Tag: f a hayek

Happy Birthday, F. A. Hayek

Today is the 113th anniversary of the birth of F. A. Hayek, perhaps the most subtle social thinker of the 20th century.

He was awarded the Nobel Prize in Economics in 1974. He met with President Reagan at the White House, and Margaret Thatcher banged The Constitution of Liberty on the table at Conservative headquarters and declared “This is what we believe.” Milton Friedman described him as “the most important social thinker of the 20th century,” and Lawrence H. Summers called him the author of “the single most important thing to learn from an economics course today.”

He is the hero of The Commanding Heights, the book and PBS series by Daniel Yergin and Joseph Stanislaw. His most popular book, The Road to Serfdom, has never gone out of print and sold 125,000 copies last year. John Cassidy wrote in the New Yorker that “on the biggest issue of all, the vitality of capitalism, he was vindicated to such an extent that it is hardly an exaggeration to refer to the 20th century as the Hayek century.”

Last year the Cato Institute invited Bruce Caldwell, Richard Epstein, and George Soros to discuss the new edition of The Constitution of Liberty, edited by Ronald Hamowy. In a report on that session, I concluded:

Hayek was not just an economist. He also published impressive works on political theory and psychology.

He’s like Marx, only right.

Cato published two original interviews with Hayek, in 1983 and 1984.

Find more on Hayek, including an original video lecture, at Libertarianism.org.

Celebrating ‘World Trade Week’ by Remembering Smoot-Hawley

Carrying on an annual tradition dating back to President Franklin Roosevelt, President Obama issued a proclamation on Friday declaring this third week in May “World Trade Week.”

Of course, every week is world trade week at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, but in order to do our part as good citizens, we’ve organized a book forum this Tuesday, May 17, at 4 p.m. on a new book by Dartmouth College economist Douglas Irwin, titled, Peddling Protectionism: Smoot-Hawley and the Great Depression.

The Smoot-Hawley tariff bill is a fitting subject for any World Trade Week. As we note in the invitation:

More than 80 years after its passage, the Smoot-Hawley Tariff Act of 1930 still resonates in today’s debate over trade policy. Advocates of trade blame the law for deepening the Great Depression and warn of the economic damage from a reversion to protectionism. Skeptics of trade say its impact has been exaggerated. Economist and historian Douglas Irwin tells the messy and, at times, amusing story of how Congress dramatically raised tariffs in 1930 just as the world was plunging into depression, and analyzes the economic consequences of the most infamous trade bill ever enacted by Congress. Irwin then draws important lessons that can help today’s trade policymakers avoid the costly mistakes of the past.

Professor Irwin will talk about his book and answer questions about this turning point in U.S. trade history. There is still time to sign up here to attend the event in person at Cato’s F.A. Hayek Auditorium, or you can watch the live video feed online here.

A Weekend’s Worth of Hayek Interviews

The estimable Francisco Marroquin University in Guatemala has just posted 15 hours of interviews with F. A. Hayek, conducted in 1978, four years after he won the Nobel Prize for Economics.

You know the interviewee is important when the interviewers include James M. Buchanan, Robert Bork, Armen Alchian, Axel Leijonhufvud, and Leo Rosten. Along with the streaming video, there’s a complete transcript posted. What an amazing resource! We are indebted to Armen Alchian, Bob Chitester, the Earhart Foundation, the Pacific Academy of Advanced Studies, and now Francisco Marroquin for making these interviews available.

A few years later Cato Policy Report published two exclusive interviews with Hayek, in print form. Find them here and here.

Hayek after 35 Years

Today I reread F. A. Hayek’s Nobel Lecture, “The Pretence of Knowledge.” Hayek was awarded the Nobel Memorial Prize in 1974 and delivered his lecture on December 11, 1974. I was amazed at how modern it was, and appropriate once again for the times.

The 1970s were terrible times: stop-go demand management policies had produced stagflation that would continue for the rest of the decade.  Hayek said that “we have indeed at the moment little cause for pride: as a profession we have made a mess of things.” He charged that the mess had been produced by policies the majority of economists “recommended and even urged governments to pursue.”

The focus of his lecture was on scientism and how its errors had led economists and the Western economies to where they found themselves at that moment.  What was the chief theoretical error? It was “the belief that we can permanently assure full employment by maintaining total money expenditure at an appropriate level.” The “Pretence of Knowledge” was that economists had or could ever have the knowledge required to do that.

What was the correct theory of the cause of widespread unemployment? It is “the existence of discrepancies between the distribution of demand among the different goods and services and the allocation of labour and other resources among the production of those outputs.” We call such discrepancies a coordination failure.

The coordination failure cannot be resolved by stimulating demand because spending is always on particular goods and services.  There is no aggregate out put on which to spend money. Aggregate demand and supply are categories of a model with no empirical counterparts.

Unless economists can solve the knowledge problem, they have no way of aligning spending with actual preferences.  Stimulus policies are more likely to aggravate as alleviate the problem.

Indeed, it was stimulus that caused the coordination failure.  Hayek outlined his theory succinctly in one paragraph.

  • Monetary injections into particular markets stimulate demand only temporarily.
  • Labor and other resources are drawn into the stimulated activities [think housing, 2002-07].
  • Once the monetary stimulus ceases or merely slows, the production and employment cannot be maintained.
  • Only if monetary stimulus or accelerated (once expectations come into play) can the new pattern of production and employment be maintained.

The consequence of monetary stimulus is “a distribution of employment which can be maintained only by a rate of inflation which would rapidly lead to a disorganization of all economic activity.”

The lecture is worth reading by those who have not done so, and rereading by those who have.

[Cross-posted at Thinkmarkets.]

Ayn Rand Is In

Who would have thought? The Washington Post, which took two months to run a review of the two important new books about Ayn Rand that were published in October, now declares Ayn Rand to be “In” for 2010. Well, technically, in the paper’s annual New Year’s Day Out/In list, it declares “Twihards” (fans of the Twilight series, I take it) to be Out and “Randroids” to be In. But the splashy display in the print paper illustrates “Randroids” with a classic photo of Ayn Rand, the one that graces the cover of Barbara Branden’s biography The Passion of Ayn Rand.

Rand had a pretty good 2009, so it’s impressive that the Post thinks she’ll be bigger in 2010. 

While the renewed interest in Rand has been noticed everywhere from the Times Higher Education Supplement to the Wall Street Journal to the left-wing Campus Progress, William Kristol apparently missed it entirely. He wrote on December 29 about the revival of conservatism in response to the challenge of the Obama administration.

Of course, as conservatives, we also know many of the very best ideas are old ideas. And I’m struck by how many people are rediscovering Hayek’s “The Fatal Conceit,” Irving Kristol’s “Two Cheers for Capitalism,” or Tocqueville’s account of soft despotism in “Democracy in America.”

There are great ideas to be found in that list of books. But as everyone but Kristol has noticed, the author who’s really being rediscovered in this first 18 months or so of financial crisis and government expansion is Ayn Rand. Consider the sales figures for the different books. In 2009 about 2000 copies of The Fatal Conceit were sold. (Kristol should have cited The Road to Serfdom, which sold 21,000, more than double its sales the year before and about six times its sales in 2007, before the financial crisis began.) About 20,000 copies of various editions of Democracy in America. And 300,000 copies of Atlas Shrugged, along with 95,000 copies of The Fountainhead and even 60,000 copies of Anthem. (Two Cheers for Capitalism is out of print, so its rediscoveries can’t be tracked by BookScan.) It’s clearly Ayn Rand who has gotten the most help from the Bush-Paulson-Geithner-Bernanke-Obama-Geithner-Bernanke policies of the past 18 months.

Note: In addition to the new books on Rand from two of the world’s greatest publishers, the revitalized Laissez Faire Books has just published, for the first time in book form, the lectures on Ayn Rand’s philosophy that Nathaniel Branden gave back in the 1960s. Known then as “The Basic Principles of Objectivism,” now published as The Vision of Ayn Rand, these lectures were instrumental in tying Rand’s fiction to philosophy, politics, and economics, and in creating one of the first organized libertarian movements. As I said in a jacket blurb:

This is the most important work on Objectivism not written by Ayn Rand, available at last in book form. These lectures were delivered by the person closest to Ayn Rand, designated by her as her intellectual heir, often with her sitting in the audience and answering questions about them, and endorsed by her. Rand’s subsequent falling out with Nathaniel Branden over personal matters doesn’t change that. This is the organized, comprehensive treatise on Objectivism that Ayn Rand never wrote. Philosophers, historians, and economists may – and should – debate the claims of Objectivism. In this book they have a systematic work with which to engage. These lectures were also a milestone in libertarian history, as the lecture sessions brought together for the first time large numbers of young people who shared an enthusiasm for Ayn Rand and the individualist philosophy. The lectures were given as taped courses in more than 80 cities, and people drove for miles to listen to them on tape. Wasn’t that a time!

#OpenGov and the Road from Serfdom

i-want-to-believeLike Jim, I watched this morning’s Open Government Initiative launch with an eyebrow reflexively arcing skyward. Like Fox Mulder, I want to believe, but it’s not just the track record that gives me pause; it’s the tension in one of Vivek Kundra & Aneesh Chopra’s answers to a pointed question that came in from the Web: How do you actually implement this? How do you get all the agencies on board, persuade (or compel) them to open up, embrace openness, and free their data?  Because the public pitch is that the great benefit of open government is accountability, which requires information that may reflect badly on an agency and generate bad publicity to be released. But since they’re limited in their ability to enforce this on an alphabet soup of agencies, the pitch to leaders within government is: Imagine how cool it would be to have the entire population as your clickworkers.  So transparency is carrot and stick in one—a carrot stick, if you will: Take a nibble between thrashings, it’s delicious! This is not totally crazy, since there will probably be data whose release opens an agency to greater scrutiny, but still benefits them on net because it lets some tasks be offloaded to the cloud. But insofar as those two things come apart, it’s not hard to guess which one agencies will want to focus on, and the mandate to ensure “data quality” makes a good stock excuse for withholding.

I don’t want to be entirely cynical, though, because openness—as I’ve harped on before, and as Jim often stresses—can be an important structural limitation on government.  And if I can riff for a moment, I think it’s worth distinguishing two aspects of “limited government” through the lens of the argument F.A. Hayek makes in his seminal The Road to Serfdom. Very crudely, the idea goes something like this: As government takes on responsibility for ever more complex forms of planning, via a growing tangle of interdependent rules, it becomes increasingly difficult for that power to be checked  by democratic mechanisms.  Expansion in the scope of state authority goes hand-in-hand tends to be associated with more centralized, opaque, and autocratic exercise of that authority, compounding the disempowerment of ordinary citizens. Call them, if you want to be dramatic, the Orwell problem and the Kafka problem, respectively. But state functions that are not amenable to democratic oversight by the crowd may be amenable to peer-produced oversight by the cloud. Libertarians focus—with good reason—on limiting the scope of state power, which we might think of as a kind of external boundary.  The internal boundaries are at least as important. But folks who are centrally concerned about limited government don’t often choose a career in the federal bureaucracy, and the ones who get elected to office, let’s face it, often lack the skill and disposition for the nitty gritty details of governance.

One implication of this is that a more open and networked government, if it ever does come about, may demand a disorienting cultural shift of libertarians—where on top of the big political-philosophy level ideas, it begins to behoove us to pick a pet agency and get interested in the profoundly unsexy details of how it operates. It lacks the frission of taking to the streets quoting Paine, to be sure, but at least engagement no longer demands more pernicious incentives—either venal or, heaven forfend, idealistic.

Soaring Sales for “Road to Serfdom”

Cato’s new staff writer, Aaron Powell, told me he had recently seen two people on the Washington Metro reading The Road to Serfdom by F. A. Hayek. That prompted me to check the sales figures for Road to Serfdom at Nielsen’s Bookscan. And whattaya know? Sales have increased this year at an even faster pace than sales of Atlas Shrugged. (Atlas sells 10 times as many copies, but the percentage increase over last year is less.)

So far this year the most popular edition of Road to Serfdom has sold 11,000 copies. That compares with 3,000 copies at the same point last year. That’s a 263 percent increase for those of you keeping score at home.

Why? Well, no doubt huge new government spending programs and attempts to massively expand the welfare state send people looking for classic literature that makes the case for liberty and limited government. But what the Marxists call the “objective conditions” can always use a bit of help. And indeed, just as I found in investigating the sales bump for Atlas Shrugged, it looks like an op-ed in the Wall Street Journal was instrumental in boosting the sales of The Road to Serfdom.

On February 4, former House Majority Leader Dick Armey, now chairman of Freedomworks, published an op-ed in the Journal titled “Washington Could Use Less Keynes and More Hayek.” Sales of Road to Serfdom, which were in the low hundreds each week since the beginning of 2009, more than doubled over the next four weeks. It seems likely that Armey’s op-ed caused the new interest.

Armey didn’t actually mention The Road to Serfdom – he just talked about Hayek and his ideas generally – but when you go looking for Hayek, you’re going to find his most popular book. So maybe we could attribute the sales bump instead to David Henderson’s review of The Road to Serfdom – titled “Still Relevant–Perhaps More So” – in the Spring issue of Regulation. But the Wall Street Journal does have a larger circulation.

Update: This item has been edited to remove proprietary information.