Friedrich August von Hayek

Lorenzo McClellan

Life

• Born in 1899 Vienna• Studied with Ludwig von Mises• Moved to London, then to Chicago and

finally to Germany.• Won the Nobel prize in 1974

Business Cycle Theory

• Hayek said “busts” were caused by badcentral bank policy.

• If the bank lowered interest rates toomuch, credit would be too easy to get.

• People would make bad businessassumptions, and the hollowness ofthese would eventually be discovered,resulting in a bust.

Hayek’s view of free marketsand government planning

• Hayek said that the problem of communismwas that knowledge is diffuse. Centralplanning assumes the planners knoweverything necessary to run society. They donot.

• Free markets allow people to each makedecisions based on their area of expertise,resulting in a “spontaneous” order.

• “The peculiar character of the problem of arational economic order is determinedprecisely by the fact that the knowledge ofcircumstances of which we must make usenever exists in concentrated or integratedform but solely as the dispersed bits ofincomplete and frequently contradictoryknowledge which all the separate individualspossess.”

• ---Hayek, The Use of Knowledge in Society

Influence

• Hayek had many followers among the newconservatives of the 1980s.

• Margaret Thatcher said his The Road toSerfdom was “what we believe.”

• Ronald Reagan appointed many Hayekiansto high office.

• George H.W. Bush gave him the presidentialmedal of freedom.

More influence

• Jimmy Wales, the founder of Wikipedia,has said that Hayek’s ideas of diffuseknowledge inspired him to create anencyclopedia anyone can edit.

Works Cited• http://freedomandwhisky.blogspot.com/1980c5.jpg (Illustration)• http://www.montpelerin.org/images/photos/friedrichVonHayek2.jpg• http://www.brisbanetimes.com.au/ffximage/2007/04/26/jimmywales55_wideweb__470x364,0.jpg• studio52contact.blogspot.com• frmarkdwhite.wordpress.com• Hayek NY Times Obit by Sylvia Nasar• Thatcher’s People by John Ranelagh• Jimmy Wales interview on Youtube• ‘The Use of Knowledge in Society,” by F.A. Hayek• Hayek biography from Mises.org, by Peter G. Klein• Hayek article on econlib.org