Hayek and the Great Depression of 1929: Did he really change his mind?

The aim of this research is to establish whether, and if so in what way, Hayek changed his mind about the Great Depression of 1929.The work is divided into two parts. In the first part, I present the ‘early’ Hayek of the 1930s. Hayek was the great rival of Keynes. Both explained the Great Depression, applying opposing business cycle theories. For Keynes, the crisis was caused by an excess of saving over investment; for Hayek, on the contrary, by an excess of investment over saving. In the early 1930s, Röpke attempted a synthesis, positing that a recession due to overinvestment can degenerate, as in 1929, into a depression caused by oversaving. Hayek examined and rejected Röpke's theory. In the second part, I present the ‘later’ Hayek of the 1970s. After years of silence and solitude, Hayek was unexpectedly awarded the Nobel Memorial Prize in Economics, precisely for the contribution he made in the 1930s to the theory of the business cycle. Hayek returned to his pursuit of the ghost of Keynes, debated with his friend and rival Friedman, re-examined Röpke's special case and, according to Haberler, changed his mind. In my conclusion, I attempt to resolve the dilemma.     

Hayek’s monetary theory and policy: A note on alleged inconsistency

Challenging the dominant view, we claim that Hayek’s monetary views did not significantly change over his lifetime. The prevalent perception of early Hayek as a money stream stabilizer and late Hayek as a price level stabilizer is attributable to an unjustified normative interpretation of Hayek’s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means of achieving them. Hayek’s allegedly inconsistent transformation from a critic to an advocate of price level stabilization is explained by a change of issues under his focus, rather than by a change in his positive views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and that he was therefore reluctant to impose his own value judgments on what people should strive for.     

Misjudging the character of the welfare state: Hayek,generality, and the knowledge problem

What are the limits of collective action? As James Buchanan famously worried, is it possible to empower the productive state without lapsing into the predatory state? This paper uses insights from F.A. Hayek to address problems of public goods and the role of the state. Hayek convincingly argued that no central planner has sufficient knowledge to run an economy. Yet Hayek also allowed for state provision of some goods beyond the prevention of coercion. The question, then, is whether Hayek’s safeguards offer a satisfactory response to Buchanan’s worry. This paper contends that Hayek violated his own conditions for permissible government activity. Nevertheless, he offers a serious research agenda for limiting state abuses.     

Book reviews

Abstract

This article contributes to the literature on the Hayek–Keynes controversy on two points. The first contribution is to show that the question of the micro-foundations of macroeconomics is crucial to understand the Hayek–Keynes controversy. The second contribution is to reveal that Hayek's attack on the micro-foundations issue had a methodological impact on the making of the General Theory especially via the concept of marginal efficiency of capital. The paper concludes that what finally contrasts Hayek and Keynes is the kind of micro-foundations that economists should adopt to explain business cycles.     

邓正来式的哈耶克——思想研究的一种德勒兹主义进路

邓正来的哈耶克研究,在“寂寞”中连续做了十五年。衡量这一研究的贡献,可以从三个层面来切入：对国内哈耶克研究的意义;对自由主义研究的意义;以及,最高的层面上,对思想一学术研究本身的意义。在本文作者看来,如果评论者只关注前两个层面,那么邓氏历时十五年的研究就只对一小部分学者有价值。因此本文尝试在最后一个层面上展开考察。本文作者认为,邓正来的哈耶克研究,从某种意义上开启了思想研究的一种德勒兹主义进路。在作者看来,当邓正来尝试将哈耶克理论抽离其本身得以型构的历史语境与时代背景,而追索该理论本身的内在原创力及其所开放出来的理论问题,他就已经进入到了德勒兹主义的阅读视野中。     

Is social justice for or against liberty? The philosophical foundations of Mill and Hayek’s theory of liberty

By comparing the philosophical foundations of Mill and Hayek’s theory of liberty, this paper shows that some similarities in the economic theories of Mill and Hayek are actually based on different rationales. It follows that any attempt to find a common thread in Mill and Hayek to provide reasonable guidance for social policy can be promising only if we can find the common ground from their social philosophy. While analyzing the rationales behind their opinions regarding the role of government and taxation policies, this paper will focus on exploring the role of two philosophical ideas, liberty, and justice. This will clarify the relationship between social justice and liberty as well as their status in relation to the ultimate principle of rules in the philosophy of Mill and Hayek. This paper will offer an explanation why, in Mill’s utilitarian philosophy, the pursuit of social justice aligns with the real freedom of everyone, but in Hayek’s philosophy, it is a hindrance.     

Post-Hayekian socialism a la Burczak: Observations

Burczak (Socialism after Hayek, Ann Arbor: University of Michigan Press, 2006) presents a proposed form of stakeholder socialism to overcome the critique by Hayek of Marxist socialist systems. This involves financing the beginning of worker-owned and managed cooperatives through a wealth tax, with a generous social safety net, within a market economy in a democratic political system with civil liberties. While such a system may overcome worker alienation, avoid many of the informational and incentive-based inefficiencies identified by Hayek, and have some special efficiencies of its own, it will likely suffer from the financing problems most cooperatives face within predominantly market capitalist economies as they try to grow larger. The most likely location for an effort at such a system might be in a smaller country that has had some experience with workers’ management, such as the former Yugoslav republic of Slovenia.      

The many roads to serfdom

This comment considers the planning/laissez faire debate discussed in the Hayek symposium, and raises three points. The first is that all debates are contextual and Hayek's Road to Serfdom needs to be considered in its contextual setting. The second is that there are many roads to serfdom, not just the one outlined by Hayek, and the Hayek/Lerner debate today would probably focus on a different road than it did in the 1930s. The third is that modern economists' focus on technical issues has in large part removed them from the role that Hayek and other top economists played in their time.     

Hayek’s 1945 Finlay Memorial Lecture: Tracing the origins and evolution of his ‘true’ individualism

Hayek’s original 1945 University College Dublin lecture outlined the origins and evolution of two different interpretations of ‘individualism’, comparing and contrasting what Hayek terms ‘true’ and ‘false’ individualism notwithstanding the misleading contemporary interpretations and distorted perceptions of the assumptions underlining ‘true’ individualism. Hayek developed and extended the Scottish Enlightenment theory of spontaneous order originally formulated by Adam Ferguson’s maxim that social order was the result of unintended human action rather than the result of deliberate human design in order to explain the origin of complex social structures, which originated in a Cromwellian maxim. The origination and inspiration for the title of Hayek’s lecture is also considered, as is the influence of other thinkers; Mandeville, Tocqueville, Mill, Acton and Schatz that Hayek cites in his Dublin lecture.     

Law, legislation, and local minima: Solving a problem in Hayek��s theory of common law judging, with historical examples

Friedrich Hayek??s Law, Legislation, and Liberty noted a problem in the common law system: Sometimes, following judicial precedent would lead to unforeseen bad outcomes over time. No judge can anticipate all possible implications of a precedent-setting decision, and sometimes later judges, bound by precedent, will be forced despite themselves to elaborate the law in ever more inefficient or unjust ways. Hayek proposed that one role of the legislator was to correct such ??dead ends?? in the common law. This paper proposes that judges working within the constraints of the common law and given only the tools Hayek himself allowed them are capable of escaping such binds on their own. It uses historical examples from the era of coverture to support this claim. Not only were judges willing to identify exceptions to coverture, these exceptions helped pave the way for coverture??s eventual abolition. This process is examined and found to be otherwise consonant with Hayek??s larger theory of the common law as a rule-finding process.     

Darwinian paradigm,cultural evolution and human purposes: on F.A. Hayek’s evolutionary view of the market

The claim that the Darwinian paradigm of blind-variation-and-selective-retention can be generalized from the biological to the socio-cultural realm has often been questioned because of the critical role played by human purposeful design in the process of cultural evolution. In light of the issue of how human purposes and evolutionary forces interact in socio-economic processes the paper examines F.A. Hayek’s arguments on the “extended order” of the market (capitalism), in particular with regard to their policy implications. Its focus is on the tension that exists in Hayek’s work between a rational liberal and an agnostic evolutionary perspective. A re-construction of his arguments is suggested that allows for a reconciliation of these seemingly contradictory views.     

Methodological individualism: True and false

I apply Hayek’s distinction between ‘true’ and ‘false’ individualism to methodological individualism. Hayek traced ‘false’ individualism to Cartesian rationalism; Hayek’s rejection of Mises’ praxeology was due to its rationalist underpinnings. The first half of this paper identifies praxeology’s foundational philosophical concepts, emphasising their Cartesian nature, and illustrates how together they constitute a case for methodological individualism: intuition and deduction; reductionism; judgement; dualism. In the second half of this paper, I draw upon philosophy and cognitive science to articulate ‘Hayekian’ (N.B. not Hayek’s) alternatives to these Cartesian concepts. The Hayekian alternative allows a ‘gestalt switch’ from the individual- to the system-level perspective. I therefore suggest that methodological individualism is both true and false: true, in that economic phenomena are grounded in the actions of individuals; false, in that certain problems might be reconceived/discovered at the system-level. I finish by suggesting three avenues of research at system-level: optimisation; stigmergy; computational complexity.     

哈耶克反对社会主义的时代和理论背景分析

哈耶克是新自由主义的旗手,一生反对社会主义。学术界往往从哈耶克理论的本身去探讨其反对社会主义的原因,事实上哈耶克反对社会主义有其社会背景和知识根源,前者主要是苏德经济政治制度的弊端和凯恩斯主义失效后西方对新自由主义的重视,后者主要是哈耶克自身接触和掌握的心理学知识及自由主义政治经济理论。     

Monetary Calculation and the Unintended Extended Order: The Misesian Microfoundations of the Hayekian Great Society

In the last decade, a small group of Austrians has attempted to argue that there are crucial distinctions between the Misesian and Hayekian lines of influence, and that the former is the superior. This paper argues that the group has both misread Hayek and underplayed the similarities of Mises and Hayek. More specifically, it sees Mises's emphasis on monetary calculation and goal-driven human action as providing the microfoundations for Hayek's emphasis on spontaneous order and the epistemic properties of the price system. The paper also disputes the claim that Hayek held a “fully-informative,” neoclassical view of prices and explores the disequilibrium foundation for Hayek's understanding of the role of prices as knowledge surrogates. The relationship between monetary calculation and cooperation in anonymity is discussed in the final section.     

Did Hayek have a monetary theory of business cycles?

Joseph Schumpeter, a careful reader of Hayek, categorized Hayek??s theory of economic cycles as non-monetary. Almost every other source, including Hayek himself, categorized the theory as monetary. The issue turns on the concept of causality being used. The question of what causality concept to apply to complex phenomena has substantive implications for economic theory. A simple concept of causality, appropriate to the study of some physical phenomena, will mislead when applied to complex phenomena. We provide examples of errors in analysis that follow from the wrong choice of a causal paradigm.     

Hayek and Keynes: From a common critique of economic method to different theories of expectations

The methodological positions of Hayek and Keynes contain striking similarities. Both authors opposed empiricist approaches to economics that assign priority to mere observation as the source of knowledge. Both emphasised intentionality, motivation and human agency. Notwithstanding this common ground, they had different conceptions of how beliefs are formed and had different explanations of thought and action in economics. Hayek grounded his explanation on an evolutionary theory of the mind, i.e. on psychological premises, whereas Keynes based his view of belief formation on probable reasoning, where probability is a logical concept. Starting from psychological premises Hayek maintained that individuals act rationally only by following rules. As a consequence, he considered conventional expectations to be the primary guide for agents in economic life. Keynes agreed that conventional expectations actually guide economic behaviour, but he maintained that they are justified only in situations of total ignorance. In conditions of limited knowledge, agents can base their action on reasonable expectations, independently of conventions. Moreover, agents?particularly those institutions responsible for economic policy?ought to shun conventional behaviour in order to counteract its negative social consequences. We argue that Keynes's theory of expectations is well grounded upon his theory of logical probability. Hence his advocacy of discretionary policy is rationally justified.     

Can a Dictator Turn a Constitution into a Can-opener? F.A. Hayek and the Alchemy of Transitional Dictatorship in Chile

Commenting on the Pinochet regime, Friedrich Hayek famously claimed in 1981 that he would prefer a ‘liberal’ dictator to ‘democratic government lacking liberalism.’ Hayek's defense of a transitional dictatorship in Chile was not an impromptu response. In late 1960, in a little known BBC radio broadcast, Hayek suggested that a dictatorial regime may be able to facilitate a transition to stable limited democracy. While Hayek's comments about Pinochet have generated much controversy, this paper neither provides a blanket condemnation of his views (he did not advocate dictatorship as a first-best ‘state of the world’) nor tries to excuse his failure to condemn the Pinochet junta's human rights abuses, but instead provides a critical assessment of Hayek's implicit model of transitional dictatorship.     

Emergence and complexity in Austrian economics

Emergence is often argued to be a deep property of complex systems, with such systems exhibiting wholes that are in some way greater than the sum of their parts. These ideas have played an important part in discussions of spontaneous order within Austrian economics, particularly by Hayek drawing on arguments dating from Mill and Menger, although with other traditions such as that of Böhm-Bawerk not relying on such ideas. Philosophical discussions of these terms are considered that raise questions about the relationship between the emergent whole and the lower level parts that comprise it. A major issue is the role of these ideas and processes within evolution, with Hayek in particular moving strongly towards identifying their linkage, something advocated by many non-Austrian economists and non-economists as well.