About FA Hayek
Born in Vienna on May 8, 1899, Friedrich A. Hayek moved to England in 1931. While teaching and researching at the London School of Economics, Hayek became one of the world’s most renowned economists even though he was still only in his mid-30s. His fame grew from his research into the causes of what were then called “trade cycles,” what we today call booms and recessions.
In the greatly depressed 1930s, of course, such research was especially important. And Hayek wasn’t alone in researching the causes of booms and recessions. Another economist studying the same matter was John Maynard Keynes (pronounced “canes”). Yet Keynes’s theory of booms and recessions was totally different from Hayek’s. Not only were the two accounts of booms and recessions very different from each other at the purely theoretical level, they also differed in the implications they offered for government policies to deal with economic slumps. Keynes’s theory promised that recessions, even deep ones like the Great Depression, can easily be cured by greater government spending. Hayek’s theory, on the other hand, offered no hope that a slumping economy can be cured by any such easy fix.
Among professional economists, Hayek’s theory went quickly from being celebrated to being scorned. Keynes’s theory won the day.
Whatever the reasons for Keynes’s victory over Hayek, that victory was total. Keynesian economics came to all but completely dominate the economics profession for the next 40 years and to win widespread acceptance among policy-makers. By the early 1940s Hayek was largely forgotten.
Hayek’s time in the shadows, however, was brief. In 1944 he published a book that became a surprise best-seller on both sides of the Atlantic: The Road to Serfdom. In this now-classic volume, Hayek warned that attempts to centrally plan an economy, or even to protect citizens from the downsides of economic change, pave a “road to serfdom.” Hayek showed that if government plans or regulates the economy in as much detail and as heavily as many of the intellectuals and politicians of the day were demanding, government must also regiment citizens and strip them of many cherished freedoms.
Hayek did not say (as he is often mistakenly accused of saying) that the slightest bit of government regulation inevitably leads to socialism and tyranny. Rather, his point was that the more intent government is on socializing an economy and regulating it in great detail, the greater are the number of individual freedoms that must be crushed in the process.
Although informed by Hayek’s economic brilliance, The Road to Serfdom is not an economics book. It is instead a work of political philosophy, and it marks Hayek’s turning away from writing exclusively about economics for professional economists, to writing about the nature of society for broader audiences. And the audience for The Road to Serfdom was vast. In the United States, the popular magazine Reader’s Digest ran an abridged version of the book in 1945, which proved to be surprisingly successful. (The Road to Serfdom remains relevant and popular. Sixty-five years after its best-selling success with Reader’s Digest, American television and radio host Glenn Beck praised The Road to Serfdom on his Fox News channel program. As a result, in June 2010 Hayek’s 1944 book shot up to a number-one ranking on Amazon.com, where it stayed for a week.)
Along with his change from narrow economist to broad social scientist, Hayek moved in 1950 to the University of Chicago. During his 12 years at that institution, he was not a professor in the Department of Economics but, instead, in the Committee for Social Thought. While at Chicago Hayek wrote a second and more extensive book in defence of a free society: The Constitution of Liberty, which was published in 1960.
In subsequent decades, two more such “big think” books would flow from Hayek’s pen: the three-volume Law, Legislation, and Liberty (published in the 1970s) and Hayek’s final book, The Fatal Conceit (published in 1988). Law, Legislation, and Liberty shows Hayek at his most bold and pioneering. Volume I brilliantly explains the differences between unplanned orders (such as languages and market economies) and planned organizations (such as business firms and centrally planned economies). Volume II explains why the popular idea of “social justice” is meaningless. Volume III contains Hayek’s most ambitious attempt to describe in detail what the legal and political structure of his ideal society would look like.
The greatest contribution of Law, Legislation, and Liberty, however, is Hayek’s explanation of the fundamental difference between law and legislation. Influenced by the Italian legal scholar Bruno Leoni, Hayek argued that law is that set of rules that emerges “spontaneously,” unplanned and undesigned. Law forms out of the countless interactions of ordinary people as they go about their daily lives. Legislation, in contrast, is a set of rules and commands that government consciously designs and imposes. Hayek believed that every good society must use a combination of law and legislation, but that much mischief is caused when the two are confused.
While still working on volumes II and III of Law, Legislation, and Liberty, Hayek was awarded the 1974 Nobel Prize in Economic Science. Sharing this award with the Swedish economist Gunnar Myrdal, Hayek finally was accorded the professional acclaim that he’d lost since his refusal, four decades earlier, to jump onto and ride the Keynesian bandwagon. Hayek’s close friends tell how this award renewed his vigour to work.
He would live for nearly 18 more years and for much of that time he remained as creative and as productive as ever. His last book, The Fatal Conceit, published in 1988, deepens his insights into the potential creative powers of a society governed by evolved rules rather than by the discretion of political officials or of democratic majorities.