Published by the Centre for Independent Studies (Sydney), 10 December 2010 (PDF)

Friedrich August von Hayek was one of the intellectual giants of the 20th century. His contributions ranged from economics to philosophy, from law to psychology. In 1972, he won the Nobel Prize in Economics, and his ideas had great influence on politicians like Ronald Reagan and Margaret Thatcher.

At an event hosted by The Centre for Independent Studies in 2008, four academics delivered an assessment of Hayek’s contributions to different fields of research and analysed their relevance to contemporary debates. This collection of essays demonstrates how much a source of inspiration Hayek’s works still are.

Contributors:

• Sinclair Davidson,
• Paul Kerin,
• Chandran Kukathas and
• Suri Ratnapala

Introduction by Oliver Marc Hartwich

We have become used to abbreviate even the abridged. Lives, works and thoughts now often have to be condensed into short, snappy phrases if they mean to become part of everyday discourse. There are now publishers condensing great works of world literature and science into five-page summaries. For a hefty fee, stressed executives can subscribe to a service that delivers the gist of books ranging from Adam Smith’s Wealth of Nations to Milton Friedman’s Free to Choose. The next step will probably be the Twitter version of Leo Tolstoy’s War and Peace in 140 characters.

This drive to brevity is deplorable as it can reduce works of great complexity into catchphrases and caricature. Friedrich Hayek is the latest victim of the age of impatience.

Although there were not many thinkers of comparable depth and breadth in the twentieth century, the name of Friedrich Hayek has been used and abused as a synonym for a certain ideology. Former Australian Labor Prime Minister Kevin Rudd publically denounced Hayek as the incarnation of ‘extreme capitalism’ to make him the counterpart in an unfavourable comparison with Soviet leader Leonid Brezhnev.

Such views of Hayek are widespread. If you asked people in the street—or rather in the cafés of fashionable suburbs—who this Friedrich August von Hayek was, the conventional answer would be that he was the most vocal proponent of unlimited capitalism, rivalled only by the late Milton Friedman.

As the contributions in this collection of essays show, this view not only reduces the complexity of Hayek’s thinking but grossly distorts the real Hayek behind the caricature.

Instead of the one-dimensional Hayek of the caricature, we encounter a multi-faceted, multi-layered thinker. Hayek and his works are comparable to a prism or a mirror. A prism because it can break up questions into a colourful spectrum of their many components. A mirror because one’s view of Hayek depends on one’s own political and philosophical convictions.

Hayek has been many things to many people. Former British Prime Minister Margaret Thatcher, a politician of the right, famously threw a copy of Hayek’s Constitution of Liberty on the cabinet table and declared, ‘This is what we believe in!’ Social democrat and former German chancellor Helmut Schmidt said, ‘We’re all Hayekians now,’ effectively countering US President Richard Nixon’s famous dictum, ‘We’re all Keynesians now.’

Others like Rudd saw Hayek as the embodiment of capitalism. To a small but vocal group of American libertarians, Hayek is a social democrat.

That Hayek is both admired and hated by people within different political camps may seem odd at first. How can the same person be regarded as a laissez faire extremist by some and an interventionist by others? How can some social democrats share their admiration for Hayek with conservatives? How can it be that some social democrats and right-wingers are both equally little fond of Hayek?

The reason is simple: Hayek was not only a thinker of great depth but also someone whose thinking developed or, should we say, matured over time. He was also one of the great interdisciplinary scholars who could tie loose ends from different fields of research together.

Such a complex mind must be puzzling to those trying to understand him. No wonder, then, that they were using shorthand methods to make this difficult Hayek more intelligible.

Hayek’s work spanned decades, countries and multiple research areas. From the technical economist working in 1920s Austria to the theoretician of distributed knowledge at the London School of Economics in the 1930s, from the lone voice against the threat of totalitarianism still in London in the 1940s to the philosopher of liberty at Chicago in the 1950s and 1960s, to the social and legal philosopher for the rest of his life, Hayek has played many different roles throughout his life.

One of the ironies of Hayek’s life must be the winning of the Nobel Prize, which he had to share with Gunnar Myrdal, an avowed socialist. It was also ironic because by the time Hayek received it, he had left core economics subjects to deal with other issues. It is even more ironic because Hayek was given the prize for his contributions to the theory of business cycles from earlier in his career—economists today would probably consider Hayek’s foundations of information economics as his most prize-worthy achievement. In Hayek’s Nobel Prize, we can thus see how easy it is to get a partial and possibly distorted picture of Hayek.

What clearly differentiates Hayek from most present-day economists is his interdisciplinary foundation. Hayek’s first doctorate was in law, not in economics. And had the opportunities for psychologists been better in 1920s Vienna, he may have well devoted more time to psychology—a subject in which he later published one major book, The Sensory Order.

Perhaps Hayek had himself in mind when he said, ‘An economist who is only an economist cannot be a good economist.’ In any case, he was right. Economics is a discipline with multiple connections to related subjects in law, history, sociology, psychology and political science. Against a technocratic view of economics as a mere tool of social optimisation, Hayek believed the economy could only be understood if considered within a social framework, which is also central to the utilisation of dispersed knowledge.

It is in this institutional way of thinking about economics that Hayek’s interdisciplinary approach showed most clearly. However, in dealing with institutions, Hayek left the clinical views of textbook economics far behind. The world that Hayek sought to deal with was a messy place, not the sanitised ideal of two-dimensional diagrams, supply and demand graphs, and the like. In acknowledging the world in all its complexity, Hayek differed from those economists, even from some of his friends and teachers, who preferred a purely theoretical approach devoid of all empirical observations.

Hayek is also different from most of his academic colleagues in another aspect. He sought to convince others by his ideas. Why should this be surprising? Isn’t it the most normal thing in the world for scholars to communicate the findings of their research? In theory, yes but, in practice, many academics neglect to engage in the battle of ideas, confining themselves to a self-chosen ivory tower.

Not so Friedrich Hayek. To him, it was not enough to develop and find new ideas but also to communicate them widely. In particular, the idea of freedom in all its variations and applications was not only analysed and discussed again and again in his works but he also made it his personal task to spread the idea beyond the confines of academic literature. It was for this sake that Hayek established the Mont Pelerin Society as a group of like-minded intellectuals with the purpose of keeping the ideas of classical liberalism alive in the face of widespread statism. Another venture in the business of spreading the word of liberty was Hayek’s help in establishing a network of independent research institutes and think tanks, of which the London based Institute of Economic Affairs was the first. The Centre for Independent Studies plays a similar role in Australia.

Hayek had realised that most economists do not play a role in public life and leave the discussions of economic policy to journalists, intellectuals and politicians. This is still true today. If more academic economists engaged in public debates, there would be less of a role for institutes like the IEA or the CIS. However, Hayek clearly saw that there were not enough translators of economic principles into a language that the ‘second hand dealers of ideas’ (Hayek about the intellectuals) could understand.

From this outline of some of the milestones and achievements of Hayek’s life, it should be clear that it is impossible to briefly sum up Hayekian thought. It is indeed quite likely that different people will understand Hayek differently—not because Hayek’s message was unclear or ambiguous but because his work is rich in facets. It also depends on the period of Hayek’s work you are dealing with. For someone whose intellectual life has spanned about seven decades, it is only to be expected that some of his ideas evolved over time.

So whatever else you may think about Hayek, one thing should be clear: Hayek’s work does not render itself to any shortcuts, and attempts to break Hayek down into some easily digestible pieces are bound to fail. The best way of dealing with Hayek, therefore, is not to give in to the widespread images and caricatures of him, whether they are sympathetic or hostile, but to engage with him directly by reading his ample writings.

The second best way is to read what eminent scholars of Hayek’s works have written about him. It has been my pleasure to edit the current publication, which brings together five essays by four academics who all have their own and different approaches to Hayek’s work. Chandran Kukathas introduces us to Hayek’s philosophy government. Paul Kerin discusses whether Hayek’s views of cartels and monopolies are still relevant in today’s business world and its regulatory environment. Sinclair Davidson has two essays in this collection: one on Hayek’s monetary economics, the other deconstructing former Australian Prime Minister Kevin Rudd’s critique of Hayek. Suri Ratnapala offers his analysis of Hayek’s jurisprudence. These essays were delivered as speeches to the CIS at an event titled ‘Hayek’s Ideas in the 21st Century: An Exploration’ in 2008 and updated for this publication.

This collection of essays has three purposes: to refute the caricature views of Hayek, to introduce readers to the ‘real Hayek,’ and, above all, to evoke a greater interest in dealing with Hayekian ideas.