Friedrich von Hayek

In 1917, Hayek joined an artillery regiment in the Austro-Hungarian Army and fought on the Italian front. Much of Hayek's combat experience was spent as a spotter in an aeroplane. Hayek suffered damage to his hearing in his left ear during the war and was decorated for bravery. During this time, Hayek also survived the 1918 flu pandemic.

In The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology (1952), Hayek independently developed a "Hebbian learning" model of learning and memory—an idea he first conceived in 1920 prior to his study of economics. Hayek's expansion of the "Hebbian synapse" construction into a global brain theory has received attention in neuroscience, cognitive science, computer science, behavioural science and evolutionary psychology by scientists such as Gerald Edelman and Joaquin Fuster.

On his mother's side, Hayek was second cousin to the philosopher Ludwig Wittgenstein. His mother often played with Wittgenstein's sisters and had known him well. As a result of their family relationship, Hayek became one of the first to read Wittgenstein's Tractatus Logico-Philosophicus when the book was published in its original German edition in 1921. Although he met Wittgenstein on only a few occasions, Hayek said that Wittgenstein's philosophy and methods of analysis had a profound influence on his own life and thought. In his later years, Hayek recalled a discussion of philosophy with Wittgenstein when both were officers during World War I. After Wittgenstein's death, Hayek had intended to write a biography of Wittgenstein and worked on collecting family materials and later assisted biographers of Wittgenstein. He was related to Wittgenstein on the non-Jewish side of the Wittgenstein family. Since his youth, Hayek frequently socialized with Jewish intellectuals and he mentions that people often speculated whether he was also of Jewish ancestry. That made him curious, so he spent some time researching his ancestors and found out that he has no Jewish ancestors within five generations. The surname Hayek uses the German spelling of the Czech surname Hájek.

At the University of Vienna, Hayek initially studied mostly philosophy, psychology and economics. The University allowed students to choose their subjects freely and there wasn't much obligatory written work, or tests except main exams at the end of the study. By the end of his studies Hayek became more interested in economics, mostly for financial and career reasons; he planned to combine law and economics to start a career in diplomatic service. He earned doctorates in law and political science in 1921 and 1923 respectively.

In August 1926, Hayek married Helen Berta Maria von Fritsch (1901–1960), a secretary at the civil service office where Hayek worked, on the rebound upon hearing of his cousin's marriage. They had two children together. Upon the close of World War II, Hayek restarted a relationship with his cousin, who had married since they first met, but kept it secret until 1948. Hayek and Fritsch divorced in July 1950 and he married his cousin Helene Bitterlich (1900–1996) just a few weeks later after moving to Arkansas to take advantage of permissive divorce laws. His wife and children were offered settlement and compensation for accepting a divorce. The divorce caused some scandal at LSE where certain academics refused to have anything to do with Hayek. In a 1978 interview to explain his actions, Hayek stated that he was unhappy in his first marriage and as his wife would not grant him a divorce he had to enforce it.

Hayek's principal investigations in economics concerned capital, money and the business cycle. Ludwig von Mises had earlier applied the concept of marginal utility to the value of money in his Theory of Money and Credit (1912) in which he also proposed an explanation for "industrial fluctuations" based on the ideas of the old British Currency School and of Swedish economist Knut Wicksell. Hayek used this body of work as a starting point for his own interpretation of the business cycle, elaborating what later became known as the Austrian theory of the business cycle. Hayek spelled out the Austrian approach in more detail in his book, published in 1929, an English translation of which appeared in 1933 as Monetary Theory and the Trade Cycle. There, Hayek argued for a monetary approach to the origins of the cycle. In his Prices and Production (1931), Hayek argued that the business cycle resulted from the central bank's inflationary credit expansion and its transmission over time, leading to a capital misallocation caused by the artificially low interest rates. Hayek claimed that "the past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process".

In 1929, Lionel Robbins assumed the helm of the London School of Economics (LSE). Eager to promote alternatives to what he regarded as the narrow approach of the school of economic thought that then dominated the English-speaking academic world (centred at the University of Cambridge and deriving largely from the work of Alfred Marshall), Robbins invited Hayek to join the faculty at LSE, which he did in 1931. According to Nicholas Kaldor, Hayek's theory of the time-structure of capital and of the business cycle initially "fascinated the academic world" and appeared to offer a less "facile and superficial" understanding of macroeconomics than the Cambridge school's.

With the help of Mises, in the late 1920s he founded and served as director of the Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) in 1931 at the behest of Lionel Robbins. Upon his arrival in London, Hayek was quickly recognised as one of the leading economic theorists in the world and his development of the economics of processes in time and the co-ordination function of prices inspired the ground-breaking work of John Hicks, Abba P. Lerner and many others in the development of modern microeconomics.

Also in 1931, Hayek critiqued John Maynard Keynes's Treatise on Money (1930) in his "Reflections on the pure theory of Mr. J.M. Keynes" and published his lectures at the LSE in book form as Prices and Production. For Keynes, unemployment and idle resources are caused by a lack of effective demand, but for Hayek they stem from a previous unsustainable episode of easy money and artificially low interest rates. Keynes asked his friend Piero Sraffa to respond. Sraffa elaborated on the effect of inflation-induced "forced savings" on the capital sector and about the definition of a "natural" interest rate in a growing economy (see Sraffa–Hayek debate). Others who responded negatively to Hayek's work on the business cycle included John Hicks, Frank Knight and Gunnar Myrdal. Kaldor later wrote that Hayek's Prices and Production had produced "a remarkable crop of critics" and that the total number of pages in British and American journals dedicated to the resulting debate "could rarely have been equalled in the economic controversies of the past".

Hayek's influence on the development of economics is widely acknowledged. With regard to the popularity of his Nobel acceptance lecture, Hayek is the second-most frequently cited economist (after Kenneth Arrow) in the Nobel lectures of the prize winners in economics. Hayek wrote critically there of the field of orthodox economics and neo-classical modelisation. A number of Nobel Laureates in economics, such as Vernon Smith and Herbert A. Simon, recognise Hayek as the greatest modern economist. Another Nobel winner, Paul Samuelson, believed that Hayek was worthy of his award, but nevertheless claimed that "there were good historical reasons for fading memories of Hayek within the mainstream last half of the twentieth century economist fraternity. In 1931, Hayek's Prices and Production had enjoyed an ultra-short Byronic success. In retrospect hindsight tells us that its mumbo-jumbo about the period of production grossly misdiagnosed the macroeconomics of the 1927–1931 (and the 1931–2007) historical scene". Despite this comment, Samuelson spent the last 50 years of his life obsessed with the problems of capital theory identified by Hayek and Böhm-Bawerk, and Samuelson flatly judged Hayek to have been right and his own teacher Joseph Schumpeter to have been wrong on the central economic question of the 20th century, the feasibility of socialist economic planning in a production goods dominated economy.

In 1932, Hayek suggested that private investment in the public markets was a better road to wealth and economic co-ordination in Britain than government spending programs as argued in an exchange of letters with John Maynard Keynes, co-signed with Lionel Robbins and others in The Times. The nearly decade long deflationary depression in Britain dating from Winston Churchill's decision in 1925 to return Britain to the gold standard at the old pre-war and pre-inflationary par was the public policy backdrop for Hayek's dissenting engagement with Keynes over British monetary and fiscal policy. Well beyond that single public conflict, regarding the economics of extending the length of production to the economics of labour inputs, Hayek and Keynes disagreed on many essential economics matters. Their economic disagreements were both practical and fundamental in nature. Keynes called Hayek's book Prices and Production "one of the most frightful muddles I have ever read", famously adding: "It is an extraordinary example of how, starting with a mistake, a remorseless logician can end in Bedlam". Many other notable economists have also been staunch critics of Hayek, including John Kenneth Galbraith and later Paul Krugman, who wrote that "the Hayek thing is almost entirely about politics rather than economics".

In 1935, Hayek published Collectivist Economic Planning, a collection of essays from an earlier debate that had been initiated by Mises. Hayek included Mises's essay in which Mises argued that rational planning was impossible under socialism.

Unwilling to return to Austria after the Anschluss brought it under the control of Nazi Germany in 1938, Hayek remained in Britain. Hayek and his children became British subjects in 1938. He held this status for the remainder of his life, but he did not live in Great Britain after 1950. He lived in the United States from 1950 to 1962 and then mostly in Germany, but also briefly in Austria.

Hayek was concerned about the general view in Britain's academia that fascism was a capitalist reaction to socialism and The Road to Serfdom arose from those concerns. It was written between 1940 and 1943. The title was inspired by the French classical liberal thinker Alexis de Tocqueville's writings on the "road to servitude". It was first published in Britain by Routledge in March 1944 and was quite popular, leading Hayek to call it "that unobtainable book" also due in part to wartime paper rationing. When it was published in the United States by the University of Chicago in September of that year, it achieved greater popularity than in Britain. At the instigation of editor Max Eastman, the American magazine Reader's Digest also published an abridged version in April 1945, enabling The Road to Serfdom to reach a far wider audience than academics. The book is widely popular among those advocating individualism and classical liberalism.

With regard to a social safety net, Hayek advocated "some provision for those threatened by the extremes of indigence or starvation due to circumstances beyond their control" and argued that the "necessity of some such arrangement in an industrial society is unquestioned—be it only in the interest of those who require protection against acts of desperation on the part of the needy". Summarizing Hayek's views on the topic, journalist Nicholas Wapshott has argued that "[Hayek] advocated mandatory universal health care and unemployment insurance, enforced, if not directly provided, by the state". Critical theorist Bernard Harcourt has argued further that "Hayek was adamant about this". In 1944, Hayek wrote in The Road to Serfdom:

In 1944, he was elected as a Fellow of the British Academy after he was nominated for membership by Keynes.

Hayek had a long-standing and close friendship with philosopher of science Karl Popper, who was also from Vienna. In a letter to Hayek in 1944, Popper stated: "I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski". Popper dedicated his Conjectures and Refutations to Hayek. For his part, Hayek dedicated a collection of papers, Studies in Philosophy, Politics, and Economics, to Popper and in 1982 said that "ever since his Logik der Forschung first came out in 1934, I have been a complete adherent to his general theory of methodology". Popper also participated in the inaugural meeting of the Mont Pelerin Society. Their friendship and mutual admiration do not change the fact that there are important differences between their ideas.

Some radical libertarians had a negative view of Hayek and his milder form of liberalism. Ayn Rand disliked him, seeing him as a conservative and compromiser. In a letter to Rose Wilder Lane in 1946 she wrote:

In 1947, Hayek was elected a Fellow of the Econometric Society.

By 1947, Hayek was an organiser of the Mont Pelerin Society, a group of classical liberals who sought to oppose socialism. Hayek was also instrumental in the founding of the Institute of Economic Affairs, the right-wing libertarian and free-market think tank that inspired Thatcherism. He was in addition a member of the conservative and libertarian Philadelphia Society.

In 1950, Hayek left the London School of Economics. After spending the 1949–1950 academic year as a visiting professor at the University of Arkansas, Hayek was brought on by the University of Chicago, where he became a professor in the Committee on Social Thought. Hayek's salary was funded not by the university, but by an outside foundation, the William Volker Fund.

Hayek points out that much of science involves the explanation of complex multivariable and nonlinear phenomena and the social science of economics and undesigned order compares favourably with such complex sciences as Darwinian biology. These ideas were developed in The Counter-Revolution of Science in 1952 and in some of Hayek's later essays in the philosophy of science such as "Degrees of Explanation" (1955) and "The Theory of Complex Phenomena" (1964).

Hayek's first class at Chicago was a faculty seminar on the philosophy of science attended by many of the University of Chicago's most notable scientists of the time, including Enrico Fermi, Sewall Wright and Leó Szilárd. During his time at Chicago, he worked on the philosophy of science, economics, political philosophy and the history of ideas. His economics notes from this period have yet to be published. Hayek received a Guggenheim Fellowship in 1954.

After editing a book on John Stuart Mill's letters he planned to publish two books on the liberal order, The Constitution of Liberty and "The Creative Powers of a Free Civilization" (eventually the title for the second chapter of The Constitution of Liberty). He completed The Constitution of Liberty in May 1959, with publication in February 1960. Hayek was concerned that "with that condition of men in which coercion of some by others is reduced as much as is possible in society". Hayek was disappointed that the book did not receive the same enthusiastic general reception as The Road to Serfdom had sixteen years before.

From 1962 until his retirement in 1968, he was a professor at the University of Freiburg, West Germany, where he began work on his next book, Law, Legislation and Liberty. Hayek regarded his years at Freiburg as "very fruitful". Following his retirement, Hayek spent a year as a visiting professor of philosophy at the University of California, Los Angeles, where he continued work on Law, Legislation and Liberty, teaching a graduate seminar by the same name and another on the philosophy of social science. Preliminary drafts of the book were completed by 1970, but Hayek chose to rework his drafts and finally brought the book to publication in three volumes in 1973, 1976 and 1979.

Hayek sent António de Oliveira Salazar a copy of The Constitution of Liberty (1960) in 1962. Hayek hoped that his book—this "preliminary sketch of new constitutional principles"—"may assist" Salazar "in his endeavour to design a constitution which is proof against the abuses of democracy".

In 1973, Hayek reiterated in Law, Legislation and Liberty:

On 9 October 1974, it was announced that Hayek would be awarded the Nobel Memorial Prize in Economics along with Swedish economist Gunnar Myrdal. The reasons for the two of them winning the prize are described in the Nobel committee's press release. He was surprised at being given the award and believed that he was given it with Myrdal to balance the award with someone from the opposite side of the political spectrum. Nobel Prize in Economics was established only in 1968 and Hayek was the first free-market, non-Keynesian economist to win it.

During the Nobel ceremony in December 1974, Hayek met the Russian dissident Aleksandr Solzhenitsyn. Hayek later sent him a Russian translation of The Road to Serfdom. He spoke with apprehension at his award speech about the danger the authority of the prize would lend to an economist, but the prize brought much greater public awareness to the then controversial ideas of Hayek and has been described by his biographer as "the great rejuvenating event in his life".

Hayek never produced the book-length treatment of "the dynamics of capital" that he had promised in the Pure Theory of Capital. After 1941, he continued to publish works on the economics of information, political philosophy, the theory of law and psychology, but seldom on macroeconomics. At the University of Chicago, Hayek was not part of the economics department and did not influence the rebirth of neoclassical theory that took place there (see Chicago school of economics). When in 1974 he shared the Nobel Memorial Prize in Economics with Myrdal, the latter complained about being paired with an "ideologue". Milton Friedman declared himself "an enormous admirer of Hayek, but not for his economics. I think Prices and Production is a very flawed book. I think his [Pure Theory of Capital] is unreadable. On the other hand, The Road to Serfdom is one of the great books of our time".

In February 1975, Margaret Thatcher was elected leader of the British Conservative Party. The Institute of Economic Affairs arranged a meeting between Hayek and Thatcher in London soon after. During Thatcher's only visit to the Conservative Research Department in the summer of 1975, a speaker had prepared a paper on why the "middle way" was the pragmatic path the Conservative Party should take, avoiding the extremes of left and right. Before he had finished, Thatcher "reached into her briefcase and took out a book. It was Hayek's The Constitution of Liberty. Interrupting our pragmatist, she held the book up for all of us to see. 'This', she said sternly, 'is what we believe', and banged Hayek down on the table".

Hayek became a professor at the University of Salzburg from 1969 to 1977 and then returned to Freiburg, where he spent the rest of his days. When Hayek left Salzburg in 1977, he wrote: "I made a mistake in moving to Salzburg". The economics department was small and the library facilities were inadequate.

In 1977, Hayek was critical of the Lib–Lab pact in which the British Liberal Party agreed to keep the British Labour government in office. Writing to The Times, Hayek said: "May one who has devoted a large part of his life to the study of the history and the principles of liberalism point out that a party that keeps a socialist government in power has lost all title to the name 'Liberal'. Certainly no liberal can in future vote 'Liberal'". Hayek was criticised by Liberal politicians Gladwyn Jebb and Andrew Phillips, who both claimed that the purpose of the pact was to discourage socialist legislation.

Hayek gained some controversy in 1978 by praising Thatcher's anti-immigration policy proposal in an article which ignited numerous accusations of anti-Semitism and racism because of his reflections on the inability of assimilation of Eastern European Jews in the Vienna of his youth. He defended himself by explaining that he made no racial judgements, only highlighted the problems of acculturation.

In 1978, Hayek came into conflict with Liberal Party leader David Steel, who claimed that liberty was possible only with "social justice and an equitable distribution of wealth and power, which in turn require a degree of active government intervention" and that the Conservative Party were more concerned with the connection between liberty and private enterprise than between liberty and democracy. Hayek claimed that a limited democracy might be better than other forms of limited government at protecting liberty, but that an unlimited democracy was worse than other forms of unlimited government because "its government loses the power even to do what it thinks right if any group on which its majority depends thinks otherwise".

Despite his opposition to nationalism Hayek made numerous controversial and inflammatory comments about specific ethnic groups. Answering an interview question about people he can’t deal with he mentioned his dislike of Middle Eastern populations, claiming they were dishonest, and also expressed "profound dislike" of Indian students at London School of Economics, saying that were usually "detestable sons of Bengali moneylenders". However, he claimed that his attitude is not based on any racial feeling. During the World War II he was discussing the possibility of sending his children to the United States, but was concerned that they might be placed with a "coloured family". In a later interview, questioned about his attitude towards Black people, he said laconically that he "did not like dancing Negroes" and on another occasion he ridiculed the decision to award Noble Prize to Martin Luther King Jr.. He also made negative comments about awarding the Prize to Ralph Bunche, Albert Luthuli, and his LSE colleague W. Arthur Lewis who he described as an "unusually able West Indian negro". In 1978 Hayek made a month-long visit to South Africa (his third) where he gave numerous lectures, interviews, and met prominent politicians and business leaders, unconcerned about possible propagandistic effect of his tour for Apartheid regime. He expressed his opposition to some of the government policies, believing that publicly funded institutions should treat all citizens equally, but also claimed that private institutions have the right to discriminate. Additionally, he condemned the "scandalous" hostility and interference of the international community in South African internal affairs. He further explained his attitude:

In 1980, Hayek, a non-practicing Catholic, was one of twelve Nobel laureates to meet with Pope John Paul II "to dialogue, discuss views in their fields, communicate regarding the relationship between Catholicism and science, and 'bring to the Pontiff's attention the problems which the Nobel Prize Winners, in their respective fields of study, consider to be the most urgent for contemporary man'".

For Hayek, the distinction between authoritarianism and totalitarianism has much importance and he was at pains to emphasise his opposition to totalitarianism, noting that the concept of transitional dictatorship which he defended was characterised by authoritarianism, not totalitarianism. For example, when Hayek visited Venezuela in May 1981, he was asked to comment on the prevalence of totalitarian regimes in Latin America. In reply, Hayek warned against confusing "totalitarianism with authoritarianism" and said that he was unaware of "any totalitarian governments in Latin America. The only one was Chile under Allende". For Hayek, the word "totalitarian" signifies something very specific, namely the intention to "organize the whole of society" to attain a "definite social goal" which is stark in contrast to "liberalism and individualism". He claimed that democracy can also be repressive and totalitarian; in The Constitution of Liberty he often refers to Jacob Talmon’s concept of totalitarian democracy.

Hayek received new attention in the 1980s and 1990s with the rise of conservative governments in the United States, United Kingdom and Canada. After winning the 1979 United Kingdom general election, Margaret Thatcher appointed Keith Joseph, the director of the Hayekian Centre for Policy Studies, as her secretary of state for industry in an effort to redirect parliament's economic strategies. Likewise, David Stockman, Ronald Reagan's most influential financial official in 1981, was an acknowledged follower of Hayek.

Hayek was appointed a Companion of Honour (CH) in the 1984 Birthday Honours by Elizabeth II on the advice of British Prime Minister Margaret Thatcher for his "services to the study of economics". Hayek had hoped to receive a baronetcy and after being awarded the CH sent a letter to his friends requesting that he be called the English version of Friedrich (i.e. Frederick) from now on. After his twenty-minute audience with the Queen, he was "absolutely besotted" with her according to his daughter-in-law Esca Hayek. Hayek said a year later that he was "amazed by her. That ease and skill, as if she'd known me all my life". The audience with the Queen was followed by a dinner with family and friends at the Institute of Economic Affairs. When later that evening Hayek was dropped off at the Reform Club, he commented: "I've just had the happiest day of my life".

In 1991, President George H.W. Bush awarded Hayek the Presidential Medal of Freedom, one of the two highest civilian awards in the United States, for a "lifetime of looking beyond the horizon". Hayek died on 23 March 1992 in Freiburg, Germany and was buried on 4 April in the Neustift am Walde cemetery in the northern outskirts of Vienna according to the Catholic rite. In 2011, his article "The Use of Knowledge in Society" was selected as one of the top 20 articles published in The American Economic Review during its first 100 years.

Hayek was brought up in non-religious setting and decided that he was an agnostic from age 15. He died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961.

His opponents have attacked Hayek as a leading promoter of neoliberalism. A British journalist, Samuel Brittan, concluded in 2010 that "Hayek's book [The Constitution of Liberty] is still probably the most comprehensive statement of the underlying ideas of the moderate free market philosophy espoused by neoliberals". Brittan adds that although Raymond Plant (2009) comes out in the end against Hayek's doctrines, Plant gives The Constitution of Liberty a "more thorough and fair-minded analysis than it has received even from its professed adherents".

Happy 120th Birthday, Prof Friedrich Hayek

Alles Gute zum Geburtstag, Herr Professor Doktor Friedrich August von Hayek.

A tribute to an economic giant -- Friedrich Hayek -- who would have celebrated his 118th birthday today | American Enterprise Institute - AEI

Today marks the 118th anniversary of the birth of the great Nobel economist Friedrich Hayek (pictured above), who was born on May 8, 1899 (and died on March 23, 1992. For a very detailed and extensive overview of Hayek’s life and intellectual contributions you can visit his Wikipedia page here. Friedrich Hayek was one of …

Happy 117th birthday, Hayek — Adam Smith Institute

F A Hayek, the Anglo-Austrian Nobel economist and liberal thinker, was born yesterday in 1899. Hayek’s economic works in the 1930s, researched with his mentor Ludwig von Mises, showed how boom and bust cycles arose from the inept government manipulation of credit; and he became the leading critic of

Happy 114th Birthday, Hayek — Adam Smith Institute

Here's a video of Friedrich Hayek talking about his key contribution, on the economics of knowledge. For his work in this field, centring around his 1945 paper "The Use of Knowledge in Society" , cited 9391 times according to google scholar, he shared the 1973 Nobel (Memorial) Prize. Here