Hayek and Education
Friedrich Augustus Hayek is one of the most respected – if seldom read – of the theorists who, whilst defending a particular concept of liberalism, from the basis of the discipline of economics – created the new political philosophy of “neo-liberalism.” Hayek has been particularly significant in the development of “Public Choice Theory,” which attempts to apply neoclassical economics to political life. In this way Hayek is a very important character behind the reform of education in many countries of the world: many of his views are now regarded as orthodox in sociology and education.
Class and culture: Hayek was born in Vienna on May 8, 1899. He was the son, grandson, and greatgrandson of men who were both scholars and public servants. His family belonged to the lower ranks of the gentry – Hayek as a member of the minor aristocracy would have been entitled to the honorary “von” except that the Austrian empire which lent such titles their legitimacy ceased to exist after the First World War.
During the First World War Hayek served as an officer in the Imperial Army. Afterward he returned to his studies in Vienna, but spent a few months at the University of Zurich, where he furthered his interest in psychology, on which he published a book, The Sensory Order, many years later, in 1952.
Hayek had a successful and eclectic education at the University of Vienna, where he studied law, and economics. He gained his doctorate in jurisprudence in 1921 and in political science in 1923.
The Austrian School
During his university career Hayek belonged to or helped to form the “Geistkreis” which was a loose association of university students and teachers who were interested in a range of topics. Associations of this kind had been a vibrant characteristic of Viennese intellectual life for many years. Hayek’s group were in a sense heir to the Menger circle, although he points out that Menger’s coffee-circle – the first “Austrian School” – were senior civil servants as well as professors in economics. The influence of Menger upon Hayek and upon economics in the academy and its reading in the world of politics would be hard to overestimate. In a sense, Hayek is the vehicle by which Menger’s most important ideas were diffused throughout the English speaking world.
A narrow interpretation of Adam Smith’s views on the character of markets; the “invisible hand” converts individual participation in the market to general wealth
The desirability of a minimalist role for government in the economy
“Methodological individualism” (Carl Menger’s original contribution to economic theory)
The notion of the “subjective theory of value” – also a contribution of Carl Menger – which attributes value to unpredictable individual preference, rather than to any fixed and calculable notion of the components of value
The Austrian school of economics owed its success – perhaps even its existence – to its peculiar ability to convert the great political doctrines of liberalism to a form of economic thought which restricted liberalism so closely to financial and economic affairs – both of the individual and of the State – that it posed no threat to the autocratic rule of the Emperor of Austria, and hence was not simply allowed to exist, but members were given favored positions within government. Participation in the market, not in government, or political life, became the great paradigm of freedom.
The Vienna Circle
Another group which had its effect upon Hayek was the Vienna Circle, the distinguished group of philosophers of science, who, starting with Ernst Mach, provided the foundations and parameters of scientific positivism. Hayek records his indebtedness to Mach, and to the ideas of Moritz Schlick, also of the Vienna Circle. Another member of the Vienna Circle who influenced Hayek was Karl Popper, whose book, The Logic of Scientific Discovery (1935) was at one and the same time a challenge to the school of logical positivism, and yet was constructed in that tradition. Popper’s views confirmed Hayek’s dissatisfaction with the teachings of Mach as applied to social science, and yet reinforced his views as to what constitutes “science.”
In 1921 Hayek took a position in the (government-sponsored) Abrechnumgsamt, an office for clearing debts incurred before the war, under Ludwig von Mises, and became a member of Mises “Privatseminar.” His association with Mises was in many ways intellectually congenial to him, but his differences with Mises over rationality and epistemology sharpened his thinking on these points, and directed him toward a view of “subjectivity” and its consequences which took him on a rather different exploratory path.
As a result of this work and his exposure in 1923 to American debates on economic changes over time, he became interested in “business cycles” on which he wrote a paper which drew the attention of Lionel Robbins and this eventually led to his being offered a position at the London School of Economics.
During the war Hayek, although now a British citizen, was not involved in the management of manpower or resources in the way that most other British economists and many other academics were, from Lord Keynes down. Instead he reflected on what he saw as the inverse relationship between “planning” and individual freedom, and became one of Keynes’s most effective critics. In this period he wrote The Road to Serfdom (1944), a book whose popular style secured his influence on political affairs for the future, but caused misgivings as to his professionalism among economists.
In 1950 Hayek was offered a position at the University of Chicago, not in the economics department or the school of management of public policy but in the school of social science, the “Committee on Social Thought.” Hayek’s interests were by now turning from economics to wider questions of human life: the processes of mind and perception (Hayek 1952a), and the relation of individual minds to social order and constitutional issues (The Constitution of Liberty 1960). Although substantially sympathetic to the Chicago school of economists, he disagreed with them on monetarism and regarded them as “logical positivists” – a position he no longer adopted. Hayek regarded Friedman as “on most things … sound” but saw Friedman’s book Essays in Positive Economics as “dangerous” (Hayek 1994, pp. 1434–1445). Eventually Hayek was invited to the University of Freiburg, where except for a relatively short period at the University of Salzburg he remained for the rest of his academic career.
Economics as Social Science
Hayek, always a voracious reader, read a great deal in the wider liberal tradition, and explored the writings of Jeremy Bentham, John Stuart Mill, Saint-Simon, and Comte, and published works on several of these writers. He was in a sense looking for a firm basis for a “social science.” Menger’s methodological individualism gave him the unit on which a science, in Mach’s logical positivist understanding, could be built. But it did not account for what could and could not be admitted to this science.
Karl Popper’s book The Logic of Scientific Discovery (1935) gave him some of the methodological ground he was looking for, although Hayek hesitated to commit social science completely to Popper’s definitions of what constituted research methodology for social science. In particular Hayek wanted to maintain that the very identity of researcher and subject in the human sciences gave the researcher access to information in the form of “understanding” of motivation which would not be possible in other sciences, where the subject was inanimate or animal.
This reservation is an important aspect of Hayek’s views on “rationality,” a core concern of economists, since theirs is a science which attempts to explain human behavior. Hayek believed that rationality was a quality which was intelligible to other rational people. If a person’s actions could not be understood, he was irrational. Irrational persons were in a sense outside the pale: their behavior could not form the kind of patterns of iterated behavior which constituted “laws.” However, Hayek did not put the faith in human rationality which was typical of Kantian philosophers: he believed that human rationality was limited, and that it could not by itself be responsible for the great human institutions which form the backbone of (Western) society – the market, the family, the church.
The Evolution of Spontaneous Order
These institutions, so vital for the continued existence of “society,” he believed to have formed over time, by a process of evolution. The evolutionary process had weeded out less advantageous forms of human relationships, and had left behind these outstanding examples of the “spontaneous” creation of order from the chaos of myriad individual human decisions. No one human he contended was sufficiently rational to be able to coordinate all the variables which came together in one of these institutions: they were therefore not of human design, although they were of human creation. In effect Hayek had devised a scheme of social Darwinism which valorized certain institutions – the market, the Church, and the family, as evolutionary survivors, and therefore the “fittest” form of human institutions. His term “spontaneous order” however also suggests that these institutions erupted from the evolutionary process without genealogy – without a history. “Collectivism” – which he sometimes calls “tribalism,” he regards as an early and inferior form of human organization, now outmoded by the evolutionary process.
In further examining one of these institutions, the market, Hayek emphasized “catallactics”: the “science of exchange.” The price mechanism supplied information to the buyer. Competition amounted to a research program: only in a competitive context could the buyer have the choice which made possible evolution from those choices of higher forms. Hayek regarded competition as a discovery procedure which compensated for the limits of knowledge, not as an end in itself. Limitations to competition result in a lack of information available to buyers, and consequently the evolutionary process – the process of continual improvement – is interrupted or distorted. He has no qualms about the unequal distribution of wealth arising from competition or inheritance: he was not interested in “equality” as a desirable feature of political or economic life. In his view, the impartiality of the application of the rules of competition would make the consequences acceptable to those who might experience disadvantage through that mechanism. The market is equal, and democratic, because everyone can enter into it, and it is free because no one is obliged to buy or sell.
The Application of Economics to Politics
From this valorization of the market and competition Hayek makes one of those great moves of “displacement” which creates a new discipline. Hayek developed an acceptance of Adam Smith’s “invisible hand,” the notion that the market is the vehicle for converting many individual transactions into general wealth by marrying buyers and sellers, and conveying information about supply and demand through the price mechanism, into a notion that that mechanism could be applied to other areas of human endeavor. For the corollary of Hayek’s idea of the limitations of human rationality was that humans are not capable of encompassing all the variables they need in order to make the grand decisions which government makes, particularly when it decided to do without, or reduce the role, of the market. This is the point on which he had disagreed with Mises: Hayek believed that Mises overestimated the possibilities of rationality, and therefore laid himself open to those errors of planning, predicting the future, and government intervention which were characteristic of socialism, communism, and fascism. The market on the other hand is an institution which compensates for the limited rationality of human beings, yet allows them freedom in the sense of being able to make “choices” and incorporates their myriad choices into an evolutionary process of perpetual improvement. Therefore the market is a superior form of governmental institution than government. The role of government should be limited to protecting the bases of the market: personal and property rights. Although he is prepared to accept a limited role for government as a “safety net” this must not be allowed to create monopoly or to undercut or otherwise distort the market.
This is the theme of Hayek’s most popular and influential book, The Road to Serfdom (1944). In this book Hayek argues that State intervention, the welfare State, socialism, fascism, bureaucracies, all share the same fallacy: that the human mind is capable of integrating the needs of the populace into a plan which can be executed by government. To accept the exigencies of wartime planning in peacetime is to start down the road which leads to fascist dictatorship, and ends the freedom of individuals. This book was directed squarely at the work of J.M. Keynes, whose economics was a direct response to the political and economic needs of the Great Depression, and whose adherents were working on the theoretic and practical application of his ideas in the welfare States which developed throughout much of the Western world during the 1930s and 1940s. The Road To Serfdom became very popular, and according to Cockett, formed the basis for Churchill’s unsuccessful election campaign in 1947.
Although the importance of this book and subsequent writing by Hayek should not be underestimated, his real impact but also ironically his effectual theoretic subversion – took place, not directly through his own writings but through the machinery he set up to spread neoliberal conceptions of economics, politics, and government.
The Mt Pelerin Society
In 1938 Hayek had been part of a “Colloquium Walter Lippmann” which was called to consider the problem of the encroachment of socialist and fascist forms of government and the lack of effectiveness of liberal arguments. Any plans for coherent and practical action were interrupted by the war, which was in itself a gorging, a gluttony of State control and intervention. After the war, Hayek tried again. He called a select meeting at Mt Pelerin in the Swiss Alps, of people dedicated to similar, neoliberal, and conservative ideas. The Mt Pelerin society was formed. Among its founding members were Hayek, Milton Friedman, Karl Polanyi, Karl Popper, James Buchanan, and the English millionaire Ralph Fisher. Fisher’s money provided the basis for the establishment of the Institute of Economic Affairs – the IEA, which took as its business the task of creating a favorable climate of opinion for the implementation of neoliberal principles of economic and government management. The IEA published the “Hobart pamphlets,” a series of simple, easily read articles on matters of public interest, all written from a clearly identifiable neoliberal point of view, but all claiming the impartiality of “science” and rationality. These short, clear texts, some of which were written by Hayek, have influenced the thinking of politicians and economists all over the world.
The success of the IEA proved the inspiration for the creation of similar “think-tanks” all over the world. Cockett estimates that they now number about 500. Prominent groups of this kind include the Adam Smith Institute, the Centre for Independent Studies, the Heritage Foundation, the Hoover Institute, the New Zealand Business Round Table, etc.
Hayek is not the only economist to be publicized through the IEA, but the common themes are ones which are consonant with Hayek’s ideas – the importance of the market, the stress on “market messages,” the fostering of competition, the need to diminish the impact of government on the economy, the indifference to social and economic inequality. Other parts of the neoliberal package he would be less happy with: human capital theory, for instance, reflects precisely that objection Hayek had to Mises’ belief in the possibility of human rationality: manpower planning preempts the market, but only the market, according to Hayek’s ideas, could rationally coordinate the demand and supply of labor. Planning, a necessary feature of the implementation of human capital theory, is the first step down the “road to serfdom.”
Hayek and Democracy: The “Rule of Law”
Hayek’s views on the limitations of individual rationality caused him to have a fairly pessimistic view of democratic institutions. His political views it must be remembered were formed in a youth spent under the most conservative government in western Europe, under whose auspices liberalism had been recast as the freedom to get rich, not to alter the government. To Hayek’s way of thinking democratic government offered a means by which taxpayers could be coerced by nontaxpaying majorities. There is no guarantee under democratic government that the principles of justice or fairness will be followed, but rather, given the Smithian concept of the self-interest of the individual, it is likely that lobbies will suborn politicians by means of an appeal to their self-interest. The very notion of “social justice” – which is in the interest of the poor majority – must, by impelling government to interfere in the interests of egalitarian distribution, bring about a totalitarian form of government (Hayek 1976, p. 68, vol. 2). A well-governed country must therefore have some form of limitation on the self-interest of politicians and lobby groups.
A necessary, and only apparently paradoxical, result of this is that formal equality before the law is in conflict, and in fact incompatible, with any activity of the government deliberately aiming at material or substantive equality of different people, and that any policy aiming at a substantive ideal of distributive justice must lead to the destruction of the rule of Law. (Hayek 1986, p. 59).
The idea of a universal superlaw has been widely spread and influential in various countries who have instituted some laws which are beyond the immediate power of government to alter – rules affecting, for instance, the inflation rate, the control of central banks, and the like. Essentially, the political program of a small group of economists has become “laws” which have been inscribed into statutes so that they become structural. Even if people of a different political persuasion should manage to attain power, their economic and political options are thereby limited.
A New Form of Liberalism
It might be argued that Hayek sought to reinscribe in liberalism the elements of advantage and property which the liberal theoretic disposition to egalitarianism had put in jeopardy. The insistence on a form of liberalism which re-emphasizes property and in effect makes participation in political affairs reconceived as economic affairs dependent upon having a stake with which to enter the market is an idea not only redolent of nineteenth-century liberalism but a formulation with great appeal in a Western world in which the traditional ruling groups find themselves under threat by others requiring inclusion in terms derived from the principles of liberalism itself. Hayek’s unease with the extension of power to other groups can be seen in John Stuart Mill and Harriet Taylor, in whom, despite his evident sympathy with the emotional and social difficulties in their relationship, he has little sympathy with her extension of liberal ideas of freedom beyond the conventional – indeed he describes her as “rationalist”, (a serious criticism from Hayek!) and remarks that after her death Mill “withdrew a little from the advanced positions” she had caused him to take up (Hayek 1951, p. 266).
…the technical specialist who was regarded as educated because he had passed through difficult schools but who had little or no knowledge of society, its life, growth, problems and its values, which only the study of history, literature and languages can give. (Hayek 1952, p. 110).
Presumably he would not be in favor then of the limitation of education to the vocational and commercially vogue subjects which is too often the logical outcome of the application of market principles to education. Indeed, genealogically, the notion of human capital, which underlies much of the pressure on schools to become training grounds for the economy, derives from Hayek’s associate Ludwig von Mises’ views, and conflicts directly with Hayek’s suspicion of rationality, planning, and predictability.
Although the remodeling of education as a “market” might be seen to be in accord with Hayek’s views on “catallaxy,” that is, that competition between schools should reveal information about the best model of school, the one which commands the highest price presumably being the evolutionary survivor, his prescription for curriculum was quite deeply affected by a notion of the requisites of the development of a subjectivity which could not in itself be reduced to a planned production of a certain kind of worker, or even manager.
Hayek’s profound distrust of government involvement in the economy might lead one to imagine that he would support the privatization of education, but there is no evidence in his account of his education at the University of Vienna that he believed it would have been more effective as a private institution. The general acceptance of his views on the inherent dangers of government provision of services has been used to support programs of privatization, including steps toward the privatization of education. It seems likely however that Hayek would support at least a minimum involvement in government provision of education as a public good. The essential problem for education which arises from the application from Hayek’s views is that the application of market principles may limit the formation of the individual whose judgment, exercised in a multiplicity of choices, creates the market’s evolutionary drive toward perpetual improvement. Hayek’s opposition to the narrow education of the Ecole Polytechnique indicates that, whatever the cost, quality education is essential to the continued liberal project, even in its neoliberal form.
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