Hayek and the Nobel Prize: 50 years on
9 October 2024
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7 October 2024
Economic Theory
9 October 2024
Friedrich August von Hayek never formally worked for the Institute of Economic Affairs. But he was nonetheless undoubtedly one of the most significant figures in the institute’s history. If we had to name ourselves after a person, in the way our friends from the Adam Smith Institute do, we would undoubtedly be the ‘Friedrich August von Hayek Institute’ (or, more realistically for the sake of media-friendliness, the ‘F. A. Hayek Institute’ or just the ‘Hayek Institute’).
For a start, it was Hayek’s book The Road To Serfdom (1944) which ‘radicalised’ a young Antony Fisher, to the point where he would later become the founder of the IEA. It was also Hayek who personally dissuaded Fisher from his initial plan of becoming a politician, and who persuaded him to become an ‘ideas entrepreneur’ instead. It was Hayek’s model, outlined in The Intellectuals And Socialism (1949), of how major changes in the climate of opinion happen, which became the closest thing to a blueprint for the future IEA. Hayekian themes, e.g. competition as a trial-and-error process, the dispersed and tacit nature of economically relevant knowledge, the role of market prices in collating and transmitting economic information, the relationship between personal and economic freedom, appear in almost every major IEA publication.
Hayek was, of course, also an IEA author in his own right. His IEA publications Confusion of Language in Political Thought (1968), A Tiger by the Tail: The Keynesian Legacy of Inflation (1972), and Economic Freedom and Representative Government (1973), but especially his book Denationalisation of Money (1976), are frequently downloaded to this day (although the word “download” would have meant nothing to Hayek). Last but not least, you can spot him in old photos taken at or around the institute, and you can find some of his letter correspondence (no e-mails yet) with our predecessors in our archives.
Significant events in Hayek’s professional life are therefore, by extension, significant events in the history of the Institute of Economic Affairs as well. Today marks the 50th anniversary of one such event. On 9 November 1974, the Royal Swedish Academy of Sciences issued a press release entitled Economics Prize for Works in Economic Theory and Inter-Disciplinary Research, which read:
“The Royal Swedish Academy of Sciences has awarded the 1974 Prize for Economic Science in Memory of Alfred Nobel to
Professor Gunnar Myrdal and Professor Friedrich von Hayek
for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.
The Academy of Sciences consider that Myrdal and von Hayek have, in addition to their contributions to central economic theory, carried out important interdisciplinary research so successfully that their combined contributions should be awarded the Prize for Economic Science.”
While it was a joint prize, it is fair to say that it made a bigger difference to Hayek’s ideas than it did to Myrdal’s. Myrdal, a Swedish social democrat, was already part of the social policy establishment anyway. Hayek, in contrast, had spent large parts of his career in the metaphorical wilderness.
The Nobel Prize was, of course, not an endorsement of “Hayekianism” in general. The press release said:
“He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.”
This is a reference to the Austrian business cycle theory. His role in the Socialist Calculation Debate was also mentioned:
“He presented new ideas with regard to basic difficulties in “socialistic calculating”, and investigated the possibilities of achieving effective results by decentralized “market socialism” in various forms. His guiding principle when comparing various systems is to study how efficiently all the knowledge and all the information dispersed among individuals and enterprises is utilized.”
These are undoubtedly important component of Hayek’s work. But they are nevertheless not the sum total of ‘Hayekianism’.
And yet, for better or worse, the prestige of a Nobel Prize rarely remains confined to a silo in such a way. For better or worse, the opinions of a Nobel Prize winning economist will inevitably be taken more seriously, even when they comment on issues that have nothing to do with the subject they won the Nobel Prize for. The clearest contemporary examples of this have to be Paul Krugman and Joseph Stiglitz.
It undoubtedly helped the cause of classical liberalism that a series of economists in that tradition won Nobel Prizes in that period, for example, Milton Friedman in 1976, George Stigler in 1982, or James Buchanan in 1986.
The more important anniversary, though, will be 10 December, the day of the Nobel Prize award ceremony, when Hayek delivered his Nobel Prize lecture The Pretence of Knowledge. We will mark the occasion by republishing The Pretence of Knowledge in full, with introductions from three contemporary scholars steeped in Hayekian thought. Stay tuned.
For a start, it was Hayek’s book The Road To Serfdom (1944) which ‘radicalised’ a young Antony Fisher, to the point where he would later become the founder of the IEA. It was also Hayek who personally dissuaded Fisher from his initial plan of becoming a politician, and who persuaded him to become an ‘ideas entrepreneur’ instead. It was Hayek’s model, outlined in The Intellectuals And Socialism (1949), of how major changes in the climate of opinion happen, which became the closest thing to a blueprint for the future IEA. Hayekian themes, e.g. competition as a trial-and-error process, the dispersed and tacit nature of economically relevant knowledge, the role of market prices in collating and transmitting economic information, the relationship between personal and economic freedom, appear in almost every major IEA publication.
Hayek was, of course, also an IEA author in his own right. His IEA publications Confusion of Language in Political Thought (1968), A Tiger by the Tail: The Keynesian Legacy of Inflation (1972), and Economic Freedom and Representative Government (1973), but especially his book Denationalisation of Money (1976), are frequently downloaded to this day (although the word “download” would have meant nothing to Hayek). Last but not least, you can spot him in old photos taken at or around the institute, and you can find some of his letter correspondence (no e-mails yet) with our predecessors in our archives.
Significant events in Hayek’s professional life are therefore, by extension, significant events in the history of the Institute of Economic Affairs as well. Today marks the 50th anniversary of one such event. On 9 November 1974, the Royal Swedish Academy of Sciences issued a press release entitled Economics Prize for Works in Economic Theory and Inter-Disciplinary Research, which read:
“The Royal Swedish Academy of Sciences has awarded the 1974 Prize for Economic Science in Memory of Alfred Nobel to
Professor Gunnar Myrdal and Professor Friedrich von Hayek
for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.
The Academy of Sciences consider that Myrdal and von Hayek have, in addition to their contributions to central economic theory, carried out important interdisciplinary research so successfully that their combined contributions should be awarded the Prize for Economic Science.”
While it was a joint prize, it is fair to say that it made a bigger difference to Hayek’s ideas than it did to Myrdal’s. Myrdal, a Swedish social democrat, was already part of the social policy establishment anyway. Hayek, in contrast, had spent large parts of his career in the metaphorical wilderness.
The Nobel Prize was, of course, not an endorsement of “Hayekianism” in general. The press release said:
“He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.”
This is a reference to the Austrian business cycle theory. His role in the Socialist Calculation Debate was also mentioned:
“He presented new ideas with regard to basic difficulties in “socialistic calculating”, and investigated the possibilities of achieving effective results by decentralized “market socialism” in various forms. His guiding principle when comparing various systems is to study how efficiently all the knowledge and all the information dispersed among individuals and enterprises is utilized.”
These are undoubtedly important component of Hayek’s work. But they are nevertheless not the sum total of ‘Hayekianism’.
And yet, for better or worse, the prestige of a Nobel Prize rarely remains confined to a silo in such a way. For better or worse, the opinions of a Nobel Prize winning economist will inevitably be taken more seriously, even when they comment on issues that have nothing to do with the subject they won the Nobel Prize for. The clearest contemporary examples of this have to be Paul Krugman and Joseph Stiglitz.
It undoubtedly helped the cause of classical liberalism that a series of economists in that tradition won Nobel Prizes in that period, for example, Milton Friedman in 1976, George Stigler in 1982, or James Buchanan in 1986.
The more important anniversary, though, will be 10 December, the day of the Nobel Prize award ceremony, when Hayek delivered his Nobel Prize lecture The Pretence of Knowledge. We will mark the occasion by republishing The Pretence of Knowledge in full, with introductions from three contemporary scholars steeped in Hayekian thought. Stay tuned.
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