The twentieth century witnessed the unparalleled expansion of government power over the lives and livelihoods of individuals. Much of this was the result of two devastating world wars and totalitarian ideologies that directly challenged individual liberty and the free institutions of the open society. Other forms of expansion in the provision of social welfare and the regulation of the economy, while more benign in their objectives, nevertheless posed significant challenges to personal freedom. Few individuals did more to both extend our understanding of the economic processes of the free society and alert us to the dangers inherent in the growth of political power than the Nobel laureate economist and social theorist Friedrich A. Hayek. In over half a century of writing and teaching, he showed why national socialism was the very antithesis of capitalism, why communism was an economic and political philosophy ultimately doomed to failure, and why we must be wary of government intervention if we are to preserve the freedoms that make democracy and prosperity possible.

In a life that spanned almost the entire twentieth century, he went from being dismissed, ridiculed, and ignored to being recognized and acclaimed as perhaps this century’s most significant social scientist and philosopher. To a remarkable degree, his story is the story of the twentieth century.

Below are some prompts for further conversation:

 

1. Why was socialism (i.e., the Fabian version) initially so appealing to Hayek?

 

2. Briefly describe the key ideas that appeared in Adam Smith’s The Wealth of Nations, as well as how this affected Hayek during his time at Vienna.

 

3. What groundbreaking insight was introduced in Menger’s Principles of Economics, and how did this influence Hayek?

 

4. What was the principle thesis of Mises’ Socialism? How did Hayek’s relationship with Mises direct his work?

 

5. What was Hayek’s purpose in his first book, Monetary Theory and the Trade Cycle?

 

6. Why was Lionel Robbin’s invitation to Hayek to join the London School of Economics so pivotal in Hayek’s career? (Hint: include some discussion of “spontaneous order”.)

 

7. Explain why Hayek’s theories about knowledge were so revolutionary. (Hint: include a discussion of how Hayek was able to extend the idea of division of labor to the realm of knowledge.)

 

8. Describe the content of the “socialist calculation debate”. How did this change Hayek’s course from the moral to the practical?

 

9. What is the main premise behind Keynesian economic theory? How does this compare to socialism?

 

10. Paraphrase Hayek’s opposition to Keynes’s General Theory. (Hint: include reference to “malinvestment” and the negative effects of government intervention.)

 

11. Why did Hayek fail to (publicly) respond to Keynes, and how did this affect Hayek’s influence?

 

12. Explain how Hayek portrays Nazism as the antithesis of capitalism.

 

13. What was Hayek’s primary thesis in The Road to Serfdom? Describe the various reactions to Serfdom. How and why did Hayek know he would suffer from its publication?

 

14. What objective does Hayek’s edited volume Capitalism and the Historians seek to accomplish?

 

15. What are the key tenets of The Constitution of Liberty, and why is it so often known as the “modern compendium of liberal ideas”?

 

16. Identify and describe the three fundamental elements of a society of free and responsible individuals, according to Hayek in Law, Legislation, and Liberty.

 

17. How did the stagflation of the 1970s begin to bring about an “economic sea change”, which once again saw Hayek’s work as valuable to public policy?

 

 

Concluding Question:

It is suggested that the 20th century could be divided into four quarters based on the men whose ideas were favored during that time: Lenin – Hitler – Keynes – Hayek.

How accurate is this categorization? Which quarter has been the most significant ideologically and/or politically? Explain, using examples.

 

 

Related References:

John N. Gray, F.A. Hayek and the Rebirth of Classical Liberalism

Gerald P. O’Driscoll, Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek

Edwin G. Dolan, The Foundations of Modern Austrian Economics

George Bernard Shaw, Fabian Essays in Socialism. 

Ludwig von Mises, Socialism: An Economic and Sociological Analysis

 

Econlib Articles:

 

EconTalk Podcasts:

 

External Resources