Hayek, Friedrich August von (1899-1992)

Austrian economist and author of Road to Serfdom (1944), an indictment of government intervention in modern economies representing ‘creeping socialism’. He shared the Nobel Prize for Economics in 1974 with Swedish economist Gunnar Myrdal, for his analysis of the interdependence of economic, social, and institutional phenomena. Hayek later gained a reputation as a leading critic of Keynesianism and an advocate of free banking as the answer to the scourge of inflation.

Hayek's reputation has gone through a remarkable cycle of fall and rise. An eminent exponent of the Austrian theory of business cycles in the 1930s, he was worsted in the battle over Keynesian economics and retreated into capital theory. He gave up economics altogether after the war and took up psychology, political philosophy, the philosophy of law, and the history of ideas. After receiving the Nobel Prize, his fame as a ‘libertarian’ began to spread.

He was born in Vienna, the capital of the Austro-Hungarian Empire, into an academic family. After serving in the army in World War I, he returned to Vienna and entered the Law Faculty of the University of Vienna, taking his doctorate of law in 1921. Two years later, he obtained a second doctorate in economics. There followed a brief visit to the USA, attending courses at Columbia University. Returning to Vienna in 1924, he became the director of the Austrian Institute for Business Cycle Research. Shortly afterwards, he gave some lectures at the London School of Economics (LSE). Published under the title Prices and Production (1931), these lectures made a considerable stir and led to a professorship at LSE, which lasted 18 years.

Hayek was professor of social and moral science at the University of Chicago 1950-62. In 1962, he returned to Europe as professor of economic policy at the University of Freiburg in Breisgau, Western Germany. After retirement from Freiburg in 1968, he spent a further nine years in Austria at the University of Salzburg before retiring from academic life at the age of 78.

The Salzburg years witnessed the publication of his final major work, the three-volume study of Law, Legislation and Liberty (1973, 1976, 1979), capping a career marked by 18 books, 15 pamphlets, and 142 journal articles and chapters in books. Some of his old papers, such as ‘Economics and Knowledge’ (Economica, February 1937) have recently been disinterred as opening new vistas that should have been explored earlier.

At the heart of many of his later writings is the ‘doctrine of unintended social consequences’: most of the worthwhile institutions of modern society (markets, courts, the legal system, and perhaps even the state itself) are the unintended by-products of individual actions taken for private reasons and never could have been deliberately and consciously created. It follows, according to Hayek, that the least interference with spontaneous individual action there is, the better. This is not an argument for doing nothing but rather an argument for doing little and for doing it gradually. This doctrine of ‘least interference’ lends itself either to a traditional conservative or to a radical anarchist interpretation.

His works include The Pure Theory of Capital (1941), Individualism and Economic Order (1948), The Constitution of Liberty (1960), Law, Legislation and Liberty (1973), The Sensory Order (1976), and The Denationalisation of Money (1976).