Hayek in his own words.

• Author: Jordan, Jerry L.

Tweet

 

FREE EXCERPT

1. Introduction

   On the occasion of the seventieth anniversary of The Road to Serfdom's publication, it occurred to me that it was also the fortieth anniversary of the awarding of the Nobel Prize in economics to Friedrich Hayek. My curiosity about what some interpret as the pessimistic message in the 1944 book and Hayek's later qualified optimism that the ideas of liberty and free people's will not only endure, but thrive, led me to explore the origins of the ideas in Hayek's Nobel Prize lecture, "The Pretense of Knowledge."

   While the ideas contained in Hayek's many publications are familiar, my new interest was in exploring what Hayek himself had to say about what he had written, including some things that surprised him--especially about The Road to Serfdom. My source of Hayek in his own words is sixteen hours of videotapes of various scholars interviewing Hayek in 1978, four years after he was awarded the Nobel Prize. These videotaped conversations have been digitized and indexed, and they are made available to the world at the Hayek Interviews webpage of the Universidad Francisco Marroqum in Guatemala.

   Throughout his long and prolific life, Hayek emphasized the scientific versus what he called "scientism." As a young man in Vienna, he encountered Marxists and psychoanalysts. "Both had the habit of insisting that their theories were in their nature irrefutable, and I was already by this driven to the conclusion that if a theory is irrefutable, it is not scientific ... A theory which is necessarily true says nothing about the world" (Buchanan 1978, p. 236). We can easily imagine Hayek's reaction to a familiar expression of our time: that something is "settled science" (Buchanan 1978, pp. 74, 236). The expression is clearly an oxymoron, because anything that is "settled" is no longer scientific: it has become an irrefutable belief.

   People often are certain about some things--their religious beliefs, the person they wish to spend the rest of their life with, their dislike of broccoli. However, in matters of both the physical and social sciences, Hayek's lesson for us is clear: once you are certain about something and think you cannot possibly be wrong, you have closed your mind to learning anything new. An element of doubt and a willingness to consider new evidence are essential to all scientific endeavors.

   In a conversation with one of my teachers, Armen Alchian, Hayek described the intellectual road he traveled on the way to writing one of his most widely read and cited articles, "The Uses of Knowledge in Society," published the year after The Road to Serfdom. The intellectual journey began in 1937, as he struggled to prepare a lecture he dreaded: his presidential address to the London Economics Club. The lecture was titled "Economics and Knowledge," and Hayek considers the core idea of the utilization of dispersed knowledge to be his one lifetime discovery (Alchian 1978, p. 426): "It was with a feeling of a sudden illumination, sudden enlightenment, that I--I wrote that lecture in a certain excitement. I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it in print."

   In his conversation with James Buchanan, Hayek explains the basis of both his economic and his political views. "As I now see the whole thing--[the] market as a system of the utilization of knowledge, which nobody can possess as a whole, which only through the market situation leads people to aim at the needs of people whom they do not know, make use of facilities for which they have no direct information, all this condensed in abstract signals, and that our whole modern wealth and production could arise only thanks to this mechanism--is, I believe, the basis not only of my economic but as much of my political views" (Buchanan 1978, pp. 226-27). He also reemphasizes his view that many economists as well as others are incorrect when they assert that observed prices reflect something that has already occurred; instead, "prices serve as guides to action and must be explained in determining what people ought to do--they're not determined by what people have done in the past" (Buchanan 1978, p. 226).

   He elaborates (Bork 1978, p. 275) on his interpretation of prices as "signals leading us ... to serve needs of which we have no direct knowledge ... and to utilize means of which we have no direct knowledge.... price signals ... enable us to fit ourselves in an order which we do not, on the...