Abstract
At first sight and in terms of explicit references, the relationship between Hayek and the early Freiburg School seems to have been one of mutually benign neglect. It took several decades before the “Hayekian challenge” was fully understood in Freiburg; in a way one could even argue that the challenge arrived in Freiburg only with Hayek himself in 1962. This delay can mostly be explained by different foci of attention. Hayek’s evolutionary economics and his classical-liberal social philosophy centers around the problem of private, dispersed knowledge. The (early) Freiburg School’s economics and its ordo-liberal social philosophy centers around the problem of private, concentrated power. This difference of perspective has consequences and can partly be explained by the different intellectual sources the proponents were drawing upon, and the different political struggles they were engaged in.
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Notes
Regarding proponents of the Freiburg tradition, I have to be highly selective and focus mainly on its most important founding figures, Walter Eucken and Franz Böhm. Goldschmidt and Wohlgemuth (2007) provide a comprehensive collection of classical texts of more than 25 authors within the core and at the fringes of the ordoliberal tradition from the 1920s until today, together with systematic introductions to their work.
See the early programmatic text “Our Task” by Böhm et al. (1936/89).
See Eucken (1940/50: 324): “In the great debate between Menger and Schmoller both parties were wrong, nor was the truth somewhere in the middle between the two. Neither Menger’s dualism, of which Schmoller perceived the danger, nor Schmoller’s pure empiricism, the failure of which Menger foresaw, does justice to economic reality”.
Austrians, for their part, were not much concerned with changing or compromising their position. Only Schumpeter, who always seemed to have had great respect for Schmoller, tried, with his original brand of economic sociology, to formulate his own research program as a combination of history and theory (see Shionoya 2000). But was Schumpeter really “Austrian”?
This is not quite true, however. Until 2002, Gerold Blümle and before him Karl Brandt were reading history of ideas. And also Hayek, when in Freiburg, regularly read history of ideas! Hayek’s followers, Erich Hoppman, Manfred Streit and Viktor Vanberg also kept puzzling their students and colleagues with their expertise in the history of ideas – without, of course, being adherents of the Historical School.
One could with some justification argue that the dominance of Schmoller’s school started with the foundation of the Verein für Socialpolitik (1872) and ended sometime between Schmoller’s death in 1917 or the oppression of free science after 1933 (see Kurz 1989 and Hagemann 2001 for overviews). On the relevance of the “Methodenstreit” based on a more friendly reading of the Historical School, see also Häuser (1988). There, I also found the quote by Solow: “No one would remember the old German Historical School if it were not for the famous Methodenstreit. Actually, no one remembers them anyway. There must be a lesson in that.”
Computopia-fallacies remained fashionable in later works of Lange (e.g. 1965/94). Even Nobel-Laureate Kenneth Arrow (1974: 5) adhered to this nirvana: “Indeed, with the development of mathematical programming and high-speed computers, the centralized alternative no longer seems preposterous. After all, it would appear that one could mimic the workings of a decentralized system by an appropriately chosen centralized algorithm.”
With his famous “Road to Serfdom”, Hayek (1944) later opened a second line of attacks on socialist proposals with his political warning of creeping totalitarianism, stressing his early prediction that partial attempts of economic planning “will necessitate further and further measures of control until all economic activity is brought under one central authority” (Hayek 1935: 134).
In the trilogy on Law, Legislation and Liberty (Hayek 1973; 1976; 1979) Eucken is not mentioned at all. Franz Böhm, is given only one small note referring to his notion of a “private law society” (1966). In the “Constitution of Liberty” (Hayek 1960) only two articles of Böhm are mentioned in footnotes.
Eucken was invited to the first international conference of liberals that Hayek called to the Swiss Mont Pèlerin in 1947 (see Hayek 1983/92: 191 f.). Hayek also invited him to give a series of lectures at the London School of Economics in 1950 (see Eucken 1951/52), during which Eucken unexpectedly died. Hayek (1951/67: 199) stated that this “sudden death … robbed the liberal revival of one of its really great men”; later Hayek ( 1983/92 189) even calls Eucken “probably the most serious thinker in the realm of social philosophy produced by Germany in the last hundred years”.
The calculation debate is referred to in only one longer footnote in Eucken (1940/50: 333f) – although he devotes half of the book to a comparison of centrally administered and market economies. Later, Eucken (1952/90: 76f, 99ff, 136ff) fills several pages discussing the ideas of Lange and Barone without mentioning Hayek’s contribution. Even Mises is mentioned only once in an editor’s note to the posthumously published book. Some negligence may be due to the fact that foreign literature was not available during the Nazi régime and the difficult after-war-period (Hayek’s “Road to Serfdom” remained censured even in the American Sector). However, Hayek’s early contributions to the calculation debate are part of a collection of essays (edited by Hayek 1935) which Eucken himself refers to; but Eucken, strangely, only deals with the contributions of Barone.
Hayek, in his biographical sketch, notes that “the real root” of his ideas lays “with Ferguson and these peoples” (Hayek 1994: 140). Concerning his political affinities, he reports a meeting with the British Prime Minister: “The last time I met her she used the phrase, ‘I know you want me to become a Whig; no, I am a Tory’. So she has felt this very clearly.” (ibid.: 141).
Consequently, Hayek and the ordoliberals equally ejected Keynesianism both as a theoretical system and as a political tool-kit.
Eucken seems to have come under the influence of his student Leonhard Miksch (e.g. 1949) when he adopted the idea of regulation according to preconceptions of an “as-if competition”.
Böhm’s account of the origins of the private law society is quite in line with Hayek’s philosophy of the law; see e.g. Böhm (1966/89: 46). Böhm (1953/60: 97) also joins Hayek when he argues that at least the elementary principles of the law are not “made”, but “found”. Hence it is justified to argue that Böhm “strikes a different, evolutionary note” (Sally 1996: 243).
In his “‘Free’ Enterprise and Competitive Order” Hayek (1948) still argued very similarly to the ordoliberals’ critique of classical liberalism, and proposed a “policy which deliberately adopts competition, the market, and prices as its ordering principle and uses the legal framework enforced by the state in order to make competition as effective and beneficial as possible - and to supplement it where, and only where, it cannot be effective” (ibid.: 110). He goes on to discuss unemployment insurance, town planning, patents, trade-marks, cartel building contracts, limited liability corporations and what today are called “incomplete contracts” opting for special legal provisions. Further indications of a somewhat “constructivist” Hayek are found by Vanberg (1986).
Hayek (1983/92: 193f) states that he early became an admirer of Erhard who “deserves far greater credit for the restoration of a free society in Germany than he is given for either inside or outside Germany.” He adds:” Erhard could never have accomplished what he did under bureaucratic or democratic constraints. It was a lucky moment when the right person in the right spot was free to do what he thought right, although he could never have convinced anybody else that it was the right thing.” For a more thorough account of Erhard’s policies and his links to ordoliberalism, see Commun (2003).
Hayek never held the chair that once was Walter Eucken’s, as is often incorrectly reported.
This does not mean that proponents of the Mises-Rothbard-Hoppe School cannot also be found amongst German libertarians; but they work mostly in libertarian think-tanks and have abandoned their quest for an academic career.
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Wohlgemuth, M. The Freiburg school and the Hayekian challenge. Rev Austrian Econ 26, 149–170 (2013). https://doi.org/10.1007/s11138-013-0221-0
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DOI: https://doi.org/10.1007/s11138-013-0221-0