The Essence of Hayek

by Chiaki Nishiyama, Kurt Leube (Editor), Chiaki Nishiyana (Editor)

The twenty-one essays in this book provide an overview of the contributions of Nobel laureate and Hoover Institution honorary fellow Friedrich A. von Hayek to the fields of economics, political theory, history, and philosophy.

Genres: Economics, Politics

420 pages, Paperback

First published August 1, 1984

Reviews

[Jon Gauthier · Rating 4 out of 5]

While for most modern social philosophers the chief aim of politics consists in setting up an ideal social order through utopian reforms, Hayek sees its main task as that of finding rules to enable men with different values and convictions to live together. These rules should be so constructed as to permit each individual to fulfill his aims.

This book is a study of catallaxy, not economy. Hayek suggests the use of this term in place of the traditional "economy" in his own essays. Wikipedia gives us the following:

Whereas the word economy suggests that people in a community possess a common and congruent set of values and goals, catallaxy suggests that the emergent properties of a market (prices, division of labor, growth, etc.) are the outgrowths of the diverse and disparate goals of the individuals in a community.

It's impossible to not be swayed by Hayek's absolute reverence of this catallaxy—of the self-organizing and self-regulating nature of the free market. His style of argument is clear, slow and methodical, especially with respect to terminology: you'll find he devotes entire essays to distinguishing the different senses of a word or deliberating over the best word to apply to a given situation. I can't say this book made me a classical liberal, but it has given me a nuanced understanding of the beauty of capitalism (in theory), and of the complex interactions between market and government in a democracy.

Essays which I found especially moving follow.

The Use of Knowledge in Society

Individualism: True and False

It would scarcely be too much to claim that the main merit of the individualism which he [Adam Smith] and his contemporaries advocated is that it is a system under which bad men can do least harm. It is a social system which does not depend for its functioning on our finding good men for running it, or on all men becoming better than they now are, but which makes use of all men in their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid. (138)

Human Reason, with a capital R, does not exist in the singular, as given or available to any particular person, as the [Cartesian] rationalist approach seems to assume, but must be conceived as an interpersonal process in which anyone's contribution is tested and corrected by others. (140)

The most general principle on which an individualist system is based is that it uses the universal acceptance of general principles as the means to create order in social affairs. It is the opposite of such government by principles when, for example, a recent blueprint for a controlled economy suggests as "the fundamental principle of organisation … that in any particular instance the means that serves society best should be the one that prevails." It is a serious confusion thus to speak of principle when all that is meant is that no principle but only expediency should rule; when everything depends on what authority decrees to be "the interests of society." [I see Ayn Rand..]

True individualism is only possible when citizens drop their demand for "intelligibility" of the markets (see Seeing Like a State):

This brings me to my second point: the necessity, in any complex society in which the effects of anyone's action reach far beyond his possible range of vision, of the individual submitting to the anonymous and seemingly irrational forces of society — a submission which must include not only the acceptance of rules of behavior … but also a readiness to adjust himself to changes which may profoundly affect his fortunes and opportunities and the causes of which may be altogether unintelligible to him. It is against these that modern man tends to revolt unless their necessity can be shown to rest upon "reason made clear and demonstrable to every individual." Yet it is just here that the understandable craving for intelligibility produces illusory demands which no system can satisfy. Man in a complex society can have no choice but between adjusting himself to what to him must seem the blind forces of the social process and obeying the orders of a superior.

The Pretence of Knowledge

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson in humility which should guard him against becoming an accomplice in men's fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals. (276)

Whither Democracy?

What we call 'legislatures' are in fact bodies continually deciding on particular measures, and are authorising coercion for their execution, on which no genuine agreement among a majority exists, but for which the support of a majority has been obtained by deals. In an omnipotent assembly, which is concerned mainly with particulars and not with principles, majorities are therefore not based on agreement of opinions, but are formed by aggregations of special interests mutually assisting each other. (356–357)

[Steven H · Rating 5 out of 5]

A VERY BROAD-BASED COLLECTION OF HAYEK'S PAPERS

Friedrich August Hayek (1899-1992) was an economist of the Austrian School (and once a student of Ludwig von Mises) who received the Nobel Prize in Economics in 1974. This 1984 book selects 21 papers from the full range of Hayek's thought: Hayekian Economics; Refutation of Socialism; History of Ideas; Theoretical Basis of the Hayekian System; and Hayek's Political Economy.

He says that the Keynsian theory (that unemployment is predominantly due to an insufficiency of aggregate demand), which "happens to be the only one which can be tested quantitatively, is nevertheless false." But he adds that his own explanation "cannot by its very nature be tested by statistics." (Pg. 7)

He says that "I wish I could share the confidence of my friend Milton Friedman who thinks that one could deprive the monetary authorities ... of all discretionary powers by prescribing the amount of money they may and should add to circulation in any one year." He rejects Friedman's sharp distinction between what is to be regarded as money and what is not. Hayek concludes, "This distinction does not exist in the real world." (Pg. 15)

In evaluating Keynes, he says that "I am fully aware that, in effect, I am claiming that perhaps the most impressive intellectual figure I have ever encountered and whose general intellectual superiority I have readily acknowledged, was wholly wrong in the scientific work for which he is chiefly known." (Pg. 48-49)

In discussing the theory of competition, he admits that the capacity to predict is necessarily limited to predicting the kind of pattern, or the abstract character of the order that will form itself, but that it "does not extend to the prediction of particular facts." (Pg. 256)

This collection will be an excellent introduction to ALL of Hayek's lines of thought.