Friedrich August von Hayek was born in Vienna on 8 May 1899 and died in Freiburg on 23 March 1992. His family had a well-established tradition in the study of the natural sciences and provided a very stimulating intellectual environment for the young Hayek. Hayek served in a field artillery regiment at the Italian front during the final stages of World War I. He enrolled at the University of Vienna in November 1918, where he studied under Friedrich von Wieser and received two doctorates: one in jurisprudence (1921) and another one in political science (1923). His first job was as a legal consultant in the Office of Accounts in Vienna (1921–6). Hayek spent a year (1923–4) in the USA doing a research assistantship at New York University; he registered for a PhD there under J.D. Magee, and attended the lectures and seminars of W.C. Mitchell and J.B. Clark at Columbia University. He was awarded a Rockefeller Fellowship to pursue his PhD studies at New York University; however, by the time he received the notification he was already on his way to Vienna and decided to stay in his home town. Upon his return from the USA Hayek joined the discussions at the famous Private Seminar conducted by Ludwig von Mises – ‘the most important centre of economic discussion at Vienna’ (Hayek on Hayek, p. 69) at the time – and subsequently co-founded with Mises the Austrian Institute for Business Cycle Research. Hayek became the Institute’s first Director (1927–31) and in 1929 published his first important work in economic theory -Geldtheorie und Konjunkturtheorie (translated into English in 1933 as Monetary Theory and the Trade Cycle). Between 1929 and 1931 he was lecturing in economics as a Privatdozent at the University of Vienna.
In 1931 he was invited by Lionel Robbins to the London School of Economics and Political Science (LSE) as a visiting professor and in the following year was offered the LSE’s Tooke Professorship of Economic Science (1932–49). Hayek’s lectures at the LSE appeared in a volume called Prices and Production (1931) and together with his first book (Monetary Theory and the Trade Cycle) represent his main treatises on monetary cycle theory. Ten years later, in 1942, Hayek published his other major contribution to the field of economics, The Pure Theory of Capital. This work, however, failed to receive due attention eclipsed by the ever spreading popularity of the macro-economic paradigm proposed and developed by Hayek’s main rival in economic theory, John Maynard Keynes .
In 1944 Hayek became a fellow at the British Academy. A few months upon receipt of that honour he published The Road to Serfdom, which was to bring him an unexpected popularity outside the world of academia, especially in the USA, and gained him the respect and friendship of politicians of the new right in both England and the USA. In academic circles, however, the book met with a mixed reception mainly because of its departure from rigorous academic standards of argumentation and its espousal of a more ‘popular’ style.
In 1947 Hayek became the main initiator and organizer of a meeting of thirty-six internationally renowned scholars that led to the founding of the Mont Pèlerin Society as a forum for the free exchange of ideas and the promotion of research on the classical liberal values of individual freedom and the rule of law. Hayek was the President of the Society until 1960 (and remained Honorary President thereafter). He lived in England for eighteen years (he took British citizenship in 1938) and only left London in 1950, when he was offered the Chair of Moral and Social Science at the Committee for Social Thought at the University of Chicago (1950–62). In 1952 he published two books, The Counter-Revolution of Science and The Sensory Order, which stated his insights into theoretical psychology and his subsequent enquiries into epistemology and methodology. In 1960 he published The Constitution of Liberty which analysed the journey of the idea of individual freedom throughout the history of Western civilization and fleshed out a conception of freedom under the rule of law in the context of a liberal society.
Hayek returned to Europe in 1962, when he accepted an appointment as a Professor of Economic Policy at the University of Freiburg. When he retired in 1967 he accepted an honorary professorship at the University of Salzburg in his homeland, Austria. Four years later, in 1971, the University of Vienna made him an honorary senator. He was awarded many other honours for his contributions to economics, political and legal theory, and philosophy from universities all around the world. During those years Hayek continued work on the project – started by The Constitution of Liberty – of recasting the principles of classical liberalism and defending their potential to address the most pressing problems of his day. In 1973 he published Rules and Order, the first volume of a trilogy entitled Law, Legislationand liberty. The subsequent volumes, The Mirage of Social Justice and The Political Order of a Free People appeared in 1976 and 1979 respectively.
In 1974 Hayek received the Nobel Prize in Economics (awarded jointly with Gunnar Myrdal). His last book, The Fatal Conceit, was published in 1988 just a few months before the changes in the countries of the Eastern bloc provided a remarkable illustration of the accuracy of his analysis of the deficiencies and dangers of socialist planning, and brought Hayek’s name and ideas to prominence once again.
Hayek was a prolific writer of particularly wide-ranging research interests: as he admitted during an interview once, his intellectual drive and curiosity to go beyond the confines of strictly one academic discipline had been fostered during his years as a student at the University of Vienna, where ‘the decisive point was simply that you were not expected to confine yourself to your own subject’ (Hayek on Hayek, p. 51). His contributions to monetary theory and business cycle theory made him one of the most eminent economists of the Austrian School in the twentieth century. His Pure Theory of Capital was an ambitious project of elaborating on von Mises’s business cycle theory as well as on Böhm–Bawerk’s capital theory in an attempt to offer an alternative model to the macro-economic paradigm introduced and developed by John Maynard Keynes and his General Theory of Employment, Interest and Money (1936). This work was largely neglected and failed to gain many adherents mainly because by 1941 the Keynesian theoretical framework was already very popular and almost firmly established. The receipt of the Nobel Prize in Economics in 1974, however, rekindled interest in Hayek’s economic writings and ideas.
Even if Hayek is often regarded primarily as an economist, the key to understanding his contributions to both economics and social and political theory is to be found in his philosophical commitment to a specific epistemological position. Viewed from such a perspective, the continuity between Hayek’s inquiries into economics and his contributions to political and legal philosophy and social theory starts to emerge. As John Gray observed, Hayek’s economic, political and social ideas do constitute a system ‘in virtue of their being informed and governed throughout by a distinctive philosophical outlook’ (Gray, 1986, pp. 2–3). The distinctive epistemological position that informs all of Hayek’s writings draws heavily on his insights into theoretical psychology presented in the book The Sensory Order. Hayek developed its main argument during his years as a student in the early 1920s though the book itself was not published until 1952. In it Hayek set out to explore the transformation of sensations into perceptions: he described
the central nervous system as an apparatus of multiple classification … as a process of continuous and simultaneous classification and constant reclassification on many levels (of the legion of impulses proceeding in it at any moment), applied in the first instance to all sensory perception but in principle to all the kinds of mental entities, such as emotions, concepts, images, drives.
|--(The Sensory Order after 25 Years, p. 289)|
Hayek argued against the empiricist belief that experience starts with the reception of sensory data by claiming that the process of classification performed by the mind relied crucially on prior experience: ‘every sensation, even “the purest” must therefore be regarded as an interpretation of an event in the light of the past experience of the individual or the species’ (Hayek on Hayek, p. 26). Hayek viewed the mind as the product of evolution and continuous ‘development of the species and the individual by a kind of “experience” or “learning”’ (The Sensory Order, p. 53).
Furthermore, he drew a distinction between the physical order of external events (or ‘the macrocosm’) and the sensory order of the mind (or ‘the microcosm’) and asserted, first, the impossibility of acquiring direct knowledge of the former (since in the process of cognition the mind, using its classificatory apparatus, would always proceed by constructing theoretical models of the external world: thus all knowledge of the external world would always be theory-laden), and second, the necessarily imperfect and limited character of any knowledge obtained through such a process of theoretical model construction. The Sensory Order did not enjoy large readership and its argument remained neglected for a considerable time. In his review of the book Edwin G. Boring disputed the originality of Hayek’s ideas by pointing out that his ‘views have antecedents’ (Scientific Monthly, March 1953). Hayek’s friend Karl Popper was sceptical of the causal theory of the mind which he thought the book’s argument was advancing.
Hayek used the insights into theoretical psychology presented in The Sensory Order as the basis for elaborating his distinctive epistemological stance on the limited capacity of human reason to account for all the factors at work in the physical world, and especially for the various factors operating in the social world. Hayek’s fundamental episternological insight naturally led him to consider its implications for the problems of methodology in the social sciences. His interest in methodological issues was triggered during his work on the editing of the collected works of Carl Menger and was further influenced by Karl Popper’s book on The Logic of Scientific Discovery (1934). Hayek addressed the specific methodological problems faced by the social sciences in The Counter-Revolution of Science and in Individualism and Economic Order (1949), among other works. He insisted on recognizing the unsuitability of the methods of the natural sciences to the study of social phenomena (he called ‘scientism’ the outlook promoting the above view) and argued for the disentangling of the methodology of the social sciences from the grip of logical positivism in particular. Hayek claimed that scientism was the defining feature of an approach to the study of social phenomena which he termed ‘constructivism’ or ‘rational constructivism’ and which he described as the belief purporting that since social phenomena were similar to physical ones inasmuch as they were governed by discoverable general laws, they were subject to rational prediction and, therefore, to rational design and conscious control. Hayek identified Saint-Simon, Comte, Hegel and Marx as some of the major forerunners of such an approach, and provided his most ardent critique of the episternological assumptions of rational constructivism and its implications for large-scale social engineering in The Road to Serfdom, The Counter-Revolution of Science and in The Fatal Conceit. Against constructivism Hayek promoted methodological individualism as the method most attuned to the subjective nature of social facts and the primacy of the individual as a social actor, especially in economics. The downside of adopting methodological individualism was in its inherent reductionism as well as in Hayek’s failure to provide a satisfactory account of the formation of individual preferences.
Hayek’s involvement with problems of methodology in economics increased his interest in social theory and in the nature of social processes and social order. He set out to explore what type of a social theory could adequately address what he called ‘the three circumstances of modern life’: the fragmentation of knowledge in society, the widespread attraction of the idea of social justice, and, finally, the diversity of human ends. Building on his evolutionary epistemology as well as on his early work on prices as a system of abstract signals for coordinating the dispersed knowledge of economic agents, Hayek claimed that social life (i.e. morals, language, law, the market, religion, etc.) was a spontaneous social order since its emergence was unplanned but rather happened as ‘the result of human action … not of human design’ (Studies in Philosophy, Politics and Economics, pp. 96–7), i.e. out of independently made individual decisions each driven by different and often conflicting goals. Moreover, he insisted that spontaneous orders could be observed in the physical and the social worlds alike.
By ‘order’ Hayek understood
a state of affairs in which a multiplicity of elements of various kinds are so related to each other that we may learn from our acquaintance with some spatial or temporal part of the whole to form correct expectations concerning the rest, or at least expectations which have a good chance of proving correct.
|--(Rules and Order, p. 36)|
As applied to his social theory, the notion of spontaneous order was used as a classificatory term to distinguish between orders emerging as the result of human design (which he called organizations) and orders emerging as the result of ‘the unintended or undesigned results of the actions of many men’ (The Counter-Revolution of Science, p. 25), i.e. spontaneous orders.
A second distinctive trait of spontaneous orders was that they were orders of rules of conduct that emerged out of individual rule following and adjustment to changes in the external environment. The market was the paradigmatic example of a spontaneous order. Other examples included morals, religion, language, laws, albeit the process of rule-following there was of a different nature than in the case of the market. In the case of the latter, spontaneous economic order arose out of ‘the operation of the market system’ through ‘people acting within the rules of the law of property, tort and contract’ (The Mirage of Social Justice, p. 109). The spontaneous orders of morals, religion, language, Hayek claimed, arose from a process of cultural evolution by natural selection.
The theory of ‘spontaneous orders’ has been regarded as the most innovative element in Hayek’s thought. Charles Larmore, Norman Barry, James S. Coleman and Walter B. Weimer, among others, had recognized the importance of this idea and praised its potential as an analytical tool in political theory. Kukathas singled out some affinities between Hayek’s theory of spontaneous order and Hume’s account of the emergence of social institutions. He also traced some influences by Smith, Ferguson and especially Vico on Hayek’s ideas in that respect (Hayek and Modern Liberalism, p. 91). A thorough critical examination of Hayek’s idea of spontaneous order could be found in Roland Kley, who identified some problematic areas and ambiguities in Hayek’s argument and concluded that despite the innovative character of that notion, ‘on close inspection the general idea of a spontaneous social order … is unable to furnish the focal point of a social theory’ (Kley, p. 23). Gray, too, expressed concerns about potential tensions between the idea of spontaneous order and Hayek’s argument for individual liberty (Gray, 1986, p. 119).
Even if the account of spontaneous order given by Hayek did not feature any normative content, it was of crucial importance for his legal and political philosophy, especially for his project of defending a recast theory of the principles of classical liberalism. Hayek’s contention was that the essence of those principles (of individual autonomy, limited government and free markets) captured better than any other doctrine the nature of social processes and the growth of human knowledge, and thus provided the most propitious environment for human flourishing. Hayek took up the challenge of elaborating a normative political philosophy capable of providing a moral justification of the liberal order in his writings on The Constitution of Liberty and in the trilogy of Law, Legislationand liberty.
Hayek defended a negative conception of liberty as freedom from coercion and ‘independence of the arbitrary will of another’ (Constitution of Liberty, p. 12). Whilst acknowledging the importance of individual freedom as ‘an indisputable ethical presupposition’ (ibid., p. 6), he did point out the instrumental value of freedom as ‘the source and condition of most values’ (ibid.). His definition of coercion was very similar to the Kantian one: coercion ‘eliminates an individual as a thinking and valuing person and makes him a bare tool in the achievement of the ends of another’ (Constitution of Liberty, p. 21). The limits of individual freedom were stipulated by rules of just conduct through the specifying of property rights; private property, in Hayek’s view, was ‘an essential condition for the prevention of coercion’ (ibid., p. 140). Freedom, thus defined, was not inconsistent with order and law. On the contrary, law and freedom were mutually constitutive in Hayek’s account – true freedom could only be freedom under the rule of law for ‘when we obey laws, in the sense of general abstract rules laid down irrespective of their general application to us, we are not subject to another man’s will and are therefore free’ (ibid., p. 153). Three distinctive features characterized the rule of law: its rules were abstract and general, they were publicly known and foreseeable; they were applied equally to all individuals. Hayek dismissed the legal positivist conception of law and defended instead a conception of law as a spontaneous order manifested in the general rules governing citizens’ actions, as different from the specific commands intended to guide governmental action, and as predating the state and the creation of government. He did not base his account of individual freedom, rights and justice on the idea of a natural law either. Instead he adopted a procedural conception of justice that claimed that as long as the rule of law was being observed the just character of the outcomes of individual actions would be secured. Nevertheless, Hayek included guarantees for the protection of the domain of individual freedom by resorting to the Kantian test of the ‘universalizability’ of a rule.
Hayek famously dismissed the notion of social justice as inconsistent. In his opinion ethical pluralism as exemplified by the diversity of human ends and conceptions of the good seriously undermined any possibility of reaching an agreement on a shared conception of social justice. Hayek termed the ideal of social justice ‘a mirage’ which could be achieved only at the expense of coercion gradually leading to totalitarian control. He believed that the best approach to accommodating the diversity of human ends and making use of the dispersed knowledge of individuals was a procedural one, and that the best procedural mechanism available was that of the spontaneous order of the free market.
Hayek’s political philosophy has elicited numerous interpretations. His ambition of reworking the principles of classical liberalism was at first met with scepticism by most of his contemporaries, who regarded Hayek’s project as an outdated and doomed enterprise at reviving nineteenth-century laissez-faire liberalism and thus failed to submit to serious evaluation the analytical side of his argument. For example, in his review of The Constitution of Liberty in Twentieth Century (August 1960) George Lichteim called the book ‘an impressive monument to a myth’. More recent interpretations of Hayek’s thought, however, make up for this oversight. Brian Crowley gave an interpretation of Hayek as a Kantian deontological liberal. Kukathas’s study traced back the influence of Hume and Kant on Hayek’s thought as well as the extent of affinity between his ideas and utilitarianism and conservatism. Kukathas argued that Hayek built his defence of the liberal social order on mutually incompatible arguments and concluded that he had not succeeded in providing an account of liberty that identified the scope of individual freedom and hence the proper scope of government action. Gray, too, acknowledged the internal inconsistencies in Hayek’s system of ideas and compared his work to that of J.S. Mill, Spencer and Popper. Kley pointed out the limitations in Hayek’s understanding of liberalism and socialism as seen primarily in terms of political methodologies opposed to each other only on the grounds of their different solutions to the problem of social and economic coordination.