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Tuesday, October 1, 1985

A Reviewers Notebook: The Essence of Hayek

To represent the full scope of Friedrich Hayek in a single book, even with an allotted 550 pages at the editors’ disposal, was surely a formidable undertaking. The object, as nurtured by W. Glenn Campbell, the director of the Hoover Institution of Stanford University, was to greet Hayek on the occasion of his 85th birthday with a present to be called The Essence of Hayek (Hoover Institution Press, $27.50). The editors, Chiaki Nishiyama and Kurt R. Leube, both of whom are former students of Hayek, had to winnow through essays, occasional papers, books, speeches and polemical exercises that are numbered literally in the hundreds.

Hayek has spent a long working lifetime in pushing his investigations into many fields outside of formal economics. He has been an epistemologist, a student of law, a theorist of government, a student of science, an historian and, finally, a psychologist.

In giving us relevant samples of all the many Hayeks, Nishiyama and Leube have exercised excellent judgment. The book jacket copy, obviously written by someone who knows what Hayek is all about, speaks of the “two fundamental ideas—the limitation of knowledge and the spontaneous formation of systems”—that unify Hayek’s work.

Individuals, as Hayek says, can’t know everything, but the market can be trusted to coordinate a thousand subjective valuations in a price. Thus “spontaneity” is regulated without the coercion that people, as individuals, can never stomach for very long.

As Campbell points out, one of Hayek’s earliest interests was psychology. Indeed, Hayek once debated the idea of becoming a professional in that field. Since Austrian economics, as developed by Carl Men-ger, Eugen Bohm-Bawerk and Ludwig von Mises, eschews “macro-economic” preoccupation with statistical aggregates and concentrates on the subjective nature of individual choice, Hayek managed to find plenty of room for the contemplation of human vagaries even within the so-called dismal science.

The Human Nature

It was knowledge of human nature that made Hayek’s The Road to Serf-dora, written in wartime England, the great book that it was and is. John Maynard Keynes, Hayek’s friendly enemy in the cloisters of Cambridge, had assumed that individuals could be handled in the mass by a dedicated bureaucracy once a group consensus could be established. In wartime, with an enemy at the gates, this can be done. But what is possible in a war crisis is not possible in times of peace. Human nature will out. Individuals have thousands of varying desires of their own, and they make their separate plans accordingly. If a master planner presumes to thwart them, re sentments will multiply to the breaking point. The central planners, to carry out their assumed mission will feel constrained to bring in the strong-arm boys to knock recalcitrants into line. So the “worst” must eventually get on top. A planned society is not possible without a bureaucracy of thugs. Orwell had not yet written 1984 when Hayek presented his analysis of statist controls to Keynes, who, in praising The Road to Serfdom as a “grand” book, uttered a feeble protest that people ought to respect the judgment of a disinterested elite.

To Hayek, words have consequences. Most idea people—the “scribblers” who, in Keynes’s the ory, have usually to wait a generation to see their doctrines picked up—are not normally action- oriented. But Hayek, in addition to being a scribbler, has also been a great “doer.” Where would England’s Margaret Thatcher be today if Antony Fisher, a British RAF pilot who made some money as a chicken farmer by outguessing the controllers, hadn’t gone to Hayek to seek advice about a possible career in politics? John B. Wood, in a book called The Emerging Consensus put out by the Institute of Economic Affairs in London, gives us an anecdotal recital of how Fisher’s visit to Hayek in 1945 resulted in the “spontaneous formation of systems.”

Hayek told Fisher to play politics at one remove, urging him to use his money and influence to change the climate of opinion in an England that needed a whole new line of thought. Taking Hayek with high seriousness, Fisher decided to set up a research organization in London. He found his director in the energetic Ralph Harris, who doubled as secretary and, later, as president of the Mont Pelerin Society, which had also come into being to advance the freedom philosophy because of the word spread by Hayek. The pam phlets, books and research material put out by Ralph Harris’s Institute of Economic Affairs played a great part in the education of Margaret Thatcher, who acknowledged it by making Harris a member of the House of Lords.

Changing Opinion

John Wood says the Fisher-Harris IEA is a “good illustration of the social philosophy with which it is now identified, namely, that most creative developments in society result from harnessing the spontaneous forces generated by individuals.” The words could be adapted to de scribe Leonard Read’s FEE in America. Tony Fisher has more recently been exercising his spontaneity by starting new research institutions in cities around the world. One of them, the Fraser Institute of Vancouver, has been credited with killing rent controls in Canada and helping to send a conservative majority to the capital in Ottawa.

As a “doer,” Hayek was responsible for a notable Mont Pelerin meeting that was devoted to exploding the myth that the industrial revolution in Britain has impoverished two or three generations of British workers. Hayek’s contributory essay, “History and Politics,” reprinted in The Essence of Hayek, is a most effective refutation of the notion, spread by Marx and Engels, that a steady proliferation of the tools available to workers can only result in their degradation as the capitalists seize the product. The industrial revolution enabled many more people to come to birth in England, and to achieve steadily improving standards of living.

Hayek, in another notable essay reprinted here, insists that he is an “Old Whig,” not a conservative. One of the traits of the conservative attitude, he says, “is a fear of change, a timid distrust of the new as such.” If Hayek is speaking of some of the Tories who make things difficult for Margaret Thatcher, he is, of course, correct. But the term “Whig” would never be understood in America, where the Whigs in nineteenth century history were the supporters of government largesse.

Hayek is fearful of the political future as long as “the ordinary representative cannot say ‘no’ to any large number of his constituents, however unjust their demands, and still hope to retain his seat.” Hayek wrote these words in 1976. They still hold in 1985. But Reagan has read Hayek, and that, conceivably, could make a difference. We shall see.

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.