Friedrich Hayek, who died on March 23, 1992 at age 92, was arguably the greatest social scientist of the twentieth century. By the time of his death, his fundamental way of thought had supplanted the system of John Maynard Keyneshis chief intellectual rival of the centuryin the battle since the 1930s for the minds of economists and the policies of governments.
Hayeks ideas, which won him a Nobel prize in 1974, influenced Ronald Reagans supply-side policy and Margaret Thatchers privatization program. He (along with Milton Friedman) is now the most-respected economist in Eastern Europe. Most important, his ideas have been confirmed by events. His analyses of socialist as well as non-socialist societies have been proven astonishingly correct by the breakup of communist Eastern Europe.
Hayeks influence has gone far beyond economics, however. During the past few decades, his system of thoughtbuilding upon the ideas of David Hume, Adam Smith, and other Scottish thinkers of the eighteenth centuryhas seeped pervasively into scholarly writings. He has influenced not only contemporary economics, political science, and philosophy, but also sociology, psychology, and anthropology. And this influence grows larger each year.
In the 1940s and 1950s, Freud and Keynes were the names to conjure withliterally. No mainstream scholar doubted the basic validity of their systems. Those few writers who argued that the Keynesian or Freudian ideas are theoretically flawed, or lack validation by empirical test, were considered cranks. It then seemed unthinkable that by the 1980s either Freud or Keynes would be largely discredited. Yet that turnaround has occurred.
Hayeks great work all flows from the fundamental vision of classical economics and political science which Hayek terms spontaneous order. This evolutionary principle (originally enunciated in 1705 by Bernard Mandeville) ascribes the development of society and economy to what Adam Fergusoncolleague of David Hume and Adam Smithcalled human action but not human design, but more commonly known as Smiths invisible hand.
Hayek flexibly and pragmatically adapted this principle to various conditions of modern everyday life. And he derived from this principle the corollary that because every set of circumstances is different, setting general policies from afar is usually inferior to decisions made on the spot by interested parties. On these insights, together with his rock-bottom value of personal liberty under law, Hayek consistently builds his system of politics and economics.
Hayeks central point with respect to policy is that economic activity cannot be effectively planned and coordinated from a central bureau. Socialism inevitably founders on the impossibility of even the largest computers effectively collecting and analyzing data about individual and group preferences, abilities, and perceptions of their circumstances. Only a system of decentralized decision-making and exchange-induced cooperationthe invisible handis feasible for a modern complex economy.
Hayek taught that progress arises from an evolutionary process of discovery wherein diverse firms and consumers experiment with a variety of profit-seeking activities. Most innovators fail in the marketplace, to their private cost. But some succeed, to the benefit of the public.
Journalists routinely applied the label conservative to Hayek. But one of his most trenchant writings is entitled Why I Am Not a Conservative. He said that conservatives oppose change and promote authority, but not he. Instead, helike Milton Friedmanpreferred the label liberal, with the connotations it had in Great Britain in the early nineteenth century.
Hayek was pragmatic and undogmatic, and his judgments were generally moderate. The main exception was his assertion that a country cannot be just a little bit socialist, and that there is no middle way between socialism and free enterprise. He believed that any element of socialism tends to spread its tentacles until it entirely corrupts a society.
Hayeks judgment proved sound in most respects. His 1930s assessment of socialisms prospects has proven exactly correct. Luckily, Hayek lived long enough to see this confirmation of his analysis in Eastern Europe.
A difficult element in Hayeks thinking is his apparent condemnation of planned policy change. But Hayek was not against all self-conscious social change. Indeed, he considered the framing of broad-ranging, even-handed, law-based rules for human conduct to be perhaps the most important and challenging task in a society. He simply wanted us to be leery of making social changes until we have done our level best to determine whether there are subtle hidden benefits from apparently dysfunctional or irrelevant customs or systems.
Following Hume, Hayek told us that we can never know why many valuable and important customs and systems evolved. Hence he hoped that we give vestigial practices the benefit of our doubt, and perhaps a bit more. His view may be summed up in a phrase attributed to Robert Frost: Never pull down a fence until you know why it was put up.
A typical bit of Hayekiana to close: After receiving the Nobel prize Hayek wrote that the prize should not be awarded in economics. His reason? Once a person receives the prize, he or she is inevitably asked by journalists about subjects outside his or her special knowledge. And too often the laureate responds to such questions. The answers have a good chance of causing damage because they are taken as statements of expert knowledge even though they are nothing more than uninformed opinions. Hayeks personal modesty, reflected in this view of the Nobel prize, is part-and-parcel of his abhorrence of the fatal conceitthe title of his final bookthat the reasoning powers of clever people are capable of successfully remaking society at will.