HAPPY BIRTHDAY, PROFESSOR HAYEK

May 8, 2012

by Mario Rizzo

I could not let May 8th pass without writing something about F.A. Hayek, or rather my appreciation of Hayek. I have not been blogging recently because I have been working very hard researching and, at last, writing my book, with Glen Whitman, on behavioral economics and the new paternalism (no real title yet).

In terms of my own thought, Hayek has been the most influential economist I have have ever encountered. I met him several times — going back to 1968 or thereabouts — but I never really knew him. He seemed difficult to get to know and even to talk to, though he was generally kind and open after he won the Nobel prize. (Before that I found him very distant and not much interested in us young’ins.)

Hayek helped me appreciate Ludwig von Mises who was rarely convincing to me.  While Mises made many a grand assertion Hayek provided careful and subtle arguments. The often arrived at the same place but I found (find) Hayek more persuasive. I also preferred his softer style.

I think the most important insight of Hayek was to understand that knowledge in any large society is decentralized. The most important function of social institutions is to mobilize this knowledge in such a way that it can been used by individuals in making their decisions. Thus: the impossibility of rational calculation under socialism (a conclusion Mises came to in a somewhat different way), the importance of the rule of law, the importance of cultural-social rules, and so forth. Compare that with, in my view, the misguided trivality of Paul Samuelson’s behaviorist theory of revealed preference or Richard Kahn’s mechanical multiplier or Maynard Keynes’s contributions to economic policy guided by his elite hand. I could go on.

In just about every class I teach I tell students about the meaning and the significance of Hayek’s idea of the decentralization of knowledge in society. This idea alone has the power to change minds dramatically. One student told me it changed her life. I do not care if students remember the Weak or Strong Axiom of Revealed Preference or the necessary conditions for perfect competition if they remember Hayek’s “The Use of Knowlege in Society.”

11 Responses to “HAPPY BIRTHDAY, PROFESSOR HAYEK”

  1. chidemkurdas Says:

    Here is one of my favorite quotes from Hayek–admittedly one of many, it is hard to choose from them.

    This is the last sentence of his 1974 Nobel Memorial Lecture, “The Pretense of Knowledge”:

    “The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson in humility which should guard him against becoming an accomplice in men’s fatal striving to control society–a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain designed but which has grown from the free efforts of millions…”

  2. Piotr Pieniążek Says:

    Here’s mine from The theory of Complex Phenomena: “While the assumption of a sufficient knowledge of the concrete facts generally produces a sort of intellectual
    hubris which deludes itself that reason can judge all values, the insight into the impossibility of such full knowledge induces an attitude of humility and reverence towards that experience of mankind as a whole that has been precipitated in the values and institutions of existing society.”

  3. Roger Koppl Says:

    I like your remark about the greater subtlety of Hayek’s arguments, Mario. It’s not only that they were more subtle; they were more scientific. In the 1920 manuscript (much) later published as The Sensory Order, Hayek said he wished to “integrate” his explanation of consciousness “into the worldview of the natural science.” He wanted to “limit the explanation to a single recognized physiological law.” After working out his basic idea, Hayek says, “It is worth noting [th]at H. Bergson reached very similar results by a very different approach and also rejected this atomistic conception [of sensory experience] most vigorously.” Thus, before Hayek fell under the influence of Mises he was already at work integrating lebensphilosophie with “the worldview of the natural science.”

    I think Hayek did the same thing with Mises. He took the whole of Mises’ research program, which was rooted in lebensphilosophie, and integrated it into the the worldview of natural science. If that’s right, you might say that the greater figure was Mises, whose research program Hayek was working out. As a working economist, however, you end up going to Hayek more than Mises. Hayek is the more useful figure to build on when working out your own research program because Hayek speaks the language of science.

  4. Richard Ebeling Says:

    Mario,
    I, too, had a chance to spend time with Hayek out at the Institute for Humane Studies, in the 1970s, when they were headquartred in Menlo Park.

    But I can say that my experience was a bit better than yours. I would frequently go in and talk with Hayek, and (luckily) never found him distant.

    Indeed, I found him to be friently, approachable, and happy to talk about almost everything.

    If I may add about “MIses vs. Hayek” in style or “persausiveness.” I think part of the reason that Hayek seems “more convincing” is that he basically always wrote in an “English” scholarly style of communication: relatively dispassiionate, tentive, and “open.”

    This contrasts with the “German” scholarly” style of communication (especially in the late 19th and early 20th century setting): argumentative, combative, and assertive.

    Thus, for example, Menger and Schmoller’s tone with each other during the “Methodenstreit”: dismissive and insulting, at times. Or Mises and, say, Othmar Spann in the 1920s and 1930s: dismissive and contemptive.

    (I’m. obviously, making broad generalizations here.)

    It is like the untrained modern ear listening (or reading) a work by Shakespeare: what the hell is this guy saying? Give me Hemmingway any day!

    Machlup “transitioned” from these two styles in coming to America as a scholar. Oh, boy, read his early German-language works, especially, for instance, his 1934 work, “A Guide to Crisis Policy.” Clear, crisp, “Austrian,” but not always “delicate” in the way he said things against interventionist and inflationary and reflationary policies that he was critically looking at.

    This is not the tone, most of the time, that we get in his English-language writings after moving to America. He changes his “tone” and style of writing.

    Some ears may not be always comfortable with Mises’ method and style of argumentation. But it was basically a norm in the intellectual context of his time.

    And, if I may add, trust me — Mises’ tone is the epitome of gracious dispassion and “gentileness” compared to many other German writers of his time.

    And clearly Hayek (or Machlup) never had a problem, per se, with seeing “beneath” Mises’ “rhetoric” because they understood and lived in that intellectual cultural context.

    Richard Ebeling

  5. Allan Walstad Says:

    Roger, I wonder if you would elaborate on your statement that Hayek “took the whole of Mises’ research program, which was rooted in lebensphilosophie, and integrated it into the the worldview of natural science.” That sounds like a very substantial claim, but I don’t see anything in your comment that would establish it. Surely Hayek’s econ writings stand on their own, even if the Sensory Order does shed light on his broader thought. If you find Hayek more useful to you, then of course that is a statement of fact. On the other hand, it is a rhetorical commonplace to enlist “science” as a positive label for one view or approach or individual scholar over another. How was Hayek (or his use of language) more “scientific?”

  6. Roger Koppl Says:

    Allan: I did not say that Hayek was more scientific. I said he was integrating Mises’s research program with “the worldview of *natural* science. In my comment I spoke of the “worldview of the natural sciences,” not simply “science.” I did use the unadorned word “science” at the very end, but only in the phrase “speaks the language of science.” I was not trying to suggest that somehow Mises is unscientific or something like that.

    I’ve worked out the argument carefully regarding methodological dualism. You can read it here:

    http://www.sciencedirect.com/science/article/pii/S0167268110001915

    See also my 2002 book “Big Players and the Economic Theory of Expectations,” where I argue that Hayek took Mises’s research program and took it in a “scientific” direction, whereas Schutz took it in a more “humanistic” direction. Please note the scare quotes around “scientific” and “humanistic”!

  7. Allan Walstad Says:

    Ok, Roger, thank you for the reference which I will consult.

  8. Allan Walstad Says:

    I see the paper is one I had looked at before. I’ll try to get hold of the book.

  9. Jim Rose Says:

    from my standpoint, hayek staged a comeback in the 2000s in terms of profile and influence

    My personal barometer was in the 1990s in Australia where mentioning Friedman was an excellent way to not get the job. Hayek was safer because few knew of him, and those that did would remember mostly his writings on the uses of knowledge

    any there any measures such a goggle hits?

  10. Jim Rose Says:

    my googling for obituaries for Hayek is very unrewarding and got short obits like this at http://www.nytimes.com/1992/03/24/world/friedrich-von-hayek-dies-at-92-an-early-free-market-economist.html which notes that “he was all but ignored by other economists for 30 years after World War II, although he was respected for early contributions to monetary theory”.

    Hayek’s son got a longer obituary in the London Independent.


  11. [...] Happy Birthday, Professor Hayek (thinkmarkets.wordpress.com) [...]


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