Hayek and Development

Friedrich Hayek’s 110th birthday today offers a good opportunity to reflect on his growing influence in the field of economic development. Here’s a short video from a Cato policy forum featuring William Easterly, one of the world’s leading development economists, explaining Hayekian insights that have shaped Easterly’s own influential thinking.

Hayek’s appeal to students of development economics is due not only to the sorry record of foreign aid and the top-down development approach of so many poor country governments; more recent, constructivist efforts to promote economic freedom or democracy, as through IMF conditionality or war and occupation (e.g., Iraq) have proved equally discouraging. As Hayek noted, “To plan or organize progress is a contradiction in terms.”

In the field of international economics, Money, Markets and Sovereignty is the latest, important book that I regard as Hayekian. Authors Benn Steil of the Council on Foreign Relations and Manuel Hinds, former finance minister of El Salvador, make the timely case that the extreme form of monetary nationalism that exists today is incompatible with globalization, prone to crises, and poses the greatest threat to globalization. For those of you not interested in monetary policy, chapter two on “A Brief History of Law and Globalism” is well worth the price of the book.

Or you can come hear the authors at Cato on May 19 present their book at a forum. (For a case study of how El Salvador is becoming an economic success story, see here.)