TAKING HAYEK SERIOUSLY

Friedrich Hayek discusses inflation, trade cycles and Lord Keynes. (mp3)

Liberty, March 2005, Vol. 19, No. 3.

Excerpts:

Friedrich Hayek (1899�1992) was among the greatest political and pure philosophers of the 20th century. His most famous work, "The Road to Serfdom," published in 1944, is an anti-socialist classic. His later works, "The Constitution of Liberty" and "Law, Legislation and Liberty," are rightly considered permanent contributions to political philosophy. His works in pure philosophy, extending from "Economics and Knowledge" in 1936 through studies published in the 1940s through early 1980s, are permanent contributions to human understanding. Hayek's was one of the greatest minds of the 20th century.

The state of his final work, "The Fatal Conceit," published in 1988, is something of a mystery. The degree of involvement by the work's editor, William Warren Bartley, is not commonly known, troubling many scholars. The first indication that something might be amiss in the published version came from Jeffrey Friedman, editor of Critical Review, in 1998. "In 1986," Friedman wrote, "I served as research assistant to W.W. Bartley . . . the 'editor' of the book . . . [T]he products of Bartley's labors were allegedly reviewed by Hayek. . . . The extent of Hayek's supervision of the project . . . is called into question by the appearance in the book, verbatim, of passages I submitted to Bartley as suggestions for how Hayek might consider updating his critique of constructivist rationalism. Among these are . . . passages mentioning Marcuse, Habermas, and Foucault. Since Hayek had not previously referred to these figures in print, I was surprised to learn, upon the appearance of the book, that he would have accepted without alteration discussions of their work written by someone he had never met."1 ..

The general editor of Hayek's collected works, Bruce Caldwell, notes "interpretive puzzles surrounding Hayek's last book," and speculates that "comparison between the finished and earlier manuscript version of 'The Fatal Conceit' might . . . help us to decipher what Hayek originally had in mind."4

Fortunately, it is now possible to engage in such comparison. In 2003, Hayek's longtime, final secretary, Charlotte Cubitt, deposited her extensive records with the Hoover Institution at Stanford University. These records demonstrate that Bartley's role in the published "Fatal Conceit" was significant, far more significant than has heretofore been known.

He worked on "The Fatal Conceit" for seven years, from mid-1978 through mid-1985. In about August 1985, he fell ill, never to recover. He thereafter did no work on it. "The Fatal Conceit" was published in late October 1988, more than three years after Hayek last worked on it. During this period, it was substantially remolded by editor Bartley. Though Hayek reviewed some of Bartley's work, he did not participate in any substantial way in the changes � he was too ill to do so. His mental capacities had diminished precipitously with his 1985 illness.

When "The Fatal Conceit" was published, it included a preface, purportedly written by Hayek and dated April 1988, that ended with Hayek expressing his "deep gratitude . . . to Professor W.W. Bartley . . . who � when I fell ill for a time, just prior to the completion of the final draft � took this volume in hand and prepared it for the publishers."6 It is not known whether Hayek or Bartley wrote this closing to the preface.

Readers of "The Fatal Conceit" were given a misleading impression of Hayek's recent participation in the book by the concluding sentence of the preface and its 1988 dating. The preface conveyed the impression that Hayek had recently been involved in writing "The Fatal Conceit," that Bartley's role in it was minimal, and that Hayek had at least somewhat recovered from his illness. None of this was the case. That Bartley himself intentionally misled readers about Hayek's recent participation in the book and inaccurately stated his own role is inescapable from his editorial foreword to the work, in which he wrote that "'The Fatal Conceit' . . . is fresh from Hayek's hands."7

Actually, during the more than two and a half years that Bartley worked on "The Fatal Conceit," from about late 1985 through the first half of 1988, he changed the work substantially. He rearranged, reorganized, and retitled chapters. He introduced much extraneous material, deleted paragraphs and sentences, added others, and rewrote many more. He inserted paragraphs from individuals who reviewed the manuscript and added citations (including to his own work). He changed terminology and emphasis. He apparently composed the conclusion of the work on page 140, Hayek's final word ..

There was little reason for most of the changes Bartley made. In a July 26, 1985, letter from Hayek to Bartley, just before Hayek fell ill and was unable to continue working, he wrote to Bartley that he had completed all but one chapter of the first part of "The Fatal Conceit," which he hoped to finish in the next few weeks. Instead of bringing this final chapter to completion (chapter 6, of seven chapters in the first part, for which good material existed that Hayek had written), and publishing Hayek's introduction and six chapters of the first part, Bartley rewrote the first part of "The Fatal Conceit."

Unfortunately, as a result of restrictions imposed by Hayek's literary heirs, it has not yet been possible to quote from much of Hayek's correspondence � particularly with respect to sensitive topics such as "The Fatal Conceit" � and it is only possible to paraphrase his and Bartley's correspondence. Nonetheless, as a result of the Cubitt donation to the Hoover Institution, it is now possible to verify the information presented here. Curiously, prior to Cubitt's deposit, little of the relevant correspondence between Hayek and Bartley was in the Hayek archive at Hoover, nor were Hayek's drafts of "The Fatal Conceit" there.

In the editorial foreword of "The Fatal Conceit," Bartley wrote that the published book was at one point "a large work in three parts; then the whole was compressed into the short book . . . presented here."10 This was misleading. While "The Fatal Conceit" was intended as a three-part work, the book as published was not a compression of the three parts. Rather, it was almost exclusively the first part. The latter two parts were intended for separate publication, which has not occurred.

During the seven years Hayek worked on "The Fatal Conceit," there were two basic versions of it, which has caused some confusion. Hayek worked on the first version from about 1979 until the summer of 1982, when a group of economists from the Mont Pelerin Society met with him to discuss this manuscript. According to James Buchanan, one of the participants: "I reveal no secrets when I state that the participants were skeptical, even after two-days discussion, about prospects for the circulated material to be transformed into a publishable book."11

For the next three years, Hayek then worked on the second version of "The Fatal Conceit," particularly its first part, which is what Bartley used to produce the published volume. Hayek's own second version of "The Fatal Conceit" was not a casually written document, but one on which he worked for years and that he anticipated would be his last and perhaps most important book ..

Hayek expressed conflicting views regarding Bartley's work on "The Fatal Conceit." It should be emphasized that Hayek's mental state fluctuated during his last years. At one point, he sent a memo to a few friends saying he had suffered a nervous breakdown. In a Jan. 24, 1986, letter to Bartley, he noted great fluctuations in his state. From at least 1987 on, he experienced significant diminution of memory, being unable to remember individuals with whom he had, even recently, been in frequent correspondence. His son, Larry, once remarked to me that his father was "out of it" during a considerable part of his last years. At the same time, Hayek experienced periods of mental comprehension and lucidity, though his physical state prevented him from work.

In a Dec. 11, 1986, letter to Bartley, Hayek told Bartley that Bartley's initially revised version of "The Fatal Conceit" should not be published during Hayek's lifetime, and that when it did appear, it should be under both their names. According to Cubitt, when Hayek received a copy of the published "The Fatal Conceit," he told her that Bartley's changes were so significant that he hardly recognized it ..

Bartley's approach to editing was perhaps best described in a Jan. 16, 1988, letter to Leif Wenar, another of Hayek's research assistants, who was to edit the latter two parts of "The Fatal Conceit." In this correspondence, also at the Hoover Institution, Bartley encouraged Wenar to edit Hayek's work on a massive scale: to compose introductions, conclusions, connective material, and summaries on Hayek's behalf, to link the second and third parts to the first part Bartley was working on, and to compose its conclusion ..

Clearly, a scholarly version of "The Fatal Conceit," including all three parts and consisting of Hayek's final drafts for as many chapters as possible, should be prepared and published. Fortunately, most � perhaps all � of these chapter drafts are now at the Hoover Institution. Hayek's goal in writing "The Fatal Conceit," as in so much of his other work, was to free men from misconceptions about the free society made possible through private property. A new edition of his last great work would be a valuable step in realizing this goal.

Alan Ebenstein is author of "Friedrich Hayek: A Biography" and "Hayek's Journey: The Mind of Friedrich Hayek."

Philosopher Elizabeth Anderson -- How Not to Complain About Taxes (III): "I deserve my pretax income". Quotable:

Today's post is a tribute to F. A. Hayek. I was going to commend Hayek earlier, for nailing the economic case against comprehensive planning, but fellow-blogger Don Herzog beat me to it ..

The claim "I deserve my income," as applied to an individual's pretax income in free market economies, has considerable intuitive force. If true, it suggests a powerful moral claim against taxation for redistributive purposes, on the intuitively plausible supposition that a just economic order ought to ensure that people get what they morally deserve.

But, however intuitive these claims may be, they are unjustified. In two of his important works of political economy, The Constitution of Liberty (see esp. ch. 6), and Law, Legislation, and Liberty (vol. 2), Hayek explained why free market prices cannot, and should not, track claims of individual moral desert ..

Hayek was right. It might sound like a compelling idea, to make sure that people receive the income they morally deserve. But orienting the economy around this goal, assuming it is achievable at all (and there are principled doubts about that), would doom us to poverty and serfdom. It would abolish capitalism, along with its chief virtues. It isn't worth the draconian costs.

3. Several implications follow from Hayek's insights into the nature of capitalism.

(a) The claim "I deserve my pretax income" is not generally true. Nor should the basic organization of property rules be based on considerations of moral desert. Hence, claims about desert have no standing in deciding whether taxation for the purpose of funding social insurance is just.

(b) The claim that people rocked by the viccisitudes of the market, or poor people generally, are getting what they deserve is also not generally true. To moralize people's misfortunes in this way is both ignorant and mean. Capitalism continuously and randomly pulls the rug out from under even the most prudent and diligent people. It is in principle impossible for even the most prudent to forsee all the market turns that could undo them. (If it were possible, then efficient socialist planning would be possible, too. But it isn't.)

(c) Capitalist markets are highly dynamic and volatile. This means that at any one time, lots of people are going under. Often, the consequences of this would be catastrophic, absent concerted intervention to avert the outcomes generated by markets. For example, the economist Amartya Sen has documented that sudden shifts in people's incomes (which are often due to market volatility), and not absolute food shortages, are a principal cause of famine.

(d) The volatility of capitalist markets creates a profound and urgent need for insurance, over and above the insurance needs people would have under more stable (but stagnant) economic systems. This need is increased also by the fact that capitalism inspires a love of personal independence, and hence brings about the smaller ("nuclear") family forms that alone are compatible with it. We no longer belong to vast tribes and clans. This sharply reduces the ability of individuals under capitalism to pool risks within families, and limits the claims they can effectively make on nonhousehold (extended) family members for assistance. To avoid or at least ameliorate disaster and disruption, people need to pool the risks of capitalism.

UPDATE: Reactions to Anderson:

Brad DeLong:

The keen-witted Elizabeth Anderson drops the Hayek Bomb on those who believe that they "deserve" their income.

Roland Patrick:

Misunderestimating Don't-Call-Him-Fritz -- Hayek that is. Not surprisingly we have a mis-use of knowledge in liberal economist bloggerdom:

"The claim "I deserve my income," as applied to an individual's pretax income in free market economies, has considerable intuitive force.... But... Hayek explained why free market prices cannot, and should not, track claims of individual moral desert...."

Those who actually know their Hayek see through this sophistry immediately, and ask: "Deserve my income, compared to whom?". And to that, Hayek answers; we can't possibly come up with an answer that undermines the claim of the individual to his own income. Because, as humans, we must be ignorant of the myriad details that went into the earning of that income ..

Bless Our Bleeding Hearts:

Left2Right's Elizabeth Anderson writes so thoughtfully that even the conservative replies to her ideas make sense. Hey, I'm always relieved when cons who aren't out of control Confederate States of America types make points that I can consider but disagree with .. I'm no economist, but it's just plain to me that unfettered capitalism can destroy human dignity and decency ..

Alex Tabarrok:

Elizabeth Anderson and other commentators misunderstand Hayek and in the process they fail to understand the sense in which market outcomes may be said to be just. Hayek argued that the concept of social or distributive justice was "empty and meaningless." Anderson tries to use this argument, which she explains well, to suggest that any idea of libertarian or free market justice must also be empty and meaningless. Hayek, however, did not argue against rules of just conduct, "those end-independent rules which serve the formation of a spontaneous order." Among such rules may be Nozickian or Lockean rules of voluntary exchange.

It's quite possible, for example, to be a good Hayekian and also to say that I deserve my income because it was acquired by just conduct, e.g. by production and trade. True, it is an accidental fact that I live in a time and place where my skills are highly prized. In this sense, I do not deserve my income (i.e. my income is in part a function of things beyond my control). But I do deserve my income in the sense that it was acquired justly and to take justly acquired earnings may be an injustice.

Matthew Yglesias:

I don't think arguments about people deserving things need to be taken very seriously. It's hard to make out what the concept is supposed to mean in this context. People deserve things relative to a system of social arrangements. If you promise to give me something, then I deserve to get that thing when you promised to give it to me. But abstracted away from any real practices, desert doesn't mean anything. But insofar as you feel like you need an argument about this, I think the argument from luck does about all the work you need.

Jim Henley:

The step that no one has managed to make is the one between arguing that people don't "deserve" their incomes/assets/property and establishing that someone else does deserve to dispossess them of same .. And why stop with incomes or property?

Ed Feser:

Since the publication of Robert Nozick�s Anarchy, State, and Utopia, if not earlier, libertarians have argued that taxation is morally problematic not because people deserve their income, but rather because they are entitled to it. One�s overall moral character is irrelevant to whether one ought to be able to keep the fruits of one�s labor, on this view; what matters is whether one got what one has fair and square, in accordance with the rules concerning the acquisition and transfer of property. Scrooge is entitled to his money even if he doesn�t deserve a nickel of it.

See also Jason Soon and Tyler Cowen.

Technorati is tracking the conversation in the blogosphere here.

REASON magazine has an interview with Bruce Caldwell, editor of the Collected Works of F. A. Hayek and author of Hayek's Challenge : An Intellectual Biography of F.A. Hayek.

FRIEDRICH HAYEK'S notorious 1981 interviews in El Mercurio (Santiago, Chile) have been translated from Spanish back into English by L'Institut Hayek. Part One of those interviews can be found here. Note well that you are reading a text which has been translated first from English into Spanish, and then more than 20 years later translated once again from Spanish back into English. THESE ARE NOT HAYEK'S OWN WORDS -- these are the efforts of translators to capture Hayek's meanings. Unfortunately, the original English text has been lost to history.

Let me cut directly to the section of these interviews which has been used by Hayek-haters in academia as a means for black-balling a life-time of work in several disciplines:

Q: Another sentence of Reagan's struck my attention: "If we look to the answer as to why, for so many years, we achieved so much, prospered as no other people on Earth, it was because here, in this land, we unleashed the energy and individual genius of man to a greater extent than has ever been done before." In other words, they had a system of liberty, and not an oppressive government. Why is it so difficult to achieve this sort of government in Latin America?

H: The difference lies in its having another tradition. The United States takes its tradition from England. In the 18th and 19th centuries especially, this was a tradition of liberty. On the other hand the tradition in South America, for example, is rooted basically in the French Revolution. This tradition lies not in the classical line of liberty, but in maximum government power. I believe that South America has been overly influenced by the totalitarian type of ideologies. And I regret to say that this includes a famous Englishman, the utilitarian Jeremy Bentham, who effectively believed in the deliberate organization of everything. This is obviously very far from the liberal English tradition of the Whigs. So the answer is that the United States remained faithful to the old English tradition even when England partly forsook it. In South America, on the other hand, people sought to imitate the French democratic tradition, that of the French Revolution, which meant giving maximum powers to government.

Q:What opinion, in your view, should we have of dictatorships?

H: Well, I would say that, as long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally I prefer a liberal dictator to democratic government lacking liberalism. My personal impression � and this is valid for South America � is that in Chile, for example, we will witness a transition from a dictatorial government to a liberal government. And during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.

Q: Apart from Chile, can you mention other cases of transitional dictatorial governments?

H: Well, in England, Cromwell played a transitional role between absolute royal power and the limited powers of the constitutional monarchies. In Portugal, the dictator Oliveira Salazar also started on the right path here, but he failed. He tried, but did not succeed. Then after the war, Konrad Adenauer and Ludwig Erhardt held initially almost dictatorial powers, using them to establish a liberal government in the shortest possible space of time. The situation called for the presence of two very strong men to achieve this task. And the two of them very successfully accomplished this stage towards the establishment of a democratic government. If you permit I would like to make a brief comment in this sense on Argentina.

Q: Why not?

H: I felt very disenchanted right from my first visit there, shortly after Peron's fall. At that time I talked with many officers from the Military School. They were highly intelligent persons. Politically brilliant, I would say among the most brilliant politicians in their country. For me it was a pity they did not make better use of this intelligence. I would have hoped they could have laid the foundations for a stable democratic government. And yet they did not. I do not know why they failed, in fact, but my impression is that they had the political ability and the intelligence to do so.

Q: Which means that you would propose stronger, dictatorial governments, during transitional periods ...

H: When a government is in a situation of rupture, and there are no recognized rules, rules have to be created in order to say what can be done and what cannot. In such circumstances it is practically inevitable for someone to have almost absolute powers. Absolute powers that need to be used precisely in order to avoid and limit any absolute power in the future. It may seem a contradiction that it is I of all people who am saying this, I who plead for limiting government's powers in people's lives and maintain that many of our problems are due, precisely, to too much government. However, when I refer to this dictatorial power, I am talking of a transitional period, solely. As a means of establishing a stable democracy and liberty, clean of impurities. This is the only way I can justify it - and recommend it.

UPDATE: On the topic of liberty and state control in Latin America, see now Alvaro Vargas Llosa, Liberty for Latin America : How to Undo Five Hundred Years of State Oppression.