Hayek, Friedrich A. (1899–1992)

One of the most significant thinkers of the 20th century, Hayek is renowned for his critique of socialist economic planning and for a defense of classical liberalism that employs a theory of social evolution and spontaneous order. A recipient of the Nobel Prize in Economics in 1974, he made important contributions to political philosophy, the history of ideas, psychology, and the method of the social sciences. The fundamental problem of society is, for Hayek, not the allocation of resources but the coordination and utilization of the knowledge that is dispersed among millions of anonymous individuals. To meet this problem, Hayek argues for a rule of law to establish conditions of liberty, thereby allowing the emergence of a spontaneous social order of greater complexity than could be attained by planning.

Hayek served in World War I and subsequently enrolled in the University of Vienna, majoring first in law and then in economics. In 1931, he accepted a position at the London School of Economics (LSE), becoming a British national in 1938. Focusing on monetary theory and the business cycle, his early work also includes robust criticism of Keynes, whose theory, Hayek argues, neglects the temporal elements of economic production. During this same period, Hayek turns to the topic of “socialist calculation.” In his contribution to his edited collection, Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism of 1935, Hayek extends the theory of Ludwig von Mises, one of the great economists of the Austrian School, by arguing that without freely determined prices, socialist planners will not know what to produce, in what quantities, or by what methods. In Economics and Knowledge of 1937, Hayek takes up the problem of the utilization of knowledge. Given the subjectivity of individual perception, along with the dispersed and fragmentary nature of knowledge, the theoretical construct of economic equilibrium (the mutual compatibility of expectations) must be explained rather than assumed. Hayek suggests that under the right conditions, the knowledge of individuals would coordinate spontaneously, tending toward an order analogous to that which a designing mind might have wrought. With the publication of The Road to Serfdom of 1944, Hayek extends his critique of socialism, warning that well-meaning attempts to plan the economy would have deleterious effects not just on economic affairs but on the political, moral, and attitudinal character of individuals.

Hayek remained at the LSE until 1950, when he joined the University of Chicago; he also taught at Freiburg (1962–1967) and was an honorary professor at Salzburg (1968–1977). During the decade of the 1950s, he published, among other works, The Sensory Order (1952), a treatise on psychology (a draft of which he had composed three decades earlier) and The Counter-Revolution of Science of 1952. In this work, he defends methodological individualism and argues that the relevant facts of the social sciences are the beliefs and intentions of agents, not empirical data.

By the end of the 1950s, Hayek completed The Constitution of Liberty of 1960. This important work restates the ideals of classical liberalism and critiques both socialism and the welfare state. His political philosophy is grounded in an understanding of society [Page 1050]that he traces to 18th-century philosophers such as Mandeville, Ferguson, Hume, and Smith. Social norms and patterns of conduct emerge over time in an unintended and evolutionary manner. Liberty, established through general and impartial law (and not through specific or particular commands), is essential to the emergence of spontaneous and beneficial patterns and institutions. These ideas are developed further in the three volumes of Law, Legislation, and Liberty (published in 1973, 1976, and 1979). Hayek focuses on the “abstract” and purpose-free rules necessary for generating a spontaneous order (explaining how such rules may run counter to deeply felt emotions). He also contends that “social justice” has no coherent application in a free society, and he elaborates the legal institutions required to preserve freedom.

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