynes was undoubtedly one of the great men of his age, in some respects representative and in others revolutionary, but hardly the great scientist whose growing insight moves along a single path."

"Keynes believed that, by taking account of foreseeable effects, he could build a better world than by submitting to traditional abstract rules. Keynes used the phrase 'conventional wisdom' as a favourite expression of scorn, and, in a revealing autobiographical account (1938/49/72: X, 446), he told how the Cambridge circle of his younger years, most of whose members later belonged to the Bloomsbury Group, 'entirely repudiated a personal liability on us to obey general rules', and how they were 'in the strict sense of the term, immoralists'. He modestly added that, at the age of fifty-five, he was too old to change and would remain an immoralist. This extraordinary man also characteristically justified some of his economic views, and his general belief in a management of the market order, on the ground that 'in the long run we are all dead' (i.e., it does not matter what long-range damage we do; it is the present moment alone, the short run - consisting of public opinion, demands, votes, and all the stuff and bribes of demagoguery - which counts). The slogan that 'in the long run we are all dead' is also a characteristic manifestation of an unwillingness to recognise that morals are concerned with effects in the long run - effects beyond our possible perception - and of a tendency to spurn the learnt discipline of the long view."

"The dramatic redefinition of state and marketplace over the last two decades demonstrates anew the truth of Keynes' axiom about the overwhelming power of ideas. For concepts and notions that were decidedly outside the mainstream have now moved, with some rapidity, to center stage and are reshaping economies in every corner of the world. Even Keynes himself has been done in by his own dictum. During the bombing of London in World War II, he arranged for a transplanted Austrian economist, Friedrich von Hayek, to be temporarily housed in a college at Cambridge University. It was a generous gesture; after all, Keynes was the leading economist of his time, and Hayek, his rather obscure critic. In the postwar years, Keynes' theories of government management of the economy appeared unassailable. But a half century later, it is Keynes who has been toppled and Hayek, the fierce advocate of free markets, who is preeminent."

"Of course the developments since then have been a great fluctuation of interests. For a long period, economics was dominated by a macroeconomic approach that in a sense was formulated by John Maynard Keynes and his revival of an era, as I regarded it, of an erroneous belief in the dependence of employment on aggregate demand, which I thought I had already finally refuted. This form of Keynesianism — which encompassed the belief that there was an unambiguous, statistically demonstrable function or connection between aggregate demand and employment — has dominated the field for the last thirty years. I found that in order to defend my conclusions concerning economic policy, which I derived from my knowledge of economics, I had to devote a lot of time to what is regarded as a scientific method — to the problems of which approach to economics leads to correct results and which leads to wrong results."

"The three quarters of century that followed Austria’s collapse in the 1930s can be seen as a duel between Keynes and Hayek. Keynes, as I was saying, begins with the observation that under conditions of economic uncertainty we would be imprudent to assume stable outcomes and therefore had better devise ways to intervene in order to bring these about. Hayek, writing quite consciously against Keynes and from the Austrian experience, argues in the The Road to Serfdom that intervention—planning, however benevolent or well-intentioned and whatever the political context—must end badly. His book was published in 1945 and is most remarkable for its prediction that the post–World War II British welfare state already in the making should anticipate a fate similar to that of the socialist experiment in post-1918 Vienna. Starting with socialist planning, you would end with Hitler or a comparable successor. For Hayek, in short, the lesson of Austria and indeed the disaster of interwar Europe at large boiled down to this: don’t intervene, and don’t plan. Planning hands the initiative to those who would, in the end, destroy society (and the economy) to the benefit of the state. Three quarters of a century later, this remains for many people (especially here in the U.S.) the salient moral lesson of the twentieth century."

"It all depends on the situation – that is the point. Sceptics like me always look at the concrete situation, question it, think about it – and then decide. Government measures to support demand are not per se evil. Insofar John Maynard Keynes was right at the time, and he prevailed in the scientific dispute against Hayek. I personally witnessed that – Hayek never got over this defeat and attributed it more to the general Zeitgeist than to scientific knowledge. After the war, he changed from being a strict economist to become a social philosopher. He developed a theory of cultural evolution of society, which is very deterministic and contradicted his previous scientific beliefs...[…] In my eyes, both of them are advocates of the market economy, but with a different emphasis. Keynes was a very sceptical mind, this is why I feel more closely related to him. […] His lesson is the following: it is not the case that the market is always good and the government is always bad, that the market is always rational and the government always acts irrationally. There are good and bad governments, just as there are good and bad functioning markets."

"Hayek cut a silly figure: a tall, erect, thickly accented professor in high-cut tweed, insisting on the formal “Von Hayek” but cruelly nicknamed “Mr Fluctooations” behind his back. In 1936, he was an academic without a portfolio and with no obvious future. Yet we now live in Hayek’s world, as we once lived in Keynes’s. Lawrence Summers, the Clinton adviser and former president of Harvard University, has said that Hayek’s conception of the price system as a mind is “as penetrating and original an idea as microeconomics produced in the 20th century” and “the single most important thing to learn from an economics course today”. This undersells it. Keynes did not make or predict the cold war, but his thinking wended its way into every aspect of the cold-war world; so too has Hayek’s thinking woven itself into every aspect of the post-1989 world."

"If you read about the tussle between the two great economists, you are struck by two things. First, how pragmatic a man John Maynard Keynes was. And second, how utopian the ideals of Friedrich Hayek are. This is odd, as each man attached himself to a polar opposite political philosophy: Keynes's ideas were adopted by idealistic lefties, while Hayek's thoughts were lapped up by conservatism, a philosophy that by definition rejects dogma. It is as if we have gone through the looking glass."

"He was a relatively sensible man. Unfortunately, he died in 1946, and so it was left to his very orthodox pupils, who out-Keynesed Keynes, which dominated the next 30 years, and so we have been living through a period in which Keynes became a sort of saint and any critic of Keynes became a third-class citizen. Now, they've discovered that Keynes was wrong, and my reputation is reviving."

"In the years after 1936, whilst Hayek was working on The Pure Theory of Capital, most economists were convinced by Keynes, whose theory had an elegance and simplicity that Hayek’s did not. Keynes’ theory lacked Hayek’s theoretical rigor in that it was not based on equilibrium (on individual rationality), and there were places in the argument where Keynes relied on loose, informal arguments, preferring to put his trust in intuition rather than formal theory. Keynesians did not solve the problems with capital theory that Hayek had identified: they just bypassed or ignored them. According to Hayek’s methodological criteria, Keynes’ theory was decidedly inferior. Against this, Keynes’ theory provided opportunities for mathematical and statistical analysis that Hayek’s did not. Indeed, though Hayek paid some attention to data, he did so only minimally: he certainly made no attempt to test his theory against statistical data. The choice of Keynesian theory was, at least in part, a methodological one."

"Hayek devoted his life to exposing the intellectual errors of socialism. But many of those he was anxious to reach and convince were not socialists, but liberals and conservatives. The intellectual opponent who provided the most searching challenge to Hayek to Hayek's worldview was not on the Left, but a fellow liberal–John Maynard Keynes. Hayek's work can be read at one level as a long debate with Keynes and the Keynesians over the political means and policies which would best safeguard a liberal society. Much of Hayek's political effort after 1945 was devoted to trying to reverse the influence of Keynes on economic and social policy."

"Keynes used the opportunity to protest against the return to gold in any form, though unfortunately it was done in the return at the former parity, and Keynes was convinced by that stage, perhaps as a fact correctly, that with strength British trade unions had achieved, you could no longer hope to maintain aggregate demand at a constant value of money and he hoped that by a gradual and slow decrease in the value of money, you could overcome the resistance of rigid wages."

"Keynes’s own experience told against Hayek’s theories. As one of the 20th century’s most successful speculative investors, playing the markets on behalf of his college from a phone at his bedside before he got up for the day, he understood – in a way that the inveterately professorial Hayek did not – the ineradicable uncertainty of economic life. As a member of the British delegation at the Paris Peace Conference in 1919, Keynes had been horrified at the punitive conditions imposed by the Allies, which he forecast would destroy the German economy and lead to an upheaval that would “submerge civilisation itself”. Keynes had an acute sense of the risks posed to social stability by misguided economic policies. In contrast, Hayek consistently ignored these hazards."

"One of the oddities of Hayek’s career is that while his professional standing was secured through his work as an economist, he had by the mid-1940s given up economics as his central intellectual activity. A major reason for Hayek’s shift into social philosophy was that he believed – correctly – that he had lost the debate with John Maynard Keynes about the causes of the Great Depression. There can be no doubt that his encounter with Keynes was the most important event in his intellectual life. Yet he had little insight into Keynes either as a thinker or a human being. He told me that during their acquaintance he never realised that Keynes had been homosexual – a surprising admission, as it was hardly something Keynes concealed within his circle of friends. The two men had quite different kinds of minds – Keynes’s swift and mobile, with an almost clairvoyant power of entering into the thinking of others; Hayek’s slowly probing, inwardly turned and self-enclosed. They were nonetheless on cordial terms. Keynes found Hayek rooms in King’s College when the London School of Economics (where Hayek became a professor of economics in 1931) moved to Cambridge for the duration of the Second World War, and for a time the pair shared fire-watching duties on the roof of the college when it was feared that Cambridge might be bombed. With characteristic generosity, Keynes – while firmly rejecting its claim that government management of the economy is bound to lead to totalitarianism – heaped praise on Hayek’s anti-socialist tract The Road to Serfdom when it appeared in 1944. The differences between the two thinkers were as much in their underlying philosophies as in their economic theories. Both were sharply aware of the limits of human knowledge. But whereas Hayek invoked these limits to argue for non-intervention in the economy, Keynes recognised that bold action by governments is sometimes the only way in which the economy can be lifted out of depression – as when Roosevelt (to whom Keynes had written an open letter in 1933) successfully adopted some aspects of Keynesian thinking in the New Deal."

"To prevent further crises of equal severity in the future, Keynesians would argue for strengthening the tools of macroeconomic management. Hayekians have nothing sensible to contribute. It is far too late for one of their favorite remedies – abolition of central banks, supposedly the source of excessive credit creation. Even an economy without central banks will be subject to errors of optimism and pessimism. And an attitude of indifference to the fallout of these mistakes is bad politics and bad morals. So, for all his distinction as a philosopher of freedom, Hayek deserved to lose his battle with Keynes in the 1930’s. He deserves to lose today’s rematch as well."

"Although Keynes was, in spite of himself, to contribute greatly to the weakening of freedom, he shocked his Bloomsbury friends by not sharing their general socialism; yet most of his students were socialists of one sort or other. Neither he nor these students recognised how the extended order must be based on long-run considerations. The philosophic illusion that lay behind the views of Keynes, that there exists an indefinable attribute of 'goodness' - one to be discovered by every individual, which imposes on each a duty to pursue it, and whose recognition justifies contempt for and disregard of much of traditional morals (a view which through the work of G. E. Moore (1903) dominated the Bloomsbury group) - produced a characteristic enmity to the sources on which he fed. This was evident for instance also in E. M. Forster, who seriously argued that freeing mankind from the evils of 'commercialism' had become as urgent as had been freeing it from slavery."

"The Hayek-Keynes interchange during 1931-32 is sometimes characterized as a “debate.” Actually, as economic historian Bert Tieben writes, “One may conclude that what characterizes the Hayek-Keynes controversy is the absence of debate.” Both sides launched their broadsides, and that was about it. There was no sustained, considered, fruitful exchange. Neither side persuaded the other to change its mind, nor even persuaded the other that there was much of value in its own position."

"I am in full agreement, also, with Dr. Hayek's rebuttal of John Stuart Mill's well-known dictum that "there cannot, in short, be intrinsically a more insignificant thing, in the economy of society, than money," which he expresses admirably in the following passage from his last lecture: "it means also that the task of monetary theory is a much wider one than is commonly assumed; that its task is nothing less than to cover a second time the whole field which is treated by pure theory under the assumption of barter, and to investigate what changes in the conclusions of pure theory are made necessary by the introduction of indirect exchange. The first step towards a solution of this problem is to release monetary theory from the bonds which a too narrow conception of its task has created.""

"The book, as it stands, seems to me to be one of the most frightful muddles I have ever read, with scarcely a sound proposition in it beginning with page 45, and yet it remains a book of some interest, which is likely to leave its mark on the mind of the reader. It is an extraordinary example of how, starting with a mistake, a remorseless logician can end up in bedlam."

"In my opinion it is a grand book. We all have the greatest reason to be grateful to you for saying so well what needs so much to be said. You will not expect me to accept quite all the economic dicta in it. But morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement."

"Hayek’s opposition to organized labour was expressed through his support for dictatorships. … The contemporary erosion of political democracy can be consistently defended from a Hayekian position as necessary for the protection of individual liberty, i.e. private property and limited interference by government in the use of that property. For those who support greater democracy, perhaps it is necessary first to understand how antithetical free market capitalism is to democracy. Private property under capitalism implies ownership of wealth and control over the production of it. Once the production and ownership of wealth is removed from democratic control, its owners can use it as a weapon against those who have opposing visions about how it may be used."

"Hayek stressed the danger of hubris, of thinking you know more than you do, of imposing your idea of the world on others, and the importance of letting those closest to a problem use their local, tacit knowledge to help resolve it. He should have done the same here: he should have let the Chileans determine the level of their government’s involvement in economic life, using their own democratic means, even if that meant going further along the road towards socialism than he would have preferred."

"Myrdal was certainly committed to democracy, even in developmental contexts, and firmly opposed to empires. Democratic or otherwise, he was highly pessimistic—in retrospect excessively so—about the prospects for international economic development. Hayek had no problem with “transitional” authoritarianism, as in Pinochet’s Chile, with which he was associated. Hayek, an Austrian aristocrat teaching in London, and Myrdal, a Social Democrat who attempted to rally his fellow Swedes against Hitler, were united and defined by their anti-Nazism."

"I come finally to what is really my only serious criticism of the book. You admit here and there that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere [between free-enterprise and planning], and that the logical extreme is not possible. But you give us no guidance whatever as to where to draw it. In a sense this is shirking the practical issue. It is true that you and I would probably draw it in different places. I should guess that according to my ideas you greatly underestimate the practicability of the middle course. But as soon as you admit that the extreme is not possible, and that a line has to be drawn, you are, on your own argument, done for since you are trying to persuade us that as soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice."

"The Austrians place no value on democracy, recognizing that voters can make choices that undermine their notion of "reason," and therefore a liberal republic should not permit popular sovereignty to override the sanctity of private property and the principles of the minimal state. I recall vividly Hayek (who was a great economist but a poor policy analyst) commenting on the Pinochet overthrow of democratic government in Chile (Pinochet brought a gang of Chicago economists into town to implement the principles of laissez-faire markets, torturing and murdering thousands who had different ideas) commenting that he would prefer a [laissez-faire style] liberal dictatorship to an illiberal democracy."

"The manifestly ‘constructivist’ way in which Hayek appears to have believed that a transitional dictator can deftly engineer the ‘bootstrap equilibrium’ of limited democracy is surprising. He acknowledged as much himself when he candidly opened his BBC talk by noting that he expected to ‘lay myself open to the … objection of being inconsistent. … I have been arguing that constitutions in the old Whig tradition ought to grow and not be made; and to suggest any completely new constitutional system is somewhat absurd’. Nevertheless, his suggestion that a Salazar-type dictator can readily conjure up an Upper House to create the traditions and moral conventions that the Western democracies required centuries to develop seems particularly far-fetched."

"If we take Professor Hayek literally, a fascist dictatorship of some kind should be regarded as the necessary pre-condition (along with monetarism) of a ‘free society’."

"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."

"Hayek saw himself as developing a ‘scientific subjectivism’ and a scientific theory of spontaneous social order. If physical scientists can create the physical conditions for molecules to line up spontaneously to form a crystal, why not support a dictator who seems to be willing to impose the scientifically objective social conditions—i.e., Hayek’s rule of law—that shape a liberal market order, with all its attending benefits? If the task of the political philosopher is ‘to show possibilities and consequences of common action, to offer comprehensive aims of policy as a whole which the majority have not yet thought of’, and if the beneficial possibilities and consequences of free markets are held with reasonable certainty, what barriers should be allowed to stand in the way?"

"Hayek was not doctrinaire about the importance of political freedom. In a 1979 interview with The Times, he defended the Chilean regime of Augusto Pinochet, which combined political repression with free-market economics, calling the results “absolutely fantastic.” Asked whether this view was inconsistent with his philosophy, Hayek replied, “You can have economic freedom without political freedom, but you cannot have political freedom without economic freedom.”"

"We gave a number of possible reasons for why Hayek failed to speak out about human rights abuses. Given the string of countries that he visited on his trips (others of which also had authoritarian governments in place with their own human right records), and his visits to confer with former Chilean presidents on his second visit, it may be that he hoped autocratic regimes that practiced what he considered to be sensible economic policies would find a way back to liberal democracy. Constitutional constraints on unlimited democracy might provide the means to do so. Chile had adopted a constitution in 1981 that promised to hold a referendum that would allow a return to democratic elections in 1988. This was just the sort of result for which Hayek hoped. And Chile’s success, after following economic liberalization, set a good example."

"Hayek chided the critics of the Chilean junta for their supposed sin of apparent omission: their supposed proclivity to denounce Pinochet without simultaneously roundly condemning dictatorial regimes such as the USSR and North Korea. Again, however, this is not to deny that Hayek himself does appear to provide much support for Pinochet and his economic policies: indeed, much the same charge that Hayek leveled against the international media in 1978 can be readily leveled at Hayek’s own lamentable failure to roundly condemn the legion human rights abuses of any and all dictatorial regimes."

"Hayek is an economic (classical) liberal but a social conservative: a believer in respect for throne and altar. Social conservative Hayek can see Pinochet as a good thing: far better to have an authoritarian state that maintains the conservative moral order, if it can be persuaded to adopt laissez-faire economics, than it is to have a democracy that regulates the economy. Friedman, by contrast, hates and fears a government that prohibits use of recreational drugs in your home almost as much as he hates and fears a government that won't let you undersell your politically-powerful competitors. For Friedman, Pinochet is a bad--an aggressive, powerful military dictator--whose evil the Chicago Boys can curb by persuading him to adopt laissez-faire policies."

"Hayek’s view that liberty was only instrumentally valuable, and his resultant rejection of a rights-based approach, left him with no basis on which to demarcate the legitimate actions of the state. From this it appears to follow that any action of the government could be justified on instrumental grounds—and this, indeed, seems to have been Hayek’s position vis-a-vis Pinochet. While Hayek had a relatively sophisticated theory of transitional dictatorship to justify this position, Friedman’s analysis of the implications of discretionary power for freedom and for effective public policy provides a good basis for rejecting this Hayekian position. Hayek’s case should serve as a warning to scholars who pursue careers as public intellectuals that the compromises they make in the public arena may live as long as their more considered contributions to the world of ideas. It should also serve as a warning of the dangers that arise when individual liberty is seen as one value among many, rather than a universal and inviolable principle."