Abstract
Friedrich Hayek’s ideas played a fundamental role in all major debates over economic policymaking throughout his lifetime and beyond. They were developed in a precise historical context and were the result of the intellectual influence of his teachers and colleagues. Unfortunately, they are surrounded by the following misconceptions: his economics was atomistic; he believed markets to be perfectly efficient and government to play no role in a market economy; and he thought any government intervention will lead to totalitarianism. Due to their importance, these ideas demand careful consideration to go beyond the misconceptions in order to engage them fully and employ them to make sense of Hayek’s ideas and how they apply to our world today.
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Notes
- 1.
See my 2017 Liggio Lecture “Context, Continuity and Truth,” https://www.atlasnetwork.org/news/article/context-continuity-and-truth-theory-history-and-political-economy for a discussion of what I believe to be the intellectual bankruptcy of the “hermeneutics of suspicion” in the history of ideas, and how this is a problem for both the left and the right. Science and scholarship, I would contend, advance in a culture of criticism, not as often portrayed in a culture of skepticism for this very reason.
- 2.
See along these lines not only Farrant and McPhail’s (2014) discussion of “transitional dictatorship,” but Meadowcroft and Ruger (2014) and the discussion of the relationship between liberty and democracy in the works of Friedman , Hayek, and Buchanan . In these discussions, however, we must always keep in mind that there exists an “institutional possibility frontier” that any historically situated society also must take as a given constraint in time that consists of the existing stock of human capital and technology. There are, in essence, constraints on the constraints of our choosing. This makes for some very complicated issues in the historical examination of pathways to political and economic development. See Boettke et al. (2005) and the references therein, but also the work by North et al. (2009) and Acemoglu and Robinson (2004). As my colleague Pete Leeson likes to say, the rules in any given society might tell us what is permissible, but the constraints tell us what is possible.
- 3.
Keynes famously commented on Hayek’s The Road to Serfdom in a letter dated June 28, 1944, reprinted in John Maynard Keynes, Activities 1940–1946: Shaping the Post-War World: Employment and Commodities, The Collected Writings of John Maynard Keynes Vol. 27 (1980, 385).
- 4.
On the analytical importance of thinking about background and foreground and how shifting those results in radical shifts in perspective, see Richard Wagner’s brilliant Mind, Society and Human Action (2010, 1–26) and his idea of bivalent logic for economic inquiry.
- 5.
“When I look back to the early 1930s, they appear to me much the most exciting period in the development of economic theory during this century.” It was, Hayek continues, “a high point and the end of one period in the history of economic theory and the beginning of a new very different one.” He is referring there to ascendancy of Keynesian macroeconomics that treated “the economic process in terms of aggregates” rather than focus on the “structure of relative prices,” and thus was unable to provide an explanation of “changes in relative prices or their effects.” This would require, Hayek suggests, economists to someday go back to the 1930s and “take up where we left off then” to make progress in economic theory once again ([1963] 1995, 49; 60; 49).
- 6.
This letter can be found in the Fritz Machlup papers at the Hoover Institution Box 43, Folder 15 and is reprinted in Volume 13 of Hayek’s Collected Works (2010, 312–313).
- 7.
Well known as a Keynesian, Nicholas Kaldor had begun his career working within the Austrian tradition. His first published paper in 1932 was an “Austrian” interpretation of the trade cycle in “The Economic Situation of Austria,” Harvard Business Review 11(10): 23–34. He later translated, with Honor Croome, Hayek’s Monetary Theory and the Trade Cycle in 1933. See also Klausinger, Hansjörg. 2011. “Hayek and Kaldor: Close Encounter at LSE.” History of Economic Ideas 19 (3): 135–163.
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Boettke, P.J. (2018). Clarifying Some Misconceptions About Hayek. In: F. A. Hayek. Great Thinkers in Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-41160-0_1
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