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Friedrich August von Hayek never formally worked for the Institute of Economic Affairs, but he was nonetheless 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.
For a start, it was Hayek’s book The Road to Serfdom (1944), which won over – and alarmed – Antony Fisher, the future founder of the IEA. A little later, it was 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 of how tectonic changes in the climate of opinion happen – outlined in The Intellectuals and Socialism (1949) – which became the closest thing to a blueprint for the future IEA, albeit on a very abstract level. Hayekian themes, such as 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 and 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 probably 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.
The anniversary of Hayek receiving the Nobel Prize is therefore an important anniversary for us at the IEA as well.
The Nobel Prize was, of course, not a wholesale endorsement of ‘Hayekianism’. Rather, the Royal Swedish Academy of Sciences specifically singled out his ‘theory of business cycles and his conception of the effects of monetary and credit policies’, and ‘new ideas with regard to basic difficulties in “socialistic calculating”’. Those are important parts of Hayek’s work, but they are not the sum total.
But, 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.
We decided to mark the occasion of this anniversary by republishing Hayek’s Nobel Prize lecture, The Pretence of Knowledge, with introductions from three contemporary scholars steeped in Hayekian thought.
Bruce Caldwell, author of an acclaimed Hayek biography, provides some context about what the Nobel Prize meant for Hayek’s career and professional recognition at the time. Although it did lead to a renewed interest in the (by then largely forgotten) Austrian School of Economics, it certainly did not mean that Hayek was now winning the argument. The zeitgeist was still very much against him, and he continued to face a lot of hostility.
Until not so long ago, it looked as though Hayek’s contribution to the Socialist Calculation Debate had been rendered redundant by events. We seemed to have reached Fukuyama’s ‘end of history’, characterised by a broad acceptance of the market economy across most of the political spectrum. But the rise of ‘Millennial Socialism’ in the 2010s brought these old arguments back to life. It is simply not true anymore that acceptance of the market economy can be taken for granted. Peter Boettke shows that the ‘new’ socialism is just as flawed as the old one, and no more robust in the face of the Hayekian critique.
The history of classical liberalism is inseparable from the history of the Enlightenment, so unsurprisingly, classical liberals have a huge respect for science, especially the natural sciences. To this day, we classical liberals often find ourselves arguing against various forms of mysticism and irrationalism, for example, radical environmentalist groups such as Extinction Rebellion and Just Stop Oil, or ‘woke’ progressives who see science as Western-centric and ‘colonialist’. But everything in its proper place, as was the theme of The Pretence of Knowledge:
There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try […] to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society.
Donald Boudreaux shows us some contemporary examples of this misuse of science, in the form of a naïve ‘scientism’ that Hayek warned us about half a century ago.
While we see this anniversary as a cause for celebration, we nonetheless do not necessarily intend this publication to be just an exercise in backslapping for self-proclaimed Hayekians. Rather, we hope that it will be just as valuable to non-Hayekians or even anti-Hayekians who, even if they end up disagreeing, nonetheless wish to inform themselves about the ideas of a man who, for better or worse, was clearly a towering figure in the history of economic thought.
The views expressed in this monograph are, as in all IEA publications, those of the authors alone and not those of the Institute (which has no corporate view), its managing trustees, Academic Advisory Council members or senior staff. IEA monographs are blind peer-reviewed by at least two academics or researchers who are experts in the field, a practice which we have waived in this exceptional case, since it is a republication of a historic text.
Kristian Niemietz
Editorial Director
Institute of Economic Affairs London, October 2024
IEA_Hayek-50-Years-On_v4_Digital
Contents
Foreword
Friedrich August von Hayek never formally worked for the Institute of Economic Affairs, but he was nonetheless 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.
For a start, it was Hayek’s book The Road to Serfdom (1944), which won over – and alarmed – Antony Fisher, the future founder of the IEA. A little later, it was 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 of how tectonic changes in the climate of opinion happen – outlined in The Intellectuals and Socialism (1949) – which became the closest thing to a blueprint for the future IEA, albeit on a very abstract level. Hayekian themes, such as 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 and 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 probably 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.
The anniversary of Hayek receiving the Nobel Prize is therefore an important anniversary for us at the IEA as well.
The Nobel Prize was, of course, not a wholesale endorsement of ‘Hayekianism’. Rather, the Royal Swedish Academy of Sciences specifically singled out his ‘theory of business cycles and his conception of the effects of monetary and credit policies’, and ‘new ideas with regard to basic difficulties in “socialistic calculating”’. Those are important parts of Hayek’s work, but they are not the sum total.
But, 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.
We decided to mark the occasion of this anniversary by republishing Hayek’s Nobel Prize lecture, The Pretence of Knowledge, with introductions from three contemporary scholars steeped in Hayekian thought.
Bruce Caldwell, author of an acclaimed Hayek biography, provides some context about what the Nobel Prize meant for Hayek’s career and professional recognition at the time. Although it did lead to a renewed interest in the (by then largely forgotten) Austrian School of Economics, it certainly did not mean that Hayek was now winning the argument. The zeitgeist was still very much against him, and he continued to face a lot of hostility.
Until not so long ago, it looked as though Hayek’s contribution to the Socialist Calculation Debate had been rendered redundant by events. We seemed to have reached Fukuyama’s ‘end of history’, characterised by a broad acceptance of the market economy across most of the political spectrum. But the rise of ‘Millennial Socialism’ in the 2010s brought these old arguments back to life. It is simply not true anymore that acceptance of the market economy can be taken for granted. Peter Boettke shows that the ‘new’ socialism is just as flawed as the old one, and no more robust in the face of the Hayekian critique.
The history of classical liberalism is inseparable from the history of the Enlightenment, so unsurprisingly, classical liberals have a huge respect for science, especially the natural sciences. To this day, we classical liberals often find ourselves arguing against various forms of mysticism and irrationalism, for example, radical environmentalist groups such as Extinction Rebellion and Just Stop Oil, or ‘woke’ progressives who see science as Western-centric and ‘colonialist’. But everything in its proper place, as was the theme of The Pretence of Knowledge:
There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try […] to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society.
Donald Boudreaux shows us some contemporary examples of this misuse of science, in the form of a naïve ‘scientism’ that Hayek warned us about half a century ago.
While we see this anniversary as a cause for celebration, we nonetheless do not necessarily intend this publication to be just an exercise in backslapping for self-proclaimed Hayekians. Rather, we hope that it will be just as valuable to non-Hayekians or even anti-Hayekians who, even if they end up disagreeing, nonetheless wish to inform themselves about the ideas of a man who, for better or worse, was clearly a towering figure in the history of economic thought.
The views expressed in this monograph are, as in all IEA publications, those of the authors alone and not those of the Institute (which has no corporate view), its managing trustees, Academic Advisory Council members or senior staff. IEA monographs are blind peer-reviewed by at least two academics or researchers who are experts in the field, a practice which we have waived in this exceptional case, since it is a republication of a historic text.
Kristian Niemietz
Editorial Director
Institute of Economic Affairs London, October 2024
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