In this first full-length biography of Friedrich Hayek—economist, thinker, Nobel laureate, and political philosopher of the rule of law, liberty, and limited government—Alan Ebenstein offers a veritable intellectual travelogue of Hayek’s journey through life. As a student, we learn, Hayek was mildly socialist. However, Austrian economist Ludwig von Mises’s devastating critique, Socialism(1922), “fundamentally altered [his] outlook.” Through continued study, Hayek became an Austrian (and free-market) economist and, in time, the philosopher of liberty.
To obtain insight into Hayek as a person, scholar, and philosopher, Ebenstein, himself an economist and author of six previous books on economic and political thought, read and re-read Hayek’s works, and researched his life thoroughly, including letters to and from Hayek, articles about him, and interviews with him and his friends. Then Ebenstein wove all that material together to describe Hayek’s intellectual “travels.” Separate chapters are devoted to persons important in Hayek’s intellectual life: John Stuart Mill, Mises, Lionel Robbins, John Maynard Keynes, Karl Popper, and Milton Friedman.
Mises encouraged Hayek’s studies of the importance of competitive market prices, which led to his major contributions. His concept of the market’s “spontaneous order” came from his understanding of prices and demonstrated that, as Ebenstein writes, “absent an orderer, human society can achieve great orderliness.” Too little emphasis, Hayek wrote, “has been placed on the fragmentation of knowledge, on the fact that each member of society can have only a small fraction of the knowledge possessed by all, and that each is therefore ignorant of most of the facts on which the working of society rests.” Hayek explained how market prices help to alleviate the knowledge problem by transmitting widely dispersed, nonverbal knowledge.
In 1920 Mises argued that a socialist society — in which property was collectivized, no factors of production were traded, and hence no market prices existed — would be unable to function because socialists would be unable to perform economic calculations. To this argument Hayek added that, without the knowledge market prices impart, the planners would lack the very information they needed to formulate a plan.
In England Hayek taught at the London School of Economics, wrote several books, and gained a reputation as a technical economist. He debated John Maynard Keynes. Hayek said he was then considered “one of the two main disputing economists. There was Keynes and there was I.” Keynes died in April 1946 and became “a saint.” But, Ebenstein writes, Hayek discredited himself academically by writing a book for popular consumption, The Road to Serfdom, and “was gradually forgotten as an economist.”
As a young man, Hayek saw his native Austria drift toward socialism. And again in England during World War II he witnessed Britain drift in that direction. The Road to Serfdom portrayed German Nazism and Soviet socialism as essentially the same. Socialism and liberty were incompatible, he maintained. The most effective way to assure freedom and individual rights was not central planning, but market competition within a “carefully thought-out legal framework.” “[A] policy of freedom for the individual is the only truly progressive policy.” The “socialists of all parties,” to whom Hayek dedicated the book, were apoplectic and responded with vehemence, but rarely came to grips with Hayek’s arguments.
The book’s fame soon crossed the Atlantic. Through the efforts of the London-based Institute of Economic Affairs, its devastating critique of socialism gained notoriety and later political influence during the administrations of Prime Minister Margaret Thatcher in England and President Ronald Reagan. The book also “revolutionized” Hayek’s life, Ebenstein notes, transforming him from economist to political philosopher. In 1950 Hayek moved to the University of Chicago’s Committee on Social Thought. His next two major works, The Counterrevolution of Science (1952) and The Constitution of Liberty (1960), enhanced his standing as a political philosopher. The former demonstrated that positivists and historicists, by applying the methods of the physical sciences to economics, were laying the grounds for socialism; the latter presented his philosophical defense of liberty. Hayek’s basic thesis throughout his life, appearing most prominently in his later writings, was that “[t]he most important institutional safeguard of individualism is the rule of law.” “Where not laws, but men rule,” he maintained, “no one is free and great coercion is inevitable.” Hayek was adamant that nothing had contributed more to the prosperity of the West than the “relative certainty of the law.”
Hayek’s three volumes, Law, Legislation and Liberty (1973, 1976 and 1979), plus a summary volume, The Fatal Conceit (1988), established his well-deserved reputation as the philosopher of liberty.
According to biographer Ebenstein, “His writing will serve as a beacon to enlighten centuries.” We are indebted to this author for his excellent work in illuminating the long and productive life of this great advocate for liberty.