1899 – 1992
Hayek was an Austrian economist and philosopher. He is known for his contributions to political economy, political philosophy and intellectual history. Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for work on money and economic fluctuations, and the interdependence of economic, social and institutional phenomena. His account of how prices communicate information is widely regarded as an important contribution to economics that led to him receiving the prize. He was a major contributor to the Austrian school of economics.
During his teenage years, Hayek fought in World War I. He later said this experience, coupled with his desire to help avoid the mistakes that led to the war, drew him into economics. He earned doctoral degrees in law in 1921 and political studies in 1923 from the University of Vienna. He subsequently lived and worked in Austria, Great Britain, the United States and Germany. He became a British national in 1938. He studied and taught at the London School of Economics and later at the University of Chicago, before returning to Europe late in life to teach at the Universities of Salzburg and Freiburg.
Hayek had considerable influence on a variety of political and economic movements of the 20th century, and his ideas continue to influence thinkers from a variety of political and economic backgrounds today. Although sometimes described as a conservative, Hayek himself was uncomfortable with this label and preferred to be thought of as a classical liberal or libertarian. His most popular work, The Road to Serfdom (1944), has been republished many times over the eight decades since its original publication. Hayek was appointed a Member of the Order of the Companions of Honour in 1984 for his academic contributions to economics. He was the first recipient of the Hanns Martin Schleyer Prize in 1984. He also received the Presidential Medal of Freedom in 1991 from President George H. W. Bush. In 2011, his article "The Use of Knowledge in Society" was selected as one of the top 20 articles published in the American Economic Review during its first 100 years.
Published in 1944, it is perhaps the most famous and enduring warning against the dangers of centralized economic planning. Written by Friedrich Hayek during the height of the Second World War, the book was not aimed at his enemies in Germany, but rather at the intellectuals and policymakers in his adopted home of Great Britain. Hayek feared that in their desire to build a more "rational" and planned post-war society, Western democracies were inadvertently following the same path that had led to the rise of totalitarianism in Europe.
The core argument of the book is that economic control is not merely the control of one sector of human life, but the control of the means for all our ends. Hayek challenges the common belief that one can surrender economic freedom while retaining political and personal freedom. He argues that when a central authority decides what is to be produced, who is to do the work, and how the fruits of labor are to be distributed, that authority inevitably gains absolute power over the lives of the citizens. In a planned economy, the government must decide which goals are most important, which means it must impose a single hierarchy of values on a diverse population.
Hayek introduces the concept of the "Rule of Law" as the essential safeguard of a free society. To Hayek, the Rule of Law means that government is bound by rules fixed and announced beforehand—rules which make it possible to foresee with fair certainty how the authority will use its coercive powers. This is contrasted with arbitrary government, where the state manages specific people and resources to achieve specific outcomes. When the state tries to plan the economy, it must constantly make discretionary decisions, which undermines the predictability of the law and leaves the individual at the mercy of the planner’s whims.
One of the most famous chapters in the book is titled "Why the Worst Get on Top." Hayek argues that the nature of a centralized planning apparatus naturally attracts and rewards those who are willing to use unscrupulous methods. To make a national plan work, the leader must achieve a high degree of uniformity in thought and action. This often requires the creation of an "enemy" to unify the public and the use of propaganda to suppress dissent. Consequently, the democratic socialist's dream of a planned economy run by benevolent experts is, in Hayek’s view, a dangerous delusion; the system itself necessitates a move toward authoritarianism.
Hayek also addresses the "knowledge problem," a theme he would expand upon in his later work. He argues that the knowledge required to run a modern economy is dispersed among millions of individuals and can never be concentrated in a single planning board. The price system in a free market acts as a communication mechanism, aggregating this dispersed information and allowing people to coordinate their actions spontaneously. Central planning fails because it tries to replace this complex, organic process with a simplified and rigid top-down structure that cannot possibly account for the local and personal knowledge of every citizen.
Despite his fierce defense of the market, Hayek was not an advocate for total anarchy. He acknowledged a role for the state in providing a framework for competition, such as preventing fraud, protecting property rights, and managing externalities like pollution. He even suggested that a certain level of social security was compatible with a free society, provided it was organized as a floor of protection rather than a tool for the state to direct the economy. His critique was specifically focused on "planning against competition," not the existence of government itself.
The book concludes with a call for internationalism and a warning against the "nationalist" tendencies of planning. Hayek argued that because planning must occur within a defined territory, it inherently leads to economic nationalism and conflict between states. He advocated for a federalist system that would prevent any one nation from becoming too powerful while ensuring that the "Road to Serfdom" remains blocked by the decentralized nature of market competition.