HAYEK, FRIEDRICH

(1899–1992), leading proponent of markets as an evolutionary solution to complex social coordination problems.

One of the leaders of the Austrian school of economics in the twentieth century, Friedrich Hayek received the Nobel Memorial Prize in Economic Science in 1974. Born to a distinguished family of Viennese intellectuals, he attended the University of Vienna, earning doctorates in law and economics in 1921 and 1923. He became a participant in Ludwig von Mises's private economics seminar and was greatly influenced by von Mises's treatise on socialism and his argument about the impossibility of economic rationality under socialism due to the absence of private property and markets in the means of production. Hayek developed a theory of credit-driven business cycles, discussed in his books Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933). As a result he was offered a lectureship, and then the Tooke Chair in Economics and Statistics at the London School of Economics and Politics (LSE) in 1931. There he worked on developing an alternative analysis to the nascent Keynesian economic system, which he published in The Pure Theory of Capital in 1941, by which point the Keynesian macro model had already become the accepted and dominant paradigm of economic analysis.

In the 1930s and 1940s, Hayek made his major contribution to the analysis of economic systems, pointing out the role of markets and the price system in distilling, aggregating, and disseminating usable specific knowledge among participants in the economy. The role of markets as an efficient discovery procedure, generating a spontaneous order in the flux of changing and unknowable specific circumstances and preferences, was emphasized in his "Economics and Knowledge" (1937), "The Use of Knowledge in Society" (1945), and Individualism and Economic Order (1948). These arguments provided a fundamental critique of the possibility of efficient economic planning and an efficient socialist system, refining and redirecting the earlier Austrian critique of von Mises. They have also provided the basis for a substantial theoretical literature on the role of prices as a conveyor of information, and for the revival of non-socialist economic thought in the final days of the Soviet Union.

Hayek worked at LSE until 1950 when he moved to Chicago, joining the Committee of Social Thought at the University of Chicago. There Hayek moved beyond economic to largely social and philosophic-historical analysis. His major works in these areas include his most famous defense of private property and decentralized markets, The Road to Serfdom (1944), New Studies in Philosophy, Politics and Economics (1978), and the compilation The Fatal Conceit: The Errors of Socialism (1988). These works, more than his economic studies, provided much of the intellectual inspiration and substance behind the anti-Communist and economic liberal movements in eastern Europe and the Soviet Union in the 1980s and 1990s. In 1962 Hayek left Chicago for the University of Freiburg in Germany, and subsequently for Salzburg, where he spent the rest of his life. The Nobel Prize in 1974 significantly raised interest in his work and in Austrian economics.

See also: liberalism; socialism

bibliography

Bergson, Abram. (1948). "Socialist Economics." In A Survey of Contemporary Economics, ed. H. S. Ellis. Home-wood, IL: Irwin.

Blaug, Mark. (1993). "Hayek Revisited." Critical Review 7(1):51–60.

Caldwell, Bruce. (1997). "Hayek and Socialism." Journal of Economic Literature, 35(4):1856–1890.

Foss, Nicolai J. (1994). The Austrian School and Modern Economics: A Reassessment. Copenhagen, Denmark: Handelshojskolens Forlag.

Lavoie, Don. (1985). Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. Cambridge, UK: Cambridge University Press.

Machlup, Fritz. (1976). "Hayek's Contributions to Economics." In Buckley, William F., et al., Essays on Hayek, ed. Fritz Machlup. Hillsdale, MI: Hillsdale College Press.

O'Driscoll, Gerald P. (1977). Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City: Sheed, Andrews and McMeel.

Richard E. Ericson

Hayek, Friedrich August von (b. 8 May 1899, d. 24 Mar. 1992). Political economist One of the leading liberal thinkers of the twentieth century. Of Austrian origin, he taught in Vienna until 1933, when he moved to the London School of Economics. In 1938 he acquired British citizenship. In 1950 he became a professor at the University of Chicago, and from 1962 he taught at Freiburg University in Germany. In 1974 he received the Nobel Prize for Economics. In his most famous book, The Road to Serfdom (1944), Hayek warned against the state taking over duties that can be performed by the individual, as this would always have negative and unforeseen side effects. Although he admitted that any civilized society had to live by a given set of rules, he resolutely opposed any degree of state interventionism in the economy, as well as in society. He was one of the most cogent opponents of Keynes, and was very influential among liberal thinkers and economists, e.g. in the new democracies of Eastern Europe.