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Happy Birthday F.A. Hayek - A Collection of Works and Thoughts

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May 08, 2009 – Comments (8)

Today is the 110th birthday of F.A. Hayek. As we watch our government waste trillions upon trillions of dollars in the name of saving us; as we watch our government's destructive attempt to re-inflate the housing and stock markets; and as we watch our government's continuous Orwellian expansion into our private lives, we should ponder what F.A. Hayek would think of the world today and what advice he would dispense.  Thus, for me, it is a bit of a melancholy day to share his memory.  His wisdom is needed.

Who Was F.A. Hayek?

Friedrich August von Hayek is undoubtedly the most eminent of the modern Austrian School economists. His most notable contribution to the field of Economics is his work on the Austrian Business Cycle Theory (ABCT) which helped earn him a Nobel Prize in 1974.  ABCT explains how Central Banks distort capital markets by manipulating interest rates, lowering them below the rate the market would set, which causes a misallocation of capital resources.  This process leads to massive speculation in projects, stock ventures, and credit instruments that would not be justifiable or even possible under normal market conditions.  This boom eventually runs out of steam (due to the scarcity of resources), leading to the bust.  Does any of that sound familiar?  It is ABCT that free market thinkers such as Ron Paul and Peter Schiff applied to predict the crash of 2007-08.  It is a fitting tribute since Hayek famously predicted the crash and Great Depression in February 1929.

F.A. Hayek (1899-1992)

For most people however, Hayek is known for his classic and disturbing look at political philosophy in the book The Road to SerfdomWritten in 1944 while living in London, Serfdom was immediately recognized as a radical and thought provoking look at the direction of State control in the lives of private citizens.  

Instead of linking to several of Hayek's works, acknowledging that such a task is impossible to complete (a planned collection of Hayek's works is slated to be 19 volumes long) I want to bring special attention to one before I close with some thoughts of my own.

The Pretense of Knowledge is a lecture Hayek gave in 1974 in memory of Alfred Nobel. He outlined his case against the predominant school of thought in the field of Economics, a "scientific" approach that he argued was not very scientific at all.  Predictably, his sage words were ignored by intellectuals everywhere. Please give it a read when you have a moment.

It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences — an attempt which in our field may lead to outright error. It is an approach which has come to be described as the "scientistic" attitude — an attitude which, as I defined it some thirty years ago, "is decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed." I want today to begin by explaining how some of the gravest errors of recent economic policy are a direct consequence of this scientistic error. - F.A. Hayek

For a more complete summary of Hayek's contributions and thoughts, please visit the Ludwig Von Mises Institute, the online home of Austrian School Economics.

My Indirect Tribute to Hayek - Gratitude and Courage

I can't possibly speak of Hayek without speaking about another man, the one who is responsible for saving me from a life of vacuous anti-intellectualism. He galvanized me (and a million others and counting) to question what we were taught, stand up for what we believe, and have the courage to fight against evil no matter the odds.  His courage in the face of open contempt and ridicule, constant hit pieces from the media, marginalization by the power structure, and the overwhelming political and economic apathy of the American public can only be understood when one examines the lives of his mentors: F.A. Hayek, Ludwig Von Mises, and Murray Rothbard, all of whom suffered the very same treatment and shared the same persaverance, humility, and courage.

That man of course is Ron Paul, a member of the Austrian School, a Congressman, and the rarest of human beings: an honest politician.  I had the honor of meeting Ron Paul at a rally in Phoenix, AZ last year. Though his campaign was winding down, there was no evidence of a drop in enthusiasm. Hope springs eternal. Indeed, Dr. Paul has taken the teachings of Hayek and Mises and started a revolution, one which grows stronger every day, much to the chagrin of the American power structure. I will cherish that day in Arizona for the rest of my life.

It is neither an overstatement nor a simplification to say that Ron Paul has changed me in a more meaningful and fulfilling way than any other human being except perhaps my father.  I feel blessed by the existence Hayek because I was blessed by the existence of Ron Paul.   Hayek helped make Dr. Paul possible, and know he makes us possible.  We can do our part.   I use my modest financial means to donate liberally to C4L, LP, and the Mises Institute, and will continue to do so as long as life permits.  Others use their organizational skills.  Many others write and speak out.  Some are taking on the power structure directly, running for offices across the country.  F.A. Hayek would be proud of these events, I'm certain.  We're starting to win very small victories but it is a long road.  Hopefully we will have the courage of Hayek to continue the fight no matter the odds.

Happy Birthday Friedrich. Thank you for enriching my life.

David in Qatar

8 Comments – Post Your Own

#1) On May 08, 2009 at 10:06 AM, whereaminow (20.94) wrote:

If you have thoughts or feelings on Hayek please share them with us. If there are any personal stories from people who have met or known him, I'd love to hear about them.

David in Qatar

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#2) On May 08, 2009 at 10:29 AM, DaretothREdux (43.62) wrote:

Everytime you make one of these posts it just reminds me of how much reading I have left to do....but I'm sure I will enjoy most every second of it.

Thanks David.

Ron Paul 2012! Don't count him out yet.

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#3) On May 08, 2009 at 10:40 AM, LawfordCap (99.85) wrote:

David how do you see economic crashes in relation to the history of evolutionary collapses and the dynamics of nonlinear systems? Can they not just result from the intrinsic property of the nonlinearities of the economic system?

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#4) On May 08, 2009 at 10:42 AM, MikeMark (29.63) wrote:

Happy Birthday Friedrich.

May the people of the world learn from your efforts.

Well done, David.

Thank you again.

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#5) On May 08, 2009 at 10:51 AM, whereaminow (20.94) wrote:

A very sad story in the life of Hayek is the ultimate outcome of his final book, A Fatal Deceit.  It turns out that the name Hayek chose would be apropos.  Hayek spent seven years working on his ultimate masterpiece before falling ill in 1985.  For the final three years of his life he remained severely incapacitated.  During that period, his editor, Professor W. W. Bartley (you can't make a name like that up!) took tremendous liberties in arranging and modifying the final work.  His role is only coming to light now, though several scholars have questioned the authenticity of Deceit for the past 20 years.  

Read the story here.

Sorry LawfordCap. I don't want to brush you off and I'm sure I'll be up for it tomorrow, but today I only wish to talk about Hayek and maybe learn about some stocks.  I'll put my thinking cap back on tomorrow. 

David in Qatar

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#6) On May 08, 2009 at 11:50 AM, mindmuse (92.75) wrote:

In dark times it helps we have the shoulders of giants like Hayek and Paul to stand on.

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#7) On May 08, 2009 at 3:36 PM, dbjella (< 20) wrote:

whereaminow

Thank you for your posts.  Everytime you write I learn more.  Everytime I learn more I am grateful.

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#8) On May 12, 2009 at 2:44 PM, nzsvz9 (< 20) wrote:

David,

When I read Hayek, my head hurts! It's like reading Peter Drucker's work ... difficult and dense with meaning. The following Hayek quote comes from "The Pretense of Knowledge" speech and is strangely coincident to today's times:

"Let me illustrate this by a brief sketch of what I regard as the chief actual cause of extensive unemployment — an account which will also explain why such unemployment cannot be lastingly cured by the inflationary policies recommended by the now fashionable theory."

I wish his material was more accessible, as re-reading passages, I almost always find myself in agreement with him.

Hayek's position that economists have over-simplified and screwed things up is so fundamental as to be non-negotiable, yet most people believe the Keynesians because of their appearance (hence the pretense) of credibility. In my own way I have often found that when confronted with a problem, it is often more complex than it appears, and the tendancy of people to think in terms of "single variate solutions" to the problem often leads one toward a local rather than global optimum. Except in the simplest of situations, the problems we encounter in life are almost always complex and multi-variate -- like the Heisenberg uncertainty principle in Physics we can not know exactly know even two conditions or compute all possible outcomes of the reactions of free bodies once the number of free bodies starts to increase past any insignificantly small number ... and so on.

We once thought Newton's Laws to be absolute, but we now believe they are just approximations of Einstein's theory of relativity (at non-relativistic speeds) which itself is only a small portion of what would be the big hairy theory of everything.

Is it even reasonable to think economists (let alone the weatherman) are scientists?

So Lord Keynes may yet be wrong ...

Known by my Macro-Economics teacher 15 years ago as nzsvz9 and a pain in the a$$

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