Suddenly, conservative—or traditional liberal—economics is becoming a fashion. In 1974 the invariably fashionable Nobel Prize committee bestowed one of its awards on Friedrich Hayek for work done a couple of generations ago. Now the same committee has honored a second conservative or true liberal, Milton Friedman, for work on monetary policy theory that was first elaborated in 1958. It’s better late’ than never, even though one must be permitted the ironical reflection that if the Nobel people—and those who follow them—had waked up to the importance of Hayek and Friedman on time we might have been spared much of the damage wrought by the Keynesians in recent decades all through the western world.
Another irony is that the greater importance of Hayek and of Friedman derives from their transcendence of economics as such. When the Mont Pelerin Society decided to honor Hayek at a special regional meeting at Hillsdale College in Hillsdale, Michigan, in the Summer of 1975, technical economics occupied just about one-seventh of the time allotted to a discussion of the Hayek contribution. Fritz Machlup, who has put together the Hillsdale proceedings in a book, Essays on Hayek (New York University Press, cloth, $10.00, Hillsdale College Press, paperback, $2.00) covered Hayek’s work on such things as the theory of economic fluctuations and the theory of economic planning in masterly fashion. But, as Milton Friedman points out in his foreword to the book, Hayek’s economics has been secondary in importance to his "influence in strengthening the moral and intellectual support for a free society."
The primary importance of Hayek’s moral and intellectual influence comes through in this volume in many ways. George Roche, the President of Hillsdale College, says, patly, that "economic science is not enough." So he hails Hayek for realizing that the failures of collectivism, which strike at men’s stomachs, "strike even more directly at men’s souls." Arthur Shenfield speaks of the importance of Hayek’s The Pure Theory of Capital, but what sets him tingling is Hayek’s work on "scientism," defined as "the uncritical application of the methods, or the supposed methods, of the natural sciences to problems for which they are not apt"
Ronald Max Hartwell’s essay recognizes that Hayek "is an economic and political theorist rather than an historian," but, as he says, "most of Hayek’s writing since the publication of The Road to Serfdom in 1944 has been at least partly concerned with history." So the Hartwell accolade is bestowed on Hayek for his exposure of the impostures of Marx, Engels, the Hammonds, Tawney, the Webbs and Harold Laski for misrepresenting the history of early industrialism as a catalogue of horrors.
There were, indeed, horrors in Manchesterian England, but most of them were hangovers from the twenty-year period in which the British had to defer the building of houses to give the making of ships and guns a first priority in order to defeat Napoleon.
A Failure of Leadership
Bill Buckley, in his essay, takes off from Hayek’s "nontechnical writings" to chastise American capitalists for their failure to react to the warnings in Hayek’s The Road to Serfdom. As Irving Kristol has said, the intellectual fight against socialism has been won, but "the stunning paradox" is that the socialists don’t seem to know it. They go on winning the battle in parliaments that vote consistently for inflationary budgets that are making capitalism more and more inoperable. "The entrepreneurial class," says Buckley, "can only change its image by taking lusty joy from its achievements." But where is this joy? It was not apparent in a scene that Bill Buckley finds "symbolic of the triumphs of demagogic terror over productive enterprise: Senator Scoop Jackson, sitting high in his committee chair, addressing the twelve top officials of the oil and gas industry meekly astride their stools at the bar of justice, publicly chastising them on their obscene profits." How bracing it would have been, says Buckley, if "as one man they had risen to their feet early in the tirade and walked out, leaving the Senator lecturing only the television cameras, which of course he was primarily addressing."
In their respective essays Gottfried Dietze and Shirley Robin Let-win come to the nub of Hayek’s greatest importance, which is his recognition that economics, as Ludwig von Mises has put it, is part of a larger science of choice. Choice, of course, implies at least an "as if" acceptance of free will, and it can only function well in a society whose basic conventions and law keep men from invading each others’ rights. Knowing that freedom, to be real in a practicable sense, requires a universally respected framework of moral certainties, Hayek, ever since The Road to Serfdom, has been devoting most of his time to determining what he calls "the constitution of liberty."
Law and Liberty
A tolerable society demands a subtle blend of order and spontaneity. Naturally the order which Hayek extols must be that of the "Rechtsstaat" which limits its legislation to the affirmation of ancient verities. The "good law" may, in the course of time, "develop in very undesirable directions" that require correction by "deliberate legislation." But when parliaments depart from the "corrective" function to indulge in arbitrary restrictions that limit the inventiveness of human beings, we all suffer.
Hayek prefers to be called an Old Whig. There must be "equality before the law," but that is where the case for egalitarianism stops. To think of equality as a matter of leveling entails robbing one man of the fruits of his work to support another. When societies embrace this type of Robin Hood egalitarianism the law becomes a most uncertain entity. What follows is the destruction of liberty. The monstrous injustice of the Robin Hood approach is that it deprives the poor of all the advantages they would otherwise get from both the spontaneous and the trained inventions and discoveries of more able men.
In what is perhaps the most challenging essay in the book Shirley Letwin makes a subtle distinction between the "spontaneous order" and what she calls the "fantasy of laissez faire: " The spontaneous order of the market place is "not a mechanical process given by nature." It consists, as Hayek keeps reminding us in one fashion or another, "of men buying and selling, investing and managing under special historical conditions … these have to be set by us, in accordance with our purposes and our conceptions of how we can best achieve them. One of Hayek’s greatest contributions to the defense of liberty is his repeated assertion that belief in the free market and competition, far from absolving us of having to think of legal arrangements, obliges us to do so more carefully." The art of making good social arrangements consists in "attending with meticulous deliberation to some things while letting others arrange themselves."
To take some of the mystery out of it, it might be said that laissez faire is fine when it is practiced within the scope of the Ten Commandments. That is what "Old Whiggism" was about. It is all that Adam Smith, who was no anarchist, intended. Hayek pays his tribute to the "Old Whig" mind when he notes, as Shirley Letwin says, that England "was famed for its individualism and liberty," and yet was disposed to conform in all externals to common usage rather than to go chasing after the development of "original personalities." The acceptance of "customary morals" was repudiated in the Bloomsbury of John Maynard Keynes, who as a young man "claimed to be our own judge in our own case."
To keep clear of the Bloomsbury mistake requires a "precarious balance." Hayek, says Shirley Letwin, has "provided the model."