December 3, 2022

Too many on the left think of the Nobel Prize-winning economist Friedrich Hayek as “conservative,” or at best “neoliberal.” But Hayek was no conservative. He was a liberal, no “neo” about it. A new biography, Hayek: A Life, by the historians of economic thought Bruce Caldwell and Hansjörg Klausinger, tells the story of his first five decades in 824 pages of mind-stunning detail.

Hayek was a leader in the third generation of the so-called Austrian School of economics. Worldwide now, though a minority view, it did originate in Austria. Starting in the 1870s, the founder Carl Menger developed and defended a radical improvement in the English liberal economics of Adam Smith, David Ricardo, and J.S. Mill.

The opponents of liberalism in Menger’s time were devotees of an echt German “historical school,” which admired the coercive masters of old and recommended new ones. In the U.S., opponents of liberal Austrian economics were called institutionalists—they sought to impose institutions, whether you like it or not. So too nowadays do neo-institutionalists such as Douglass North and Barry Weingast and Daron Acemoglu.

The Austrian School of Menger, Ludwig von Mises, Hayek, Israel Kirzner, Murray Rothbard, and now Peter Boettke recommends instead that we stick with pretty good spontaneous orders. They arise all over the place from masterless people interacting as they do in, say, the English language, German music, American Wikipedia, Dutch friendship, French cuisine, and the world economy. Except in totalitarian countries like the one Xi Jinping fantasizes about, most of life occurs outside the state. How often, after all, do you enforce a contract in the state’s courts? 

So Hayek and the Austrian School are liberal, in a modern world lurching between the fatal conceits of left and right. On the left nowadays Acemoglu and James Robinson, and more radically Thomas Piketty and Mariana Mazzucato, recommend a bigger and bigger state. They promise it will be a very nice one, you understand. On the right Donald Trump and Vladimir Putin recommend a bigger and bigger state. They make no such promises about niceness. They envision a state of the sort that Hayek opposed in Russia and then in the German lands, growing up with Viennese antisemitic politics and the street violence of Weimar Germany next door. We liberals stand apart from the usual spectrum, recommending as Hayek did a competent but small state, liberty with love.

The peculiarly American term for such a worldview is libertarianism. The usage delivers liberal over to the social democrats. Hayek and I disapprove. True liberalism adopts instead the strange and wonderful idea arising suddenly by happy accident in northwestern Europe during the 18th century that the ancient hierarchies of husband and master and king should not stand. Ordinary people were to be treated for the first time like adults. Such a liberalism could be called adultism.

In their biographical volume, which covers 1899–1950, Caldwell and Klausinger tell everything about Hayek’s youth you wanted to know but were afraid to ask. From his happy childhood in Vienna and foolhardy service as a junior officer in the Austrian army on the Italian front, he went during the 1920s to university and then a research job with Mises. He shifted in his commitments from a sentimental socialism to an intellectual liberalism. So did numerous leftish intellectuals during the 20th century—Leszek Kołakowski, Robert Nozick, Thomas Sowell. I did too, though not as rapidly as Hayek did. The old joke is that if you are not a socialist at age 16, you have no heart. If you are still a socialist at age 26, you have no brain.

Hayek was partly converted as early as age 23 by Mises’ 1922 book Die Gemeinwirtschaft (Collectivized Economy; published in English in 1936 as Socialism). “I had already grown very skeptical [of central planning],” he wrote, perhaps from watching the Austrians and the Italians do utterly incompetently what states are primarily formed to do, waging bloody war. Some in my generation drew the same lesson from the blood of Vietnam. Yet, like me and many others, Hayek could not for a long time fully embrace what he already knew: “I would not have said then—as I do now—that socialism is not even half right, but totally wrong.”

My own conversion book was Nozick’s 1974 Anarchy, State and Utopia. Back in college a dozen years earlier my roommate Derek and I, majors in the Keynesian economics on offer then, sneered loftily at our electrical engineer roommate David for reading Mises’ 1949 Human Action. David, relaxing from solving second-order differential equations, would light up an unfiltered Gauloises cigarette, lean back in his office chair, and perch the old Yale Press edition on his knees. If I had not sneered but read, I would have saved at least a dozen years—more like the 30 or so it took me to grasp much of the Austrian contributions to economics, especially in its theory of markets and discovery.

Caldwell and Klausinger move through Hayek’s unhappy first marriage, his rejection of Viennese antisemitism, his teaching at the London School of Economics in its creative decade of the 1930s, and his composing in the 1940s The Road to Serfdom. In April 1945, that work was condensed in a famous issue of Reader’s Digest for 5 million subscribers and given free to millions of soldiers. In the harsh pro-socialist climate of the time among the intelligentsia, the book ruined Hayek’s then-lofty reputation as an academic.

In 1947, he led the first Mont Pelerin meeting of the handful of anti-socialist liberals, at the high point of world socialism. Hayek served as the president of this alarming discussion group of professors from 1947 to 1961, as he turned from technical economics to political philosophy, where he at length rebuilt his reputation—but those developments await the reader in Volume 2.

That volume, to be co-authored by Klausinger and the brilliant Bulgarian-German Stefan Kolev, will have to find its way through conflicting accounts of Hayek’s controversial statements on Chile and his interactions with Augusto Pinochet. (Yet the Chicago Boys, so often unfairly tarred with the sins of that Chilean strongman, were mainly taught price theory at the University of Chicago by a liberal named, uh, McCloskey.) That volume will tell of his The Constitution of Liberty (1960), his depression when he realized that few were listening, and his rise to world prominence after the Nobel Committee smiled. The Committee likes to pair opposite candidates, in a characteristically nonfunny Swedish joke. So it awarded the glittering prize in the same year to Hayek and to the Swedish socialist Gunnar Myrdal.

In 1960, Hayek wrote a persuasive appendix to his own big tome, The Constitution of Liberty, explaining “Why I Am Not a Conservative.” (That didn’t stop the conservative National Review from ranking it ninth among the 100 best books of the century.) Hayek noted that the political right wants to coerce us to construct a fantastic version of a lovely past and the left wants to coerce us to construct a fantastic version of a future heaven. We liberals do not want to coerce anyone. And we don’t like fantasies.

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