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NOTE 18. Friedrich August von Hayek: Grand Seigneur on the Fence

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18.

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Frederich August von Hayek, Grandseigneur on the fence

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Frederich August's great-grandfather Joseph Hayek, on account of his commercial success,

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was knighted by Emperor Joseph II a few weeks before the French Revolution in 1789.

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He had risen to a state administrator and had founded two textile factories near Brünn

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and Vienna.

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The family fortune was largely lost during the course of the 19th century, but the family

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in turn produced a high school principal, an ornithologist, a botanist, a chemist, a

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beetle specialist and three physicians.

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Friedrich August's father, who worked as a physician as well, published standard works

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on Austria's botanical geography in his free time, which led to his being offered an

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unsalaried lecture post at the University of Vienna.

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His mother, Felicitas, whose kinship to the Wittgensteins and whose friendship with the

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Royal Imperial Finance Minister Eugen von Boehm-Bawerk contributed significantly to

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the social status of the family, raised three more academics. The two youngest sons, Erich

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and Heinrich, started careers as a chemist and anatomist respectively. But Friedrich

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August, born on May 8, 1899, would make his family's name known worldwide.

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Jung Fritz accompanied his father on botanical expeditions into the region surrounding Vienna

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early on. Here he received his first training in scientific methodology as a photographic

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assistant. Through his family he became acquainted with the future Nobel Prize winners Erwin

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Schrödinger, 1887-1961, Karl von Frisch, 1886-1982, and Konrad Lorenz, 1903-1982,

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who had been fascinated by geese, even as a young child. These men would become his

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valued colleagues. His parents placed little importance on religious education, but they

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did accompany him to the Burgtheater, where he became acquainted with the works of the

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great playwrights. During Hayek's middle school years he displayed the typical signs

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of a gifted student who was not being sufficiently challenged. He attracted the teacher's attention

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and usually in a negative way due to his intelligence, laziness and lack of concentration and interest.

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At the same time he would read Aristotle and socialist pamphlets, especially during religious

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education and under his desk at that. After graduating from the Elisabeth Gymnasium and

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serving as an officer in the First World War, he enrolled at the University of Vienna to

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study law, but spent most of his time concerned with economics, psychology, the philosophy

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Theory of Science and Philosophy Hayek read works by Menger and Boehm-Bawerk,

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made initial contact with the Austrian School, and also got to know some members of the Wiener

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Kreis. The Vienna Circle was a group of philosophers

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of logical positivism at the University of Vienna from 1922 to 1936, chaired by Moritz

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Schlick, 1882-1936. Insufficient opportunities for the training and

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and Employment of Psychologists, finally made him decide to deepen his knowledge of economics

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as part of his political science studies under Friedrich von Mises, who would later be his

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doctoral advisor. Mises also supervised his habilitation in political economy in 1929.

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After receiving his law doctorate in 1921, Hayek, along with Joseph Herbert Fürth, an

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old friend from his youth and from his time at the university, founded a private discussion

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Club, the so-called Geistkreis. Gottfried Habeler, Fritz Machlup, Felix Kaufmann,

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Oskar Morgenstern, Erich Wögeling and Alfred Schutz, among others, belonged to its inner

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circle. Like many of his generation, who returned from the battlefields of the First World War,

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Hayek sympathised with socialist ideas, but he was quickly persuaded otherwise by reading

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Mises's Die Gemeinwirtschaft, 1922, Socialism, which contained the proof that economic calculation

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was impossible in a socialist community. Hayek subsequently took up a professional position

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in the newly formed Abrechnungsamt, an institution created to process reparation payments and

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to deal with the consequences of war, and in which Mises was one of his superiors. In

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1923 Hayek finished a second doctoral thesis in political science and then spent a year

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studying in the United States. Mises recognized Hayek's talent quite early on and invited

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Hayek led him to his private seminar. With him he established the Österreichisches Institut

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für Konjunkturforschung, where Hayek was able to perform difficult pioneering work at the

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economic grass roots. Hayek's scholarly contributions, which gradually brought him international

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recognition, led to Geldtheorie und Konjunkturtheorie 1929, Monetary Theory and the Trade Cycle,

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a treatise which would eventually become his habilitation paper, and enabled him to take

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Hayek was given the opportunity to give a guest lecture at the London School of Economics.

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He made such a good impression that he was promptly offered a tenured professorship.

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Every Thursday evening he held a seminar which was attended by prominent economists such as

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John Hicks, 1904-1989, and Abba P. Lerner, 1903-1982, and representatives of the Austrian

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School as well, including Gottfried Habeler, Fritz Machlub, and Paul Rosenstein Rodan.

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Hayek was soon enriching London's cosmopolitan scholarly community,

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along with Ludwig Wittgenstein, 1889-1951, art historian Ernst Gomrich, 1909-2001,

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and Karl Popper, 1902-1994, who also attended the seminar.

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But at the end of the 1930s, and while on the way to becoming John Maynard Keynes's 1883-1946 major

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opponent, Hayek became more isolated academically. Having spoken out against the policy of expansive

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state employment, and having warned against its inflationary consequences during the nadir of

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the Great Depression, his recommendations hardly offered much scope to politicians keen on

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on Implementing Policies. By contrast, Keynes's proposals pressing for further government

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intervention were gladly seized upon by politicians, and within a short time became the guidelines

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for economic policy decisions. Hayek considered himself an Englishman at heart. He held the

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philosophy of the Scottish Enlightenment and the English legal system in equal esteem and

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became a citizen of Great Britain in 1938. If one cannot fight against the Nazis, one

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One ought to at least fight the ideas which produce Nazism, wrote Hayek in a letter to

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Fritz Machlup in 1941. Thereafter he began preliminary work on The Road to Servedom,

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a haunting analysis of the German and Soviet varieties of socialism that also described

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democratic socialism as an insidious path to servitude. The book appeared in 1944 during

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the Second World War and was a resounding publishing success. It made Hayek famous worldwide

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In April 1945, an abridged version appeared in the Reader's Digest, and reached more

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than 600,000 readers. It was followed in 1950 by a comic strip version in Look Magazine.

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This popular warning against the threatening post-war totalitarian collectivism, brought

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about by holding on to the planned war economy and peacetime, and the awaited dynamics of

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any centrally planned economy, fell on fertile ground. Opponents of socialism found in it

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and ample intellectual ammunition. But since Hayek's ideas during the Cold War were also

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appropriated politically and put into the same category as other non-socialist schools

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of thought and movements, his reputation as a social scientist was quickly ruined. In 1947

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he managed, nonetheless, to gather in Vivier, on the shores of Lake Geneva, 39 non-collectivist

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thinkers from all over the world whose aims were to discuss the future of liberalism on

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on a broader basis, among them Wilhelm Röpke, 1899-1966, Walter Oiken, 1891-1950, Ludwig

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Earhart, 1897-1977, Milton Friedman, 1912-2006, Henry Hazlitt, 1894-1983, Karl Popper, Fritz

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Machlub, Lionel Robbins, 1898-1984, and also Ludwig von Mises. With this was founded the

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The Mont Pelerin Society, a kind of liberal internationale, which serves to this day as

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a platform for advocates of a free market economy.

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After the war, Hayek married his cousin Helene Varhaneck, with whom he had cultivated an

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intimate connection for some time. Complicating the matter was that both had to file for divorce

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first. Hayek's first wife put up considerable resistance, and Helene Varhaneck's husband

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Hayek died shortly before the appointed divorce date. After some troubling times, the couple

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moved to the University of Chicago in 1950, where Hayek assumed a tenured professorship

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for moral and social sciences. This suited him very well, as he was able to offer all

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manner of different programs and maintain contacts far beyond the scope of his primary

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subject area. In the two decades that followed, Hayek would publish those works that would

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would secure his lasting importance as a theoretician of a liberal society, Individualism and Economic

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Order, 1948, The Sensory Order, 1952, and his magnum opus The Constitution of Liberty,

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1960. He returned to Europe in 1962 and took over

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Walter Euken's chair for Applied Economics at the University of Freiburg. He presented

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After becoming Professor Emeritus, Hayek took up a guest professorship at the University

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of Salzburg, but this was a move he soon regretted on account of petty bureaucratic quarrels

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and the country's intellectual climate. He returned to Freiburg after having a heart

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attack and wrote his three-volume late work Law, Legislation and Liberty, 73-76-79, Denationalization

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of Money, 1977, and finally The Fatal Conceit, The Errors of Socialism, 1988. It summarized

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the very essence of his thinking for the last time. He died in Freiburg in 1992 at the age

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of 93 and was buried in Vienna.

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In 1974, a year after Mises' death, Friedrich August von Hayek was awarded the spherius

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Heinrich Bonck Prize in Economic Sciences in memory of Alfred Nobel for his work on

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the theory of the business cycle. Remarkably, he had to share it with Swedish Social Democrat

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Gunnar Myrdal 1898-1987. But Hayek's work went far beyond pure economics. Expert circles

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considered him not just an economist, but also a philosopher of law, an ethicist, a

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A social theoretician, a historian of ideas, a legal expert, a theoretician of science,

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a systems theoretician, and a theoretical psychologist.

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It's much more the case with social sciences than with natural sciences, wrote Hayek in

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his Freiburger Studien, that a particular problem cannot be solved by just one of the

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specialist subjects. Not only political science and law, but also ethnology and psychology

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Strategy and, of course, History are subjects with which an economist should be more familiar

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than is possible for one human being, and the problems of economics overlap time and

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again with those of philosophy above all. It is certainly no coincidence that in a country

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that had long taken the lead in economics, namely England, almost all great economists

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were philosophers as well, and all great philosophers were significant economists too, at least,

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in the past.