All Commentary
Monday, February 1, 1988

Book Review: Hayek on Liberty by John Gray

New York: Basil Blackwell – 1986 * 270 pp. • $12.95 paperback

In the 1930s Friedrich A. Hayek was recognized as one of the leading opponents of the emerging Keynesian Revolution in economic policy. In the 1940s he was equally recognized as one of the most articulate and incisive critics of socialism and government central planning. But the 1950s and 1960s were the intellectual highwater marks of both Keynes-ianism and socialism, and Hayek was “forgotten.”

By the 1970s, however, Keynesian economics and socialism were in retreat and their demise was symbolized by the 1974 awarding of the Nobel Prize in Economics to Professor Hayek. Since then interest has reawakened in his earlier writings, he has published several important new works, and a number of volumes have appeared analyzing his contributions to the various social sciences.

One of the best of these critical evaluations is John Gray’s Hayek on Liberty, which recently has been published in a second, revised edition. Professor Gray’s training is in philosophy, politics, and economics, and he brings these skills to bear in offering an integrated analysis of Hayek’s ideas as a coherent system of thought.

The heart of Hayek’s system, as Professor Gray emphasizes, is his view of man and the constraints on man’s ability to know and understand the world in which he lives. Being one of the elements forming the world, man lacks a privileged position that would enable him to step “outside” and see objectively how reality and its “laws” all fit together. His knowledge of the natural and social world, as well as of himself, is, therefore, always limited, uncertain, and incomplete. There is always more to know than the human mind can ever hope to fully comprehend.

Professor Gray explains that this led Hayek to question those social theories that claimed that the order and patterns discernible in social and economic life were the result of overall planning and design. Rather, Hayek turned to and developed further the theories of Adam Smith and Carl Menger (the founder of the Austrian School of Economics) which explained how the social and economic order, that we take for granted and which enables a high degree of interpersonal coordination in human affairs, is the result of rational actions but has not been created out of intentional designs. Instead, much of what we refer to as the “social order” emerged, evolved, and has taken shape out of the interactions of a multitude of individuals pursuing their respective self- interests. And the institutionalization and habituation of their actions in particular forms have generated a “spontaneous order” of human intercourse.

The realization that society and its structures are the cumulative, evolutionary product of many generations of people interacting and contributing some element and reinforcement to the social order made Hayek suspicious of those who proposed to redesign society “according to plan.” Professor Gray lucidly explains and evaluates Hayek’s writings on the origin and purpose of law, the limits and dangers of interventionist and socialist eco nomic policies, and the disastrous consequences of government management of money in the form of the business cycle.

Finally, Professor Gray contrasts Hayek’s ideas with those of John Stuart Mill, Herbert Spencer, Karl Popper, and Milton Friedman. This leads Gray to his own critical evaluation of Hayek’s system. Here he shows himself to be a sympathetic critic. He believes that Hayek has seen and explained essential aspects of a successful theory of social and economic order. Yet, he says, Hayek fails to “ground” his system on any explicit moral principles, other than that a spontaneous order is more natural than any attempted created one and, therefore, a spontaneous order is “good” and superior. And, second, Professor Gray criticizes some of Hayek’s writings where the argument seems to imply that any social order that has spontaneously evolved and “survived” has proven its worth. Gray correctly asks, I believe, why we should assume that evolutionary processes never lead to undesirable social outcomes or dead ends.

Professor Gray concludes with a suggestion that an improvement on Hayek’s theory may possibly be found in the “Contractarian” approach of James Buchanan and the Public Choice theorists. This approach suggests that society be viewed as the result of a constitutional contract among free men, guided by rational choice, concerning the general “rules of the game” under which agents act and interact in society. But, as Gray admits, the tacit assumption is that the participants share a common belief in the Western individualist tradition. This still avoids, therefore, the crucial question: What are the moral and philosophical bases of individual liberty and rights, upon which a free society flourishes?

  • Richard M. Ebeling is BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008.