F. A. Hayek: Austrian Economist and Social Theorist

Beware the Ides of March! OK, now that I’ve gotten that out of the way . . .

Week 4 of the Mises Institute’s Home Study Course in Austrian Economics includes one audio lecture and a corresponding book chapter on Hayek from 15 Great Austrian Economists.

1. “The Economics of Friedrich von Hayek” by Peter Klein: This lecture from the 2001 Mises University assumes a little background knowledge on the listener’s part about Hayek’s work and focuses on his biography. Klein discusses at length the friendly relationship between Hayek and John Maynard Keynes (Hayek actually stayed at Keynes’s house in Cambridge when the London School of Economics shut down during the Blitz in 1940) and gives several possible reasons why Hayek made the strategic error of not publicly responding to Keynes’s General Theory upon its publication in the mid-1930s. Hayek had poked so many holes in Keynes’s treatise on money in the early 1930s that Keynes had abandoned it, so it has always been a puzzle why he didn’t do the same to the General Theory. Klein suggests that Keynes’s proclivity for continually changing his positions led Hayek to conclude that the General Theory would be forgotten within a few years, and he chose to focus on developing his own capital theory instead. Unfortunately, the General Theory ended up sweeping the English-speaking world instead, and when Hayek’s Pure Theory of Capital appeared in 1941, what we now call Keynesianism was already too entrenched to be dislodged.
2. “F.A. Hayek: Austrian Economist and Social Theorist” by Peter Klein (Ch. 12 of Randall Holcombe, ed., 15 Great Austrian Economists): Again we have lots overlap between the week’s audio and book chapter because both are from the same author. This chapter has sections dealing with Hayek’s work on business cycle and price theories (price as a process of “discovery” and communication). It also has a helpful discussion near the end of the differences between Hayek and Ludwig von Mises. (For example, those familiar with both know that Hayek was much more accommodating to the welfare state than was Mises.) Recent scholarship focuses on the contrast between Hayek’s emphasis on dispersed knowledge in society and discovery of information through prices on the one hand, and Mises’s emphasis on monetary calculation based on existing prices on the other.

I found it interesting that these materials only mention Hayek’s Road to Serfdom, his best known work, in passing. This program is focused on economics, and that work is really more about social and political philosophy, so it makes sense that Klein doesn’t dwell on it. Of course, the Road to Serfdom is still worth reading!