The Hayek Century

The Hayek Century - The Hayek Century By John Cassidy...

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Unformatted text preview: The Hayek Century By John Cassidy Economist and Hoover honorary fellow Friedrich Hayek spent seven decades extolling the supremacy of capitalism over som. For most of those decades, Hayek was a voice in the wilderness. Yet as John Cassidy argues, by the end of his life Hayek was vindicated to such an extent that "it is hardly an exaggeration to refer to the twentieth century as the Hayek century." If there are two things most people can agree on these days, they are that free market capitalism is the only practical way to organize a modern society and that the key to economic growth is "knowledge." So prevalent are these beliefs that their origins are rarely examined, which is somewhat surprising, since both statements can be traced back, in large part, to one man, Friedrich August von Hayek, a reserved Austrian economist who died in 1992. In November 1989, when the Berlin Wall came down, Hayek was a frail but mentally alert 90-year-old living in Freiburg im Breisgau, Germany, a picturesque town in the Black Forest. Hayek didn’t issue any public statements, but he thoroughly enjoyed watching the television pictures from Berlin, Prague, and Bucharest. "He would beam benignly, and the comment was ‘I told you so,’" said Hayek’s son. Hayek did indeed tell us so and at a time when that message was deeply unfashionable. In 1937, in the wake of the Great Depression and with capitalism and democracy under siege from communism and fascism, he published an academic article entitled "Economics and Knowledge," which pointed out that free markets were not just a political construct, as many critics claimed, but remained the best way of coordinating scattered information. Seven years later, when most of the world’s major economies were under unprecedented central control, Hayek published The Road to Serfdom, a damning indictment of som and state planning that once more, this time in plain English, laid out the fundamental advantage of the free market: by allowing millions of decision makers to respond individually to freely determined prices, it allocates resources—labor, capital, and human ingenuity—in a manner that can’t be mimicked by a central plan, however brilliant the central planner. Illustration by Taylor Jones for the Hoover Digest. This argument is now widely accepted, but when The Road to Serfdom was published, Hayek later recalled, "it went so far as to completely discredit me professionally." Many of his colleagues interpreted the book as a dangerous and antediluvian attack on the welfare states that were being built in wartime Britain, where Hayek lived, and in other European countries. The reviews didn’t get any better for a long time. During the 1950s and 1960s, the Soviet economy appeared to be doing pretty well, and the social democracies of Western Europe, with their large and growing state sectors, prospered mightily. In 1967, Eric Hobsbawm, the Marxist historian, dismissed Hayek as a "prophet in the wilderness"; in the same year, Anthony Quinton, a British philosopher, dubbed him a "magnificent dinosaur." If economic history had stopped when the Beatles split up, Hayek would have remained a...
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This note was uploaded on 04/05/2011 for the course ECO 365 taught by Professor Giederman during the Winter '11 term at Grand Valley State.

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The Hayek Century - The Hayek Century By John Cassidy...

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