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Hayek's Challenge. "For much of Friedrich von Hayek's career, mainstream economists tended to dismiss him as a free-market extremist who had lost the argument against Keynesianism in the 1930s and 1940s. Even anti-Keynesians patronised him as a venerable polymath with correctly anti-interventionist views who nevertheless belonged down the hall in the political-theory department. When in 1950 Hayek joined the University of Chicago, a stronghold of free-market theory, he taught in the newly created Committee on Social Thought, not as he had hoped in the economics faculty, which politely declined him a post. Vindication, however, came to this dry, dogged Austrian in his 70s, by when academic economists and policymakers were belatedly taking note. In 1974 Hayek won the Nobel prize for economics. The theoretical idea he was proudest of—that only markets, not governments, could gather and disperse price knowledge effectively—helped inspire a wave of deregulation and privatisation. His chief political idea—that free markets and political liberty were indissociable—lent strength to the revival of classical liberalism. By his death in1992, Hayek had joined Milton Friedman and Robert Nozick as one of the three theoretical godfathers of the Thatcher-Reagan revolution. Such is the heroic story, and like all heroic stories it contains a measure of truth. Yet the exact nature of Hayek's achievement remains a puzzle. If asked for a good summary of Mr Friedman's lasting contribution, you can point to “Capitalism and Freedom” (1962), a box of argumentative tools, sharpened by theory, for reversing three decades of governmental thinking, be it on social security, minimum wages, mandatory seat belts or flood relief. Nozick's big book was “Anarchy, State and Utopia” (1974), a philosophical critique of the redistributive welfare policies and a defence of the minimal state. By contrast Hayek's diverse and ruminative output—on business cycles, money, economic ignorance, liberty, social evolution, the human mind, economic methodology, the character of social science, complexity theory—threatens to engulf readers before they start. Of all modern right-wing economic thinkers, Hayek is most like Karl Marx in trying to link everything to everything else. And that may be one reason why it is exaggerating only slightly to say that Hayek nowadays is more revered than read. Obviously guides are needed, and Bruce Caldwell's “Hayek's Challenge” is a welcome introduction. It has several merits. As an editor of Hayek's collected works, Mr Caldwell knows his texts. Unlike many writers on Hayek, he does not treat him as a guru. He admits his obscurities and longueurs. He opens with the influences on Hayek: Carl Menger, the founder of the Austrian school of economics, and Ludwig von Mises, Hayek's mentor, who questioned the value of abstract model-making and urged economists to focus instead on how market decision-takers—which means all of us—really think and act. Mr Caldwell takes us through Hayek's debate with Keynes about money and the business cycle, summarises his key article, “Economics and Knowledge” (1937), as well as his two best known books, “The Road to Serfdom” (1944) and “The Constitution of Liberty” (1960), before delving into his more philosophical endeavours. “Hayek's Challenge” is not a biography. We learn little of Hayek the man or his private life, though the spite of academic combat lightens the going, especially in the footnotes. Punning on his own title, Mr Caldwell ruefully admits that charting the Hayek archipelago is a challenge. One reader of the manuscript, he tells us, wanted more on Hayek's economics. The balance does seem odd at times: too much method, too little substance; not enough of the political thought, too much on Hayek's speculations about the mind, a topic his cousin, Ludwig Wittgenstein, was rather better at. Others—for example, John Gray in “Hayek on Liberty” (1984) and Roland Kley in “Hayek's Social and Political Thought” (1994)—make of Hayek a more systematic thinker by imposing on him a clearer grid. Mr Caldwell's approach may be truer to the inquisitive and open-ended character of Hayek's thought. But it makes things hard to follow. Hayek believed that markets and societies generally exemplified spontaneous order: as a rule even the best-meant interventions make things worse. True or not in economics, that is, alas, not true for books. “Hayek's Challenge”, for all its virtues, could have done with the hidden hand of an editor."

Hayek's Challenge: An Intellectual Biography of F.A. Hayek. By Bruce Caldwell. University of Chicago Press; 489 pages..

From The Economist. Posted by Greg Ransom | TrackBack