Friedrich Hayek: A Biography
2001-09-24 10:53 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
archerships(Note: Deirdre McCloskey (nee Donald McCloskey) is also an interesting person in his own right. See her autobiography Crossing:A Memoir: http://www.amazon.com/exec/obidos/ASIN/0226556697/qid=1001350282/sr=1-1/ref=sr_1_2_1/002-6001974-3371233)
Persuade and Be Free A new road to Friedrich Hayek
By Deirdre McCloskey
Friedrich Hayek: A Biography, by Alan Ebenstein, New York:
Palgrave/St. Martinís Press, 403 pages, $29.95
"The libertarian age is at hand," declares Alan Ebenstein at the end
of his engaging new biography. So we most fervently pray, though the
very sainted Friedrich August von Hayek (1899-1992), one of the people
who brought it about, would I think be less than confident. Hayek
lived through a startling disintegration of liberal societies. He saw
socialism triumphant and freedom limited to a handful of nations. By
the early 1940s even his fellow Austrian, Harvard economist Joseph
Schumpeter, had abandoned capitalism, as had most other intellectuals.
By 1944, when Hayek wrote his most famous if not his most profound
book, The Road to Serfdom, most of his academic colleagues were lining
up behind state slavery. George Orwell praised the book in part; it
elaborated on the same worries Orwell had about central planning: "It
cannot be said too often -- at any rate it is not being said nearly
often enough -- that collectivism is not inherently democratic, but,
on the contrary, gives to a tyrannical minority such powers as the
Spanish Inquisitor never dreamed of." When Hayek tried to have The
Road to Serfdom published in the United States, it was rejected by
three publishers. Orwellís Animal Farm, a rather more vivid approach
to the same theme, was in that same heyday of collectivist enthusiasm
rejected by eight or nine American publishers, one of whom explained
kindly that, "We are not doing animal books this year."
But Hayek gloriously lived to receive the 1974 Nobel Memorial Prize in
Economic Science and to witness socialismís collapse. The centuryís
chief political theorist of capitalism became a hero in the former
socialist countries. In 1989 the Cato Institute gave Yevgeny Primakov
a bronze bust of the author of The Road to Serfdom. The ironies are
dizzying.
Hayek had an interesting life, sometimes in the sense of the Chinese
curse: May you live in interesting times. He was a child in the Vienna
of Freud, a cousin of Wittgenstein, a decorated officer in the horrors
of the Italian front in World War I, a witness to hyperinflation and
the rise of Nazism, an early proponent of the new quantitative methods
in social science, an academic star at the London School of Economics,
a media figure briefly in the United States after Readerís Digest
published a condensed edition of The Road to Serfdom in its March 1945
issue, and then a pariah in mainstream economics, viewed as merely
polemical, no longer an economist.
When he was considered for a job in economics at the University of
Chicago in 1946, and then again in 1950 when he was in fact invited to
join the universityís quirky Committee on Social Thought, the
economics department one floor down wouldnít give him an
appointment. It was not because he was an anti-socialist -- the
Chicago School was just forming then, under the agricultural economist
Theodore Schultz, and was realizing that it was an anti-socialist
outpost -- it was because he was thinking beyond economics and
econometrics. (Departments of economics havenít changed since 1950.)
In the 1950s, he worked on political philosophy at Chicago, then
returned to the German-speaking world, and especially his well-named
hometown Freiburg, for the final third of his career.
That career can be summed up as a stellar rise to 1944 and a shocking
fall, which was followed by a long period of relative and then
depressing obscurity, out of which emerged the grand old man of what
the Europeans call neoliberalism. Hayek confessed in an interview, "I
had a period of twenty years in which I bitterly regretted having once
mentioned to my [first] wife after [John Maynard] Keynesí death [in
1946 that] I was probably the best-known economist living. But ten
days later it was probably no longer true." What happened? Keynesí
stock rose after his death, just as the academics were getting cross
about the popular success of The Road to Serfdom. A dead saint was
hard for Hayek to match. Yet in Hayekís and the centuryís middle 70s,
he began a triumphant old age. Even his health improved. "For a while
I tried old age," he said, "but it disagreed with me."
Ebensteinís compulsively readable book gives you a man almost in
full. Itís a mainly intellectual biography with intriguing personal
supplements. It consists of 40 or so little essays, perfect for
bedtime dipping -- "University of Vienna," "New York," "Robbins" (his
pro-Austrian friend at the London School of Economics), "Mont Pelerin
Society" (the influential club of neoliberals Hayek co-founded in the
darkest days after World War II), "Chicago School of Economics" (of
which he was of course no member: He was an Austrian economist, and we
Chicago Schoolers looked down on their lack of quantitative rigor),
"Mill" (about whom he did important scholarly work), "Law, Legislation
and Liberty," "Laureate," "Friedman," "Thatcher," "Opa" (that is,
Grandpa), and "The Fatal Conceit" (his last book, a brief against the
conceit of excessive rationalism).
We hear about Hayekís first marriage ending in a contested divorce,
and of an idyllic second marriage to a boyhood sweetheart and
cousin. A big, tall man (he weighed 200 pounds in his prime), Hayek
was "aristocratic in temper and origins," but no Prussian. Unlike his
senior in the Austrian school, Ludwig von Mises (notice all those
vons, sir!), he did not demand sycophancy, nor did he get it much
until his Nobel Prize. What comes through is a Viennese sense of
humor, sardonic and self-deprecating.
The very non-libertarian Keynes, a sort of friend and certainly an
intellectual opponent of Hayek, remarked famously that "madmen in
authority...distill...their frenzy from some academic scribbler a few
years back." The madmen (and women, if you please) who brought on
neoliberalism were Margaret Thatcher, Ludwig Erhard, Jacques Rueff,
Luigi Einaudi, Barry Goldwater, and Ronald Reagan. The scribblers from
whom their frenzy was distilled were Mises, Ayn Rand, Milton Friedman,
and Hayek.
Many, including Hayek himself, have noted that the chief theorist
against socialism had some of the statist about him. He was no
anarchist. Rand, for example, viewed him as "real poison" for his many
concessions to the state. Ebenstein argues somewhat strangely that
Hayek discovered the link between state-enforced law and real personal
liberty. (One would have thought that the entire Western liberal
tradition is based on such a notion.)
Hayek always courted socialists and had many leftish friends, the
economic historian Richard Tawney, for example. He was certainly no
conservative: On the last page of The Constitution of Liberty (1960)
he argued that our "hopes must rest on persuading and gaining the
support of those who by disposition are ëprogressives,í those who,
though they may now be seeking change in the wrong direction, are at
least willing to examine critically the existing [sic: Hayek was never
smooth in English] and change it whenever necessary."
As a student he was much influenced by Friedrich von Wieser, the more
leftish of the two who ran Austrian economics. (The other was Eugen
Boehm-Bawerk, who was Wieserís brother-in-law. They dominated Austrian
economics between 1890 and 1920 the way another such pair, Paul
Samuelson and Kenneth Arrow, dominated American economics between 1940
and 1970. The last Clinton secretary of the Treasury and the new
president of Harvard, Larry Summers, is their nephew.)
Hayek rejected the notion that equality of results necessarily leads
to mediocrity and he was concerned throughout with human dignity. In a
radio debate in 1945, for example, he declared flatly, "I am in favor
of a minimum income for every person in the country." He approved of
the military draft, and wanted ownership of guns restricted. He was
green, offering endorsements after his Nobel Prize to the World
Wildlife Fund. Hayek admired Marx as an economist, saying of Capital
that its "long middle part is really essentially flawless."
Isaiah Berlin in his first book, Marx (1939), described Marxism as
"not a hypothesis liable to be made less or more probable by the
evidence of facts, but a pattern, uncovered by a non-empirical,
historical method, the validity of which is not questioned." That
doesnít make Marxism "non-scientific." It makes it storytelling. An
identical sentence could be written about the most fruitful scientific
theory of the past two centuries, Darwinism: a non-hypothesis, a
pattern, a historical method, the validity of which is not
questioned. The point is you could write still another, identical
sentence (in fact Iím positing it now) about the lifework of the 20th
centuryís great anti-Marxist. By his own account, Hayek in his youth
almost became a Darwinian biologist.
So Hayek was an anti-positivist, an anti-behaviorist, an
anti-most-things-that-passed-for-Science until post-modernism and its
revival of The Story as the basic form of organizing and revising
knowledge. We are the economic molecules, said Hayek, and can tell
our story without having to pretend that only "observation" is real
knowledge. Yet as Milton Friedman has remarked, the Austrian method
"makes it very hard to build up a cumulative discipline....[In
empirical science] if you and I disagree...I say to you, what facts
can I find that will convince you?" After Hayekís days in the 1920s as
a statistical student of business cycles, he lost interest in such
arguments. He claimed, for example, in The Constitution of Liberty
that, "The rapid economic advances that we have come to expect seem in
a large measure to be the result of inequality and to be impossible
without it." He gives no shred of evidence, this man who read and
indeed wrote knowingly on economic history.
Had he said such a thing in a seminar in the presence of Friedman (as
he no doubt did, if not at Chicago then in the annual meeting of the
Mont Pelerin Society) Milton would surely have asked, as he always
asks everyone, "How do you know?" The doubting Milton would have
stayed for an answer, a quantitative one. The great failing of the
Austrian School, which Hayek did nothing to help, was its insistence
that one form of argument, the non-quantitative, was the only good
form. (The great failing of the other schools of economics, by
contrast, is their insistence that one form of argument, the
quantitative, is the only good form.)
Hayek summarized his own intellectual life as one "discovery" and two
mere "inventions." The discovery was that a division of information is
as crucial to society as a division of labor, which suggests --
Hayekís method would allow him to say implies -- that central-plan
socialism will work badly. Planners, Hayek understood, simply can
never possess adequate information. One of the inventions was the
claim in his three-volume Law, Legislation and Liberty (1973-1979)
that certain legislative elections should be restricted to
45-year-olds and that only people who get no benefits from government
should vote. You can see that this particular academic scribbler had
no interest in political feasibility.
The other invention, more influential, was the suggestion that moneys
should compete. A government should not be able to force its citizens
to take its money. Contemporary governments, like those in Russia and
Argentina, that have adopted the American dollar and thereby have
removed their temptations to print too many rubles and pesos, are
following Hayek. Here he disagreed with Friedman, who retains a
peculiar fondness for a state monopoly of the money supply. The gold
standard worked, Hayek would say, because people wanted to do business
in gold, or its close substitute called pounds sterling, not because a
monopoly of mines had agreed to follow a rule of monetary expansion,
or because a wise Greenspan was in charge of the monopoly.
What was really important was his one "discovery," so damaging to the
rationalist project of central planning. Hayekís discovery that
information is fragmented connects his biologic with his economic
thinking: a "neuron, or buyer or seller" in a brain or in an economy
"is induced [by evolution, not by magic] to do what in the total
circumstances benefits the system...to serve the needs of which it
doesnít know anything at all." He described in an interview with Jack
High (reproduced in another good introduction to Hayek, Stephen Kresge
and Leif Wenerís edited Hayek on Hayek [1994]) how in the 1930s "my
whole thinking on this started with...joking about economists speaking
about given data." Hayek realized the term was an absurdity: "Data"
means in Latin "things given," so the phrase means "given things
given." But given to whom? Not to the central planners, certainly, but
dispersed in each individualís mind, and gatherable only by dickering
in the market.
Dickering, or as Adam Smith put it, "the propensity to truck, barter,
and exchange one thing for another" is "a necessary consequence of the
faculty of reason and of speech." Smith was vividly aware of the
faculty of speech, but nonetheless confined his system to the more
behavioral and observable and quantitative division of labor. Hayek,
who first came upon the idea (Smithís and the inklings of his own)
when attempting during the Great War to lead men in an Austrian
brigade speaking a dozen different languages, nonetheless confined his
extension of Smith to the division of information.
This is a fault. I know, for example, that I like purple dresses. You
as a dressmaker need to acquire that information if I am to be
served. Good point, and a very great obstacle to central planners, who
have no good way of getting information, as Hayek expressed it in his
famous essay of 1948, about "particular circumstances of time and
place," such as that Deirdre likes purple.
Right. But letís go all the way: Why would you want to serve me, or I
you? It is, I would claim against Friedrich Hayek and Israel Kirzner
and others of the Austrian School who have taught us so much about
alertness and information, the division of persuasion, not only of
labor and information, that runs a modern economy. "By pursuing
profit," Hayek wrote, "we are as altruistic as we can possibly be,
because we extend our concern to people who are beyond our range of
personal conception." Yes, I entirely agree, as did Smith. But if the
dressmaker merely has the "information" that I like purple, she can
ignore it unless something leads her will. Profit and the other
persuasive resources of language make her "pay attention," as we say.
Adam Smith expressed the linguistic character of market persuasion
this way: "If we should enquire into the principle in the human mind
on which this disposition to trucking is founded, it is clearly the
natural inclination every one has to persuade. The offering of a
shilling, which to us appears to have so plain and simple a meaning,
is in reality offering an argument to persuade someone to do so and so
as it is for his interest....And in this manner every one is
practicing oratory on others thro the whole of his life."
The babyís crying in a family, the instinct of workmanship at the
factory, the threat of dismissal as a housekeeper, the lure of profit
in making dresses, the offer of a shilling: These are all persuasions
to courses of action, connecting heart and hand. Without persuasion,
the theory of economics is incomplete. And so it is incomplete without
an account of language, language viewed not merely as "conveying" or
"communicating" information originally "dispersed" (in Hayekís
terminology), but language as rhetoric -- that is, as capable of
moving us to action. The socialistsí favored form of speech is an
order: "Go mine coal." The Austrian economistís favored form is an
informative statement: "I like purple." Neither of these quite do the
economic task. You can be in the right job, and know exactly what to
do. But unless the boss or the culture or the market or you yourself
in the council of your soul has exercised sweet talk on your will,
there you sit, ready to work. Enlightened, yes, but unmoved.
Completing the Austrian system in this way makes clearer that it is a
system for a free society. If something called the division of "labor"
is the sole key to economics, then the authoritarian claim to
improving the way labor is assigned sounds plausible enough. Letís
see. We will need 1,657,987 coal miners next year if we are to produce
18,987,876 metric tons of steel. Or so at least it seemed to
intellectuals in the 1930s. The socialist hope sounds much less
plausible if, as in Hayek, the key is a division of information. But
as the Hollywood Nazis say, "Vee have vays" of extracting information,
maybe, short of giving people their freedom. Or so it seemed to the
intellectuals plugging "market socialism" in the 1950s.
But if an economy depends on a division of persuasion, an ability to
exercise sweet talk with a variety of people every day, and with
people we have never met, then it is suddenly clear why personal
freedom, the dignity that comes from owning private property, and the
quantitative miracle of capitalist economic growth have pretty much
gone together.
The intellectual defenses of a new age of libertarianism need sweet
talk, a unity of word and number, story and metaphor, on the lips of
free men and women. The story of Hayekís astonishing life and work
says just that: Persuade and be free.
_Friedrich Hayek: A Biography_ is available at significant discount
from Laissez Faire Books, on the web at:
http://laissezfairebooks.com/product.cfm?op=view&pid=FA8382&aid=10097
and from Amazon books, on the web at:
http://www.amazon.com/exec/obidos/ASIN/0312233442/thefriedrhayeksc
Deirdre McCloskey teaches economics, history, and English at the
University of Illinois, and economics, philosophy, and art and
cultural studies at Erasmus University, Rotterdam. Her latest books
are _How to be Human* - *Though an Economist_ (University of Michigan,
2001), at discount from Amazon at:
http://www.amazon.com/exec/obidos/ASIN/0472067443/thefriedrhayeksc
and _Measurement and Meaning in Economics: The Essential Deirdre
McCloskey_, (Edward Elgar, 2001), available from Amazon at:
http://www.amazon.com/exec/obidos/ASIN/1852788186/thefriedrhayeksc
"Persuade and Be Free: A new road to Friedrich Hayek" By Deirdre
McCloskey. _Reason_ (Oct) 2001.
http://reason.com/0110/cr.dm.persuade.html
Persuade and Be Free A new road to Friedrich Hayek
By Deirdre McCloskey
Friedrich Hayek: A Biography, by Alan Ebenstein, New York:
Palgrave/St. Martinís Press, 403 pages, $29.95
"The libertarian age is at hand," declares Alan Ebenstein at the end
of his engaging new biography. So we most fervently pray, though the
very sainted Friedrich August von Hayek (1899-1992), one of the people
who brought it about, would I think be less than confident. Hayek
lived through a startling disintegration of liberal societies. He saw
socialism triumphant and freedom limited to a handful of nations. By
the early 1940s even his fellow Austrian, Harvard economist Joseph
Schumpeter, had abandoned capitalism, as had most other intellectuals.
By 1944, when Hayek wrote his most famous if not his most profound
book, The Road to Serfdom, most of his academic colleagues were lining
up behind state slavery. George Orwell praised the book in part; it
elaborated on the same worries Orwell had about central planning: "It
cannot be said too often -- at any rate it is not being said nearly
often enough -- that collectivism is not inherently democratic, but,
on the contrary, gives to a tyrannical minority such powers as the
Spanish Inquisitor never dreamed of." When Hayek tried to have The
Road to Serfdom published in the United States, it was rejected by
three publishers. Orwellís Animal Farm, a rather more vivid approach
to the same theme, was in that same heyday of collectivist enthusiasm
rejected by eight or nine American publishers, one of whom explained
kindly that, "We are not doing animal books this year."
But Hayek gloriously lived to receive the 1974 Nobel Memorial Prize in
Economic Science and to witness socialismís collapse. The centuryís
chief political theorist of capitalism became a hero in the former
socialist countries. In 1989 the Cato Institute gave Yevgeny Primakov
a bronze bust of the author of The Road to Serfdom. The ironies are
dizzying.
Hayek had an interesting life, sometimes in the sense of the Chinese
curse: May you live in interesting times. He was a child in the Vienna
of Freud, a cousin of Wittgenstein, a decorated officer in the horrors
of the Italian front in World War I, a witness to hyperinflation and
the rise of Nazism, an early proponent of the new quantitative methods
in social science, an academic star at the London School of Economics,
a media figure briefly in the United States after Readerís Digest
published a condensed edition of The Road to Serfdom in its March 1945
issue, and then a pariah in mainstream economics, viewed as merely
polemical, no longer an economist.
When he was considered for a job in economics at the University of
Chicago in 1946, and then again in 1950 when he was in fact invited to
join the universityís quirky Committee on Social Thought, the
economics department one floor down wouldnít give him an
appointment. It was not because he was an anti-socialist -- the
Chicago School was just forming then, under the agricultural economist
Theodore Schultz, and was realizing that it was an anti-socialist
outpost -- it was because he was thinking beyond economics and
econometrics. (Departments of economics havenít changed since 1950.)
In the 1950s, he worked on political philosophy at Chicago, then
returned to the German-speaking world, and especially his well-named
hometown Freiburg, for the final third of his career.
That career can be summed up as a stellar rise to 1944 and a shocking
fall, which was followed by a long period of relative and then
depressing obscurity, out of which emerged the grand old man of what
the Europeans call neoliberalism. Hayek confessed in an interview, "I
had a period of twenty years in which I bitterly regretted having once
mentioned to my [first] wife after [John Maynard] Keynesí death [in
1946 that] I was probably the best-known economist living. But ten
days later it was probably no longer true." What happened? Keynesí
stock rose after his death, just as the academics were getting cross
about the popular success of The Road to Serfdom. A dead saint was
hard for Hayek to match. Yet in Hayekís and the centuryís middle 70s,
he began a triumphant old age. Even his health improved. "For a while
I tried old age," he said, "but it disagreed with me."
Ebensteinís compulsively readable book gives you a man almost in
full. Itís a mainly intellectual biography with intriguing personal
supplements. It consists of 40 or so little essays, perfect for
bedtime dipping -- "University of Vienna," "New York," "Robbins" (his
pro-Austrian friend at the London School of Economics), "Mont Pelerin
Society" (the influential club of neoliberals Hayek co-founded in the
darkest days after World War II), "Chicago School of Economics" (of
which he was of course no member: He was an Austrian economist, and we
Chicago Schoolers looked down on their lack of quantitative rigor),
"Mill" (about whom he did important scholarly work), "Law, Legislation
and Liberty," "Laureate," "Friedman," "Thatcher," "Opa" (that is,
Grandpa), and "The Fatal Conceit" (his last book, a brief against the
conceit of excessive rationalism).
We hear about Hayekís first marriage ending in a contested divorce,
and of an idyllic second marriage to a boyhood sweetheart and
cousin. A big, tall man (he weighed 200 pounds in his prime), Hayek
was "aristocratic in temper and origins," but no Prussian. Unlike his
senior in the Austrian school, Ludwig von Mises (notice all those
vons, sir!), he did not demand sycophancy, nor did he get it much
until his Nobel Prize. What comes through is a Viennese sense of
humor, sardonic and self-deprecating.
The very non-libertarian Keynes, a sort of friend and certainly an
intellectual opponent of Hayek, remarked famously that "madmen in
authority...distill...their frenzy from some academic scribbler a few
years back." The madmen (and women, if you please) who brought on
neoliberalism were Margaret Thatcher, Ludwig Erhard, Jacques Rueff,
Luigi Einaudi, Barry Goldwater, and Ronald Reagan. The scribblers from
whom their frenzy was distilled were Mises, Ayn Rand, Milton Friedman,
and Hayek.
Many, including Hayek himself, have noted that the chief theorist
against socialism had some of the statist about him. He was no
anarchist. Rand, for example, viewed him as "real poison" for his many
concessions to the state. Ebenstein argues somewhat strangely that
Hayek discovered the link between state-enforced law and real personal
liberty. (One would have thought that the entire Western liberal
tradition is based on such a notion.)
Hayek always courted socialists and had many leftish friends, the
economic historian Richard Tawney, for example. He was certainly no
conservative: On the last page of The Constitution of Liberty (1960)
he argued that our "hopes must rest on persuading and gaining the
support of those who by disposition are ëprogressives,í those who,
though they may now be seeking change in the wrong direction, are at
least willing to examine critically the existing [sic: Hayek was never
smooth in English] and change it whenever necessary."
As a student he was much influenced by Friedrich von Wieser, the more
leftish of the two who ran Austrian economics. (The other was Eugen
Boehm-Bawerk, who was Wieserís brother-in-law. They dominated Austrian
economics between 1890 and 1920 the way another such pair, Paul
Samuelson and Kenneth Arrow, dominated American economics between 1940
and 1970. The last Clinton secretary of the Treasury and the new
president of Harvard, Larry Summers, is their nephew.)
Hayek rejected the notion that equality of results necessarily leads
to mediocrity and he was concerned throughout with human dignity. In a
radio debate in 1945, for example, he declared flatly, "I am in favor
of a minimum income for every person in the country." He approved of
the military draft, and wanted ownership of guns restricted. He was
green, offering endorsements after his Nobel Prize to the World
Wildlife Fund. Hayek admired Marx as an economist, saying of Capital
that its "long middle part is really essentially flawless."
Isaiah Berlin in his first book, Marx (1939), described Marxism as
"not a hypothesis liable to be made less or more probable by the
evidence of facts, but a pattern, uncovered by a non-empirical,
historical method, the validity of which is not questioned." That
doesnít make Marxism "non-scientific." It makes it storytelling. An
identical sentence could be written about the most fruitful scientific
theory of the past two centuries, Darwinism: a non-hypothesis, a
pattern, a historical method, the validity of which is not
questioned. The point is you could write still another, identical
sentence (in fact Iím positing it now) about the lifework of the 20th
centuryís great anti-Marxist. By his own account, Hayek in his youth
almost became a Darwinian biologist.
So Hayek was an anti-positivist, an anti-behaviorist, an
anti-most-things-that-passed-for-Science until post-modernism and its
revival of The Story as the basic form of organizing and revising
knowledge. We are the economic molecules, said Hayek, and can tell
our story without having to pretend that only "observation" is real
knowledge. Yet as Milton Friedman has remarked, the Austrian method
"makes it very hard to build up a cumulative discipline....[In
empirical science] if you and I disagree...I say to you, what facts
can I find that will convince you?" After Hayekís days in the 1920s as
a statistical student of business cycles, he lost interest in such
arguments. He claimed, for example, in The Constitution of Liberty
that, "The rapid economic advances that we have come to expect seem in
a large measure to be the result of inequality and to be impossible
without it." He gives no shred of evidence, this man who read and
indeed wrote knowingly on economic history.
Had he said such a thing in a seminar in the presence of Friedman (as
he no doubt did, if not at Chicago then in the annual meeting of the
Mont Pelerin Society) Milton would surely have asked, as he always
asks everyone, "How do you know?" The doubting Milton would have
stayed for an answer, a quantitative one. The great failing of the
Austrian School, which Hayek did nothing to help, was its insistence
that one form of argument, the non-quantitative, was the only good
form. (The great failing of the other schools of economics, by
contrast, is their insistence that one form of argument, the
quantitative, is the only good form.)
Hayek summarized his own intellectual life as one "discovery" and two
mere "inventions." The discovery was that a division of information is
as crucial to society as a division of labor, which suggests --
Hayekís method would allow him to say implies -- that central-plan
socialism will work badly. Planners, Hayek understood, simply can
never possess adequate information. One of the inventions was the
claim in his three-volume Law, Legislation and Liberty (1973-1979)
that certain legislative elections should be restricted to
45-year-olds and that only people who get no benefits from government
should vote. You can see that this particular academic scribbler had
no interest in political feasibility.
The other invention, more influential, was the suggestion that moneys
should compete. A government should not be able to force its citizens
to take its money. Contemporary governments, like those in Russia and
Argentina, that have adopted the American dollar and thereby have
removed their temptations to print too many rubles and pesos, are
following Hayek. Here he disagreed with Friedman, who retains a
peculiar fondness for a state monopoly of the money supply. The gold
standard worked, Hayek would say, because people wanted to do business
in gold, or its close substitute called pounds sterling, not because a
monopoly of mines had agreed to follow a rule of monetary expansion,
or because a wise Greenspan was in charge of the monopoly.
What was really important was his one "discovery," so damaging to the
rationalist project of central planning. Hayekís discovery that
information is fragmented connects his biologic with his economic
thinking: a "neuron, or buyer or seller" in a brain or in an economy
"is induced [by evolution, not by magic] to do what in the total
circumstances benefits the system...to serve the needs of which it
doesnít know anything at all." He described in an interview with Jack
High (reproduced in another good introduction to Hayek, Stephen Kresge
and Leif Wenerís edited Hayek on Hayek [1994]) how in the 1930s "my
whole thinking on this started with...joking about economists speaking
about given data." Hayek realized the term was an absurdity: "Data"
means in Latin "things given," so the phrase means "given things
given." But given to whom? Not to the central planners, certainly, but
dispersed in each individualís mind, and gatherable only by dickering
in the market.
Dickering, or as Adam Smith put it, "the propensity to truck, barter,
and exchange one thing for another" is "a necessary consequence of the
faculty of reason and of speech." Smith was vividly aware of the
faculty of speech, but nonetheless confined his system to the more
behavioral and observable and quantitative division of labor. Hayek,
who first came upon the idea (Smithís and the inklings of his own)
when attempting during the Great War to lead men in an Austrian
brigade speaking a dozen different languages, nonetheless confined his
extension of Smith to the division of information.
This is a fault. I know, for example, that I like purple dresses. You
as a dressmaker need to acquire that information if I am to be
served. Good point, and a very great obstacle to central planners, who
have no good way of getting information, as Hayek expressed it in his
famous essay of 1948, about "particular circumstances of time and
place," such as that Deirdre likes purple.
Right. But letís go all the way: Why would you want to serve me, or I
you? It is, I would claim against Friedrich Hayek and Israel Kirzner
and others of the Austrian School who have taught us so much about
alertness and information, the division of persuasion, not only of
labor and information, that runs a modern economy. "By pursuing
profit," Hayek wrote, "we are as altruistic as we can possibly be,
because we extend our concern to people who are beyond our range of
personal conception." Yes, I entirely agree, as did Smith. But if the
dressmaker merely has the "information" that I like purple, she can
ignore it unless something leads her will. Profit and the other
persuasive resources of language make her "pay attention," as we say.
Adam Smith expressed the linguistic character of market persuasion
this way: "If we should enquire into the principle in the human mind
on which this disposition to trucking is founded, it is clearly the
natural inclination every one has to persuade. The offering of a
shilling, which to us appears to have so plain and simple a meaning,
is in reality offering an argument to persuade someone to do so and so
as it is for his interest....And in this manner every one is
practicing oratory on others thro the whole of his life."
The babyís crying in a family, the instinct of workmanship at the
factory, the threat of dismissal as a housekeeper, the lure of profit
in making dresses, the offer of a shilling: These are all persuasions
to courses of action, connecting heart and hand. Without persuasion,
the theory of economics is incomplete. And so it is incomplete without
an account of language, language viewed not merely as "conveying" or
"communicating" information originally "dispersed" (in Hayekís
terminology), but language as rhetoric -- that is, as capable of
moving us to action. The socialistsí favored form of speech is an
order: "Go mine coal." The Austrian economistís favored form is an
informative statement: "I like purple." Neither of these quite do the
economic task. You can be in the right job, and know exactly what to
do. But unless the boss or the culture or the market or you yourself
in the council of your soul has exercised sweet talk on your will,
there you sit, ready to work. Enlightened, yes, but unmoved.
Completing the Austrian system in this way makes clearer that it is a
system for a free society. If something called the division of "labor"
is the sole key to economics, then the authoritarian claim to
improving the way labor is assigned sounds plausible enough. Letís
see. We will need 1,657,987 coal miners next year if we are to produce
18,987,876 metric tons of steel. Or so at least it seemed to
intellectuals in the 1930s. The socialist hope sounds much less
plausible if, as in Hayek, the key is a division of information. But
as the Hollywood Nazis say, "Vee have vays" of extracting information,
maybe, short of giving people their freedom. Or so it seemed to the
intellectuals plugging "market socialism" in the 1950s.
But if an economy depends on a division of persuasion, an ability to
exercise sweet talk with a variety of people every day, and with
people we have never met, then it is suddenly clear why personal
freedom, the dignity that comes from owning private property, and the
quantitative miracle of capitalist economic growth have pretty much
gone together.
The intellectual defenses of a new age of libertarianism need sweet
talk, a unity of word and number, story and metaphor, on the lips of
free men and women. The story of Hayekís astonishing life and work
says just that: Persuade and be free.
_Friedrich Hayek: A Biography_ is available at significant discount
from Laissez Faire Books, on the web at:
http://laissezfairebooks.com/product.cfm?op=view&pid=FA8382&aid=10097
and from Amazon books, on the web at:
http://www.amazon.com/exec/obidos/ASIN/0312233442/thefriedrhayeksc
Deirdre McCloskey teaches economics, history, and English at the
University of Illinois, and economics, philosophy, and art and
cultural studies at Erasmus University, Rotterdam. Her latest books
are _How to be Human* - *Though an Economist_ (University of Michigan,
2001), at discount from Amazon at:
http://www.amazon.com/exec/obidos/ASIN/0472067443/thefriedrhayeksc
and _Measurement and Meaning in Economics: The Essential Deirdre
McCloskey_, (Edward Elgar, 2001), available from Amazon at:
http://www.amazon.com/exec/obidos/ASIN/1852788186/thefriedrhayeksc
"Persuade and Be Free: A new road to Friedrich Hayek" By Deirdre
McCloskey. _Reason_ (Oct) 2001.
http://reason.com/0110/cr.dm.persuade.html