Why read Hayek? Three reasons on the occasion of his birthday - RSA

Why read Hayek? Three reasons on the occasion of his birthday.

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  • Economics and Finance
  • Institutional reform
  • Philosophy

It was Friedrich Hayek’s birthday yesterday.  Were he actually alive I imagine he’d be having a rye chuckle at today’s criticism of the Queen’s Speech which, despite including twenty-one parliamentary bills most of which either extend or tinker with regulations, has been accused of not having enough in it or even of being a laissez-faire programme.

Friedrich Hayek: 114 years young yesterday


The Nobel Laureate is reviled and loved in equal measure but here’s three reasons from me why I think he should be read whether you agree with him or not.

1. Hayek is a great counter-point to our dominant culture of ‘do something’ politics. In a world of highly competitive political parties and 24 hour news coverage, the pressure on governments to be seen to be taking action in the face of any and every problem is intense.  Sometimes it is undoubtedly right for governments to act but Hayek offers an important challenge to the easy assumption that the blunt instrument of legislation is any match for the highly complex world of distributed information in which we live. For FH, this was nowhere more the case than in economic policy where the best governmental intentions can often lead to awful consequences particularly over that deeply unfashionable time period: the long run.

2. Hayek was more subtle and complex than many of his opponents and proponents recognise.  He is, of course, regarded today as the high priest of laissez faire, sink-or-swim economics. What Mao’s Little Red Book was for the Chinese Communist Party, The Road to Serfdom has become for Tea Party sorts in the US.  What is less acknowledged by both sides is that Hayek argued that certain state protections did have to be extended to citizens.  For example, he was a supporter of a universal basic income: the guarantee of a flat rate income to all citizens without conditionality.  Indeed, it has even been asserted by some that Hayek was much closer to being a moderate social democrat than a classical liberal.

3. Hayek could never be accused of thinking boom and bust had been abolished. While our most influential economic policy-makers and more than a few economists may have convinced themselves that The Great Moderation was some sort of proof that the biggest economic challenges had been cracked, I think we can be pretty sure that Hayek would have thought no such thing. Based on his analysis of trade cycles in his early academic career, Hayek argued that rapid swings in economic fortunes were only exacerbated by the efforts of governments and central banks to stimulate growth.  The idea popular in the nineties and noughties that committees of economists and politicians could tweak fiscal and monetary policy to keep the economy chugging along nicely as though they were the Captain of a ship gently touching the tiller would have had him chortling into his Viennese coffee.

Like any thinker of Hayek’s prolific output and enormous influence, he wrote and said a lot of things that were less impressive than his best work and in the case of his warm words for Chilean dictator Pinochet shameful and bemusing. And, of course, those who fundamentally disagree with his beliefs also have a lot of good arguments and evidence on their side. But there is a bracing quality to Hayek’s work and more than a little wisdom worthy of consideration by all whatever their values and outlook.

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  • Thinking in the "long run" is generally pointless at a time when change is so common - what policy enacted in 1900 survived unchanged by 2000?

    Trying to get this generally right in the short term continuously will do farm more to keep things okay over the span of time better than thinking you can predict how things will be in twenty years, to say nothing more of even longer time spans.