Friedrich August von Hayek was born in Austria on May 8, 1899. After World War I, he earned doctorates in Law and Science at the University of Vienna. Upon receiving his degrees he joined a private seminar led by the greatest of the Austrian economists, Ludwig von Mises.
The free market, Hayek said, was not designed by anyone, but evolved through the spontaneous ordering of self-interested human actions. He showed, as have others, that so-called market failures are actually the failures of government central planners. For example when the central bank holds interest rates at artificially low levels, people are led into mal-investment and reduced savings. (A certain housing crash comes to mind, and before that a tech bubble.)
The reason socialist economists thought central planning could work, argued Hayek, was that they thought planners could take the given economic data and allocate resources accordingly. They’re smarter than their fellow citizens, after all. But Hayek pointed out that the data are not “given.” The data do not exist, and cannot exist, in any one mind or small number of minds. Rather, each of the individuals who make up a market—millions of people, actually—has knowledge about particular resources, and opportunities for using these resources, that a central planner can never have. The virtue of the market is that it gives those individuals the freedom to use and share their own unique sets of information. Without markets, information can’t flow.
In 1944, Hayek published The Road to Serfdom1 to warn the British people of Socialism as a growing political force within their country. The warning was ignored, and it was finally left to the “Iron Lady” Margaret Thatcher to undo the damage thirty-five years later.
In 1974, Hayek shared the Nobel Prize in economics with the Swedish economist Gunnar Myrdal (1899 – 1987) 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.
Hayek was still publishing at age eighty-nine. In his final book The Fatal Conceit2, he offered some profound insights explaining the intellectuals’ attraction to socialism, and he masterfully refuted the basis for their beliefs. Of all Hayek’s work, the two named here are the required reading.
Friedrich August von Hayek died in Freiburg, Germany on March 23, 1992.
1 The Road to Serfdom, University of Chicago Press, 1944.
2 The Fatal Conceit, University of Chicago Press, 1988.