Happy Birthday Friedrich Hayek!
On 8 May 1899, in Vienna, Friedrich Hayek was born. He would become, in Robert Skidelsky’s words, “the dominant intellectual influence of the last quarter of the twentieth century” and he remains influential among liberals and libertarians today.
From the 1940s to the 1970s, Hayek had — almost alone — kept alive the spirit of personal and economic freedom that had been crushed by the chaos of the Second World War and the Keynesian government interventionism that followed it. Such interventionism, he argued, was based on a fatal conceit, the conceit that we knew far more than we in fact did. Governments and their planners simply could not collect and process all the information needed to run an efficient economy, because that information is dispersed, diffuse, incomplete and essentially personal. The socialist dream, therefore, would always be frustrated by reality; and as socialists struggled to control that reality, individuals would increasingly find their freedoms being stripped away. It was a road to serfdom.
More than anyone, Hayek showed how unplanned societies could be highly rational and collaborative, their conventional practices containing a ‘wisdom’ that we may not even understand, never mind be able to manipulate. The price system, for example, allocated resources to their most urgent uses, with a speed and efficiency that conscious government planning could never achieve.
Hayek explained how such spontaneous orders (which include not just markets but language, justice and much else) were the product of social evolution rather than of rational thought. Indeed, trying to replace them with some planned ‘rational’ alternative was likely to end in disaster. His thought influenced a whole generation of economists, including many who, like he, would win the Nobel Prize, such as Milton Friedman, George Stigler, Maurice Allais, James Buchanan, Vernon Smith, Gary Becker and Ronald Coase. A 2009 study by David Skarbek showed that only Kenneth Arrow was cited more often in the work of other Nobel economists – an indicator of his influence on the profession.
Hayek’s ideas also enthused a whole generation of intellectuals, writers and think-tankers who in turn disseminated his ideas even more widely. Among them were Henry Hazlitt, journalist and co-founder of the Foundation for Economic Education; Ralph (later Lord) Harris and Arthur Seldon who ran the Institute of Economic Affairs; F A (“Baldy”) Harper who founded the Institute for Humane Studies, Eamonn Butler and Madsen Pirie who set up the Adam Smith Institute; and many others.
Through this process, Hayek’s ideas came to have a real political effect too – something unimaginable for much of the half-century following the Second World War. Politicians such as Margaret Thatcher and Ronald Reagan owed much to his thinking. So did those, like Mart Laar and Vaclav Klaus, who became the political leaders of Eastern Europe after the fall of the Soviet system — which Hayek’s thought did much to undermine. “No person,” concluded Milton Friedman, “had more of an influence on the intellectuals behind the Iron Curtain than Friedrich Hayek.”
Hayek’s ideas remain a guide and inspiration to lovers of individual freedom all over the world. Think tanks promote his view; student groups name themselves after him; college programmes spring up in his name; journalists cite him; academics admit their intellectual debt to him; his views are analysed in books, papers and blogs. Millions of ordinary people owe to Hayek their enjoyment of the fruits of economic and personal freedom, even though they may not realise it; but then as Hayek pointed out, knowledge is not always obvious.
Eamonn Butler is author of Friedrich Hayek: The Ideas and Influence of the Libertarian Economist (Harriman Economics Essentials).