Happy 120th Birthday, Prof Friedrich Hayek

Alles Gute zum Geburtstag, Herr Professor Doktor Friedrich August von Hayek.

Since Hayek was an Austrian, the birthday greetings in German is appropriate, wouldn’t you say? He was born May 8th, 1899, and died 23rd March at the age of 92 in 1992.

Hayek was the greatest philosopher of liberty and freedom of the 20th century CE. He was an economist but like Adam Smith, he was a master of moral philosophy. In celebration, here are a few quotes that I like you to read.

  • The more the state “plans” the more difficult planning becomes for the individual.
  • The reasons why the adoption of a system of central planning necessarily produces a totalitarian system are fairly simple. Whoever controls the means must decide which ends they are to serve. As under modern conditions control of economic activity means control of the material means for practically all our ends, it means control over nearly all our activities.
  • Since the value of freedom rests on the opportunities it provides for unforeseen and unpredictable actions, we will rarely know what we lose through a particular restriction of freedom.
  • A limited democracy might indeed be the best protector of individual liberty and be better than any other form of limited government, but an unlimited democracy is probably worse than any other form of unlimited government, because its government loses the power even to do what it thinks right if any group on which its majority depends thinks otherwise. … free choice can at least exist under a dictatorship that can limit itself but not under the government of an unlimited democracy which cannot.
  • I have a profound dislike for the typical Indian students at the London School of Economics, which I admit are all one type—Bengali moneylender sons. They are to me a detestable type, I admit, but not with any racial feeling. I have found a little of the same amongst the Egyptians—basically a lack of honesty in them. If I advise speaking about honesty, I think honesty is really the best expression of what I call the morals of a civilized society. Primitive man lacks a conception of honesty.
  • A society that does not recognize that each individual has values of his own which he is entitled to follow can have no respect for the dignity of the individual and cannot really know freedom.
  • Freedom granted only when it is known beforehand that its effects will be beneficial is not freedom.
  • Justice, like liberty and coercion, is a concept which, for the sake of clarity, ought to be confined to the deliberate treatment of men by other men.
  • As long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally I prefer a liberal dictator to democratic government lacking liberalism.
  • Real competence in some particular field comes first. Unless you really know your economics or whatever your special field is, you will be simply a fraud. But if you know economics and nothing else, you will be a bane to mankind, good, perhaps, for writing articles for other economists to read, but for nothing else.

Hayek was at the London School of Economics from 1931 through 1950. His observation about the Indian students at the LSE then. Perhaps he’s referring to the Amartya Sen type at the LSE. I am sure that the quality of Indian students has improved since then.

And finally, a quote that anyone who fancies himself or herself to be an economist must understand:

The misconception that costs determined prices prevented economists for a long time from recognizing that it was prices which operated as the indispensable signals telling producers what costs it was worth expending on the production of the various commodities and services, and not the other way around. It was the costs which they had expended which determined the prices of things produced.

It was this crucial insight which finally broke through and established itself about a hundred years ago through the so-called marginal revolution in economics.

The chief insight gained by modern economists is that the market is essentially an ordering mechanism, growing up without anybody wholly understanding it, that enables us to utilize widely dispersed information about the significance of circumstances of which we are mostly ignorant. However, the various planners (and not only the planners in the socialist camp) and dirigists have still not yet grasped this.