Hayek, Peart, Levy

• Authors: Evan Kontras, Riley Spencer, Rafael Sternbach

Early Life

Born Friedrich August von Hayek in 1899. Hayek was born to a distinguished family of intellectuals. His father was a physician and professor at the University of Vienna.His mother, Felicitas, was the daughter of Franz von Juraschek, a professor and later a prominent civil servant.[1] He attended the University of Vienna, he earned doctorates in Law and Political science in 1921 and 1923.In 1923, his last year at the university, Hayek studied under the Austrian economist Friedrich von Wieser[2]He also began working at a temporary government office, where he met Ludwig von Mises, a monetary theorist and author of a book-length critique of socialism. Wieser became Hayeks mentor.[3] In 1927 Hayek became the director of the newly formed Austrian Institute for Business Cycle Research.In the early 1930s he moved to London to teach at The London School of Economics. He was faculty there for eighteen years.[4]

"Most of Hayek’s work from the 1920s through the 1930s was in the Austrian theory of business cycles, capital theory, and monetary theory. Hayek saw a connection among all three. The major problem for any economy, he argued, is how people’s actions are coordinated."[5]

Hayek is one of the best known supporters of Austrian Economics. The basic ideas of Austrian Economics are that 1. only individuals make choices 2.The study of the market order is fundamentally about exchange behavior and the institutions within which exchanges take place 3.The “facts” of the social sciences are what people believe and think 4.Utility and costs are subjective 5. The price system economizes on the information that people need to process in making their decisions 6.Private property in the means of production is a necessary condition for rational economic calculation 7.The competitive market is a process of entrepreneurial discovery 8. Money is nonneutral 9. The capital structure consists of heterogeneous goods that have multispecific uses that must be aligned.[6]

Hayek became a professor of social sciences at the University of Chicago in 1950 and stayed until 1962. While was at the University of Chicago he worked on methodology, psychology, and political theory.

Economist

• University of Vienna(Austrian School of Economics)

While at the University of Vienna(Austrian School), he earned his doctorates in law and political science in 1921, while he also studied with a special interest in economics. Hayek initially gave Socialism the benefit of the doubt, however after a few years of studying at the University of Vienna, he thought process was transformed. Ludwig von Mises, one of Hayek's professors, caused this transformation as Hayek attended his private seminars and eventually became Mises protégé. As a team, they argued that without the right to own private property and monetary prices, there would never be a precise economic calculation. Hayek was individually credited with the concept of Intertemporal equilibrium. This states that the economy is constantly in disequilibrium and only in an equilibrium when looking to the future. This concept was used as a tool for argument for the free market by Hayek and other Austrian Economists during a time when Socialism was popular. They argued that the imperfectness was the true beauty of the free market because it encourages innovation and continuous improvement towards an equilibrium of supply and demand.[7]

Hayek had a major influence on the Austrian School of Economics. In 1974, he brought new attention to the Austrian School of Economics by winning the Nobel Memorial Prize (shared the prize with Israel Kirzner and Ludwig Lachmann).

In 2000, Alan Greenspan(former U.S. Federal Reserve Chariman) said with regards to the originators of the Austiran School of Economics, “the Austrian school have reached far into the future from when most of them practiced and have had a profound and, in my judgment, probably an irreversible effect on how most mainstream economists think in this country.”

• New York Universtiy and the London School of Economics

Hayek worked as an assistant to Jeremiah Jenks from 1923 to 1924, who at the time, was an economist at New York University. In 1931, he became a faculty member of the London School of Economics, where his belief on the importance of relating time to capital in the world economy became popular. Hayek remained in Britain during the second World War and thus, became a British subject.[8]

Legacy

Hayek's legacy is both profound and multi-faceted. His Road to Serfdom put forth the idea that

socialism inevitably leads to totalitarianism, which leads to a loss of individual freedoms and liberties. Today he is championed by the right as a protector of individual rights and free trade. Later on in his career he became a libertarian, strongly believing in the ideals of free trade, liberty, and individual freedoms. Most notably he was praised in the United States during 70s and 80s. Margaret Thatcher, the former Prime Minister of Great Britain was a very big fan of Hayek's. He wrote an essay called "Why I am Not a Conservative" which detailed his reasons for rejecting the conservative embrace. His primary reason was what he called "the conservative movement's inability to deal with change."

He is also praised by economists and historians, who recognize his work as radical for its era. His Road To Serfdom was penned during a time period when such conservative and basic ideas as free trade were highly unpopular. While during the 40s he was lambasted for this work, today he is praised as prescient and most importantly, correct.

The Expert

The idea of an "expert" is challenged in Levy and Peart's Vanity of the Philosopher. This idea is that some scientific theories do not contain the self proclaimed expert in the field of measure. This is necessary, because the expert is part of the whole equation. In the study of eugenics is specifically Peart and Levy take issue because most eugenicists did not consider themselves in their measurements.

What Hayek said essentially is that eugenics leads to planning and planning leads to socialism. The easiest way to imagine socialism is one central body controlling all aspects of the market. This is impossible due to the limit of knowledge. For example a central body will not know anything about local prices in a specialized industry, while many within that industry are capable of setting accurate prices. This practices limits the spread of growth in a centralized market. Hayek challenged socialism based on this knowledge, and he did so in a time when many considered socialism, fascism, or anarchy as better forms of government than democracy.

Because Peart and Levy challenge "experts" they would disagree with a group of experts controlling markets. This links Hayek with Peart and Levy's work. Peart and Levy challenge the first step of planning, eugenics, and so support Hayek. Hayek specifically challenges the second and third steps of the formation of socialism, which are planning other things. This will eventually lead to a centralized body with all the power, and thus socialism.

Spontaneous order

Spontaneous order means that no one is in charge, controlling the economic system—the order we see around us is spontaneous, organic, emergent, rather than controlled, directed or managed. What Hayek meant was that the market evolved as the result of human actions.

The idea that a harmonious, evolving order arises from the interaction of a decentralized, heterogeneous group of self-seeking agents with limited knowledge. This order, he claimed, was not "designed" nor could be "designed" by a social planner, even a very wise one, but merely "emerged" or evolved spontaneously from a seemingly complex network of interaction among agents with limited knowledge. Hayek's elaborations on this complex, evolving spontaneous order are found in various places (e.g. 1952, 1964). Hayek continued with his work on "evolving order", linking it with his work on political and legal theory (e.g. 1960, 1973). In tackling the evolution of political, social, legal and economic institutions, Hayek is rightly conceived as one of the founding fathers of "evolutionary economics".[9]

Vanity of the Philosopher

Hayek played a critical role in questioning eugenics as central planning(Pg. 122). he also defended consumer sogereignty from the ideas of Maurice Dobb and J.K. Galbraith(Pg. 32). He "vigorously" opposed central planning (when related to material things, setting prices and outputs of goods and services)(Pg. 105). Because of Hayek's disdain for the "expert", it can be assumed that he would oppose eugenicists and their beliefs.

Analytical egalitarianism by definition means that all humans, regardless of race, gender and any other physical or neurological differences, have the same potential for gaining knowledge and success. This term is tied to the classical economists. They state that the economists believed in equality, while there counter parts did not. The opposition towards analytical egalitarianism were the “experts”, or advocates of eugenics. This group is described as people who want to advance the human race through selective breeding and who also believe in analytical hierarchicalism. This term, when simplified, means that people who appear different than the “experts” must be inferior. The “Experts vs. subjects” is an example made to demonstrate analytical hierarchicalism. This example says that experts find their subjects to be inferior, which somehow motivates them to remake the human “herd” more to the experts’ desire. This idea, remaking the human race, soon became known as eugenics.

The classical economists argue that men, at birth, are equal. An example is the common folk vs. the expert. The factors that separate the two men after birth are luck, choice and predestined-circumstances. If one is born into wealth, an automatic advantage for success is given. Certain choice made by people at a younger age separate the philosopher, who decided to attend a university, from the common person who chose to work. Generally, the capacity for intelligence is even within all humans.

Major Works

This is a brief list of Hayek's most important, controversial and well known works.

• Road to Serfdom-Hayek's most well known book, helped to launch his career. Strongly criticizes Nazism, socialism, and communism.

• Constitution of Liberty- A book that sided with conservative economics. Read by a few politicians, it never was the success Hayek had hoped for. He was expecting a similar response to Road to Serfdom

• Law, Legislation and Liberty-A massive tome, it deals with the ideas of "cosmos" and "taxis".

• Essay "Why I Am Not Conservative"-This short essay dealt mostly with European conservatism, which was often in opposition with capitalism.

References

• 1. The Vanity of the Philosopher, Peart and Levy (2005)
• 2. The Road to Serfdom, F.A. Hayek (1944)
• 3. Socialism After Hayek, Burczak
• 4. http://www.econlib.org/library/Enc/bios/Hayek.html
• 5. http://cepa.newschool.edu/het/profiles/hayek
• 6. http://www.econlib.org/library/Columns/LevyPeartdismal5.html#
• 7. http://search.eb.com/eb/article-236423

Images

• 1. http://www.econlib.org/library/Columns/LevyPeartdismal5.html#
• 2.http://images.google.com/imgres?imgurl=http://server40136.uk2net.com/~wpower/images/product_images/9780472114962.jpg&imgrefurl=http://www.word-power.co.uk/books/the-vanity-of-the-philosopher-I9780472114962/&usg=__ohl1lRnBZhWJT-S2Y2ozLNxPnGU=&h=400&w=269&sz=16&hl=en&start=2&um=1&tbnid=cbIH_Ps7ZMLotM:&tbnh=124&tbnw=83&prev=/images%3Fq%3Dvanity%2Bof%2Bthe%2Bphilosopher%26um%3D1%26hl%3Den%26sa%3DN
• 3. http://manwithoutqualities.files.wordpress.com/2007/07/hayek.jpg
• 4. http://ecx.images-amazon.com/images/I/41qbopf4ieL._SL500_.jpg