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Book Review: Hayek

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Hayek: A Commemorative Album
compiled by John Raybould (London: Adam Smith Institute, 1999); 120 pages; $19.95.

I first met Friedrich A. Hayek in 1975, the year after he received the Nobel Prize in economics. I had had the exceptionally good fortune to be awarded summer fellowships for 1975 and 1977 at the Institute for Humane Studies when their offices were located in Menlo Park, California. For both of those summers, Hayek was a resident scholar at the Institute. I was 25 years old in 1975 and to me Hayek seemed really old at the age of 76. I was positive that he was going to die at any moment. (He actually lived until the age of 92 and published five more books during his lifetime!) So I set myself the task of going into his office at the institute every day, trying to “squeeze” out of him every bit of information that I could about the older members of the Austrian school, the intellectual life in Vienna during the years between the two world wars, and his economic and political battles with Keynes in the 1930s.

Thinking back on those two summers, I’m sure that Hayek must have thought I was a terribly brash, irritating pest. And no doubt I was. At every meeting in his office, however, I found him knowledgeable, wise, and thoughtful. He could vividly recollect those happier days of his youth before the First World War, when the world was still in the sunset glow of the epoch of classical liberalism. And he would recall those exciting days of the early 1930s, when he was the leading opponent of Keynes in the English-speaking world, and it was still in doubt whether the economics of the future would be Keynesian or Austrian.

But most of all, he was patient and understanding and listened to each of my questions, politely answering them as if it was for the first time and as if I was his equal and not an immature, somewhat ill-mannered, undergraduate who presumed to know where Hayek had gone wrong on various issues. I last saw him in September 1981 at the University of Freiburg in Germany, where he was a professor emeritus. He greeted me as an old friend, though I’m sure he hardly remembered who I was. I shall always recall with deep affection and appreciation his kindness and patience. He epitomized what I like to idealize a Nobel Laureate should be.

This year — 1999 — marks the centenary of Hayek’s birth. Conferences have been organized in his memory in many countries, all of them bringing attention to his incalculable importance in reviving and fostering the rebirth of classical-liberal ideas and the ideal of the free-market economy in the post-World War II era. If there is any justice in history, Friedrich Hayek’s name will be inseparable from the restoration of freedom in the 21st century.

Also marking his 100th birthday is a fascinating volume entitled Hayek: A Commemorative Album, compiled by John Raybould, who has put together a large and rare collection of photographs and documents with which he tells the story of Hayek’s life, ideas, and influence on 20th-century economic and political thought.

Hayek was born into a scholarly family and had an interest in the natural sciences from an early age, owing to his father’s research into botany. He might very well have specialized in some area of the natural sciences if not for the First World War and its immediate aftermath. He joined the Austrian army in 1917 and fought on the Italian front. When war ended in November 1918, he enrolled as a student at the University of Vienna. The disaster of the war, the political collapse of the Austro-Hungarian Empire, the postwar inflationary experience, and the growth of socialist movements throughout Europe led him to take an interest in the social sciences at the university. At first torn between psychology and economics, he ended up focusing on the latter after studying with leading members of the Austrian school, including Friedrich von Wieser. Hayek earned two doctoral degrees, one in law and the other in political economy.

But the greatest influence on Hayek was Ludwig von Mises, with whom he worked after graduation in an office set up to handle financial aspects of the peace treaty between Austria and the victorious Allied powers. Besides Mises’s direct personal impact on Hayek’s thinking, the most profound influence came from reading Mises’s 1922 book, Socialism, which destroyed any of his remaining sympathy for socialist ideas.

After a brief time doing further study in New York, Hayek became the first director of the Austrian Institute for Business Cycle Research in 1926. This became the springboard for his career. In 1931 he was invited to deliver a series of lectures at the London School of Economics; the lectures caused such a sensation that he was invited to become a permanent member of the faculty there. The lectures were published as Price and Production, in which he argued that the Great Depression had been caused by monetary manipulation of interest rates by central banks and that the only lasting cure was to allow the market to freely reestablish equilibrium through unimpeded competition.

He soon became embroiled in a heated debate with Keynes, in which Keynes argued for monetary and fiscal “stimulus” to end the depression, instead of Hayek’s free-market solution. Only in the late 1930s did the economic theorists and policymakers turn completely to Keynes’s formula, marking the triumph of the Keynesian Revolution.

At the same time, Hayek began amplifying Mises’s criticisms of socialism, explaining that a developed system of division of labor is just too complex to be controlled and directed through any form of central planning. Only competitively formed market prices can successfully coordinate all the activities of the multitudes of market participants. This argument culminated in Hayek’s most influential book, The Road to Serfdom, published in 1944, in which he showed not only that planning could not work but inevitably ran the risk of degenerating into political tyranny.

In 1950, Hayek moved to the University of Chicago, during which time he wrote one of the greatest treatises in defense of freedom, The Constitution of Liberty. As Raybould points out, this was a time during which Hayek was almost forgotten or treated with derision as a political “dinosaur.” But in 1974, after winning the Nobel Prize, Hayek once again became a central figure in political and economic debates, ending up influencing Margaret Thatcher and her “conservative revolution” in Great Britain. He also acted as a catalyst for the formation of a series of free-market think tanks around the world that have helped make classical-liberal ideas legitimate once again.

Raybould often allows Hayek to tell his own story with extensive quotes in which Hayek recounts his life and ideas. The photographs have been selected with great care and include many covering Hayek’s career that have never been published before. The volume is a fitting tribute to the memory of one of the towering intellectual figures of our time.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).