Austrian School Economist Hayek Finds New Fans
by: Tamara Keith, NPR, November 14, 2011 11:11:00 pm
Second in a three-part series
These days it can feel like the country is unsteady - politically, economically. In a search for the way forward, scholars and politicians often turn to their fundamental beliefs. NPR is taking a look at some of the most influential philosophers whose ideas molded the present and could shape the future. You might not know all their names, but you're certainly familiar with their ideas. They are woven into the fabric of our society.
The Nobel Prize-winning Austrian economist Friedrich Hayek's arguments for free-market capitalism and against socialism and central planning made him a popular figure in 1940s America - and again today.
Hayek argued for humility among economists and politicians. And that, says George Mason University economics professor Don Boudreaux, was his most important contribution. Boudreaux is one of the people behind Cafe Hayek, an economics blog with a Hayekian point of view.
"The economy will always be more complex, will always confound you in your attempts to mold it to your designs," Boudreaux says of Hayek's economic philosophy.
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In other words, the economy is too complicated for politicians to avert recessions and unemployment without unintended consequences that may well be worse. This was one of the ideas in his most famous book, The Road to Serfdom. In it he made a nuanced case against central planning, something Boudreaux says had been gaining steam among Western intellectuals since at least the Great Depression.
"It's a fatal conceit that we can control our destiny as a society, consciously. We can't do that. It'll lead to results quite the opposite of what its best intentioned proponents believe," Boudreaux says.
The book was first published in 1944 and later reached millions through a Reader's Digest condensation. A new edition came out in 2007 without much fanfare. Bruce Caldwell, a professor at Duke who specializes in the history of political economy, edited the new edition. Caldwell says interest in The Road to Serfdom started to build after the bank bailouts and passage of President Obama's health plan.
"Some people called it socialized medicine and of course Hayek was known as an opponent of socialism, so people were interested in it for that," Caldwell says.
But that's not what made it a best-seller. In June 2010, Glenn Beck - then on Fox News Channel - spent an entire hourlong show encouraging his audience to read The Road to Serfdom.
Friedrich August Von Hayek: A Brief Bio
1899: Friedrich August von Hayek is born in Vienna
1921 and 1923: He earns doctorates in law and political science at the University of Vienna. Around this time he also attends economist Ludwig von Mises' private seminars.
1927: Serves as director of the Austrian Institute for Business Cycle Research
1931: Joins faculty at the London School of Economics
1938: Becomes British citizen
1944: Publishes The Road To Serfdom
1950: Begins teaching at the University of Chicago
1962: Begins teaching at University of Freiburg in Germany
1974: Wins Nobel Prize in Economics
1992: Hayek dies in Germany
Sources: Nobel Prize.org and Econlib.org
"This book was like Mike Tyson in his prime. Right hook to socialism in Western Europe and in the United States. But the influence didn't stop there," Beck said at the time. "It has inspired political and economic leaders for decades since, most famously, you know who loved this book? Ronald Reagan."
Caldwell says people listened.
"The next day it was No. 1 on Amazon.com, and it stayed there for I think 10 days and stayed in the top 100 for a couple of months. It was like an Oprah moment for old Fritz Hayek," Caldwell says.
Hayek had been dead for more than 15 years, and just like that, his book was flying off the shelves. These days, saying that you're reading Hayek - or others from the Austrian school of economics - is almost obligatory for conservative politicians.
In a recent debate, Ron Paul cited the Austrian school. This summer Michele Bachmann said she lies on the beach reading Hayek's mentor, Ludwig von Mises. And when asked at a campaign event in Iowa to name some books that have shaped him, Rick Perry gave a shoutout to The Road to Serfdom.
"Freiderich Hayek's book is one that had an impact on me, understanding that John Maynard Keynes absolutely knew nothing about economics," Perry said.
Hayek and the more influential and well-known Keynes feuded over economic theory and the proper role of government for years. Western governments generally bought into Keynes' idea that with well-timed public spending, you could level out the dips in the business cycle. Recently, though, Hayek has been making a comeback.
Freshman Rep. Justin Amash, a Republican from Michigan, can say he was reading Hayek back before Hayek was cool.
"I've got a framed portrait of Hayek on my wall," Amash says.
In his Capitol Hill office, Amash has framed photos of about half a dozen Austrian economists, but the one of Hayek is big, almost rock-poster big.
"And then I also have the signature of F.A. Hayek and I have that framed," he says.
Amash, who was elected with Tea Party backing, discovered Hayek's work five years ago and has devoured his books and essays since. He says Hayek's ideas have informed just about all of his votes in the House.
"A lot of legislators, members of Congress, think they can decide how society functions from these offices here, and they don't really have the dispersed knowledge that society has to make those kinds of decisions," Amash says.
Boudreaux thinks he knows why so many politicians are citing Hayek.
"He's got the intellectual creds. He's not someone who can be dismissed by people on the other side - in this case, by people on the left - as a flake, as someone who was just ranting and raving, as someone who failed to understand the great nuances of the market and politics," he says.
But Boudreaux also believes Hayek and The Road to Serfdom are misunderstood, and he suspects some of the big names claiming to read Hayek may not actually be reading his dense academic texts. He says The Road to Serfdom wasn't written as a political tract.
And, in fact, Hayek scholar Caldwell says Hayek was concerned when he arrived in America in 1945 for a book tour and discovered his book was being championed by partisans.
"He was surprised and dismayed that it had been taken in a party spirit, [as] the intent of this book was not to endorse one party or the other," he says. "It was to make certain points about the feasibility of certain institutional arrangements that responsible people were promoting."
However, Caldwell thinks Hayek would be pleased at all of the attention his work is getting - even if some of it is extremely partisan.