PRESTOPUNDIT -- "It's a team sport, baby!"

ECONOMIST AMARTYA SEN

on F. A. Hayek's The Road to Serfdom at 60 in the Financial Times.

Caldwell's

Hayek's Challenge: An Intellectual Biography of F. A. Hayek -- in its second printing -- continues to climb the Amazon charts.

Indeed, the second printing is selling faster than the first.

Hayek.

Friedrich A. Hayek, "The Non Sequitur of the Dependence Effect" from Southern Economic Journal Vol. 27. April, 1961 (pdf). Hayek takes down John Galbraith.

Books that Changed the World.

"SIXTY years ago this week, George Orwell reviewed a work by a little-known Austrian professor and refugee from Hitler, FA Hayek. It was called The Road to Serfdom , and Orwell didn�t think much of it. Conceding that there was some justice in Hayek�s criticism of collectivism, which Orwell granted was "not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisition never dreamed of", Orwell nevertheless dismissed Hayek�s argument for a return to "free" competition out of hand: "Since the vast majority of people would far rather have state regimentation than slumps and unemployment, the drift towards collectivism is bound to continue if popular opinion has any say in the matter." Well, Orwell got it wrong. Within 40 years, it was collectivism that was in retreat while governments, especially in the UK and the US, were withdrawing from attempts to manage the economy and reasserting the virtues of the free market. And they found the intellectual justification for their policies in the book that Orwell had dismissed. Now, with the free market and globalism dominant - for the time being, anyway - Hayek�s may be claimed as one of those books that changed the world, even though comparatively few have read it, and of those who have done so, not all, probably, have understood it. There�s nothing new in that, of course. Books may have a huge influence even when few have read them in their entirety. That certainly could be said of the work which Hayek may be said to have dislodged: Das Kapital, by Karl Marx. No-one can deny that Marx was the most influential political thinker of the 19th century. His critique of capitalism and his emphasis on the inevitability of its overthrow provided the intellectual basis for the Bolshevik Revolution in Russia. If it seemed to many who called themselves socialists or social democrats that capitalism was doomed (as Orwell believed), this was because Marx had told them so. Even more remarkably, inaccurate as Marx�s analysis of history was, reputable historians endorsed his interpretation of the historical process. Books that changed the world? Well, very obviously, that may be claimed for the Bible and the Koran .. ". more ALLAN MASSIE.

Road to Serfdom - 60 Years.

Click here to listen to yesterday's CATO Institute event 60 Years -- The Road to Serfdom featuring James Buchanan and Daniel Yergin. Or click to watch the event. (Real Player).

60 Years.

Hear or view CATO's The Road to Serfdom 60th Anniversary event live beginning at 3:30 pm today (Eastern). Featured speakers include Nobel Prize winner James Buchanan and PBS documentarian Daniel Yergin.

60 Years.

"On March 10, 1944, when Friedrich Hayek published The Road to Serfdom, the 20th century seemed very advanced on its way to becoming the apogee of collectivism. Hayek was born in Vienna in 1899, and when he was a teenager people could travel almost everywhere without passports, visas or work permits. Empires and kingdoms were still the rule, but free trade under British leadership and the gold standard meant relatively small governments and real personal freedom for a large proportion of the population of the Western World. The concentration of political and economic power in the hands of politicians promoted by the two world wars and guided by the Fabian socialists in the U.K. and the New Deal in the U.S. was soon to change that. Hayek was invited to the London School of Economics in 1931 and became a British citizen in 1938. The London School of Economics moved to Cambridge during the Second World War and it was there that he wrote this book, dedicated to "the socialists of all parties," and which many consider to have started the turning of the tide against socialism. The modern welfare state had evolved from Bismarck's Germany, with the regulation of private enterprise, government intervention in people's lives, and the development of state health coverage and pension plans. Hayek argued, to the dismay of the intelligentsia, that Nazism, far from being an extremist movement, really was the "culmination of a long evolution of thought� simply collectivism freed from all traces of individualist tradition." In Hayek's words:

"The democratic socialism, the great utopia of the last few generations, is not only unachievable, but that to strive for it produces something so utterly different that few of those who now wish it would be prepared to accept the consequences� the ideals of social justice, greater equality, and security� are the ultimate aims of socialism� [But] socialism means the abolition of private enterprise, of private ownership of the means of production, and the creation of a system of 'planned economy'�"

In Latin America today, the apparent success of socialism and loud denunciation of capitalism and globalization is the culmination of the movement towards collectivism accomplished by both Social Democrats and Christian Democrats over the past few decades. Hayek correctly believed that even under a relatively mild form of socialism the love of liberty is extinguished. Today, the Latin Social Democrats and Christian Democrats are being displaced by extremists such as Ch�vez, Kirchner, and Lula, who hope that a good part of the population has by now forgotten what individual freedom really means. Only 2,000 copies of the first edition were published in England, and then Hayek asked his friend and fellow Austrian economist Fritz Machlup, then working in Washington, for help in getting it published in this country. But there was little interest and one publisher said it was "unfit for publication." It was finally published by the University of Chicago and then Henry Hazlitt wrote a glorious review for the New York Times Book Review, declaring that "Friedrich Hayek has written one of the most important books of our generation... It is a strange stroke of irony that the great British liberal tradition, the tradition of Locke and Milton, of Adam Smith and Hume, of Macaulay and Mill and Morley, of Acton and Dicey, should find in England its ablest contemporary defender -- not in a native Englishman but in an Austrian exile." Soon afterwards, a condensation of the book was published in the first 20 pages of the April 1945 issue of the Reader's Digest, which had a circulation of 8 million, of which 1.5 million went to American soldiers. But the Allied Occupation authorities in Germany did not allow the publication of The Road to Serfdom in that country, in order not to offend the Soviets. Hayek later said:

"After the publication of The Road to Serfdom, I was invited to give many lectures. During my travels in Europe as well as in the United States, nearly everywhere I went I met someone who told me that he fully agreed with me, but that at the same time he felt totally isolated in his views and had nobody with whom he could even talk about them. This gave me the idea of bringing these people, each of whom was living in great solitude, together in one place. And by a stroke of luck I was able to raise the money to accomplish this."

In April 1947, 39 economists, political scientists, historians, and journalists met in the Swiss Alps, at the village of Mont P�lerin to discuss the threats to freedom. Among them: John Davenport, S. R. Denninson, Aaron Director, Walter Eucken, Milton Friedman, F. A. Harper, Henry Hazlitt, Albert Hunold, B. de Jouvenel, Frank H. Knight, Fritz Machlup, Ludwig von Mises, Michael Polanyi, Karl Popper, Leonard Read, Lionel C. Robbins, Wilhelm Roepke, and George Stigler. The Mont P�lerin Society was then born under the leadership of Professor Hayek .. ".

-- Carlos Ball

It's A Party!

Celebrating 60 years of The Road to Serfdom in London, in Portland, in Krakow, and in Washington, D.C. Hayek's The Road to Serfdom was originally published 60 years ago Wednesday -- March 10, 1944 -- in London.

Read the April 1945 Reader's Digest condensed version of The Road to Serfdom here (pdf).

The paperback edition of The Road to Serfdom has been in the Amazon top 1,000 for most of the last week. An amazing achievement for Hayek's amazing little book.

UPDATE: An interview with Heritage President Ed Feulner on Hayek & The Road at 60.

Hayek.

F.A. Hayek -- "The Defense of Our Civilization Against Intellectual Error".

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.

Hayek. "The Austrian Teacher" By Jason Steorts -- from the February 23, 2004, issue of National Review.

A review of Hayek's Challenge: An Intellectual Biography of F. A. Hayek, by Bruce Caldwell (Chicago, 489 pp., $55)

"Friedrich Hayek said of his book The Fatal Conceit that "it is a work for which one has to be an economist, but this is not enough!" This sentence captures the essence of both the book and its author. Hayek was an economist, of course � but he was much more. His contributions extend to fields as disparate as cognitive psychology and political philosophy. So the study of Hayek's thought is not without its difficulties: One must think like an economist, but this is not enough.

Bruce Caldwell � who is an economist, and a historian � confronts the difficulties inherent in Hayek scholarship with this new book. Caldwell admits to some trepidation about his work. "I am an historian of economic thought, and my own self-image is that I am a careful one," he writes. "One need not be a genius to recognize that writing outside one's field is not a good way to be careful." Such reservations notwithstanding, Hayek is fortunate in his biographer. Hayek's Challenge is a success, and Caldwell proves himself capable of presenting Hayek's ideas � in all fields � with both depth and clarity.

The book is divided into three main sections. Roughly the first quarter discusses the rise of the Austrian school of economics and its antagonism with the German historical school in the late 1800s � the background against which Hayek would emerge. The next section of the book � just over half � traces the development of Hayek's thought over the course of his life. Readers interested in the facts of that life will be disappointed, as few are given. What is provided in great detail, rather, is a discussion of Hayek's main works, summarizing both their general themes and their specific arguments. In the final section of the book, Caldwell assesses Hayek's legacy. Here Caldwell is less historian and more interpreter, offering his thoughts on the success and relevance of Hayek's work and placing it in the context of contemporary thought.

Where Caldwell succeeds best is in showing how certain of Hayek's basic concerns affected his views across the board, on seemingly unrelated matters; and those who know Hayek in only one of his guises should find it rewarding to get to know the man as a whole.

Consider, for example, Hayek on income redistribution. Readers of National Review are perhaps most likely to think of Hayek as the author of The Road to Serfdom and The Constitution of Liberty, works of political philosophy in which he defends market institutions against interventionist policies designed to achieve "social justice." (Hayek's work in this area played an important role in the conversion of Robert Nozick, another great defender of free markets, from socialism.) What many may not know, however, is that Hayek's antipathy toward socialistic meddling was but one manifestation of his more general concern with what he called the "knowledge problem" � his insights into which are, according to Caldwell, his most important contribution to economics.

In the 1937 essay "Economics and Knowledge," Hayek formulated the "knowledge problem" this way: "How can the combination of fragments of knowledge existing in different minds bring about results which, if they were to be brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess?" Hayek's answer was that market institutions manage to gather the "fragments of knowledge" and coordinate individuals toward efficient outcomes. No one knows just what combination of production inputs will minimize costs and produce the quantity of goods that satisfies demand. But the operations of the market, in which prices are not fixed but respond to changes in supply and demand, are a "discovery procedure" (as Hayek would later put it) for such information.

Lest that sound like a small insight � the stuff of an introductory economics textbook � note how Hayek's answer diverges from standard neoclassical economic theory. In the textbook version, individuals are assumed to have perfect rationality and foresight. They then unfailingly make decisions about the allocation of their resources that maximize their utility. While this model no doubt has its uses, its unrealistic assumptions are often seized upon to discredit laissez-faire economics.

Hayek, like many of his peers (and the Austrians in particular), was also inclined toward skepticism of the elusive, perfectly rational homo economicus. But rather than take the apparent implausibility of the standard model as a reason to reject free markets, Hayek saw that free markets helped compensate for the limitations of human knowledge and rationality. By spontaneously gathering dispersed information and coordinating it through the setting of prices, markets make the choices of individual men both better informed and more rational than they would otherwise be. Hayek also understood � long before most, and to his great credit � that the incompleteness of any individual's knowledge makes central economic planning both impossible and undesirable. (Undesirable in that the planner must, as Hayek explained in the 1939 pamphlet "Freedom and the Economic System," "impose upon the people the detailed code of values that is lacking" � paving a path toward despotism.)

Caldwell goes on to show how Hayek's reflection on the knowledge problem led him to conclusions about the methodology of economics. Just as no central planner knows enough to bring about an efficient economic outcome, no economist knows enough to make precise forecasts. Instead, economists must content themselves with offering general explanations of the principles by which economic outcomes arise, and making predictions about the pattern of future events (rather than predicting specific outcomes). This skepticism continues to rub economists of a positivist persuasion � which is to say nearly the entire field � the wrong way.

According to Caldwell, Hayek's main message concerned "the limits that we face as analysts of social phenomena." In this vein, Caldwell ends with a plea for a renewed interest in the study of economic history � a field that has been almost entirely displaced by economists' ever-increasing interest in mathematical models and empirical analysis. The positivist hope has been that such work would establish law-like relations between events and economic outcomes; but for Hayek � and, as is clear by the end of the book, for Caldwell too � such ambitions smack of hubris.

None of which is to say that empirical work should be abandoned. Hayek's call is for modesty in the profession's aims, not for complete asceticism. But one doesn't have to be an economist � or a political philosopher, or a cognitive psychologist, or anything else � to reflect on the last century and see the catastrophes to which overly sanguine economic planners can lead. For this reason alone, Hayek's challenge is worth remembering, and Bruce Caldwell has done a great service by reminding us of it."

� Mr. Steorts is a former Harvard Crimson columnist and National Review intern

Hayek. After reading James Scott's worthwhile Seeing Like a State: Why Certain Schemes to Improve the Human Condition Have Failed Henry Farrell at Crooked Timber finds an opening for an attack on "free" markets from what he calls a "Hayekian" perspective -- invoking such themes as tacit knowledge and local rules, and contrasting these with abstract universal standards. Farrell is completely open about his limited experience with Hayek's complex work on these matters, and I'd second the notion that his speculations would be much improved with solid reference to Hayek's actual thinking on such things.

Worth checking out -- the comments section features an cogent discussion of local knowledge and rules competition from Hayek-L'er Chirag Kasbekar.

Hayek. Edwin Feulner on F.A. Hayek's The Road to Serfdom at 60:

"Before starting a long journey, it�s important to check a road map and make sure you know the best way to get where you�re going. A good map does more than highlight a path -- it warns of pitfalls ahead and helps you avoid them.

Sixty years ago, master mapmaker Friedrich Hayek gave us his seminal work �The Road to Serfdom.� It was swiftly condensed by Reader�s Digest, and became an international best seller. Hayek�s insight would eventually earn him the 1974 Nobel Prize for economics (he�s probably the only Nobel-winning economist who�s also penned a bestseller), and because of him, we�ve been avoiding economic potholes ever since.

Hayek wrote the book at the height of World War II. At that time, virtually everyone in his adopted homeland of Britain was involved in the war movement in some way -- and Hayek saw the danger in that. At that time of national crisis, government management of the economy made sense. With millions of people carrying arms and those at home busy making the weapons, only a central government could direct the overall economy.

But Hayek feared that citizens of the western democracies would draw the wrong conclusions -- that, after the Nazis were defeated, too many people would call for continued state control of the economy. They would do so, he warned, in the mistaken belief that if they surrendered some measure of personal freedom to the government, the government would in return guarantee their personal and financial security.

Hayek correctly predicted that surrendering personal freedom to the government wouldn�t lead to greater security. It would lead merely to servitude -- what Hayek called serfdom.

After all, government can harm us much more than any employer, no matter how large, ever can. �In every real sense a badly paid unskilled workman in this country [Great Britain] has more freedom to shape his life than many an employer in Germany or a much better paid engineer or manager in Russia,� Hayek wrote.

That�s because, in a free society, your employer can merely fire you. In a totalitarian one, a government bureaucrat can arrest you, beat you or even kill you.

Sadly, after the war an Iron Curtain dropped across Europe, and people on both sides found out just how right Hayek had been. For decades, those on the eastern side of that curtain labored under totalitarian governments.

Russians starved to death on collective farms; a series of �five-year plans� promised prosperity just around the corner (while citizens stood in endless bread lines), and millions perished in concentration camps after they dared to speak out against their rulers.

The collapse of communism finally came in 1989. But in today�s world, another of Hayek�s warnings rings true. �Our generation,� he wrote, �has forgotten that the system of private property is the most important guarantee of freedom.�

That warning is a key reason why, a decade ago, The Heritage Foundation decided to publish an �Index of Economic Freedom.� Our 10th annual edition came out this year, and our findings confirm what Hayek articulated so well: Countries with the most economic freedom have the highest rates of economic growth. On the other hand, countries where freedom is lacking struggle economically.

I was honored to get to know Friedrich Hayek, first as a member of the Mont Pelerin Society (he was the first president) and later when he became a Distinguished Fellow and served three separate times as a scholar-in-residence at The Heritage Foundation.

In print and in person, Hayek was eloquent in his explanations of why the road to prosperity is paved with freedom -- both economic freedom and personal freedom. Today, six decades after �The Road to Serfdom� first hit bookshelves, it�s still a critical roadmap for where we should go and what we must -- and must not -- do."

Money. "The Economics of International Monies" by G. Dwyer & J. Lothian. Abstract: "The authors summarize the history of international monies, from the gold solidus introduced in the fourth century to the present. They identify four common characteristics of these currencies: high unitary value; relatively low inflation rates; issuance by major economic and trading powers; and spontaneous, as opposed to planned, adoption .. Recent theories' common implication of multiple equilibria supports the importance of spontaneous adoption as developed by Menger and Hayek."

Hayek. Antoine Martin & Stacey Schreft, Fed Bank of Kansas City, "Currency Competition: A Partial Vindication of Hayek".

Hayek. Daniel Klein, "Mere Libertarianism: Blending Hayek and Rothbard".

Taking Hayek Seriously. Economists Barry Eichengreen & Kris Mitchener are taking Hayek seriously in their working paper "The Great Depression as a Credit Boom Gone Wrong" (pdf). Major empirical finding: those nations with the biggest credit expansions in the 1920s were hit with the largest economic contractions in the 1930s.

Eichengreen & Mitchener also echo "Austrian" macro econs like Roger Garrison and Friedrich Hayek in emphasizing that the full depth and length of the 1930s depression is best explained by a multiplicity of factors, and certainly isn't solely explained by the height of the antecedent credit expansion of the 1920s.

PRI's Lance Izumi on NRO -- "Bush should listen to Friedman and Hayek". Quotable:

The president seems not to fully realize that taxation and spending policies are more than just fiscal tools to improve economic performance or address group demands. In addition, these policies determine the extent of individual liberty in our society. In this regard, Bush should heed the advice of two Nobel Prize-winning economists and conservative icons, Milton Friedman and Friedrich Hayek ..

Government spending on noble causes, even those staked out by Bush, still adversely affect the individual liberty of Americans. In his famed book Road to Serfdom, which celebrates its 60th anniversary this year, Hayek warned that when government seeks to impose specific effects on people, "It must, of necessity, take sides, impose its valuations upon people and, instead of assisting them in the advancement of their own ends, choose the ends for them." The National Endowment for the Arts, for example, has certainly been guilty of imposing the government's values on people in its choice of art projects to fund.

Hayek further observed "that the most important change which extensive government control produces is a psychological change, an alteration in the character of the people." Although it may take generations, "even a strong tradition of political liberty is no safeguard if the danger is precisely that new institutions and policies will gradually undermine that spirit."

One can see such a transformation occurring in the American people. A people who once demanded "give me liberty or give me death," now say "give me a government program" as an answer to any perceived problem.

An expansionist government, even in the pursuit of noble causes, reduces freedom. That's why the current federal spending spree isn't just a budget issue, but a freedom issue. Given the unrest among his conservative base, President Bush must rediscover the importance of limited government to the maintenance of a free people and the promotion of a free society.

Hayek on C-SPAN II cable network.

Saturday, Feb. 7 at 8:00 pm EST & Sunday, Feb. 8 at 11:00 pm EST

Hayek's Challenge & Hayek's Journey

with Bruce Caldwell and Alan Ebenstein.

Description -- From the Cato Institute, Bruce Caldwell, author of "Hayek's Challenge," and Alan Ebenstein, author of "Hayek's Journey," discuss their biographies of Austrain economist Friedrich A. Hayek.

Alan Ebenstein talks about Hayek's views on such topics as freedom of association, legalization of drugs, and limited government. Bruce Caldwell discusses Hayek's economic philosophy and describes how it developed. Commentary is provided by former House majority leader Dick Armey. All three panelists answer questions from the audience following their remarks.

UPDATE: Or watch it right now on the internet here (RealVideo) or listen here (RealAudio).

The Ideas and Impact of F. A. Hayek -- a live event today (Monday) at the CATO Institute, broadcast in streaming video or audio. Click on these links at 4 p.m. Eastern or 1 p.m. Pacific to catch the event -- which features Bruce J. Caldwell, author of Hayek's Challenge: An Intellectual Biography of F. A. Hayek and Alan Ebenstein, author of Hayek's Journey: The Mind of Friedrich Hayek -- with comments by Dick Armey, Former professor of economics, former House majority leader, and cochairman, Citizens for a Sound Economy.

The discussion of Hayek and gay marriage has moved from the blogs, to the Boston Globe -- and is now heating up on the Hayek-L email list, where many of those involved got an early "heads up" on the debate. Hayek-Ler Paul Varnell of the Chicago Free Press flags The Independent Gay Forum as "perhaps the most comprehensive collection of commentary pieces on gay marriage" available anywhere. Worth a read -- Varnell's "Gay Rights on the Right". Quotable:

In 1960, Friedrich Hayek, an economist and social philosopher at the University of Chicago, and later a winner of the Nobel prize, published "The Constitution of Liberty." Hayek's chief aim was to set out arguments for personal liberty and explain why government coercion was harmful both to the individual and to society.

One of Hayek's key points was that just because a majority does not like something, it does not have the right to forbid it. "The most conspicuous instance of this in our society," Hayek wrote, "is that of the treatment of homosexuality." After noting that men once believed that tolerating gays would expose them to the fate of Sodom and Gomorrah, Hayek added, "Where such factual beliefs do not prevail, private practice among adults, however abhorrent it may be to the majority, is not a proper subject for coercive action for a state."

Just two years later one of Hayek's students wrote a long article, "Sin and the Criminal Law," for the libertarian quarterly "New Individualist Review." Using Hayek's framework, the article attacked all so-called "morals" legislation � e.g., laws against gambling, drug use, suicide, prostitution, voluntary euthanasia, obscenity and homosexuality.

The article dismissed all these as "imaginary offenses" and developed Hayek's argument that such laws should be repealed because the personal freedom of individuals is what creates the conditions for social progress.

Hayek's influence was pervasive among libertarians ...

Alex Tabarrock has an interesting post on the role Hayek and The Road to Serfdom played in the re-education of Nazi POWs at American prison camps. His remarks were prompted by this article in the Washington Post. Quotable:

Concordia's canteens and library were filled with books that had been banned by the Nazis. [Heinrich] Treichl read and reread the American bestseller The Road to Serfdom by Friedrich Hayek, which detailed the flaws in socialism and contrasted it with democracy.

Treichl returned home to occupied Austria, carrying books from Getty and his beloved copy of The Road to Serfdom. He still has them. He married a Jewish woman and helped her family reclaim their publishing empire, became head of Austria's largest bank and, later, served as honorary president of the Austrian Red Cross. Now 91, Treichl is known in Austria for his generosity and his habit of speaking hard truths. "I'm very American," he says with a grin.

"[Bruce Caldwell's] Hayek's Challenge should easily gain a reputation as one of the most�and possibly the most�significant contributions to the literature of F.A. Hayek." -- Roger Garrison, author of Time and Money: The Macroeconomics of Capital Structure

Economist Peter Boettke: "I strongly urge readers .. to study Caldwell�s brilliant book on Hayek --- Hayek�s Challenge --- and in particular the first 1/3 of the book where he goes through the historical context within which Mises and Hayek came to intellectual maturation. Of course the book is about Hayek, so Mises while central to the story doesn�t get the focus that he will in his own biography. But Caldwell�s biography is actually an excellent role model for economic biographies --- especially in the way he mixes historical context and doctrinal issues. I would put Caldwell�s work already in the league of Skidelsky�s biographies of Keynes and Hacohen�s biography of Popper".

"The Austrian road to much of Blairism".

Hayek's Challenge: An Intellectual Biography of F A Hayek reviewed by
Richard D North in The Independent:

"F A Hayek's name is often linked with that of Milton Friedman, the other founder of Reaganomics and Thatcherism. That makes Hayek a hate-figure for the many whose "liberalism" was the mirror-image of his own.

Bruce Caldwell's intellectual biography of the great Austrian is a wonderful work, but an odd one. Hayek's best-known work is The Road to Serfdom (1944). Yet this receives scant attention from Caldwell. Perhaps it was too populist to be treated as seriously as Hayek's other books. But it did address his big political idea.

As Caldwell shows, Hayek had cut his economic teeth watching "statism" try to create a kindly society as Germany invented the welfare state (the model for our own Beveridge Report). He believed he had charted how benign interference descended into totalitarianism, but turned out to be wrong. After the Second World War, Western Europe became welfarist. But we arrived merely at stultification.

Was that because we avoided the full-on socialism he hated? The big argument for the past 50 years has been on Hayek's terrain. The Institute of Economic Affairs was founded in 1955 by a young idealist who had read a condensed Serfdom in the Reader's Digest, and its Hayekian agenda is now at least one half of Blairism and will surely unfold further. The state will own and do less in future.

Caldwell shows us how Hayek believed in a welfare safety-net, and was fascinated by how markets depend on institutions.

One of the oddities of Caldwell's book is it is 133 pages before we really meet the subject. Instead, we are taken back to the Austrian and German academic milieus of the 1870s, into whose legacies Hayek was born in 1899. Hayek was a child, like Wittgenstein, of the Viennese fin-de-si�cle: the spawning-ground of logical positivism and its enemies.

In economics, he was interested in whether there was a testable way of talking about the many processes of exchange. This amounts to talking about a vast proportion of human interactions. Caldwell concludes with an essay suggesting that economics has never really succeeded in answering these big questions. By that count, it's almost a saving grace that Hayek was sceptical about much economic thinking. But he triumphantly helped to frame a rebellion against the unintended oppressiveness of do-gooders. Most of his brain-work was in a tradition of inconclusiveness: wonderful, then, that he produced one work of dazzling clarity."

Lecture -- "Hayek's Challenge". Speaker: Professor Bruce Caldwell.

Thursday 19 February 2004. 6.30 pm, Hong Kong Theatre, Clement House, 6pm, Old Theatre. London School of Economics. London. This event is free and open to all with no ticket required.

"This lecture will explore the development of one of the twentieth century's most important and seminal thinkers, F. A. Hayek. Drawing on his new book Hayek's Challenge: an intellectual biography of FA Hayek, Caldwell will explore the path by which Hayek gradually developed his unique perspective on not only economics but almost the whole range of social and political phenomena, and show how his economic ideas came to inform his view on these wider issues.

Bruce Caldwell is the Joe Rosenthal Excellence Professor in the Department of Economics at the University of North Carolina, Greensboro. He is past president of the History of Economics Society and general editor of The Collected Works of F A Hayek. Caldwell was the recipient of a Lachmann Fellowship at LSE in 2001-02. His new book, Hayek�s Challenge: An Intellectual Biography of FA Hayek, will be published [in Great Britian] in 2004."

"The Ideas and Impact of F. A. Hayek" BOOK FORUM Monday, February 2, 2004 4:00 pm The Cato Institute 1000 Massachusetts Avenue, NW Washington, DC 20001

Featuring Bruce J. Caldwell, Author, Hayek's Challenge: An Intellectual Biography of F. A. Hayek (Chicago, 2003); and Alan Ebenstein, Author, Hayek�s Journey: The Mind of Friedrich Hayek (Palgrave, 2003); with comments by Dick Armey, Former professor of economics, former House majority leader, and cochairman, Citizens for a Sound Economy.

"It is hardly an exaggeration to refer to the 20th century as the Hayek century,� John Cassidy wrote in the New Yorker. Confirming Hayek�s stature, two new books from major publishers explore the development of his thought. Biographer Alan Ebenstein discusses Hayek�s Austrian roots and his relationship to such thinkers as Mill, Marx, Keynes, and Popper. Bruce Caldwell, editor of The Collected Works of F. A. Hayek, traces the complex evolution of Hayek�s thought�and the evolution of Austrian economics�and places Hayek in a broader intellectual context. His book has been called �the best book in economics of 2003.� Please join us for a discussion of one of the most influential thinkers of the 20th century.

Cato book forums and receptions are free of charge. To register for this event, please fill out the form below and click submit or call Krystal Brand by 4:00 pm, Friday, January 30, 2004, at (202) 789-5229, fax her at (202) 371-0841, or e-mail to kbrand@cato.org. News media inquiries only, please call 202-789-5200. If you can't make it to the Cato Institute, watch this forum live online.

HAYEK IS HOT

My editor at the Globe says that as of this morning, my feature on Hayek was the Globe's website seventh most often accessed piece, even though the top stories are usually the morning's main news: "not bad for a mustachioed Austrian!" Keep those links coming... UPDATE: The piece is #4 as of Tuesday noon.

-- Virginia Postrel

The Road to Serfdom. Today's Amazon sales rank: 781. Not bad for a 60 year old book. The Road to Serfdom is a perennial Amazon.com bestseller, ranking usually somewhere in the range of the top 1,000 to 2,500 bestselling books. In fact, the book is dependably ranked in the top 100 in several Amazon categories, often as high as the top 10. The book sells in part because of the overwhelming outpouring of support the book has received from Amazon readers in the customer review section. The book has been reviewed over 100 times and ranks 4 1/2 stars, with strongly positive reviews outnumbering zero star reviews about 20 to 1. Not bad for a book written as "war work" as the bombs came down on London. So raise a toast this year to 60 years of The Road to Serfdom the little book that keeps on going ..

Harvard -- Social Studies 10 -- Introduction to Social Studies:

An introduction to the classics of modern social theory. The first term focuses on the rise of commercial society. The second term focuses on the individual in modern society. Readings include Smith, Tocqueville, Weber, Durkheim, Marx, Polanyi, Hayek, Foucault, Habermas, and Strauss.

Lecture: "Hayek: Free Markets and Free Societies" -- Glyn Morgan

Readings: The Essence of Hayek, Nishiyama & Leube eds. Chapters: 5, 11, 13, 15, 18, 20.

wwwlinks: The Friedrich Hayek Scholars' Page

"Dismissed by critics as a free-market extremist, economist Friedrich Hayek is gaining new attention as a forerunner of cognitive psychology, information theory, even postmodernism. A reintroduction to one of the most important thinkers you've barely heard of."

Hayek-Ler Virginia Postrel on "Friedrich the Great" in the Boston Globe:

AT A RECENT think-tank luncheon in Raleigh, economist Bruce J. Caldwell chatted with a local lawyer active in Democratic party circles. The man asked Caldwell what his new book was about. "It's an intellectual biography of Friedrich Hayek," replied Caldwell, a professor at the University of North Carolina, Greensboro. He got a blank look. "He was an economist. A libertarian economist."

What an understatement.

Hayek, who died in 1992, was not just any economist. He won the Nobel Prize in economics in 1974. His 1945 article, "The Use of Knowledge in Society," is a touchstone work on the role of prices in coordinating dispersed information. His 1944 bestseller "The Road to Serfdom" helped catalyze the free-market political movement in the United States and continues to sell thousands of copies a year.

Economist Milton Friedman calls him "the most important social thinker of the 20th century." Hayek's most significant contribution, he explains, "was to make clear how our present complex social structure is not the result of the intended actions of individuals but of the unintended consequences of individual interactions over a long period of time, the product of social evolution, not of deliberate planning."

Indeed, Hayek is increasingly recognized as one of the 20th century's most profound and important theorists, one whose work included political theory, philosophy of science, even cognitive psychology. Citing the "proof of time," Encyclopedia Britannica recently commissioned Caldwell to replace its formulaic 250-word Hayek profile with a nuanced discussion more than 10 times as long. Harvard has added him to the syllabus of Social Studies 10, its rigorous introductory social theory course.

Hayek is fairly well known in Britain, where he spent much of his life, because of his influence on Margaret Thatcher. In the United States, however, well-educated, intellectually curious people who nod at mentions of Max Weber, Hannah Arendt, or Michel Foucault have barely heard of him.

Politics has a lot to do with that ignorance. Hayek drew on the traditions of 18th- and 19th-century liberal thought, leading critics to dismiss him as a man of the past. He defended competitive markets against the champions of central planning, noting that supposedly "irrational" customs, traditions, and institutions often embody the hard-won knowledge of experience. He advocated cosmopolitan individualism in an age of nationalism and collectivism.

But Hayek turned out to be ahead of his time, not behind it. Arguing with the social engineers of the mid-20th century, he grappled with problems equally relevant to the 21st century. He anticipated today's rage for biological metaphors and evolutionary analysis, today's fragmented and specialized markets, today's emphasis on the legal institutions needed to make markets work, even today's multicultural challenges.

Hayek's 1952 book, "The Sensory Order," often considered his most difficult work, foreshadowed theories of cognitive science developed decades later. "Hayek posited spontaneous order in the brain arising out of distributed networks of simple units (neurons) exchanging local signals," says Harvard psychologist Steven Pinker. "Hayek was way ahead of his time in pushing this idea. It became popular in cognitive science, beginning in the mid-1980s, under the names `connectionism' and `parallel distributed processing.' Remarkably, Hayek is never cited."

Hayek was "one of the last unprofessionalized economists," says Harvard political philosopher Glyn Morgan, who was instrumental in adding Hayek's writings to the Social Studies 10 syllabus three years ago. ("It was actually quite controversial," he says, adding, "This course was known as a slightly left-of-center course, and people were skeptical of Hayek.") Unlike today's increasingly professionalized social scientists, Morgan adds, Hayek was "a top-notch economist, but he wrote on the history of ideas, he wrote on a variety of things."

Born in Vienna in 1899, Hayek fought in World War I and earned degrees in law and political economy in the rich intellectual atmosphere of the University of Vienna. In the early 1930s, he was invited to join the faculty at the London School of Economics. There, he made his name as the leading intellectual opponent of John Maynard Keynes. (The two men were nonetheless friends.) Keynes believed that economic slumps could be cured by government deficit spending, while Hayek argued that those policies would only exacerbate the underlying problem of excessive production capacity.

Beyond his technical arguments with Keynes, Hayek was out of step with his contemporaries' zeal for centralized economic planning, which was widely held to be more productive and efficient than market competition. In 1930s Britain, even political moderates advocated nationalizing all major industries. During and after World War II, central planning reached levels of detail that are inconceivable today. Britain's wartime Utility scheme, for instance, dictated mass-produced furniture designs that eliminated craftsmanship and ornament. Wartime rationing treated bookcases as essential and dressing tables and upholstered easy chairs as unnecessary. Price controls and punitive taxes continued to discourage "irrational" designs until 1952.

"It is not enough to say that some of his views were unpopular," writes Caldwell in "Hayek's Challenge," just published by the University of Chicago Press. "For most of his life his economic and political positions were completely out of sync with those of the rest of the intelligentsia . . .. [F]or much of the century Hayek was a subject of ridicule, contempt, or, even worse for a man of ideas, indifference."

Hayek's most important insight, which he referred to as his "one discovery" in the social sciences, was to define the central economic and social problem as one of organizing dispersed knowledge. Different people have different purposes. They know different things about the world. Much important information is local and transitory, known only to the "man on the spot." Some of that knowledge is objective and quantifiable, but much is tacit and unarticulated. Often we only discover what we truly want as we actually make trade-offs between competing goods."

The economic problem of society," Hayek wrote in his 1945 article, "is thus not merely a problem of how to allocate `given' resources -- if `given' is taken to mean given to a single mind which deliberately solves the problem set by these `data.' It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in totality."

The key to a functioning economy -- or society -- is decentralized competition. In a market economy, prices act as a "system of telecommunications," coordinating information far beyond the scope of a single mind. They permit ever-evolving order to emerge from dispersed knowledge.

"What's the single most important thing to learn from an economics course today?" economist Lawrence Summers said in an interview for "The Commanding Heights," Daniel Yergin and Joseph Stanislaw's 1998 study of the resurgence of economic liberalism. "What I tried to leave my students with is the view that the invisible hand is more powerful than the hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That's the consensus among economists. That's the Hayek legacy." Summers, who was then deputy treasury secretary and is now president of Harvard, recently reaffirmed those views in an e-mail.

Information technology has strengthened Hayek's legacy. At MIT's Sloan School, Erik Brynjolfsson uses Hayek to remind students that feeding data into centralized computers doesn't necessarily solve a company's information problems. In any complex operation, there is too much relevant information for a single person or small group to absorb and act on.

"As Hayek pointed out, the key thing is to have the decision rights and the information co-located," says Brynjolfsson. "There are at least two ways of achieving that. One is to move information to decision maker. The other is to move decision rights to where the information is."

This analysis, which applies as much to culture as to economics, informs Hayek's best-known work, "The Road to Serfdom," which he wrote as a wartime warning to a popular audience. Published in 1944 and dedicated "to the socialists of all parties," the book argued that the logic of socialist central planning implied the erosion of personal freedoms. Britain's well-intended socialists were headed down the same path as the National Socialists whose rise Hayek had witnessed in Austria.

The book was shocking enough in Britain, where it was respectfully, though critically, received. But in the United States, where Reader's Digest published a condensed version, "The Road to Serfdom" was a bestseller and a political lightning rod. It rallied supporters of traditional free enterprise and enraged the intelligentsia to whom it was addressed. How dare this mustachioed Austrian suggest that the ambitions of the New Deal might have anything in common with Hitler or Stalin!

Even today, the book's thesis is often misstated as what Caldwell calls "the inevitability thesis -- that if you start down the road to intervention in the economy, you're automatically going to end up in a totalitarian state." But Hayek spent much of his career arguing against the then-popular idea of historical laws. Nor did he oppose an economic safety net; a wealthy society, he believed, could provide a basic income for the poor.

Rather, he argued that to fully control the economy meant to control all aspects of life. Economic decisions are not separate from individual values or purposes. They reflect those purposes."We want money for many different things, and those things are not always, or even rarely, just to have money for its own sake," explains Jerry Z. Muller, a historian at Catholic University and author of "The Mind and the Market: Capitalism in Modern European Thought" (2002). "We want money for our spouses or our children or to do something in terms of the transformation of ourselves -- for everything from plastic surgery to reading intellectual history or building a church. These are all noneconomic goals that we express through the common means of money."

Hayek argued that only in a competitive market, in which prices signal the relative values placed on different goods, can people with very different values live together peacefully. And only in such a market can they figure out how best to meet their needs and wants -- or even what those needs and wants are.

Caldwell, who is editing Hayek's collected works for the University of Chicago Press, is currently working on the project's edition of "The Road to Serfdom," a task that entails reading the largely forgotten contemporary works with which Hayek was contending. "It's almost chilling to read some of these books. They were willing to accept fairly massive interventions in the economy -- directing labor, who should be working at what jobs and that kind of thing," says Caldwell. He adds, "`The Road to Serfdom' today reads reasonably, most of it. You read these other books and you feel like you're on another planet."

Because he emphasized the pluralism of values, the limits of knowledge, and the totalitarian side of "rationalist" (or, as he would put it, "scientistic") control, some have claimed Hayek as a precursor to postmodernism. Indeed, toward the end of his life, postmodernist philosopher Michel Foucault gave lectures on Hayek's work.

Nick Gillespie, editor-in-chief of the libertarian magazine Reason, says that in a broad sense Hayek anticipated many postmodern critiques. "Hayekian liberalism and postmodernism alike are not interested in total knowledge, or in the total institutions necessary to maintain such a vision," says Gillespie, who holds a doctorate in literary studies. "For Hayek, the very essence of liberalism properly understood is that it replaces the ideal of social uniformity with one of competing difference." That's why Foucault, though no Hayekian liberal, "recognized that Hayek's formulation of a private sphere was a meaningful hedge against the worst excesses of state power."

Unlike postmodernists, Hayek never rejected the idea of scientific knowledge. But in confronting the advocates of centralized economies, Hayek did take pains to distinguish between science and pseudoscience.

Beginning with "The Sensory Order," he began to differentiate between "simple" sciences like physics, which study phenomena that can be explained by only a few variables, and "complex" sciences like biology, psychology, and economics, which depend on so many variables that precise predictions are impossible. "Hayek felt that many of his opponents, all claiming the mantle of science, were but pretenders to the throne," Caldwell writes. "He constantly encountered people who thought of themselves as objective scientists, people who held ideological views different from his and who immediately felt comfortable attributing their differences to the fact that, whereas they were scientists, he was an ideologue."

Hayek and postmodern philosophers were troubled by many of the same issues, but they came to different conclusions. "I don't view him as a postmodernist in the way that some interpreters have," says Caldwell. However, he adds, "I think they had similar enemies."

Virginia Postrel is the author of The Substance of Style: How the Rise of Aesthetic Value Is Remaking Commerce, Culture, and Consciousness and an economics columnist for The New York Times business section.

(thanks to Robert Tagorda for the tip.)

Friedrich Hayek's banquet speech at the Nobel Prize award dinner, 1974:

Now that the Nobel Memorial Prize for economic science has been created, one can only be profoundly grateful for having been selected as one of its joint recipients, and the economists certainly have every reason for being grateful to the Swedish Riksbank for regarding their subject as worthy of this high honour.

Yet I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it ...

more.

Samuel Brittan -- should there be a Nobel Prize in Economics? Quotable:

The dispute about the value of the prize is still running. A former Swedish finance minister, Kjell Olof Feldt, who himself subsequently became head of the Riksbank, has advocated abolishing the economics prize. Some members of the present generation of the Nobel family have done the same. One is reminded of the disputes among the descendants of the composer Richard Wagner, who still claim the right to decide the future of the Festival Theatre he established in Bayreuth.

Indeed a few of the economics prize winners themselves expressed reservations, Friedrich Hayek, the free market political economist who won the prize jointly with the Swedish socialist Gunnar Myrdal in 1974, was grateful that the prize rescued him from a long period of personal depression and had relaunched his ideas - well before Margaret Thatcher started to publicise his name. Yet he admitted that if he had been consulted on whether to establish the prize he would "have decidedly advised against it." Myrdal rather less graciously wanted the prize abolished because it had been given to such reactionaries as Hayek (and afterwards Milton Friedman).

How does the matter look now? A glance at the correspondence columns for the FT will show that mainstream academic economics is far from being the only source of ideas on the subject. Business school theorists, contemporary historians, engineers with an interest in policy and opinionated businessmen all weigh in. It is the Nobel Prize which gives some kind of imprimatur to mainstream academic ideas, which combine an emphasis on individual utility maximisation and the role of markets, with advanced statistical techniques. It has not however in the least increased the willingness of policy makers to accept international free trade or reject the "lump of labour" fallacy - matters on which most academic theorists are agreed.

An insight indeed comes from comparing two very recent books on Hayek. The first by Alan Ebenstein is simply called Friedrich Hayek, a Biography(Palgrave 2001). The second is Bruce Caldwell's Hayek's Challenge, (University of Chicago Press, 2003.) While both books are sympathetic their interpretations are very different. Ebenstein follows Milton Friedman in treating Hayek as a distinguished political philosopher whose views on economic methods were antediluvian. He accepts Friedman's view of economics as science like any other and thus implicitly endorses the Nobel Prize.

Caldwell on the other hand steers as clear as he can of the political debate but shares Hayek's own scepticism about modern economics and its ability to make specific refutable predictions. (Hayek's Nobel Lecture was entitled The Pretence of Knowledge.) He asks whether there really has been steady cumulative progress as economic laws are discovered and improved empirical methods introduced. His own work on micro economics makes him extremely doubtful. And I would endorse this from the macro side. We know that an excess of purchasing power will lead to runaway inflation and that a deficiency will induce deflation and unemployment. We also know that a country cannot have an independent monetary policy if it is on a rigidly fixed exchange rate. But beyond such basics, forecasts are mainly ways of encapsulating what is already happening. The real drivers are so-called "shocks" which by definition are unpredictable.

Caldwell echoes Hayek in believing that the most that economists, like other social scientists, can hope to achieve is pattern predictions. Such consensus as exists among economists - for instance that demand curves slope downwards - is based much more on the way they have been brought up to think than any decisive empirical tests. If Caldwell is right then the Nobel Prize for economics was a mistake as the subject could not expect the kind of steady incremental progress achievable in the physical sciences - or for that matter in ancillary studies such as statistical theory. But having the Prize we are now stuck with it. To abolish would simply increase the influence of the kind of anti-economics which embraces for instance rent controls, minimum wages and arms promotion "for the sake of jobs". The best way forward would be to follow the tentative gropings of the Swedish Academy of the mid-1990s and extend the Prize to the social sciences in general and really mean it.

Madsen Pirie gives this brief of his case for saying Hayek is a conservative. Quotable:

There is the conservative disposition, which likes to keep familiar things as they are. Michael Oakeshott expressed this brilliantly in Rationalism in Politics. Hayek was not like that at all; he wanted to improve things, not keep them the same.

Alongside this temperament, there is also the political tradition of conservatism. This represents a resistance to taking society in any preconceived direction, and especially towards any earthly paradise. Those of this school try to keep society spontaneous, and oppose any attempts to impose 'visions' upon it. Hayek said that conservatives had no goal, whereas his goal was for a free society. I suggested that conservatives have not only tried to retain the spontaneity of society, but also to restore it when it had been compromised. In seeking to preserve freedom, to extend it and restore it, Hayek fitted quite comfortably within that political tradition.

Seminar on Hayek-L -- Dec. 8 - Dec. 19

Ken Hoover will conduct an e-seminar on the Hayek-L email list between Monday, Dec. 8 and Friday, Dec. 19 discussing his new book Economics as Ideology; Keynes, Laski, Hayek, and the Creation of Contemporary Politics (subscription information found below).

Order the book from Amazon

Economics as Ideology -- Table of Contents:

Preface: Left, Center, and Right in the 20th Century
Of Identities, Ideas, and Ideologies
The Pre-War World: Seeds of Struggle
World War I: Unresolved Conflicts
The Twenties: Government and the Market in Combat
The Thirties: Duel of Allegiances
World War II: Destruction and Deliverance
The Post-War World: Denouement
The Second Half-Century: From Ideas to Ideologies
Developmental Turning Points and the Formation of Ideology
The Oppositional Bind of Ideology
Identity, Ideology, and Politics

From the publisher:

"Economics as Ideology: Keynes, Laski, Hayek and the Creation of Contemporary
Politics explores the lives and thought of three powerful theorists who shaped
the foundations of the center, left, and right of the political spectrum in the
20th century. Noted scholar Kenneth R. Hoover examines how each thinker
developed their ideas, looks at why and how their views evolved into ideologies,
and draws connections between these ideologies and our contemporary political
situation.

Similar in age, colleagues in academic life, and participants in the century's
defining political events, the story of Keynes, Laski, and Hayek is also the
story of how we in the west came to define politics as the choice between
government and the market, between regulation and freedom, and between the
classes and the masses."

About Ken Hoover:

Kenneth R. Hoover is professor of political science at Western Washington University. His previous books include The Elements of Social Scientific Thinking, Ideology and Political Life, and The Power of Identity: Politics in a New Key. "

Ken Hoover's email address is:

Ken.Hoover - at - wwu.edu

His web page is at:

http://www.ac.wwu.edu/~khoover/

Advanced reviews:

"An important book and a fascinating, absorbing read." �G. C. Harcourt, Jesus College, Cambridge University

"The idea is simply splendid. It does make supreme sense to construct a history
of theories of political economy in the 20th century around Keynes, Laski, and
Hayek and the three do, in fact, succeed one another in 'hegemony' as the century unfolds. Inasmuch as Keynes and Hayek were interlocutors and rivals and
duelists their relationship bears considerable drama and the fact that Hayek
appears to have had the last laugh makes for high irony. It is a major
achievement of this volume that Hoover never loses sight of the intellectual
stakes in these debates." � James Scott, Yale University

"Economics as Ideology is a most engrossing book. It tells an important tale of
the development of economic thinking through the stories of three giants of
political economic thought. Lives intersected at the nexus of theory and
practice told in a compelling, even dramatic, narrative makes for better reading
than a novel. I kept wanting to know how it was going to turn out--even though I
knew the general contours from the start. The book offers important background
for understanding economic thinking as it has evolved. It will be greatly
prized." � Sanford F. Schram, author of Praxis for the Poor: Piven and Cloward
and the Future of Social Science in Social Welfare

"I enormously enjoyed reading Economics as Ideology. The tradition of parallel
and interacting biography is small but distinguished. Hoover adds a further
dimension with his examination of the role of opposition, and his investigation
of the link between social situation, individual circumstances, and thinking." �
Rodney Barker, London School of Economics

"This is a very credible work of prodigious scholarship, with frequent keen
analyses and insights, and written in a lively, attractive style." � Kenneth
Dolbeare, editor of American Political Thought

Related papers:

"IDEOLOGIZING INSTITUTIONS: Laski, Hayek, Keynes, and the Creation of Contemporary Politics" by Kenneth Hoover, Journal of Political Ideologies, February, 1999, 4 (1), 87-115.

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Economist Peter Boettke's important collection of essays titled Calculation and Coordination: Essays on socialism and transitional political economy is available online in PDF format -- just click the link. The book includes Peter's essay "Hayek�s The Road to Serfdom revisited: government failure in the argument against Socialism." This is the good stuff, folks.

Roger Garrison on Hayek and the "Austrian" theory of the trade cycle:

In these recent remarks by Samuel Brittan, Hayek's rendition of the Austrian theory of the business cycle is dismissed because it entails a "relative contraction" of consumption during the boom. We should note,though, that Mises rendition is different from Hayek's in this regard: He repeatedly refers to the "malinvestment and overconsumption" that characterizes the boom. Also, as early as 1934, Richard Strigl took, in effect, the Mises view over the Hayek view on this issue. And Machlup found Strigl's account superior to Hayek's, as Richard Ebeling has recently noted.

From the the Mises email list.

Thirty five years of REASON and 35 Heroes of Freedom. Including:

Friedrich Hayek. He mapped the road to serfdom during World War II and paid a steep price -- decades-long professional isolation -- for daring to suggest that social democracy had something in common with collectivist tyrannies of the right and left. The economist-cum-philosopher lived to see his arguments vindicated by the failure of the Third Way and even took home a Nobel Prize in 1974. Building on the work of that other great Austrian economist, Ludwig von Mises, and combining a respect for inherited wisdom with an understanding that freedom is fundamentally disruptive, Hayek showed that the uncoordinated actions of individuals generate wonders -- market prices, language, scientific progress -- that the deliberate designs of central planners never could.

Andrew Sullivan gets a letter on Hayek and gay marriage:

I have very mixed feelings about the push for gay marriage. Principal among my reservations is the notion proposed by Hayek and echoed by conservative thinkers such as Russell Kirk that the institutions, morals, customs and habits of society are not merely arbitrary choices. They have evolved, below the radar of abstract reason, across many generations and through many cultures. The social patterns that have survived until now are those that most guaranteed cultural fitness (in the evolutionary sense), and have thus created civilization as we know it. We must be very cautious in concluding then that we fully understand them, and more cautious about abandoning these customs simply because we can pose excellent intellectual arguments against them.

Much as some economists have recognized that no elite group of planners can ever equal the knowledge contained in the sum total of thousands of individual market decisions, no elite group of judges or legislators should feel so wise as to toss out what has taken thousands of years to develop. Why not? What harm could possibly come from such hubris? Well, that's the point, isn't it? We don't know the unintended consequences of creating massive social changes by fiat. And we will only find out by engaging in an experiment that cannot be undone ...

Reason's Nick Gillespie takes on Hayek and gay marriage:

In The New Republic in 1996, during the debate over the awful Defense of Marriage Act, [Jonathan] Rauch argued that Hayek, whom he admires greatly, would indeed have been in the conservative locker room on this issue. Rauch wrote, "The Hayekian view argues strongly against gay marriage. It says that the current rules may not be best and may even be unfair. But they are all we have, and, once you say that marriage need not be male-female, soon marriage will stop being anything at all. You can't mess with the formula without causing unforeseen consequences, possibly including the implosion of the institution of marriage itself."

However, I think Rauch and [Jonah] Goldberg are mistaken. Hayek is ambivalent on many things (and inscrutable on many others). But as I argued in this 1996 piece for Reason, attempts such as The Defense of Marriage Act --and current attempts to keep states from having to recognize same-sex marriages performed in other states -- exemplify an anti-Hayekian view toward social evolution:

F.A. Hayek defined a free society as one in which people "could at least attempt to shape their own li[ves], where [they] gained the opportunity of knowing and choosing different forms of life." Hayek emphasized that such individual empowerment is absolutely necessary to maintain an "extended order" vibrant enough to generate opportunities for its members. It is the means by which society adapts to constantly changing circumstances, needs, and desires. He also underscored that the outcomes of such a "discovery" mechanism would not always be "good" or "just," in either a moral or utilitarian sense, but that trying to "wrest control of evolution...only damages the functioning of the process itself."

While stressing that social institutions --themselves the result of an evolutionary process-- cannot and should not be simply thrown out and redesigned at will, Hayek insisted that we run terrible risks when we seek to limit the choices people make. That's because the act of choosing is the very basis of a flourishing society.

... [The Defense of Marriage Act] is designed to foreclose governmental recognition of gay marriage. It is a misguided attempt to define for all time an institution that is constantly, if slowly, evolving. Its supporters may think they can stop social evolution in its tracks and enforce a singular vision of the good society. But such people misunderstand the very nature of a free society and its dependence on choice and change.

Read the full 1996 Gillespie article here.

George Mason economist Peter Boettke on Bruce Caldwell's Hayek's Challenge:

I just want to say to the readers of this list [HAYEK-L] that we all have to take off our hats to Bruce [Caldwell] for this book [Hayek's Challenge: An Intellectual Biography of F. A. Hayek] l-- it is wonderful and a real page turner. It is by far the best thing written on Hayek and a real contribution to not only Hayek studies, but to Austrian economics in general.

I don't have a blog, but I do have a What's New paper off my webpage (due to numerous request from readers of my webpage to keep them up to date on my whereabouts). I wrote the following on Bruce's book ---

But on the plane to San Antonio I encountered the best book written in Austrian economics in a generation -- Bruce Caldwell's Hayek's Challenge (University of Chicago Press, 2003). Caldwell, as to be expected, is a master historian of thought and constructs a narrative of Hayek's evolution of a thinker that is simply better than any alternative account. And, in the process, Caldwell tells the story of the development of Austrian economics from Menger to today better than I have ever seen. This is a phenomenal work of scholarship and a beautifully written book. This is the history of economics as it should be written --- a subtle treatment of economic doctrine, contextualization of the evolution of argument within its broader history of philosophical, political and economic debates, and engagingly written. As far as economics goes, this book is a page turner. It is nothing short of a brilliant. Congratulations to Bruce Caldwell for writing in my opinion the best book of 2003, and perhaps the best book in Austrian economics in a generation.

During the Dean Smith days at UNC it used to be said that if God wasn't a Tarheel than why is the sky Carolina Blue, I think that motto for the hour should be that if God supports the Austrians (because of truth and justice) than Bruce should be seeing lots of green ---- buy this book, enrich your mind and send a signal to publishers and to Bruce that such work is highly valued by the community of scholars, and interested laymen. Bruce has proven without a doubt that you can write an engaging book, tell the truth and be subtle about economic reasoning as well. Caldwell's book passes the "wow" test when few books really do, and in doing so sets a standard for the rest of us to live up to.

Boettke is editor of The Review of Austrian Economics

Would Hayek approve gay marriage? Worth noting -- portions of Hayek's The Fatal Conceit were written by the editor of the book -- who happened to have been gay -- when Hayek fell ill before the final completion of the manuscript. There has yet to be a full scholarly accounting of these non-Hayek passages in the book, which can be found throughout the text.

Hayek biographer Alan Ebenstein has called for a new edition of the book -- one actually written by Hayek -- and I'm in complete support of the idea. Until then, the publisher should be printing some sort of "reader beware" notice in the book, warning readers that all of the ideas in the book are not necessarily those of Friedrich Hayek.

Ebenstein discusses the Bill Bartley / Fatal Conceit matter in his new book Hayek's Journey

Sabine Herold leads a freedom revolution in France. France? Yes, France:

Some conservatives liken Sabine Herold, a 22-year-old student, to Joan of Arc, and others nickname her "Mademoiselle Thatcher" after she took on France's left-wing labor unions this summer. Many in France see her as a symbol of a growing revulsion among young French libertarians against a ruling class that punishes excellence and rewards mediocrity.

"A generation of reformers, who can't bear the blocking of the [French] society anymore, is emerging. There will be soon an electoral power of people who really want to change the status quo," said Miss Herold.

In March 2001, she co-founded the group Libert�, J'Ecris Ton Nom, or "Liberty, I Write Your Name," which now has about 2,000 adherents. "We are in favor of the freedom of business, but we consider that the market is not an end in itself," Miss Herold told The Washington Times. "It is a means in the duty of individual liberty."

She first came to public attention in May during a nationwide strike that had paralyzed her hometown in France's Champagne region, Reims. In the shadow of the Notre Dame Cathedral � where Joan of Arc once crowned a king � Miss Herold began denouncing the bus drivers, schoolteachers and other union members who were striking for pension reform.

The French newspapers reported that about 2,000 people cheered and applauded as she spoke. Within a month, she stood before an estimated 80,000 cheering Frenchmen in Paris with the same message. She castigated the trade unions as "terrorists of the social action" and "strongholds of egoist conservatism."

"In France, we are unable to have negotiations before strikes," she said. "The principle of preventive strikes prevails. The contract proposal is still not written, and there are already union members in the streets."

When the British news media found out, they crowned Miss Herold the new symbol of the free-market conservatives in Europe ...

Born into a family of teachers in a small village near the northern Champagne-producing city of Reims, she said she was not interested in politics until only two years ago. Lots of reading, including works of Alexis de Tocqueville and her favorite, the Nobel economics prize-winner Friedrich Hayek, inspired her political ideas.

"Libertarianism is not anarchy. It implies liberty and responsibility" she said ...

HAYEK STUFF. Kelson, Hayek, and the Economic Analysis of the Law by Richard Posner. Or read it in PDF (recommended).

Margaret Thatcher discusses Friedrich Hayek (from the newly opened online archive of the papers of Margaret Thatcher.):

I am a great admirer of Professor Hayek. Some of his books are absolutely supreme� "The Constitution of Liberty" and the three volumes on "Law, Legislation and Liberty" � and would be well read by almost every hon. Member .. source

The Second World War, even more than other wars, had given an enormous boost to government control. Indeed, oddly enough when you consider that it was fought against totalitarian states, the War provided in many people's minds convincing proof that a planned society and a planned economy worked best. The sixties and seventies in Britain were decades during which this illusion was gradually, painfully dispelled. Social and economic planning led to larger, cumulative failures, and these in turn produced disillusionment and despair - even among those who once thought that socialism could achieve heaven on earth.

As the results of all this multiplied, commentators spoke wearily of the so-called "British disease". By this they meant an affliction of restrictive practices, low productivity, trade union militancy, penal taxes, poor profits, low investment - in short economic decline. And hardly less corrosive was the mentality which underlay, and which was itself encouraged by that decline. To put it simply, there was a resigned acceptance that Britain was finished.

This discouraged some politicians on the Right, who felt that damage limitation was the only sensible strategy, that managing decline made best sense. But a number of us felt differently. We did not believe that Britain was down, let alone out. We felt that it was socialism that had failed the country, not the country that had failed socialism. And we were determined to prove it.

Let me emphasise again: my journey along this path was never a solitary one. Keith Joseph gave the best political analysis of what was wrong, and what had to change. But behind him lay the wisdom of people like Friedrich Hayek, bodies like the Institute for Economic Affairs, and a host of thinkers who had swum against the tide of collectivism which at one time threatened to sweep away our national foundations.

If I were to use one phrase to sum up what had to be done - and what indeed was done - it is that we had to "reverse the ratchet" ... source

Not surprisingly, therefore, the most powerful critique of socialist planning and the socialist state which I read at this time [as a student at Oxford] and which I have returned to so often since, F.A. Hayek's The Road to Serfdom, is dedicated famously "To the socialists of all parties".

I cannot claim that I fully grasped the implications of Hayek's little masterpiece at this time. It was only in the mid 1970s, when Hayek's works were right at the top of the reading list given me by Keith Joseph , that I really came to grips with the ideas he put forward. Only then did I consider his arguments from the point of view of the kind of state Conservatives find congenial - a limited government under a rule of law - rather than from the point of view of the kind of state we must avoid - a socialist state where bureaucrats rule by discretion. At this stage it was the (to my mind) unanswerable criticisms of socialism in The Road to Serfdom which had an impact. Hayek saw that Nazi-ism - national socialism - had its roots in nineteenth century German social planning. He showed that intervention by the state in one area of the economy or society gave rise to almost irresistible pressures to extend planning further into other sectors. He alerted us to the profound, indeed revolutionary, implications of state planning for Western civilisation as it had grown up over the centuries.

Nor did Hayek mince his words about the monopolistic tendencies of the planned society which professional groups and trade unions would inevitably seek to exploit. Each demand for security, whether of employment, income or social position, implied the exclusion from such benefits of those outside the particular privileged group - and would generate demands for countervailing privileges from the excluded groups. Eventually, in such a situation everyone will lose. Perhaps because he did not come from a British Conservative background and did not in fact ever consider himself a Conservative at all, Hayek had none of the inhibitions which characterised the agonised social conscience of the English upper classes when it came to speaking bluntly about such things.

Hayek was unusual and unpopular, but he was not quite alone in root and branch criticism of socialism. I also read at this time and later the polemical journalist Colm Brogan 's writings. Where Hayek deployed philosophy, Brogan relied on withering irony and devastating wit. source -- from Margaret Thatcher The Path to Power, pp. 50-51.

The kind of Conservatism which he and I � though coming from very different backgrounds � favoured would be best described as "liberal", in the old-fashioned sense. And I mean the liberalism of Mr Gladstone not of the latter day collectivists.

That is to say, we placed far greater confidence in individuals, families, businesses and neighbourhoods than in the State.

But the view which became an orthodoxy in the early part of this century � and a dogma by the middle of it � was that the story of human progress in the modern world was the story of increasing state power.

Progressive legislation and political movements were assumed to be the ones which extended the intervention of government.

It was in revolt against this trend and the policies it bred that Hayek wrote The Road to Serfdom, which had such a great effect upon me when I first read it � and a greater effect still, when Keith suggested that I go deeper into Hayek's other writings.

Hayek wrote:

"How sharp a break � with the whole evolution of Western civilisation the modern trend towards socialism means � becomes clear if we consider it not merely against the background of the nineteenth century, but in a longer historical perspective. We are rapidly abandoning not the views merely of Cobden and Bright, of Adam Smith and Hume, or even of Locke and Milton, but one of the salient characteristics of Western civilisation as it has grown from the foundations laid by Christianity and the Greeks and Romans. Not merely nineteenth- and eighteenth-century liberalism, but the basic individualism inherited by us from Erasmus and Montaigne, from Cicero and Tacitus, Pericles and Thucydides is progressively relinquished."

So, Ladies and Gentlemen, against that background, it is not surprising that the Left claimed all the arguments of principle, and that all that remained to the Right were the arguments of accountancy � essentially, when and how socialism could be afforded.

It was this fundamental weakness at the heart of Conservatism which ensured that even Conservative politicians regarded themselves as destined merely to manage a steady shift to some kind of Socialist state. This was what � under Keith's tuition � we came to call the "ratchet effect".

But all that was not just bad politics. It was false philosophy � and counterfeit history.

Let me remind you why this is so .. source

British Chancellor of the Exchequer Nigel Lawson spreads word of Friedrich Hayek and the new Conservative revolution to the Swedes in 1980.

And here is a draft of Thatcher's Conservative Manifesto from 1978 (pdf).

Both documents are from the newly opened online archive of the papers of Margaret Thatcher.

Bruce Caldwell's Hayek's Challenge: Intellectual Biography of F.A. Hayek is now available from Amazon. Caldwell is the leading academic authority in America on the evolution of Hayek's economic ideas. Here's more on the book:

Buy it.

"Hayek's Challenge represents a career's worth of thinking and writing on F. A. Hayek's contributions to the social sciences. Because of the breadth and depth of Hayek's work, evaluating it or even summarizing it is a reach for anyone; yet, because of his own specialization in methodology and his willingness to delve into fields well outside his own, Caldwell is uniquely qualified to undertake the challenge. His book has to be judged a dramatic success. Hayek's Challenge should easily gain a reputation as one of the most and possibly the most significant contributions to the literature on F. A. Hayek." � Roger Garrison, author of Time and Money: The Macroeconomics of Capital Structure

"A highly original work. Caldwell's scholarship is impeccable, and in fact extraordinary. Written lucidly and eminently readable, Hayek's Challenge is likely to become one of the leading works in the field. It will be consulted again and again for the wealth of incidental information that it contains." � Israel M. Kirzner

Table of Contents
Acknowledgments
Introduction

I. The Austrian School and Its Opponents---Historicists, Socialists and
Positivists
1. Menger's Principles of Economics
2. The German Historical School
3. The Methodenstreit
4. Max Weber and the Decline of the Historical School
5. Positivism and Socialism

II. Hayek's Journey
6. Hayek in Vienna
7. Monetary Theory and Methodology
8. Hayek at the London School of Economics
9. Some Methodological Debates of the 1930s
10. "Economics and Knowledge" and Hayek's Transformation
11. The Abuse of Reason Project
12. Individualism and the Sensory Order
13. Rules, Orders and Evolution

III. Hayek's Challenge
14. Journey's End---Hayek's Multiple Legacies
15. Epilogue: A Meditation on Twentieth-Century Economics

Appendixes
Bibliography
Index

From the publisher:

Friedrich A. Hayek is regarded as one of the preeminent economic theorists of the twentieth century, as much for his work outside of economics as for his work within it. During a career spanning several decades, he made contributions in fields as diverse as psychology, political philosophy, the history of ideas, and the methodology of the social sciences. Bruce Caldwell -- editor of The Collected Works of F. A. Hayek -- understands Hayek's thought like few others, and with this book he offers us the first full intellectual biography of this Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce Caldwellpivotal social theorist.

Caldwell begins by providing the necessary background for understanding Hayek's thought, tracing the emergence, in fin-de-si�cle Vienna, of the Austrian school of economics--a distinctive analysis forged in the midst of contending schools of thought. In the second part of the book, Caldwell follows the path by which Hayek, beginning from the standard Austrian assumptions, gradually developed his unique perspective on not only economics but a broad range of social phenomena.

In the third part, Caldwell offers both an assessment of Hayek's arguments and, in an epilogue, an insightful estimation of how Hayek's insights can help us to clarify and reexamine changes in the field of economics during the twentieth century. As Hayek's ideas matured, he became increasingly critical of developments within mainstream economics: his works g ew increasingly contrarian and evolved in striking -- and sometimes seemingly contradictory -- ways. Caldwell is ideally suited to explain the complex evolution of Hayek's thought, and his analysis here is nothing short of brilliant, impressively situating Hayek in a broader intellectual context, unpacking the often difficult turns in his thinking, and showing how his economic ideas came to inform his ideas on the other social sciences.

Hayek's Challenge will be received as one of the most important works published on this thinker in recent decades.

Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce Caldwell

Can a person write well and be a philosopher at the same time? Edward Feser proves that one can, and he does so again in an important essay titled "Hayek on Tradition". Feser is that rarest of fine writers -- one who writes well while at the same time thinking well. Not a common thing, that. And it his essay Feser is in top form, explicating uncommon wisdom in common language -- making here the important point that the very idea of tradition has long been under fierce assualt from a critical viewpoint which itself lacks the justification which is demanded of those who perceive the significance of tradition in the make-up of who and what we are. Correctly understood, however, tradition itself might be said to have made possible even such things as critical inquiry itself. A critical tradition which condemns tradition is one advocating the philosophy of the tail-swallow. Only fools need follow there.

So who is Feser? Feser teaches philosophy at Loyola Marymont in Los Angeles and is the author of a solid little introduction to the moral and political philosophy of Robert Nozick titled On Nozick. He's also perhaps the world's leading expert on Friedrich Hayek's philosophy of mind -- no small challenge that (take a look some time at Hayek's landmark work in neuroscience and philosophy titled The Sensory Order if you'd like some sense of the difficulties involved).

A page of quotes from Friedrich Hayek collected by the Adam Smith Institute. Here are two that caught my eye:

The part of our social order which can or ought to be made a conscious product of human reason is only a small part of all the forces of society.

Human reason can neither predict nor deliberately shape its own future. Its advances consist in finding out where it has been wrong.

Madsen Pirie -- "Why Hayek is a Conservative" (pdf).

Buy it.

Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce J. Caldwell -- Chapter One:

Hayek is a puzzle. Certainly he started out as one for me, now some twenty-odd years ago.

It was the spring of 1982, and I was finishing up a postdoctoral year at New York University (NYU). An assistant professor, I had received my doctorate in economics a few years earlier with a specialization in the history of economic thought. My thesis had carried the earnest and pedantic title "The Methodology of Economics from a Philosophy of Science Perspective," and part of the reason I was at NYU was to try to transform it into a book that people might actually want to read. But I was also there to study Austrian economics or, more precisely, to learn more about the distinctive methodological views of the Austrians. These differed radically from, and, indeed, directly criticized, the positivistic pronouncements of mainstream economists. In particular, I wanted to know more about the rather strange-sounding apriorist methodology that had been advocated by Ludwig von Mises. I knew next to nothing about Hayek.

NYU was very much the place to go if you wanted to learn about the Austrian movement. There was (and still is) a formal program dedicated to the study of Austrian economics there, with courses, a weekly seminar, and funding for faculty positions, postdocs, and graduate students. The faculty members present that year included Israel Kirzner, Mario Rizzo, Jerry O'Driscoll, and (in the spring) Ludwig Lachmann. Larry White was a visiting professor, Richard Langlois held another postdoc, and among the dozen or so students were Don Boudreaux, Mark Brady, Sandy Ikeda, Roger Koppl, Kurt Schuler, and George Selgin. It was a great gathering of minds and personalities and, for me, a very rich experience.

That spring, Jerry O'Driscoll handed me a book by Terence Hutchison and said, "So what do you think of his argument about Hayek's U-turn?" Hutchison had claimed that Hayek underwent a "methodological U-turn" in the mid-1930s. More precisely, he had argued that the publication in 1937 of an article by Hayek titled "Economics and Knowledge" marked Hayek's turning away from Mises's apriorist approach and toward the falsificationist methodology propounded by the philosopher Karl Popper (Hutchison 1981, chap. 7; see also Hayek [1937] 1948a).

The claim certainly seemed strange to me. I had studied Popper's thought carefully for my dissertation and now knew more about Mises's ideas, and, frankly, it is hard to conceive of two viewpoints more at odds with one another. How could anyone change so much as to switch from one to the other? Yet it was also evident that Hayek was close friends with both men. Hutchison was a leading historian of thought who had lived through the period in question, and he provided detailed textual evidence to support his argument. So Hutchison's interpretation presented a puzzle, and it was in trying to solve that puzzle that I began to do research specifically on Hayek. I have been at it ever since, even though people who care about me have warned me against putting so many of my eggs in one basket. I hope that, in this introduction, I am able to convey some of the reasons why I ended up doing so.

�

For the first eight or nine years of his academic life, the economist F. A. Hayek wrote in German. Afterward, he wrote principally in English, at least until he moved to Germany in 1962. Perhaps because of the novelty and challenge of trying to communicate ideas in a new language, he chose his titles with considerable care. Sometimes he made allusions to other works. Thus "The Trend of Economic Thinking," his 1933 inaugural lecture at the London School of Economics, alluded to The Trend of Economics, a volume edited by Rexford Tugwell that had appeared in America a decade before (see Hayek [1933] 1991c; Tugwell [1924] 1930). He got the idea for the title of his most famous book, The Road to Serfdom ([1944] 1976b), from a phrase used by Alexis de Tocqueville, "the road to servitude" (see Hayek 1983b, 76). And I offer as a conjecture that the title of his Finlay lecture, "Individualism: True and False" ([1946] 1948c), was a reference to passages about individualism in Oscar Wilde's "The Soul of Man under Socialism."

On other occasions, titles had multiple meanings. The paper that gave rise to Hutchison's claim about Hayek's "methodological U-turn," "Economics and Knowledge," was one of these. Its subject was the assumptions that are made in economic theories about agents' knowledge, but it was also about what economists themselves could know. It would seem that Hayek's Nobel address, "The Pretence of Knowledge" ([1975] 1978e), can be similarly interpreted. My own title, Hayek's Challenge, follows Hayek's lead; it refers to the multiple challenges that surround his work.

Hayek himself, of course, faced challenges. Economists are used to the pose of being bearers of bad news. (I say pose because demand for our services, like that for those of undertakers and therapists, is highest when times are bad.) For Hayek, however, it was less of a pose than for most. It is not enough to say that some of his views were unpopular. For most of his life his economic and political positions were completely out of sync with those of the rest of the intelligentsia. He attacked socialism when it was considered "the middle way," when seemingly all people of good conscience had socialist sympathies. He disavowed the Keynesian revolution�even before it had properly taken place. In the latter half of the twentieth century, when some form of welfare state existed within virtually all the Western democracies, he criticized the concept of social justice that provided its philosophical foundations. Although a small group of libertarians and conservatives always read him with enthusiasm, for much of the century Hayek was a subject of ridicule, contempt, or, even worse for a man of ideas, indifference. Because of his political views, Hayek faced many challenges in trying to find an audience for his ideas among the thinkers of his day.

Hayek also presents challenges to those who try to interpret his thought. (Since I am one of these, I may as well share the secret title of my book: Caldwell's Challenge.) There are multiple problems here.

First, there is the simple fact that Hayek's writings lie within the Austrian tradition. Now, to be sure, in the 1930s that tradition was part of the then-developing mainstream in economics. In the postwar era, however, economics changed. One way to characterize the changes is to say that the discipline moved from interwar pluralism to postwar neoclassicism (Morgan and Rutherford 1998). Another is to point out that the mainstream experienced a number of "revolutions": the Keynesian revolution, the econometrics revolution, the general equilibrium or formalistic revolution, and so on. However one might choose to characterize the changes, it is clear that the Austrians did not participate in them. More strongly, people like Hayek and Mises actively opposed them. It may, therefore, be difficult for modern-day economists (who I hope make up at least a portion of my audience) to make much sense of the Austrians. Part of my task is to provide the necessary background to make the Austrians' viewpoint comprehensible to those unfamiliar with their tradition.

The volume of Hayek's work provides another daunting challenge for interpreters. Hayek lived from 1899 to 1992, and his writings span seven decades. Worse, he was incredibly prolific. Even worse, he did not restrict himself to economics, making contributions in fields as diverse as psychology, political philosophy, the history of ideas, and social-science methodology. I joke, of course, when I use the word worse, for part of Hayek's fascination is that he contributed, at times significantly, to so many fields. Studying Hayek forces you to read outside your field, and that can be a liberating experience. But, in this age of specialist training, it is also difficult not to feel inadequate when reading him, and his sheer reach makes any attempt at assessment of his ideas dicey, to say the least.

An even more serious challenge for those who would interpret him arises from the fact that Hayek seems to have changed his mind about certain things over the years or, put in another light, that his work appears to contain contradictions. We will see, for example, that, in the course of one decade, Hayek seems simultaneously to have held the views that what he called equilibrium theory is necessary if one is to do economic science at all and that it is also a highly misleading model for understanding the workings of a market system. Within the covers of the same book he will both argue that policies that aim at income redistribution violate the rule of law and endorse the provision of a "safety net" that is itself an instrument of redistribution. He will trumpet both methodological individualism and group selection, positions often viewed as mutually exclusive. Now, if one disagrees with Hayek on ideological or other grounds, these apparent contradictions are not, of course, a problem. They are a solution, for they provide grounds for dismissing him. But, for someone who wants, as I do, to make sense of Hayek, to provide a plausible reading of the development of his ideas, they pose real difficulties.

There is a huge secondary literature on Hayek, and it produces challenges as well. Part of the problem derives from the fact that Hayek was, and is, a controversial figure. Many who write about him have strong opinions about whether he was right or wrong, and this affects their readings. Furthermore, the enormous scope of his corpus makes for multiple interpretations, as writers draw on different parts of his work. Finally, some people use Hayek's writings as input into their own substantive theories, and, in such cases, the temptation is great to interpret Hayek himself as participating in the same project. As a result, very different interpretations of what Hayek was up to exist�probably more so than for most writers. As I said, I hope to provide a plausible reading of the development of Hayek's thought. But part of my job will also be to confront my own readings with others that exist in the secondary literature.

Another set of challenges has to do with what Hayek has said about himself. Hayek occasionally introduced autobiographical elements into talks and papers, and he even gave a few interviews, but the degree of autobiographical revelation changed dramatically when he was awarded the Nobel Prize in economics in 1974. A few years later, under the auspices of an Oral History Project at the University of California, Los Angeles, Hayek agreed to sit for an extensive set of interviews. The sessions stretched over a number of weeks in late 1978, with nine different people asking him questions. The topics covered ranged far and wide, and there appears to have been little attempt to coordinate what was asked, so sometimes he repeated himself. Hayek discussed his personal life, his academic history, his ideas, his times, his interactions with and impressions of the many great and near-great figures whose paths he crossed. The resulting 493-page transcript (Hayek 1983b) is a wonderful source of information on all aspects of his life and work.

So why is this a problem? As Malachi Hacohen has amply demonstrated in his superb new biography of Karl Popper (see Hacohen 2000), sometimes autobiographical accounts are inaccurate. Popper wrote an autobiographical sketch for the volume on his work in the Library of Living Philosophers series, a slightly revised version of which later appeared in book form as Unended Quest (1976). Popper spent a long time working on the manuscript, producing a number of drafts before he was finally done. Despite this, Hacohen discovered factual errors in Popper's careful reconstruction, some of them serious. Although he was at first inclined to think that Popper had intentionally fudged the record, he later came to the conclusion that the mistakes were not intentional. Popper just remembered things wrong. In this, Hacohen concluded, he was doubtless anything but abnormal: "Autobiographical anachronism is common, and Popper's memory failure may not even be as surprising as I still occasionally find it" (Hacohen 2000, 14).

Hayek had prepared for the oral-history interviews, of course. Still, he was over seventy years old when he gave them, and he was responding extemporaneously about events some of which had taken place forty or more years earlier. It also appears that Hayek had answers for certain questions almost programmed, using exactly the same wording again and again. This is not to suggest that he made things up. But, after a while, what a person recalls may be the story that he told last time, rather than what actually happened. The interviews provide many insights, but they must be handled with care. This is particularly true when the subject matter is sensitive or controversial and when independent verification of his claims is absent.

The final challenge for the Hayek interpreter is the question, Why? Hayek's research path was anything but straightforward. This was a man who, after all, started out as an economist but whose most famous (or, for some, notorious) book, The Road to Serfdom, was in part a political tract. Furthermore, right after he published The Road to Serfdom, he started work on a book on theoretical psychology. He would later say that the resulting volume, The Sensory Order ([1952] 1967h), was extremely important for understanding his later work. But he never said how or why, and, for that matter, subsequent references to The Sensory Order were not particularly prominent. Later in his career, he would turn to political theory, and, ultimately, he would offer an evolutionary theory of the development of human social norms. These sorts of violent twists and turns in research interest cry out for explanation. Is it possible to make sense of Hayek's journey? That is certainly one of the biggest challenges that we face.

The challenges, I can say, have been well worth it. (I speak for myself; I am writing this introduction after having finished writing the book.) Even after all these years, I have at times felt exhausted from, but have never grown tired of, wrestling with Hayek. His mind, of course, fascinates. Anyone with his breadth of interests, with his ability to write on so many different subjects, cannot fail to attract an intellectual historian. Since I was a boy, I have always loved puzzles, so I have enjoyed the puzzling parts, too, the work of trying to piece together, to make sense of, his odyssey. I may as well admit that the controversial nature of his writings also appeals to my contrarian instincts; I have come to enjoy the challenge of presenting his ideas to audiences in which I know there are people who are prepared to dismiss them. In trying to be a good historian, I have been forced in explicating Hayek to confront my own commitments and biases, simply because I have been challenged so often to defend my readings. You can judge for yourself the extent of my self-delusion on this score.

Finally, Hayek's story is, well, just a plain good story. The people he knew and those he corresponded with, worked alongside of, and argued against include many of the most influential economists of the twentieth century. His is, in many ways, the story of the development of modern economics. But, because Hayek so frequently disagreed with those around him, his was a contrapuntal variation, parallel but contrasting, and the more intriguing for it. It is a great tale, one that I will relish recounting, and I suspect that my enthusiasm will shine through my analysis.

�

The plan of the book is straightforward. Part 1 is intended to provide background on the Austrian school. Given that the Austrian approach often differs from that of the mainstream within economics, few are likely to question the need for some sort of background. It may be appropriate, however, for me to offer some justification for the length of this part, for long it is.

Here we will meet Carl Menger, whose 1871 Principles of Economics became a founding document of the school (see Menger [1950] 1976). Because the book is a foundational document, we will explore in detail a variety of its themes. But, to understand the Austrian approach, it is not enough simply to review its proponents ideas. One must also recognize the fundamental fact that the Austrian school was a movement formed in opposition; indeed, its very name was given to it by its detractors and intended as a slur of sorts. We will, therefore, need to spend some time on the Austrians' first rival, the German historical school, and on the battles, methodological, political, and academic, that ensued as the two schools vied with one another for power, prestige, and, not least of all, academic positions. The Germans quickly subdued their Austrian competitors, although, in a way, the Austrian movement became more united for it: as the Viking motto goes, things that do not kill you outright tend to make you stronger. The rivalry between the two schools of thought, known as the Methodenstreit, or "battle over methods," was a defining element in the first twenty years or so of the Austrian school's existence. But it also obscured the many similarities between the two schools, similarities that are the more striking if one compares either school to what passes today for the mainstream of economics. Unraveling all of this is one of the chief goals of the first part of the book.

The battle over methods is, however, only part of the story. If the Methodenstreit provided the initial impetus for the growth and development of Austrian thought, new conflicts were to sustain it. The twin forces of socialism and positivism increasingly became, for the economists of Vienna in the first two decades of the twentieth century, the new opposition. Incredibly, all the forces and personalities came together in a seminar presided over by Eugen von B�hm-Bawerk at the University of Vienna in the years just before the war. Little did the Austrian economists realize the strength of their new antagonists or that the arguments that they were formulating were but a dress rehearsal for disputes that would echo through the coming century. Every one of the arrayed forces, from the positivists to the historicists, from the subjective value theorists to the socialists, would claim for his ideas the mantle of science. Hayek fought in the First World War, then went to university during the cold, hungry, and at times violent days that followed. He would encounter each of the contending sets of ideas during his student days, and the ghosts of Menger and Gustav Schmoller, as well as the larger-than-life influence of seminar participants like Ludwig von Mises and Otto Neurath, would leave their marks. But it would take nearly a lifetime of scholarly work before his particular vision of what it meant to do scientific economics would finally emerge.

In part 2 of the book I tell Hayek's story. If Hayek is sometimes a puzzle for later interpreters, he was also himself a puzzler. Schooled in a university tradition that permitted bright students to explore areas on their own, he was confident enough to plunge into new fields of study when he thought that they might help him discover solutions to his problems. The first puzzle that Hayek encountered had to do with the role of money in an economy. The existence of money obviously conferred substantial benefits�at the most basic level, it facilitates trade, thereby encouraging specialization and growth. Money is a puzzle because its manifold benefits come at a cost: money itself can destabilize an economy, as the hyperinflation that wracked the already-decimated economies of Germany and Austria following World War I amply demonstrated. Hayek's first puzzle was to provide a theory of how a monetary economy works, one that would also explain why at times it fails to work.

By the 1930s, Hayek was working on a second, related puzzle: a theoretical description of how a capital-using monetary economy, one with freely adjusting prices, might operate through time. Hayek was not, of course, the only one to tackle this question, and the answer offered by one of his rivals, a British economist named John Maynard Keynes, would be taken by many economists as definitive during the middle decades of the twentieth century. Keynes was not only a theorist, he was also a man of affairs, and he saw himself as saving capitalism. Others of his rivals among the economists, market socialists like Oskar Lange, thought the rescue mission chimerical and recommended more drastic remedies.

Whatever the many differences that separated Keynes from Lange might be, both of them saw a machine that had broken down when they looked at the economy. This provided another puzzle for Hayek, for, when he looked at the economy, he saw an organism that sometimes failed to work, to be sure, but at other times was able to coordinate the activities of millions of independent human beings. Why did almost everyone else of his day see the world so differently? Hayek began to wonder whether the theoretical tools that economists employed were to blame. He came to the conclusion that even the most advanced theories of the time failed to capture the central features of a market economy, in particular the way it was able to coordinate dispersed knowledge and allow that knowledge to be used by others. Hayek eventually came up with an alternative description that highlighted that fact.

It convinced no one, or virtually no one, at least not at first. And Hayek recognized immediately that changes in economic reasoning alone were not enough. If he was to convince his opponents, he would need to develop a more complete theory of society, to show how a host of social institutions might work together to allow free individuals to put their knowledge to use. This recognition led Hayek into all sorts of new areas of study and to new puzzles. Why did some institutions work better than others? Where did they come from? Could they be altered? At what cost?

Every step along the way, then, Hayek encountered puzzles and opponents who offered alternative solutions to them. But there was one constant: every one of his opponents claimed to be doing "real" science. This provided a final puzzle, one with which Hayek would deal all his life. What was science, after all? What distinguished it from pseudoscience? (This question also engaged one of Hayek's closest friends, the philosopher Karl Popper.) It was clear enough that, for much of the twentieth century, science was regnant. But Hayek felt that many of his opponents, all claiming the mantle of science, were but pretenders to the throne. He constantly encountered people who thought of themselves as objective scientists, people who held ideological views different from his and who immediately felt comfortable attributing their differences to the fact that, whereas they were scientists, he was an ideologue. Hayek developed criticisms of what he called scientism and also tried to explain how his opponents had come to hold their erroneous beliefs. In the process, like Carl Menger before him, he turned to the study of methodology to make his case. And, just as, earlier, he had found that the tools of equilibrium theory did not illuminate the workings of a market economy, he found that the methods of study endorsed by his scientistic antagonists obscured the workings of the complex, spontaneously ordered phenomena that social scientists seek to explain. He therefore proposed alternative methods.

In my intellectual biography of Hayek, then, I trace the development of Hayek's ideas, focusing on the development of his ideas regarding methodology as a unifying theme. Although certain methodological pronouncements were present in Hayek's early work, like most economists (this was also true of Menger) his first love was not methodology. Therefore, when, in his early work, Hayek wrote about methodology, he simply echoed some standard Austrian doctrines, doing so principally to make a case to a German audience for an Austrian approach to business cycle theory. It was only later, as he engaged in numerous debates over how well his and alternative theories captured what he saw as essential features of a market economy, that Hayek began to explore methodological issues more thoroughly. The end result was a distinctive vision of what was possible in the social sciences and of how social phenomena might best be studied.

Hayek's methodological views are of interest in their own right, but they also increasingly came to inform much of his substantive work. Accounts that leave out this part of his thought miss much of the rationale for why he took the specific positions he did. In tracing out the evolution of his ideas, I will try to show the relations between his methodological writings and his contributions to such areas as economics, political philosophy, and psychology. I will not try to provide a systematic and detailed exposition of all his theories. There already exist a number of excellent generalist accounts that provide overviews as well as others that deal with specific aspects of his thought. On the other hand, my book does not presuppose a knowledge of Hayek's work; indeed, it is intended to be accessible to readers who are neither economists nor historians. I also hope that those who wish to undertake a more systematic study of Hayek's thought will, after reading my book, both understand his broader vision and know where in his massive oeuvre to look for specific ideas.

I call the middle part of the book "Hayek's Journey." The title is meant not so much to draw attention to the physical journeys that he took, from Vienna to London to Chicago and beyond�although they too are part of the tale to come�as to emphasize Hayek's intellectual voyage. Where Hayek began was with the Austrian presuppositions, but, after decades of study, where he ended up was in a place that was unique. I hope to offer a plausible account of the many twists and turns that the road to that unique place took. There are, of course, different stories that could be told. More to the point, different stories have been told, and, although some of them complement my account, others clearly compete with it. I will address some of these alternative interpretations, but, to keep to the main thread, I will do so in appendixes to the volume.

History is always like this, of course. It is always a negotiation between the present and our reconstructions of the past, between the evidence and our interpretations of the evidence, a struggle between contending plausible stories offered by different narrators whose own histories, perspectives, and agendas color their accounts. I have puzzled over Hayek's journey for a long time, and I believe the story that I am about to tell you, but I also know that the strength of my convictions matters very little. What perhaps matters most is that, in putting forward my account, I provide a clear target for those who will carry the interpretive task further. That is something that I have tried to do.

I should perhaps say a few words about where my book fits into the now enormous secondary literature on Hayek and on the Austrian school. When I started work on this project over ten years ago, not much had been written on the early history of the Austrian school. This has now been to a considerable extent remedied. Caldwell (1990) contains conference papers on Menger, English translations of some early work are provided in Kirzner (1994a), and Endres (1997) offers a book-length explication of some of the theoretical contributions of Menger, B�hm-Bawerk, and Wieser. The methodological positions of the founding fathers are analyzed in Cubeddu (1993) and Oakley (1997). There has also been a revival of interest in the thought of the German historical school, as documented in Peukert (2001).

Even in the light of the recent additions to the literature, I still feel that, in part 1, I am able to add considerably to our understanding of Hayek's predecessors and their effects on his thought. In particular, I have tried to emphasize the complex interplay of theory and methodology and to highlight the contending ideological, political, and academic rivalries that existed between the Austrians and their historicist, and, later, their positivist and socialist, opponents. This background would help shape Hayek's perceptions of, and responses to, his own opponents, from the American institutionalists to the assorted groups and personalities that he would encounter in England and beyond. An understanding of it will allow us to make better sense, I think, of the unique blending of perspectives and viewpoints that would emerge in his own thought, a blending that resulted in a thoroughly modernist critique of the scientistic pretensions of his age and yet simultaneously pointed toward some surprising (some might even label them postmodern) new directions.

Part 3 of my book contains two chapters. In the first, I review Hayek's journey, in the process trying my hand at assessing his legacy. Although I feel confident about the story I tell about Hayek's journey, I must confess that I feel less certain about my attempt at assessment. Writing that assessment was, for me, the scariest part of the book, for it required me to enter into regions well outside my own areas of expertise. (Indeed, part of the assessment involves pointing the reader toward newly developing literatures in diverse fields that may be read as part of Hayek's continuing legacy.) I have given dozens of talks about Hayek over the years. During the discussion periods that followed the talks, I discovered that people take very different things away from their readings of Hayek. Hayek wrote so much and in so many different areas that that is, perhaps, inevitable. I therefore recognize that my own assessment will equally inevitably be idiosyncratic, reflecting my own readings and interests. Still, I feel that this is something that I owe to the reader.

In the second chapter, one styled as an epilogue, I examine a final challenge that Hayek's work provides, a challenge to the discipline of economics. Hayek had a particular vision of the subject matter studied by economists and was critical of the methods that economists employed in their investigations. If Hayek was right, then some of the directions taken by the discipline in the twentieth century have been wrong. In this final chapter, I try to take those criticisms seriously and use them to reflect, as a historian of economic thought, on the development of economics in the century that has just passed.

Copyright notice: Excerpted from pages 1�20 of Hayek's Challenge: An Intellectual Biography of F.A. Hayek by Bruce Caldwell, published by the University of Chicago Press. �2003 by The University of Chicago. All rights reserved. This text may be used and shared in accordance with the fair-use provisions of U.S. copyright law, and it may be archived and redistributed in electronic form, provided that this entire notice, including copyright information, is carried and provided that the University of Chicago Press is notified and no fee is charged for access. Archiving, redistribution, or republication of this text on other terms, in any medium, requires the consent of the University of Chicago Press and of the author.

Released today from the U. of Chicago Press:

Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce J. Caldwell.

Buy it from Amazon.

416 p. (est.). 2003 Cloth $55.00sp 0-226-09191-0 2003

"Hayek's Challenge represents a career's worth of thinking and writing on F. A. Hayek's contributions to the social sciences. Because of the breadth and depth of Hayek's work, evaluating it or even summarizing it is a reach for anyone; yet, because of his own specialization in methodology and his willingness to delve into fields well outside his own, Caldwell is uniquely qualified to undertake the challenge. His book has to be judged a dramatic success. Hayek's Challenge should easily gain a reputation as one of the most and possibly the most significant contributions to the literature on F. A. Hayek." � Roger Garrison, author of Time and Money: The Macroeconomics of Capital Structure

"A highly original work. Caldwell's scholarship is impeccable, and in fact extraordinary. Written lucidly and eminently readable, Hayek's Challenge is likely to become one of the leading works in the field. It will be consulted again and again for the wealth of incidental information that it contains." � Israel M. Kirzner

Table of Contents
Acknowledgments
Introduction

I. The Austrian School and Its Opponents---Historicists, Socialists and
Positivists
1. Menger's Principles of Economics
2. The German Historical School
3. The Methodenstreit
4. Max Weber and the Decline of the Historical School
5. Positivism and Socialism

II. Hayek's Journey
6. Hayek in Vienna
7. Monetary Theory and Methodology
8. Hayek at the London School of Economics
9. Some Methodological Debates of the 1930s
10. "Economics and Knowledge" and Hayek's Transformation
11. The Abuse of Reason Project
12. Individualism and the Sensory Order
13. Rules, Orders and Evolution

III. Hayek's Challenge
14. Journey's End---Hayek's Multiple Legacies
15. Epilogue: A Meditation on Twentieth-Century Economics

Appendixes
Bibliography
Index

From the publisher:

Friedrich A. Hayek is regarded as one of the preeminent economic theorists of the twentieth century, as much for his work outside of economics as for his work within it. During a career spanning several decades, he made contributions in fields as diverse as psychology, political philosophy, the history of ideas, and the methodology of the social sciences. Bruce Caldwell -- editor of The Collected Works of F. A. Hayek -- understands Hayek's thought like few others, and with this book he offers us the first full intellectual biography of this pivotal social theorist.

Caldwell begins by providing the necessary background for understanding Hayek's thought, tracing the emergence, in fin-de-si�cle Vienna, of the Austrian school of economics--a distinctive analysis forged in the midst of contending schools of thought. In the second part of the book, Caldwell follows the path by which Hayek, beginning from the standard Austrian assumptions, gradually developed his unique perspective on not only economics but a broad range of social phenomena.

In the third part, Caldwell offers both an assessment of Hayek's arguments and, in an epilogue, an insightful estimation of how Hayek's insights can help us to clarify and reexamine changes in the field of economics during the twentieth century. As Hayek's ideas matured, he became increasingly critical of developments within mainstream economics: his works g ew increasingly contrarian and evolved in striking -- and sometimes seemingly contradictory -- ways. Caldwell is ideally suited to explain the complex evolution of Hayek's thought, and his analysis here is nothing short of brilliant, impressively situating Hayek in a broader intellectual context, unpacking the often difficult turns in his thinking, and showing how his economic ideas came to inform his ideas on the other social sciences.

Hayek's Challenge will be received as one of the most important works published on this thinker in recent decades.

Hoover seminar on Hayek-L -- Dec. 8 - Dec. 19

Ken Hoover will conduct an e-seminar between Monday, Dec. 8 to Friday, Dec. 19 on his book Economics as Ideology; Keynes, Laski, Hayek, and the Creation of Contemporary Politics on the Hayek-L email list.

Order the book from Amazon:

http://www.amazon.com/exec/obidos/ASIN/0742531139/ref=nosim/thefriedrhayeksc/

Table of Contents:

Preface: Left, Center, and Right in the 20th Century
Of Identities, Ideas, and Ideologies
The Pre-War World: Seeds of Struggle
World War I: Unresolved Conflicts
The Twenties: Government and the Market in Combat
The Thirties: Duel of Allegiances
World War II: Destruction and Deliverance
The Post-War World: Denouement
The Second Half-Century: From Ideas to Ideologies
Developmental Turning Points and the Formation of Ideology
The Oppositional Bind of Ideology
Identity, Ideology, and Politics

From the publisher:

"Economics as Ideology: Keynes, Laski, Hayek and the Creation of Contemporary Politics explores the lives and thought of three powerful theorists who shaped the foundations of the center, left, and right of the political spectrum in the 20th century. Noted scholar Kenneth R. Hoover examines how each thinker developed their ideas, looks at why and how their views evolved into ideologies, and draws connections between these ideologies and our contemporary political situation.

Similar in age, colleagues in academic life, and participants in the century's
defining political events, the story of Keynes, Laski, and Hayek is also the
story of how we in the west came to define politics as the choice between
government and the market, between regulation and freedom, and between the
classes and the masses."

About Ken Hoover:

Kenneth R. Hoover is professor of political science at Western Washington
University. His previous books include The Elements of Social Scientific Thinking, Ideology and Political Life, and The Power of Identity: Politics in a New Key. "

Ken Hoover's email address is: Ken.Hoover@wwu.edu

His web page is at: http://www.ac.wwu.edu/~khoover/

Advanced reviews:

"An important book and a fascinating, absorbing read."�G. C. Harcourt, Jesus
College, Cambridge University

"The idea is simply splendid. It does make supreme sense to construct a history
of theories of political economy in the 20th century around Keynes, Laski, and
Hayek and the three do, in fact, succeed one another in 'hegemony' as the
century unfolds. Inasmuch as Keynes and Hayek were interlocutors and rivals and duelists their relationship bears considerable drama and the fact that Hayek
appears to have had the last laugh makes for high irony. It is a major
achievement of this volume that Hoover never loses sight of the intellectual
stakes in these debates." � James Scott, Yale University

"Economics as Ideology is a most engrossing book. It tells an important tale of
the development of economic thinking through the stories of three giants of
political economic thought. Lives intersected at the nexus of theory and
practice told in a compelling, even dramatic, narrative makes for better reading
than a novel. I kept wanting to know how it was going to turn out--even though I
knew the general contours from the start. The book offers important background
for understanding economic thinking as it has evolved. It will be greatly
prized." � Sanford F. Schram, author of Praxis for the Poor: Piven and Cloward
and the Future of Social Science in Social Welfare

"I enormously enjoyed reading Economics as Ideology. The tradition of parallel
and interacting biography is small but distinguished. Hoover adds a further
dimension with his examination of the role of opposition, and his investigation
of the link between social situation, individual circumstances, and thinking." �
Rodney Barker, London School of Economics

"This is a very credible work of prodigious scholarship, with frequent keen
analyses and insights, and written in a lively, attractive style." � Kenneth
Dolbeare, editor of American Political Thought

Related papers:

"IDEOLOGIZING INSTITUTIONS: Laski, Hayek, Keynes, and the Creation of Contemporary Politics" by Kenneth Hoover, Journal of Political Ideologies, February, 1999, 4 (1), 87-115. On the web at:

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Hayek, Stiglitz, and Michael Powell by Arnold Kling. Kling argues that FCC Chairman Michael Powell is Hayekian, while most regulators are Stiglitzian. Quotable:

Hayek would have the government tolerate messy competition. His point is that with the optimal outcome unknown, government resolution of issues shuts off the learning process that market competition provides.

Stiglitz sees the messiness in real-world economies, and he claims to have the right solution in every case. ..Stiglitz's outlook is that markets are imperfect, but he is not. Where Marx offered dictatorship of the proletariat, Stiglitz would give us dictatorship of the Nobel Laureate. Between the two, we might be safer with Marx.

Kling's interactive blog discussion of the matter can be found here.

"If the triumph of the New Right could be blamed on one person, that villain might be Austrian economist F.A. Hayek .. " -- In These Times takes on our hero and draws some lessons for leftists.

Hayek on the web in China at SinoLiberal.com.

It ships in November. Get your advance copies for Christmas and help support PrestoPundit and the Hayek Center. Bruce Caldwell -- an economic thought historian -- is the leading Hayek scholar in America.

Brad De Long has a provocative reply to my remarks on Hayek and democracy. Check it out. Basically De Long is suggesting that Hayek would have favored an armed coup in Britain by a band of oligarchs -- which, in my humble opinion, is nonsense .. and on the edge of irresponsibility to suggest. Did Hayek in his polemical writings ever exaggerate? Yes, in his crankier moods, obviously. Did he ever advocate or favor armed overthrow of the British government and the British constitution? -- oh please!

On a brighter note, in the comments section Chirag Kasbekar has some further intelligent remarks -- which have the added advantage of having something to do with Hayek's own actual ideas and opinions.

More on De Long's mischaracterization of Hayek's views on democracy from Chirag Kasbekar:

You're being a little silly, and needless to say, unfair to Hayek ...

1. I agree with Greg Ransom that you miss Hayek�s point about �liberal� (that is, limited) democracy as opposed to �majoritarian/egalitarian� democracy � a la Dahl, etc. I don�t think you would find him ever criticizing democracy, but always �unlimited democracy� and �extreme democracy�.

See Gus diZerega, �"Equality, Self-Government, and Democracy" Western Political Quarterly, now The Political Research Quarterly, Summer, 1987. (http://www.dizerega.com/equal.htm)

This is a critique of Dahl that is remarkably close to Hayek�s own critique. Gus� critique has been acknowledged by Dahl�s own students as one of the best available. But Dahl has refused to respond to it.

In fact, it�s ironic that you cite slavery against Hayek. His main point is to argue that something like slavery can come about if democracy is not limited by liberalism.

This is Hayek�s point about democracy (The Constitution of Liberty, pp.107-108):

"Democracy is, above all, a process of forming opinion. Its chief advantage
lies not in its method of selecting those who govern but in the fact that,
because a great part of the population takes an active part in the formation
of opinion, a correspondingly wide range of persons is available from which
to select... It is in its dynamic, rather than in its static, aspects that
the value of democracy proves itself... The ideal of democracy rests on the
belief that the view which will direct government emerges from an
independent and spontaneous process. It requires, therefore, the existence
of a large sphere independent of majority control in which the opinions of
the individuals are formed."

Brad De Long is reading Hayek -- but none too closely. Hayek distinguishes between liberal democracy bounded by the rule of law -- and unlimited democracy bounded by nothing. De Long completely ignores a distinction which is fairly easy to understand. Why? Lord knows. Anyway, here is De Long, and his "criticism" of a straw-Hayek (a criticism which ignores the central purposes which Hayek does find in democracy -- and which can be found repeatedly in Hayek's work, if the objective is scholarship, and not political demagoguary):

But last night I ran into a passage that makes me wonder whether Hayek in his inner core believed that democracy had any value -- even any institutional value -- at all. It came on pp. 171-2 of Friedrich Hayek (1979), Law, Legislation and Liberty: The Political Order of a Free People vol. III (Chicago, Il.: University of Chicago Press: 0226320901):

"Egalitarianism is of course not a majority view but a product of the necessity under unlimited democracy to solicit the support even of the worst. It is by the slogan that 'it is not your fault' that the demagoguery of unlimited democracy, assisted by a scientistic psychology, has come to the support of those who claim a share in the wealth of our society without submitting to the discipline to which it is due. It is not by conceding 'a right to equal concern and respect' to those who break the code that civilization is maintained."

Now it is certainly true that of the trio "Prosperity, Liberty, Democracy," Hayek puts prosperity first and liberty second--or, rather, that freedom of contract needs to be more closely safeguarded than freedom of speech, for if there is freedom of contract then freedom of speech will quickly reappear, but if there is no freedom of contract than freedom of speech will not long survive. But the passage above makes me wonder whether democracy has any place in Hayek's hierarchy of good things at all.

That isn't end of De Long's non sequiturs, but enough for here.

UPDATE: And here is my rather heated posting to De Long's comments section:

Balderdash. This is ridiculous Brad, and shame on you for pretending otherwise. If you want to know what purposes Hayek finds for democracy he tells you -- repeatedly in many places. But I'm not sure that is your interest or your purpose. If it were you would start at by pointing out up front that Hayek make a big deal of a distinction between liberal democracy bound by the rule of law and unlimited democracy bound by nothing. I can't believe that you've read what you claim to have read and still somehow you failed to absorb this rather simple distinction, which Hayek hammers home again and again in his work. Hayek values liberal democracy most highly and has little use for unlimited democracy -- a position shared by Madison, Jefferson, Adams, and the other folks who created America. This is fairly commonplace stuff. Why pretend otherwise -- and why smear Hayek in such a blantantly unscholarly fashion -- and in a way that mimics the worst of the worst .. false carnards against Hayek coming from the far left on the fringes of the Internet. What web sites have you been reading to get this stuff?

You see, I've run into this idiotic non-sense again and again on the internet, and there is more of it in the comments section of De Long's post. Sadly, and predictably, some of it comes out of the universities, where the Left finds it impossible to deal with either truth or the actual ideas of actual people. Smear is instead the favorite game in town -- and the appalling lack of intellectual diversity in the university make its an easy to get away with. Sad, terribly frustrating .. and more than a little pathetic.

Hayek biographer Alan Ebenstein is out with his new examination of Friedrich Hayek and this ideas titled Hayek's Journey: The Mind of Friedrich Hayek. The book is a follow up to his earlier Friedrich Hayek: A Biography, the first English language biography of the great man -- which is now out in paperback.

Hayek-L'er Rafe Champion fisks George Orwell.

Ronald Hamowy remembers Friedrich Hayek and Murray Rothbard.

Sabine Herold, the 21 year old conscience of France, is boning up on her Hayek. Bruce Bartlett suggests she'll need that -- and all the luck she can get.

Conference Program:

"Dewey, Hayek and Embodied Cognition: Experience, Beliefs and Rules"
-- 3rd Annual Symposium on the Foundations of the Behavioral Sciences

American Institute for Economic Research
Division Street, Great Barrington, Mass.
July 18-20, 2003

Keynote Speaker:

Gerald Edelman �Naturalizing Consciousness: From Hard Science to Human Science� [Abstract]

Participants in Plenary Sessions:

Antonio R. Damasio (TBA))

Jean-Pierre Dupuy �Intersubjectivity and Embodiment�

Rodolfo Llin�s (TBA)

Douglass C. North �Understanding the Process of Economic Change�

Richard Posner �The Epistemological and Policy Views of Dewey and Hayek�

John R. Searle (TBA)

Vernon Smith �Constructivist and Ecological Rationality in Economics� [Abstract]

Invited Participants:

Bruce Caldwell �Hayek, The Sensory Order, and Psychology�

Thomas C. Dalton �Value, Belief and Inquiry: A Deweyan Perspective� [Abstract]

Kurt Dopfer and Jason Potts �Embodied Cognition in an Evolving Economic Environment: Genetic Invariants and Adoptable Rules�

Edward Feser �Naturalism, Evolution and Hayek's Philosophy of Mind� [Abstract]

Geoffrey M. Hodgson �Instinct and Habit before Reason: Dewey, Hayek and Veblen�

J. Rogers Hollingsworth �Are There Regularities in the Cognitive and Organizational Properties which Facilitate Major Discoveries in Basic Science�

Mark Johnson �How the Embodied Mind Thinks Disembodied Thoughts�

Elisabeth Kreck� and Carine Kreck� �Law and Experience�

Howard Margolis �Merging Rational Choice with Cognitive Arguments: Some Evidence from Public Goods Experiments�

Bart Nooteboom �Elements of a Cognitive Theory of the Firm�

Mark Perlman �Competing and Complementary Authority Systems� [Table 1][Table 2][Abstract]

John Pickering �Signs and Beliefs: Hayek's Inquiry and Biosemiotics� [Abstract]

Salvatore Rizzello �Knowledge as a Path-dependence Process: Microfoundations and Economic Implications�

Frank X. Ryan �Neuroscience and Dewey�s Critique of Behaviorism�

Ulrich Witt �The Cognitive Underpinnings of the Generation of Novelty�

Contributed Papers:

Timothy L. Adamson �Judgment as Measurement: The Flesh of Thought� [Abstract]

Avner Ben-Ner and Massoud Stephane �The Salience of Different Attributes of Identity: Experimental Evidence� [Abstract]

Harry Binswanger �Consciousness: An Objectivist Approach� [Abstract]

Stephan Boehm �Computation, Markets and Central Planning: The View from Hayek and Searle� [Abstract]

Paul Bohan Broderick �Should Neuroscience Lead to a Reconstruction in Philosophy?� [Abstract]

William N. Butos and Thomas J. McQuade �Sensory Order and Other Natural
Classifier Systems� [Abstract]

Adam Gifford, Jr. �Meaning, Action and Uncertainty� [Abstract]

Nancy J. Holland �The Knot of Nature: Behavioral/Perceptual Holism in Dewey, Edelman, and Merleau-Ponty� [Abstract]

Elias L. Khalil �The Two Faces of Beliefs: Newcomb Paradox, Book of Job, Chain Letters, and Other Paradoxes of Rationality� [Abstract]

Janet T. Landa and Michael T. Ghiselin �The Bioeconomics of Folk and Scientific Classification� [Abstract]

Gregory P. La Blanc �Embodied Cognition, Psychoneuroimmunology, and the Placebo Response� [Abstract]

Richard N. Langlois �Embodied Cognition and the Economics of Organization� [Abstract]

David Mitch �Professional Education as Embodied Cognition: Legal and Medical Training in Historical Perspective� [Abstract]

Julie A. Nelson �Freedom, Reason, and More: Feminist Economics and Human Development� [Abstract]

Stephen O'Sullivan �The Knot of Nature: What Tought? Whose Mnd? Pragmatic and PenomenologicalResolutions of the Problem of Mental Individuation� [Abstract]

Harold Wolozin �The Unconscious and Emotion in Economic Decision-making:
Convergent Voices� [Abstract]

For registration and submission of papers, visit

www.brc-aier.org

or contact:

Elias L. Khalil, BRC, AIER, PO Box 1000, Great Barrington, MA 01230
TEL: (413) 528-1216; Email: elk@aier.org; FAX: (413) 528-0103

Samuel Brittan examines the thinking behind Britain's decision to say "not now" to the Euro. And he adds this:

Behind the technical discussion there is a more human point. It is what Friedrich Hayek called in his Nobel Prize Address, "the pretence of knowledge". By pretending we know more about the characteristics of the economy than we really do we actually throw away the more modest improvements which our limited knowledge makes possible. It took us the closing decades of the 20th century to learn this lesson; I hope we do not spend the first few decades of the new century in unlearning it.

(via Institutional Economics).

Andrew Stuttaford has a Hayek story:

All this chat about Hayek is the perfect excuse (particularly as I am stuck in a near deserted hotel in the middle of nowhere) to tellonly story about the great man. It was some time in the late 1970s and the venue was (appropriately or inappropriately enough) the Keynes Auditorium (or Hall, or something like that) in Cambridge. Hayek was the speaker and most of the audience, stuck in the orthodoxies of that era, was either astonished, appalled or both.

At the end of his talk (which was, needless to say, quite brilliant) Hayek bravely asked for questions. Brimming with indignation and bubbling with bile, one man rose to his feet and asked �that�s all very well, Professor Hayek, but don�t you believe it is possible to have an egalitarian society.�

�Oh yes, � replied Hayek, �you can have an egalitarian society � but only at the lowest possible level.�

It's a story of Liberals vs. bureaucrats and statists battling for the soul of Europe in John Gillingham's European Integration 1950-2002: Superstate or New Market Economy?, reviewed by Barry Eichengreen. From the review:

Enterprise privatization and market deregulation thus became the economic tools du choix. A single European market free of barriers to the internal movement of merchandise, capital, and labor -- Hayek's vision -- came to be seen as a solution to the problems of stagflation and high unemployment. A continental market would allow European firms to reap the benefits of economies of scale and scope, and the need to attract footloose factors of production would force national governments to remove barriers to production and innovation. A single currency, a creation with both symbolic and real value for integrating markets and intensifying competition, capped the process in 1999.

But this finale proved anticlimatic for the Hayekians, for it neither reduced the reach of the state nor led to the devolution of regulatory functions to regional and local governments. To the contrary, the creation of the single market starting in 1986 led to a greater role for the European Commission, the EU's proto-executive in Brussels. With the benefit of hindsight, this result is unsurprising. The cross-border spillovers of policies grow more pervasive as markets are integrated, creating a logic for centralizing the regulatory functions required for the operation of a single market. Even a classical liberal economy must have a trade policy and a competition policy, and an integrated international market can have only one of each. As Gillingham notes, Jacques Delors, the EU's head technocrat from the mid-1980s through the early 1990s, saw this as a convenient opportunity to expand the responsibilities of the European Commission and to turn it into the EU's central policymaking organ.

Jerry Muller's The Mind and the Market: Capitalism in Modern European Thought has been reviewed in Foreign Affairs by Sheri Berman. Snippet:

Muller has written a lively and accessible survey of what dozens of major European thinkers have thought about capitalism. The value of the book lies less in its contribution to the literature on any particular individual than in its gathering together in one place of a wealth of information on figures from Burke, Smith, and Voltaire to Schumpeter, Keynes, and Hayek. Muller's masterful sketches of intellectuals from across the political spectrum help put today's battles over globalization in proper historical perspective. He reminds us just how venerable many of the current antiglobalization movement's concerns actually are, and thus how they need to be understood and addressed not as the consequences of recent policies or conditions but rather as inherent in the dynamics of capitalism itself. What becomes painfully clear in the process is how far the level of debate has fallen in recent decades and how impoverished and narrow contemporary thought about the market has become ...

Hegel believed that in order to lead a truly full and satisfying life, individuals needed a sense of identity, a feeling of being connected to some larger whole beyond themselves. In the precapitalist world these connections were provided by things such as religion, tradition, and shared cultural norms, but in modern society Hegel thought they would have to come from institutions such as the state and the civil service.
Indeed, perhaps the only defender of capitalism whom Muller finds largely unmoved by the critiques is the twentieth-century Austrian liberal Friedrich Hayek (which undoubtedly explains a large part of his contemporary appeal). Hayek had little sympathy for talk of virtue or "higher ends" and was skeptical of any state role in controlling the market or in fostering so-called public goods. Instead, he praised precisely what was often criticized, the emergence of a society in which individuals were as free as possible to do as they pleased and states served merely as "pieces of utilitarian machinery intended to help individuals in the fullest development of their individual personality." But Hayek is the exception that proves the rule, for he was honest enough to recognize that the libertarianism he championed would not necessarily be very popular because it would be too personally and socially destabilizing for many to handle. Rather than try to alleviate such concerns, however, he was content to suppress them and accept limitations on democracy in the process -- an aspect of his thinking that receives little attention from his admirers today.

A Michael Kinsley article on how American's reacted to losing one of their basic freedoms in the 1970's has inspired a discussion of price controls and the modern history of the freedom movement over at The Volokh Conspiracy. Worth quoting:

Nixon's [price control] edict was the precipitating event for the founding of the Libertarian Party by a group of activists who thought the Republican Party had finally become entirely hopeless. Whatever has become of the LP since then, I think that fact was and is important. Largely under Nozick's influence, academics often talk as if the defining issue for libertarians is opposition to welfare or poverty relief by the state. (Not that Nozick himself thought this; he talked about it more because it was an interestingly hard case.) But Republicans had been administering and expanding the welfare state for years; and Friedman and Hayek and their followers had been arguing about extent and incentives, but didn't believe that state-directed poverty relief was wrong per se and both Hayek and Friedman advocated a particular form of it. It was the assertion of control over the price system that broke the activists' back.

The discussion was started by this quotation from Kinsley:

The notion that the government could tell everyone from General Motors to a baby-sitting teenager what they could charge�and did so�seems shocking in retrospect, at least to me. There was no real national emergency. It was part of a cynical re-election strategy to gun the economy while holding inflation temporarily in check. But at the time, controls were not just accepted but popular. When they disappeared, even those (like me) who had opposed them found it strange and, at first, unnatural. You mean, anyone can just charge whatever they want? How does that work? The analogy isn't perfect. The right to set your own price isn't as profound as the right to express your own political opinion. But it is, if anything, even more a part of every citizen's daily life. And yet when they took it away, we freedom-loving Americans didn't even miss it.

Over time it's simply not true that the right to set your own price is not as profound as your right to express your own opinion -- and this is what folks quickly were learning in the early 1970s. It was a lesson learned not in the least instance by the economists and bureaucrats around Nixon. After having taken a crash-course in the significance of prices to the functioning of an economy - and the hopelessness and destructiveness and blocking this function from occuring -- many of these folks found their thinking changing decisively. Among these you might include George Schultz. Schultz not only played a key role the administration of prices control -- he also helps bring them to an end. As Schultz puts it, "A line of talented people were involved, and even with all that talent we couldn't make wage and price controls work. They're terrible. So at least maybe we proved the negative." Only a few years later, Schultz was supporting Ronald Reagan -- who ran on a plank promising to end the last vestiges of Nixon's failed price control program -- controls on energy prices. The move which finally ended the "energy crisis". Another lesson learned by economist aligned with both major parties. A lesson, by the way, which Hayek had been teaching since his first successful conference paper on housing price controls. And it was no accident that Hayek's work on the coordinating role of prices was rediscovered to wide acclaim during the 1970s. Without the failed monetary policies of stagflation and the failed microeconomic policies of wage and price controls, one wonders whether Hayek would have won the Nobel Prize.

Friedrich Hayek's important essay "Competition as a Discovery Procedure" is now available on the web (pdf). This version of the essay is a translation from a lecture given in 1968 at the U. of Kiel. It differs in several small ways from the essay published in Hayek's New Studies.

Roger Garrison explains it all for you -- an outline of his current LSE lecture series on Hayek, Keynes, Friedman and a macroecon which takes capital goods seriously.

Roger Garrison explains why the false Krugman/Phelps "overinvestment" account of the Mises-Hayek boom-bust cycle gets everything wrong in the sense that it leaves out everthing which is important in the theory, including its central causal mechanism -- sort of like a criticism of the Darwinian theory of evolution which betrays a complete lack of awareness of the causal mechanism of natural selection (Hayek-L posting):

Fiona writes: >>But, on another issue, I wonder why the great aversion to the term "overinvestment" if Austrians regard I/GDP increasing out of sync with consumers' preferences as a part of their story?<<

The aversion stems from the popular misinterpretation of the Austrian theory as a theory that's all about overinvestment, a characterization that overlooks the malinvestment emphasized by the Austrians. The malinvestment is the first phase of the self-reversing process. In my own view, the Austians need not deny--and in fact should affirm--that there is overinvestment during the boom. What they should deny is that overinvestment is the whole story .. As understood in the context of a macroeconomy, it would seem that while malinvestment is unique to the Austrian theory, both malinvestment and overinvestment (along with overconsumption) are essential to it. Malinvestment without overinvestment would allow the counter-movements to set in early, nipping the boom in the bud. Overinvestment (along with overconsumption) without malinvestment would allow the economy to experience a temporarily high growth rate, moving first beyond and then back to the PPF but without there being any intertemporal misallocations requiring painful adjustments that can send the economy inside the frontier. Only with both prefixes (mal- and over-) in play do we have (1) a problem of intertemporal misallocation and (2) time for that problem to fester before the internal conflict of market forces eventually turns boom into bust.

Roger Garrison has an important new paper on Overconsumption and Forced Saving
in the Mises-Hayek Theory of the Business Cycle. His abstract includes the following teaser:

unperceived-or only dimly perceived-shortcomings in F. A. Hayek's theorizing may help explain why Hayek was largely ineffective in responding to his critics and why he failed to produce a timely and effective critique of Keynes's General Theory.

Hayek and the Flat Tax. Hayek has a note on the history of the case against progressive taxation on p. 516 of The Constitution of Liberty. He notes that by 1950 there were hardly any economists still around who stood against progressive taxation "on principle" (Hayek lists only Mises & Lutz). The original "scientific" case for progressive taxation using the logic of marginal valuaion was made by Hayek's teacher, Friedrich Weiser. The arguments of Weiser, those also of Edgeworth, and additional political considerations all but swept the field among professional economists.

Hayek suggests that the (intellectual) tide against the case for progressive taxation began to turn only with the work of D. Wright in 1948 and most especially with that of W. Blum and H. Kalven, Jr. in a 1952 U. of Chicago Law Review article. Hayek's own case against progressive taxation comes down to three principle considerations: 1) progressive taxation is an arbitrary abridgement of an individual's right to equality before the law -- individuals are victimized by the political process without any boundary in justice upon confiscation, such as would be provided by the usual standard of equality before the law. 2) Progressive taxation "creates a state of things in which one class imposes on another burdens which it is not asked to share, and impels the State into vast schemes of extravagance, under the belief that the whole costs will be thrown upon others" (Hayek quoting W. Lecky) 3) progressive taxation leads to a violation of the principle of "equal pay for equal work" for non-salaried individuals, resulting in the perversity across the tax year that "the more the consumers value a man's services, the less worthwhile will it be for him to exert himself" (F. Hayek, 1960, p. 317).

Comments from folk familiar with the work of Wright, Democracy and Progress and Blum and Kalven, The Uneasy Case for Progressive Taxation, would be most welcome. More later.

Donald Devine, the vice-chair of the ACU is in the midst of a dustup with Rush Limbaugh and National Review. Devine seeks to pin his foes by claiming the mantle of Hayek:

National Review could not comprehend the most important modern insight about government, made by modern conservatism's icon and Nobel laureate, F.A. Hayek. He recognized that the principle reason for the ultimate failure of national central planning was the inability of the government to process widely disbursed, localized and situation-specific information effectively in complex social settings. The magazine could not understand why that limitation would also apply to the U.S. trying to administer a world empire.

The neo-cons are pseudo-cons, according to Jim Pinkerton. A snippet:

Once upon a time, conservatives opposed God-playing hubris. The Austrian-born economist Friedrich Hayek, for example, wrote a book titled "The Fatal Conceit." And what was that "fatal conceit"? It was the idea that "man is able to shape the world around him according to his wishes." Hayek was no enemy of progress - which is achieved, he argued, through the trial-and-error experiments of the marketplace. His criticism was aimed at central planning, which sought progress instead by overturning the hard-learned lessons of human nature.

To Hayek, the idea that experts in a marbled ministry could gather the information necessary to make good decisions was the most lethal of follies. And the same centralization that strangles economic growth, he maintained, also strangles free expression, eventually turning technocrats into tyrants.

Hayek's conservatism was based on caution and prudence. The new conservatism, often called "neoconservatism," is radically different; it should be called pseudo-conservatism. It's based on the profoundly hubristic unconservative idea of creating heaven on earth, of playing God. To be sure, the pseudocons proclaim the purest of motives, but they should be judged on their results, not their rhetoric.

Jason Soon has blogged some notes on liberalism and utilitarianism, Hayek and Rawls.

Major Hayek News. Edelman, Damasio, Searle, Margolis, Pickering, Posner, North, Searle, Caldwell, Feser, Hodgson, Witt, etc. all together, all discussing Dewey, Hayek and Embodied Cognition. WOW. Go here for the details.

"The implications of his thesis are hideous" and his book is "filled with every fallacy known to the study of logic" ... Herman Finer, visiting professor of Government at Harvard on Hayek's The Road to Serfdom, June 5, 1945 in the Harvard Crimson. Over 100 years of the Crimson are now available on line. (Tip via Brad DeLong).

Dennett was recently interviewed by Reason magazine. Here he dances around a discussion of Hayek's notion of cultural filtering intermediated by group success:

Reason: One of the arguments the social theorist Friedrich Hayek made is that cultures that have better rules tend to spread while cultures that have worse rules don�t, and one of the ways you find out whether something is good or bad is, pretty crudely, which cultures are winning over other cultures.

Dennett: This is a claim that I�m cautiously skeptical of. But if you couch it very carefully, I think there is something to it. Change the topic from moralities to, say, scientific theory. There�s no question, contrary to some of the blather you see, that good, coherent, true scientific theories in general tend to win out over second-rate, formless, incoherent theories. We�ve improved our understanding of the world over the years. The good theories spread. Bad theories don�t. Well, not always. Sometimes they get a foothold, and they�re sort of like diseases and they�re hard to eradicate, but those are the exceptions. I think it�s an uphill battle for falsehoods to get established.

Dennett's new book is Freedom Evolves.

Some sound reflections from Peter Roff on the transition to a sustainable liberal order in Iraq;

Those who will be dispensing advice to the post-war government must not repeat the mistakes U.S. advisers made in the late 1980s and early 1990s. Assisting the transitions as Soviet-style systems collapsed throughout Eastern Europe and Russia, they emphasized the need for expanding and securing political rights over the need to codify economic rights.

Friedrich Hayek, the Nobel Prize-winning Austrian economist, correctly recognized that the free-market capitalist system is the only one through which individuals can intelligently coordinate a society. The sudden appearance or even the imposition of political rights is not sufficient to guarantee peace, liberty or democracy.

"We have seen millions voting themselves into complete dependence on a tyrant," Hayek once wrote, adding that this led many of his generation to understand "that to choose one's government is not necessarily to secure freedom."

"The ideal of democracy rests on the belief that the view which will direct government emerges from an independent and spontaneous process. It requires, therefore, the existence of a large sphere independent of majority control in which the opinions of the individuals are formed," Hayek said.

The large independent sphere he describes can only be achieved where the right of citizens to acquire, amass and transfer property exists and is protected, hence the need for an emphasis on economic rights in a reborn Iraq.

As they say, read the whole thing.

Thomas Pynchon has a new introduction to George Orwell's 1984. A snippet:

What is clear from his letters and articles at the time he was working on 1984 is Orwell's despair over the postwar state of "socialism." .. Orwell seems to have been particularly annoyed with the widespread allegiance to Stalinism to be observed among the Left, in the face of overwhelming evidence of the evil nature of the regime. "For somewhat complex reasons," he wrote in March of 1948, early in the revision of the first draft of 1984 , "nearly the whole of the English left has been driven to accept the Russian regime as 'Socialist,' while silently recognising that its spirit and practice are quite alien to anything that is meant by 'Socialism' in this country. Hence there has arisen a sort of schizophrenic manner of thinking, in which words like 'democracy' can bear two irreconcilable meanings, and such things as concentration camps and mass deportations can be right and wrong simultaneously." We recognise this "sort of schizophrenic manner of thinking" as a source for one of the great achievements of this novel, one which has entered the everyday language of political discourse - the identification and analysis of doublethink.

I've always been convinced that this theme in Orwell was much inspired by his reading of Hayek's chapter eleven, "The End of Truth" in The Road to Serfdom. Orwell read and reviewed Hayek's book in 1944, during during the period in which he was writing 1984. The title of Pynchon's piece in the Guardian is "The Road to 1984". I've never seen a detailed scholarly investigation into this matter -- if only such work had any prospect of being done in our contemporary universities.

UPDATE: Amazingly, the Amazon.com Sales Rank for Hayek's The Road to Serfdom continues strong at # 1249. Even more amazingly, Orwell's 1984 is ranked # 382. And of course, there are other editions of both books which are selling other additional copies.

Richard Epstein has an interesting little piece on Hayek and Orwell. Epstein's bottom line:

In a sense, the contest is between Hayek the tortoise and Orwell the hare. The hare gets most of the publicity; but in the long-run the tortoise supplies us with a more profound appreciation of what makes the commercial marketplace tick.

Also this:

Hayek was not able to offer any coherent theory of what a sensible government should do, or how it might improve the situation.

Unfortunately, Epstein doesn't go beyond a judgment here. My own is that Hayek offers a great deal on how to improve things (e.g. always make sure government programs have room for competitions of various sorts -- an example Hayek jumped on was the school vouchers idea). My guess is that Epstein is not going so much on actual indepth consideration of Hayek's particular ideas and proposals, but is going instead (mostly) on faded memories of the (mostly mistaken) impressions of a hot-in-the-blood rationalistic libertarian.

When Epstein says the following, he is (in my own well considered judgment) completely off-base:

Instead of explaining what sensible rules might determine the proper scope of government activities, Hayek, especially toward the end of his life, often lapsed into a mystical reverence in which he treated �spontaneous order� created by uncoordinated individuals, usually in commercial trades, as a complete alternative to government action.

This is simply the false "Hayek myth" that seems impossible to kill. Yet it's a sure bet that the easy myth will beat hard thinking and onerous research every time. Can you tell I'm a bit tired of the constant repetitions of Hayek myths like these?

An excellent article by Richard Ebeling on Mises and money policy. Once again, it looks like Hayek came to develop an idea whose kernel can be found earlier in Mises:

In essence, Mises was suggesting in 1919 what Friedrich Hayek proposed over fifty years later in the 1970s, that in place of and as an escape from their own government's monetary system and inflationary policies, people should be free to have a "choice in currency" of either gold or the use of any variety of alternative national currencies.

According to Ed Feulner, the internet is taking over the spot once taken by Hayek and friends:

The most exciting development .. has been the proliferation of computer power. In the past, conservatives had to rely on the writings from the great minds - Friedrich von Hayek and Russell Kirk and Milton Friedman - as the primary sources of great argument and solid facts. But for the last five or eight years, the previously restricted access to facts has been pried wide open. Now, most anybody with a personal computer and access to the internet finds cutting-edge theory and rich databases literally at their fingertips. They can personally review not just the arguments, but the actual numbers pertaining to those arguments.

The interviewer is Rush Limbaugh.

John Blundell comes out in favor of a free market in money. Blundell rather likes Hayek's utterly subversive thinking on the issue:

Friedrich Hayek, argued in Denationalise Money that the politicians and their agents, the central banks, should forfeit their monopoly. His assertion is that honesty or reputation would be tested daily on the exchanges.

We can see in half the nations of the world the local state monopoly currencies are little more than cruel jokes. People prefer to trade US dollars or possibly gold coins. In some territories the US dollar has displaced the central bank.

Inflation in the UK - how I wish it was termed "dilution" - is bobbing along just beneath 3 per cent. Far better than Edward Heath's 20 per cent but at our modest rate prices still double every 23 years. So, here is a huge disagreement in the centre of what we might call liberal thinking. Should the state have the power to coerce us and if so should it be forced to obey monetary rules? Gordon Brown's innovation of giving the Bank of England autonomy and inflation targets is something of a mirage.

If he reduces or raises taxes sharply the Bank of England has no levers. Despite the fanfares the euro has been less than a triumph. The quiet success on the Continental monetary scene is the Swiss franc. Opt-outs are important. They are a truth test.

I like and admire Milton Friedman. I hold his scholarship in awe. Yet there is a great curiosity that the leading disciple of the capitalist ideal has built his main reputation in advocating a state monopoly - even if it is urged to be plain-dealing and open in its policies.

Hayek's subversive arguments appear to me to be rather stronger. Professor Lawrence White of New York University and Professor Michael Fry of Brown University have published acute pieces of research which retrieve Scotland's lost memory of how banks can succeed as issuers of notes and coins. I doubt if a single MSP has read these studies or could even articulate the arguments.

I used to imagine private money would emerge as a response to monetary chaos. Now policy makers have recovered their continence inflation has lost much of its bite. Yet can you imagine any of the respectable representatives of the capitalist cause proclaiming they could easily supply a more trustworthy currency than the state? The great intellectual defeat of the socialist ideal is nearly complete but they still hold a few fortresses where alternatives are crushed.

I'm not suggesting central banks be abolished, only that they have to surrender their power to compel. There is a scandal so familiar we no longer see it as a scandal - that the civil service and public sector employees enjoy "index-linked" pensions; that is to say they can opt out of the inflation imposed on the rest of us.

Now the appreciation that inflation is purely a monetary disease is almost universally agreed we might be bold and see companies creating their own monies.

Suzanne Fields has Castro's number, with a little help from Alan Kors & F.A. Hayek:

In a provocative essay building on F.A. Hayek, in the current journal of the Social Philosophy and Policy Foundation, Alan Kors, professor of history at the University of Pennsylvania, compares Marxism and socialism to Nazism and fascism. The concentration of power over all life in a centrally planned society, he writes, always attracts and rewards those who are the "morally worst," the most ruthless and the most submissive. Communist leaders don't come to power as a "necessary evil" in a transitional process toward an ideal goal. They exert absolute power for personal gain. Those who rebel are inevitably treated as Castro treats his dissenters.
"No cause, ever, in the history of all mankind," writes Mr. Kors, "has produced more cold-blooded tyrants, more slaughtered innocents, and more orphans than socialism with power."

In a provocative essay building on F.A. Hayek, in the current journal of the Social Philosophy and Policy Foundation, Alan Kors, professor of history at the University of Pennsylvania, compares Marxism and socialism to Nazism and fascism. The concentration of power over all life in a centrally planned society, he writes, always attracts and rewards those who are the "morally worst," the most ruthless and the most submissive. Communist leaders don't come to power as a "necessary evil" in a transitional process toward an ideal goal. They exert absolute power for personal gain. Those who rebel are inevitably treated as Castro treats his dissenters.
"No cause, ever, in the history of all mankind," writes Mr. Kors, "has produced more cold-blooded tyrants, more slaughtered innocents, and more orphans than socialism with power."

The Future of Freedom

I've just ordered The Future of Freedom: Illiberal Democracy by Newsweek International reporter Fareed Zakaria. The book adds lots of contemporary detail from around the world on Friedrich Hayek's theme that there is a world of difference between liberal democracy and, well, illiberal democracy. The book has been reviewed in The Wall Street Journal among others publications. For a list of reviews, click here.