Friedrich A. Hayek

"A claim for equality of material position can be met only by a government with totalitarian powers. " 

Born Friedrich August von Hayek in 1899 to a distinguished family of Viennese intellectuals.  In 1917, Hayek joined an artillery regiment in the Austro-Hungarian Army and fought on the Italian front.  Hayek suffered damage to his hearing in his left ear during the war and was decorated for bravery. He also survived the 1918 flu pandemic.  Hayek attended the University of Vienna, earning doctorates in 1921 and 1923. Hayek came to the University at age 19 when it was one of the three best places in the world to study economics (the others being Stockholm and Cambridge).

Like many students of economics then and since, Hayek chose the subject not for its own sake, but because he wanted to improve social conditions—the poverty of postwar Vienna serving as a daily reminder of such a need and to help avoid the mistakes that had led to the war. Hayek said of his experience: "The decisive influence was really World War I. It's bound to draw your attention to the problems of political organization". He vowed to work for a better world. Socialism seemed to provide a solution. Then in 1922 Mises published his Die Gemeinwirtschaft, later translated as Socialism. “To none of us young men who read the book when it appeared,” Hayek recalled, “the world was ever the same again.” It was around this time that Hayek began attending Mises’s famed Privatseminar. For several years the Privatseminar was the center of the economics community in Vienna.

With the help of Mises, in the late 1920s he founded and served as director of the Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) in 1931.  Hayek was quickly recognized as one of the leading economic theorists in the world and his development of the economics of processes in time and the co-ordination function of prices inspired the ground-breaking work of John Hicks, Abba P. Lerner and many others in the development of modern microeconomics.  Hayek lectured on Mises’s business-cycle theory, which he was refining and which, until Keynes’s General Theory came out in 1936, was rapidly gaining adherents in Britain and the U.S. and was becoming the preferred explanation of the Depression.  Hayek remained at the L.S.E. until 1950, when he joined the Committee on Social Thought at the University of Chicago. 

Hayek, Frank Knight, Milton Friedman and George Stigler worked together in forming the Mont Pèlerin Society, an international forum for classical liberals.  Hayek and Friedman cooperated in support of the Intercollegiate Society of Individualists, later renamed the Intercollegiate Studies Institute, an American student organization devoted to libertarian ideas.

From 1962 until his retirement in 1968, he was a professor at the University of Freiburg, West Germany.  Following his retirement, Hayek spent a year as a visiting professor of philosophy at the University of California, Los Angeles.  Hayek became a professor at the University of Salzburg from 1969 to 1977 and then returned to Freiburg.

On 9 October 1974, it was announced that Hayek would be awarded the Nobel Memorial Prize in Economics with Swedish economist Gunnar Myrda.  The prize was awarded for "their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena."  The Nobel Committee listed these accomplishments for Hayek:

The Functional Efficiency of Economic Systems

Hayek’s contributions in the field of economic theory are both profound and original. His scientific books and articles in the twenties and thirties aroused widespread and lively debate. Particularly, his theory of business cycles and his conception of the effects of monetary and credit policies attracted attention and evoked animated discussion. He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.

Hayek showed how monetary expansion, accompanied by lending which exceeded the rate of voluntary saving, could lead to a misallocation of resources, particularly affecting the structure of capital. This type of business cycle theory with links to monetary expansion has fundamental features in common with the postwar monetary discussion.

The Academy is of the opinion that Hayek’s analysis of the functional efficiency of different economic systems is one of his most significant contributions to economic research in the broader sense. From the mid-thirties he embarked on penetrating studies of the problems of centralized planning. As in all areas where Hayek has carried out research, he gave a profound historical exposé of the history of doctrines and opinions in this field. He presented new ideas with regard to basic difficulties in “socialistic calculating”, and investigated the possibilities of achieving effective results by decentralized “market socialism” in various forms. His guiding principle when comparing various systems is to study how efficiently all the knowledge and all the information dispersed among individuals and enterprises is utilized. His conclusion is that only by far-reaching decentralization in a market system with competition and free price-fixing is it possible to make full use of knowledge and information.

Hayek’s ideas and his analysis of the competence of economic systems were published in a number of works during the forties and fifties and have, without doubt, provided significant impulses to this extensive and growing field of research in “comparative economic systems”. For him it is not a matter of a simple defence of a liberal system of society as may sometimes appear from the popularized versions of his thinking.

Hayek died on 23 March 1992, aged 92, in Freiburg, Germany and was buried on 4 April in the Neustift am Walde cemetery in the northern outskirts of Vienna.