F. A. Hayek died in 1992 at the age of 92. Most readers of The Freeman know of his writings on business cycles and political philosophy. But what of Hayek the man? Hayek on Hayek, a supplement to the planned 19-volume Collected Works of F. A. Hayek, gives us insight into the life experiences and turn of mind that shaped one of the premier free-market economists of our time.
Prominent among the economic concepts Hayek brought to light was the idea of the market economy as a “spontaneous order.” How fitting this was in light of the unforeseeable events which impelled Hayek’s career along the circuitous path it traveled. Attracted to economics by his experience in World War 1, cured of Fabianism by Ludwig von Mises, drawn to theorizing by his exposure to Wesley Mitchell’s “history without theory,” he ended up forsaking his youthful fascination with biology. His early plan to straddle the academic and government sectors was also derailed by external events–his drawing the attention of Lionel Robbins and being offered a position at the London School of Economics, World War II preventing his return to Austria, and the success of The Road to Serfdom, which at the same time reduced his standing among professional economists and led to a position at the University of Chicago’s Committee on Social Thought. Hayek’s migration from country to country kept him, for the most part, out of the government sector. He was ultimately thankful for this, having theorized “that all economists who serve in government are corrupted as a result…. I owe my own independence [to the fact] that I cleared out of every country as soon as they started using me for governmental service.”
Hayek relates that the most intellectually stimulating period of his life was that part of the 1930s he spent at LSE. It was there that his work on the business cycle led him to prominence as the principal critic of John Maynard Keynes. When Hayek stood up to Keynes’ customary attempt to intellectually steamroller younger colleagues, meeting him with serious arguments at every turn, he earned the respect of his nemesis. Despite the close friendship that eventually developed between the two men, Keynes’ intellectual evaluation of Hayek was no better than “Of course he is crazy, but his ideas are rather interesting.”
Hayek’s view of Keynes was no more flattering. He describes Keynes as devoid of any knowledge of economic history, even of economic theory other than Marshall’s, yet supremely confident that he knew more than anyone else. As Hayek put it, “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.”
Not carrying the day over Keynes was not only one of Hayek’s biggest personal disappointments, but also represented a collapse of effective intellectual opposition to the inflationary policies that have prevailed ever since. Ironically, Hayek believes that the combination of Keynes’ sudden death, which accorded him a sort of secular sainthood that placed criticism of his ideas beyond the pale, and his own demonization among academic economists as a result of his Road to Serfdom, finalized Keynes’ victory. Nonetheless, Hayek confides that his own belief in the Austrian Business Cycle theory he espoused was strengthened by subsequent events.
At this point in his career, Hayek tired of macroeconomics and his professional work turned to methodology and political philosophy. Conceiving of economics as an empirical science, he deviated from the praxeological approach pursued by his mentor, Ludwig von Mises. However, he never accepted the positivism dominant in the economics profession today, which teaches that theories derived from false assumptions are fine as long as they yield accurate predictions. Indeed, his failure to have even attempted to rebut Milton Friedman’s Methodology of Positive Economics, which he deemed “in a way … quite as dangerous a book,” as Keynes’ General Theory, was another major source of regret to Hayek.
In some ways, Hayek’s method was his downfall. In contrasting the mental aptitudes of Böhm-Bawerk, “the absolute master of his subject,” and Wieser, “a slow thoughtful person, to whom nothing was simple, . . . who hated discussing anything because he had to give a quick answer,” Hayek makes it clear that he himself more resembled Wieser. He adds, “what original ideas I have actually had did not come out of an orderly process of reasoning.”
In discussing his own adolescent rejection of the Catholic faith into which he was born, Hayek opined that, “if someone really wanted religion, he had better stick to what seemed to me the ‘true article,’ that is, Roman Catholicism. Protestantism always appeared to me as a step in the process of emancipation from a superstition … which, once taken, must lead to complete unbelief.” Surely, both Catholics and Protestants will take exception to different parts of this claim. I raise it, however, because of a parallel I detect between his rejection of the religious orthodoxy of Catholicism and the Austrian economic orthodoxy of praxeology. While in turning away from the latter, Hayek never approached the total rejection of free-market economics, he did move further in that direction than many people realize. This comes through in the transcript of a 1945 radio discussion of The Road to Serfdom reproduced here. Free-market purists will surely cringe at the concessions Hayek makes under the admitted pounding he takes from the other panelists, one a socialist, the other a New Dealer: expressing support for a government-guaranteed minimum income and central banking (“that the monetary system must be under central control has never, to my mind, been denied by any sensible person”), for instance.
The narrative is, as one would expect from this type of book, somewhat fragmented and occasionally repetitious.
Still, the editors deserve our gratitude for weaving together as well as they did this melange of scattered autobiographical notes and interviews into a coherent narrative. Their efforts have accorded us a glimpse into the prolific mind of a man who, whatever his compromises, courageously opposed the inflationary, socialistic, and redistributive spirit of his age.
Robert Batemarco
Robert Batemarco teaches economics on an adjunct basis at Fordham University and Manhattan College. He was formerly book review editor of The Freeman. He is a member of the FEE Faculty Network.