F. A. Hayek is a lightning-rod figure in the social and policy sciences. He is often criticized, along with Milton Friedman, as the architect of a neoliberal conspiracy that somehow hijacked the twentieth century and created tensions and conflicts that plague the twenty-first century. I will not be able to fix those interpretative issues in this book. If you are expecting an effort to counter Naomi Klein or Corey Robin and their attempt to scandalize Hayek and his project, this book is not where to look. There are two reasons for this. First, I believe the writings of Naomi Klein and Corey Robin are actually not that challenging to a serious student of Hayek’s work; they are, instead, musings of ideological ax-grinders who appeal to those who already believe as they do. I would like to avoid that entire “intellectual” enterprise.1 If you want to read legitimate scholarship that finds serious flaws in Hayek’s writings and actions in this area of the scandalous, I recommend, instead, the works of Andrew Farrant and Edward McPhail (2014). For a more empathetic discussion of Hayek, I would recommend Bruce Caldwell and Leonidas Montes (2015). Second, my purpose throughout this book is not to defend Hayek the man, but to discuss the evolution of Hayekian ideas. In this regard, I believe an extended discussion about Hayek, his efforts with the Mont Pelerin Society , and his purported relationship with political figures such as Pinochet , Reagan , or Thatcher is simply tangential to my purposes except as it relates to the focus on the evolution of Hayekian ideas.
F. A. Hayek, like all of us, was a flawed man. He was, in a strange way, thrust into public view early in his career, then again in the middle of the career, and finally, at the end of his career—with long lapses of general disinterest in what he had to say by the intellectual elite and general public. He fought with John Maynard Keynes, he fought with a variety of socialists such as Oskar Lange, and he fought in general with an intellectual zeitgeist that he struggled to fully grasp. Hayek, the man, demonstrated the same confusions and frustrations in trying to make sense of it all that all flesh-and-blood human beings do, and in the process, said and did things, I am sure, in hindsight he would regret.
No doubt some of the remarks he said about the situation in Thatcher’s England or Pinochet’s Chile would qualify as such remarks. But his relationships with those in political power was remote at best as Hayek was never a political consultant to any leader in power; he was always a critical scholar who tried to speak truth to power from the outside. While I have no desire to defend Hayek, the man, I still have to ask—as Michel Foucault in Power/Knowledge (1980, 135) taught—what in those texts of Hayek that supposedly were developing an argument for true liberalism might make possible authoritarian regimes?2 Hopefully, the reader will find my exposition of Hayekian liberalism in the later parts of this book as a sufficient beginning to this necessary conversation on the nature and significance of the liberal project for our times.
Hayek, the man, witnessed first-hand the inhumanity of World War I (WWI) and was dismayed by the lack of understanding among his London School of Economics (LSE) colleagues of the developments in Germany during the 1930s (see Hayek [1963] 1995, 62). Thus, his overarching concerns were the institutional setting of economic life and how that institutional setting could be destroyed by unrestrained government (whether democratic or not). Hayek’s articulation of Hayekian liberalism was incomplete, and thus, the Hayekian argument needs to be continually worked on so as to realize a better understanding of the institutional infrastructure of a political order of a free people: a political order that exhibits neither discrimination nor dominion. Hayek was in many ways a revolutionary, but strictly in the intellectual sense and not in the political sense.
Unfortunately, Hayek suffered the fate of an intellectual revolutionary in two ways. He was misunderstood by foes and falsely appropriated by friends as a result of the intellectual prejudices of the times. In the practical policy realm, this meant that his books such as The Road to Serfdom ([1944] 2007)3 and The Constitution of Liberty (1960) were not read, but displayed. His arguments were not wrestled with, but reduced to slogans. In the realms of methodology and analytics, Hayek’s bold ideas were either incorrectly translated into the preferred language of the day—the very language he was trying to get folks to break out of—or they were outright dismissed as either incomprehensible or relics of an earlier age that science had progressed beyond. I recently wrote in an article for the Journal of the History of Economic Thought that: “Mises was a sophisticated nineteenth-century thinker and Hayek was a sophisticated twenty-first-century thinker, but in both instances the twentieth century didn’t know how to deal with their arguments about methodology, analytic methods, and the political economy import of their analysis of socialism, interventionism, and radical liberalism” (2015, 84). This thesis will be repeatedly stressed as we study the evolution of Hayekian ideas concerning epistemic institutionalism and attempt to clarify a variety of misconceptions about Hayek’s argument along the way.
So, putting aside the ideological misconceptions that are embedded in the critique of neoliberalism, the main scientific misconceptions are:
- 1.Hayek’s methodological individualism was based upon atomistic actors who were perfectly rational.
- 2.Hayek saw the price system as perfectly efficient.
- 3.Hayek was categorically opposed to government action.
- 4.Hayek presented a slippery slope argument toward totalitarianism in The Road to Serfdom .
- 5.Hayek saw something being the product of spontaneous order as a normative approval of that order.
- 6.Hayek’s resistance to formal modeling and statistical testing was based on old-fashioned methodological ideas that led to dogmatic stances rather than scientific progress.
- 7.Hayek’s evolutionary arguments developed late in his career about group selection constituted an abandonment of his earlier methodological individualism.
- 8.Hayek’s ideas on monetary theory and the price system never evolved throughout his career.
- 9.Hayek’s ideas were roundly defeated by Keynes with respect to macroeconomics, and by Lange -Lerner with respect to the market socialism.
- 10.Hayek effectively abandoned economics after the publication of The Pure Theory of Capital ([1941] 2007) and retreated to political theory, legal theory, and public intellectual work.
It is my hope to counter each of these ten claims throughout this book. I will make judicious use of quotes from Hayek’s body of work, which challenge each of these claims so the reader can see that these misconceptions are a product of efforts to pigeonhole a ...