Neoliberal foundations: an introduction to Friedrich Hayek

We believe that students from both formal economics/commerce backgrounds and those who are not formally educated but have the field as an interest are under-informed about the ideas of some of history’s greatest thinkers. The ideas of these social scientists and economists still shape the world today, and so deserve more recognition and understanding by the current generation of students coming through universities.

We open with Friedrich Hayek.

Friedrich August Hayek was born in Vienna, Austria, in 1899, to August von Hayek (a doctor) and Felicitas Juraschek. He had two brothers – Heinrich and Erich. He was a precocious child, and it has been suggested that he read fluently and frequently before going to school (according to unpublished autobiographical notes).

Hayek had numerous academic interests in his life; his father, as well as practicing as a doctor, was heavily involved in botany, and his mother’s family are related to noted philosopher Ludwig Wittgenstein. Indeed, Hayek has suggested that Wittgenstein’s philosophy and methods influenced his own thoughts. Friedrich was involved in philosophy, genetics and evolution, and subsequently formal study in law and political science (as well as philosophy, psychology, and economics). He was involved in neuroscientific research and spent a great deal of time researching learning through neuronal staining – developing the model of long term memory we use today (Hebbian Theory).

Over the years, Hayek was involved with democratic socialism, and then subsequently moved toward classical liberalism, at least partly due to the influence of Ludwig von Mises (another Austrian School economist and philosopher).

Over the years Hayek worked extensively on research relating to the business cycle at the London School of Economics. He explored theories involving the primacy of private investment in public markets in comparison with government spending programs – with frequent letters to John Maynard Keynes amongst others. (As an aside, this long-running theoretical debate led to modern-day rap battles being created imagining the roles of Hayek and Keynes.)

Against the backdrop of this conflict and the Second World War, Hayek wrote what is arguably his most famous book: The Road to Serfdom. The title itself was inspired by Alexis de Tocqueville, and it was immediately very popular when it was first published in Britain in 1944. It has been lauded as such by prominent thinkers and economists like Milton Friedman: “This book has become a true classic: essential reading for everyone who is seriously interested in politics in the broadest and least partisan sense.” A short discussion on the context of The Road to Serfdom follows, though the book is far too complex for a short exploration to do it justice.

The socio-political backdrop to Hayek’s writing at the time was a fear that trends in England in the 1930s and 40s were moving in tandem to those present in Germany 20-25 years previously. In the introduction, it is suggested that,“[it] is necessary now to state the unpalatable truth that it is Germany whose fate we are in some danger of repeating.” It was suggested that a strong nation-state that impinges on individual freedoms is required in war, and Hayek was concerned that this ideology was being maintained and expanded in peace-time. His view was that the public and intellectual-elite alike have “…contempt for nineteenth century liberalism” and the “…same fatalistic acceptance of ‘inevitable trends’ [toward a powerful and intrusive government]” pervades the entirety of the work. This is a remarkably prescient observation, which is relevant to both Australia (in the sense that we are continually following some of the rest of the Western world in eroding civil liberties and basic economic freedoms) and the wider international community.

Throughout The Road to Serfdom Hayek’s historical underpinning prevails and sets the tone for the thread of his reasoning. It is used to examine the ethics of central rule, the philosophical basis for totalitarianism, the age-old debate between security and freedom, and even Nazism (the latter through a chapter entitled: “The Socialist Roots of Nazism”). Morality as well as ‘ends justifying the means’ logic is considered, and age-old political thought is framed in a way that remains relevant to today’s economic and political discussions.

The whole theme of the book, including the title, is a discussion of how the ideals of a centrally planned economy (‘The Great Utopia’) inevitably fall away to a life of servitude (or serfdom) for the masses. However, despite the book’s generally positive reputation in various conservative and classical liberal circles, it has received some criticism in that area also. Hayek supported (at the time of the writing of The Road to Serfdom at least) work-hour regulation and some degree or form of social welfare. However, this is not necessarily the position that those who cite Hayek as an influence take and this seemingly moderate stance is perhaps somewhat at odds with the legacy he has left.

The Road to Serfdom is regarded as a masterpiece of political and economic/human-action thinking, and rightly so. Hayek won a Noble Memorial Prize in Economic Sciences in 1974 (with Gunnar Myrdal), whereupon Hayek gave a speech entitled “The Pretence of Knowledge”. This idea of spontaneous order and bottom-up (as opposed to top-down) thinking and action is central to Hayekian thought, and indeed to classical liberalism and its antecedents today. The Road To Serfdom is as necessary now as it ever was, and we strongly suggest that everyone consider reading it to increase their knowledge of the potential fallibility of central planning, and the law of unintended consequences with specific application to economic and political theory.

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