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Full text of "Nobel prize-winning economist oral history transcript"

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aofcai 



NOBEL PRIZE-WINNING ECONOMIST 
Friedrich A. von Hayek 



Interviewed by 
Earlene Graver, Axel Lei jonhufvud, Leo Rosten 
Jack High, James Buchanan, Robert Bork 
Thomas Hazlett, Armen A. Alchian, Robert Chitester 



Completed under the auspices 
of the 
Oral History Program_ 
University of California 
Los Angeles 



Copyright @ 19 83 
The Regents of the University of California 



This manuscript is hereby made available for research 
purposes only. All literary rights in the manuscript, 
including the right to publication, are reserved to the 
University Library of the University of California at 
Los Angeles. No part of the manuscript may be quoted 
for publication without the written permission of the 
University Librarian of the University of California 
at Los Angeles. 



FUNDING FOR THIS INTERVIEW WAS PROVIDED BY THE 
PACIFIC ACADEMY FOR ADVANCED STUDIES. 



CONTENTS 

Introduction xii 

Interview History xiv 

TAPE: GRAVER I, Side One (Tape Date Unspecified) 1 

The war years--Pos twar plans--Entering the 
university--Austrian university system-- 
Academic life in Austria--Viennese 
intellectual lif e--Viennese intellectual 
f igures--Teaching at the London School of 
Economics--Intellectual climate at the 
London School--Socialist intellectual 
currents--Intellectual influence of Ludwig 
von Mises--Economics faculty at the 
University of Vienna--Intellectual 
influence of Friedrich von Wieser--Ernst 
Mach and philosophical positivism. 

TAPE: GRAVER I, Side Two (Tape Date Unspecified) 18 

Karl Popper's critique of positivism-- 
Roman Catholicism as an intellectual 
current--Developing an interest in social 
science--Tay lorism as an intellectual 
current--General intellectual atmosphere 
at the University of Vienna--Life in New 
York City in the 1920s. 

TAPE: LEIJONHUFVUD I, Side One (Tape Date Unspecified). . 27 

Student life at the University of Vienna-- 
Differences between contemporary students 
and those in Hayek's time--Interest in 
methodology in Hayek's circle-- 
Intellectual concerns of the Geistkreis-- 
Intellectual climate of Vienna and 
Budapest--Formation of the Geistkreis-- 
Members of the Geistkreis — Topics 
discussed in the Geistkreis — Economics 
circles in Vienna--The Mises seminar-- 
The character of Mises. 

TAPE: LEIJONHUFVUD I, Side Two (Tape Date Unspecified). . 44 

Formation of intellectual interests — 
Menger's Grundsetze --The influence of 



IV 



Goethe--Austrian schools of economic 
thought--Traditional liberalism in the 
Austrian intellectual framework. 

TAPE: LEIJONHUFVUD II, Side One (November 12, 1978). . . 59 

The Road to Serf dom --Central planning, the 
welfare state, and market mechanisms-- 
Competition applied to money supply-- 
Fixed and flexible exchange rates-- 
The gold standard as a discipline on 
national monetary policy--Evolution 
within the framework of rationalist 
interventions--The three sources of 
human values--Instinct and civilization. 

TAPE: ROSTEN I, Side One (November 15, 1978) 71 

Intellectual beginnings — Intellectual 
jousts with Marxists and Freudians-- 
The controversy surrounding The Road 
to Serf dom --Socialism as reaction-- 
Cultural origins of "civilized" behavior 
— Market ethics as the basis for 
civilized society--The intellectual 
history of antimarket thought — 
Demy thologizing history — The future 
of democracy — The role of unions-- 
Popularizing libertarian principles 
— Inflation and monetarist economic 
policy. 

TAPE: ROSTEN I, Side Two (November 15, 1978) 99 

Libertarian currents in the English 
polity — The concept of equality — 
What should government provide? — 
The Soviet Union. 

TAPE: ROSTEN II, Side One (November 15, 1978) 108 

The London School of Economics years — 
The significance of Lionel Robbins to 
economics as a discipline--Twentieth- 
century English economists — The place 
of John Maynard Keynes in the history 
of economic thought--Keynes as a 
personality--National schools of 
economic thought — Joining the Committee 
on Social Thought at the University 



V 



of Chicago — Economists at the University 
of Chicago. 

TAPE: ROSTEN II, Side Two (November 15, 1978) 127 

Frank Knight and Jacob Viner-- 
Varieties of mind--The Quadrangle 
Club at the University of Chicago-- 
Political implications of economic 
problems --American neoconservatives 
--Formative intellectual influences 
--Mises's rationalist utilitarianism 
--Lifelong hostility toward 
Freudianism--Memories of Ludwig 
Wi ttgenstein--Interdepartmental 
contacts at the University of 
Chicago . 

TAPE: ROSTEN III, Side One (November 16, 1978) 143 

Contemporary American economists-- 
The usefulness of aggregates and 
statistics in economics--Prediction 
in economics--Epistemology as 
science and social science--The 
myth of "data" in economics--Early 
work in physiological psychology — 
The Institute of Trade Cycle Research 
--Distortions of the market--Good 
money and bad money--Inf lation and 
price controls--The meaning of social 
justice--Education and social order-- 
Political institutions and the 
direction of democracy. 

TAPE: ROSTEN III, Side Two (November 16, 1978) 168 

The U.S. Constitution--Material law 
versus formal law--Religion and society-- 
Market society and free society. 

TAPE: HIGH I, Side One (Tape Date Unspecified) 174 

Beginning of interest in social science 
and economics — World War I experience — 
The influence of Mises--Economic 
practice as a form of uncons tructed 
cultural evolution--Inf luence of 
twentieth-century American economists 
— Austrian economists of the 1920s and 



VI 



19 30s — The careers of Keynes and 
Hayek--Macroeconomics and econometrics 
--Trade-cycle theory--The socialist 
calculation debate--Economic planning 
--The myth of "given" data — The role 
of mathematics and statistics in 
economics . 

TAPE: HIGH I, Side Two (Tape Date Unpsecified) 190 

Capital theory--Limits of economic 
"science" — The Austrian and English 
traditions--Contemporary trends in 
economic though t--From economics to 
social philosophy--Micro and macro 
paradigms--The pitfalls of unlimited 
democracy- -Reconstituting government 
— The influence of John Stuart Mill — 
The Nobel Prize. 

TAPE: BUCHANAN I, Side One (October 28, 1978) 206 

Limits on government--Perils of 
unlimited democracy--Af fecting 
current attitudes--Government 
taxation--Def initions of law-- 
The function of constitutions — 
Social justice--Trade unionism — 
Correcting inf lation--From economics 
to political philosophy--The origins 
of The Road to Serfdom — The 
Constitution of Liberty and Law, 
Legislation and Liberty --Natural 
selection of social order. 

TAPE: BUCHANAN I, Side Two (October 28, 1978) 234 

Conservatism versus classical liberalism 
--The work of Karl Popper. 

TAPE: BUCHANAN II, Side One (October 28, 1978) 238 

Psychoanalytic theory and society-- 
Education and the transmission 
of social values--The Austrian 
tradition in economics--Intellectual 
styles--Hayek 's intellectual influence 
--The socialist calculation debate — 
Remembrances of Ludwig Wi ttgenstein-- 
Sensory order and pattern prediction-- 



VI 1 



The limits of knowledge in economics 
— The Committee on Social Thought at 
the University of Chicago. 

TAPE: BUCHANAN II, Side Two (October 28, 1978) 263 

Cross-departmental contacts in higher 
education--The persistence of Marxism 
--German universities. 

TAPE: BORK I, Side One (November 4, 1978) 269 

Law as a paradigm of institutional 
evolution--Vienna in the twenties and 
and thirties--Intellectual influences 
— Prices as a form of dispersed knowledge 
— The threat to liberty--Nazism as 
socialism--Permissive education and 
social values--Constructivist rationalism 
versus evolutionary rationalism--The 
emotional burden of a market society-- 
Evolutionary law and freedom--The 
origin of capitalism--The origin of 
social instincts--Law and legislation. 

TAPE: BORK I, Side Two (November 4, 19 78) 29 3 

Recasting democratic representation 
--Discriminatory law and free society 
--Income redistribution as a form 
of coercive law--Egali tarianism as a 
form of rationalist constructivism 
--The function of inequality. 

TAPE: BORK II, Side One (Tape Date Unspecified) 301 

Intellectuals and their "class" 
interes ts--Science and the 
unintelligible--Generality in 
law — Constitutional reconstruction 
— The function of prices--Property 
and freedom--The concept of social 
justice--The nature of social 
organization under feudalism-- 
Free-market economy as the foundation 
for a free society — The meaning of 
justice--The proper task of judges 
and legislators — Consistency in law. 



Vlll 



TAPE; 



BORK II, Side Two (Tape Date Unspecified) 330 



Constitutions as organizers of 
principle or arbiters of conduct. 

TAPE: BORK III, Side One (Tape Date Unspecified). ... 331 

Principles of constitutional 
organization- -Influencing political 
opinion--Reimposing limits on 
governmental power. 

TAPE: HAZLETT I, Side One (November 12, 1978) 336 

Spontaneous order--The evolution of 
Roman private law--The U.S. Constitution 
--The reemergence of classical 
liberalism--Af f irmative action as a form 
of discrimination--Freedom versus 
equa 1 i ty--S pe ci a 1- interest democracy 
— Separation of legislative functions. 

TAPE: HAZLETT I, Side Two (November 12, 1978) 347 

"Material" law versus "formal" law 
--Evolution through design--Value 
versus merit--Solzheni tsyn ' s critique 
of Western society — Contemporary 
intellectual currents--Choices in 
contemporary politics — The rediscovery 
of Hayek's thought. 

TAPE: ALCHIAN I, Side One (November 11, 1978) 362 

Pupils of Hayek--The joint seminar 
with Lionel Robbins at the London 
School of Economics--Visiting New 
York in the 1920s--The "Prices and 
Production" lectures at the London 
School of Economics — Hayek's writing 
habits--The meaning of prices — 
Prediction in economics. 

TAPE: ALCHIAN I, Side Two (November 11, 19 78) 389 

The future of liberal principles — 
Government and inf lation--Economis t 
William Hutt — Personal episodes of 
moral dilemma — Hayek's children. 



IX 



TAPE: ALCHIAN II, Side One (November 11, 1978) 397 

Personal lobbies--First contact with 
Adam Smith--Early influences in economics 
— Intellectual life in early twentieth- 
century Vienna--Issues in economics in 
the 1920s and 19 30s--Hayek ' s complete 
works--Capital theory — Personal work 
habits . 

TAPE: ALCHIAN II, Side Two (November 11, 1978) 417 

Self-evaluation of works--Intellectual 
debates--Intellectual origins of The 
Road to Serf dom --Intellectual watershed 
--The origins of an innovative idea — 
The Ricardo effect. 

TAPE: CHITESTER I, Side One (Tape Date Unspecified). . . 430 

Characteristics of contemporary 
American culture--The proliferation 
of current information in American 
society--World War I as a historical 
watershed--Revolution against traditional 
morals--Rapidi ty of change in contemporary 
American society--The role of intellectuals 
in society--American influence worldwide — 
Fluctuations in Hayek's popularity-- 
Controversy surrounding The Road to 
Serf dom -- Culture and temperament. 

TAPE: CHITESTER I, Side Two (Tape Date Unspecified). . . 448 

Socialism in Great Britain-- 
Psychoanalysis and society--The 
natural, the artificial, and the 
cultural--Freedom as a product of 
cultural restraints--The function 
of law and morals in culture-- 
Perceptions of the United States. 

TAPE: CHITESTER II, Side One (Tape Date Unspecified). . 461 

Tobacco use--The excitement of creativity 
— Enjoyment in work--Instincts and 
civilization — Intellectual threats to 
civilization--Early intellectual 
interests . 



TAPE: CHITESTER II, Side Two (Tape Date Un; .). . 

Accomplishment and recognition-- 
Economists and government-- 
Intermediaries between the scholar 
and the public — Intellectual 
incompatibilities — Religion as the 
inscrutable — The importance of 
honesty in civilized society. 

Index 454 



ERRATUM: There is no page 268 



XI 



INTRODUCTION 

The idea of capturing visually and orally the person- 
ality of Friedrich von Hayek, 1974 Nobel laureate, was so 
attractive that when the Earhart Foundation agreed to 
fund such an arrangement, the Pacific Academy for Advanced 
Studies was proud to undertake the pleasant task. No 
attempt was made in these interviews to restate or review 
Hayek's staggering intellectual accomplishments or his 
influence on contemporary understanding of social, political, 
and economic events. Nor is this introduction the place 
to recount them. Either you know of the man's contribu- 
tions or you do not. If the latter is true, then I suggest 
you read some of his books, the most popular lay book being 
The Road to Serfdom . 

A series of conversations with Hayek was conducted 
in a television studio. This volume provides an edited 
transcript of those conversations. An integral part of 
Hayek's recorded oral history, indeed the most interesting, 
are the videotapes. Seeing the man gives a reliable picture 
of his personality and traits: calm, imperturbable, sys- 
tematic, questioning, uncompromising, explicit, and relaxed. 
It is the personality of the man that was sought, and the 
video and audio record helps capture it faithfully. 

The economist has only to grieve that similar tapes 
do not exist for Adam Smith or David Ricardo. What a treat 



Xll 



if one could see such a record of those men, a treat such 
as is here made available to future generations. .Inciden- 
tally, it was and still is the hope of the Pacific Academy 
for Advanced Studies to obtain such interviews with all the 
Nobel laureates in economics — or at least all except those 
two who have experienced the inevitable. As for many 
desirable things, the costs are still insurmountable. 

So, here is the man, alive and influential, whether 
this be read in 1984 or in the inscrutable future years 
of 2034, 2084, or, hope of hopes, 2984. Here are represented 
the visions and beliefs of a group of people in 1978. See 
and hear their manner of expression, their subtle prejudices 
and misconceptions, fully apparent only to people a century 
from now. Perhaps we in 19 83 will be envied, perhaps we 
will evoke sympathy. Whatever it may be, if not both, here 
is the personality, appearance, and style of Friedrich von 
Hayek, a man for all generations, who believes mightily in 
the freedom of the individual, convinced that the open, 
competitive survival of diffused, decentralized ideas and 
spontaneous organizations, customs, and procedures in a 
capitalist, private-property system is preferable to 
consciously rational-directed systems of organizing the 
human cosmos — a judgment that distant future viewers and 
readers may more acutely assess. 



— Armen A. Alchian 
May 1983 



Xlll 



INTERVIEW HISTORY 



INTERVIEWER: Armen A. Alchian, Earlene Graver, 
Axel Lei jonhufvud, Thomas Hazlett, Jack High, 
Department of Economics, UCLA; Robert Bork , Yale 
University Law School; James Buchanan, Center for the 
Study of Public Choice, Virginia Polytechnic Insti- 
tute; Robert Chitester, president, Public Broad- 
casting of Northwestern Pennsylvania; Leo Rosten, 
author. New York City. 

TIME AND SETTING OF INTERVIEW: 

Place : Studios of station KTEH , Channel 54, in San 
Jose, California. 

Dates : October 28, November 4, 11, 12, 1978. 

Time of day, length of sessions, and total number of 
recording hours ; Sessions were conducted between 
10 a.m. and 2 p.m., with a short break for lunch. 
Time allotted to the individual interviewers varied, 
so that in a single four-hour session Professor 
Hayek sometimes spoke sequentially with more 
than one interviewer. A total of fifteen and one- 
quarter hours of conversation was recorded. All 
sessions were videotaped. 

Persons present during interview : Hayek and the 
interviewer. In addition, Alchian and/or Leijonhufvud 
attended each session. 

CONDUCT OF THE INTERVIEW: 

This series of oral history interviews was organized 
by Alchian and Leijonhufvud and was prompted by 
Hayek's visit to the Hoover Institution at Stanford 
University in the fall of 1978. Some of the inter- 
viewers were selected because they knew and had worked 
with Hayek; others were chosen because they were 
familiar with and interested in his work. Each inter- 
viewer was assigned a particular area of discussion 
from Hayek's life and work. Some interviews were 
primarily biographical; some were primarily topical. 

After the interviews were completed, Alchian and 
Leijonhufvud initiated discussions with the Pacific 
Academy for Advanced Studies, which agreed to finance 
the processing of the interviews through the UCLA Oral 
History Program. 



XIV 



EDITING: 

Editing was done by Rick Harmon, editor, Oral History 
Program. He checked the verbatim transcript against 
the original tape recordings, provided paragraphing 
and punctuation, and verified proper nouns. Words 
and phrases inserted by the editor have been 
bracketed. The final manuscript of the individual 
interviews remains in the same order as the original 
tape material, but the sequence of the interviews 
was rearranged in order to group together interviews 
that focused on similar issues. 

Graver reviewed and approved the edited transcript. 
Hayek responded to a list of questions about the 
editing of the transcript prepared by Harmon and 
sent to him at the University of Freiburg in West 
Germany . 

The index and table of contents were prepared by 
Harmon. 



XV 



TAPE: CRAVER I, SIDE ONE 
TAPE DATE UNSPECIFIED 

CRAVER: Professor Hayek, when you returned to Vienna 
after the war in 1918, what sorts of opportunities were 
there for a young man of talent, or a young man who 
thought he had talent? 

HAYEK: Well, immediately it was absolutely uncertain, 
you know. The world changed--the great collapse of the 
old Austrian Empire. I hadn't any idea (what to do] ; 
so for the time being I just went on with what I had 
decided upon in the year-- Well, it was almost two years 
I spent in the army making plans for the future, but even 
these were upset. It's a very complicated story. I 
had decided to enter the diplomatic academy, but for a very 
peculiar reason. VJe all felt the war would go on indef- 
initely, and I wanted to get out of the army, but I didn't 
want to be a coward. So I decided, in the end, to volun- 
teer for the air force in order to prove that I wasn't a 
coward. But it gave me the opportunity to study for what 
I expected to be the entrance examination for the diplomatic 
academy, and if I had lived through six months as an air 
fighter, I thought I would be entitled to clear out. 
Now, all that collapsed because of the end of the war. 
[tape recorder turned off] In fact, I got as far as having 
my orders to join the flying school, which I never did in 



the end. And of course Hungary collapsed, the diplomatic 
academy disappeared, and the motivation, which had been 
really to get honorably out of the fighting, lapsed. 
[laughter] 

But I had more or less planned, in this connection, 
to combine law and economics as part of my career. I 
imagined it would be a diplomatic career, really. So 
I came to the university with only a general idea of what 
my career would be. My interests, even from the beginning, 
were-- My reading was largely philosophical — well, not 
philosophical; it was method of science. You see, I had 
shifted from the wholly biological approach to the social 
field, in the vital sense, and I was searching for the 
scientific character of the approach to the social 
sciences. And I think my career, my development, during 
those three years exactly at the university was in no way 
governed by thoughts about my future career, except, of 
course, that tradition in our family made us feel that 
a university professor was the sum of achievement, the 
maximum you could hope for, but even that wasn't very 
likely. It reminds me that my closest friend predicted 
that I would end as a senior official in one of the 

ministries . 

GRAVER: It's sometimes hard for Americans-- Maybe after 

1974 it's not so hard for an American student with a 



doctorate to realize how difficult it can be to get a 
university post. But still, it's hard for us to realize 
how hard it was. I think it would be helpful if you 
could tell us exactly, if you had hopes of an academic 
career, how likely it was to realize it. 
HAYEK: Yes, but it would never have been an academic 
career from the beginning in the then Austrian conditions, 
unless you were in one of the experimental fields where 
you could get a paid assistantship . Until you got a 
professorship you could not live on the income from an 
academic career, you see. The aim would be to get what I 
best describe as a license to lecture as a so-called 
Privatdozent . This allowed one to lecture but practically 
to earn no money. When I finally achieved it, what I got 
from student fees just served to pay my taxi, which I had 
to take once a week from my office to give a lecture at the 
university. That's all I got from the university. 

So outside the exact sciences there was, in a sense, 
no academic career. You had to find an occupation outside 
which enabled you to devote enough time to your work. And, 
in fact, the whole crowd of my friends in the social sciences, 
law and so on, were all people who were earning their 
incomes elsewhere and aiming at a Privatdozent position. 
Then even for years you would continue, at the same time, 
to have a bread-earning occupation and on the side do 



academic work. That was particularly marked in Vienna 
because you had this large intellectual Jewish community, 
most of whom couldn't really hope to get a university post. 
So in this circle in which I lived, my closest friends 
were either practicing lawyers-- The philosopher and 
mathematician was the director of the Anglo-Persian Oil 
Company in Vienna; another one, a sociologist, was the 
secretary of one of the banking associations; one or 
two were actually in some low civil service positions. 
But among my friends, I don't think a single one, up to 
their middle thirties or later thirties, could live on 
this income from an academic position. Even if you 
acquired the lectures, you see, it didn't mean you could 
live on that. You lived on something, some other income, 
which may have been completely unconnected with academic 
activities. So even if you ultimately aimed at a profes- 
sorship, your immediate concern was to find something 
else which you could combine with academic activities. 

What I finally got was by pure accident, I think. I 
did not expect it to the very last moment. That was a job 
in a newly created government office, and it was compara- 
tively well paid because it required a combination of 
law, economics, and languages, which was rather rare. 
This gave me, for the first five years, a comparatively 
well-paid position in Vienna. 



CRAVER: Could there be roadblocks even in getting 
accepted as a Privatdozent ? 

HAYEK: Oh, yes, of course. You were very much dependent 
on the sympathy, or otherwise, of the professor in charge. 
You had to find what was called a Habilitations-Vater , 
a man who would sponsor you. And if you didn't happen to 
agree with the professor in charge, and there were 
usually only two or three — in fact, even in a big subject 
like economics, there were only two or three professors — 
unless one of them liked you, well there was just no 
possibility. 

CRAVER: I thought it might be useful if you gave the names 
of some rather famous men who were at the university and 
who never were anything more than Privatdozent s , not only 
in economics but in other fields. 

HAYEK: Well, in law it wouldn't mean anything because 
they weren't very eminent. But Heinrich Gomperz, a 
philosopher, for example, is a clear instance. Though 
[Ludwig von] Mises, my teacher, had such a good position 
that I do\±>t whether he would have wished to start at a 
lower level, even for an extraordinary professor, it was 
a great chagrin to him that [a chair] was never offered to 
him. But again, the medical faculty was full of such men 
who had academic ambitions, who did little teaching at 
the university, but who made their incomes as practicing 



doctors. There were even one or two distinguished mathe- 
maticians, whose names I do not know, who partly because 
of a shortage of positions, partly because of anti- 
Jewish prejudice, were part and then not part of the 
university. 

I mean this really created, to a large extent, a 
peculiar intellectual atmosphere in Vienna that was not 
confined to the people who were actually inside the univer- 
sity. So many people had just a foot in the university, 
which meant there was a large intellectual audience to 
whom you could speak who were not solely or mainly profes- 
sors but who gave you an audience of general interest, 
which I don't think was of the same character an^^where 
else. I emphasized the anti-Semitism as one of the 
causes, but it wasn't only that. The tradition that you 
might do scholarly work on the side with a practical 
occupation became quite general, perhaps because of the 
example of the people who were kept out. But there were 
any number of people who in other countries might have 
been private scholars with a private income, but there 
were very few wealthy people of that kind who could 
[manage it in Austria] --or were allowed to. There v.'ere 
mostly people who had decided to earn their living outside 
of the university, and yet to pursue their scholarly 
interests in addition. 



GRAVER: So this gave Vienna a very lively intellectual 
life, and much of that was going on outside the university? 
HAYEK: Outside and in little circles. You probably 
wouldn't be aware that there was such a large community, 
because it never met as a whole. And there were also 
scientific societies and discussion clubs, but even they 
were in a cruel way split up, and that again was connected 
with what you might call the race problem, the anti- 
Semitism. There was a purely non-Jewish group; there was 
an almost purely Jewish group; and there was a small inter- 
mediate group where the two groups mixed. And that split 
up the society. 

On the other hand, I have only recently become aware 
that the leading people were really a very small group 
of people who somehow were connected with each other. It 
was only a short while ago, when somebody like you 
inquired about whom I knew among the famous people of 
Vienna, that I began to go through the list, and I found 
I knew almost every one of them personally. And with most 
of them I was somehow connected by friendship or family 
relations and so on. I think the discussion began, "Did 
you know [Erwin] Schrodinger?" "Oh, yes, of course; 
Schrodinger was the son of a colleague of my father's and 
came as a young man in our house." Or, ("Did you know Karl 
von] Frisch, the bee Frisch?" "Oh, yes, he was the 



I 



youngest of a group of friends of my father's; so we 
knew the family quite well." Or, ["Did you know Konrad) 
Lorenz?" "Oh, yes, I know the whole family. I've seen 
Lorenz watching ducks when he was three years old." And 
so it went on. [laughter] Every one of the people who 
are now famous, except, again, the purely Jewish ones-- 
Freud and his circle I never had any contact with. They 
were a different world. 

GRAVER: But you had this intermediate group who were Jewish 
or who were part Jewish? 

HAYEK: One did always hear what happened to them, but we 
didn't know the people personally. 

GRAVER: Yes. I certainly got this impression from reading 
Karl Popper, also, of how small the group was, and how — I 
don't know if he was the one who mentioned it--how [Anton] 
Bruckner, for example, might be playing the piano for 
someone else who was a philosopher. 

HAYEK: Oh, yes. Again, you see, there were bridges. The 
Wittgensteins had a great musical salon. Now, see, the 
Wittgensteins themselves were three-quarters Jewish, but 
Ludwig Wittgenstein's grandmother was the sister of my 
great grandfather; so we were again related. I personally 
was too young. You see, the Wittgenstein salon ended with 
the outbreak of war. Both the old men had died, and after 
the breakdown it never reassembled. But that was one of 



the centers where art and science met in a very wealthy 
background and, again, was one of the bridges between 
the two societies. 

GRAVER: When you were a young man at this time, let's say 
about when you were finishing your degree in economics in 
the faculty of law, which is how it was organized, what 
were your dreams? your fantasies of what you might do with 
your career? 

HAYEK: Well, at that time I really wanted a job in which 
I could do scientific work on the side. That was the main 
problem. It was a little later that I formed an idea. 
I made a joke to my first wife, I think just before we 
married, that if I could plan my life I would like to begin 
as a professor of economics in London, which was the center 
of economics. I would do this for ten or fifteen years, 
and then return to Austria as president of the national 
bank, and ultimately go back to London as the Austrian ambas- 
sador. A most unlikely thing happened that I got the 
professorship in London, which I thought was absolutely a 
wish-dream of an unlikely nature. Even the second step-- 
Not at the time but forty years later, I was once negoti- 
ating a possible presidency of the Austrian National Bank, 
[laughter] 

GRAVER: You were? [laughter] 
HAYEK: It did not come off. 



GRAVER: This means you were an Anglophile early. What 
made you an Anglophile, do you think? 

HAYEK: Why it was as early as that, I really can't say. 
Once I got to England, it was just a temperamental simi- 
larity. I felt at home among the English because of a 
similar temperament. This, of course, is not a general 
feeling, but I think most Austrians I know who have lived 
in England are acclimatized extraordinarily easily. There 
must be some similarity of traditions, because I don't 
easily adapt to other countries. I had been in America before 
I ever came to England, I was here as a graduate student 
in '23 and '24, and although I found it extremely stimula- 
ting and even knew I could have started on in an assistant- 
ship or something for an economic career, I didn't want 
to. I still was too much a European and didn't the least 
feel that I belonged to this society. But at the moment 
I arrived in England, I belonged to it. 

GRAVER: Let's see, we talked a little bit about Vienna 
and the circles and the intellectual life outside the 
university. Did England, when you went there, have more 
of that than what you saw when you were in the United States? 
HAYEK: Yes, yes, it had more. It wasn't quite the same. 
I might have had more if I had gone to one of the old 
universities or even one of the specialized colleges of 
the University of London. The London School of Economics, 



10 



which first was an attraction to me, was extremely good 
in the social sciences, but it was completely specialized 
to social sciences. While, at first, moving among very 
good people in my field was very attractive, I admit that 
at the end of twenty years I longed to get back to a general 
university atmosphere, which the London School of Economics 
is not. It is very much a specialized school, where you 
spend all your time among other social scientists and see 
nobody else. 

CRAVER: Many young men of your generation have been 
socialists when they were young, or at least social 
democrats. Had you been influenced at one time by this 
atmosphere? 

HAYEK: Oh, yes, very much so. I never was a social 
democrat formally, but I would have been what in England 
would be described as a Fabian socialist. I was especially 
inf luenced--in fact the influence very much contributed 
to my interest in economics--by the writings of a man 
called Walter Rathenau, who was an industrialist and later 
a statesman and finally a politician in Germany, who 
wrote extremely well. He was Rohstof f diktator in Germany 
during the war, and he had become an enthusiastic planner. 
And I think his ideas about how to reorganize the economy 
were probably the beginning of my interest in economics. 
And they were very definitely mildly socialist. 



11 



Perhaps I should say I found a neutral judge. 
That's what made me interested in economics. I mpan, 
how realistic were these socialist plans which were found 
very attractive? So there was a great deal of socialist 
inclination which led me to-- I never was captured by 
Marxist socialism. On the contrary, when I encountered 
socialism in its Marxist, frightfully doctrinaire form, 
and the Vienna socialists, Marxists, were more doctrinaire 
than most other places, it only repelled me. But of the 
mild kind, I think German Sozialpoli tik , state socialism 
of the Rathenau type, was one of the inducements which led 
me to the study of economics. 

CRAVER: I've talked to a number of people who went 
through the University of Vienna in this period, and a num- 
ber of them have spoken--in fact, some from the German 
universities also--have spoken of the influential role, 
once they were studying economics, of Mises's-- I think 
it's a 1919 article on the problems of economic calculation, 
HAYEK: I think it was 1920. 

CRAVER: I'm sorry. [laughter] You would know better 
than I. 

HAYEK: He wrote that article and then particularly a book. 
Die Gemeinwirtschaft , Untersuchungen liber den Sozialismus , 
which had the decisive influence of curing us, although it 
was a very long struggle. At first we all felt he was 



12 



frightfully exaggerating and even offensive in tone. You 
see, he hurt all our deepest feelings, but gradually he 
won us around, although for a long time I had to-- I just 
learned he was usually right in his conclusions, but I 
was not completely satisfied with his argument. That, 
I think, followed me right through my life. I was always 
influenced by Mises's answers, but not fully satisfied 
by his arguments. It became very largely an attempt to 
improve the argument, which I realized led to correct 
conclusions. But the question of why it hadn't persuaded 
most other people became important to me; so I became 
anxious to put it in a more effective form. 
GRAVER: I'd like to move into maybe a slightly different 
area, but it still pertains to this. In the economics 
faculty, prior to the First World War, it had had a grand 
reputation that started with [Karl] Menger, and then there 
was [Friedrich von] Wieser and [Eugen von] Bohm-Bawerk. 
Now when you came into economics after the First World 
War, what was the situation at that time? 
HAYEK: At first it was dreadful, but only for a year. 
There was nobody there. Wieser had left the university to 
become a minister in the last Austrian government; Bohm- 
Bawerk had died shortly before; [Eugen von] Philippovich , 
another great figure, had died shortly before; and when I 
arrived there was nobody but a socialist economic historian. 



13 



Then Wieser came back, and he became my teacher. 
He was a most impressive teacher, a very distinguished 
man whom I came to admire very much, I think it's the 
only instance where, as very young men do, I fell for a 
particular teacher. He was the great admired figure, 
sort of a grandfather figure of the two generations between 
us. He was a very kindly man who usually, I would say, 
floated high above the students as a sort of God, but 
when he took an interest in a student, he became extremely 
helpful and kind. He took me into his family; I was 
asked to take meals with him and so on. So he was for a 
long time my ideal in the field, from whom I got my main 
general introduction to economics. 

CRAVER: How did he take notice of you? How did that happen? 
HAYEK: I first flattered myself that [it was because] I 
had gone up to him once or twice after the lecture to ask 
intelligent questions, but later I began to wonder whether 
it was more the fact that he knew I was against some of 
his closest friends. [laughter] 

CRAVER: I know that there were three chairs at the univer- 
sity, and Wieser retired at what time? 

HAYEK: Well, I'm afraid Wieser was responsible for rather 
poor appointments. The first one was Othmar Spann , a very 
curious mind, an original mind, himself originally still a 
pupil of Menger's. But he was a very emotional person who 



14 



moved from an extreme socialist position to an extreme 
nationalist position and ended up as a devout Roman 
Catholic, always with rather fantastic philosophical 
ideas. He soon ceased to be interested in technical 
economics and was developing what he called a universalist 
social philosophy. But he, being a young and enthusiastic 
man, for a very short time had a constant influence on all 
these young people. Well, he was resorting to taking us 
to a midsummer celebration up in the woods, where we jumped 
over fires and — It's so funny [laughter], but it didn't 
last long, because we soon discovered that he really didn't 
have anything to tell us about economics. 

As long as I was there, there were really only these 
two professorships, and of course when Wieser retired, 
which happened in the year when I finished my first degree, 
he was succeeded by Hans Meyer, his favorite disciple. An 
extremely thoughtful man, but a bad neurotic. [He was] a 
man who could never do anything on time, who was always late 
for any appointment, for every lecture, who never completed 
things he was working on, and in a way a tragic figure, a 
man who had been very promising. Perhaps it's unjust to 
blame Wieser for appointing him because everybody thought 
a great deal would come from him. And probably there is still 
more in his very fragmentary work than is appreciated, but 
one of his defects was that he worked so intensely on the 



15 



most fundamental, basic problems—utility and value-- there 
was never time for anything else in economics. So he 
was, in a sense, a narrow figure. 

The third profesorship was only filled a year or 
two after I had left. The man, Count [Ferdinand) Degenfeld- 
[Schonburg] , played a certain role when I finally got my 
Privatdozenteur , but I never had any contact with him 
otherwise. There were a few Privatdozent s , or men with the 
title of professor like Mises, but my contact with him was 
entirely outside the university. No, the faculty, except 
for Wieser, as a person, as an individual, was not very 
distinguished in economics, really. It was a great 
tradition, which Wieser kept up, but except for him the 
economics part of the university was not very distinguished. 
GRAVER: When I look at this period, a lot of people--this 
is true also before the war and for those who were young 
men after the war--often describe themselves as positivists 
or antipositivists , and I have difficulty in knowing what 
positivism actually meant at that time. 

HAYEK: Well, it was almost entirely the influence of Ernst 
Mach, the physicist, and his disciples. He was the most 
influential figure philosophically. At that time, apart 
from what I had been reading before I joined the army, I 
think my introduction to what I now almost hesitate to call 
philosophy--scientific method, I think, is a better 



16 



description--was to Machian philosophy. It was very good 
on the history of science generally, and it domin-ated 
discussion in Vienna. For instance, Joseph Schumpeter 
had fully fallen for Mach, and when-- While I was still 
at the university, this very interesting figure, Moritz 
Schlick, became one of the professors of philosophy. 
It was the beginning of the Vienna Circle, of which I 
was, of course, never a member but whose members were in 
close contact with us. [There was] one man who was 
supposedly a member of our particular circle, the Geistkreis, 
and also the Schlick circle, the Vienna Circle proper, and 
so we were currently informed of what was happening there. 
[tape recorder turned off] 

Well, what converted me is that the social scientists, 
the science specialists in the tradition of Otto Neurath, 
just were so extreme and so naive on economics that it 
was through [Neurath] that I became aware that positivism 
was just as misleading as the social sciences. I owe it 
to his extreme position that I soon recognized it wouldn't 
do. 



17 



TAPE: CRAVER I, SIDE TWO 
TAPE DATE UNSPECIFIED 

HAYEK: And it took me a long time, really, to emancipate 
myself from it. It was only after I had left Vienna, 
in London, that I began to think systematically on problems 
of methodology in the social sciences, and I began to 
recognize that positivism in that field was definitely 
misleading . 

In a discussion I had on a visit to Vienna from London 
with my friend [Gottfried] Haberler, I explained to him that 
I had come to the conclusion that all this Machian positivism 
was no good for our purposes. Then he countered, "Oh, 
there's a very good new book that came out in the circle of 
Vienna positivists by a man called Karl Popper on the logic 
of scientific research." So I became one of the early 
readers. It had just come out a few weeks before. I found 
that Haberler had been rather mistaken by the setting in 
which the book had appeared. While it came formally out of 
that circle, it was really an attack on that system, 
[laughter] And to me it was so satisfactory because it 
confirmed this certain view I had already formed due to 
an experience very similar to Karl Popper's. Karl Popper 
is four or five years my junior; so we did not belong to 
the same academic generation. But our environment in 
which we formed our ideas was very much the same. It was 



18 



very largely dominated by discussion, on the one hand, 
with Marxists and, on the other hand, with Freudians. 

Both these groups had one very irritating attribute: 
they insisted that their theories were, in principle, 
irrefutable. Their system was so built up that there 
was no possibility-- I remember particularly one occasion 
when I suddenly began to see how ridiculous it all was 
when I was arguing with Freudians, and they explained, 
"Oh, well, this is due to the death instinct." And I said, 
"But this can't be due to the [death instinct]." "Oh, 
then this is due to the life instinct." [laughter] Well, 
if you have these two alternatives, of course there's no 
way of checking whether the theory is true or not. And 
that led me, already, to the understanding of what became 
Popper's main systematic point: that the test of empirical 
science was that it could be refuted, and that any system 
which claimed that it was irrefutable was by definition not 
scientific. I was not a trained philosopher; I didn't 
elaborate this. It was sufficient for me to have recognized 
this, but when I found this thing explicitly argued and 
justified in Popper, I just accepted the Popperian phi- 
losophy for spelling out what I had always felt. 

Ever since, I have been moving with Popper. We became 
ultimately very close friends, although we had not known 
each other in Vienna. And to a very large extent I have 



19 



agreed with him, although not always immediately. Popper 
has had his own interesting developments, but on -the whole 
I agree with him more than with anybody else on philosophical 
matters . 

GRAVER: Do you think you reacted to this kind of dogmatism 
also because of your rejection of this form of dogmatism 
in the church, in the Roman Catholic church? 
HAYEK: Possibly, although I had so completely overcome 
[church dogma] by that time that it really never — You see, 
that goes back so far in my family. If you have a grand- 
father who's an enthusiastic Darwinian; a father who is also 
a biologist; a maternal grandfather who evidently only 
believed in statistics, though he never spoke about it; and 
one grandmother who was very devoted to the ceremonial 
[aspects] of the Catholic church but was evidently not 
really interested in the purely literal aspect of it-- And 
then I was very young--! must have been thirteen or fourteen-- 
when I began pestering all the priests I knew to explain 
to me what they meant by the word God . None of them could, 
[laughter] That was the end of it for me. 

GRAVER: Was this true of most of the intellectuals in these 
circles we were talking about--that they weren't people 
who had rebelled, let's say, against Roman Catholicism, but 
they came from families who had a sort of enlightened back- 
ground? 



20 



HAYEK: Yes, it was predominantly true. It was very 
rare in this circle to find anybody who had any definite 
religious beliefs. In fact, there was, I think, in 
university circles a very small minority who by having 
these beliefs almost isolated themselves from the rest. 
GRAVER: Can you say more about your initial interest in the 
social sciences? 

HAYEK: I remember the very specific occasion, which must 
have been a few weeks before I joined the army, when we had 
a class in the elements of philosophy — logic and philosoph- 
ical propaedeutic, it was called — and he gave us a sort 
of survey of the history of philosophy. [The teacher] was 
speaking about Aristotle and explained to us that Aristotle 
defined ethics as consisting of three parts: I believe 
it was morals, politics, and economics. When I heard this 
[my response was], "Well these are the things I want to 
study." It had a comic aftereffect when I went home and 
told my father, "I know what I'm going to study. I'm going 
to study ethics." He was absolutely shocked. [laughter] 
And it had a curious aftereffect. A few days later he 
brought me three volumes of the philosopher Ludwig 
Feuerbach, which he had seen in the shop window of a second- 
hand bookseller. Feuerbach was, of course, at that time 
a hard-line positivist of a rather crude kind. This was 
in order to cure me of my interest in ethics. Well, I 



21 



think the real effect was that an attempt to read this book 
gave me a very definite distaste for philosophy for some 
time. 

But, of course, what I had meant by ethics wasn't at 
all what my father understood when I mentioned the term. 
But it does mean that as early as probably late 1916, 
when I was seventeen, I was clear that my main interests 
were in the social sciences, and the transition must have 
come fairly quickly. I do remember roughly that until 
fifteen or so I was purely interested in biology, originally 
what my father did systematically. He was mainly a plant 
geographer, which is now ecology, but the taxonomic part 
soon did not satisfy me. At one stage, when my father 
discovered this, he put a little too early in my hand what 
was then a major treatise on the theory of evolution, some- 
thing called Deszendenz-theorie . I believe it was by 
[August] Weismann. I think it was just a bit too early. 
At fourteen or fifteen I was not yet ready to follow a 
sustained theoretical argument. If he had given me this a 
year later, I probably would have stuck with biology. 
The things did interest me intensely. 

But, in fact, my interests very rapidly moved, 
then, to some extent already toward evolution, and for a 
while I played with paleontology. We had in our circle 
of friends a very distinguished paleontologist; in fact. 



22 



two: an ordinary one (D. Abel) and an insect paleonto- 
logist (Handlirsch) . Then somehow I got interested in 
psychiatry, and it seems that it was through psychiatry that 
I somehow got to the problems of political order. One of 
my great desires had been to get a very expensive volume 
which described, as it were, the organizations of public 
life. I wanted to learn how society was organized. I 
remember — I have never read it--it contained chapters on 
government and one on the press and about information. 

So then I turned to certain practical aspects of 
social life. If I may add, in general, up to my student 
days at the university, my tendencies were very definitely 
practical. I wanted to be efficient. My ideal, for a long 
time, was that of a fireman's horse. I once did see how, 
before the time of the automobile, the fire equipment was — 
The horse was standing in its stable ready to be put on the 
carriage with everything hanging over it; so it required 
only two or three pressings of buttons and the horse was 
finished to go out. So I felt, "I must be like that, 
ready for every possibility in life, and be very efficient." 
Just as in the area of sports--mountaineering, climbing, 
skiing, cycling, photography — I was for a time extremely 
interested in technical efficiency of this kind, something 
which I completely lost in my later life. 
GRAVER: Did you read [Frederick] Taylor? Was the American 



23 



Taylor being read in your circles at all? 

HAYEK: Well, yes, there was a stage in which I v^s reading 
all the Taylor stuff, but that was a little later. I think 
it was at the beginning of my economics reading, but that 
was the time of the great fashion of Taylorism. But I 
had this passion for understanding all sorts of functioning 
in the organization of complicated phenomena, and I mention 
this because nowadays all my friends think I'm completely 
indifferent to technical things. I am no longer really 
interested, but I had a great passion for that at one time. 
GRAVER: I think when you were still at the university you would 
go over to lectures sometimes. Was it in psychiatry, or in 
the biology department? 

HAYEK: In anatomy. It was largely in connection with my 
then-growing interest in physiological psychology. I had 
easy access. My brother was studying in the anatomy depart- 
ment; so I just gate-crashed into lectures occasionally and 
even in the dissecting room. 

GRAVER: Was it common for students at that time to gate- 
crash in lectures in another discipline outside of their 
own specialization? 

HAYEK: Oh, very common, yes. That part of the students 
who were really very intellectually interested was substantial. 
But, of course, if you take a faculty like law--I suppose the 
law faculty in Vienna in my time was something like 2,000 



24 



or 3,000 students — perhaps 300 had really intellectual 
interests, and the others just wanted to get through 
their exams. You can't generalize about the students, 
but a small group certainly did not specialize solely 
in one discipline but sampled all the way around. I would 
go to lectures on biology, to lectures on art history, to 
lectures on philosophy, certainly, and certain biological 
lectures. I sampled around. 

I sometimes marvel how much I could do in the three 
years when you think, as I mentioned before, my official 
study was law. I did all my exams with distinction in law, 
and yet I divided my time about equally between economics 
and psychology. I had been to all these other lectures 
and to the theater every evening almost. 

GRAVER: You didn't see this when you came to the United 
States for that year? 

HAYEK: Oh, no. This sort of life was completely absent. 
But it was also, of course, that in the United States I was so 
desperately poor that I couldn't do anything. I didn't 
see anything of what the cultural life of New York was 
because I couldn't afford to go anywhere. And I had no 
real contacts, you see. I wasn't a regular student. I 
was sitting in the New York Public Library, and there were 
four or five people at the same desk who I came to know, 
but that was the total of my acquaintance with Americans. 



25 



I met a few Austrian families, but I really had very 
little contact with American life during that year, 
mainly because of financial limitation. And I was so 
poor that my dear old mother used to remind roe to the 
end of her life that when I came back from America I 
wore two pair of socks, one over the other, because each 
had so many holes it was the only way. [laughter] 
GRAVER: In your case, you were also poor, as you say, 
when you were a student in America. But do you think the 
fact that you and many other economists I know from Vienna 
were so reluctant to come to take a position in America, 
even though it was an academic position, was partly related 
to what they had observed here? 

HAYEK: No, it doesn't apply to the others. You see, I 
was the only one who did not come away in the comfort of 
the Rockefeller Foundation. All the later visitors visited 
America very comfortably and could travel and see everything. 
My case was unique. I was the only one who came on his own, 
at his own risk, and with practically no money to spare, and 
who lived for the whole of a fifteen-month period on sixty 
dollars a month. It would have been miserable if I hadn't 
known that if I was in a real difficulty I would just cable 
my parents, "Please send me the money for the return." But 
apart from this confidence that nothing could really happen 
to me, I lived as poorly and miserably as you can possibly 

live . 

26 



TAPE: LEIJONHUFVUD I, SIDE ONE 
TAPE DATE UNSPECIFIED 

LEIJONHUFVUD: Doctor Hayek, in your early studies you 
pursued not just law but psychology and economics at 
the law school in Vienna. Was this sort of triple- 
threat competence common among your contemporaries? 
HAYEK: Well, common among that group who studied not 
merely for entering a profession but because of intel- 
lectual interest, yes; but it was a small part of the total 
student population. They were the same people who even 
in their subject would do more than was essential for 
examinations. Most of those who would voluntarily attend 
a seminar beyond the formal lectures would not be interested 
only in economics but would go outside. 

But it's partly, of course, connected with the whole 
organization of the study. I mean, in general, and certainly 
in all the nonexperimental subjects, instruction was almost 
entirely confined to formal lectures. There were no tests 
except three main examinations, mostly at the very end of 
your study; so beyond the purely formal requirement that the 
professor testified to your attendance in your lecture book, 
you were under no control whatever. You chose your own 
lectures. Very few of them were compulsory, and most of 
[the students] would not confine themselves to lectures 
required for their exam. We were entirely free, really, in 



27 



what we did, provided that we were ready to be orally 
examined. You see, the examinations were oral examina- 
tions only. We did no written work at all for our whole 
study, or no obligatory written work. There were some 
practical exercises in legal subjects where we discussed 
particular things, but even they were not obligatory at 
that time. And in the law faculty, especially, I think, 
the majority of the students hardly ever saw the university, 
but went to coach and the coach prepared them for their 
final exam. 

So even the attendance of the lectures would be small, 
and the part of those who were really intellectually 
interested was even smaller. But I think what it amounts to, 
say of the 600 or 800 students in one year of law--it was 
larger in the immediate postwar period because many years 
had been compressed in that period — perhaps a hundred would 
attend the lectures; perhaps twenty would have an acute 
intellectual interest. But if you were in that group, you 
then constantly would meet the same men in your law lectures 
and the art history lectures, or in anything else. It all 
happened in one building. Except for the institutes and 
the experimental subjects, it was all in the university 
building; so even if you had in your regular program an hour 
free, you walked over to the philosophy faculty and tried 
different lectures, [some of] which you liked and [some of) 



28 






I 



which you did not like. 

LEIJONHUFVUD: And that is the atmosphere that you came 
to miss, eventually, in London. Do you feel that, in 
this respect, things have changed in your lifetime? In 
the universities you visit now, is it becoming more uncom- 
mon, perhaps? 

HAYEK: Oh, I'm sure that it has become more uncommon. 
I'm sure even in Vienna [it has become uncommon], although 
I've been very much out of contact with that university. 
In more than one respect, it's not what it used to be. It 
certainly is not in existence in England. But of course 
there's another point. In the continental universities 
at that time there was a very great break between the 
discipline of school and the complete freedom at the 
university. And a good many people got lost in that tradi- 
tion. You had to learn to find your own way, and most of 
those who were any good learned to study on their own with 
just a little advice and stimulus from the lectures. 
LEIJONHUFVUD: But a great number of students did not finish 
their degrees? 

HAYEK: Oh, a great many fell by the way, yes. I think the 
proportion of those who entered the universities who 
completed must have been — I don't suppose more than half 
of them who entered ever completed the course. 
LEIJONHUFVUD: What are your views on the advantages of 



29 



1 



specializing or of pursuing more than one field seriously, 
the way you and the best of your contemporaries cTid? 
HAYEK: Well, it certainly was very beneficial in our 
time, but it's possible that the amount of factual knowledge 
you have to acquire even for a first degree — I think we 
were more likely and more ready to ask questions, but we 
knew factually less than a present-day student does. We 
were able to pick and choose very largely. It didn't 
matter if you neglected one subject, up to a point. I 
think on any sort of test of competence in our special 
subject we were probably less well trained than the present- 
day student. On the other hand, we preserved an open mind; 
we were interested in a great many things; we were not well- 
trained specialists, but we knew how to acquire knowl- 
edge on a subject. And I find nowadays that even men 
of high reputations in their subject won't know what to do 
for their own purposes if they have to learn a new subject. 
To us this was no problem. We constantly did it. We had 
the confidence, more or less, that if you seriously 
wanted to pursue a subject, you knew the technique of how 
to learn about it. 

LEIJONHUFVUD: Another aspect of that was that many of 
your contemporaries were very interested in methodology 
and philosophy and retained that interest throughout their 
careers. It's a common attitude that you often meet today 



30 



that this is not worthwhile. But if you were not as 
competent, perhaps, in your specialized subjects, from 
the contrast between the various fields that you pursued 
came this interest in methodology. 

HAYEK: I'm not sure what the answer is. It may have been 
purely accidental in our circle that the interest in 
methodology was so high. It was, to some extent, brought 
by some of my colleagues who went elsewhere for a semester. 
When people like [Alfred] Schutz and [Felix] Kaufmann 
went to Freiburg to study under [Edmund] Husserl, or when 
[Herbert] Furth and [Use] Minz went to Heidelberg to study 
there for a semester, they brought back philosophical 
ideas, partly because an Austrian student going to another 
German university doesn't use that semester to continue law, 
but he looks around for other subjects. 

So we had special stimuli in our discussion circle who 
were interested in philosophical problems, and whether apart 
from these special reasons it would have been-- 

Well, of course, there was also a great general fashion 
in Vienna due to the influence of Mach on the whole 
intellectual outlook. There was this almost excitement 
about matters of scientific method due to the influence 
of Mach, very largely. All that came together, and there 
were probably more-- I don't know in Vienna of any other 
similar group like our little group, the Geistkreis. There 



31 



may have been others, but I don't know them. 
LEIJONHUFVUD: Yes. Well, it was sort of carried on, this 
influence from Mach, by the Vienna Circle of (Moritz) 
Schlick and [Rudolf] Carnap, and by [Ludwig] Wittgenstein. 
HAYEK: But that was much more definitely a philosophical 
circle. But our group, while we happened to be all ex-law 
students, law was the least subject we ever considered in 
our circle. It was either the social sciences or literature 
or — Well, sociology is a social science, but sociology 
in the widest sense, Felix Kaufmann brought in from the 
Schlick circle the approach of the natural sciences. There 
were a great deal of semipractical aspects. I mean, the 
fact that somebody like Alfred Schutz was, by profession, 
secretary of the banking association, but he was in one 
sense most philosophical, and he was most intimately con- 
nected with daily events. 

LEIJONHUFVUD: Do you feel that Vienna was uniquely good 
in producing this first-rate intellectual talent, who were 
also men of affairs at the same time? 

HAYEK: In that particular period, I don't know of any 
similar — Well, yes, it seems to have been also (true) in 
Budapest. I have only learned about it much later, but in 
a way Budapest was even more productive than Vienna in 
the same period. There were a number of distinguished 
scientists with a broad interest compared with the 



32 



population, and even more so if you compare it with the 
relevant population, which in Budapest was almost- entirely , 
exclusively, the Jewish population, which of course was 
not true in Vienna. But I didn't know it at the time. 
LEIJONHUFVUD: But these were not ivory-tower people, 
either. 

HAYEK: Oh, no, very far from it. And the Vienna people, 
for the reasons I discussed already, were very far from 
ivory- tower people because they had to have a living, 
[laughter] 

LEIJONHUFVUD: So it was partly out of necessity. How did 
it come about that you founded a circle like the Geistkreis? 
It included a great many people of later distinction. 
HAYEK: The initiative came from Herbert Furth, whom you 
know. He first approached me [about] whether I would join 
with him in asking Jewish people whom we had known in the 
university, partly active contemporaries in the law 
faculty, partly a few personal friends of his more than mine, 
like [Franz] Gliick, the art historian — I had hardly any 
distinct contribution in the selection of persons. I think 
part of the reason is that I was away for the most important 
period of forming the circle. We formed it immediately after 
we left the university, but I remained only for a year and 
a half in Vienna before I went to America. The circle 
started on a very small scale during that period, but it grew 



33 



while I was in America. I think that is the reason why 

Furth made a much more definite contribution to the 

composition than I did. 

LEIJONHUFVUD: What was the method of selection? Did you 

have something like a program in mind when you approached 

other people? 

HAYEK: No, not at all. I think at the beginning, Herbert 

Furth and I would just talk. This was a discussion group, 

selecting from the people we knew; then some other members 

might make suggestions, and if the rest of us knew about a 

man and agreed that he was-- 

LEIJONHUFVUD: But were you intent on making it an 

economics discussion? 

HAYEK: Oh, no, very far from it. I suppose the feeling 

was rather there were too many economists in it already. 

LEIJONHUFVUD: So did you try broadening it? 

HAYEK: Yes. I mean, after [Fritz] Machlup, (Gottfried) 

Haberler, and I-- We were part of the nucleus, and I 

think we felt that economics was sufficiently represented. 

LEIJONHUFVUD: So Machlup, Haberler, and yourself, and Furth. 

Can you mention some others? 

HAYEK: Well, [Furth] wasn't really an economist. He 

learned a lot of economics by that association, but he 

was not primarily interested in economics. He finally made 

use of this when he had to go to the United States to get a 



34 



position as an economist, but in Vienna he was not an 
economist. 

LEIJONHUFVUD: He went to the Federal Reserve Board once 
he came here? 

HAYEK: Well, no, I think he began with a teaching post at 
one of the Negro universities in Washington. 
LEIJONHUFVUD: Howard [University]? 
HAYEK: Yes, I believe so. 

LEIJONHFVUD: So Furth and Kaufmann [were also members]. 
And who were some of the others? 

HAYEK: [Eric] Voegelin, Schutz--Alf red Schutz, the 
sociologist — Gliick, the art and literary historian. There 
were one or two people who later left who were very active 
at the beginning. One or two Germans who had been students 
in Vienna and returned to Germany: a man called [Walter] 
Overhoff, who recently died; a man who became a very suc- 
cessful industrialist, whose name I cannot recall. There 
are several people of whom I have completely lost sight--if 
I could just remember their names--who were there in the 
beginning. Furth is the only one who has now a complete 
list. In fact, I passed on my list to him. He lost all 
his papers when he left Vienna; so he didn't bring anything 
himself. And when I found a carbon copy of a list he had 
sent me many, many years before, I returned it to him so 
that he should possess the essential information. 



35 



LEIJONHUFVUD: Now, in this circle, Kaufmann would talk, 
for example, on logical positivism. And I suppose that 
you and Machlup and Haberler would give early versions of 
the papers you were working on. 

HAYEK: Yes, and I spoke on psychology, for instance. I 
did at that time expound to them what ultimately became 
my sensory order book [ The Sensory Order ] . And I think I 
spoke about American economics when I came back from the 
United States. Kaufmann was much more generally [concerned 
with] scientific method. I remember, for instance, we got 
from him an extremely instructive lecture on entropy 
and its whole relation to probability problems, and another 
one on topology. This interest in relevant borderline 
subjects — He was an excellent teacher, in the literal 
sense. After a paper by Kaufmann, you really knew what 
a subject was about. 

LEIJONHUFVUD: Do you remember some other topics that would 
seem perhaps far from economics and the concerns of an 
economist? 

HAYEK: Voegelin, who is now [in the United States], read 
a paper on Rembrandt, I remember; and Franz GliJck, the 
literary man, spoke on [Adalbert] Stifter; and Voegelin, 
again, on semipolitical subjects; Schutz on phenomenology. 
I think there were very few economics papers, really, in 
that circle. 



36 



LEIJONHUFVUD: So no restriction on subject matter what- 
soever. What was the format? Did the famous Vienna 
cafes play any role? 

HAYEK: It was all in private homes. It went around 
from house to house--af terdinner affairs. I suppose we 
were always offered a few sandwiches and tea. Sitting 
around in a circle or sometimes around a taible, I suppose 
a normal attendance would be under a dozen--ten, eleven, 
something like that. 

LEIJONHUFVUD: Was it an exclusively male group? Were you 
antifeminist? 

HAYEK: No, it was impractical, under the then-existing 
social traditions, which created so many complications, to 
have a girl among us; so we just decided-- Our name was 
even given [to us] by a lady whom you probably have met, 
who resented being excluded, and so gave us the name Geist- 
kreis in order to ridicule the whole affair. [laughter] 
LEIJONHUFVUD: But it stuck, and you now remember it? 
HAYEK: Oh yes, we remembered it and accepted it. Her name 
is Stephanie Browne. Do you know her? 
LEIJONHUFVUD: Yes, yes. 

HAYEK: In fact, if you want the anecdotes of the time, she 
would be an exhaustive resource. [laughter] 

LEIJONHUFVUD: Yes. Let me turn to the other circles in which 
you moved: first, in economics. There was [Hans] Meyer's 



37 



seminar at the university, and then there was [Ludwig 
von] Mises's seminar that was, in effect, outside, the 
university. Was the Mises seminar the more important? 
HAYEK: Oh, yes, very much the most important. Meyer's 
seminar was almost completely confined to marginal utility 
analysis. It took place at a time that was inconvenient 
to most of us who were already in a job. I'm not certain 
at all that I ever attended a seminar of Meyer's. [laughter] 
I did see Meyer. Meyer was a coffeehouse man, mainly. If 
there was any place he was to be found, it was at the 
coffeehouse at Kiinstlercaf e , opposite the university; and 
I did sit there with him and a group of his students many 
times in quite informal talk, which I'm afraid was much 
more university scandal than anything serious. [laughter] 
Occasionally there were interesting discussions. You 
could get very excited, particularly if you strongly 
disagreed with somebody. And there were all these stories 
about his constant quarrels with Othmar Spann, which unfor- 
tunately dominated the university situation. But, on our 
generation his influence was very limited. [Paul] 
Rosenstein-Rodan was the main contact. Of course, Rosenstein- 
Rodan and [Oskar] Morgenstern were for a time editing for 
Meyer the Vienna Zeitschrift , in fact. They were the two 
editorial secretaries and, in fact, ran it for all 
intents and purposes. Rosenstein-Rodan was never a member 



38 



of the Geistkreis--! don't know why--and Morgenstern was. 
They were the main contacts to the Meyer circle. - 

After I had returned from America, it was the Mises 
circle and later the Nationale Okonomische Gesellschaf t , in 
a more formal manner, which was the real center of discussion, 
And even the Mises seminar was by no means confined to 
economics. It was not so much general methodological 
problems but the relations between economics and history 
that were very much-discussed problems, to which we always 
returned. And there, in many ways, you had the scime 
people as in the Geistkreis--but not exactly. There were 
some, like [Richard] Strigl, among the communists; and 
[Friedrich] Engel-Janoschi , the historian. I think he 
became later a member of the Geistkreis, after I had left. 
Yes, I'm sure he did. And the women, who were excluded 
from the Geistkreis--Stephanie Browne, Helene Lieser, and 
Use Minz--were all members of the Mises seminar but not 
of the Geistkreis. 

LEIJONHUFVUD: So how large was that group? How many 
regulars in the Mises seminar? 

HAYEK: Oh, it was about the same number, because the non- 
economists would not go. The real noneconomists were non- 
social scientists. People like Voegelin and Schutz--oh, 
Schutz did attend — but Gliick, the literary man, and these 
two Germans I mentioned before who disappeared, were the 



39 



people who were not interested in economics. There were 

a good many not interested in economics in the Gelstkreis 

but none in the Mises seminar, even if they were not 

technical economists. 

LEIJONHUFVUD: These seminars would go on year after year, 

and people would come-- You attended over six or seven 

years? 

HAYEK: From 1924 until I left: '24 through '31. 

LEIJONHUFVUD: Others must have been members for ten years. 

HAYEK: Probably. You see, the thing went on until Mises 

left in '36, and it had started before I came back from 

America — I believe even before I went to America, but I 

didn't know about it. So people like Stephanie Browne and 

Helene Lieser and Strigl probably attended from 1923 to 

19 36. I think it must have gone on for thirteen years. 

That's probably a likely duration. 

LEIJONHUFVUD: So now this was outside the university, and 

it was not in [Mises 's] capacity as a titular professor or 

anything like this. It was he who attracted people to the 

seminar? 

HAYEK: Entirely. It was in his office at the chamber of 

commerce in the evening. It always continued with a visit to 

the coffeehouse, and the thing was likely to have gone on 

from six to twelve at night. The whole affair would probably 

sit for two hours in the official seminar, and then — 



40 



LEIJONHUFVUD: How often? 

HAYEK: Every two weeks. In the real term-period,- probably 

from late October to early June. 

LEIJONHUFVUD: Well, Mises ran at least two famous seminars 

in his life like this--maybe three: in Geneva as well. 

But I'm thinking now of, first, Vienna and then, much later 

in his life, a similar seminar in New York. 

HAYEK: Which I once attended, yes. But that was much more 

an academic institution. I mean, it was in a classroom 

with relatively large numbers attendant, while in his 

private seminar he was sitting at his ordinary desk, and there 

was a small conference table in the room, and we were grouped 

in the other corner of the room facing him at his desk. But 

it had no academic atmosphere at all, while in the New York 

seminar, which I knew, he was on a platform, and so it 

looked like an academic class. It was probably a much wider 

range — There were real students there; there were no students 

in the Mises seminar in Vienna. We were all graduates or 

doctors . 

LEIJONHUFVUD: Was the Vienna seminar the more fruitful one? 

HAYEK: I think it was, yes. 

LEIJONHUFVUD: It stimulated more people to do work that 

then became real contributions. 

HAYEK: You know, when I think about it I see I forget a few 

older people who attended the Mises seminar. There was that 



41 



interesting man, [Karl] Schlesinger, who wrote a book on 
money and who was a banker in Vienna; there was occasionally 
another, an industrialist. Dr. Geiringer. He must have 
been originally in industry, but at that time he was also 
a banker, but one of the joint-stock type. He was a 
private banker. And there may have been one or two other 
people. Yes, there was a high government official who 
occasionally came, a man named Forcheimer, mainly interested 
in sort of social security problems. The average age in 
the Vienna seminar must have been at least in the thirties, 
while as far as I could see as an occasional visitor in 
the New York seminar, it was much more a students' affair 
than the so-called Mises seminar in Vienna, which was a 
discussion club. 

LEIJONHUFVUD: Mises personally — The view here in the 
United States, I think, is of Mises in his old age, and 
he's viewed very often, particularly by his enemies, of 
course, as very doctrinaire. Do you feel that he got 
doctrinaire with age? Was he a different man in Vienna 
back then than he became later? 

HAYEK: He was always a little doctrinaire. I think he 
was not so susceptable to take offense as he was later. I 
think he had a period of — Well, he always had been rather 
bitter. He had been treated very badly all through his life, 
really, and that hard period when he arrived in New York and 



42 



was unable to get an appropriate position made him very 
much more bitter. On the other hand, there was a counter- 
effect. He became more human when he married. You see, 
he was a bachelor as long as I knew him in Vienna, and he 
was in a way harder and even more intolerant of fools than 
he was later. [laughter] If you look at his autobio- 
graphy, the contempt of his for most of the German economists 
was very justified. But I think twenty years later he 
would have put it in a more conciliatory form. His opinion 
hadn't really changed, but he wouldn't have spoken up as 
openly as in that particular very bitter moment when he 
just arrived in America and didn't know what his future 
would be. 



43 



TAPE: LEIJONHUFVUD I, SIDE TWO 
TAPE DATE UNSPECIFIED 

HAYEK: On the whole, I think he was softened by mar- 
riage. 

LEIJONHUFVUD: He mellowed personally, but he became more 
demanding of intellectual allegiance from — 
HAYEK: Yes, he easily took offense even when — I believe 
I'm the only one of his disciples who has never quarreled 
with him. 

LEIJONHUFVUD: And that includes all the disciples from 
Vienna? 

HAYEK: No, I'm speaking only about the old ones in Vienna. 
LEIJONHUFVUD: Yes, the old ones in Vienna. Now there 
were some other circles. The Austrian Economic Association 
was another forum where economists met. 

HAYEK: Yes. That had existed from before World War I and 
was still going when I took my degree--I attended one or 
two meetings--and then it died during the inflation period. 
The short but acute inflation period upset social life and 
a great many things. I think it was partly a question of 
expense. The economic society used to meet at a coffeehouse 
and hire a room there, and I think the expense of doing so 
during the height of the inflation was probably one of the 
contributing factors. We all were too busy; life was too 
hard. 



44 



The reason why I then took the initiative of re- 
constituting [the association] was because I rather 
regretted the division which had arisen between the Mises 
and the Meyer circle. There was no forum in which they 
met at all, and by restarting this no-longer existing 
society there was at least one occasion where they would 
sit at the same table and discuss. And there were a good 
many people who either did not come to the Mises seminar 
or did not come to the Meyer seminar, including a few of 
the more senior industrialists and civil servants. So it 
was a larger group, I suppose, than either of the two other 
groups, which hardly ever counted more than a dozen. In 
the economic society, the Nationale Okonomische Gesellschaf t , 
numbers would go up to thirty or so. Even that wasn't large. 
Later it met in an office in a meeting hall of the banker's 
association. Helene Lieser was one of the secretaries. In 
fact, there were two women who were both very competent 
economists: Marianne Herzfeld--an older woman, although I 
believe she may be still alive or died only recently in 
Edinburgh — who wrote once a very good article on inflationism 
as a philosophy, or something like that; and Helene Lieser, 
of course. 

LEIJONHUFVUD: Lieser became secretary of the International 
Economic Association. 
HAYEK: Yes, for a time she was. Then she died relatively 



45 



I 



early--in her fifties or just about sixty. So that was 
a more mixed group. I believe the only paper I read 
there was my later pamphlet on rent restriction. 
LEIJONHUFVUD: You mentioned the inflation in the context 
of why the economic association died for a while. There's 
another thing that I think is interesting to discuss. We 
have now talked about the various circles in which you 
moved and the intellectual influence from the people that 
more-- Some of them dominated their circle, as Mises did 
to some extent. So there are those influences on you that, 
in part, determine what kind of work you did on what 
problems. But there are also the influences of events, 
the inflation being one. And of course when you came back 
from the war, you lived through the dissolution of the 
Austro-Hungarian Empire. The inflation came on top of that, 
and Vienna became a rather overgrown capital of a very 
small country. How much did events determine your lifelong 
interests, and to what extent did purely intellectual 
influences play a role? 

HAYEK: Intellectual influences became more and more pre- 
dominating. I think in the beginning the practical ones 
were more important, and I can give you one illustration: 
I think the first paper I ever wrote — never published, 
and I haven't even got a copy--was on a thing which had 
already occurred to me in the last few days in the army. 



46 



suggesting that you might have a double government, a 
cultural and an economic government. I played for a time 
with this idea in the hope of resolving the conflict 
between nationalities in the Austro-Hungarian Empire. I 
did see the benefits of common economic government. On 
the other hand, I was very much aware of all the conflicts 
about education and similar problems. And I thought it 
might be possible in governmental functions to separate 
the two things — let the nationalities have their own 
cultural arrangements and yet let the central government 
provide the framework of a common economic system. That 
was, I think, the first thing I put on paper. 
LEIJONHUFVUD: Have you ever returned to those ideas? 
There are still areas of the world where the same problems 
occur. 

HAYEK: Yes, but my approach is so completely different. 
Yes, in a sense, the problem is the same, but I no longer 
believe that that sort of division is of any practical 
possibility. But in a way I played with constitutional 
reform at the beginning and the end of my career. 
LEIJONHUFVUD: Well, on the intellectual influences, then, 
which ones would you mention first from your student days? 
HAYEK: Personal influences or literary influences? 
LEIJONHUFVUD: Well let's take literary influences first, 
perhaps. 



47 



HAYEK: Well, I think the main point is the accident of, 
curiously enough, Othmar Spann at that time telli-ng me 
that the book on economics still to read was [Karl] Menger's 
Grundsetze . That was the first book which gave me an idea 
of the possibility of theoretically approaching economic 
problems. That was probably the most important event. 
It's a curious factor that Spann, who became such a heter- 
odox person, was among my immediate teachers the only one 
who had been a personal student under Menger. The book 
which made [Spann] famous is Haupttheorien der Volkwirt - 
schaf tslehre , which in its first edition was a very good 
popular handbook. It's supposed to really have been a 
cribbed version of Menger's lectures on the history of 
England. [laughter] 

LEIJONHUFVUD: Yes, I heard that. And personal influences? 
We have talked about Mises already, but are there also 
others? 

HAYEK: I mean, we have talked more about my contemporaries 
and to some extent about the influence of my father, which 
was of some importance. I don't think there are really 
any personal influences. At the university I did take an 
interest in a great many men, but no single man had a distinct 
influence on me. 

In a purely literary field, I was reading much more 
fine literature as a young man and, as you have probably 



48 



become aware, I was a great Goethe fan. I am thoroughly 
familiar with the writings of Goethe and with German litera- 
ture, generally, which is incidentally partly because of 
the influence of my father. My father used to read to us 
after dinner the great German dramas and plays, and he 
had an extraordinary memory and could quote things like 
the "Die Glocke, " Schiller ' s poem, from beginning to end 
by heart, even in his — I can't say his old age; he died 
at fifty-seven. He was, in the field of German literature, 
an extraordinarily educated man. As a young man before the 
war, and even immediately after, I spent many evenings 
listening to him. In fact, I was a very young man. Of 
course, I started writing plays myself, though I didn't 
get very far with it. But I think if you ask in this sense 
about general influence, Goethe is really probably the most 
important literary influence on my early thinking. 
LEIJONHUFVUD: In economics, let me come back to a question 
we have touched upon before. In the twenties in Vienna, 
was there such a thing as an Austrian school in economics? 
Did you and your contemporaries perceive an identification 
with a school? 

HAYEK: Yes, yes. Although at the same time [we were] very 
much aware of the division between not only Meyer and Mises 
but already [Friedrich von] Wieser and Mises. You see, we 
were very much aware that there were two traditions — the 



49 



lEugen von] Bohm-Bawerk tradition and the Wieser tradition 
— and Mises was representing the Bohm-Bawerk tradition, 
and Meyer was representing the Wieser tradition. 
LEIJONHUFVUD: And where did the line between the two go? 
Was there a political or politically ideological line 
involved? 

HAYEK: Very little. Bohm-Bawerk had already been an out- 
right liberal, and Mises even more, while Wieser was 
slightly tainted with Fabian socialist sympathies. In fact, 
it was his great pride to have given the scientific founda- 
tion for progressive taxation. But otherwise there wasn't 
really-- I mean, Wieser, of course, would have claimed to be 
liberal, but he was using it much more in a later sense, 
not a classical liberal. 

Of course, Wieser and Bohm-Bawerk had been personally 
very close friends, although Wieser always refused to discuss 
economics. In fact, I am told he began to avoid Bohm-Bawerk 
because Bohm-Bawerk insisted on talking economics all the time. 
Of course, there's a famous episode which is rather similar: 
before the war, immediately before, [Alfred] Marshall used to 
go to the Austrian Dolomites for his summer holiday, and for a 
time Wieser went to the next village. They knew of each other 
but made no attempt to make contact. Then Bohm-Bawerk came on a 
visit and insisted on visiting them both, bringing them 
together to talk economics, with the result that neither 



50 



Wieser nor Marshall returned. [laughter] 
LEIJONHUFVUD: So Bohm-Bawerk apparently could be a bit 
of a bore, insisting on talking economics all the time. 
HAYEK: At least to his brother-in-law. No, not all the 
time. It was my grandfather who was a personal friend, co- 
mountain climber, and academic colleague of his, who was 
not interested in economics but was originally a constitu- 
tional lawyer and then became head of the Austrian statis- 
tical office. I don't think he talked economics with him 
but general politics — not technical economics, which my 
grandfather was not interested in. 

LEIJONHUFVUD: So what were the differences, then, between 
the Meyer circle and the Mises circle? 

HAYEK: Oh, things like the measurability of utility and 
such sophisticated points. Wieser and the whole tradition 
really believed in a measurable utility. 
LEIJONHUFVUD: Did not Meyer abandon that? 

HAYEK: Yes, of course, Meyer was most sophisticated about 
it, but he still adhered to this. He was puzzled by such 
questions as the sum of the utilities; or whether there was 
a decreasing utility or a total utility which was like the 
area under the curve; or was it a multiple of the marginal 
utility — such problems were hotly disputed. 
LEIJONHUFVUD: In Meyer's circle? 
HAYEK: Yes. 



51 



LEIJONHUFVUD: But that doesn't explain a split between 
the two groups. 

HAYEK: Oh, there wasn't really. You see, Meyer — and also 
Rosenstein, perhaps--kept away from the Mises circle for 
political reasons. There were no very good Meyer pupils. 
I mean, [Franz] Mayr, who became his successor, while a 
very well-informed person, was really a great bore. He had 
no original ideas of any kind. There were one or two other 
very young men, whose names I cannot remember now, who 
died young and who had been more interesting. 

Of course, there was one very interesting person whom 
we haven't mentioned. There was, so to speak, an interme- 
diate generation between the Mises-Meyer- [Joseph ] Schumpeter 
generation and ours. This included Strigl, whom I have 
mentioned, who was a much more distinguished man than he is 
remembered for; there was a very interesting man, [Ewald] 
Schams , who wrote largely on semimethodological problems — 
very intelligent and well informed; and there was this 
curious man, Schonfeld, who later wrote under the name of 
[Hermann] Illig, a complicated story connected with Nazi 
anti-Semitic things. His adopted father, Schonfeld, was 
Jewish, but he himself was not Jewish; so he changed the name 
into Illig. He was probably the only one who made 
original contributions on the Wieser-Meyer lines. While I 
could not now explain what it was, I believe there's more 



52 



in his work than has yet been absorbed. I think if you 

want to get the upshot of the other tradition, it's in the 

work of Schonfeld more than anywhere else that it is to be 

found. 

LEIJONHUFVUD: That is interesting. 

HAYEK: Illig, I should say, because his main book is known 

as a book by Illig. 

LEIJONHUFVUD: But Strigl and these other two were older. 

And is that, in part, why there was no use for you and your 

contemporaries to wait around for a chair? 

HAYEK: Certainly, yes. We all expected that in justice 

Strigl should have become Meyer's successor, but I don't know 

whether he lived long enough or died before. Anyhow, we all 

took it for granted that the claim to the chair was Strigl' s. 

LEIJONHUFVUD: Well, Meyer survived the war, didn't he? 

HAYEK: Oh, yes; you're right. Strigl died during the war, 

and Meyer survived it, but not in the active occupation of 

a professorship. He retired, and I believe the appointment 

was made to Mayr at a time — I'm not sure of that — when 

Strigl was still alive. I can't say for certain. Anyhow, 

we took it for granted that there was an obvious successor 

in the person of Strigl, and we all wished he'd get it. We 

all agreed he deserved it. 

LEIJONHUFVUD: You, Haberler, Machlup, Morgenstern, and 

several of the others as well moved from Austria, and only a 



53 



couple of the members of the Geistkreis were still in Vienna 
when the Anschluss came. 

HAYEK: Well, yes, but the thing was-- I was the only one 
who was quite independent of politics. You see, at the 
age of thirty-two, when you're offered a professorship in 
London you just take it. [laughter] I mean, there's no 
problem about who's competing. It was as unexpected as 
forty years later the Nobel Prize. It came like something 
out of the clear sky when I never expected such a thing to 
happen, and if it's offered to you, you take it. It was in 
'31, when Hitler hadn't even risen to power in Germany; so 
it was in no way affected by political considerations. 

In the later thirties, when Haberler and Machlup and 
Mises left, I think the clouds were so clearly visible 
that everybody tried to get out in time. So even if they 
are not technical refugees who were forced to leave, they 
had left because prospects were so very bad. Of course, 
Morgenstern was lucky at being in America on a visit when 
Hitler took over, and he just stayed. 

LEIJONHUFVUD: Yes, he told me that he got a telegram from 
some friend who said, "Do not return"--that he was known 
to be on a blacklist at that time. 
HAYEK: Very likely, yes. 

LEIJONHUFVUD: Now, in the twenties, were most of the econo- 
mists in Vienna at that time liberals in the traditional 
sense? 

54 



HAYEK: No, no. Very few. Strigl was not; he was, if any- 
thing, a socialist. Shams was not. Morgenstern -was not. 
I think it reduces to Haberler, Machlup, and myself. 
LEIJONHUFVUD: So my previous question was: Was there an 
Austrian school? and you said yes, definitely. 
HAYEK: Theoretically, yes. 
LEIJONHUFVUD: In theory. 

HAYEK: In that sense, the term, the meaning of the term, 
has changed. At that time, we would use the term 
Austrian school quite irrespective of the political 
consequences which grew from it. It was the marginal utility 
analysis which to us was the Austrian school. 
LEIJONHUFVUD: Deriving from Menger, via either Wieser or 
Bohm-Bawerk? 
HAYEK: Yes, yes. 

LEIJONHUFVUD: The association with liberal ideological 
beliefs was not yet there? 

HAYEK: Well, the Menger/Bohm-Bawerk/Mises tradition had 
always been liberal, but that was not regarded as the 
essential attribute of the Austrian school. It was that 
wing which was the liberal wing of the school. 
LEIJONHUFVUD: And the Geistkreis was not predominately 
liberal? 

HAYEK: No, far from it. 
LEIJONHUFVUD: And what about Mises's seminar? 



55 



I 



HAYEK: Again, not. I mean you had [Ewald] Schams and 
Strigl there; and Engel-Janoschi , the historian; -and 

Kaufmann, who certainly was not in any sense a liberal; 
Schutz, who hardly was--he was perhaps closer to us; 
Voegelin, who was not. Oh, I think the women members of 
the seminar were very devout Mises pupils, even in that 
sense. It's perhaps common that women are more susceptible 
to the views of the master than the men. But among the 
men, it was certainly not the predominant belief. 
LEIJONHUFVUD: So in the revival of interest in the 
Austrian school that has taken place in recent years in 
the United States — 

HAYEK: It means the Mises school. 
LEIJONHUFVUD: It means the Mises group? 

HAYEK: I am now being associated with Mises, but initially 
I think it meant the pupils whom Mises had taught in the 
United States. Some rather reluctantly now admit me as a 
second head, and I don't think people like [Murray] Rothbard 
or some of the immediate Mises pupils are really very happy 
that they are not-- The rest are not orthodox Misesians but 
only take part of their views from Mises. 

LEIJONHUFVUD: In that group, an attempt is often made to 
draw connections between the particular interests in 
theoretical teachings of the Austrian school and liberal, 
I should say libertarian, ideology. Do you think that 



56 



there is something in the theoretical tradition? 
HAYEK: Yes. Yes, I would very definitely maintain that 
methodological individualism does lead to political 
individualism. I don't think they would all admit it, 
but in the form in which I have now been led to put it-- 
this idea of utilization of dispersed knowledge--! would 
maintain that our political conclusions follow very directly 
from the theoretical insights. But that's not generally 
admitted. I'm not speaking about the opponents, of course, 
but among those of the original group, I think it's even — 
Well, I think in the American Austrian school, yes, it is now 
generally admitted. The young people would not call one 
an Austrian who is not both a methodological individualist 
and a political individualist. But that applies to the 
younger school and was not the tradition. 
LEIJONHUFVUD: And, as far as you are concerned, those 
ideas belonged to the mid- thirties and after, and not to 
the Austrian school when it still was in Austria. 
HAYEK: Yes, you are quite right. 

LEIJONHUFVUD: You have developed your own views on method- 
ology over the years. Did you have a conflict with Mises 
on methodological matters? 

HAYEK: No, no conflict, although I failed in my attempt 
to make him see my point; but he took it more good-naturedly 
than in most other instances. [laughter] I believe it was 



57 



in that same article on economics and knowledge where I 
make the point that while the analysis of individual plan- 
ning is in a way an a priori system of logic, the empir- 
ical element enters in people learning about what the 
other people do. And you can't claim, as Mises does, 
that the whole theory of the market is an a priori 
system, because of the empirical factor which comes in 
that one person learns about what another person does. 
That was a gentle attempt to persuade Mises to give up 
the a priori claim, but I failed in persuading him. 
[laughter] 

LEIJONHUFVUD: And you would not share his reliance on 
introspection? 

HAYEK: Well, up to a point, yes, but in a much less intel- 
lectual sense. You see, I am neither a utilitarian nor 
a rationalist in the sense in which Mises was. And his 
introspection is, of course, essentially a rationalist 
introspection. 



58 



TAPE: LEIJONHUFVUD II, SIDE ONE 
TAPE DATE: NOVEMBER 12, 19 7 8 

LEIJONHUFVUD: Could you explain your intent in writing 
The Road to Serfdom ? 

HAYEK: Well, it was aimed against what I would call 
classical socialism; aimed mainly at the nationalization 
or socialization of the means of production. Many of the 
contemporary socialist parties have at least ostensibly 
given up that and turned to a redistribution/fair taxation 
idea--welf are — which is not directly applicable, I don't 
believe it alters the fundamental objection, because I 
believe this indirect control of the economic world 
ultimately leads to the same result, with a very much 
slower process. So when I was then talking about what 
seemed to be in imminent danger if you changed over to 
a centrally planned system, which was still the aim of 
most of the official socialist programs, that is not 
now of direct relevance. At least the process would be 
different, since I personally believe that even the-- Some 
parts of the present welfare state policies--the redistri- 
bution aspect of it--ultimately lead to the same result: 
destroying the market order and making it necessary, 
against the will of the present-day socialists, gradually 
to impose more and more central planning. It would lead 
to the same outcome. But my description of the process. 



59 



and particularly the relative speed with which I assumed 
it would take place, of course, is no longer applicable to 
all of the socialist program. Partly I flatter myself-- 
the book has had partly the influence of making socialist 
parties change their program. 

LEIJONHUFVUD: Away from reliance on central planning and 
toward using the budget for redistribution of income? 
HAYEK: Exactly. I don't know whether I should say I 
flatter myself; I think socialism might have discredited 
itself sooner if it had stuck to its original program, 
[laughter] 

LEIJONHUFVUD: So the road has been a different one, 
historically speaking. The Western European countries, the 
U.S., took a different road from your "road to serfdom." 
You're saying that along the present road, your pessimis- 
tic conclusions would take a longer time to materialize. 
HAYEK: Yes, and it's relatively more easy to reverse the 
process. No, once you had transferred the whole productive 
apparatus to government direction, it's much more difficult 
to reverse this, while such a gradual process can easily be 
stopped or can even be reversed more easily than the other 
process . 

LEIJONHUFVUD: That's what I wanted to ask. Obviously you 
feel that it's a downhill road, but can one apply the brakes? 
How far would you like to see the developments of the last 



60 



thirty years reversed? What kind of society would you 
envisage that could evolve from the present starting 
point? 

HAYEK: Well, I would still aim at completely eliminating 
all direct interference with the market--that all 
governmental services be clearly done outside the market, 
including all provision of a minimum floor for people who 
cannot make an adequate income in the market. [It would 
then not be] some attempt to control the market process 
but would be just providing outside the market a flat 
minimum for everybody. This, of course, means in effect 
eliminating completely the social justice aspect of it, 
i.e., the deliberate redistribution beyond securing a 
constant minimum for everybody who cannot earn more than 
that minimum in the market. All the other services of 
a welfare state are more a matter of degree — how they are 
organized. I don't object to government rendering quite 
a number of services; I do object to government having 
any monopoly in any case. As long as only the government 
can provide them, all right, but there should be a pos- 
sibility for others trying to do so. 

LEIJONHUFVUD: You do not object, then, to government's 
production of services, for example, if private production 
is not precluded. 
HAYEK: Yes. Of course there is one great difficulty. 



61 



If government does it--supplies it below cost-- there ' s 
no chance for private competition to come in. I would 
like to force government, as far as it sells the services, 
to do so at cost. 

LEIJONHUFVUD: Even if it is involved in also financing 
the demand. You say that you would allow a government to 
provide a minimum, a floor; are you then also thinking of 
special, particular functions — health care, for example — 
or are you thinking simply in terms of an income floor? 
HAYEK: Simply in terms of an income. From what I've seen 
of the British national health service, my doubt and 
skepticism has rather been increased. No doubt that in 
the short run it provides services to people who otherwise 
would not have got it, but that it impedes the progress of 
medical services--that there as much as anywhere else 
competition is an essential condition of progress--! have 
no doubt. And it's particularly bad because while most 
people in Britain dislike it, everybody agrees it can never 
be reversed. 

LEIJONHUFVUD: But the essential point is whether competi- 
tion is provided or not, not whether the government is in 
this line of activities. 

HAYEK: Exactly. But you know I now extend it even to 
money. 
LEIJONHUFVUD: Yes. [laughter] I was going to bring that 



62 



up. But let's take that topic, then. You returned 
recently to your early interest in monetary theory. Let 
me ask, first, why you have come to focus on money again 
recently. It was an interest of yours through some time 
in the thirties. 

HAYEK: It was a difference between nearly all my friends, 
who were in favor of flexible exchanges, and my support of 
fixed exchange rates, which I had intellectually to justify. 
I was driven to the conclusion that I wanted fixed 
exchange rates, not because I was convinced that it was 
necessarily a better system but it was the only discipline 
on governments v/hich existed. If you released the govern- 
ments from that discipline, the democratic process, which 
I have been analyzing in different conditions, was bound 
to drive it into inflation. Even my defense of fixed 
exchange rates was, in a way, limited. I was against 
abandoning them only where people wanted flexible exchanges 
in order to make inflation easier. 

When the problem arose in Germany and Switzerland, 
when it was a question of protecting them against imported 
inflation, I was myself supporting [flexible exchanges]. 
In fact, I argued in Germany that Germany kept too long 
fixed exchange rates and was forced to inflate by them, 
which they ought not to have done. It was confirmed to 
me by the people of the German Bundesbank that they were 



63 



aware of this, but they still had the hope that the 
system of fixed exchange rates would restrain the. 
inflation [in the United States] from doing even more 
inflation, and that they brought deliberately the 
sacrifice of swallowing part of the inflation in order 
to prevent it from becoming too large in the rest of the 
world. 

That was very much my point of view; but that led 
me, of course, to the question of whether this was the 
best discipline on monetary policy, and to the realization 
that what I'd taken for granted--that the discipline of 
the gold standard was probably the only politically 
practicable discipline on government--could never be 
restored. Even a nominal restoration of the gold standard 
would not be effective because you could never get a 
government now to obey the rules of the gold standard. 

These two things forced me [to the conclusion] --and 
I first made the suggestion almost as a bitter joke--that 
so long as governments pursue policies as they do now, there 
will be no choice but to take the control of money from 
them. But that led me into this fascinating problem of 
what would happen if money were provided competitively. 
It opened a completely new chapter in monetary theory, 
and discovering there was still so much to be investigated 
never really made the subject again very interesting to me. 



64 



I still hope--the two editions of the pamphlet on denation- 
alizing money were done, incidentally, while I was working 
on my main book--to do a systematic book which I shall call 
Good Money . Beginning really with what would be good money 
— what do we really want money to be--and then going on to 
the question of how far would the competitive issue of money 
provide good money in terms of that standard. 
LEIJONHUFVUD: Would you agree that the most important 
step in this direction would have less to do with who 
issues money than simply separating the so-called unit 
of account, in which private parties make contracts, from 
the government-issued money, to get around, in effect, 
legal tender provisions and so on? 

HAYEK: Yes, in a way. You know, I started remarking against 
the idea of a common European currency, saying why not 
simply admit all the other currencies competing with yours, 
and then you don't need a standard currency. People will 
choose the one which is best. That, of course, led me to 
the extension: Why confine it to other government moneys 
and not let private enterprise supply the money? 
LEIJONHUFVUD: But there's a question that extends to other 
aspects of your work — to Law, Legislation and Liberty as well 
--that I would like to raise here, which bothers me and I 
think some other people as well. The process whereby the 
Western countries gave up first the gold standard, and then 



65 



what you call a discipline--and I agree there is a 
discipline--of fixed exchange rates: Is that not an 
evolutionary process, and are you not, with these proposals, 
in effect rationally trying to reconstruct, rationally 
trying to controvert, as it were, a process of evolution? 
HAYEK: No, it's a process of evolution only within the 
limits set by the powers of government. Even within 
control there is still an evolutionary process, but so many 
choices are excluded by governmental powers that it's not 
really a process which tries out all possibilities but a 
process which is limited to a very few possibilities that 
are permitted by existing law. 

LEIJONHUFVUD: But you have referred to the development of 
democratic government into omnipotent government, and 
certainly the trend has been in that direction. Is that 
not a process of social evolution? 

HAYEK: Again, it's an inevitable consequence of giving 
a government unlimited powers, which excludes experimen- 
tation with other forms. A deliberate decision by a man 
has put us on a one-way track, and the alternative 
evolutions have been excluded. In a sense, of course, 
all monopolistic government limits the possibilities of 
evolution. I think it does it least if it confines itself 
to the enforcement of general rules of conduct, but I would 
even go so far as to say that even very good world government 



66 



might be a calamity because it would preclude the pos- 
sibility of trying alternative methods. I'm thoroughly 
opposed to a world government. 
LEIJONHUFVUD: Of any form? 
HAYEK: Any form. 

LEIJONHUFVUD: So to the question of what mistakes of 
evolution may be corrected by, as it were, rationalist 
intervention, you would answer by saying, well, there are 
certain processes of development where the course taken 
by the actual development has been dictated by-- 
HAYEK : --the use of force to exclude others. 
LEIJONHUFVUD: Yes. Are those the only instances in which 
you would interfere with spontaneous changes in social 
structure? 

HAYEK: It depends on what you mean by interfere. They are 
the only cases in which I would admit intervention in the 
sense of experimenting with an alternative without excluding 
what is actually happening. I think there may even be a 
case for government coming in as a competitor, as it were, 
with other developments. My objection is that govern- 
ment assumes a monopoly and the right to exclude other 
possibilities. 

LEIJONHUFVUD: So in certain sectors, for example, where 
we are dissatisfied with the private outcome, you would-- 
HAYEK: --let the government try and compete with private 
enterprise. 

67 



LEIJONHUFVUD: I see. The most recent thing I've seen 
from your pen is your Hobhouse lectures. Could you 
briefly recap what you mean with the "three sources 
of human values"? 

HAYEK: Well, it's directed against the thesis, now 
advanced by the social biologists, that there are only two 
sources: innate, physiologically embedded tendencies; 
and the rationally constructed ones. That leaves out the 
whole of what we generally call cultural tradition: the 
development which is learned, which is passed on by learning, 
but the direction of which is not determined by rational 
choice but by group competition, essentially--the group 
which adapts more effective rules, succeeding better than 
others and being imitated, not because the people under- 
stand the particular rules better but [understand] the 
whole complexes better. That leads, of course, to the 
conclusion, which I have only added now in a postscript 
to the postscript, that we must realize that man has been 
civilized very much against his wishes. That, I think, is 
the upshot of the whole argument--that it's not in the 
construction of our intelligence which has created civiliza- 
tion, but really in the taming of many of our innate 
instincts which resisted civilization. In a way, you see, 
I am arguing against Freud, but the problem is the same 
as in Freud's Civilization and Its Discontents. I only 



68 



don't believe that you can remove these discontents by 
protecting-- 

LEIJONHUFVUD: --becoming uncivilized. [laughter] 
HAYEK: You can only become civilized by these repres- 
sions which Freud so much dislikes. 

LEIJONHUFVUD: I wonder how you would sum up your recent 
work, the position that you've arrived at now. I tried 
to think of it the other night when I knew I was coming 
here, and it seems to me that beyond the concrete issues, 
such as the denationalization of money, and beyond your 
proposals for constitutional reform, you are really 
addressing yourself to intellectuals in general, and that 
your basic plea is for intellectuals to respect unintel- 
ligible products of cultural evolution. 
HAYEK: Exactly. 

LEIJONHUFVUD: And to handle them a bit more carefully, 
and with more caution than was done by the main intel- 
lectual schools in your lifetime. 

HAYEK: Exactly. You see, I am in a way taking up what 
David Hume did 200 years ago--reaction against Cartesian 
rationalism. Hume was not very successful in this, although 
he gave us what alternative we have, but there's hardly been 
any continuation. Adam Smith was a continuation of Hume, 
up to a point even [Immanuel] Kant, but then things became 
stationary and our whole thinking in the past 150 years or 



69 



200 years has been dominated by a sort of rationalism. 
I avoid the word rationalism because it has so many 
meanings. I now prefer to call it constructivism, this 
idea that nothing is good except what has been deliberately 
designed, which is nonsense. Our whole civilization has 
not been deliberately designed. 
LEIJONHUFVUD: Thank you very much. 



70 



TAPE: ROSTEN I, SIDE ONE 
TAPE DATE: NOVEMBER 15, 19 7 8 

ROSTEN: Well, Dr. von Hayek, it's a pleasure to see you 
after years of reading you and, indeed, listening to you. 
I was one of the auditors of a course you gave at the 
London School of Economics many, many years ago. Tell 
me, did you begin, in your intellectual life as an adult, 
did you begin as a Fabian? were you a socialist? were you 
an Adam Smith man? 

HAYEK: You could describe it as Fabian. Well, there were, 
in fact, Fabians in Austria, too, but I didn't know them. 
The influence which led me to economics was really Walter 
Rathenau's conception of a grand economy. He had himself 
been the raw materials dictator in Germany, and he wrote 
some very persuasive books about the reconstruction after 
the war. And [those books] are, of course, socialist of a 
sort--central planning, at least, but not a proletarian 
socialism. They were very persuasive, indeed. And I found 
that really to understand this I had to study economics. 
The first two books of economics [I encountered] , which I 
read while I was fighting in Italy, were so bad that I'm 
surprised they didn ' t put me permanently off economics; but 
when I got back to Vienna somebody put me on to Karl Menger 
and that caught me definitely. 

ROSTEN: Had you read the English economists, the classical 
economists? 

71 



HAYEK: At that time, no. Adam Smith I had read fairly 
early, but that's the only one--and in a German transla- 
tion. You see, English is really the third foreign 
language I learned; it's now the only one I can speak. 
But I was tortured all my childhood being taught French-- 
irregular verbs and nothing else--and consequently never 
learned to speak it really. I picked up Italian during 
the war in Italy--well, sort of Italian. 
ROSTEN: Very different. 

HAYEK: I don't dare to speak it in polite society, 
[laughter] That gave me the confidence to take up English, 
and ultimately, of course, I really learned it when as a 
young man after my degree I went to the United States. My 
first experience with American English was in New York 
in 1923 and '24. 

ROSTEN: I didn't know you'd come to the United States 
that early. 

HAYEK: It was before the time of the Rockefeller Foundation; 
so it was at my own risk and expense. I arrived in New 
York in March 1923 with twenty-five dollars in my pocket, 
with a series of letters of recommendation by [Joseph] 
Schumpeter, which each earned me a lunch and nothing 
else. [laughter] 

ROSTEN: Had you known Schumpeter in Vienna? 
HAYEK: Not really, but he was a visiting professor at 



72 



Coluinbia [University] before the war; so when [Ludwig von] 
Mises and [Friedrich von] Wieser learned that I wanted 
to go, they sent me to Schumpeter, who was then a chairman 
of the bank. He had just been minister of finance and 
was now chairman, and he equipped me with a number of let- 
ters of ministerial size, which I had to get a separate 
folder for to carry them to America. I delivered them all; 
so I met all the famous old economists. They all were very 
kind to me, but did nothing. 

I'd gone over there on a promise of a job from 
Jeremiah W. Jenks , the head trust specialist. But when 
I arrived, he was away on holiday; so I ran out of money. 
I then was greatly relieved that the very morning I was 
to start as a dishwasher in a Sixth Avenue restaurant, 
a telephone call came that Jenks had returned and was willing 
to-- I have ever since bitterly regretted that I cannot 
say I started my career in America [as a diswasher] . 
[laughter] 

ROSTEN: Now, you say you began as a Fabian socialist, under 
the influence of Walter Rathenau. In those days, of course, 
this was a kind of intellectual socialism, and you 
mentioned the fact that it wasn't proletarian. Did it 
interest you that so many of the German, Russian, Austrian 
intellectuals were the ones who became the Marxists, not 
the masses. It was an intellectual movement that spread 



73 



with enormous-- 

HAYEK : Well, you see, I spent my university days already 
arguing with these Marxists--my opponents were Marxists 
and Freudians. We had endless discussions, and it was 
really what I thought was the poverty of the argxaments of 
the Marxists which turned me against socialism. Inci- 
dentally, I'll let you in on another thing: both the 
Marxists and the Freudians had the dreadful habit of 
insisting that their theories were irref utable--logically , 
absolutely cogent. That led me to see that a theory which 
cannot be refuted is not scientific, and that made me later 
praise [Karl] Popper when he spelled the same idea out, 
which he had gained in the same experience. He was a few 
years younger; so we didn't know each other. But we both 
went through this experience, arguing all the time with 
Marxists and Freudians. 

ROSTEN: They were both ideologists of a very strong sort. 
HAYEK: Oh, very strong; all very good arguers, and very 
anxious to discuss. 

ROSTEN: They also had, I think, the power of an evangelical 
movement and a humane movement. By this I mean that those 
of us who listened to you and read you, or studied under 
people like Jacob Viner or Frank Knight or Lionel Robbins , 
always had to come to terms with the fact that the system, 
a free market system, was not humane, and that we felt that 



74 



the society had to undertake something. Remember, this 
was the Depression, and we were seeing unemployment and 
poverty, banks failing, people scared and people killing 
themselves because their earnings had been wiped out; and 
when the New Deal came along, it seemed that here was the 
humane answer. Indeed, my parents, who were socialists, 
stopped voting socialist, even though they liked and 
loved Norman Thomas, and began to vote for [Franklin] 
Roosevelt. We all felt that at last government had 
developed a "heart." Does any of this make-- 
HAYEK: Well, I didn't see it that way, but of course it 
tallies completely with what I am doing at the moment. 
You may be amused that a few days ago, when I was returning 
the last volume of Law, Legislation and Liberty for being 
printed, I inserted one sentence into it: "Man was 
civilized very much against his wishes." It's really the 
innate instincts which are coming out. [laughter] 
ROSTEN: That's a very Freudian statement. 

HAYEK: In a way. Well, it's Freudian and anti-Freudian, 
because Freud, of course, wanted to relieve us of these 
repressions, and my argument is that by these repressions 
we became civilized. 

ROSTEN: His whole point is that civilization is the repres- 
sion of guilt, and that without that you can't have-- 
HAYEK : In his old age, of course. 



75 



ROSTEN : --and the repression of aggression, of the 
hostility. 

HAYEK: When he wrote Civilization and Its Discontents , 
he was already getting upset by what his pupils were 
making of his original ideas. 

ROSTEN: Quite so, I was interested that your works 
in the last ten years have become, or have returned to, 
a much more social-philosophical scale. But let's start 
with the earlier ones. You created a furor in the United 
States, England, and I imagine around the world, with The 
Road to Serfdom , because it came out at a time when you 
were a lone voice speaking in the wilderness about the 
terrible dangers which were inherent in turning over to 
government--even good government by a good and well- 
intentioned people--powers which were both dangerous and 
inexorable. If you were to write that book over again, 
first. Would you make any changes? and secondly, what would 
you call it? 

HAYEK: Well, I suppose I would still call it the same, 
although I was never quite happy with the title, which I 
really adopted for sound. The idea came from [Alexis de] 
Tocqueville, who speaks about the road to servitude; I would 
like to have chosen that title, but it doesn't sound 
good. So I changed "servitude" into "serfdom," for merely 
phonetic reasons. 



76 



ROSTEN : Has it occurred to you since then that this was 

one reason there was so much vicious response, because the 

English and the Americans could not believe that they 

were in danger of becoming serfs. It seemed unthinkable. 

HAYEK: There wasn't the vicious reaction in England. In 

fact, the English socialists, or most of them, had all 

themselves become a little apprehensive already at the 

time. 

ROSTEN: That early? 

HAYEK: Oh, yes. The book was received in England in the 

spirit in which I had meant it to be understood: as a 

serious argument. In fact, I'll tell you one story: 

Barbara Wootton , who wrote one book against me, told me, 

"You know, I had been at the point of writing a rather 

similar book, but you have now so overstated the case that 

I have to turn against you." [laughter] 

ROSTEN: She said you had overstated the case-- 

HAYEK : --against socialism. 

ROSTEN: — against planning. 

HAYEK: The United States reception was completely different, 

Of course, it came here at the height of the enthusiasm for 

the New Deal. All the intellectuals had just discovered 

their new great idea, and the extent to which I was 

abused here — [I suffered the] worst [abuse], incidentally, 

by a man who had been my colleague at the-- [laughter] 



77 



ROSTEN: Herman Finer. I think that's the most savage 
book I've ever read. 

HAYEK: But there's a comic part. I think I can now tell 
you the story behind it. Herman Finer had come to hate 
the London School of Economics, and particularly Harold 
Laski , because when he had come to the United States and 
war broke out, he had asked for a leave, an extension of 
leave, and it was denied him because he was needed for 
teaching. He was so upset about this that he turned 
against the London School of Economics, and particularly 
Laski. Then it happened that I was the first member of the 
London School of Economics on which he could release all 
his hatred of the place. So I had to suffer for Harold 
Laski. [laughter] 

ROSTEN: I am horrified to hear you adopt so simple a 
psychological point of view. [laughter] 
HAYEK: It was contributory. 

ROSTEN: May I suggest another point. It takes a good deal 
of sophistication and poise to accept a system which is 
full of apparent paradoxes. The socialist system is very 
persuasive and very simple to explain to people. The govern- 
ment will take care of making sure that resources are 
sensibly and rationally distributed, that people will get 
what they deserve. There will be no unemployment; there 
will be no war; there will be no depression. The system 



78 



that you have described, and that actually is in the great 
tradition in economics, is one which demands a very high 
degree of equilibrium, in the presence not only of complex- 
ity but of apparent indifference to human happiness. 
That is, profits are wicked and cruel; workers are 
exploited; imperialism, the search for profits, brings 
war. And the evidence seems visible. What I'm trying to 
suggest is that people like Finer, and many political 
scientists and sociologists, were reacting to what they 
believed--or felt threatened by--was an intellectual 
performance of great complexity which "ignored the hxmian 
problems of the time." Is this correct? 

HAYEK: You know, we're coming up to what I am doing at 
the moment. In fact, what I am writing at the moment is 
called "The Reactionary Character of the Socialist 
Conception." My argument there is essentially that our 
instincts were all formed in the small face-to-face society 
where we are taught to serve the visible needs of other 
people. Now, the big society was built up by our obeying 
signals which enabled us to serve unknown persons, and to 
use unknown resources for that purpose. It became a 
purely abstract thing. Now our instinct still is that 
we want to see to whom we do good, and we want to join 
with our immediate fellows in serving common purposes. 
Now, both of these things are incompatible with the great 



79 



society. The great society became possible when, instead 
of aiming at known needs of known people, one is guided 
by the abstract signals of prices; and when one no longer 
works for the same purposes with friends, but follows one's 
own purposes. Both things are according to our instincts , 
still very bad, and it is these "bad" things which have 
built up the modern society. 

ROSTEN: May I ask you to comment on the fact that it isn't 
because of instinct that we have been raised that way-- 
and I don't think that instincts vary very much according 
to how you're raised, except in intensity--but [because of] 
the fact that people need to have some kind of religious 
structure. Now, you can qualify the word religion , [but 
people need] some scale of what is good and what is evil, 
some scale of what is worth and not worth living for. 
Our Judeo-Christian tradition tells us "Love thy neighbor," 
"Am I my brother's keeper?" and as you very shrewdly 
pointed out, we start with the family as a little society 
in which we take care of each other. The mother gives 
food from her plate to the child, or says to the child, 
"Now, don't be greedy; give a little to so-and-so. Just 
because you're older and stronger does not mean that you 
have the right to it." And the whole structure of a 
religiously supported and religiously cemented social 
system is involved when you come to deal with-- 



80 



HAYEK: Oh, exactly, exactly. But it's that very charac- 
teristic which refers to the neighbor, the known fellow 
man. Our society is built on the fact that we serve 
people whom we do not know. 

ROSTEN: Roosevelt was shrewd enough to say to Latin 
America, "We shall be your good neighbors. We want 
to be good neighbors." He didn't realize he was so 
confirming Hayek. [laughter] But how do you respond to 
this? Do you find that in societies which have a different 
religious structure, or a different ethos, that it is 
permissible to run the society without such values? or that 
power is in and of itself sufficient? 

HAYEK: Well, that's a very long story; I almost hesitate to 
talk about it. After all, we had succeeded, so long as the 
great mass of the people were all earning their living in 
the market, either as head of a household or of a small 
shop and so on. Everybody learned and unquestionably 
accepted that what had evolved was--the capitalist ethic 
was much older than capitalism--the ethics of the market. 
It's only with the growth of the large organizations and 
the ever-increasing population that we are no longer brought 
up on this ethic. 

At the same time that we no longer learned the 
traditional ethics of the market, the philosophers were 
certainly telling them, "Oh, you must not accept any 



81 



ethical laws which are not rationally justifiable." 
These two different effects--no longer learning the 
traditional ethics, and actually being told by the philo- 
sophers that it's all nonsense and that we ought not to 
accept any rules which we do not see have a visible pur- 
pose--led to the present situation, which is only a 150- 
year event. The beginning of it was 150 years ago. Before 
that, there was never any serious revolt against the market 
society, because every farmer knew he had to sell his 
grain. 

ROSTEN: Do you think that Marx, who was not alone and 
who, after all, had his own predecessors-- First of all, 
his misreading of history was always to me so astonishing, 
even when I first read it. For example, when he suggests, 
in effect, that all wars are carried on for purposes of 
profit as part of the profit-making system — All you had 
to do was pick up a map of the world and look at the 
ferocity and the horrors of wars in the East, say, or in 
Africa, or a history book of the religious wars, which were 
very harsh wars, and so on. It is interesting that he 
captured, and that his disciples then captured, with kind 
of an umbrella, all of our troubles. They did not dis- 
tinguish society from a capitalist society; they did not 
distinguish the group from a capitalist group. They 
found a convenient way of saying to people, "The reason 



82 



i 



you are miserable, or inadequate, or short, or weak, is 
because the system has been so unjust." And this appeal, 
then not so much to the Germans as to the Russians, was 
that it was implemented by to me one of the great tragic 
disasters of the human race, Lenin, who taught Hitler. 
HAYEK: Oh, sure. Well, you see, I think the intellectual 
history of all this is frightfully complex, because this 
idea of necessary laws of historical development appears at 
the same time in [Georg Wilhelm Friedrich] Hegel and 
[Auguste] Comte. So you had two philosophical traditions — 
Hegelian idealism and French positivism--really aiming at 
a science which was supposed to discover necessary laws 
of historical development. But it caught the imagination-- 
[It] not only [caught] the imagination but it appeased 
certain traditional feelings and emotions. As I said before, 
once you put it out that the market society does not 
satisfy our instincts, and once people become aware of this 
and are not from childhood taught that these rules of the 
market are essential, of course we revolt against it. 
ROSTEN: The interesting thing is the unawareness that people 
can have about the impersonal consequences of a system. 
My own intellectual history was enormously affected by a 
book that you edited. Capitalism and the Historians , in 
which you have a chapter. That's a remarkable book because, 
in effect, what it says is that all that my generation had 



83 



been taught about the horrors of the Industrial Revolution, 
based almost entirely on the work of the Hammonds [Barbara 
and J, L. ] was a terribly incorrect and a terribly super- 
ficial statement. And I think it was [T. S.] Ashton who 
points out that, of course, if you went into the slums of 
London and saw the poverty there, you thought these people 
were poorly off; but they thought they were very well off. 
He quotes the letters of the clergyman, who would come to 
visit London, saying, "I just saw the Jenkinses. Isn't it 
marvelous. Only last year they were starving in the ditches 
and sleeping in the barns and had no shoes; their children 
now are shod and go to school," and so on. 
HAYEK: Well, I've long believed that misery becoming 
visible, not appearing for the first time but being drawn 
to the attention of the urban population, was really the 
cause even of an improvement of the status of the poorest 
class. But so long as they-- 

ROSTEN: You mean it improved the status of the privileged 
classes . 

HAYEK: Oh, it did improve. But, you see, the people who 
lived so miserably in town really had been drawn to the town 
because they were so much better off than they had been 
before. 

You mentioned this book which I edited. Again, as in 
the former instance of the one on collectivist economic 



84 



planning, it was that I found that the general public just 
did not know the most important work which was being done 
by the historians. In this case, not only Ashton but 
[W. H.] Hutt. Hutt's study was of the early industrialization 
and the misrepresentation by certain parliamentary com- 
missions in inquiring into the state of the poor. For 
purely political reasons they had distorted the real facts. 
ROSTEN: Have you ever run across a book by a young 
Cambridge graduate called Prelude to Imperialism ? 
HAYEK: I've only seen the title; no, I don't know it. 
ROSTEN: It's an extraordinary book, because it's in the 
tradition of Ashton and Hutt. What he did was to 
examine the letters of the Christian missionaries who 
went to Africa--the letters back to their societies-- 
and what emerges is as startling a transformation of our 
impressions of what went on in Africa as the one dealing 
with the Industrial Revolution. The most exploited group 
in Africa were the wives of the missionaries. They worked 
much harder than the natives, because they had to teach 
them their own language, and make a vocabulary, and sing the 
songs, raise the vegetables, and be the nurses and the 
doctors, and settle the quarrels. [laughter] 
HAYEK: I can quite believe it; it never occurred to me. 
ROSTEN: But the book is full of extraordinary examples of 
what I like to say are the nonvisible and much more 



85 



significant consequences. For example, if you were 

to take ninety percent of the graduating students of 

the colleges of the United States and ask them what a 

bank or a banker does, what percentage do you think would 

answer to your satisfaction? 

HAYEK: Hardly any. [laughter] 

ROSTEN: Yet they have all been exposed to banks, bankers, 

economics, and professors. How many of them would know 

what an executive does? 

HAYEK: Well, that is extraordinarily difficult to explain-- 

that I know from my own experience. The business schools 

are doing quite a good job, the economics students know 

nothing about it. 

ROSTEN: The ignorance of people about the things they 

vote about is, of course, very depressing. One must temper 

one's disillusionment with the fact that these are very 

complicated [issues], and by uttering the heresy that not 

all people are intelligent. And you run into the problem 

of what the fate of the democracy will be when the crises 

become more acute and depend on more "technical signals," 

to use your expression, or "information," to use mine. 

HAYEK: Well, I'm very pessimistic about this. You see, 

my concern has increasingly become that in democracy as 

a system it isn't really the opinion of the majority which 

governs but the necessity of paying off any number of special 



86 



interests. Unless we change the organization of our demo- 
cratic system, democracy will-- I believe in democracy as 
a system of peaceful change of government; but that's all 
its whole advantage is, no other. It just makes it 
possible to get rid of what government we dislike, but that 
omnipotent democracy which we have is not going to last 
long. What I fear is that people will be so disgusted 
with democracy that they will abandon even its good 
features . 

ROSTEN: If you had magical powers and were to set about 
restructuring the system — A friend of mine, in making a 
witticism, prompted me to retort by saying, "That's a 
good rule; let's pass a law that for every law that [the 
U.S.] Congress passes it must simultaneously repeal twenty 
others . " 

HAYEK: Twenty others; yes, I agree. [laughter] 
ROSTEN: At least twenty. But what would you do? 
HAYEK: Oh, in the long run, the only chance is to alter 
our constitutional structure and have no omnipotent single 
representative assembly, but divide the powers on the 
traditional idea of a separation of powers. [You would] 
have one which is confined to true legislation in the sense 
of general rules of conduct, and the other a governmental 
assembly being under the laws laid down by the first: the 
first being unable to discriminate; the second, in 



consequence, being unable to take any coercive action 
except to enforce general laws. 

You see, I believe Schumpeter is right in the sense 
that while socialism can never satisfy what people 
expect, our present political structure inevitably drives 
us into socialism, even if people do not want it in the 
majority. That can only be prevented by altering the 
structure of our so-called democratic system. But that's 
necessarily a very slow process, and I don't think that 
an effort toward reform will come in time. So I rather 
fear that we shall have a return to some sort of dicta- 
torial democracy, I would say, where democracy merely 
serves to authorize the actions of a dictator. And if the 
system is going to break down, it will be a very long 
period before real democracy can reemerge. 
ROSTEN: Two points, if I may: the Schumpeter book--I 
assume you mean Capitalism, Socialism and Democracy — 
which was to me a stupendous piece of work, makes the 
horrifying point that capitalism will be destroyed 
because of its successes. 
HAYEK: In a way it's true. 
ROSTEN: Would you comment on that? 

HAYEK: Well, capitalism has, of course, raised expecta- 
tions which it cannot fulfill. Unless we take from 
government the powers to meet the demand of particular 



88 



groups, which are raised by their success, I think it 

will destroy itself. This applies to both capitalism 

and democracy. 

ROSTEN: Does it strike you as ironic that perhaps the 

most influential group, in terms of political leverage, 

is not the business group or the capitalist group in the 

United States at all, but the unions? 

HAYEK: Oh, you know, my main interest is England; so I 

cannot be unaware of this. 

ROSTEN: I hope that we're in better shape than England. 

HAYEK: In that respect, you are still a little behind 

English development. But I used to say, when I knew the 

United States better than I do now, that in America, 

fortunately, the unions are just a capitalist racket; 

but it's no longer true. 

ROSTEN: Unions are part of the establishment in the 

United States. 

HAYEK: Well, so they are in England--much more so. But 

the American unions did believe, basically, in capitalism, 

but I fear this is changing. 

ROSTEN: In the United States, certainly, the unions have 

been much more flexible and less doctrinaire. 

HAYEK: Yes. 

ROSTEN: And it would seem to me that no matter how one 

read history, in a free society it's impossible to prevent 



89 



people from meeting out of a feeling of their joint 
interests in order to-- 

HAYEK: Oh, I have no objection against unions as such. I 
am for--what is the classical phrase? — freedom of associa- 
tion, of course, but not the right to use power to force 
other people to join and to keep other people out. The 
privileges which have been granted the unions in America 
only by the judicature--in England by law, seventy years 
ago--that they can use force to prevent people from doing 
the work they would like, is the crux, the dangerous aspect 
of it. While I think unions are fully justif ied--as a 
matter of fact, I support freedom of association--f reedom 
of association means free to join and not to join. 
ROSTEN: Freedom of nonassociation. 
HAYEK: Yes, yes. 

ROSTEN: One interesting fact about this is that the 
Communist party tried to infiltrate the unions in the 
United States in the early thirties and the late twenties, 
and were quite savagely and quite successfully--and I think 
quite intelligently--kept out of the leadership. This 
was to a much lesser degree true in England. They don't 
call themselves Communists; they say they're Marxists. 
HAYEK: No, but they do want to destroy the present 
capitalist system. 
ROSTEN: The stewards, or what we would call the foremen. 



90 



are surprisingly candid about that. The responses in the 
polls-- For instance, a friend of ours, Mark Abrams, who 
is also at the London School of Economics, did a poll 
in which he asked a group of stewards at one of the large 
factories--! think it was [British] Leyland, which was in 
very serious trouble; it was really bankrupt and was being 
held up by the government--he said, "But if your demands 
are met, don't you realize it will wreck the company, it 
will wreck the industry?" They said, "But that's exactly 
what we want!" I don't think you would find an American 
labor leader who's responsible who would say that. 
HAYEK: They certainly wouldn't admit it. [laughter] 
ROSTEN : No, I have the feeling you wouldn't have it any- 
way. 

HAYEK: Probably, yes; you're probably right. 
ROSTEN: That's why I said, to a degree, that the experience 
in England--to which I have returned often; it's a country 
I love--the depth of the class distinction, which is 
just beginning to disappear, has created degress of bit- 
terness which I've never found in the United States. There 
is a hatred. 

HAYEK: My impression of England may be wrong in the sense 
that I only really know the south. All you are speaking 
about is the north of England, where I think this feeling 
prevails. But if you live in London-- Right now my relations 



91 



are mainly in the southwest of England, where my children 
live, and I don't find any of this sharp resentment. And 
the curious thing is that in the countryside of southwest 
England, the class distinctions are very sharp, but they're 
not resented. [laughter] They're still accepted as part 
of the natural order. 

ROSTEN: That is so, and one puzzles about that. But as 
in all of these social things, you can make certain guesses 
Are you impressed, as you get older, as I get older, 
by the unbelievable intensity with which people maintain 
their beliefs, and the difficulty of getting people to 
change their minds in the face of the most extraordinarily 
powerful evidence? 

HAYEK: Well, one has to be if one has preached this thing 
for fifty years without succeeding in persuading. [laughter] 
ROSTEN: You mean you still are the voice in the wilderness? 
Well, you can hardly say that. 

HAYEK: No, you see, now I'm in the habit of saying that 
when I was young only the very old people believed in the 
sort of libertarian principles in which I believe; when I 
was in my middle age nobody else did, and I was the only one ; 
I have now lived long enough to have the great pleasure 
of seeing it reviving among the younger generation, people 
in their twenties and early thirties. There is an increas- 
ing number who are turning to our position. So my 



92 



conclusion is that if the politicians do not destroy the 
world in the next twenty years, there is good hope, 
because there's another generation coming up which reacts 
against this. But the chance that they will destroy the 
world in the next twenty years, I'm afraid, is fairly 
high. 

ROSTEN: The difficulty of contending with government 
power, when even the press is dominantly committed to the 
faith or the ideology that you think wrong, only increases 
the difficulties of the problem. That is, we do have a 
very, very free press, a free radio, and a free television, 
but the system which has produced the people who do the 
writing and the thinking and the talking and so on is 
such that your hope for a rise of the libertarians, let us 
call it, seems to me to be a faint one, given the opposi- 
tion. 

HAYEK: Well, I'm not so pessimistic as I used to be on 
this subject, as a result of recent experience. It has 
long been a puzzle to me why what one commonly calls the 
intellectuals, by which I don't mean the original thinkers 
but what I once called the secondhand dealers in ideas, 
were so overv,'helmingly on the Left. That [phenomenon], 
provides sufficient explanation of why a whole generation 
influenced by this has grown up. And I have long been 
convinced that unless we convince this class which makes 



93 



public opinion, there's no hope. But it does seem now 
that it's beginning to operate. There is now a reaction 
taking place in that very same class. While even ten years 
ago there was hardly a respectable journal--ei ther news- 
paper or periodical--to be found that was not more or 
less on the Left, that is changing now. And I seriously 
believe that this sort of thing in twenty or thirty years 
may have changed public opinion. The question is whether 
we have so much time. 

ROSTEN: When you think of the likelihood of a recession, 
which most economists say will happen, whether we're in it 
now or we'll have it at the beginning of '79, you think 
of the human responses to that recession. You think of 
the man and his wife and three children, and he's thrown 
out of work, and there isn't a job anywhere except 500 
miles away, and it's in a different business, and so on. 
Will you not have a revival then of the feeling that the 
system has let them down, the system has failed, that again 
we are having unemployment, again we are having inequity? 
HAYEK: There will certainly be a reaction of this sort, 
but I rather hope that for the idea of the system, govern- 
ment will be substituted. I think people are beginning 
to see that the government is doing a great deal of harm, 
and this myth of "the system" which is responsible for 
everything can be exposed, and I think is gradually being 



94 



weakened. I may be overoptimistic on this, but I believe 
government is now destroying its reputation by inflation. 
ROSTEN : Isn't that because inflation is the easiest 
way to meet the demands of the interest groups? 
HAYEK: Oh, surely, but at the same time people do see that 
this is a constant concession to the expediency of the 
moment, at the price of destroying the whole system. 
ROSTEN: Are you a complete monetarist? 

HAYEK: Yes, in the sense that I am absolutely convinced 
that inflation is done by government; nobody else can do 
anything about it. 
ROSTEN: By printing of money. 

HAYEK: Yes. Of that I have no doubt; I believe Milton does 
oversimplify a little — 

ROSTEN: Milton Friedman, I should say. 

HAYEK: — by concentrating too much on the statistical- 
magnitude relation between the total quantity of money and 
the price level. It isn't quite as simple as this. But 
for all practical purposes we are really--our differences 
are fine points of abstruse theory--wholly on the same side. 
ROSTEN: The political uses of inflation are so attractive 
and so powerful, but as you say, people begin to realize 
thay they're being gulled, they're being cheated. Sure 
they get ten dollars a week more, but look at how much 
more they pay in social security withholding, and how much 



95 



more they pay-- Two things astound me that parallel this 
growing awareness about what inflation does: there has 
not been a growing awareness about the appalling shabbiness 
of official figures on almost everything. That is, the 
figures on inflation itself are outrageously underesti- 
mated — 

HAYEK: The figures on unemployment, on the other hand-- 
ROSTEN: Unemployment is overestimated because they ask 
a person if he's employed or unemployed, and the person 
says he's unemployed, and that includes many housewives 
who don't want a job, or don't care about the job. But 
it's morally more justifiable to say, "Oh, I've been 
tr^'ing to get a job" than to say "Who wants to work?" But 
it's surprising to me that the figures on both of these 
very significant indices are continually being put out, 
the president has regular press conferences, every member 
of the cabinet [knows them], and no one says, "Tell us, 
how did you get these figures? how much faith do you put 
in them? and can we believe them?" 
HAYEK: Do you read the Wall Street Journal ? 
ROSTEN: Oh, yes! 

HAYEK: There you get all the facts very clearly put, and 
it has no effect. 

ROSTEN: When you were talking about the growth of new 
voices-- The Wall Street Journal has become a national 



96 



newspaper in a way that it wasn't; it was thought of as 
a trade journal. I often think that just as you might 
have chosen a different name for The Road to Serfdom , they 
would be better off if it wasn't the Wall Street Journal , 
because to the Midwest that already means bankers and so 
on. 

HAYEK: Of course, yes. 

ROSTEN: But also the rise of a magazine like the Public 
Interest , which has become influential far beyond its 
circulation, and in the intellectual community. I was 
interested that one of your fellow Nobel laureates, who I 
think would be classed as a liberal, Paul Samuelson, in 
a column several years ago--it was quite a startle--raised 
the question as to whether imperialism really pays. He 
had been reading people like Hutt, I suspect, and [John] 
Jewkes , I suspect, and possibly [Alec] Cairncross, and he 
came to this extraordinary conclusion. He said, "I would 
be hard-put to know how to prove it," and explains why. He 
says on balance it would be very hard to say--this is 
not to say that, of course, no Englishmen prof i ted--but on 
balance that the total input, as compared to where it might 
have gone, that this necessarily represented English 
interests as against Indian. He said, "I couldn't try to 
make that case." What he in effect said was we really can 
no longer continue to hold that position, which was one 



97 



of the great props, I think, in socialism. 
HAYEK: Well, you see, Samuelson--! think he's an honest 
person, and he's moving in the right direction. He 
probably started — well, I wouldn't say far on the Left — 
but anyhow it was predominantly what you here call liberal, 
and what I call socialist ideas. But he does see the 
problems; there are others who don't. 



98 



TAPE: ROSTEN I, SIDE TWO 
TAPE DATE: NOVEMBER 15, 19 7 8 

HAYEK: Even Nobel laureates. [laughter] 

ROSTEN: Well, you were a colaureate with a man who 

probably didn't agree at all with you, right? 

HAYEK: Well, [Gunnar] Myrdal. 

ROSTEN: But he's not really an economist, is he? 

HAYEK: Oh, yes. 

ROSTEN: I always thought of him as a sociologist because 

of his work on the American Negro. 

HAYEK: He started with exactly the same sort of problems I 

did. 

ROSTEN: Is that right? 

HAYEK: Forty years or fifty years ago. 

ROSTEN: Which of the English economists do you feel are 

beginning to follow the pattern or reexamining what you 

would call the socialist, what I would call the liberal, 

tradition? 

HAYEK: Well, among the young people, no single very 

eminent person, but the work being done by the Institute 

of Economic Affairs in London is, of course, absolutely 

first class. They are so very good because they are 

taking up particular problems and illustrating in point 

after point how the present system doesn't work. I think 

they have gradually achieved a position of very great 



99 



influence indeed, and that is really the main source 
of resistance. It creates a coherent body of opinion 
which is probably more important than any of the peri- 
odicals or newspapers in England. 

ROSTEN: You had said earlier that with Schumpeter you 
agreed that one of the problems of the free market, or 
the free society, is that the economic base thereof, 
capitalism, arouses expectations it cannot fulfill. I 
wish you would comment on the passion, the drive, or the 
delusion, or whatever you want to call it, but the power 
of the movement for equality. 

HAYEK: Well, it's, I think, basically a confusion. The 
idea of equality before the law is an essential basis of 
a civilized society, but equality before the law is not 
compatible with trying to make people equal. Because 
to make people equal who are inevitably, unfortunately, very 
different in thousands of respects, you have to treat them 
differently. So between these two conceptions of equality 
is an irreconcilable conflict. Material equality requires 
political discrimination, and ultimately really a sort of 
dictatorial government in which people are told what they 
must do. I think egalitarianism-- Well, I would even go 
further: our whole morals have been based on our esteeming 
people differently according to how they behave, and the 
modern kind of egalitarianism is destructive of all moral 



100 



conceptions which we have had. 

ROSTEN: Coming to that problem from an entirely dif- 
ferent discipline, since I was in political science 
and political theory, I have two comments: first, in 
all of the debates on the [U.S.] Constitution-- In the 
Federalists the United States had a collection of political 
brains such as I think existed nowhere in history except 
in Athens. 

HAYEK: I entirely agree, yes. 

ROSTEN: The most unbelievable brilliance, resilience, and 
flexibility. Two very interesting things: nowhere did 
they worry about the growth of federal power — on the 
contrary, they were reasonably convinced that the states 
would be so jealous of their sovereign rights that they 
v/ould have to coax them into the union and bring them 
dragging their heels. But the idea of a federal system, 
which has become a Leviathan, so far as I remember, is 
nowhere to be found. It's one of the few examples in which 
their predictive activities were blank. 
HAYEK: Yes. 

ROSTEN: Now, the equalitarian idea would have seemed to 
them ludicrous, because what they said was that the kind of 
society we're trying to form, the very diversity and rich- 
ness of life, of the farmer to till his soil, of the 
hunter to do this, and so on-- The awareness that they had 



101 



of the fact that freedom would give people an opportunity 
to express themselves and live their kind of lives, even 
unto what they believed in or what church they went to, or 
whether they went to church or not-- None of them, inciden- 
tally, used the word God , you know, but rather Providence , 
Divine Providence . 

HAYEK: Well, the one who I think came nearest to seeing 
the danger of excessive power of the federal government was 
[James] Madison, a man of whom I think most highly. 
ROSTEN: He wrote the Fifth [Amendment]. 

HAYEK: Yes. As for the others, certainly, you're quite 
right. 

ROSTEN: He also picked up the point of Aristotle about the 
middle class. 
HAYEK: Yes. 

ROSTEN: In a most powerful way. Incidentally, it just 
occurred to me-- We're sitting here talking and I couldn't 
help but think how few economists I know with whom I could 
carry on this kind of discussion. In that sense, if I may 
say so, you are unique, and I'm reminded of the fact that 
in the United States there were not separate fields called 
economics and political science. It was called political 
economy, and it seems to me a great tragedy that the fields 
were split. 
HAYEK: I agree, and I even more regret that there's a 



102 



complete split between economics and law. You see, in my 
time on the Continent, you could study economics only as 
part of a law degree. That was very beneficial, and I still 
maintain, as I once put it, that an economist who is only 
an economist cannot even be a good economist. 
ROSTEN: I'm so glad to hear you say that. Incidentally, 
just as you mentioned the rise of a libertarian movement 
among the young economists, it's interesting how many new 
centers there are called the study of law and economics, 
or economics and law. There's one down in Florida. 
HAYEK: I'm going there in February, yes. 
ROSTEN: I always anticipate you, or I'm behind you. 
[laughter] Let me ask you this question: What would 
you think if you were talking to a group of working men 
who said, "These two eggheads and highbrows, they talk on 
a high level, but I've got a wife and kids to support, 
and I can't possibly raise them on the salary I'm getting 
today. It's a rotten society. We have moved twenty times, 
we were burned out, insurance didn't pay," whatever. What 
do you think a society owes, if you want to use that term? 
I'm not talking about the The Social Contract , which was 
written by another very talented but I think crazy man. 
What do you think the society owes those of its members who 
are law-abiding? 
HAYEK: Well, "owes," I think, is a somewhat inappropriate 



103 



expression; but I think you can reasonably expect a 

tolerably wealthy society to guarantee a uniform minimum 

floor below which nobody need descend. The people who 

cannot earn a certain very low minimum in the market 

should be assured of physical maintenance. But I'm 

afraid even this cannot be generalized, because only a 

tolerably wealthy society can physically do it. The 

Indians couldn't possibly do it, and many of the other-- 

ROSTEN: You mean India, not the American Indians. 

HAYEK: East Indians, yes. The same is true of many of 

the underdeveloped countries. But once you have reached 

a certain level of wealth, I think it's in the common 

interest of all citizens to be assured that if their 

widows or their children by some circumstances become unable 

to support themselves, they would be assured of a certain 

very low minimum, which on current standards would be 

miserable but still would secure them against extreme 

deprivations. But beyond that I don't think we can do 

anything. 

ROSTEN: Do you say we can't do it because we really don't 

have the resources, or the GNP , or — 

HAYEK: No, it would destroy the motive to keep our system 

going. 

ROSTEN: Yes. Now, if people who were getting this minimum 

income-- I should hasten to add that I'm sure you do not 



104 



mean the minimum wage, which is a different animal. 
HAYEK: Oh, no. On the contrary. 

ROSTEN: But if people could supplement that income by 
part-time work, handyman work, and so on-- 

HAYEK: Oh, that's all right. I wouldn't object to that. 
ROSTEN: You wouldn't deduct that? 

HAYEK: No. Most of the people I have in mind would really 
not be able to make much of an extra income. But if some 
widow who had to live on that small minimum income did take 
in some washing in her kitchen, I just would not notice it. 
[laughter] 

ROSTEN: I asked what does the society owe, and I feel that, 
in that sense, a society does owe its people certain things. 
First military protection. 
HAYEK: Oh, yes, of course. 

ROSTEN: You can't go out and buy a few bombs to protect 
your house and so on. We owe, the society owes, and the 
legislators and the people who have been elected freely-- 
HAYEK : That would reform the society before we get this 
protection. 

ROSTEN: Exactly. VJe don't want to be eaten by the nearby 
cannibals, whatever name they may have. 
HAYEK: Yes. 

ROSTEN: Incidentally, you were surprisingly lenient, it 
seemed to me, on the Soviet Union. 



105 



HAYEK: In The Road to Serfdom ? 

ROSTEN : Yes . 

HAYEK: Well, you forget that it was our ally in war 

at the time I wrote and published it. 

ROSTEN: Well, what year did it come out? 

HAYEK: In '44. 

ROSTEN: This was just shortly after the execution of 

[Henrik] Ehrlich and [Viktor] Alter and the Katine Forest 

and all of that. No, I'm not criticizing you-- 

HAYEK: We didn't know about these things yet. You see, 

in fact, I say it came out in '44, but it was mostly 

written in '41 and '42. 

ROSTEN: I see. And you felt that it was unwise-- 

HAYEK : I just had to restrain myself to get any hearing. 

Everybody was enthusiastic about the Russians at that time, 

and to get a hearing, I just had to tune down what I had 

said about Russia. 

ROSTEN: I see, yes. 

HAYEK: You asked me before whether there is anything I 

would do differently to the book now. Apart from that which 

is directed against the sort of socialism which is largely 

abandoned by the official Socialist party, I would certainly 

speak much more openly about the Communist system than I 

did in that book. 

ROSTEN: I said earlier how people do not change their 



106 



i 



opinions. Even today some of the American intellectuals-- 
the literary community; it's stretching the point to say 
the intellectual community, but the literary community and 
the breastbeatings and the mea culpas--temper their due 
revelation in ways that make me very angry. I went to 
the Soviet Union very early on, just after Roosevelt 
recognized it, and spent four months there. We studied in 
something called the First Moscow University. When I came 
back, people wanted to know [about it]. I said, "VJell, 
you know, one thing that worries me terribly is that they're 
going to have to become anti-Semitic." My sociologist 
friends were horrified and asked why, and I said, "Because 
Jews ask questions." I tried to find two Jews in Moscow, 
and I was told they were on vacation; I was told they 
would be back; and I was told this, and I was told that. 
[My friends] said, "But you're wrong; this is a dreadful 
thing to say. In fact, it is against the law to be anti- 
Semitic!" I said, "My dear man, they're punishing the 
Jews today not because they're Jews but because their fathers 
were jewelers." They could actually not get into the 
university. 



107 



TAPE: ROSTEN II, SIDE ONE 
TAPE DATE: NOVEMBER 15, 19 7 8 

HAYEK: Our discussion turned in a direction which I was 
always tempted not to speak about. This is supposed to 
be about my past, not what I am going to do — that's really 
not the purpose. But at the moment I'm writing an essay 
under the title "The Reactionary Character of the Socialist 
Conception," which is all based on the idea that--I 
explained part of it--natural instincts are being released 
by, on the one hand, the discipline of a gradually evolved 
commercial ethics being discredited; on the other hand, 
rationalism telling people, "Don't believe anything which 
cannot be explained to you. " 

I'm having great fun writing this out. It's all meant 
to be the basis of a public debate, which we intend to hold 
someday in Paris, on the question, "Was socialism a 
mistake?" for which I have gained the support of a dozen 
members of the Mont Pelerin Society. The great problem is 
how to determine the opposite team, because if we select it, 
it won't have any credibility. So we have finally decided 
to postpone the thing, which we meant to hold this coming 
April, for a year, and try to write out the whole thing as 
a challenge and ask the other side to form a team from 
their midst. 
ROSTEN: Wouldn't Abba Lerner be someone — 



108 



HAYEK: Abba Lerner was certainly on my list, but I have 
since been told he hardly any longer believes in social- 
ism, [laughter] That's my trouble; the people I knew, 
who were very honest people, mostly have lost their 
belief in socialism. I had Solzhenitsyn on my list, and 
two days after I had put his name down, he declared 
publicly at Harvard [University] that he was no longer 
willing to defend socialism. [laughter] 

ROSTEN: Well, I think you'll find plenty of intellectuals 
in the United States who do. Well, you know, in talking 
to you, we've really neglected--and I would like to repair 
that neglect--going back to your experiences in England: 
first, the London School of Economics, where you met Lionel 
Robbins . 

HAYEK: Well, Robbins, of course, got me into the London 
School of Economics. I didn't know him before, but he got 
very interested in an essay I had done criticizing-- Do 
you remember the names of [William] Foster and Catchings? 
ROSTEN: Yes, Waddill Catchings. 

HAYEK: I had written an essay called "The Paradox of 
Saving," which fascinated Robbins; so he asked me to give 
these lectures on prices and production that led to my 
appointment. We found that Robbins and I were thinking 
very much on the same lines; he became my closest friend, 
and still is, although we see each other very rarely now. 



109 



For ten years we collaborated very closely, and the 
center of teaching at the London School of Economics was 
our joint seminar. Robbins, unfortunately, before he had 
achieved what he ought to have done — He might have written 
the textbook for this generation--and he had it all ready — 
but with the outbreak of the war he was drawn into govern- 
ment service. That's a real tragedy in the history of 
economics. Up to a point, he has since become a statesman 
as much as an economist, and I don't think he would any 
longer want to do this sort of thing. 

ROSTEN: Would this have been a textbook on the price 
system? 

HAYEK: Yes, just a textbook of economic theory, essentially 
of the functioning of the market. He was a brilliant 
teacher, a real master of his subject. Unlike the English 
of that period, he was not at all insular; he really knew 
the literature of the world. In a sense, modern economics 
is his creation, by bringing together what was then a 
number of diverse schools: the English tradition of 
Marshall, the Swedish tradition, the Austrian tradition. 
And he did it very effectively in his lectures, which were 
masterly. If those had been turned into a textbook, it 
might have changed the development of economics. Unfor- 
tunately, war came and he never did it. 
ROSTEN: Was Alfred Marshall much of an influence on you? 



110 



HAYEK: Not at all. By the time I came to read Marshall, 
I was a fully trained economist in the Austrian tradition, 
and I was never particularly attracted by Marshall. I 
later discovered [H. B.] Wicksteed, who was a very impor- 
tant English economist. I was more influenced, if 
influenced [at all], by some of the Americans: John 
Bates Clark, [Frank A.] Fetter, and that group. But Marshall 
never really appealed to me. I think this somewhat timid 
acceptance of the Marshall utility approach--the famous 
two-scissors affair: it's partly cost and so on--his kind 
of analysis of the market positions, did not appeal to me. 
ROSTEN: How did you get on with [William] Beveridge? Had 
Beveridge written the Beveridge Report by then? 
HAYEK: He never wrote it; he was incapable of doing 
this. I have never known a man who was known as an 
economist and who understood so little economics as he. 
He was very good in picking his skillful assistants. The 
main part, the report on unemployment, was really done 
by Nicholas Kaldor. And I think Kaldor, through the 
Beveridge Report, has done more to spread Keynesian thinking 
than almost anybody else. Beveridge, who was a splendid 
organizer--no , not organizer, because he wasn't even good 
at detail--but conceiving great plans, in formulating them, 
he was very impressive. But he literally knew no economics. 
He was the type of a barrister who would prepare, given a 



111 



brief, and would speak splendidly to it, and five minutes 

later would forget what it was all about. 

ROSTEN: That's extraordinary. 

HAYEK: Everybody knows one famous story: just as I came 

to London they had written that book on free trade, and 

then came in '31 the reversal of English policy. Beveridge 

quite naively turned to his friends, with whom he had 

just written a book on free trade, and said, "Oughtn't we 

now to write a book on tariffs?" 

ROSTEN: I thought he opposed tariffs. 

HAYEK: Oh, he had! The book on tariffs was opposed to 

it. But after the 1931 change, he suddenly thought that 

it might after all be a good thing to have a little protection, 

but his friends of course refused it. 

I don't mind putting this on the record now; there was 
an even more comic scene. Fortunately, he knew that he 
didn't know much economics; so when he made public speeches, 
he would let either Robbins or myself look through the draft. 
Even in the m.id- thirties , there was one proposal which was 
frightfully inflationary; so I pointed out to him, "If you 
do this, you'll get a great rise in prices." As usual, he 
took the comment. Fortunately, I saw a second draft of 
the same lecture, which contained the sentence, "As 
Professor Hayek has shown, an increase in the quantity of 
money tends to drive up prices." This was a very great 



112 



new discovery. [laughter] One could talk at great length 
about this extraordinary person. 

ROSTEN: What about the others at the London School, such 
as Harold Laski, who were very much in the Fabian tradition, 
out of which you came, in one way or another? 
HAYEK: Harold Laski, of course, at that time had become 
a propagandist, very unstable in his opinions. There 
were many other people whom I greatly respected, like old 
[Richard Henry] Tawney. I differed from him, but he was 
a sort of socialist saint, what you Americans call a do- 
gooder, in a slightly ironic sense. But he was a man who 
really was only concerned with doing good--my Fabian socialist 
prototype--and a very wise man. 

ROSTEN: You're talking about The Sickness of an Acquisitive 
Society Tawney. 

HAYEK: Yes. Curiously enough, Laski and I had a good deal 
of contact because we are both passionate book collectors. 
It was only that way. And he was frightfully offended by 
my The Road to Serfdom . He was very egocentric and believed 
it was a book written especially against him. 
ROSTEN: Really? He didn't know economics? 

HAYEK: No, not at all. And as I say, he must have been a 
very acute thinker in his youth, but by the time I really 
came to know him, he had become not only a propagandist but 
even to the students-- He still had the capacity of getting 



113 



students excited at first, but even they noticed after 
two or three months he was constantly repeating himself. 
And he was extraordinarily inconsistent. 

ROSTEN: In his private life he was extremely generous to 
the refugees. He concealed his generosity. 

HAYEK: Yes, and he was generous to his students. He would 
do anything to help his students. But he was wholly 
unreliable, both his stories and his theoretical views. 
I was present one evening in August 19 39, when he held 
forth for half an hour on the marvels of Communist 
achievement. Then we listened to the news, and the story 
of the Hitler-Stalin Pact came through. And when we 
finished the news, he turned against Communism and 
denounced them as though he had never said a word in 
their favor before. 

ROSTEN: That's amazing. Now this was the period, of course, 
when John Maynard Keynes was coming into international 
repute, and I'd love you to talk about him. 
HAYEK: Well, I knew him very well. I made his acquain- 
tance even before I had come to England, in '28, at the 
meeting of the Trade Cycle Research Institute. There we 
had our first difference on economics--on the rate of 
interest, characteristically--and he had a habit of going 
like a steamroller over a young man who opposed him. But 
if you stood up against him, he respected you for the 



114 



rest of your life. We remained, although we differed 
in economics, friends till the end. In fact, I owe it 
to him that I spent the war years at King's College, 
Cambridge. He got me rooms there. And we talked on a 
great many things, but we had learned to avoid economics. 
ROSTEN: You avoided economics? 
HAYEK: Avoided Economics . 

ROSTEN: But you took on [ The ] General Theory [ of Employment, 
Interest and Money ], didn't you, the moment that it appeared? 
HAYEK: No, I didn't; I had spent a great deal of time 
reviewing his [A] Treatise on Money , and what prevented me 
from returning to the charge is that when I published the 
second part of my very long examination of that book, his 
response was, "Oh, I no longer believe in all this." 
ROSTEN: He said so? 
HAYEK: Yes. [laughter] 
ROSTEN: How much later was this? 

HAYEK: That was '32, and the Treatise came out in '30. 
He was already then on the lines towards The General Theory , 
and he still had not replied to my first part when six 
months later the second part came out. He just said, 
"Never mind, I no longer believe in this." That's very 
discouraging for a young man who has spent a year critici- 
zing a major work. I rather expected that when he thought 
out The General Theory , he would again change his mind in 



115 



another year or two; so I thought it wasn't worthwhile 
investing as much work, and of course that became the 

frightfully important book. That's one of the things 
for which I reproach myself, because I'm quite convinced 
I could have pointed out the mistakes of that book at 
that time. 

ROSTEN: Well, did you seriously think that he would say, 
"Oh, I no longer believe in the tradeoff between unemploy- 
ment" and so forth? 

HAYEK: I am sure he would have modified. 
ROSTEN: You think he did change? 

HAYEK: He would have modified his ideas. And in fact, my 
last experience with him--I saw him last six weeks before 
his death; that was after the war--I asked him whether he 
wasn't alarmed about what his pupils did with his ideas in 
a time when inflation was already the main danger. His 
answer was, "Oh, never mind, my ideas were frightfully 
important in the Depression of the 1930s, but you can trust 
me: if they ever become a danger, I'm going to turn public 
opinion around like this." But six weeks later he was 
dead and couldn't do it. I am convinced Keynes would have 
become one of the great fighters against inflation. 
ROSTEN: Do you think he could have done it? 
HAYEK: Oh, yes. He wouldn't have had the slightest hesi- 
tation. The only thing I blame him for is that what he 



116 



knew was a pamphlet for the time, to counteract the 

deflationary tendencies in the 1930s, he called a general 

theory. It was not a general theory. It was really 

a pamphlet for the situation at a particular time. This 

was partly, I would say, due to the influence of some of 

his very doctrinaire disciples, who pushed him-- There's 

a recent essay by Joan Robinson, one of his disciples, 

in which she quite frankly says they sometimes had great 

difficulty in making Maynard see the implications of his 

theory. [laughter] 

ROSTEN: I'm interested in the fact that you think it would 

have been that easy to have reversed opinion, coming out 

of a deflationary period. 

HAYEK: Well, I don't think so, but Keynes — 

ROSTEN: Oh, he thought so. I see. 

HAYEK: Keynes had a supreme conceit of his power of 

playing with public opinion. You know, he had done the 

trick about the peace treaty. And ever since, he believed 

he could play with public opinion as though it were an 

instrument. And for that reason, he wasn't at all alarmed 

by the fact that his ideas were misinterpreted. "Oh, I 

can correct this anytime." That was his feeling about it. 

ROSTEN: It did not upset him when his name or authority 

was used? He had a great influence on politicians^ didn't 

he? 



117 



HAYEK: More in this country even than in England. He 
had gained great influence in his capacity during the war, 
when he was advising the government, but of course then 
he was essentially updating the Breton Woods agreement. In 
the end he had become very powerful, but of course till 
the war he partly was a protester and partly liked the 
pose of being disregarded and neglected by official opinion. 
ROSTEN: In the United States, he was in Washington, and when 
he left the White House--he had already talked to Secretary 
of the Treasury [Henry] Morgenthau and so on--he 
made the politically indiscreet remark, which went around 
all of Washington, that he was quite surprised by how little 
President Roosevelt knew about economics. 
HAYEK: Surprised? 
ROSTEN: He said. 

HAYEK: Yes, I think it was a very deliberate indiscretion, 
[laughter] 

ROSTEN: You think he said that intentionally. Was he 
given to that? 

HAYEK: Well, I know he had such a low opinion of the eco- 
nomic knowledge of politicians generally that he cannot 
really have been surprised. 

ROSTEN: How do you think he will rank in the history of 
economic theory and thought? 
HAYEK: As a man with a great many ideas who knew very 



118 



little economics. He knew nothing but Marshallian economics; 
he was completely unaware of what was going on elsewhere; 
he even knew very little about nineteenth-century economic 
history. His interests were very largely guided by esthetic 
appeal. And he hated the nineteenth century, and therefore 
knew very little about it--even about the scientific 
literature. But he was a really great expert on the 
Elizabethan age. 

ROSTEN : I'm absolutely astounded that you say that John 
Maynard Keynes really didn't know the economic literature. 
He had surely gone through it. 

HAYEK: He knew very little. Even within the English 
tradition he knew very little of the great monetary writers 
of the nineteenth century. He knew nothing about Henry 
Thornton; he knew little about [David] Ricardo, just the 
famous things. But he could have found any number of 
antecedents of his inflationary ideas in the 1820s and 
1830s. When I told him about it, it was all new to him. 
ROSTEN: How did he react? Was he sheepish? Was he-- 
HAYEK: Oh, no, not in the least. He was much too self- 
assured, convinced that what other people could have said 
about the subject was not frightfully important. At the 
end--well, not at the end-- There was a period just after 
he had written The General Theory when he was so convinced 
he had redone the whole science that he was rather 



119 



contemptuous of anything which had been done before. 

ROSTEN: Did he maintain that confidence to the end? 

HAYEK: I can't say, because, as I said before, we had 

almost stopped talking economics. A great many other 

sub jects--his general history of ideas and so on--we 

were interested in. And, you know, I don't want you to 

get the impression that I underestimated him as a brain; 

he was one of the most intelligent and most original thinkers 

I have known. But economics was just a sideline for him. 

He had an amazing memory; he was extraordinarily widely 

read; but economics was not really his main interest. His 

own opinion was that he could re-create the subject, and 

he rather had contempt for most of the other economists. 

ROSTEN: Does this tie in with your two kinds of minds? 

You wrote in Encounter some years ago a piece-- 

HAYEK: Curiously enough, I will say, Keynes was rather 

my type of mind, not the other. He certainly could not 

have been described as a master of his subject, as I 

described the other type. He was an intuitive thinker with 

a very wide knowledge in many fields, who had never felt 

that economics was weighty enough to-- He just took it 

for granted that Marshall's textbook contained everything one 

needed to know about this subject. There was a certain 

arrogance of Cambridge economics about-- They thought 

they were the center of the world, and if you have 



120 



learned Cambridge economics, you have nothing else worth 

learning. 

ROSTEN: What was their reaction to The Road to Serfdom ? 

HAYEK: Well, Keynes, of course, took it extraordinarily 

kindly. He wrote a very remarkable letter to me, but 

I think he was the only one in Cambridge to do so. That, 

I think, shows very clearly the difference between him and 

his doctrinaire pupils. His pupils were really all 

socialists, more or less, and Keynes was not. 

ROSTEN: What was he? How would you describe him politically? 

HAYEK: I think here the American usage of the term 

liberal is fairly right, fairly close to what he was. He 

wanted a controlled capitalism. 

ROSTEN: And he thought that he could control it. 

HAYEK: Oh, yes. 

ROSTEN: Or at least advise those in power. Is it true 

that he said, "I am no longer a Keynesian"? 

HAYEK: I haven't heard him say so; it's quite likely. 

But, after all, Keynesian ism spread only just about the 

time of his death. You mustn't forget that he died as 

early as '46, just as the thing became generally accepted. 

In fact, I sometimes say that his death made him a saint 

whose word was not to be criticized. 

If Keynes had lived, he would greatly have modified 
his own ideas, as he always was changing opinion. He would 



121 



learned Cambridge economics, you have nothing else worth 

learning. 

ROSTEN: What was their reaction to The Road to Serfdom ? 

HAYEK: Well, Keynes, of course, took it extraordinarily 

kindly. He wrote a very remarkable letter to me, but 

I think he was the only one in Cambridge to do so. That, 

I think, shows very clearly the difference between him and 

his doctrinaire pupils. His pupils were really all 

socialists, more or less, and Keynes was not. 

ROSTEN: What was he? How would you describe him politically? 

HAYEK: I think here the American usage of the term 

liberal is fairly right, fairly close to what he was. He 

wanted a controlled capitalism. 

ROSTEN: And he thought that he could control it. 

HAYEK: Oh, yes. 

ROSTEN: Or at least advise those in power. Is it true 

that he said, "I am no longer a Keynesian"? 

HAYEK: I haven't heard him say so; it's quite likely. 

But, after all, Keynesianism spread only just about the 

time of his death. You mustn't forget that he died as 

early as '46, just as the thing became generally accepted. 

In fact, I sometimes say that his death made him a saint 

whose word was not to be criticized. 

If Keynes had lived, he would greatly have modified 
his own ideas, as he always was changing opinion. He would 



121 



never have stuck to this particular set of beliefs. 
And you could argue with him. Since we are speaking about 
him, curiously enough the two persons I found most 
interesting to talk to for an evening were Keynes and 
Schumpeter, two economists who were the best conversa- 
tionalists and the most widely educated people in general 
terms I knew — with the difference that Schumpeter knew the 
history of economics intimately and Keynes did not. 
ROSTEN: Had Keynes read Schumpeter? 

HAYEK: I would assume yes, but he wasn't reading much 
contemporary economics, either. He probably had an idea 
[of him]. I have seen them together; so I know he knew 
Schumpeter. But I doubt whether he carefully studied any 
of Schumpeter ' S-- Schumpeter 's book on capitalism, which I 
mentioned before, came out in wartime, when he was much too 
busy to read anything of the kind. As for Schumpeter 's 
earlier works, I would suspect Keynes had read the 
brochure Schumpeter wrote on money, because that was in his 
immediate field, but probably nothing else. 
ROSTEN: I'm interested in your earlier comment about the 
fact that here is a man of immense intelligence, great 
imagination, wide learning, and so on, and yet was not 
an economist. I'm not clear whether you mean he didn't 
have the kind of mind that excels in economics-- just as 
in mathematics, say, you can find people who are brilliant 



122 



but who, given mathematics, are just hopeless--or do you 
mean he didn't have the kind of mind that makes for 
first-rate economists? 

HAYEK: Oh, yes, he had. If he had given his whole 
mind to economics, he could have become a master of econom- 
ics, of the existing body. But there were certain parts 

of economic theory which he had never been interested in. 
He had never thought about the theory of capital; he was 
very shaky even on the theory of international trade; he 
was well informed on contemporary monetary theory, but 
even there he did not know such things as Henry Thornton 
or [Knut] Wicksell; and of course his great defect was he 
didn't read any foreign language except French. The whole 
German literature was inaccessible to him. He did, 
curiously enough, review Mises's book on money, but later 
admitting that in German he could only understand what he 
knew already. [laughter] 

ROSTEN: What he had known before he read the book. How 
would you distinguish the streams that economics took 
in Austria and Sweden and England during your time? 
HAYEK: Well, in England--unf ortunately , Sweden and Austria 
were moving on parallel lines — if [W. Stanley] Jevons had 
lived, or if his extraordinarily brilliant pupil Wicksteed 
had had more influence, things may have developed in a 
different direction; but Marshall established almost a 



123 



monopoly, and by the time I came to England, with the 

exception of the London School of Economics, where Edwin 

Cannan had created a different position, and where Robbins 

was one of the few economists who knew the literature of 

the world--he drew on everything--England was dominated by 

Marshallian thinking. And this idea that if you knew 

Marshall there was nothing else worth reading was very 

widespread. 

ROSTEN : Now, what happened when you came to the University 

of Chicago? How did you find that? 

HAYEK: Well, I was in Chicago not in the economics 

department; I was on the Committee on Social Thought, 

and I greatly welcomed this, because I had become a little 

tired of a purely economics atmosphere like the London 

School of Economics. I wanted to branch out, and to be 

offered a position concerned with any borderline subject 

in the social sciences was just what I wanted. 

When I came to Chicago Jacob Viner had already left, 
but I had known him before, and it was his influence as 
much as Frank Knight's influence-- So, on the whole, I 
found there this very sympathetic group of Milton Friedman 
and soon George Stigler; so I was on very good terms with 
part of the [economics] department, but numerically it 
was the econometricians who dominated. The Cowles 
Commission was then situated in Chicago; so the predominant 



124 



group of Chicago economists had really very little in 
common. Just Frank Knight and his group were the 
people whom I got along with. 

ROSTEN: Frank Knight was a remarkable person, and he 
was at heart an anarchist. His contempt for all forms 
of government, or the intelligence or the capacity of people 
to manage things, was such that he seemed to me to end up 
as a kind of a philosophical anarchist. 

HAYEK: Yes, of course, I know no person more difficult 
to describe, and who was capable of taking the most 
unexpected positions on almost anything. But he was 
extraordinarily stimulating, even in conversation. And his 
influence was wholly beneficial. It's hardly an exag- 
geration to say that all the leading economic theorists 
in this country above the age of fifty, or even forty- 
five, come out of the Frank Knight tradition, even more than 
the Harvard tradition. Earlier it was the [Frank W. ] 
Taussig tradition and Harvard, but in the generation 
slightly younger than myself, I think nearly all the 
first-class economists at one time or another have been 
pupils of Frank Knight. 

ROSTEN: Yet, as I remember, he only wrote one book: 
Risk, Uncertainty and Profit . A remarkable book. 
HAYEK: Yes, all the others are collections of essays. 
ROSTEN: Did you know that he once gave a lecture entitled 
"Why I Am a Communist"? 

125 



HAYEK: I've heard that, yes. [laughter] 
ROSTEN : It was one of the most hilarious experiences I 
had, because we couldn't believe our eyes or ears when 
we heard this. And what it came down to was the fact 
that the country was going to ruin so fast, and that 
the growth of governmental power was so great, and the 
federation--people from politics and the New Deal--that 
only a strong Communist threat could awaken the American 
people to the need for change and the growth of a 
conservative movement. [laughter] 

HAYEK: I've heard him later take a very similar position, 
then, to my complete surprise; it was on that occasion 
that I was told about the earlier lecture. But he was 
completely unpredictable as to what position he would take. 
I will tell you one amusing episode about Frank Knight: 
when I had called that first meeting on Mont Pelerin, which 
led to the formation of the Mont Pelerin Society, I had 
already had the idea we might turn this into a permanent 
society, and I proposed that it would be called the Acton- 
Tocqueville Society, after the two most representative 
figures. 



126 



TAPE: ROSTEN II, SIDE TWO 
TAPE DATE: NOVEMBER 15, 19 7 8 

HAYEK: Frank Knight put up the greatest indignation: 
"You can't call a liberal movement after two Catholics!" 
[laughter] And he completely defeated it; he made it 
impossible. As a single person, he absolutely obstructed 
the idea of using these two names, because they were 
Roman Catholics. 

ROSTEN: He was a midwesterner , and he had a kind of a dry 
and original way of thinking. You knew Viner? 
HAYEK: Oh, yes, I knew him quite well. 
ROSTEN: Isn't it interesting to you that Viner wrote 
three papers, I believe, in which he demolished the 
then-current theory that wars are caused by governments 
protecting private profits. And he did this extra- 
ordinary piece of research in England, France, Russia, 
and Germany on the origins of the First World War, and in 
effect pointed out it was exactly the opposite [cause] . 
How did that revolution in thinking and a breakthrough 
in research-- Why didn't that have a greater effect? 
HAYEK: I don't know. In general, Viner, who was one 
of the most knowledgeable persons and most sensible persons, 
had an extraordinarily little effect on the literature. 
And to my great regret I am told that the manuscripts of 
three books on which he was working for his last years are 



127 



not usable. For some reason or other he seems to have 
himself become a little uncertain. Incidentally, since you 
have read these essays of mine on the two types of mind-- I 
didn't mention it in that essay, but the contrast between 
Knight and Viner seems to me an ideal illustration of the 
case. Viner was a perfect master of his subject; he was a 
greater master of the whole subject than anyone I know. 
And of course Knight was very much what I called the 
"muddlehead. " [laughter] 

ROSTEN: Well, from the way you describe Frank Knight, he 
was a kind of hick John Maynard Keynes. That is, kind of 
a mi dwe stern rover. 
HAYEK: Yes, yes. 

ROSTEN: He had a remarkable founding, or basis, in philos- 
ophy, for example. But he surprised you; he would always 

come up--because I studied under all the people we've been 
talking about; I was lucky enough for that--he would 
always surprise you by coming up with a quotation from 
some very obscure philosopher of the Middle Ages, about 
whom he knew a great deal. 

HAYEK: But you knew he also knew the history of economics 
very well; he knew exactly — In that respect, he was 
quite unlike Keynes. You could hardly mention an ancient 
or ninteenth-century economist and Knight wouldn't know all 
about it. But it was not in the sense that he had made 



128 



traditional theory his own and that he automatically gave 
the official reply to any subject. There were some people 
who had no reason to think because they had the answer 
ready on everything from the literature they had read. 
Frank Knight was one of the people who had to think through 
everything before he formed-- 
ROSTEN: You mean [think through] anew. 
HAYEK: Think anew, yes. 

ROSTEN : That is an interesting comment. It gave him this 
quality that endeared him to students of not answering off- 
the-cuff or, you know, you press a button-- On the contrary, 
he took students very seriously; he would get annoyed, he 
would argue, he would show his discontent, and then he would 
suddenly go into, "But don't you realize the theological 
implications?" when you were talking about the Federal 
Reserve Bank or something. 

HAYEK: I don't know how early that was. When I knew him in 
the fifties, of course, he was preoccupied with religion. 
Though he was always fundamentally atheistic in the anti- 
religious attitude, his greatest interest was religion. 
ROSTEN: He was agnostic, I would say, not an atheist. He 
was obviously a man who would refuse to take as firm a 
position as saying "I know" or "There is no God." Quite 
the contrary. But, unlike Viner, he was unpredictable: 
for example, his anarchism. Viner was all of a piece. 



129 



HAYEK: Oh, yes. 

ROSTEN: And he was enormously homogeneous and wide 
ranging in his thought. 

HAYEK: I was driven once, in a similar discussion about 
the two men, to describe them both as wise. And then I 
found I was using wise in altogether different senses in 
describing the one and the other. I find it very dif- 
ficult to define it, but I would say that in a sense 
Frank Knight was a more profound but much less systematic 
thinker; Viner had a rounded system, where he attempted to 
reconcile everything with everything else. Viner could 
have written a very good textbook. Incidentally, the first 
four chapters of Risk , Uncertainty and Profit , which of 
course Knight did when he was very young, or relatively 
young, was at that time the best summary of the current 
state of theory available anywhere. Robbins, when I came 
to London, was giving his students the first chapter of 
Risk, Uncertainty and Profit as an introduction to economic 
theory, and it was then the best one which was available. 
ROSTEN: Did you find the intellectual atmosphere at the 
University of Chicago wider, so to speak, than at the London 
School of Economics? 

HAYEK: Well, there were interdisciplinary contacts. What 
I enjoyed in Chicago was returning to a general university 
atmosphere from the narrow atmosphere of a school devoted 



130 



exclusively to social sciences. The faculty club, the 
Quadrangle Club, in Chicago was a great attraction. You 
could sit with the historians one day and with the physicists 
another day and with the biologists the third. In fact, I 
still know of no other university where there is so much 
contact between the different subjects as in the University 
of Chicago. 

ROSTEN: Or as much contact between the undergraduate 
student and the faculty. 
HAYEK: Yes, that too. 

ROSTEN: That tradition, I hear, has still maintained. I 
should have thought that you would have found yourself 
returning to a more congenial university. 
HAYEK: In a sense, yes, I had become a little tired of 
economics after twenty years at the London School of 
Economics. And of course economics drove me into the exami- 
nation of political problems. I had already come to the 
conclusion that with our present political constitution 
you could not expect government to pursue a sensible 
economic policy--we ' re forced to do something else--and 
that has occupied me ever since. 

ROSTEN: Can you give me an example of why this didn't occur 
to you sooner? Let me put it this way: there is constant 
argument, whether it's on a very high level or just a 
journalistic level, between the economist and, say, the 



131 



sociologist, or the economist and the political scientist. 
They say, "You're not dealing with a model in the abstract; 
you can't say that it's a political problem and therefore 
you have nothing to say about it." So surely you ran into 
the interferences with economics because of-- We started 
out earlier talking about the way in which you were raised 
in a family, which I thought was a very vivid way of 
pointing out what is ultimately going to be a problem 
intellectually, when you deal with what is called the 
real world. 

HAYEK: I think I was just taken in by the theoretical 
picture of what democracy was--that ultimately we had to 
put up with many miscarriages, so long as we were governed 
by the dominant opinion of the majority. It was only when 
I became clear that there is no predominant opinion of 
the majority, but that it's an artifact achieved by paying 
off the interests of particular groups, and that this was 
inevitable with an omnipotent legislature, that I dared to 
turn against the existing conception of democracy. That 
took me a very long time. 

In fact, I'd been mainly interested in borderline 
problems of economics and politics since before the out- 
break of war-- ' 38- ' 39--when I had planned this book on 
what I was going to call "The Abuse and Decline of Reason." 
The Counter-Revolution of Science, which I wrote as the 



132 



beginning of this study of the rationalist abuse of 
constructivism, as I now call it, came out of this. 
Conceptually, I had the big book on the decline of 
reason ready, and I used the material I had prepared then 
to write The Road to Serfdom as a pamphlet applied to 
contemporary affairs. So it's really over the past 
forty years that my main interest is so much broader 
than technical economics, but it's only gradually that 
I've been able to bring the things really together. 
They arose out of the concern with the same problems, but 
to treat it as a coherent system, I think I have only 
succeeded in just completing Law, Legislation and Liberty . 
ROSTEN: Did you find many of the political scientists 
responsive to what you were thinking and doing? 
HAYEK: Very few at that time. There was one good man, 
not very original but sensible, at the London School of 
Economics-- [Kingsley] Smellie, if you remember him. There 
are a few now developing. There is a man now [in the United 
States], the Italian [Giovanni] Sartori, who has seen 
more or less the same problems. But the general answer 
is no, I had very little real either contact with the 
political scientists or sympathetic treatment of my ideas. 
ROSTEN: But on the Committee on Social Thought you 
certainly had sociologists like Ed Shils. I think he 
was then there, wasn't he? 



133 



HAYEK: Yes. Ed Shils was the only sociologist. Of 
course, he was a very intelligent man, but he ramained 
a puzzle to me to the end. I never quite-- He's an 
extremely knowledgeable and well-informed man--you can 
talk with him on everything--but if he has a coherent 
conception of society, I have yet to discover it. He 
probably has, and I may be unjust. But he was the only 
sociologist-- We had philosophers, we had art historians, 
and of course the chairman was a very considerable 
economic historian, John Neff. We had an anthropolo- 
gist, [Robert] Redfield, who was one of our members. It 
was an extremely interesting club. There was a classical 
scholar, David Green, who was interested in the social 
ideas of the ancient Greeks. Oh, it was a fascinating 
group. And if I may say so, the first seminar I held 
there was one of the great experiences of my life. I 
announced in Chicago a seminar on scientific method, 
particularly the differences between the natural and the 
social sciences, and it attracted some of the most 
distinguished members of the faculty of Chicago. We had 
Enrico Fermi and Sewall Wright and a few people of that 
quality sitting in my seminar discussing the scientific 
method. That was one of the most exciting experiences of 
my life. 
ROSTEN : What do you think of the newer, younger, so-called 



134 



neoconservatives , whether Chicago or not? Some of them 

have appeared in the Mont Pelerin Society. 

HAYEK: The economists among them are very good; I'm 

not so impressed by the people who think along these 

lines in political science and so on. But there are 

a few people now in philosophy, still little-known 

people, who seem to be very good. So I am rather hoping 

that these ideas are now spreading. Of course, I think 

the main thing is that there are economists who are 

working outside their fields, like Jim Buchanan and [the 

one] in South Carolina, and some of the people working 

at UCLA. What I said before--that you cannot be a 

good economist except by being more than an economist-- 

I think is being recognized by more and more of the 

economists. This narrow specialization, particularly of the 

mathematical economists, is, I believe, going out. 

ROSTEN: If you were to name five books, ten books, as 

you look back on your life-- Each of us does this. I 

was struck by this fact the other day, reading someone 

who happened to read [ Adventures of ] Huckleberry Finn at 

the age of nine and said, "It was an experience from which 

I never recovered." But if you look back over your own 

background, your own reading, which five or ten books would 

you say most influenced your thinking? 

HAYEK: That's a tall order to do at a moment's notice. 



135 



ROSTEN: Yes, you're a tail man. 

HAYEK: There is no doubt about both [Karl] Menger's 
Grundsetze and [Ludwig von] Mises's On Socialism . Menger 
I at once absorbed; Mises's was a book with which I 
struggled for years and years, because I came to the 
conclusion that his conclusions were almost invariably 
right, but I wasn't always satisfied by his arguments. 
But he had probably as great an influence on me as any 
person I know. On political ideas, I think the same is 
true of the two men I mentioned before in another con- 
nection: [Alexis de] Tocqueville and Lord [John] Acton. 
ROSTEN: Do you know how long Tocqueville was in the 
United Sates? 

HAYEK: Oh, I did know; I have read the diary. A few 
months, wasn't it? 
ROSTEN: Unbelievable. 

HAYEK: Yes. And, of course, I will say that as a 
description of contemporary America that great book is 
probably not a very good book; but [it was] extraordinarily 
prophetic. He saw tendencies which only became really 
effective much later than he wrote. 

ROSTEN: Let me go back to something you just said, which 
interested me very much, on Ludwig von Mises, when you 
said you agreed with his conclusions but not with the 
reasoning by which he came to them. Now, on what basis 



136 



would you agree with the conclusions if not by his 
reasoning? 

HAYEK: Well, let me put it in a direct answer; I think. 
I can explain. Mises remained to the end a strict 
rationalist and utilitarian. He would put his argument 
in the form that man had deliberately chosen intelligent 
institutions. I am convinced that man has never been 
intelligent enough for that, but that these institutions 
have evolved by a process of selection, rather similar 
to biological selection, and that it was not our reason 
which helped us to build up a very effective system, but 
merely trial and error. 

So I never could accept the, I would say, almost 
eighteenth-century rationalism in his argument, nor his 
utilitarianism. Because in the original form, if you say 
[David] Hume and [Adam] Smith were utilitarians, they 
argued that the useful would be successful, not that 
people designed things because they knew they were useful. 
It was only [Jeremy] Bentham who really turned it into 
a rationalist argument, and Mises was in that sense a 
successor of Bentham: he was a Benthamite utilitarian, 
and that utilitarianism I could never quite swallow. I'm 
now more or less coming to the same conclusions by 
recognizing that spontaneous growth, which led to the 
selection of the successful, leads to formations which 



137 



look as if they had been intelligently designed, but of 
course they never have been intelligently designed nor 
been understood by the people who really practice the 
things . 

ROSTEN : So Freud did influence you, in the sense that he 
exposed the enormous power of the not-rational, or of 
the rationalizing mechanisms, for the expression of self- 
interest in the psychological sense. 

HAYEK: It may be; I'm certainly not aware of it. My 
reaction to Freud was always a negative one from the 
very beginning. I grew up in an atmosphere which was 
governed by a very great psychiatrist who was absolutely 
anti-Freudian: [Julius] Wagner- Jauregg , the man who 
invented the treatment of syphilis by malaria and so on, 
a Nobel Prize man. In Vienna, Freud was never-- But, 
of course, that leads to a very complicated issue: the 
division of Viennese society [into] the Jewish society, 
the non- Jewish society. I grew up in the non- Jewish 
society, which was wholly opposed to Freudianism; so I was 
prejudiced to begin with and then was so irritated by the 
manner in which the psychoanalysts argued--their insistence 
that they have a theory which could not be ref uted--that 
my attitude was really anti-Freudian from the beginning. 
But to the extent that he drew my attention to certain 
problems, I have no doi±it that you are right. 



138 



ROSTEN: Two comments on that. You know Bertrand Russell's 
famous statement — he didn't mention Aristotle-- that 
[although] it has been said that man is a rational animal, 
"All my life I have been searching for evidence to support 
this." Did you know Russell? [laughter] 

HAYEK: Oh, I knew him, yes, but I had never heard this. 
I knew him fairly well. In the final years of the war, he 
was back in Cambridge, and while I was still in Cambridge 
I saw him. Even before, he once came to talk to my seminar, 
and then I was in correspondence with him about [Ludwig] 
Wittgenstein. He, in fact, gave me the whole set of letters 
which Wittgenstein had written to him, and I had started 
writing a biography on Wittgenstein around these letters 
when the literary executors stopped me. They didn't 
give me permission to publish his letters before they 
had published them, and in the meantime I lost interest. 
I had a certain duty, because I am still the only person 
who knew Wittgenstein both in Vienna and in London. You 
know, he was a cousin of mine, a distant one. 
ROSTEN: No, I did not know. 

HAYEK: Oh, yes, he was a second cousin of my mother's, 
strictly speaking, and I did not know him much in Vienna; 
but I knew the family, the family background and all that. 
And then I was in contact with him in England. 
ROSTEN: Was he Jewish? 



139 



HAYEK: Three-quarter. The common great-grandmother, his 
and mine, was of a stern country family, who married into 
these Jewish Vienna connections. So three of his grand- 
parents were Jewish. 

ROSTEN: You got interested in Wittgenstein very early, 
before you were working on your material in philosophy. 
HAYEK: Yes, I read the Tractatus [ Logi co-phi losophi cus ] 
as soon as it appeared, just because I — My knowledge of 
the whole thing was curiously indirect: his eldest 
sister, who was a second cousin, was also a very close 
friend of my mother's; so this elderly lady--well, she 
wasn't so elderly then — was talking frequently about her 
youngest brother, of whom she was very fond, but he was 
just one of at that time five Wittgenstein brothers whom 
I didn't really know apart. I saw them as distant relations. 

I first made his acquaintance--! wrote also an article 
about my recollection of Wittgenstein in Encounber - - a t the 
railway station inBadlschl, [Austria], in August 1918, as 
we were both ensigns in the artillery in uniform, on the 
point of returning to the front. We traveled to Vienna 
together, and it was the first time I really had a long 
conversation with him. But the point I have only remembered 
since I wrote that essay is that, of course, in his ruck- 
sack he carried already the manuscript of the Tractatus . 
ROSTEN: Did he really? 



140 



HAYEK: No doubt, because he was on the way to the front, and 

he was captured by the Italians with the Tractatus on him. 

ROSTEN: Did Russell know any economics? 

HAYEK: No. 

ROSTEN: Was he interested at all? 

HAYEK: No. He was very suspicious of it as a science. 

ROSTEN: Why? 

HAYEK: He didn't think it was a scientific siobject. 

ROSTEN: I once asked him this question, which will 

interest you because of the precision of his speech. I 

said, "But just suppose that, much to all of our dismay, 

you left this earth and now found yourself standing 

before the Throne. There is the Lord in all of His 

radiance. What would you say?" He looked at me as though 

I was some idiot and said, "Why, I would say, 'Sir, 

why didn't you give me better evidence?'" which is quite 

typical. [laughter] 

HAYEK: Yes. Oh, yes. 

ROSTEN: At Chicago you found a kind of fellowship, which 

included the physical scientists and the philosophers. 

You haven't mentioned any of the Chicago group of philosophers 

HAYEK: I don't know. Keyworth was the only one I was at 

all-- 

ROSTEN: Did many of the law school people come to your 

seminars? 



141 



HAYEK: Not much, really. I used to know [Harold] Katz 

fairly well; I used to know [Edward] Levi, but not well, 

really; the only one I knew fairly well was [Max] Rheinstein. 

ROSTEN: Did Mortimer Adler play any part in — 

HAYEK: No, he had left Chicago practically the year I 

arrived. He was an influence there; everybody talked 

about him. But, in fact, I believe I have never encountered 

him in person. 

ROSTEN: Well, he has tried to do, in a very different 

way, things on freedom and liberty, but with no foot in 

the economic or political structure. He's much more 

legalistic and philosophical. 

HAYEK: I came across his influence rather via [Harry] 

Hutchins. Hutchins I knew fairly well, and I could see 

that Hutchins was relying on Adler and his ideas. This made 

me read some of Adler's stuff. 



142 



TAPE: ROSTEN III, SIDE ONE 
TAPE DATE: NOVEMBER 16, 1978 

ROSTEN: Dr. Hayek, I'm interested in your impressions 
of the empirical work that was being done by American 
economists. When you came here, it must have struck you 
rather f orcibly--the stuff that was being done at the 
National Bureau [of Economic Research] , stuff on business 
cycles, in which I think you were interested at one point. 
HAYEK: Well, I got interested by my visit to the United 
States. You see, when I came here as a young man in '23, 
I found they had nothing here to learn in economic theory. 
The American economic theorists had a great reputation at 
that time, but by the time I arrived, the few who were 
surviving were old men. And current teaching wasn't 
really interesting from a theoretical point of view. I 
was actually attached to New York University, but I gate- 
crashed into Columbia [University] . Then I was working 
in the New York Public Library on the same table with 
Willard Thorp and other people from the National Bureau. 
I was drawn into that circle, and I learned a great deal 
about descriptive statistical work; in fact, I owe part 
of my later career to the fact that I learned the tech- 
nique of time-series analysis at that time and was the only 
person in Austria who knew it. So I became director of that 
new institute of business-cycle research. 



143 



ROSTEN: This was in Vienna? 

HAYEK: That was in Vienna, yes. Information about current 
affairs is very valuable; the expectation that you will 
learn much for the explanation of events is largely decep- 
tive. You cannot build a theory on the basis of statistical 
information, because it's not aggregates and averages 
which operate upon each other, but individual actions. 
And you cannot use statistics to explain the extremely 
complex structures of society. So while I will use 
statistics as information about current events, I think 
their scientific value is rather much more limited than the 
American economists of the last thirty or forty years have 
believed. 

ROSTEN: I've left you at one point. If you say that the 
description of aggregates and the uses of statistics 
don't help you much to explain things, and if you say that 
they help with contemporary events, they cease to be con- 
temporary very soon. 
HAYEK: Oh, yes. 

ROSTEN: You have built up a body of data: now, how 
important are those data? 

HAYEK: Well, they give you an indication of what has 
probably happened in society during the last six months, 
[laughter] 

ROSTEN: Do you see any more optimistic possibility for the 
application of statistics? 

144 



HAYEK: Not really, in economics. Demography, yes. In 
all fields we have to deal with true mass phenomena, but 
economics has not to deal with mass phenomena in the strict 
sense. You know where you have a sufficiently large 
number of events to apply the theory of probability, and 
proper statistics begins where you have to deal with 
probabilities . 

ROSTEN: Well, all the sciences begin with that amassing 
of what might seem to be formless data. Would you tell 
us a little more about why you think this is not true in 
economics? Do you really think that most of economics 
takes place in discrete, isolated events, decisions, 
judgments? 

HAYEK: Well, this leads very deeply into methodological 
issues; but the model of science--physical science, in the 
original form--has relatively simple phenomena, where you 
can explain what you observe as functions of two or three 
variables only. All the traditional laws of mechanics 
can be formulated as functions of two or three variables. 
Now, there is another extreme field, mass phenomena proper, 
where you know you cannot get the information on the 
particular events, but you can substitute probabilities 
for them. But there is, unfortunately, an intermediate 
[type of] event, where you have to deal with complex 
phenomena, which, on the one hand, are so complex that you 



145 



cannot ascertain all the individual events, but, [on the 
other] , are not sufficiently mass phenomena to be able to 
siobstitute probabilities for information on the individual 
events. In that field I'm afraid we are very limited. 

We can build up beautiful theories which would explain 
everything, if we could fit into the blanks of the formulae 
the specific information; but we never have all the specific 
information. Therefore, all we can explain is what I like 
to call "pattern prediction." You can predict what sort 
of pattern will form itself, but the specific manifestation 
of it depends on the number of specific data, which you 
can never completely ascertain. Therefore, in that inter- 
mediate f ield--intermediate between the fields where you 
can ascertain all the data and the fields where you can 
substitute probabilities for the data--you are very limited 
in your predictive capacities. 

This really leads to the fact, as one of my students 
once told me, that nearly everything I say about the 
methodology of economics amounts to a limitation of the 
possible knowledge. It's true; I admit it. I have come 
to the conclusion that we're in that field which someone 
has called organized complexity, as distinct from dis- 
organized complexity. 
ROSTEN: Warren Weber. 
HAYEK: Yes, exactly. Warren Weber spoke about this. Our 



146 



capacity of prediction in a scientific sense is very 
seriously limited. We must put up with this. We can only 
understand the principle on which things operate, but these 
explanations of the principle, as I sometimes call them, 
do not enable us to make specific predictions on what will 
happen tomorrow. 

I was just listening to the wireless here, where 
people were speaking about the inevitable depression. Oh, 
yes, I also know a depression will come, but whether in six 
months or three years I haven't the slightest idea. I 
don't think anybody has. [laughter] 

ROSTEN: Yes, life is a terminal disease. [laughter] But 
could you give me some examples of questions to which you-- 
I mean about economics, or in economics--questions to which 
you would like answers, or to which you do not have any 
satisf actory-- 

HAYEK : Oh, any price movement of the future. I have no 
way of predicting them. Well, that's exaggerating. There 
are instances where you can form a shrewd idea of what's 
likely to happen, but in that case, of course, the price 
movements which you anticipate, which you expect, are already 
anticipated in current prices, and they are no longer true. 
The only interesting things are the unforeseen price move- 
ments, and they, by definition, you cannot foresee. 
[laughter] 



147 



ROSTEN : You were expressing your respect for Frank 
Knight, and once he said with great exasperation that the 
difference between the physical sciences and the social 
sciences is that in the physical sciences they don't care 
what you say about them, but in the social sciences you 
affect the subject matter by talking about it. Now, to 
the degree to which people in government think they can 
affect economic policy, whether fine-tuning, to use that 
old phrase, or large-scale changes, by either changes in 
money supply or attempts to influence credit or so on, do 
you feel that we know enough to be able to make any of that 
kind of prediction plausible? 

HAYEK: I'm sure not. I don't think all this fine-tuning — 
Well, you see, that really comes back to my basic approach 
to economics: economic mechanism is a process of adaptation 
to widely dispersed knowledge, which nobody can possess as 
a whole. And this process of adaptation to knowledge, which 
people currently acquire in the course of events, must 
produce results which are unpredictable. The whole eco- 
nomic process is a process of adaption to unforeseen changes 
which, in a sense, is self-evident, because we could never 
have planned how we would arrange things once and for all 
and could just go on with our original plans. 
ROSTEN: You mean, if those who knew, really knew, and 
acted upon what they knew. Are you saying that the social 



148 



sciences, particularly economics, as an example, are much 
more complicated than the physical sciences? 
HAYEK: Well, not the sciences; it's the subject that's 
much more complicated, simply in the sense that any [eco- 
nomic] theory would have a larger number of data to insert 
than any physical theory. As I said a moment ago, all 
the formulae of mechanics have only two or three 
variables in them. Of course, in real life you can use 
this to explain an extremely complex phenomenon, but the 
underlying theory is of a very simple character. With us, 
you can't have a theory of perfect competition without at 
least having a few hundred participants. And you would have 
to be informed about all their knowledge in order to 
arrive at a specific prediction. The very definition of 
our subject is that it's built up of a great many distinct 
units, and it wouldn't be a subject of that order if the 
elements weren't so numerous. You cannot form a theory of 
competition with only three elements in it. 
ROSTEN: You could certainly have a theory. 
HAYEK: Well, it would be wrong, because it wouldn't be 
competition with only three acting persons in it. 
ROSTEN: Well, just explain that. What about four? 
HAYEK: No, I don't think it's the approach. But you have 
to have a number where it's impossible for any one of them 
to predict the action of the others, and there must be a 



149 



sufficient number of others for the one to be unable to 

predict it. 

ROSTEN: You say that's in the order of a hundred, or 

hundreds, or thousands, and so on. 

HAYEK: Yes. 

ROSTEN: It's a startling theory, and I've not heard it 

put quite this way. 

HAYEK: But, you know, the whole market is due to the fact 

that people are aiming at satisfying needs of people whom 

they do not know, and use for their purposes facilities 

provided by people of whom they also have no information. 

It's a coordination of activities where the individual 

can, of necessity, be only a small part of it--any 

individual, not only the participating individuals but 

even any outsider. The mistaken conception comes from 

a very curious use of the term data. The economists 

speak about data, but they never make clear to whom these 

data are given. They are so unhappy about it that 

occasionally they speak even in a pleonasm about "given 

data," just to reassure themselves that [the data] are 

really given. But if you ask them to whom they are given, 

they have no answer. [laughter] 

ROSTEN: You mean "revealed"? 

HAYEK: They are fictitiously assumed to be given to the 

explaining theorists. If the data were such and such. 



150 



then this would follow. But of course the data are not 
really given either to them or to any one other single person, 
They are the widely dispersed knowledge of hundreds of 
thousands of people, which can in no way be unified; so the 
data are never data. 

ROSTEN: It's almost as if you were talking about nuclear 
physics and the difficulty, or impossibility, of talking 
about an atom and how it's going to behave. 
HAYEK: Yes. It's a different argument. You see, in 
nuclear physics, up to a point, you can substitute 
information about individual elements by probability 
calculations. There the numbers are big enough for the 
law of large numbers to operate. In economics they are 
not. They are too big to know them individually and not 
big enough to be described by probability calculations. 
ROSTEN: Do you think that this is a permanent and unbreak- 
able prison? 

HAYEK: Yes. I don't think we can ever get beyond that. 
ROSTEN: --because earlier you had said something about the 
processes of proof and the fact that you couldn't prove 
anything. And I was reminded of the work, of which I 
know very little and which I know you know a great deal 
about, of Caddel, at Princeton [University]. 
HAYEK: Yes. 
ROSTEN: — on the terrible, to me tragic, built-in trap 



151 



that he has discovered in the uses of logic, and in what 
you earlier had talked about as the uses of reason. 
HAYEK: You see, I became aware of all this not by my 
work in economics but--I don't know whether you know that 
I once wrote a book on psychology. 
ROSTEN: No, I did not know. 

HAYEK: On physiological psychology--a book called The 
Sensory Order --in which I make an attempt to provide at 
least a schema for explaining how physiological processes 
can generate this enormous variety of qualities which our 
senses represent. [The schema is] called "the sensory 
order." [The book] ends up with the proof that while we 
can give an explanation of the principle on which it 
operates, we cannot possibly give an explanation of detail, 
because our brain is, as it were, an apparatus of classifi- 
cation. And every apparatus of classification must be more 
complex than what it classifies; so it can never classify 
itself. It's impossible for a human brain to explain itself 
in detail. 

ROSTEN: And this was called The Sensory Order ? 
HAYEK: Yes. It came out in '52, but it was an idea which 
I conceived as a student when I divided my time more or 
less--I was officially studying law--but actually dividing 
it between economics and psychology. 
ROSTEN: You're talking here about the philosophy which has 



152 



not engaged the biochemists and the bioengineers. What 

was their response to this? 

HAYEK: Respectful but incomprehending. (laughter] 

ROSTEN: You mean, they really did not believe it, or 

didn't understand it, or both? 

HAYEK: Well, psychologists, at that time particularly, 

had a great prejudice against what they regarded as a 

philosophical argument. And I begin the book by saying, "I 

have no new facts to present; all I ain trying is to put 

order in the facts which you already know." They were 

no longer interested. One or two of the great people of 

the time, like [Edwin] Boring, were very respectful in the 

way they treated the book, but it's had practically no 

influence till recently. Now they're beginning to discover 

it, incidentally, but after thirty years. 

ROSTEN: I had no idea that you had cut into the field from 

this direction at all. 

HAYEK: It taught me a great deal on the methodology of 

science, apart from the special subject. What I later 

wrote on the subject, the theory of complex phenomena, is 

equally the product of my work in economics and my work 

in psychology. 

ROSTEN: And you had not then been working in statistics. 

HAYEK: No, although I've nearly all my life had the 

title of Professor of Economics and Statistics, I've never 

really done any statistical work. I did do practical 



153 



i 



statistics as the chief of that Austrian Institute of Trade 
Cycle Research. 

ROSTEN: Did you know [Albert] Einstein at all? 
HAYEK: I've just seen him once. No, I didn't know him. 
ROSTEN: The work that you started on business cycles, I 
assume, was not unlike the work later done by [Simon] 
Kuznets and his group at the institute. 

HAYEK: Well, again, you see, it was an abstract schema with- 
out much empirical work. I had some very elementary data 
which were commonly accepted [to demonstrate] that in every 
boom there was an excessive development of production of 
capital goods, much of which afterwards turned out to be 
mistaken. And I didn't need many more facts for my purpose 
to develop a theory which fits this, and which exclusively 
shows us, [using] other accepted data, that a credit 
expansion temporarily allows investment to exceed current 
savings, and that it would lead to the overdevelopment of 
capital industries. Once you are no longer able to 
finance a further increase of investment by credit 
expansion, the thing must break down. 

It becomes more complicated in conditions when the 
credit expansion is no longer done for investment by 
private industry but very largely by government. Then you 
have to modify the argument, and our present booms and 
depressions are no longer explicable by my simple scheme. 



154 



But t±ie typical nineteenth- and early- twentieth-century 
[phenomena], I think, are still adequately explained by 
my theory--but not adequately to the statisticians, 
because, again, all I can explain is that a certain pattern 
will appear. I cannot specify how the pattern will look 
in particular, because that would require much more infor- 
mation than anyone has. So, again, I limit the possible 
achievement of economics to the explanation of a type-- One 
of my friends has explained it as a purely algebraic theory. 
ROSTEN: An algebraic theory? 

HAYEK: Yes, you get an algebraic formula without the 
constants being put in. Just as you have a formula for, 
say, a hyperbola; if you haven't got the constants set in, 
you don't know what the shape of the hyperbola is--all 
you know is it's a hyperbola. So I can say it will be a 
certain type of pattern, but what specific quantitative 
dimensions it will have, I cannot predict, because for that 
I would have to have more information than anybody actually 
has . 

ROSTEN: And sooner or later you'd reach the point where you 
couldn't do it no matter how much information you had, in 
your theory. Do you blame the layman or the workingman 
or the amateur for wondering why, in a society which has 
extolled the increased production of goods and services and 
the growth of the national product, it is now dangerous 



155 



to have too-rapid growth? We must now cut back to an 

annual growth of 3 1/2 percent or 4 percent; we're going 

too fast and producing too much? 

HAYEK: I am not at all surprised that the layman is 

greatly puzzled by this, but the actual explanation is very 

simple. You see, we have suspended the self-steering 

mechanism of the market by feeding in false information 

and by producing money for that purpose. So it's quite 

easy to show how we have destroyed it. 

ROSTEN : The money's more dangerous than the information, 

or is it the other way around? You say we feed false 

information? 

HAYEK: In the form of money. You know that by adding 

money, injecting money, at some point you distort the price 

system artificially, and it leads you to do things, which if 

the price system were really inherently determined, it 

wouldn't happen. It leads ultimately to-- 

Another thing which you probably haven't heard about is 
that I am convinced we shall never have good money again 
so long as we leave it in the hands of government. Govern- 
ment has always destroyed the monetary systems. It was 
tolerable so long as government was under the discipline of 
the gold standard, which prevented it from doing too much 
harm; but now the gold standard has irrevocably been 
destroyed, because, in part, I admit, it depended on certain 
superstitions which you cannot restore. I don't think there's 



156 



any chance of getting good money again unless we take the 
monopoly of issuing money from government and hand it over 
to competitive private industry. 

ROSTEN: Well, we did have that in the United States. 
HAYEK: Not really. You see, they were all issuing dollars. 
The essential point is that they must issue different 
moneys under different names so that people can choose 
between them. 

ROSTEN: Well, we had different banks printing different 
money; so you built up a body of trust in one bank's 
paper as against another. It was one of the problems 
of the federal government, actually. 

HAYEK: Well, to a very limited extent, because, on the 
whole, the mass of the people took one dollar bill as 
equivalent to another dollar bill. They must have a 
current currency market in which they tell you which cur- 
rency is stable in terms of which others, and which 
fluctuate. Then they will leave any money which is unstable 
and float to the one which is stable. 

ROSTEN: Do you think there's any chance of that ever being 
adopted? Or will we be driven to adopt it? 
HAYEK: Ever? Yes. Not in my lifetime, and probably not 
in the next fifty years. But the kinds of money which we 
are having is going to get so much worse in the course of 
time--we have so many experiences of alternating inflation, 



157 



and price controls being clapped on in order to prevent 

inf lation--that people will ultimately despair of it, and 

if anyone starts my system, I think it will spread very 

rapidly. But I won't live to see it. 

ROSTEN : But in terms of the next decade or so, you're 

predicting a chaotic, almost catastrophic, alteration in 

people's assumptions about the value of money and the 

value of their governments. 

HAYEK: Well, I'm afraid the worst thing which will happen 

is that in the mistaken way of combating inflation, we 

will be driven into a completely controlled economy. 

Since people believe inflation consists in the rise of 

prices and not an increase in the quantity of money, they 

will be fighting the rise of prices and continue to inflate 

at the same time. 

ROSTEN: You mean, it would be their way of keeping prices 

rising. 

HAYEK: And, you know, if there's anything worse than an 

open inflation, it's a repressed inflation, when there's 

more money than you can buy for it and all the prices are 

artificially fixed. Now, how that will ultimately end I 

don't know, because, as I always say, you Americans have one 

advantage: you are willing to change your opinions very 

rapidly on some subject, and if you get really disgusted 

with the money you have, you might well try something 



158 



completely different. But in the present state of 
opinion, I don't see any hope, only alternating periods of 
inflation repressed by price controls; then the price 
controls being taken off and the inflation, which already 
has been going on, exploding again; then people getting 
so alarmed about the exploding inflation that we clap on 
new price controls; and that may go on for several cycles 
like this. 

ROSTEN : Have price controls ever worked except in one 
case: wartime? Have they ever been successfully admin- 
istered? I think in wartime they were. 

HAYEK: I doubt even whether they have been successful 
in wartime. They have disguised from the people some of 
the unpleasant effects and perhaps have been politically 
effective by preventing discontent. But I don't think 
they've made the economic system more efficient, and cer- 
tainly for the pursuit of war, a functioning price system 
would have been more effective than price controls. 
ROSTEN: Even in wartime? 
HAYEK: Even in wartime. 

ROSTEN: But, again, the business of the sense of inequity 
comes in, and the political consequences that have to be 
dealt with by the politician, by the political leader, by 
the legislator. This is a terrible problem about human 
behavior. 



159 



HAYEK: It's a terrible problem. You can preserve the 

existing economic system only by making concessions to 

the people, which will ultimately destroy the same system. 

[ laughter] 

ROSTEN: Well, the numbers, too. There were a great many — 

Even [George Bernard] Shaw, who was very silly about many 

things, got off a very acute line about democracy when he 

said, "When you rob Peter to pay Paul, remember how many Peters 

there are and how many Pauls." And he went on from that 

to hint at the growing unwieldiness and difficulty of mass 

sufferage in a society where there are a limited number of 

goods to be parceled out. 

HAYEK: You see, it's all in the destruction of the meanings 

of words. Everybody's convinced it has a meaning. And when 

you begin to investigate what it means, you find it means 

precisely nothing. 

ROSTEN: No, but the people who think they know what it 

means would surely give you a meaning. 

HAYEK: They all believe it will benefit the particular 

causes in which they are concerned. 

ROSTEN: Or that things would be more "fair"--the whole concept 

of what is "fair" or what is "just." 

HAYEK: Yes, but it's not facts which are fair, it's human 

action which is fair or just. To apply the concept of 

justice, which is an attribute of human action, to a state 



160 



of affairs, which has not been deliberately brought about 
by anybody, is just nonsense. 

ROSTEN: Yes, but can people accept that? They don't seem 
to be willing to accept that. Under the training of voting, 
mass education, and so on, we are raised on the assumption 
that problems can be solved, that we can solve them, and 
we can solve them fairly. 

HAYEK: That brings us back to things we were discussing 
much earlier: the revolt against this is an affair of the 
last 150 years. Even in the nineteenth century, people 
accepted it all as a matter of course. An economic crisis, 
a loss of a job, a loss of a person, was as much an act of 
God as a flood or something else. It's certain developments 
of thinking, which happened since, which made people so 
completely dissatisfied with it. On the one hand, that 
they are no longer willing to accept certain ethical or 
moral traditions; on the other hand, that they have been 
explicitly told, "Why should we obey any rules of conduct, 
the usefulness or reasonableness of which cannot be 
demonstrated to us?" Whether man can be made to behave 
decently, I would even say, so long as he insists that the 
rules of decency must be explained to him, I am very doubtful, 
It may not be possible. 

ROSTEN: Well, in a sense, you're also talking about what 
has happened in the 1960s, when precisely those kinds of 



161 



arguments were involved. The thing that seemed to me 
to be most conspicuous was that they weren't afraid of any- 
thing. That is, the young people on the campuses and else- 
where were not afraid. They were not afraid of the police, 
they were not afraid of their parents, they weren't afraid 
of their teachers, and this was something rather new. At 
least to me it was an entirely new phenomenon. We had 
never stopped to think of whether we were afraid or not, 
but there was an order of respect and an order of obedience, 
even in the rather free society of the Westside of Chicago. 
HAYEK: Well, of course, my explanation of this is that it's 
the effect of the teaching of the generation of teachers 
who taught in the forties , which we saw happen in their 
twenties. They essentially told the young people: "Well, 
all the traditional morals are bunk." 
ROSTEN: In the twenties? 

HAYEK: No, in the forties. The height of the influence of 
the modern psychoanalysis of "uneducation" was in the 
forties and fifties. And it was in the sixties that we 
got the products of that education. 

ROSTEN: Yes. It was more, I think, the vulgarization of 
psychoanalysis--I want to put in a word of defense there-- 
and the silliness of the people who were the practitioners 
and the counselors. I doubt very much that Freud would ever 
have approved of this, because certainly his work is not lacking 



162 



in severe moral strictures. 

HAYEK: Freud himself, probably not. Certainly not 
[Carl] Jung, but nearly all the next generation of well- 
known psychoanalysts were working in that direction. 
And if you take people like Erich Fromm and such people, 
or that man who became the first secretary of that 
international health service--that Canadian psychoanalyst-- 
ROSTEN: Oh, yes, yes. His name will come [Brock 
Chisholm--ed. ] . The World Health Organization. 
HAYEK: Yes. 

ROSTEN : You were talking about the forties, and I was 
reminded of, I think it's [Ludwig] von Mises, who had this 
extraordinary description of Germany before the First 
World War, with bands of young people with the equivalent of 
guitars and mandolins roaming the countryside, and so on. 
HAYEK: Oh, yes. 

ROSTEN: Perfectly remarkable passage. 
HAYEK: The Wandervogel . 

ROSTEN: The Wandervogel . And all that they left, he 
said, was not a single work of art, not a single poem, 
nothing but wrecked lives and dope! Were you familiar with 
that at all? 

HAYEK: Oh, I saw it happen; it was still quite active 
immediately after the war. I think it reached the highest 
point in the early twenties, immediately after the war. In 



163 



fact, I saw it happen when my youngest brother was full 
time drawn into that circle; but they were still not 
barbarians yet. It was rather a return to nature. Their 
main enjoyment was going out for walks into nature and 
living a primitive life. But it was not yet an outright 
revolt against civilization, as it later became. 
ROSTEN: Let me get back, as our time draws to a close. 
If we can't get from the economists any reasonably precise 
guidelines--! say "precise" simply in the earlier sense we 
were talking about: controls and so on — to whom do the 
leaders of the society turn for judgment? You've presented 
the politician, and I'm using "the politician" not in a 
negative sense, because I think it's an honorable profession 
and one which requires great skill — the mediators, if you 
want; the ones who have to make the recommendations to 
the Congress. If they can't get it from the economists, 
on economic problems--and the core of the problems we've 
been talking about are surely economic--where do they 
get their advice? 

HAYEK: You can tell the people that our present consti- 
tutional order forces politicians to do things which are 
very stupid and which they know are very stupid. I am not 
personally trying to blame the politicians; I rather blame 
the institutions which we have created and which force the 
politicians to behave not only irrationally but I would 



164 



say almost dishonestly. But they have no choice. So 
long as they have to buy support from any number of small 
groups by giving them special privileges, nothing but the 
present system can emerge. 

My present aim is really to prevent the recognition of 
this turning into a complete disgust with democracy in any 
form, which is a great danger, in my opinion. I want to 
make clear to the people that it's what I call unlimited 
democracy which is the danger, where coercion is not limited 
to the application of uniform rules, but you can take any 
specific coercive measure if it seems to serve a good 
purpose. And anything or anybody which will help the politician 
be elected is by definition a good purpose. I think people 
can be made to recognize this and to restore general limita- 
tions on the governmental powers; but that will be a very 
slow process, and I rather fear that before we can 
achieve something like this, we will get something like 
what [J. L. ] Talmon has called "totalitarian democracy"-- 
an elective dictatorship with practically unlimited 
powers. Then it will depend, from country to country, 
whether they are lucky or unlucky in the kind of person 
who gets in power. After all, there have been good dictators 
in the past; it's very unlikely that it will ever arise. 
But there may be one or two experiments where a dictator 
restores freedom, individual freedom. 



165 



ROSTEN: I can hardly think of a program that will be 
harder to sell to the American people. I'm using "sell" 
in the sense of persuade. How can a dictatorship be good? 
HAYEK: Oh, it will never be called a dictatorship; it 
may be a one-party system. 
ROSTEN: It may be a kindly system. 

HAYEK: A kindly system and a one-party system. A dictator 
says, "I have 9 percent support among the people." 
ROSTEN: That's already been said by several recent 
occupants of the White House, and it raises a terribly 
interesting and difficult question. At one point during 
the worst days of the Vietnam War, when President [Lyndon] 
Johnson suddenly realized that he had been misled, that 
he had been given a totally false picture and that he really 
faced a different, terrible kind of problem, there was a 
Cabinet meeting, and one member of the Cabinet said, "If 
we only knew what the American people want us to do!" 
Johnson looked up and said, "And let us suppose that we did 
know what the American people wanted us to do. Would that 
necessarily be the right thing for us to do?" It's an 
extraordinary insight into the problem of a statesman who 
is elected, who feels that responsibility, and yet has a 
degree of power that, as you have pointed out, today exceeds 
anything that we have ever known in the United States. 

How do you dismantle the bureaucracy? Remember Lenin, 



166 



who certainly didn't hesitate to use power and chop off 

heads and send people into exile and terrible things 

without the slightest mercy, and without anything to stop 

him, complained after three years, "We've been carrying on 

a fight against bureaucracy and there are 24,000 more 

bureaucrats in Moscow now than when I began!" He could 

not understand why he couldn't get rid of the bureaucracy. 

Do you have any ideas on that? 

HAYEK: I think, again, it comes ultimately to the question 

of restraining the power of the so-called legislature, 

which is now omnipotent. There is a long intellectual 

tradition which has led to this whole idea of positivism-- 

that the only possible limitation of power is the 

legislature . 

ROSTEN : When you say positivism, are you talking about the 

philosophical-- 

HAYEK : Legal positivism. 

ROSTEN: Legal positivism. Would you explain that for a 

minute? 

HAYEK: Well, that all law derives from the will of an 

ultimate legislature, which is omnipotent; while of course 

law, in the sense of rules of private conduct, is a process 

supported by evolution and the sense of justice for the 

people, which would put very definite limits [on it]. It's 

by no means inevitable that you give some supreme authority 

unlimited powers. 

167 



TAPE: ROSTEN III, SIDE TWO 
TAPE DATE: NOVEMBER 16, 19 7 8 

HAYEK: But legal positivism insists on the necessity of 

some supreme authority. Now, the authority can consist 

in the agreement of the people to form a union for certain 

purposes and not for others, in which case, of course, the 

power is automatically limited, and that power might well 

limit all coercive activity to the enforcement of certain 

uniform rules, which would exclude the granting of 

privileges to some and not to others. 

ROSTEN: Well, in other words, if you could rewrite the 

drama or the story of the United States, and make certain 

changes in the Constitution, we could avoid many of the 

problems we have now. 

HAYEK: Yes, I am — 

ROSTEN: Of course, we didn't know. But — 

HAYEK: You said before what great men, really, the writers 

of the American Constitution were. They were probably the 

wisest political scientists who ever lived. But I will give 

you just one illustration of how their intention has been 

completely misunderstood. Do you remember--! will test you-- 

the contents of the Ninth Amendment to the Constitution? 

ROSTEN: No, don't test me at this hour. It's bad 

enough in the morning. [laughter] Go ahead. 

HAYEK: Well, I've tried it with American lawyers, even 



168 



constitutional lawyers, and they first don't remember the 

text, and then don't know what it means. "Nothing in 

this Constitution is to restrict the people of the rights 

retained by the people." It has never been used, though I 

believe there is a single decision in which it is referred 

to. The intention was, of course, that the rights of 

government should be enumerated by the Constitution. 

ROSTEN : And that comes back to my earlier statement that 

it never occurred to them that there would be a problem 

with federal government over the states. 

HAYEK: Oh, no; it's partly the same thing, yes. 

ROSTEN: But it would be interesting to speculate how changes 

of this order, made in this place and in this place, would 

have prevented us from many of the-- 

HAYEK: I think if instead of a Bill of Rights enumerating 

particular protected rights, you had had a single clause 

saying that government must never use coercion, except in 

the enforcement of uniform rules equally applicable to all, 

you would not have needed the further Bill of Rights, and 

it would have kept government within the proper limits. It 

doesn't exclude government rendering services apart from this, 

but its coercive powers would be limited to the enforcement 

of uniform rules equally applicable to all. 

ROSTEN: You wouldn't have needed a First Amendment; you 

wouldn't have needed-- 



169 



HAYEK: Oh, this First Amendment is very limited to a 
specific field. 
ROSTEN: Sure. 

HAYEK: I would begin my amendment with the same words: 
"Congress must make no law"--but not to restrict in 
particular thing? , but quite generally [to restrict the] 
coercing of people except to obey uniform rules equally 
applicable to all. But it includes all the existing 
protections to society. 

ROSTEN: But suppose the uniform rules applicable to all 
were bad: illegal, unconstitutional, unjust. But they 
are equal to all. You've got to have some prior code or 
test, don ' t you? 

HAYEK: It's hardly conceivable that-- Well, the definition 
has to be much more complex than I gave you. It has to be 
rules applicable to an unknown number of future instances, 
referring to the relation of persons to other persons so as 
to exclude internal affairs and freedom of thought and so 
on. But there was, in the nineteenth century, a development 
of the concept of law which defined what the legal philoso- 
phers then called "law in the material sense," as distin- 
guished from law in the purely formal sense. [Law in the 
material sense] gives practically all the required 
characteristics of law in [the formal] sense and reproduces, 
I am convinced, essentially a conception in which law was 



170 



being used in the eighteenth century. That law is no 
longer something which has a meaning of its own, and the 
legislator is confined to giving laws in this sense; but 
that we derive the word law from legislature, rather than 
the other way around, is a relatively new development. 
ROSTEN: Well, again, to come back to the religious 
foundations of a society, you of course remember that 
Plato wrestled with the idea and said that democracy-- 
He had to have one royal lie--and of course he lived in a 
pagan and a polytheistic society--and I've often wondered 
what he meant by that "one royal lie," because it must 
have meant something like the divine right of the king. 
Someone has to carry that, or some institution. The curious 
thing about the Founding Fathers, the most marvelous thing 
about them, was they all agreed on Providence. So it was 
possible for the religious, for the Episcopalians, for the 
nonbeliever, to agree on this vague thing called deism, 
but it was a tremendous cement. And as that cement erodes, 
consequences follow for which there seems to be no 
substitute. I'm wondering whether, when you talk about 
the rule of law, you aren't, in a sense, talking in that 
tradition. Can you have a functioning society without 
some higher dedication, fear, faith? 

HAYEK: I believe, yes. In fact, in my persuasion, the 
advanced Greek society, the Greek democracy, was essentially 



171 



irreligious for all practical purposes. There you had a 
common political or moral creed, which perhaps the Stoics 
had developed in the most high form, which was very generally 
accepted. I don't think you need-- 

This brings us back to something which we discussed 
very much earlier. There is still the strong innate need 
to know that one serves common, concrete purposes with one's 
fellows. Now, this clearly is the thing which in a really 
great society is unachievable. You cannot really know. 
Whether people can learn this is still part of the 
emancipation from the feelings of the small face-to-face 
group, which we have not yet achieved. But we must achieve 
this if we are to maintain a large, great society of free 
men. It may be that our first attempt will break down. 
ROSTEN : Has the growth of anthropology, with the emphasis 
on kind of a cultural relativism and an indifference, as 
it were, to the "innate superiority" or not of one custom 
as against another, done a great deal to erode one's 
confidence in whatever moral order-- 

HAYEK : I would say it's rather a reflection of a more 
general public belief, a general belief. This idea that 
the anthropologists now frequently teach that every culture 
is as good as any other. Well, good for what? If you want 
to live in small tribal groups, some other [culture might] 
be good; but if you want not only to have a world society but 



172 



to rraintain the present population of the world, you have 
no choice. If that is your ultimate aim--just to assure 
to the people who live a future existence and continuance- 
I think you must create and maintain essentially a market 
society. If we now destroy the market society, then 
two-thirds of the present population of the world will 
be destined to die. 

ROSTEN: As they did before we had one. 
HAYEK: Oh, yes. 



173 



TAPE: HIGH I, SIDE ONE 
TAPE DATE: UNSPECIFIED 

HIGH: Professor Hayek, I believe you came from a family 
of natural scientists. How did you get interested in the 
social sciences? 

HAYEK: It's hard to say. I had a maternal grandfather who 
was a constitutional lawyer and later a statistician, but 
there's no influence from that side. The background was 
purely biological, which has now been passed on to my 
children. I don't know quite how it happened. I think 
the decisive influence which interested me and which led me 
to be interested in politics was really World War I, 
particularly the experience of serving in a multinational 
army, the Austro-Hungarian army. That's when I saw, more 
or less, the great empire collapse over the nationalist 
problem. I served in a battle in which eleven different 
languages were spoken in a single battle. It's bound to 
draw your attention to the problems of political organization. 

It was during the war service in Italy that I more or 
less decided to do economics. But I really got hooked when 
I found [Karl] Mengers's Grundsetze such a fascinating 
book--so satisfying. Even then, you see, I came back to 
study law in order to be able to do economics, but I was about 
equally interested in economics and psychology. I finally 



174 



had to choose between the things I was interested in. 
Economics at least had a formal legitimation by a degree, 
while in psychology you had nothing. And since there was 
no opportunity of a job, I decided for economics. 
HIGH: I seem to recall you telling a story in Claremont. 
You presided over the retreat of some troops. You were a 
lieutenant and ran into quite an interesting-- 
HAYEK: Well, it wasn't very interesting. On the retreat 
from the Piave [River] , we were first pursued by the 
Italians. Since I was telephone officer of my regiment 
(which meant that I knew all the very few German-speaking 
men, who were the only reliable men in these conditions) , 
I was asked to take a little detachment for the artillery 
regiment, first as a rear guard against the Italians fol- 
lowing us and then as an advance guard as we were passing the 
Yugoslav part, where there were irregular Yugoslav cadres 
who were trying to stop us and get our guns. On that 
occasion, after having fought for a year without ever having 
to do a thing like that, I had to attack a firing machine 
gun. In the night, by the time I had got to the machine 
gun, they had gone. But it was an unpleasant experience, 
[laughter] 

HIGH: Your name, of course, is closely associated with 
[Ludwig von] Mises's. What do you feel were the most 
important influences he had on you? 



175 



HAYEK: That's, of course, a big order to answer. Because 
while I owe him a great deal, it was perhaps most important 
that even though he was very persuasive, I was never quite 
convinced by his arguments. Frequently, I find in my own 
explanations that he was right in the conclusions without 
his arguments completely satisfying me. In my interests, 
I've been very much guided by him: both the interest in 
money and industrial fluctuations and the interest in 
socialism comes very directly from his influence. If I 
had come to him as a young student, I would probably have 
just swallowed his views completely. As it was, I came to 
him already with a degree. I had finished my elementary 
course; so I pushed him in a slightly more critical fashion. 
Being for ten years in close contact with a man with whose 
conclusions on the whole you agree but whose arguments 
were not always perfectly convincing to you, was a great 
stimulus . 

As I say, in most instances I found he was simply 
right; but in some instances, particularly the philosophical 
background — I think I should put it that way--Mises remained 
to the end a utilitarian rationalist. I came to the 
conclusion that both utilitarianism as a philosophy and 
the idea of it--that we were guided mostly by rational 
calculations-- jus t would not be true. 

That [has] led me to my latest development, on the 



176 



4 



insight that we largely had learned certain practices 
which were efficient without really understanding why we 
did it; so that it was wrong to interpret the economic 
system on the basis of rational action. It was probably 
much truer that we had learned certain rules of conduct 
which were traditional in our society. As for why we did, 
there was a problem of selective evolution rather than rational 
construction. 

HIGH: How about the work of Frank Knight, especially his 
work on uncertainty? How big an influence did that have 
on you? 

HAYEK: Comparatively little, because I came across it 
too late. I found it extremely satisfactory when I became 
acquainted with it, but that was after I'd gone to London; 
so [it was] at a comparatively late stage. At that stage, 
Lionel Robbins used the first introductory chapters of the 
book as an elementary textbook on economics. My students 
were all brought up on it; so I had to study it very care- 
fully. But, as I say, at a stage where my ideas were 
fairly definitely formed I liked it very much, and I think 
the stress on the risk problem had some influence on me, 
but only a contributing influence, as it fitted in with my 
thinking rather than starting something new. 
HIGH: So that book was not a part of the intellectual 
material of Vienna of the 1920s. 



177 



HAYEK: No, in spite of the fact that Knight visited 

us once in Vienna. We made his personal acquaintance, and 

I suppose some of my friends read his book at the time. 

I didn't. 

HIGH: How about the work of [Frank] Fetter? Did that have 

much of an influence on you? 

HAYEK: I knew it; in fact, I knew the old man himself. I 

visited him at Princeton [University] when I was here in 

•23 or '24. Influence is putting it too strong. I was 

very interested in it, but being brought up on [Eugen von] 

Bohm-Bawerk I found it a very nice restatement--exag- 

gerating, in my opinion, the purely psychological part of it. 

I think Bohm-Bawerk had kept much more balance between 

the time-preference and the productivity aspect. Fetter 

stressed entirely the time-preference aspect, although 

Mises liked it very much. I think Mises would have--I 

didn't hear him say so--but probably would have argued that 

Fetter was an improvement on Bohm-Bawerk. I've never been 

persuaded that was so. 

HIGH: So in the debate between Fetter and [Irving] 

Fisher, then, I guess you would come down more on the side 

of Fisher. 

HAYEK: Yes, I think so. 

HIGH: Looking back, it seems like there was a remarkable 

number of economists who later became prominent, who were 



178 



in Vienna in the 1920s. What do you attribute that to? 
HAYEK: Well, the number wasn't so very large. It was a 
group of almost contemporaries, consisting essentially of 
[Gottfried] Haberler; [Fritz] Machlup; Oskar Morgenstern; [Paul] 
Rosenstein-Rodan, who at that time was much more influen- 
tial than he has since been, and who wrote a very important 
article on marginal utility; and myself. I think that is 
the group. 
HIGH: Haberler? 

HAYEK: I mentioned Haberler first, I thought. 
HIGH: Oh, did you? 

HAYEK: Haberler would come to my mind first, anyhow. We 
were all about the same generation, all of us still members 
of the same seminar. We were only two years apart, and 
we were all members of Mises's seminar, which I think was 
really much more important because it kept us together after 
we'd finished — You see, Mises's seminar was not really a 
university affair; this was a discussion club in his office. 
We called it the Mises Seminar, and it went on for some- 
thing like twenty years. I left after fifteen years, in 
'31, when I went to London, but all the rest, and Mises 
himself, still continued until about 1936 or so. 

It's really the members of this seminar who, I think, 
probably were largely encouraged to pursue economics by this 
discussion group of Mises's, which in a way was much more 



179 



important than the university. At the university there 
was no inspiring teacher after [Friedrich von] V'Jieser 
had retired. Hans Meyer, his successor, was a severely 
neurotic-- He was a very intelligent and knowledgeable 
man, but the kind of person who will never fulfill their 
promise because they haven't discipline enough to force 
themselves to complete a piece of work of any length, and 
that was his tragedy because it all led to certain emotional 
strains on the man. He was also a difficult person to get 
on with, and Mises was, contrary to his reputation, an 
extremely tolerant person. He would have anyone in his 
seminar who was intellectually interested. Meyer would 
insist that you swore by the master, and anybody who 
disagreed was unwelcome. 

HIGH: I see. Very little or maybe even none of Hans Meyer's 
work has been translated into English. Did he make any 
important contributions? 

HAYEK: I'm never quite sure. When I recently expressed 
doubts about it, a man who is a very good judge, [Ludwig] 
Lachmann, thought it was unjust, and perhaps I have 
forgotten. I haven't referred to him again since that time, 
and he really did not make a very great impression on me. 
But I should not be surprised that if I returned to him, 
I would find more in him than I remember. 
HIGH: I see. John Hicks wrote about you, and I want to 



180 



quote this. This is a quote: "When the definitive 

history of economic analysis during the 1930s comes to 

be written, a leading character in the drama--it was quite 

a drama--will be Professor Hayek. There was a time when 

the new theories of Hayek were the rivals of the new 

theories of Keynes." End of quote. Why do you think 

your theories lost out to the theories of [John Maynard] 

Keynes? 

HAYEK: Well, there are two sides to it. One is, while 

Keynes was disputed as long as he was alive--very much 

so--after his death he was raised to sainthood. Partly 

because Keynes himself was very willing to change his opinions, 

his pupils developed an orthodoxy: you were either allowed 

to belong to the orthodoxy or not. 

At about the same time, I discredited myself with most 
of my fellow economists by writing The Road to Serfdom , 
which is disliked so much. So not only did my theoretical 
influence decline, most of the departments came to dislike 
me, so much so that I can feel it to the present day. 
Economists very largely tend to treat me as an outsider, 
somebody who has discredited himself by writing a book like 
The Road to Serfdom , which has now become political 
science altogether. 

Recently, and Hicks is probably the most outstanding 
symptom, there has been a revival of interest in my sort of 



181 



problems, but I had a period of twenty years in which I 
bitterly regretted having once mentioned to my wife after 
Keynes's death, that now Keynes was dead I was probably 
the best-known economist living. But ten days later it 
was probably no longer true. [laughter] At that very 
moment Keynes became the great figure, and I was gradually 
forgotten as an economist. 

Part of the justification, you know, was that I did 
only incidental work in economics after that. And most of 
what I did was kind of to a present — Well, I guess there 
is one more aspect. I never sympathized with either macro- 
economics or econometrics. They became the great fashion 
during the period as a curious pattern, thanks to Keynes's 
influence. In the case of macroeconomics, it's clear. 
But Keynes himself did not think very highly of econometrics, 
rather to the contrary. Yet somehow his stress on aggre- 
gates, on aggregate income, aggregate demand, encouraged 
work in both macroeconomics and econometrics. So, very much 
against his own wishes he became the spiritual father of 
this development towards the mathematical econometric 
economics. Now, I had always expressed my doubts about this, 
and that didn't make me very popular among the reigning 
generation of economists. I was just thought to be old- 
fashioned, with no sympathy for modern ideas, that sort of 
thing. 



182 



HIGH: I see. What is your evaluation of Hicks's book 
Value and Capital ? 

HAYEK: Oh, really, absolutely first-class work in his time. 
So far as there is a theory of value proper, which does not 
extend beyond this and which doesn't really analyze it in 
terms of directing production, I think it's the final 
formulation of the theory of value. I don't think [Paul] 
Samuelson's improvements are really improvements beyond it. 
I think the Hicksian analysis in terms of rates of substi- 
tution, in that narrow field, is a definite achievement. 
HIGH: Do you think that what is now called the Keynesian 
revolution should have been called the Hicksian revolution? 
Kas he influential in getting Keynes's ideas accepted? 
HAYEK: I certainly don't think of Hicks as a revolutionary, 
I think he tried to give it a more acceptable form. But 
I have reason to say that it probably should be called a 
Kaldorian revolution, not for anything which is connected 
with Kaldor's name, but what spread it was really Lord 
[William] Beveridge's book on full employment, and that 
was written by Mr. Nicholas Kaldor and not by Lord 
Beveridge, because Lord Beveridge never understood any 
economics. [laughter] 

HIGH: Have the economic events since you wrote on trade- 
cycle theory tended to strengthen or weaken your ideas on 
the Austrian theory of the trade cycle? 



183 



HAYEK: On the whole, strengthen, although I see more 
clearly that there's a very general schema which has to be 
filled in in detail. The particular form I gave it was 
connected with the mechanism of the gold standard, which 
allowed a credit expansion up to a point and then made a 
certain reversal possible. I always knew that in principle 
there was no definite time limit for the period for which 
you could stimulate expansion by rapidly accelerating 
inflation. But I just took it for granted that there was 
a built-in stop in the form of the gold standard, and in 
that I was a little mistaken in my diagnosis of the postwar 
development. I knew the boom would break down, but I didn't 
give it as long as it actually lasted. That you could 
maintain an inflationary boom for something like twenty 
years I did not anticipate. 

While on the one hand, immediately after the war I 
never believed, as most of my friends did, in an impending 
depression, because I anticipated an inflationary boom. My 
expectation would be that the inflationary boom would last 
five or six years, as the historical ones had done, forget- 
ting that then the termination was due to the gold standard. 
If you had no gold standard--if you could continue 
inflating for much longer--it was very difficult to predict 
how long it would last. Of course, it has lasted very much 
longer than I expected. The end result was the same. 



184 



HIGH: The Austrian theory of the cycle depends very heavily 
on business expectations being wrong. Now, what basis 
do you feel an economist has for asserting that expectations 
regarding the future will generally be wrong? 
HAYEK: Well, I think the general fact that booms have 
always appeared with a great increase of investment, a large 
part of which proved to be erroneous, mistaken. That, of 
course, fits in with the idea that a supply of capital was 
made apparent which wasn't actually existing. The whole 
combination of a stimulus to invest on a large scale followed 
by a period of acute scarcity of capital fits into this idea 
that there has been a misdirection due to monetary 
influences, and that general schema, I still believe, is 
correct. 

But this is capable of a great many modifications, 
particularly in connection with where the additional money 
goes. You see, that's another point where I thought too 
much in what was true under prewar conditions, when all 
credit expansion, or nearly all, went into private invest- 
ment, into a combination of industrial capital. Since then, 
so much of the credit expansion has gone to where government 
directed it that the misdirection may no longer be over- 
investment in industrial capital, but may take any number 
of forms. You must really study it separately for each 
particular phase and situation. The typical trade cycle no 



185 



longer exists, I believe. But you get very similar 
phenomena with all kinds of modifications. 
HIGH: You've already talked a little bit about your 
involvement with the socialist calculation debate. What 
effects do you feel the debate had on the theory of 
socialism? 

HAYEK: Well, of course, it had some immediate effects. 
When Mises started it, there was still the idea very 
prevalent that there was no need for calculation in terms 
of value at all. Then came the idea that you could 
substitute values by mathematical calculation; then there 
came the idea of the possibility of socialist competition. 
All these were gradually repressed. But as I now see, the 
reason why Mises did not fully succeed is his very use of 
the term calculation . People just didn't see why calcula- 
tion should be necessary. 

I mean, when I now look at the discussion at that time, 
and Mises asserts that calculation is impossible, I can 
[understand] the reply: Why should we calculate? We have 
the technical data. We know what we want. So why 
calculation at all? If Mises, instead of saying simply 
that without a market, calculation is impossible, had 
claimed that without a market, people would not know what 
to produce, how much to produce, and in what manner to 
produce, people might have understood him. But he never 



186 



put it like this. He assumed everyone would understand 
him, but apparently people didn't. 

HIGH: To what extent do you think the debate has slowed 
down the spread of national economic planning in the 
Western world? 

HAYEK: Well, it's reviving again. It had died down very 
much, but when two years ago in this country this planning 
bill of Senator [Hubert] Humphrey's and the agitation of 
[Wassily] Leontief and these people came forward, I was 
amazed that people were again swallowing what I thought 
had been definitely refuted. Of course, Leontief still 
believes firmly in it. I don't think he ever understood 
any economics, but that's a different matter. 
HIGH: To what extent do you think that general-equilibrium 
analysis has contributed to the belief that national 
economic planning is possible? 

HAYEK: It certainly has. To what extent is very dif- 
ficult to say. Of the direct significance of equilibrium 
analysis to the explanation of the events we observe, I 
never had any doubt, I thought it was a very useful 
concept to explain a type of order towards which the process 
of economics tends without ever reaching it. I'm now trying 
to formulate some concept of economics as a stream instead 
of an equilibrating force, as we ought, quite literally, to 
think in terms of the factors that determine the movement 



187 



of the flow of water in a very irregular bed. That would 
give us a much better conception of what it does. 

But ultimately, of course, it goes back to the 
assumption of what the economists pleonastically call 
"given data," this ridiculous concept that, if you assiame 
the fiction that you know all the facts, the conclusion 
you derive from this assumption can apply directly to the 
world. My whole thinking on this started with my old 
friend Freddy Bennan joking about economists speaking 
about given data just to reassure themselves that what 
was given was really given. That led me, in part, to 
ask to whom were the data really given. To us, it was 
of course [given] to nobody. The economist assumes [the 
data] are given to him, but that's a fiction. In fact, 
there's no one who knows all the data or the whole process, 
and that's what led me, in the thirties, to the idea 
that the whole problem was the utilization of information 
dispersed among thousands of people and not possessed by 
anyone. Once you see it that way, it's clear that the 
concept of equilibrium helps you in no way to plan, because 
you could plan only if you knew all the facts known to 
all people; but since you can't possibly know them, the 
whole thing is vain and a misconception partly inspired 
by this concept that there are definite data which are known 
to anyone. 



188 



HIGH: Do you feel that mathematics has an important role 
to play in economic theory? 

HAYEK: Yes, but algebraic mathematics and not quantitative 
mathematics. Algebra and mathematics are a beautiful way 
of describing certain patterns, quite irrespective of 
magnitudes. There's one great mathematician who once 
said, "The essence of mathematics is the making of 
patterns," but the mathematical economists usually 
understand so little mathematics that they believe strong 
mathematics must be quantitative and numerical. The moment 
you turn to accept this belief I think the thing becomes 
very misleading--misleading , at least, so far as it concerns 
general theory. I don't deny that statistics are very 
useful in informing about the current state of affairs, 
but I don't think statistical information has anything to 
contribute to the theoretical explanation of the process. 



189 



TAPE: HIGH I, SIDE TVTO 
TAPE DATE: UNSPECIFIED 

HIGH: What is your assessment of game theory? 
HAYEK: Well, I don't want to be unkind to my old friend, 
the late Oskar Morganstern, but while I think his book is 
a great mathematical achievement, the first chapter which 
deals with economics is just wrong. I don't think that 
game theory has really made an important contribution to 
economics, but it's a very interesting mathematical 
discipline . 

HIGH: You have written an extraordinarily difficult book on 
capital theory--in my opinion it's difficult. What message 
did you want to convey in that book? 

HAYEK: Well, to put it briefly, I think it's that while 
Bohm-Bawerk was fundamentally right, his exposition in 
terms of an average period of production was so oversim- 
plified as to mislead in the application. And that if we 
want to think the Bohm-Bawerk idea through, we have to 
introduce much more complex assumptions. Once you do this, 
the things become so damned complicated it's almost 
impossible to follow it. [laughter] 

HIGH: Did you have any idea the work was going to be that 
complicated when you undertook it? 

HAYEK: No, no. I certainly didn't. It very gradually 
dawned upon me that the whole thing seemed to change its 



190 



aspect once you could not put it in the simple form that 
you could substitute a simple average period of production 
for the range of investment periods. The average period of 
production is the first model showing a principle, but it 
is almost inapplicable to the real situation. Well, of 
course, the capital that exists has never been built up 
consistently on the basis of a given set of expectations, 
but by constantly reusing accumulated real capital assets 
for new purposes that were not foreseen. So the dynamic 
process looks very different. 

I think the most useful conclusions drawn from what 
I did are really in Lachmann's book on capital, whatever the 
title is. Like so many things, I am afraid, which I have 
attempted in economics, [this capital-theory work] shows 
more a barrier to how far we can get in efficient explana- 
tion than [sets forth] precise explanations. All these 
things I've s tressed--the complexity of the phenomena in 
general, the unknown character of the data, and so on--really 
much more point out limits to our possible knowledge than 
our contributions that make specific predictions possible. 

This is, incidentally, another reason why my views have 
become unpopular: a conception of scientific method became 
prevalent during this period which valued all scientific 
fields on the basis of the specific predictions to which 
they would lead. Now, somebody pointed out that the 



191 



specific predictions which [economics] could make were 
very limited, and that at most you could achieve what I 
sometimes called patterned predictions, or predictions 
of the principle. This seemed to the people who were used 
to the simplicity of physics or chemistry very disap- 
pointing and almost not science. The aim of science, 
in that view, was specific prediction, preferably mathe- 
matically testable, and somebody pointed out that when 
you applied this principle to complex phenomena, you couldn't 
achieve this. This seemed to people almost to deny that 
science was possible. Of course, my real aim was that the 
possible aims of science must be much more limited once 
we've passed from the science of simple phenomena to the 
science of complex phenomena. And there people bitterly 
resented that I would call physics a science of simple 
phenomena, which is partly a misunderstanding, because 
the theory of physics ends in terms of very simple equations. 
But that the active phenomena to which you have to apply it 
may be extremely complex is a different matter. The models 
of physical theory are very simple, indeed. 

So far as the field of probability, that's another part. 
But it is this intermediate field, which we have in the 
social sciences, where the elements which have to be taken 
into account are neither few enough that you can know them 
all, nor a sufficiently large number that you can substitute 



192 



probabilities for the new information. The intermediate- 
phenomena field is a difficult one. That's a field with 
which we have to deal both in biology and the social 
sciences. And they're complex. They become, I believe, 
an absolute barrier to the specificity of predictions 
that we can arrive at. Until people learn themselves that 
they can't achieve these ends, they will insist on trying. 
They will think that somebody who does not believe [this 
specificity can be achieved] is just old-fashioned and 
doesn't understand modern science. 

HIGH: I have heard you say before that in the 1920s, 1930s, 
you didn't regard Austrian economics as essentially any 
different from British economics. Looking back, do you 
still think that's true? 

HAYEK: If you stress essentially, yes, I think it is 
still true. So long as British economics at least aimed 
at being microeconomics (and that was true at that time) , 
there was no such fundamental difference, though there must 
have been inherent in it a greater propensity to shift 
over to macroeconomics than there was in the Austrian 
tradition. I think historically it is true that most of the 
people in the Marshallian school readily switched over to 
macroeconomics, but the Austrians did not. It would be 
interesting, especially, to investigate the reasons 
why this happened. But my general feeling was that before 



193 



Keynes helped macroeconomics to this complete temporary 
victory, the two traditions were closely approaching. 
Perhaps this was due to my making the acquaintance with 
English tradition very much in the form of Lionel Robbins's 
exposition, which was half-Austrian already. [laughter] 
If I had moved not to the London School of Economics but 
to Cambridge, I might not have felt like this. 
HIGH: What do you feel saved the Austrian economists 
from adopting the perfect-competition/perfect-knowledge 
approach to micro problems? 

HAYEK: Well, I don't know, that is really deeply embedded 
in the whole tradition. I think already Menger's resistance 
against mathematical economics was based on the same aware- 
ness that you deal with the phenomena where your specific 
information is limited, but none of them have ever really 
spelled it out--not even Mises--adequately . It is still 
one of my endeavors to show why this tendency towards 
macroeconomics-- I just can't explain at the moment. I'm 
quite clear why, from the Austrian point of view, you could 
never be happy with a macroeconomic approach. It's almost 
a different view of the world from which you start. I 
find it much more puzzling that so many people seem to be 
able to live in both worlds at the same time. 
HIGH: There are quite a number of young economists today 
who are studying your work and the work of Mises. How 



194 



do you look on the new Austrian movement? Do you 
regard it as significant? How do you regard its future 
prospects? 

HAYEK: Oh, yes, it's certainly significant. I am quite 
hopeful in the long run, just because of this movement, 
which consists not only of those who call themselves, in 
this country, the Austrian economists. There is a similar 
reaction among the young people in England and in Germany, 
and quite recently even in France, where it came latest. 
So I think the intellectual movement is wholly in the right 
direction. But it will take another twenty years before they 
will have any influence on policy, and it's quite possible 
in the meantime that the politicians will destroy the world 
so thoroughly that there's no chance of the thing taking 
over. But I've always made it my rule not to be concerned 
with current politics, but to try to operate on public 
opinion. As far as the movement of intellectual opinion 
is concerned, it is now for the first time in my life moving 
in the right direction. 

Now, speaking a moment about the more general 
political aspect of it all, I'd like to say that when I 
was a young man, only the very old men still believed in 
the free-market system. When I was in my middle ages, I 
almost found that myself, and nobody else, believed in it. 
And now I have the pleasure of having lived long enough 



195 



to see that the young people again believe in it. That 

is a very important change. Whether it comes in time to 

save the world, I don't know. 

HIGH: Looking back, your articles "The Use of Knowledge 

in Society" and "Economics and Knowledge" seem like a 

bridge between your economics work and your later social 

philosophy. Now, in the late 1930s, did you make a 

conscious decision to move in the direction of social 

philosophy rather than technical economics? 

HAYEK: No, it came from my interest in the history of 

the ideas that had first led economics in the wrong 

direction. That's what I did in the "counterrevolution 

of science" series of articles, which again sprung from 

my occupation with planning similar things, and it was 

these which led me to see connections between what 

happened in economics and what happened in the approach to 

the other social sciences. So I acquired gradually a 

philosophy, in the first instance, because I needed it for 

interpreting economic phenomena that were applicable to 

other phenomena. It's an approach to social science very 

much opposed to the scientistic approach of sociology, 

but I find it appropriate to the specialized disciplines 

of the social sciences — essentially economics and linguistics, 

which are very similar in their problems. [It explains] 

the genesis of all kinds of social structures, but throughout 



196 



opposed to sociology. 

As I put it in my recent lectures, I'm very doiibtful 
whether there is really a justification for a single 
theoretical science of sociology, any more than there's 
any justification for a single theoretical science of 
" naturology . " Science has to deal with particular 
phenomena. It may develop a philosophy which explains how 
certain complexes of phenomena are ordered, but there are 
certainly many ordering principles operating in forming 
society, and each is of its own kind. For sociologists to 
claim otherwise--well , sociology, in a way, puts it 
dif ferently--is due to the same current to which macro- 
economics is due in economics. It's, of course, a--well, 
I've never used the term before--"macrosociology " instead 
of a "microsociology . " Microsociology would consist of 
sciences like economics and linguistics and the theory of 
law and even the theory of morals; while macrosociology 
is as much a mistake as macroeconomics is. 
HIGH: What were the most important considerations in 
your leaving the field of economics and concentrating 
on social philosophy? 

HAYEK: Well, it was never a deliberate decision. I was, 
by accident, led into writing that book The Road to Serfdom . 
I found that it raised many problems to which I had no 
satisfactory answer and couldn't find a satisfactory 



197 



answer anywhere. And when, to retreat a moment from the 
controversial subjects, I decided to write up my ideas on 
psychology', I became aware of the existence of this 
general background of a different methodological approach 
to complex phenomena. Once I had elaborated this aspect of 
the methodology of science, I just saw that it had even 
more urgent application at the moment to things like theory 
of politics than to the theory of economics. 

But there was one more-- There's always so many dif- 
ferent things converging which drive one to a particular 
outcome. I did see that our present political order made it 
almost inevitable that governments were driven into sense- 
less policies. Already the analysis of the The Road to 
Serfdom showed me that, in a sense, [Joseph] Schumpeter 
was right--that while socialism could never do what it 
promised, it was inevitable that it should come, because 
the existing political institutions drove us into it. This 
didn't really explain it, but once you realize that a 
government which has power to discriminate in order to 
satisfy particular interests, if it's democratically 
organized, is forced to do this without limit-- Because 
it's not really government but the opinion in a democracy 
that builds up a democracy by satisfying a sufficient number 

of special interests to offer majority support. This gave me 
a key to the reason why, even if people understood 



198 



economics correctly, in the present system of government it 
would be led into a very stupid economics policy. 

This led me to what I call my two inventions in the 
economics field. On the one hand, my proposal for a system 
of really limited democracy; and on the other--also a 
field where present government cannot pursue a sensible 
policy--the denationalization of money, taking the control 
of money out of the hands of government. Now, once you 
are aware that, although I am very little concerned with 
influencing current politics, the current institutional 
setup makes a good economics policy impossible, of course 
you're driven to ask what can you do about this institutional 
setup. 

HIGH: Is it possible to arrange governments so that they 
are not eventually driven to make these-- 

HAYEK: Well, that is the attempt of my Law, Legislation 
and Liberty --to sketch a possible constitutional arrange- 
ment which I think would do so. There is the question 
of what you mean by possible. Whether it's possible to 
persuade people to accept such a constitution, I don't 
know. But there, of course, my principle comes in that 
I never ask what is politically possible, but always aim 
at so influencing opinion as to make politically possible 
what today is not politically possible. 
HIGH: You spoke earlier of ideas that had led economists 



199 



astray. What do you feel are the most important of these 
ideas? 

HAYEK: Well, that's too long a story to explain briefly. 
Most of what I have done on the intellectual history is 
my study of positivism. The origin of the idea of central 
direction, the idea about the utilization of dispersed 
knowledge, all really converge on this same point. And 
I think it was inevitable, in a way, that I was led from 
economics in the narrower sense to the question of social 
organization and appropriate governments which would avoid 
being driven, even against their better insight, into stupid 
policies . 

Apart from the general effect of democracy, of course 
the present position with the inflation is a very clear one. 
You have a situation in which everybody knows that a little 
inflation will reduce unemployment, but that in the long 
run will increase it. But that the politicians are bound 
to be led by short-run considerations because they want to 
immediately be reelected, I think to me proves irrefutably 
that so long as government has discretionary powers over 
money, it will be driven into more and more inflation. In 
fact, it has always been so, except as long as government 
voluntarily submitted to the discipline of the gold 
standard. I can't really defend the gold standard, because 
I think it rests--its effectiveness rested--in part on a 



200 



superstition, and the idea that gold money as such is 
good is just wrong. The gold standard was good because 
it prevented a certain arbitrariness of government in its 
policy; but merely preventing even worse is not good 
enough, particularly if it depends on people holding certain 
beliefs which are no longer held. So, in my opinion, 
an effective restoration of the gold standard is not a 
thing we can hope for. 

HIGH: I would like to ask you a couple of questions on 
the background of economics--history of economic thought. 
How do you evaluate the influence of John Stuart Mill? 
HAYEK: Well, you ask me at the wrong moment. I'm just 
drafting an article which is going to be called "Mill's 
Muddle and the Muddle of the Middle." [laughter] I'm 
afraid John Stuart Mill--you know, I have devoted a great 
deal of time studying his intellectual development — really 
has done a very great deal of harm, and the origin of it 
is still impossible for me to explain. That in any man 
the mere fact that he was taught something as a small boy 
should make him incapable of seeing that it is wrong, I 
still find very difficult to understand. That applies 
especially to the labor theory of value. 

In the 1820s and 1830s the labor theory of value was 
very badly shaken. In fact, there was a famous meeting of 
the Political Economy Club, in which I believe [Robert] 



201 



Torrens asked the question, "What is now left of the 
theories of Mr. [David] Ricardo?" concluding that the 
theory of value had been finally exploded by Samuel 
Bailey. Now, I don't know whether John Stuart Mill was 
among the members of the Political Economy Club, but I 
know that his own little discussion circle devoted several 
meetings to discussion of Bailey's book on value, which is 
one of the books that clearly refuted Ricardo. And Mill 
was very familiar with the French discussion at the time 
when utility analysis was very definitely in the air. It 
had not become a definite formulation, but Leon Walras and 
even [A. A.] Cournot-- And there was even an Englishman, 
Don Lloyd, who had developed almost a complete marginal- 
utility theory, and I assume Mill must have known this. 
Any man after this who can assert of the theory of value 
that in the theory of value there's nothing to improve, that 
it is certain to be for all times definite, is completely 
incomprehensible to me. This had very serious conse- 
quences [for Mill], because it was this belief that the 
theory of value was definite that led him to this curious 
statement that the theory of production is determined by 
nature; where distribution is concerned, it's open to our 
modification according to our will. I'm not quoting 
literally now; I can't remember the form of words he used. 
Now that, of course, is entirely due to the fact that he 



202 



had not understood the real function of value as telling 
people what they ought to do. By assuming that value 
is determined by what has been done in the past rather than 
seeing that to maintain the whole structure values are the 
things people are to follow in deciding what to do. Mill 
was led into this statement that distribution is a matter 
of arbitrary decision, and that forced him into a third 
great mistake in inventing the conception of social justice. 

Now, that means the three most important things in his 
book are not only completely wrong but are extremely harm- 
ful. That's not denying that he was a very ingenious man, 
and there are many little points in his book which are of 
great interest. [George] Stigler, in an article you 
probably remember, has pointed out his positive contribu- 
tion, but I think the net effect of John Stuart Mill on 
economics has been devastating, and [W. Stanley] Jevons 
knew this. Jevons regarded Mill as a thoroughly pernicious 
influence. And while I would never use quite as strong 
language, I think Jevons was fundamentally right. 
HIGH: Then, in your view [Alfred] Marshall was wrong in his 
rehabilitations . 

HAYEK: Oh, yes, yes. In assessing the difference between 
the Austrians and the Cambridge school, it was Marshall, 
with his harking back to Mill and his famous two blades of 
a sisal--it's not demand only, it's not supply only, it's a 



203 



sisal that determines values — that preserved this tradition. 
And it's out of this tradition that the whole of English 
socialism has sprung. If you look at--whether it's 
(George Bernard] Shaw or Bertrand Russell — the whole 
leaders of opinion in England at the beginning of this 
century, they were brought up on John Stuart Mill. 
HIGH: I want to switch the topic a little bit now, 
because we're just about out of time. I would like to 
ask you, what were your feelings, how did you react, when 
you found out you had won the Nobel Prize? 
HAYEK: Complete surprise. I mean, I expected nothing 
less, and I didn't even approve. I didn't think the Nobel 
Prize ought to be given late in life to people that had 
done something important in the distant past. That was 
certainly not the intention of [Alfred] Nobel himself, and 
I don't think it ought to be in economics. I think it 
ought to be given for some specific achievement in the 
fairly recent past; but this conferring it as a general 
sign of distinction on people who had given-- But even so, 
I assumed they would treat me as too old, as already out of 
the running. 

HIGH: Looking back over your career, how do you feel about 
your work, and what things do you think you might change, 
if you had to do it again? 
HAYEK: I don't know. I never thought about this. In 



204 



spite of my age, I'm still thinking much more about the 
future than about the past. It's so difficult to know 
what the consequences of particular actions have actually 
been, and since all evolution is largely the product of 
accidents, I'll be very hard-put to say what particular 
decisions of my own have had particular consequences. I 
know certain events which were extremely lucky, that I had 
luck in many connections, but how far my own decisions 
were right or wrong — It is my general view of life that 
we are playing a game of luck, and on the whole I have been 
lucky in this game. 

HIGH: Well, I think we're out of time. I would like to 
say that those of us who have had access to your work to 
learn from are very lucky and also very appreciative. 
HAYEK; Thank you very much. 



205 



TAPE: BUCHANAN I, SIDE ONE 
TAPE DATE: OCTOBER 28, 19 7 8 

BUCHANAN: Professor Hayek, I appreciate the opportunity 
to talk to you here today. We had a chat last night, but 
I appreciate the opportunity to have a chance to talk to 
you again. They told me I was supposed to talk to you 
pretty largely on, or at least to start on, the subject 
of political theory. So I'd like to start off with what 
is a very general topic, if we might. In his book published 
in April, in England, Lord Hailsham [Quintin Hogg] argued 
that one of the problems that we face in Western nations 
these days is that we have been suffering under this 
delusion that somehow, so long as governments were in fact 
responsible electorally to the people, we didn't need to 
worry about putting limits on government. Now, at a 
much more profound level, you argue that point also in 
the third volume of Law, Legislation and Liberty . I think 
it would be useful, to start off this discussion, if you 
would just talk about that a little. Why did we get 
involved in this sort of delusion — and I think it is a 
delusion--to the effect that somehow we didn't need to 
worry about limiting government if in fact we could make 
the politicians responsible? 

HAYEK: Well, I've been very much puzzled by this, but I 
think I have discovered the origin of this. It begins with 



206 



the utilitarians, with [Jeremy] Bentham and particularly 
James Mill, who had this conception that once it was a 
majority who controlled government, no other restriction 
on government was any longer possible. It comes out quite 
clearly in James Mill, and later in John Stuart Mill, who 
once said, "The will of the people needs no control if it's 
the people who decide." Now there, of course, is a complete 
confusion. The whole history of constitutionalism till 
then was a restraint on government, not by confining it 
to particular issues but by limiting the form in which 
government could interfere. 

The conception was still very large then that coercion 
could be used only in the enforcement of general rules 
which applied equally to all, and the government had no 
powers of discriminatory assistance or prevention of 
particular people. Now, the dreadful thing about the 
forgetting of this is that it's, of course, no longer the 
will of the majority, or the opinion of the majority, I 
prefer to say, which determines what the government does, 
but the government is forced to satisfy all kinds of 
special interests in order to build up a majority. It's 
as a process. There's not a majority which agrees, but 
the problem of building up a majority by satisfying 
particular groups. So I feel that a modern kind of 
democracy, which I call unlimited democracy, is probably 



207 



more subject to the influence of special interests than 
any former form of government was. Even a dictator can 
say no, but this kind of government cannot say no to 
any splinter group which it needs to be a majority. 
BUCHANAN: You said you think that in Britain this sort 
of view started with the utilitarians. I'm wondering 
whether--and this is a more general question I've been 
planning to ask you anyway after reading your third volume-- 
it is not true that perhaps this attitude, or this delusion, 
was more widespread in Britain than in the United States? 
It does seem to me that sort of the notion of constitutional 
limits, separation of powers, was more pervasive in the 
United States, with our Founding Fathers, and later in the — 
HAYEK: Well, among the Founding Fathers, there were some 
who very clearly saw the very point I am making. And I 
believe they did try, by the design of the American 
Constitution, to achieve a limit on their powers. After 
all, the one phrase in the American Constitution, or rather 
in the First Amendment, which I think most highly of is 
the phrase, "Congress shall make no law. . . ." Now, 
that's unique, but unfortunately [it goes] only to a 
particular point. I think the phrase ought to read, 
"Congress should make no law authorizing government to 
take any discriminatory measures of coercion." I think 
this would make all the other rights unnecessary and create 



208 



the sort of conditions which I want to see. 
BUCHANAN: I think that's interesting that you refer to 
that, because now we seem to have got ourselves in a 
position where the more laws Congress makes, that's the 
way we measure its productivity. But let me go on a 
little bit to raise the question that this implies. I 
certainly have worked in this area, and you have too, 
somehow on the faith that we can impose some constitu- 
tional limits on government. Isn't that sort of a blind 
faith? Don't we have to maybe come back to the Hobbsian 
view that either we have anarchy — and I think you and I 
would agree that anarchy wouldn't work--or else we 
have Leviathan? And how do you base your faith that we 
can impose constitutional limits? 

HAYEK: Oh, on the fact, in which I profoundly believe, 
that in the long run, things are being governed by opinion, 
and opinion just has been misled. It was the whole group 
of opinion makers, both the thinkers and what's now called 
the media--the secondhand dealers in ideas--who had become 
convinced that dependence on majority view was a sufficient 
limitation of governmental powers. I think it's now 
almost universally recognized that it is not. Now, we 
must hope that an intellectual situation like the one which 
existed in the United States at the time the Constitution 
was written could again be created. 



209 



BUCHANAN: But can we have the opportunity to do that? 
That's the thing. 

HAYEK: Yes. I believe there is a chance of making the 
intellectuals proud of seeing through the delusions of 
the past. That is my present ambition, you know. It's 
largely concerned with socialism, but of course socialism 
and unlimited democracy come very much to the same thing. 
And I believe--at least I have the illusion--that you can 
put things in a way in which the intellectuals will be 
ashamed to believe in what their fathers believed. 
BUCHANAN: Well, you made the point--! thought it was a 
very interesting point--that now the young people are 
rediscovering the principles of freedom. And I think that 
is a very interesting point. I mean, we can hope that, 
but I'm perhaps not as optimistic as you are, that ideas 
will ultimately matter. It's partly just the general point 
that I don't quite see how they can be transmitted and have 
much effect, and then there's partly this question about 
how can we get ourselves in a situation where it would be 
equivalent to the situation of the Founding Fathers. Will 
it come through an ordinary-- 

HAYEK : I could answer it only indirectly. I think we have 
to be concerned in our argument not on current influence 
but in creating the opinions which will make politically 
possible what now is not politically possible. It takes 



210 



something like a generation before ideas conceived by 
philosophers or abstract thinkers take effect. A 
Montesquieu or an Adam Smith began to operate on public 
opinion after a generation, or even more, and that's 
why I always say I think if the politicians do not destroy 
the world in the next twenty years, which is very likely, 
I think there's hope for afterwards. But we have to work 
for this distant date, which I shan't see to happen. 
Perhaps twenty years is too short. But one thing which 
gives me confidence is, having watched the United States 
for fifty years, you seem to change your opinion funda- 
mentally every ten. 

BUCHANAN: Well, I think there are some encouraging signs, 
but I think I see-- 

HAYEK : And you don't always change in the right direction, 
[laughter] 

BUCHANAN: --I see them slightly differently from you, and 
let me just try out my own view of things a little bit 
here. It seems to me that we in the United States have 
really never had much understanding of sort of the prin- 
ciples of markets. Some of the work by Jonathan Hughes and 
others has convinced me that the sort of interventionist- 
collectivist-socialis t thrust has always been present, 
and that really the only reason we had burgeoning markets 
and rapid growth and so forth was largely because the 



211 



government was decentralized, federalized, and so forth, 
with migration, frontier, and all of that. And I have 
a good deal of skepticism about the sort of principles of 
freedom being adopted by enough people to do much. On 
the other hand, where I see the encouragement, or the 
encouraging signs, is that we have lost faith in the 
collectivist alternative. It does seem to me that in 
the last twenty years in particular, people don't have 
faith in the alternative. The market, as you and I know, 
will always emerge if you leave it alone. And I think 
that's an encouraging aspect. 

HAYEK: I think people are quite likely to agree on general 
rules which restrict government, without quite knowing 
what it implies in practice. And then I think if that is 
made a constitutional rule, they will probably observe 
it. You can never expect the majority of the people to 
regain their belief in the market as such. But I think 
you can expect that they will come to dislike government 
interference. If you can make it clear that there's a 
difference between government holding the ring and 
enforcing certain rules, and government taking specific 
measures for the benefit of particular people-- That's 
what the people at large do not understand. If you talk 
to an ordinary person, he'll say somebody must lay down 
the law, as if that involved all the other things. I think 



212 



that distinction must be made clear, because not every- 
thing Congress resolves is a law. 

In fact, as you know, I'm joking about the fact that 
we now do not call the legislature "legislature" because 
it gives laws, but we call everything a law which is 
resolved by the legislature! The name law derives from 
legislature , not the other way around. 

BUCHANAN: Well, this relates to a question, though, and 
again it creates the problem of whether or not we can get 
things changed. It's something that people don't talk 
about now, but a century ago John Stuart Mill was talking 
about it: namely, the franchise. Now, it seems to me that 
we've got ourselves in--again, it goes back to the delusion 
of democracy, in a way--but we've got ourselves into a 
situation where people who are direct recipients of 
government largesse, government transfers, are given the 
franchise; people who work directly for government are 
given the franchise; and we wouldn't question them not 
having it. Yet, to me, there's no more overt conflict 
of interest than the franchise [given] to those groups. 
Do you agree with me? I don't believe you discussed that 
in your book. 

HAYEK: No, I think in general the question of the franchise 
is what powers they can confer to the people they elect. 
As long as you elect a single, omnipotent legislature, of 



213 



course there is no way of preventing the people from 
abusing that power without the legislature's being forced 
to make so many concessions to particular groups. I see 
no other solution than my scheme of dividing proper 
legislation from a governmental assembly, which is under 
the laws laid down by the first. After all, such a 
newfangled conception gradually spreads and begins to be 
understood. And, after all, in a sense, the conception 
of democracy was an artifact which captured public 
opinion after it had been a speculation of the philosophers. 
Why shouldn' t--as a proper heading--the need for restoring 
the rule of law become an equally effective catchword, once 
people become aware of the essential arbitrariness of the 
present government. 

BUCHANAN: Well, how would you see this coming about, 
though? Would you see us somehow getting in a position 
where we call a new constitutional convention and then 
set up this second body with separate powers? Or how 
would you see this happening? 

HAYEK: I think by several experiments in new amendments in 
the right direction, which gradually prove to be beneficial, 
but not enough, until people feel constrained to recon- 
struct the whole thing. 

BUCHANAN: In this connection, you have long been — I 
remember this comment at Wabash we were talking about. You 



214 



were at that time giving some lectures that later became 
The Constitution of Liberty , I think, and you were talking 
about proportional and progressive taxation. At that time, 
at least, you were arguing that you felt that proportional 
taxation would, in fact, come under this general rule or 
rubric, whereas progressive taxation would not. Do you 
still feel that way, and would you elaborate on that a 
little? 

HAYEK: Oh, yes. Well, I only think — and I don't know 
whether I saw it clearly then--it applies to the general 
rate of taxation, not particularly the income tax. I do 
admit that it may be necessary to have a slightly progres- 
sive income tax to compensate for the regressive effect of 
other taxation. But the principle which ought to be 
recognized is that the tax laws as a whole should end at 
proportional taxation. I still believe in this. 

What I , in a way, think is more important is that 
under my scheme of the separation of legislation and 
government, government should determine the volume of 
revenue, but the legislative [branch should determine] the 
form of raising it. The people who would decide on 
expenditures could not decide who should pay for it, but 
would know that they and their constituents would have to 
pay equally to every contribution they made. Much of the 
increase of government expenditures is now happening under 



215 



the illusion that somebody else will pay for it. So if 
you can create a situation in which every citizen is aware 
that "for every extra expenditure, I shall have to make 
my proportional contribution," I think they might 
become much more reluctant. 

BUCHANAN: I think that's very true. As a matter of fact, 
we've taken that direct quotation in a thing that we're 
doing now, and we're trying to check out just precisely 
what the effects of these alternative constitutional amend- 
ment schemes are. 

If I may come a little bit into current policy, as 
you know in this country now there are all sorts of schemes 
being put forward as to how we might limit the tax revenues 
of government. Some of them try to limit the government 
in terms of proportion of national product or state product 
or income; some of them try to put limits on rates and 
specific taxes. Do you have any preference for either of 
those types? 

HAYEK: No, I'm puzzled by it, because all the discussion 
seems to turn on taxation and not on expenditure. People 
even seem to assume that you can go on increasing expendi- 
tures without at the same time reducing taxation. As I 
say, I know very little about it, but the offhand impres- 
sion you get is that these people are frightfully confused, 
and they assume that you can cut taxation and carry on 



216 



with government as it is. 

BUCHANAN: Well, perhaps we should talk a little more about 
this general distinction between law and legislation, 
which is certainly central to your political theory. I 
think I have a pretty good conception of what you have in 
mind here, but perhaps you'd like to elaborate on that a 
bit. 

HAYEK: There used to be a traditional conception of law, 
in which law was a general rule of individual conduct, 
equally applicable to all citizens, determined to apply to 
an unknown number of future instances, and law in this 
sense should be the only justification of coercion by 
government. Government should have no, under no circum- 
stances — except perhaps in an emergency--power of discrim- 
inatory coercion. That was a conception of law which in 
the last century, by the jurists, had been very fully 
elaborated. In the European continental literature, it 
was largely discussed under the headings "law in the 
material sense," which is law in my sense, and "law in the 
merely formal sense," something which has derived the name 
of law for having come about in the proper constitutional 
manner, but not by having the logical character of laws. 

Now, the story of why these very sensible efforts 
foundered in the end is quite a comic one. At one stage, 
somebody pointed out that [instituting material law] would 



217 



mean that a constitution is not a law. Of course, 

a constitution is a rule of organization, not a rule of 

conduct. In this sense, a constitution would not be a 

law. But that shocked people so much that they dropped 

the whole idea [laughter] and abandoned the distinction 

altogether! 

Now, I think we ought to recognize that with all the 
reverence a constitution deserves, after all a constitu- 
tion is something very changeable and something which has 
a negative value but doesn't really concern the people very 
much. We might find a new name for it, for constitutional 
rules. But we must distinguish between the laws under 
which government acts and the laws of organization of govern- 
ment, and that's what a constitution essentially is. A law 
of organization of government might prohibit government from 
doing certain things, but it can hardly lay down what used 
to be [known as] the rules of just conduct, which once 
were considered as law. 

BUCHANAN: Let me raise another point here. In I believe the 
preface to the second volume of your Law, Legislation and 
Liberty , you say--the mirage of social justice--in one 
sentence you say that you think that you're attempting to 
do the same thing, essentially, that John Rawls has tried 
to do in his theory of justice. People have queried me 
about that statement in your book. 



218 



HAYEK: Well, I perhaps go a little too far in this; I 
was trying to remind Rawls himself of something he had 
said in one of his earlier articles, which I'm afraid 
doesn't recur in his book: that the conception of correcting 
the distribution according to the principle of social- 
justice is unachievable, and that therefore he wanted 
to confine himself to inventing general rules which had 
that effect. Now, if he was not prepared to defend social- 
distributive justice, I thought I could pretend to agree 
with him; but studying his book further, my feeling is 
he doesn't really stick to the thing he had announced first, 
and that there is so much egalitarianism, really, under- 
lying his argument that he is driven to much more inter- 
vention than his original conception justifies. 
BUCHANAN: I think there's much in what you say. I think 
there's a lot of ambiguity, and the first articles were 
much more clear. But in your notion--this mirage of 
social justice--is your idea that when we try to achieve 
"social justice," we're likely to do more harm than good? 
Or is it somehow that the objective itself is not worth 
proposing or thinking about? 

HAYEK: It's undefinable. People don't know what they 
mean when they talk about social justice. They have 
particular situations in mind, and they hope that if they 
demand social justice, somebody would care for all people 



219 



who are in need, or something of that kind. But the 
phrase "social justice" has no meaning, because no two 
people can agree on what it really means. I believe, as 
I say in the preface, I'd written quite a different 
chapter on the subject, trying that [concept] in practice 
in one particular case after another, until I discovered 
that the phrase had no content, that people didn't really 
know what they meant by it. The appeal to the word 
justice was just because it was a very effective and 
appealing word; but justice is essentially an attribute 
of individual human action, and a state of affairs as such 
cannot be just or unjust. So it's in the last resort a 
logical muddle. It's not that I'm against it, but I say 
that it has no meaning. 

BUCHANAN: Well, you remember our old friend Frank Knight 
used to say that one of the supports for the market is 
that people couldn't agree on anything else, in terms of 
distribution. [laughter] I think that there's probably 
much in that. 

HAYEK: Well, if they had to agree it would be good. But 
with our present method of democracy, you don't have to 
agree , but you have to-- You are pressed, on the pretext of 
social justice, to hand out privileges right and left. 
BUCHANAN: Well, do you think this thrust is waning a bit 
in modern politics? 



220 



HAYEK: Well, I don't know how it is in different countries. 
I am most concerned, because it's the most dangerous thing 
at the moment, with the power of the trade unions in 
Great Britain. While people are very much aware that 
things can't go on as they are, nobody is still convinced 
that this power of the trade unions to enforce wages 
which they regard as just is not a justified thing. I 
believe it's a great conflict within the Conservative 
party at the moment that one-half of the Conservative 
party still believes you can operate with the present law 
and come to an understanding with the trade union leaders, 
while the others do see that unless these privileges of 
the trade unions to use coercion and force for the achieve- 
ment of their ends is in some form revoked or eliminated, 
there's no hope of curing the system. The British have 
created an automatic mechanism which drives them into more 
and more use of power for directing the economy. Unless 
you eliminate the source of that power, which is the 
monopoly power of the trade unions, you can't [correct 
this] . 

BUCHANAN: Well, is Britain unique in that, say, compared 
to the United States? 

HAYEK: Well, things seem to have changed a great deal 
since I knew the United States better. Fifteen years 
ago, when I knew more about it, it seemed to me that the 



221 



American trade unions were a capitalist racket rather than, 
in principle, opposed to the market as such. There seem 
to be tendencies in public opinion and in American 
legislation to go the British way, but how far it has 
gone I don't know. 

The reason why I was so very much acutely aware of the 
British significance is because I happened to see the same 
thing in my native country, Austria, which is also a 
country governed by the trade unions. At the present 
moment, nobody doubts that the president of the trade 
union association is the most powerful man in the country. 
I think it works because he happens to be personally an 
extremely reasonable man. But what will happen if they get 
a radical in that position I shudder to think. In that 
sense, the position in Austria is very similar to that in 
Britain. And I think it's worsening in Germany. 

I have always maintained that the great prosperity of 
Germany in the first twenty-five years after the war was due 
to the reasonableness of the trade unions. Their power 
was greater than they used, very largely because all the 
trade union leaders in Germany had known what a major 
inflation was, and you just had to raise your finger-- 
"If you ask for more, you will have inf lation"--and they 
would give in. That generation is going off now. A new 
generation, which hasn't had that experience, is coming 



222 



up. So I fear the German position may increasingly 
approach something like [the British], but not quite as 
bad as the British position, because the closed shop is 
prohibited by law in Germany, and I don't think that 
will be changed. 

So there are certain limits to the extension of 
trade union powers. I can't speak about France. I must 
say, I've never understood internal French politics, and 
the Italian position is so confused to me. I'm getting 
more and more the impression that Italy has now two 
economies: one official one, which is enforced by law 
and in which people spend their mornings doing nothing; 
and an unofficial one in the evening, when they work in 
a second job illegally. And that the real economy is a 
black economy. 

BUCHANAN: You speak of inflation. I don't want to get 
into the economic aspects, which I'm sure you've discussed 
in some other interviews, but let me follow up a little 
bit in the political problems of getting out of inflation. 
It does seem to me that we face the major political problem 
of the short term, not only in this country but also in 
Britain and other countries, of how can we politically 
get the government to do something about the inflation. 
HAYEK: Only by a very circuitous way. First, by removing 
all limitations on people using money, other than the 



223 



government's money; and by eliminating all of the, in 
the wider sense, foreign-exchange restrictions, including 
legal tender laws and so on. This will give the people 
a chance of using other money than they would. My 
example is always what would happen in Britain if there 
were no exchange restrictions, people discovered that Swiss 
francs are better money than sterling, and then began using 
Swiss francs. The thing is happening in international 
trade, you know. The speed with which sterling has been 
replaced and the dollar is now being replaced in inter- 
national trade, as soon as people have the chance to use 
another money, should be applied internally. And I think 
ultimately it will be necessary. 

That's a field where I am most pessimistic. I don't 
think there's the slightest hope of ever again making 
governments pursue a sensible monetary policy. That is a 
thing which you cannot do under political pressure, because 
it is undeniable that in the short run you can use inflation 
to increase employment. People will never really under- 
stand that in the long run you make things worse that way. 
This thing is driving us into a controlled economy because 
people will not stop inflation inflating but try to combat 
inflation by price controls. I'm afraid that's the way 
in which the United States is likely in the near future 
to slide into a controlled economy. Again, my hope is that 



224 



you are so quick to change that you might find it so dis- 
gusting that [even though] you may erect an extremely 
complex system of price controls, after two years you're 
so fed up with it that you throw the whole thing over again! 
BUCHANAN: I'd like to shift back, if I could — I'm sure 
we could spend a lot of time following up on that--to your 
basic political theory, political philosophy, position 
I'd like to ask you a little bit of intellectual history 
here, in terms of your own position. Both of us started 
out, more or less, as technical economists, and then we got 
interested in these more political-philosophical questions. 
Could you trace for us a little bit the evolution of your 
own thinking in that respect? 

HAYEK: Well, I'll have to do a little thinking. It really 
began with my doing that volume on collectivist economic 
planning, which was originally merely caused by the fact 
that I found that certain new insights which were known on 
the Continent had not reached the English-speaking world 
yet. It was largely [Ludwig von] Mises and his school, 
but also certain discussions by [Enrico] Barone and others, 
which were then completely unknown to the English-speaking 
world. Being forced to explain this development on the 
Continent in the introduction and the conclusion to this 
volume, which contained translations, I was curiously 
enough driven not only into political philosophy but into 



225 



an analysis of the methodological misconceptions of econo- 
mics. [These misconceptions] seemed to me to lead to these 
naive conceptions of, "After all, what the market does we 
can do better intellectually." My way from there was 
very largely around methodological considerations, which 
led me back to-- I think the decisive event was that essay 
I did in about '37 on--what was it called?--"Economics and 
Knowledge. " 

BUCHANAN: That was a brilliant essay. 

HAYEK: I think that was a decisive point of the change 
in my outlook. As I would put it now, [it elaborated] the 
conception that prices serve as guides to action and must 
be explained in determining what people ought to do-- 
they ' re not determined by what people have done in the past. 

But, of course, psychologically the consequence 
of the whole model of marginal-utility analysis was perhaps 
the decisive point which, as I now see the whole thing-- 
market as a system of the utilization of knowledge, which 
nobody can possess as a whole, which only through the 
market situation leads people to aim at the needs of people 
whom they do not know, make use of facilities for which 
they have no direct information, all this condensed in 
abstract signals, and that our whole modern wealth and 
production could arise only thanks to this mechanism--is , 
I believe, the basis not only of my economic but as much 



226 



of my political views. It reduces the possible task of 
authority very much if you realize that the market has 
in that sense a superiority, because the amount of informa- 
tion the authorities can use is always very limited, and 
the market uses an infinitely greater amount of information 
than the authorities can ever do. 

BUCHANAN: Well, this is very interesting. What you're 
telling me--as I get what you're telling me--is really 
that it came from an idea rather than sort of an observation 
of events. 

HAYEK: Very much so, yes. 

BUCHANAN: Many people, I suspect, consider your The Road 
to Serfdom , which came out about '44 or so, as sort of 
an observation of things that might be happening, and then-- 
HAYEK: No, you see The Road to Serfdom was really an advance 
sketch of a more ambitious book I had been planning before, 
which I meant to call "The Abuse and Decline of Reason." The 
abuse being the idea that you can do better if you determine 
everything by knowledge concentrated in a single power, and 
the consequent effects of trying to replace a spontaneous 
order by a centrally directed order. And the [results of 
the] decline of reason were the phenomena which we observed 
in the totalitarian countries. I had that in my mind, and 
that in fact became the program of work for the next forty 
years . 



227 



Then a very special situation arose in England, 
already in '39, that people were seriously believing that 
National Socialism was a capitalist reaction against 
socialism. It's difficult to believe it now, but the main 
exponent whom I came across was Lord [William] Beveridge. 
He was actually convinced that these National Socialists 
and capitalists were reacting against socialism. So I 
wrote a memorandum for Beveridge on this subject, then 
turned it into a journal article, and then used the war 
to write out what was really a sort of advance popular 
version of what I had imagined would be the great book on 
the abuse and decline of reason. [This was] the second 
part, the part on the decline of reason. It was adjusted 
to the moment and wholly aimed at the British socialist 
intelligentsia, who all seemed to have this idea that 
National Socialism was not socialism, just something 
contemptible. So I was just trying to tell them, "You're 
going the same way that they do." 

That the book was so completely differently received 
in America, and that it attracted attention in America 
at all, was a completely unexpected event. It was written 
so definitely in an English — And it was, of course, 
received in a completely different manner. The English 
socialists, with few exceptions, accepted the book as some- 
thing written in good faith, raising problems they were 



228 



willing to consider. People like Lady [Barbara] Wootton 
wrote a very-- In fact, with her I had a very curious 
experience. She said, "You know, I wanted to point out some 
of these problems you have pointed out, but now that you 
have so exaggerated it I must turn against you!" [laughter] 
In America it was wholly different. Socialism was a new 
infection; the great enthusiasm about the New Deal was still 
at its height, and here there were two groups: people who 
were enthusiastic about the book but never read it--they 
just heard there was a book which supported capitalism-- 
and the American intelligentsia, who had just been bitten 
by the collectivist bug and who felt that this was a betrayal 
of the highest ideals which intellectuals ought to defend. 
So I was exposed to incredible abuse, something I never 
experienced in Britain at the time. It went so far as 
to completely discredit me professionally. 

In the middle forties--I suppose I sound very con- 
ceited--I think I was known as one of the two main disputing 
economists: there was [John Maynard] Keynes and there was 
I. Now, Keynes died and became a saint; and I discredited 
myself by publishing The Road to Serfdom , which completely 
changed the situation. [laughter] 

BUCHANAN: I've heard you say that you were so surprised by 
the reaction to The Road to Serfdom . On the other hand, 
I've heard--I don't believe I've heard you say it--but I've 



229 



heard people say that you were greatly disappointed by 

the reaction to The Constitution of Liberty --that you 

expected much more of a reaction than you got. Is that 

right? 

HAYEK: Yes, that is true. 

BUCHANAN: Do you attribute that to the fact that it 

was more comprehensive, that maybe you tried to include 

too much, or what? 

HAYEK: It was a book on political science by somebody who 

was not recognized as a political scientist. It was on 

that ground very largely neglected by the professionals; 

it was too philosophical for the nonphilosophers . When I 

say I was disappointed, I was disappointed with regard to 

the range of effect. It was received exceedingly friendly 

by the people whom I really respect, but that's a very small 

crowd. I've received higher praise, which I personally 

value, for The Constitution of Liberty , but from a very 

small, select circle. It has never had any real popular 

appeal, and perhaps it was too big a book for it, too 

wide ranging. People picked out a chapter here and there 

which they liked; they would reprint my chapter on trade 

unions, because that fit in with their idea. But very few 

people have fully digested and studied the book. 

BUCHANAN: It seemed to me that you were attacking two quite 

different things in The Constitution of Liberty , and in 



230 



your three-volume Law, Legislation and Liberty . In The 
Constitution of Liberty you were going through and 
talking about particular areas of economic policy: trade 
unions, taxation, this type of thing, coming out with 
quite specific proposals for reform,- whereas in Law, 
Legislation and Liberty , you're really talking more about 
the structural changes in government that would be neces- 
sary before we could even hope to put in such reforms. My 
own thinking would be that these, in a sense, are reversed. 
HAYEK: Well, I don't think you represent it quite correctly, 
since in The Constitution of Liberty I deal with these 
problems only in the third part, which is a third of the 
book, just to illustrate the general principles I have 
elaborated in parts one and two. But the other point is 
that in The Constitution of Liberty I was still mainly 
attempting to restate, for our time, what I regarded as 
traditional principles. I wanted to explain what nineteenth- 
century liberals had really intended to do. It was only 
at the time when I had practically finished the book that 
I discovered that nineteenth-century liberals had no 
answers to certain questions. So I started writing the 
second book on the grounds that I was now tackling problems 
which had not been tackled before. I was not merely 
restating, as I thought, in an improved form what was 
traditional doctrine; I was tackling new problems, 



231 



including the problem of democracy. 

BUCHANAN: Yes, I do recall that, and I remember that it 
was only the last part of that book where you took those 
particular reforms up. But it seems that in the discus- 
sion of that book, that is what has got most of the attention. 
HAYEK: That's perfectly true. But that illustrates 
perhaps what I said before: the book was too philosophical 
on the whole, and people concentrated on the parts where I 
became more concrete. 

BUCHANAN: Let me just ask you a little bit now about your 
view on what I would call social-cultural evolution. It 
comes out in several of your pieces in these two volumes of 
essays, and also in the third volume of Law, Legislation 
and Liberty , where you place a great deal of attention on 
the sort of spontaneous emergence of rules, customs, and 
institutions. Yet, at the same time, you seem to be willing 
to classify some things that have emerged as undesir- 
able. How do you sort of reconcile these two positions? 
HAYEK: Well, there's no great difficulty. The things 
which have been tested in evolution, by being selected as 
superior--by prevailing, because the groups which practice 
them were more successful than others--have proved their 
beneficial character. What I object to is the attempt 
to alter that development by deliberate construction from 
the outside, which is not necessarily wrong, but where the 



232 



self-correcting mechanism is eliminated. While, if 
practices go wrong, the group concerned declines; if a 
government goes wrong and enforces the mistake it has 
made, there's no automatic correction of any kind. 
BUCHANAN: In this connection, do you consider your own 
views to be close to, or how do they differ from, those 
of Michael Oakeshott? 



233 



TAPE: BUCHANAN I, SIDE TWO 
TAPE DATE: OCTOBER 28, 19 7 8 

HAYEK: There are two new books which I admit in my 
third volume I ought to have carefully studied before 
writing it, but if I had done so I would never have 
finished my own book. They are by [Robert] Nozik and 
Oakeshott. I sympathize with both of them, but I know 
only parts of them. Now, Oakeshott I know at least 
personally fairly well; so I have a fairly good conception 
of his thinking without having studied his book. I think, 
to put it really crudely, I am a nineteenth-century liberal 
and he is a conservative. I think that is — 
BUCHANAN: Well, one of your former students, Shirley 
Letwin-- I've talked to her about this problem a great 
deal, and when she talks about your work in this connection, 
she always also ties it in with Oakeshott. So I had 
assumed there was obviously a closer connection between 
the two from personal relationships than maybe there is. 
HAYEK: We can talk with each other with complete under- 
standing, but to my feeling--! may do him in jus tice-- there 
are in Oakeshott 's systems certain hardly conscious 
general prejudices in favor of a conservative attitude, 
where it is just his feeling which makes him prefer some- 
thing without his being strictly able to justify his 
argument, but he will justify his not justifying it. He 



234 



believes that we ultimately must trust our instincts, 
without explaining how we can distinguish between good 
and bad ones. My present attempt is to say, yes, we 
rely on traditional instincts, but some of them mislead 
us and some not, and our great problem is how to select 
and how to restrain the bad ones. 

BUCHANAN: Well, now that I'm mentioning people from London, 
let me also ask you about Sir Karl Popper, whom I saw a 
month ago, incidentally. Shirley Letwin also suggested to 
me that you might have been influenced a good deal by some 
of Popper's work, apparently stuff that has not really 
been published, but what she calls his "evolutionary ethics," 
or his attempts to develop an evolutionary ethics. 
HAYEK: I remember a time when Popper reproached me for my 
evolutionary approach. 
BUCHANAN: That's interesting. 

HAYEK: Now, the relation is, on the whole, curious. You 
see. Popper, in writing already The Open Society [ and Its 
Enemies ] , knew intimately my counterrevolution of science 
articles. It was in these that he discovered the similarity 
of his views with mine. I discovered it when The Open 
Society came out. Although I had been greatly impressed-- 
perhaps I go back as far as that--by his Logic of Scien - 
tific Discovery , his original book, it formalized conclusions 
at which I had already arrived. And I arrived [there] 



235 



due to exactly the same circumstances. 

Popper is a few years my junior; so I did not know 
him in Vienna. We were not in the same generation. But 
we were exposed to the same atmosphere, and in the discus- 
sion, then, we both encountered two main groups on the 
other side: Marxists and psychoanalysts. Both had the 
habit of insisting that their theories were in their 
nature irrefutable, and I was already by this driven to 
the conclusion that if a theory is irrefutable, it's not 
scientific. I'd never elaborated this; I didn't have the 
philosophical training to elaborate it. But Popper's 
book gives the justification for these arguments--that a 
theory which is necessarily true says nothing about the 
world. So when his book came out, I could at once 
embrace what he said as an articulation of things I had 
already been thinking and feeling. Ever since, I have 
followed his work very closely. 

In fact, before he went to New Zealand, I met him in 
London--he even spoke to my seminar--and we found very 
far-reaching, basic agreement. I don't think there's any- 
thing fundamental with which I disagree, although I some- 
times had, at first, hesitation. His present new interest 
about the three worlds I was at first very puzzled about. 
I believe I now understand it, and I agree. When, in that 
Hobhouse Lecture, I speak about culture as an external 



236 



element which determines our thinking, rather than our 

thinking determining culture, this is, I believe, the 

same thing Popper means when he speaks about the three 

worlds. Of course, in the few years we were together at 

the London School of Economics--only about from '45 to 

'50--we became very close friends, and we see completely 

eye-to-eye on practically all issues. 

BUCHANAN: He has written a new book with Sir John Eccles 

on the self and the brain-- 

HAYEK: I've read his part of it, but I haven't read Eccles's 

part. This essentially develops the point I was just 

speaking about--the three worlds and — 

BUCHANAN: Yes, I remember the "three worlds" lecture he 

gave in--where was it?--you know, in Switzerland, at the 

Mont Pelerin meeting in Switzerland. 

HAYEK: At that time I didn't understand it. It is only 

in the things he has written since that it became clear 

to me, and [because of a] certain development in my own 

thinking, which goes in the same direction. 



237 



TAPE: BUCHANAN II, SIDE ONE 
TAPE DATE: OCTOBER 28, 19 7 8 

BUCHANAN: Professor Hayek, a few minutes ago you were 
saying that the two influences to be countered in your 
younger days in Vienna were Marxism and psychoanalysis. 
I know in the Hobhouse Lecture you also spent a good 
deal of time talking about the baneful influence of Freud 
and his ideas. Perhaps you'd develop that a little bit. 
HAYEK: It's so difficult to generalize about Freud. He 
was undoubtedly a very intelligent and observant man- 
But I think his basic idea of the harmful effect of repres- 
sions just disregards that our civilization is based on 
repressions. While he himself, as I point out in the 
lecture, became later rather alarmed by the exaggeration 
of these ideas by his pupils, I think he is ultimately 
responsible for the modern trend in education, which 
amounts to an attempt to completely free people from 
habitual restraints. 

After all, our whole moral world consists of restraints 
of this sort, and [Freud], in that way, represents what 
I like to call the scientific destruction of values, which 
are indispensable for civilization but the function of 
which we do not understand. We have observed them merely 
because they were tradition. And that creates a new task, 
which should be unnecessary, to explain why these values are 
good. 

238 



BUCHANAN: Well, this ties back to our other question. 
Given this reading of the history of the last century, 
and given this destruction of these moral values, which 
we did not really understand why we hold, how can we 
expect something analogous to that to be restored? Or 
how can we hope that can be restored? 

HAYEK: Well, I wish I knew. My present concern is to make 
people see the error. But that's an intellectual task, 
and how you can undo this effect-- Well, I have an idea 
the thing is on the whole effective via its effect on the 
teaching profession. And probably that generation which 
has been brought up during the last thirty years is a lost 
generation on that point of view. I don't think it's 
hopeless that we might train another generation of teachers 
who do not hold these views, who again return to the rather 
traditional conceptions that honesty and similar things are 
the governing conceptions. If you persuade the teaching 
profession, I think you would get a new generation brought 
up in quite a different view. 

So, again, what I always come back to is that the whole 
thing turns on the activities of those intellectuals whom 
I call the "secondhand dealers in opinion," who determine 
what people think in the long run. If you can persuade 
them, you ultimately reach the masses of the people. 
BUCHANAN: And you don't see a necessity for something like 



239 



a religion, or a return to religion, to instill these moral 
principles? 

HAYEK: Well, it depends so much on what one means by 
religion. You might call every belief in moral principles, 
which are not rationally justified, a religious belief. 
In the wide sense, yes, one has to be religious. Whether 
it really needs to be associated with a belief in super- 
natural spiritual forces, I am not sure. It may be. It's 
by no means impossible that to the great majority of people 
nothing short of such a belief will do. But, after all, 
we had a great classical civilization in which religion 
in that sense was really very unimportant. In Greece, at 
the height of its period, they had some traditional beliefs, 
but they didn't take them very seriously. I don't think 
their morals were determined by religion. 

BUCHANAN: Well, that's hopeful, in any case. Let me go 
back now to what I was getting at a little bit. It's 
related to this early period in Vienna, too. I was very 
pleased to hear you say earlier that you attribute a good 
deal of your subsequent thinking in political philosophy, 
political theory, to this insight that you gained in 
"Economics and Knowledge," or that was expressed first in 
"Economics and Knowledge" — this whole notion, as you 
mentioned a minute ago, of the fictitious data of the 
economist. As you know, there has been a big upsurge 



240 



within the last decade in this country of the Austrian 
economics group, centered around sort of subjectivist 
notions of economics. 

As you know, I got into the periphery of this in 
some work on cost, the subjective nature of cost, and so 
forth. In rereading some of that literature, the central 
contributions were, of course, your contributions, made 
during the period you were in London, along with several 
of your London colleagues. What I'd really like to ask 
you and have you talk to me about would be: To what 
extent did this notion of the sub jectiveness of economics-- 
of the subjectivity of economic choice — to what extent did 
that come down to you through the Austrian economists, 
or to what extent was that part of this economics knowledge 
illumination that you felt at that time? 

HAYEK: Well, I believe I derived it directly from [Karl] 
Menger's original work. I don't think there's much of it 
in the later Austrians, nor in Mises's work, and he's the 
real founder of the American school of Austrian economics. 
I mean, the American school of Austrian economics was very 
largely a Mises school. 

[Mises] had great influence on me, but I always 
differed, first not consciously and now quite consciously. 
Mises was a rationalist utilitarian, and I am not. He 
trusted the intelligent insight of people pursuing their 



241 



within the last decade in this country of the Austrian 
economics group, centered around sort of subjectivist 
notions of economics. 

As you know, I got into the periphery of this in 
some work on cost, the subjective nature of cost, and so 
forth. In rereading some of that literature, the central 
contributions were, of course, your contributions, made 
during the period you were in London, along with several 
of your London colleagues. What I'd really like to ask 
you and have you talk to me about would be: To what 
extent did this notion of the sub jectiveness of economics-- 
of the subjectivity of economic choice — to what extent did 
that come down to you through the Austrian economists, 
or to what extent was that part of this economics knowledge 
illumination that you felt at that time? 

HAYEK: Well, I believe I derived it directly from [Karl] 
Menger's original work. I don't think there's much of it 
in the later Austrians, nor in Mises's work, and he's the 
real founder of the American school of Austrian economics. 
I mean, the American school of Austrian economics was very 
largely a Mises school. 

[Mises] had great influence on me, but I always 
differed, first not consciously and now quite consciously. 
Mises was a rationalist utilitarian, and I am not. He 
trusted the intelligent insight of people pursuing their 



241 



known goals, rather disregarding the traditional element, 
the element of surrounding rules. He wouldn't accept 
legal positivism completely, but he was much nearer it 
than I would be. He would believe that the legal system-- 
No, he wouldn't believe that it was invented; he was too 
much a pupil of Menger for that. But he still was inclined 
to see [the legal system] as a sort of rational construc- 
tion. I don't think the evolutionary aspect, which is 
very strongly in Menger, was preserved in the later members 
of the Austrian school. I must say till I came, really, 
in between there was very little of it. 

BUCHANAN: Well, you mentioned the evolutionary aspect, 
but what I was really getting at more was the sort of 
subjectivist aspect--the subjective dimension of choice, 
which is very clear in your-- 

HAYEK: Oh, I think I would almost say that's the same 
thing in almost entirely different form. If the decisive 
factor is the knowledge and attitudes of individuals, the 
particular question of preferences and utilities becomes 
a minor element in the individual action and habits being 
the driving element. To me subjectivism really becomes 
individualism, methodological individualism. 

BUCHANAN: Oh, sure. I think that's right. One man whom I 
have been reading a good deal of this year, and who was at 
the London School of Economics at that time, more or less, 



242 



as an older student, I would suspect, is [George] Shackle. 
Did you know him very well? 
HAYEK: Oh, yes. I discovered Shackle. 

BUCHANAN: I have sort of discovered him, too. He's very 
good. 

HAYEK: No, I mean I discovered him in a very literal 
sense. Shackle sent to me, when he was a schoolmaster in 
South Wales, an essay he'd written; nobody knew him. But 
I encouraged him to elaborate it for Economica . Then he 
came on a visit to London, and I've never seen a man more 
moved because he was speaking for the first time to a 
live economist. It seems to have been a great experience 
in his life, and I was very impressed and got him a 
scholarship at the London School of Economics. We've 
ever since been on very friendly terms, and I followed his 
development with great interest. I think he's a first- 
class mind. 

BUCHANAN: I find him to be grossly neglected among economists, 
HAYEK: I entirely agree. 

BUCHANAN: His material on choice under uncertainty — To 
me, there's much in that that has not been digested at all 
by the profession. 

HAYEK: There's a very curious disagreement between two 
younger men of the London School of Economics who don't 
see eye-to-eye at all: that's John Hicks and Shackle. I 



243 



don't know why, but they move on parallel but completely 
nonconverging ways; both, I think, think of the other as 
having done rather harm. [laughter] 

BUCHANAN: I'm interested to get that story about Shackle, 
because I met him once and I found him to be a fascinating 
man. His book Expectation in Economics is, I think, a 
great book. 

HAYEK: He's still very active thinking. I traveled with 
him in Spain a year ago, and we lectured together. 
BUCHANAN: Let me shift a little bit, if I may, to ask 
you something on a slightly different topic. I remember 
reading a piece that you wrote in Encounter maybe a decade 
ago, in which you talked about two kinds of mind. Maybe 
you could tell me a little more about that. 
HAYEK: Oh, it's a very old idea of mine which, as I 
explained at the beginning of that article, I never wrote 
up because it would sound so frightfully egotistic in 
speaking about myself — why I feel I think in a different 
manner. But then, of course, I found a good many instances 
of this in real life. The first observed instance of 
other people was the relation between [Eugen von] Bohm- 
Bawerk and Friedrich [von Wieser] , who were of these two 
types: the one, whom I call the "master" of his subject, 
who had complete command of all his subject areas, and who 
can give you a prompt answer about what is the answer of 



244 



current theory to this-and-this problem. Robbins 

is another one. 

BUCHANAN: Which one is which? 

HAYEK: Bohm-Bawerk was the master of his subject; Wieser 

was much more what one commonly would call an intuitive 

thinker. Then, later in life, I have known two types 

who are typical masters of the subject, and who, because 

they have the answer for everything ready, have not done 

as much original work as they would have been capable of. 

The one is Lionel Robbins; the other is Fritz Machlup. 

They both, to an extent, have command of the present state 

of economics which I could never claim to. But it's just 

because I don't remember what is the standard answer to a 

problem and have to think it out anew that occasionally I 

get an original idea. 

BUCHANAN: Jacob Viner you'd put in that first camp, too. 

HAYEK: Oh, yes. Oh, I think Viner and Frank Knight are 

another instance of the same contrast. 

BUCHANAN: Right, right, that's what I'm saying. 

HAYEK: In philosophy, Bertrand Russell and [Alfred North] 

Whitehead. Bertrand Russell, a typical master of his 

subject; Whitehead, I think, has described himself once as 

a muddlehead, on the same ground: he didn't have the answers 

ready. 

BUCHANAN: So you have to start from scratch, in other words. 



245 



HAYEK: No, but there's a sort of vague background map, 
which is not very precise but which helps you in finding 
the right way. But the right way isn't clearly marked on 
it. 

BUCHANAN: Yes, I think I get the point. Let me ask you 
about your relationship, or did you know or how close were 
you, to Michael Polanyi? Did you know him very well? 
HAYEK: Yes, he was for a few years my colleague on the 
Committee on Social Thought [at the University of] Chicago, 
and there was one interesting relationship for a period of 
ten years when we happened to move from the same problem 
to the same problem. Our answers were not the same, but 
for this period we were always just thinking about the 
same problems. We had very interesting discussions with 
each other, and I liked him personally very much. I think, 
again, he is a somewhat neglected figure, much more-- 
Well, I think he suffered from the usual thing: if you 
leave your proper subject, other people regard you as an 
amateur in what you are talking about. But he was in fact 
very competent. I would almost say he's the only nonecono- 
mist I know who wrote a good book on economics. 
BUCHANAN: Well, he was probably influenced by you in 
that Logic of Liberty material. 

HAYEK: Not much. He knew a little about my ideas; we had 
a meeting in Paris in 19 38, I believe, organized by the 



246 



philosopher [Louis] Rougier, called "Colloque Walter 
Lippmann," It was occasioned by Lippmann's The Good 
Society book. And that's when I first encountered Polanyi, 
and then we had some very interesting discussions. But 
some of the essays in the Logic of Liberty were already 
written by that time. The book appeared later. But as I 
say, our minds moved on parallel courses, frequently giving 
different answers but asking the same questions. 
BUCHANAN: Well, I asked you whether or not you thought 
your notions had influenced Polanyi. Let me ask the question 
more generally. Among prominent thinkers, who are the 
men you think you have influenced most? Maybe that's an 
embarrassing question; maybe I shouldn't have asked that. 
HAYEK: It's not embarrassing; I just don't know. [laughter] 
I would have to think. Shackle, whom I mentioned before. 
I am convinced I have had a great influence on him. I am 
discovering to my pleasure now that many of the very much 
younger generation--the men in their thirties--seem to be 
greatly influenced. But among the older generation-- the 
people who would now be in their fifties or sixties--of f- 
hand I can't think of any. 

BUCHANAN: Oh, I don't think there's any question of the 
group at [the London School of Economics]: Shackle and 
Ronald Coase. Surely his ideas on cost were-- 
HAYEK : Yes, Ronald Coase probably, too. You know, I had 



247 



a curious influence on Hicks. You won't believe it, but 
I told him about indifference curves. [laughter] He was 
a pure Marshallian before. And I remember a conversation 
after a seminar, when he had been talking in Marshallian 
terms, when I drew his attention to [Vilfredo] Pareto. 
[laughter] It was the very beginning of the thirties, of 
course. 

BUCHANAN: Well, to go back to the Austrians again, were 
you actually a student of Bohm-Bawerk and Wieser? 
HAYEK: No. B6hm-Bawerk, no. Bohm-Bawerk died in 1915, 
when I was sixteen. I happened to know him as a friend of 
my grandfather and a former colleague at [the University] 
of Innsbruck, and as a mountaineering companion of my grand- 
father's. But when I saw him, I had no idea what economics 
was, because I was too young. 

I was a direct student of Wieser, and he originally 
had the greatest influence on me. I only met Mises really 
after I had taken my degree. But I now realize--I wouldn't 
have known it at the time--that the decisive influence was 
just reading Menger's Grundsetze . I probably derived more 
from not only the Grundsetze but also the Methodenbuch , not 
for what it says on methodology but for what it says on 
general sociology. This conception of the spontaneous 
generation of institutions is worked out more beautifully 
there than in any other book I know. 



248 



BUCHANAN: Did you know Max Weber? 

HAYEK: No. Vienna was full of his influence when I came 
back. You see, he had taught in Vienna in the spring of 
1918, when I was at the front. He had gone to Munich that 
summer, and I came to the university [when it was] 
absolutely full of his influence. I must say, all the 
girls were speaking about him because there had been hardly 
any boys at the university then. My hope had been-- In 
fact, I had a promise from my father that if I got my degree 
very soon I could go for a year to Munich to study under 
Max Weber. But before it was possible, he died; so it 
never came off. But there must have been in the atmosphere 
there a very great Max Weber influence. Of course, I only 
read his stuff when his main book came out, which must have 
been 1921-1922. He had very close contact with Mises, 
incidentally, during that short period when he was in Vienna. 
BUCHANAN: Do you think there's much lasting influence of 
Weber's ideas? 

HAYEK: I doubt it. On one point he was clearly wrong. I 
think the most famous thing about the Calvinist sources of 
capitalism is completely wrong. Even beyond this, I rather 
believe that what is lasting is probably what [Alfred] 
Schutz has taken over. But I must confess to my shame that 
I've never studied — But he was a close friend; he was one 
of our Vienna circle. I have never studied Schutz 's work 



249 



carefully, but I always intend to some day. 
BUCHANAN: I know Fritz Machlup has told me about that, 
and I've felt the same way — that I should do it--but I've 
never really done it. 

I'd like to go back a little bit to this thing that 
you alluded to earlier: namely, this period in the thirties 
and this debate on the socialist calculation between 
[Oskar] Lange and [Abba] Lerner, on the one hand, and [Henry] 
Dickinson and Mises and yourself and others, on the 
other. Looking back on that debate now, it's hard for some 
of us to believe that people could have been quite so 
naive as people like Lange were, to think that an economy 
could be computed in that sense. 

HAYEK: But they really believed it. At least in the case 
of Lerner, I'm absolutely certain; he was somewhat more 
sophisticated. Lange-- I became later a little doubtful 
whether he was really intellectually completely honest. 
When he had this conversion to communism, as communism 
came to power, and was willing to represent his communist 
government in the United Nations and as ambassador, and 
when I met him later, he had at least been corrupted by 
politics. I don't know how far he had already been 
corrupted in the thirties when he wrote these things, but 
he was capable of being corrupted by politics. 
BUCHANAN: But it's hard, at least for me, to re-create the 



250 



mind-set of those type of people who could — 

HAYEK: Dickinson was an absolutely sincere and honest 

thinker. I have no doubt about him. He was a bit 

naive. There was also conceit, but he strongly believed 

that these things he described would be possible--perhaps 

a little what the Germans call Weltfremd . 

BUCHANAN: I remember when you visited Charlottesville, 

we prevailed on you to give a very interesting short 

discussion of your relationship with your cousin [Ludwig] 

Wittgenstein. I doubt if anyone else in these interviews 

is going to take that up; so maybe you could talk a little 

bit about that here. 

HAYEK: Well, you know, I have recently published in 

Encounter a paper of my recollections of Wittgenstein. 

I can't say I knew him well, but of course I knew him over 

a much longer period than anybody now alive. [laughter] 

My first recollection goes back to a day on furlough and 

leave of absence from the front, where on the railway 

station in Bad Ischl, [Austria], two young ensigns in 

in the artillery in uniform looked at each other and said, 

"You have a fairly familiar face." Then we asked each 

other "Aren't you a Wittgenstein?" and "Aren't you a Hayek?" 

I now know that at this moment returning to the front, he 

must have had the manuscript of the Tractatus in his 

rucksack. But I didn't know it at that time. But many of 



251 



the mental characteristics of the man were already present 
as I gathered in this night journey from Bad Ischl to 
Innsbruck, where the occasion was his contempt for the 
noisy crowd of returning young officers, half -drunk; 
a certain contempt for the world. 

Then I didn't see him for a long time, but I heard a 
lot about it because his oldest sister was a close friend 
of my mother's. They were second cousins, and she came 
frequently to our house. There were little rumors constant 
about this crazy young man, but she strongly defended 
Wittgenstein, and that's how I heard about him. 

But I came to know him much later in Cambridge. I 
met him there before the war; I saw him in the later part 
of the war when he returned, but we did really never talk 
philosophy. I have a strong impression of the kind of 
personality. The last discussion I had with him was a 
discussion on politics. We were both returning from Vienna, 
but I had broken the journey in Bahl and stepped into a 
sleeping car at midnight in Bahl, and it turned out that 
my companion in the sleeping car was Wittgenstein. And all 
during the first half of the following morning we were--as 
soon as he had finished his detective story--first talking 
about Vienna and the Russians in Vienna, and this led to 
talk about philosophy and ethical problems; he was bit- 
terly disappointed about what he had seen of the Russians 



252 



then. And just when it became interesting, we arrived 
at the port for the ferry. And although he said, "We 
must continue this," he apparently regretted having gone 
out of himself, because on the ship he was not to be 
found, and I never saw him again. 

BUCHANAN: Speaking of Vienna, I remember — I guess it was 
in the fifties--you were telling me once about a project. 
You had to get a lot of money--as I remember it, it was 
the Ford Foundation--to reestablish the University of 
Vienna back in the — 

HAYEK: Well, to reestablish its tradition. My idea was 
to create something like an institute of advanced studies, 
and to bring all the refugees who were still active back 
to Vienna--people like [Erwin] Schrodinger and Popper and — 
Oh, I had a marvelous list! I think we could have made an 
excellent center, if the thing could have been financed. 
But what grew out of it is the present Ford Institute in 
Vienna, which is devoted entirely to mathematics, economics, 
and statistics, which I don't particularly approve of. I 
think the plan miscarried, not least because the University 
of Vienna did not display great enthusiasm for such a scheme, 
[laughter] 

BUCHANAN: Not quite completely, because I'm going over in 
March to that institute to give some lectures, but to the 
political scientists, you'll be interested to know, not to 



253 



the economists. You're quite right about the economists. 

HAYEK: Well, it has, I believe, grown. When I was there 

once about fifteen years ago for part of a term, it really 

seemed to consist entirely of econometricians . 

BUCHANAN: I think the economics people are pretty much 

that way; that's right. But the political scientists are 

interested in public choice — 

HAYEK: Well, that may be. Probably the personnel has 

changed almost completely since — 

BUCHANAN: Well, I'm really straying a little bit from 

this whole topic of political theory, and I suppose we 

should try to get back on that topic somewhat. I did 

want to bring in this Wittgenstein connection, because I 

thought that would be an interesting interlude in the 

conversation. 

HAYEK: I perhaps ought to add that I did, because I knew 

him, or knew the family, read the Tractatus almost as 

soon as it came out. And I was familiar with his thinking 

long before he was generally known. But that is really an 

early acquaintance with his work, rather than a personal 

acquaintance with the man. 

BUCHANAN: I gather, in terms of your own training, it was 

pretty much strictly in economics. You weren't influenced 

a great deal by any political-legal philosophy. You 

studied law, of course. 



254 



HAYEK: Yes. My main study was law, but I divided my 
time almost equally between psychology and economics. 
[laughter] So it was these three subjects which I studied. 
I did get a fairly good background in the history of political 
ideas from one of our professors, but no particular interest. 
I just knew I could find my way about them. But no strong 
interest in political theory or anything similar. 
BUCHANAN: And of course you wrote a book in psychology, 
too. I remember that book. 

HAYEK: Oh, yes. I still believe this is one of my more 
important contributions to knowledge. And, curiously 
enough, the psychologists are now discovering it. 
BUCHANAN: Yes, I have seen some references within the 
last year or two. 

HAYEK: It's now twenty-five years old, and the idea is 
fifty-odd years old. 

BUCHANAN: Could you perhaps summarize that notion? Or 
could you do it in a few minutes? 

HAYEK: Well, I think the thing which is really important 
about it, and which I could not do when I first conceived 
the idea, is to formulate the problem I try to answer rather 
than the answer I want to get. And that problem is what 
determines the difference between the different sensory 
qualities. The attempt was to reduce it to a system of 
causal connection — associations, you might say — in which 



255 



the quality of a particular sensation--the attribute of 
blue, or whatever it is — is really its position in a system 
of potential connections leading up to actions. 

You could, in theory, reproduce a sort of map of how 
one stimulus evokes other stimuli and then further stimuli, 
which can, in principle, reproduce all the mental processes. 
I say "in principle," because it's much too complicated 
ever to do it. It led me, incidentally, to this distinc- 
tion between an explanation of principle and an explanation 
of detail--pattern prediction, as I now know it--which I 
really developed in my psychological work and then applied 
to economics. 

BUCHANAN: Yes, I think pattern prediction is a very impor- 
tant concept that most economists still sort of miss. 
HAYEK: It's the whole question of the theory of how far 
can we explain complex phenomena where we do not really have 
the power of precise prediction. We don't know of any laws, 
but our whole knowledge is the knowledge of a pattern, 
essentially . 

BUCHANAN: I think that's very important and has been missed. 
And I think, again, to go back to what you attributed a 
lot to the utilitarians, I think the utilitarian mode of 
thought had a lot of influence toward preventing that sort 
of way of going. 
HAYEK: Yes, yes. In a way, you know, I am becoming aware 



256 



that the positivist conceptions of science, which I 
assumed was only invented in the middle of the last 
century by Auguste Comte and those people, goes back 
much further. It's a Newtonian example of how you could 
reduce all scientific knowledge to very simple laws-- 
that one thing was a function of only one or two other 
magnitudes. And this conception of a single function is 
a prototype of a scientific explanation. It had 
probably a very profound effect from the late eighteenth 
century on scientific thinking generally. 

BUCHANAN: Of course, that does have its virtues, as has 
been proven; but, on the other hand, I think in places 
like economics, when dealing with human interaction in 
particular, I think it's had major drawbacks. One thing 
has concerned me, and I don't know to whom you attribute 
it, really — maybe Hicks is partly responsible--and that 
is when once the mathematicians start putting down utility 
functions, and putting a formula in for utility functions, 
they have already excluded so much of the problem that, in 
fact, they neglect what is really going on. 
HAYEK: I quite agree. 

BUCHANAN: In a sense, I'm influenced partly by just 
reading Shackle recently. There's been a tremendous 
neglect of the notion of emergent choice: the idea that 
we don't really have before us objects among which to 



257 



choose; we create them in the act of choice. Arbitrage, 
really, has not become central to economics like it 
should be, it seems to me. That's part of this whole 
sub jectivist, Austrian, whatever you want to call it, 
type of an approach to economics. But do you see much 
hope for-- There's been a little upsurge of interest in 
this among young people in the United States, but the 
dominant graduate schools are still predominantly the 
other direction. 

HAYEK: Certainly, but the other thing is spreading. What 
I'm afraid of is that people will get disappointed because 
what we can know in the field of economics is so much 
less than people aspire to. Much of this tradition you 
are speaking about — my tradition--is really more indicating 
barriers to further advance than leading to further advance, 
and that may well lead to a disappointment again among 
these young people. They are more ambitious, and of course 
the great bulk of econometrics and all this claims to be 
able to make predictions which I believe are impossible. 
But people don't like to accept an impossibility, and of 
course there is a certain widespread view that nothing is 
impossible. Hundreds of things which science has said are 
impossible were proved to be possible; so why shouldn't 
this be possible? You can't prove that it's impossible. 
BUCHANAN: This was the main thrust of your Nobel Prize 



258 



lecture. I guess you're saying that economics is unique 
in this respect, compared to other disciplines. 
HAYEK: Oh, no. It's a general problem of having complex 
phenomena. You encounter this already in the field of 
biology, to a very large extent. You certainly encounter 
it in the theory of biological evolution, which has not 
made any prediction--it can't possibly make any predictions. 
I think it's true of linguistics, which is the most similar 
in structure to economics. Well, I don't know where there 
is another social science proper, except economics-- 
BUCHANAN : But I meant unique in the sense of having 
expectations so different from its possible accomplishments. 
HAYEK: Oh, I see. I think that is at least particularly 
characteristic of economics, yes. 

BUCHANAN: So, in a sense, we're in a bigger methodological 
muddle. 

HAYEK: Yes, yes. There's no emotional disappointment in 
the other fields when you recognize that you can't find 
out certain things; but so many hopes are tied up with the 
possible control and command over economic affairs that if 
a scientific study comes to the conclusion that it just 
can't be done, people won't accept it for emotional reasons 
BUCHANAN: "Every man is his own economist"--that ' s part 
of the problem and has been all along. I remember in that 
connection a very good book--again, it ties back to the 



259 



London days--which raises the name of another man who 
was clearly influenced by you: Bill Hutt. He wrote 
a book, Economists and the Public . His name ought to 
be mentioned in this London connection. 

HAYEK: To that book I have even given the title. [laughter] 
BUCHANAN: I think again, like Shackle, Hutt is a much- 
neglected economist. 

HAYEK: Yes, of a quite different type. He has a very 
clear mind, but not as profound as Shackle. I think his 
great advantage is clarity and simple thought, which you 
can't say of Shackle, whose thought is not simple. 
BUCHANAN: That's really true. What were your relation- 
ships with Frank Knight? 

HAYEK: Personally, very good. We had several very friendly 
controversies. I think we were always more puzzled by 
each other than anything else. It was not a real meeting 
of minds. With great effort, you know, we had some 
serious discussions, but somehow we were talking mostly 
at cross-purposes. 

BUCHANAN: Certainly on the capital theory. [laughter] 
I've always wondered why, knowing Knight very well as 
I did--of course later — and knowing his work and his 
interests, why he, in a sense, got diverted intellectually 
into capital theory. For years he spent attacking the 
Austrians, essentially. 



260 



HAYEK: He was frightfully dogmatic about it. He asserted 

that he was absolutely certain, and he had very few 

arguments to justify it. I always assumed it must have 

been some very early teaching which he had absorbed and to 

which he had stuck; he hadn't done any further thinking 

about it, but he felt that it was one of the foundations 

of his economics, to which he had to stick. 

BUCHANAN: But he always said that he accepted the view-- 

essentially the Austrian view--for a long time, but he 

somehow got converted away from it. I don't know exactly 

what was the-- 

HAYEK: Yes, what led him to this I don't know. 

BUCHANAN: But you weren't at [the University of] Chicago 

at that time; so there were no direct — 

HAYEK: Oh , no . I can't say I didn't know him when we 

had the controversy, but I had just met him once or twice 

in various places. But it was only when I came to Chicago 

that I really came to know him. It was very late, when 

his interest was much more religion than economics. 

BUCHANAN: The Committee on Social Thought, which you were 

involved in at Chicago-- That produced some interesting 

students . 

HAYEK: Oh, yes. You see, it was never explicitly so 

defined, but it was in effect devoted to the study of 

borderline problems in the social sciences. We were not 



261 



limited in any way. Study of scientific methods had a 
great influence in that crowd, and the first year I was 
there was, of course, the most fascinating experience of 
my life. I announced a seminar on comparative scientific 
method, and the people who came included Sewall Wright, the 
great geneticist; Enrico Fermi, the physicist; and a crowd 
of people of that quality. It only happened once; we 
couldn't repeat this. But that first seminar I had in 
Chicago was one of the most interesting experiences I had. 
[It was] entirely on the method of science. 
BUCHANAN: It seems to me that this is something that 
we're lacking now, at least in American graduate schools 
and professional schools — this opportunity for students to 
really get into these basic philosophical types of questions 
and issues. In the law schools, for example, legal 
philosophy has been waning; in politics, political philosophy 
is not as important as it was; there's no economic philoso- 
phy in economics departments. I don't know, for example, 
where--and I'd like to get your comments on this--in a 
regular curriculum, a student could get exposed to your books 
or my books, for example. 

HAYEK: I know too little about American universities, but 
my general impression is the same. I have now, from a 
distance, the feeling that there may be something like that 
in UCLA. 



262 



TAPE: BUCHANAN II, SIDE TWO 
TAPE DATE: OCTOBER 28, 19 7 8 

HAYEK: There was for a time in Chicago — You see, 
Chicago had more interdepartmental contacts than I have 
encountered in any other American university. And it 
owes it very largely to the facility of the Quadrangle 
Club, where you really talk to people from all other subjects 
and meet them. I know no other American university where 
that is true; it certainly was not at the London School of 
Economics, which was so highly specialized to the social 
sciences and which made me in the end a little tired. 

Although in my time the London School of Economics was 
probably the leading center, still, in economics, it was 
narrowly specialized and had no contact with other subjects. 
[There were] certainly no interesting philosophers until 
Karl Popper came, and that was nearly in the last moment 
prevented by the positivists. They didn't succeed, but 
when he-- I had tried to support the attempt to get Karl 
Popper and persuade the academic council to appoint him by 
rushing out the publication of his The Poverty of Historicism , 
and that nearly destroyed his chances, because it so 
offended all the positivists. But it was too late to stop 
it. [laughter] Still, one of my sociology colleagues made 
serious attempts to stop the appointment at the last 
moment. 



263 



BUCHANAN: Yes, I think I'd heard something of that story. 
But is it as much the necessity of having contacts with 
other disciplines as it is within each discipline too much 
concentration on formalism? At least in economics, it 
seems to me that students aren't anywhere challenged to 
think about the broader questions. 

HAYEK: Well, I don't know what the cause is, but there is 
a great difference in people confining themselves to 
examination subjects and people reading about and moving 
into subjects which are not directly related to what they 
will be examined about. In the American universities I 
know, with the sole exception of the Committee on Social 
Thought, people rather do concentrate on equipping them- 
selves for the examination and probably for an assistant- 
ship or something later in a special subject. 

This is certainly very different from my recollection 
of study, where you had to do your subject, but you spent 
most of your time exploring other fields, exploring related 
fields. I mentioned before it was entirely possible to be 
not only nominally a law student but to do all your law 
exams with quite good success, and yet be mainly interested 
in economics and psychology. 

BUCHANAN: How do you explain — to shift the subject now-- the 
revival, so to speak, of sort of Marxist notions in so much 
of Europe and, to some extent, in this country? 



264 



HAYEK: I don't know. I don't think on the European 
continent there is really a revival; there has been a 
continuous strain [of this]. There is [a revival] in 
the English-speaking world; there has been for quite some 
time. What the cause of this is, I don't quite know. 
I believe it was Solzhenitsyn who recently said that 
there's no person in Moscow who any longer believes in 
Marxism. That's probably the only place in the world 
where that is true. I just find it so difficult to under- 
stand what makes people believe these things. I cannot see 
that it's intellectually respectable at all. 
BUCHANAN: Yes, ideas which have been discredited; yet it 
does seem, say compared with twenty years ago, there's 
more talk of Marxism now, outside of the — 
HAYEK: Yes, that's probably true. 

BUCHANAN: Certainly in Japan, especially in the academy, 
in the universities. 
HAYEK: Yes; oh, yes. 

BUCHANAN: They tell me--you would know better than I--but 
they tell me that some German universities are dominated 
by Marxists. 

HAYEK: Oh, yes, they are. There's no noticeable influence 
of it at Freiburg; but there is a place like Bremen, which 
I am told is a completely Marxist institution. And there's 
a very great influence of that curious institution in 



265 



Frankfurt, the Institut fur Sozialwissenschaf ten , where 
now [Herbert] Marcuse is the main figure, who made his 
reputation by combining Marxism and psychoanalysis. 
BUCHANAN: I heard a rumor at Altdorf a month ago that 
[Ralf] Dahrendorf may be going there, and if so he might 
straighten it out. Have you heard that? 
HAYEK: Well, he seems to be negotiating with various 
German institutions. There was the suggestion of the 
foundation of a new Max Planck Institut for him. 
BUCHANAN: Maybe that's what I'm thinking about. 
HAYEK: It may well be, and that of course confirms the — 
He was a great success at the London School of Economics, 
and what I rather had feared--that his nerves wouldn't 
stand it--has been untrue. He seemed to me a hypertensive 
character who might break down any moment; no sign of that 
at all. But I warned them, "You won't keep him very long; 
he is not a person who will stay anywhere very long." And 
that seems to be true. [laughter] His interest is 
already shifting. But his feelings are settled there; he's 
as good a director as they've ever had. 

BUCHANAN: But in terms of his ideas, he seems to be coming 
around more and more to the position that would not be too 
different from your own. 

HAYEK: He fluctuates. I don't think his development is 
very steady. He was at one time very enthusiastic about my 



266 



Constitution of Liberty , and that was soon after it 
appeared. Then for a time he very definitely moved again 
away from that position. I think he's again coming closer. 
BUCHANAN: I had lunch with him, and he told me that one 
of the most important events that had happened in the last 
decade was Proposition 13 in California, which I thought 
was an interesting indication. [laughter] 
HAYEK: Very interesting; quite unexpected to me. 
BUCHANAN: Well, Professor Hayek, I want to thank you very 
much for this chance to chat with you. 
HAYEK: It was pleasant. 



267 



TAPE: BORK I, SIDE ONE 
TAPE DATE: NOVEMBER 4, 19 7 8 

BORK: Dr. Hayek, you were trained as a lawyer, I under- 
stand. Where were you trained? 

HAYEK: [At the University of] Vienna. My earlier back- 
ground was biological, but during World War I, I got 
intensely interested in political subjects. At that time, 
you could study economics in Vienna only as part of the 
law degree; so I did a regular law degree, although only 
the first part in the normal way. Thus, I have a very good 
education in the history of law. But then I discovered 
that I could claim veterans' privileges, and so I did the 
second part in modern law in a rush and forgot most of 
modern Austrian law. I was later again interested. In 
fact, in 1939, or rather in 1940, I was just negotiating 
with the Inner Temple people to read for a barrister 
there when I had to move to Cambridge; so the thing was 
abandoned. But I got so fascinated with the differences of 
the two legal systems--and my interests had turned to 
these problems-- that I thought it might be useful to have 
systematic training, but it never came off. So my knowledge 
of common law is still very limited. 
BORK: Were you thinking of practicing actually? 
HAYEK: Oh, no. It was just that I became so interested 
in the evolution of the law and the similarity between the 



269 



evolution of Roman law and the later evolution of common 
law that I wanted just to know a little more cibout judge- 
made law. 

BORK: You went to the law school because you wanted to 
study economics, and your lifework, of course, as every- 
body knows, has been in economics. When did you first 
begin to think about the relationship between legal philos- 
ophy and the problem of maintaining a free society? 
HAYEK: Well, that's difficult to remember. I began to 
think about this problem in the late thirties in a general 
way, and I think it began with the general problem of the 
genesis of institutions as not designed but evolving. Then 
I found, of course, that law was paradigmatic for this 
idea. So it must have been about the same time that I wrote 
the counterrevolution of science thing, when I was interested 
in the evolution of institutions, that my old interest in 
law was revived--as paradigmatic for grown institutions 
as distinct from designed institutions. 

BORK: Your interest in grown institutions, or evolving 
institutions, came out of your work in biology? I under- 
stand you had some background-- 

HAYEK : Well, I come from a completely biological family; 
so my knowledge of biology derives from my boyhood. I'm 
the grandson of a zoologist, son of a botanist, and the 
funny thing is that although my own family grew up in 



270 



England separated from my Austrian family, both of my 

children have become biologists again. [laughter] 

BORK: That's a genetic trait. 

HAYEK: My brother was an anatomist, incidentally; so the 

tradition is wholly biological. I've never studied biology, 

but I think by the time I became a student of law, I knew 

more biology than any other subject. 

BORK: But your approach to these matters has been largely 

affected by the fact that you were familiar with Darwin 

and the evolutionary hypothesis from an early age? 

HAYEK: Yes. I think it was mainly revived when I returned 

to my psychological interests. I did not mention that while 

I was studying law, I really divided my time fairly equally 

between economics and psychology, with the law on the side. 

I did conceive at that time, when I was twenty-one and 

twenty-two, ideas on physiological psychology which I had 

to give up; I had to choose between the two interests, which 

were economics and psychology, and for practical reasons I 

chose economics. 

But after I published The Road to Serfdom in 1944, I 
wanted to take leave from this sort of subject. I had so 
discredited myself with my professional colleagues by 
writing that book that I thought I would do something quite 
different and return to my psychological ideas. So 
between '45 and '50, I wrote this book The Sensory Order , 



271 



and that is based entirely on psychological ideas, on 

biological ideas. And that was, I think, the revival of 

my interest in the field of biological evolution. 

BORK : You mentioned that your interest was divided 

between economics and psychology, and for practical 

reasons you took up economics. What were the practical 

reasons? 

HAYEK: There was no chance of a job in psychology. 

BORK: I see. You mean, the universities just didn't have 

an opening? 

HAYEK: No, In fact, there were hardly any psychologists 

teaching there, and certainly nobody had any sympathy with 

my kind of interests. And anyhow, at that time you couldn't 

make an academic career your [entire] career. I mean, 

nearly everybody in Austria, except in the experimental 

subjects, who was aiming at a professorship had to have a 

second occupation during the period in which he prepared 

for it. And there was then, in the early twenties, still 

no chance for psychologists getting an outside job. But 

as a lawyer with an interest in economics, it was quite 

easy. 

BORK: And what was your outside job? 

HAYEK: Oh, at first I became a civil servant in one of 

these temporary governmental offices for carrying out the 

provisions of the peace treaty of 1918, clearing the prewar 



272 



days. In that capacity, it so happened that my official 
chief was Ludwig von Mises, whom I had not known at the 
university, and I had never attended his lectures at the 
university. 

I rather like telling the story of how I came to him 
with a letter of introduction by [Friedrich] von Wieser, 
who was my real teacher, who described me as a promising 
economist. Mises looked at me and said, "Promising econo- 
mist? I've never seen you at my lectures." [laughter] 
We became very great friends afterwards, and for the next 
ten years, while I was working in Austria, he was for the 
first five my official head in the government office; then 
he helped me to create the Institute of Economic Research 
and became vice-president while I was director. For the 
whole ten-year period while I was still in Austria, I 
was very closely connected with him, 

BORK : Is it possible for you to identify now the major 
intellectual influences on the development of your thought? 
I mean, I gather some of them come out of a Darwinian brand 
of thought, and there must have been others in law and in 
economics . 

HAYEK: Oh, I think the main influence was the influence 
of Karl Menger's original book, a book which founded the 
Austrian school and which convinced me that there were real 
intellectual problems in economics. I never got away from 



273 



this. I was taught by his immediate pupil, von Wieser, 
and that is my original background. 

I was later very much influenced by Mises; the first 
theoretical problems I took up were problems arising out of 
his theory of money and the trade cycle, which I elaborated. 
So until the middle thirties or late thirties, in my own 
age, I was a pure economist concerned with money, capital, 
industrial fluctuations. 

Then came one event in my life which really changed my 
outlook. I became suddenly — It's a very funny circumstance 
which started it. One of my colleagues at the London School 
of Economics used to make fun of the use of [the word] 
data by economists, who were so anxious to assure themselves 
that there were data that they were speaking about given 
data. [laughter] This talk about data made me aware 
that they are, of course, purely fictitious; that we are 
assuming these facts are given, but never say to whom they 
are given. This made it clear to me that the whole 
economic problem is a problem of utilizing widely dispersed 
knowledge which nobody possesses as a whole, and that 
determined my outlook on economics and proved extremely 
fertile. 

My whole interpretation of the market prices as the 
signals telling people what they ought to do all sprang from 
this one thing which I first outlined in a lecture to the 



274 



London Economics Club in 19 37. I think, while up to 
this point my work was conventional in the sense of just 
carrying on what existed, this was a new outlook I brought 
into economics. I now like to put it into the form of 
interpreting prices as signals leading us, on the one hand, 
to serve needs of which we have no direct knowledge, and 
on the other hand, to utilize means of which we have no 
direct knowledge. But it's all through the price signals, 
which enable us to fit ourselves in an order which we do 
not, on the whole, comprehend. 

BORK: The idea that information and facts are spread widely 
throughout the society, and that no one person has even 
an appreciable fraction of the facts, also forms a large 
part of the basis of your philosophy of law. 
HAYEK: Oh, yes; oh, yes. 

BORK: I want to come back to that in a moment, but before 
I do, I thought I'd ask you specifically in your work on 
law, if you can identify the writers or the persons who 
influenced you. 

HAYEK: Well, I don't think there was an original influence 
when I began to search for people sympathetic to me. It 
was very largely the late ninteenth-century English lawyers, 
people like [A. V.] Dicey and [P.] Vinogradoff and [F. W. ] 
Maitland, in whom I found a treatment which was sympathetic 
to me and which I could use. But the initial interest came 



275 



really from economics, which led me back to law. I was 
trying to comprehend the basis of the English system, 
and found, in these English lawyers, the key. The basic 
philosophy of liberalism was probably more clearly expressed 
by some of the English lawyers of the period than by any of 
the economists. 

BORK: The positivists, the legal positivists, come in for 
what one might, with understatement, call considerable 
criticism in your latest book, and I wondered, when did 
you first come across legal positivism? 
HAYEK: [H,] Kelsen was my teacher. 

BORK: Oh, was he? [laughter] You went to his lectures? 
And when you went to his lectures, did you then-- 
HAYEK : I was greatly impressed by him at first; the logic 
of it has a certain beauty, and he was a very effective 
expositor. But I think what disturbed me first was his 
claim to be the only one who was not ideologically affected. 
He pretended that his was a critique of all ideology, and 
[his system] was pure science. I saw too clearly that he 
was as much affected by a certain kind of ideology as 
anybody else. 

BORK: When did you first come to have the now-critical 
view of Kelsen that you hold? 

HAYEK: Oh, certainly only when I was working on these 
problems ten years after my study in England. It was 



276 



probably when I was working on these things on the 
history of ideas, particularly [Auguste] Comte and the 
Saint-Simonians , when I learned to see what I now call 
the constructivistic approach. It was in Comte and the 
early sociology that I found it most clearly expressed, 
and I began to trace the development from Cartesian ratio- 
nalism to positivism. Well, it was a very slow and gradual 
process which let me see it clearly; so that's why I 
can't say exactly when it began. But by the time I did 
this book on the "counterrevolution of science," I had a 
fairly clear conception of it. 

BORK: Well, in your latest book. Law, Legislation and 
Liberty , you're starting from a premise, I take it, that 
liberty is really declining throughout Western democracies, 
and in fact is in considerable danger of extinction within 
the foreseeable future. I wonder if you'd care to talk a 
little bit about the evidence you see for the proposition 
that liberty is, in fact, declining and is in danger. 
HAYEK: Well, of course, the original occasion was my 
analysis of the causes of the intellectual appeal of the 
Nazi theories, which were very clearly-- I mean, take a 
man like Carl Schmitt, one of the most intelligent of the 
German lawyers, who saw all the problems, then always came 
down on what to me was intellectually and morally the 
wrong side. But he did really see these problems almost 



277 



more clearly than anybody else at the time--that an 
omnipotent democracy, just because it is omnipotent, 
must buy its support by granting privileges to a number 
of different groups. Even, in a sense, the rise of 
Hitler was due to an appeal to the great numbers. You 
can have a situation where the support, the searching for 
support, from a majority may lead to the ultimate destruc- 
tion of a democracy. 

Perhaps I should explain this. You see, the reason 
why I ever wrote The Road to Serfdom -- In the late 
thirties, even before war broke out, the general opinion 
in England was that the Nazis were a reaction, a capitalist 
reaction, against socialism. This view was particularly 
strongly held by the then-director of the London School of 
Economics, Lord Beveridge, Sir William Beveridge, as he 
was then. I was so irritated by this--I'd seen the thing 
develop--that I started writing a memorandum for him, 
trying to explain that this was just a peculiar form of 
socialism, a sort of middle-class socialism, not a pro- 
letarian socialism. That led first to turning it into an 
article and then turning it into that book, for which I 
was able to use material I had already accumulated for a 
book I had planned about the abuse and decline of reason, 
of which the "counterrevolution of science" thing was to 
be the first, introductory, part. 



278 



[In this] I thought I would trace the development of 
this extreme rationalism, or as I now call it, constructivism, 
from Descartes through Comte and positivism; and then in the 
second volume, on the decline of reason, showing the effects, 
leading to totalitarianism and so on. I had all these 
ready when I had the practical purpose of explaining to the 
English intellectuals that they were completely mistaken 
in their interpretation of what the Nazi system meant, and 
that it was just another form of socialism. So I wrote up 
an advance sketch of what was then meant to be volume two of 
the large work on the abuse and decline of reason, which I 
never completed in that form, very largely because the 
next historical chapter would have had to deal with Hegel and 
Marx, and I couldn't stand then once more diving into that 
dreadful stuff. [laughter] So I gave it up, and it's only 
now, almost forty years after I started on the thing, that 
in Law, Legislation and Liberty I've finally written out 
the basic ideas as they have gradually shaped themselves. 
BORK : Well, I wonder if you see, for example, in the 
United States, evidence of the decline of freedom. 
HAYEK: Well, I think in a way the necessity for an 
American government, in order to capture the support of all 
kinds of splinter groups, to grant them all kinds of special 
privileges is more visible than in almost any other 
country. It hasn't gone as far yet, because your development 



279 



is not a steady one, unlike the British one, which has 

been continuously in the same direction. You make 

experiments like the New Deal and then undo it again. 

BORK: Well, we never really undid a lot of the New Deal, 

I'm afraid, did we? 

HAYEK: No, it's quite true. But at the time I formed these 

ideas, because it was during the New Deal, the New Deal 

was very largely evidence for me that America was going the 

same way in which Europe, at least England, had gone ahead. 

BORK: I suppose a lot of people would say that, in fact, 

in some sense freedom was increasing in America, because 

we certainly now have much more freedom for racial minorities 

HAYEK: Yes. 

BORK: There is much more freedom in the area of sexual 

permissiveness. There is much more freedom--if you want 

to call these things freedom--in the area of things that may 

be said or written or shown on film or shown on the stage. 

Now, I suppose the latter could be evidences of depravity 

rather than freedom, but I take it you think-- 

HAYEK : Well, I think America is in a very early stage of 

the process. You see, it comes with a restriction of 

economic freedom, which only then has effects on the mental 

or intellectual freedom. In a way, American development is 

probably a generation behind the one which gave me the 

illustrations--the German development. The American degree 



280 



of restrictions of freedom is perhaps comparable to what 
it was in Germany in the 1880s or 1890s under Bismarck, 
when he began to interfere with the economic affairs. Only 
ultimately, under Hitler, did the government have the power 
which American government very nearly has. It doesn't use 
it yet to interfere with intellectual freedom. In fact, 
perhaps the danger to intellectual freedom in the United 
States comes not from government so much as from the trade 
unions. 

BORK: Well, I think what you're saying, then, is that 
although in some ways society is becoming more permissive, 
that the basic freedom upon which all others ultimately 
depend is economic freedom. 

HAYEK: Yes. And, you know, even the permissiveness-- I 
have certain doubts whether this sort of permissiveness, 
in which the-- I'm not now speaking about governmental 
activities. The change in morals due to permissiveness 
is in a sense antiliberal, because we owe our freedom to 
certain restraints on freedom. The belief that you can 
make yourself your own boss--and that's what it comes to--is 
probably destroying some of the foundations of a free 
society, because a free society rests on people voluntarily 
accepting certain restraints, and these restraints are very 
largely being destroyed. I blame, in that respect, the 
psychologists, the psychoanalysts, as much as anybody else. 



281 



They are really the source of this conception of a 
permissive education, of a contempt for traditional rules, 
and it is traditional rules which secure our freedom. 
BORK: I think somebody said that the reason John Stuart 
Mill and others could talk about the requirements of now 
almost absolute freedom in some areas was that they were 
really relying upon an understood set of morals, which 
people would not transgress. Once the moral capital 
of that era has been dissipated, that kind of permissive- 
ness or freedom is no longer restorable. 

HAYEK: John Stuart Mill's attitude toward this was very 
ambiguous. In a sense, his argument is directed against 
the tyranny of the prevailing morals, and he is very largely 
responsible for the shift from protest against government 
interference to what he calls the tyranny of opinion. And 
he encouraged a disregard for certain moral traditions. 
Permissiveness almost begins with John Stuart Mill's On 
Liberty . 

BORK: So that there's a direct line between John Stuart 
Mill and Times Square in New York City, which is a rather 
overly permissive area? 

HAYEK: Yes, yes, I think he is the beginning. You know, 
I sometimes said--I don't want really to exaggerate--that 
the decline of liberalism begins with John Stuart Mill's 
On Liberty . 



282 



BORK: That's an interesting thought. Do you agree with 
the suggestion that Mill was really a much more sensible 
writer when he was not under the influence of Harriet 
Taylor? 

HAYEK: Yes, but I think that influence can be overrated. 
He always needed a moral-- He was not a very strong 
character fundamentally, and he was always relying on the 
influence of somebody who supported him. First his 
father, then Comte , then Harriet Taylor. Harriet Taylor 
led him more deeply into socialism for a time, then he 
stayed. Well I'll tell you, the next article I'm going 
to write is to be called, "Mill's Muddle and the Muddle 
of the Middle." [laughter] 

BORK: It's a great title. But returning to your book 
and the relationship between law and liberty, as you just 
mentioned, I think really central to your argument is the 
distinction between constructivist rationalism and evolu- 
tionary rationalism, and I wonder if you would elaborate 
for us on that distinction. 

HAYEK: Well, I have tried to do that at length in that 
postscript to Law, Legislation and Liberty , which I first 
gave as a Hobhouse Lecture under the title "The Three 
Sources of Human Values." The point essentially amounts 
to that our rules of conduct are neither innate--the 
majority of our rules of conduct--nor intellectually 



283 



designed, but are a result of cultural evolution, which 
operates very similarly to Darwinian evolution, but of 
course is much faster, because it allows inheritance of 
inherited characteristics, as it were. And that the 
whole of our system of rules of conduct--legal as well as 
moral--evolved without our understanding their function. 

I put it even as strong as that it's culture which 
has made us intelligent, not intelligence which has made 
culture. And that we are living all the time thanks to 
the system of rules of conduct, which we have 
not invented, which we have not designed, and which we 
largely do not understand. We are now forced to learn to 
understand them in order to defend them against the attempt 
to impose upon them a rationally designed system of rules, 
which we can't do because we don't even understand how our 
present system works, and still less how any designed rules 
would work. But it is in this context that I am now 
trying to develop and finally state the upshot of all my 
ideas . 

BORK : But I take it--and correct me; I may be quite wrong-- 
that you think a body of rules or laws which evolve because 
it serves the group in ways the group doesn't even under- 
stand is likely to leave more room for freedom of the indi- 
vidual than is a rationally designed body of law. 
HAYEK: Yes, very definitely; but of course it takes a 



284 



long time really to explain this. A system of rules 
which has developed is a purely abstract system of rules 
that merely secures coordination without enforcing upon 
us common goals or common aims. We are only happy emo- 
tionally if we are aware that we are working with our 
environment for common purposes. But we are actually living 
in a system where we profit from a method of coordination 
which is not dependent on common purposes of which we are 
aware, but rests entirely on our obeying abstract rules 
which are end-independent, as it were, and that is partly 
the cause of our discomfort in this system, because it does 
not satisfy our emotional desire for knowing that we're 
working for common purposes. 

On the other hand, [our system] has created these 
conditions in which we constantly serve purposes of which 
we have no information, serve needs of other people whom 
we don't know, and profit from the doings of other people 
who don't intend to benefit us but who, just by obeying 
these abstract rules, produce an order from which we can 
profit. It is a system which creates a maximum opportunity 
for people to achieve their own purposes without their 
being constrained to serve common purposes with the group 
into which they were born. But they are still free to join 
voluntarily any group for pursuing common purposes. But 
this freeing from the need to pursue the same common 



285 



purposes with the environment in which you are born is, 
on the one hand, the basis of the worldwide economic order; 
on the other hand, [it is] a thing which disagrees with our 
emotions. 

BORK: It has in fact occurred, particularly in countries 
with the Anglo-Saxon tradition, that the evolved order 
has allowed a great deal of freedom. On the other hand, 
other orders have evolved elsewhere in the world which 
are quite unfree; so that there's no necessary connection 
between an evolutionary body of law, is there, and freedom? 
HAYEK: In a sense, yes. But it works both ways. You 
have real evolution only under freedom. Wherever you have 
a community completely commanded by an authoritarian 
system, there is no evolution, in a sense, because better 
systems cannot prevail so long as the old system is 
maintained by force. So it's rather that evolution is 
made possible by freedom, and what you get in unfree 
systems is due to the fact that the emergence of the 
better has been prevented. 

BORK: You mean there's no competition between rules 
within the system when it's-- 

HAYEK : No competition, or no competition at least between 
groups who assume different rules. You can't start in a 
little circle acting [out] different rules from those 
which are the official ones. 



286 



BORK : I'm not sure that you would say that a system 
which is allowed to evolve freely will necessarily pre- 
vail over a system which operates on command and tyranny. 
That is, to the degree that the issue between the United 
States and the Soviet Union is still in doubt, a free 
system of law may not be conducive to the will and the 
military determination necessary — 

HAYEK: Oh, no! You had, of course, a historical instance 
when the military organizations of a feudal state destroyed 
what was essentially already a commercial organization which 
in antiquity had already existed. It was largely the invading 
military bands which came from the east which destroyed 
what was a sort of commercial civilization in a wider 
sense, and which throughout the whole Middle Ages imposed 
an authoritarian order and was only gradually destroyed 
by some little commercial centers which escaped the 
feudal system. The Italian commercial cities and later 
the Dutch commercial cities developed because they 
allowed new rules to spring up and to prevail. These 
little communities, which acted on different principles, 
really developed modern civilization. 

BORK: So the survival of the fittest is really a survival 
of the fittest rules within a society where there are-- 
HAYEK : --which comes to the same thing as the fittest 
groups. Rules are always things practiced by some little 



287 



group, though you get the difference very clearly between 
the difference in morals of the few comiriercial towns 
between Venice and Florence and the surrounding country- 
side. They developed in the towns a new system of 
morals which made commercial development possible; the 
morals still prevailing in the open country would not 
have made [this] possible. 

Let me go back even earlier. I mean, take the trading 
towns of the Mediterranean in Phoenician and Greek times. 
It was certainly a breaking of the tribal rules when these 
little centers began to trade with distant places, taking 
from their neighbors what they could have used very well, 
to sell it elsewhere against traditional morals. And it was 
this breaking of traditional morals that made the rise of 
commerce possible, which ultimately benefited all the people 
in these towns. They all undoubtedly greatly resented it, 
for things they could have better used were taken else- 
where, [laughter] 

BORK: But if I understand you correctly, the superior 
system of law within a society which allows law to evolve 
is not necessarily correlated to the military strength of 
that society or the military interpretation of that society. 
HAYEK: Oh, no. You see, I think the most beautiful phrase 
which confirms this occurs in a recent study by a youngish 
French economic historian that "capitalism grows everywhere 



288 



due to political anarchy." I think that's true. 

BORK: Is that right? I thought perhaps it created it. 

HAYEK: Oh, no; oh, no. I think it was the weakness 

of government which prevented government from suppressing 

these new developments, which they otherwise would have 

done. 

BORK: You make a distinction between mankind evolving 

originally in small tribal groups, which were end-oriented, 

and now having moved into the greater society, which is 

not end-oriented but is more abstract and more general. I 

wonder if part of your argument is that that part of our 

evolutionary heritage in the tribal society makes us long 

for kind of a tribal cohesion, which will destroy the 

open society and its freedom. 

HAYEK: Forgive me if I first correct the thing. "Tribal" 

is not the right expression, because a tribe is always the 

beginning of a political order. It's in small bands of 

forty or fifty, in which mankind lived for a million years 

before even the first tribes arose , that we've acquired our 

innate instincts. 

So innate instincts are really based on a face-to-face 
society where you knew every other member and every outsider 
was an enemy. That's where our instincts come from. The 
tribe was the first attempt, of a sort of large order, where 
some rules as distinct from common purpose already began. 



289 



That's why I don't like the expression "tribal element" in 

this sense. It's really--we have no word for this--inorals 

which existed in the small face-to-face band that determined 

our biologically inherited instincts, which are still very 

strong in us. And I think all civilization has grown up 

by these natural instincts being restrained. We can use even 

the phrase that man was civilized very much against his 

wishes. He hated it. The individual profited from it, 

but the general abandoning of these natural instincts, and 

adapting himself to obeying formal rules which he did not 

understand, was an extremely painful process. And man still 

doesn't like them. 

BORK: Well, I wonder if you thought that the growth of 

intrusive government, which announces moral aims and 

regulates in the name of moral aims, is in fact due to 

that evolutionary heritage--an attempt to get back to that 

kind of a society. 

HAYEK: Partly that, and partly, at least, an attempt to 

stop further development. People have always accepted a 

certain number of rules and resent new ones. The whole 

process is a process of introducing new rules adopted by 

a small minority which a majority rejects, and the function 

of government very frequently, as a rule, is to prevent 

further evolution. 

BORK: Well, it would seem to follow from your view of a 



290 



good law and a just law and a free society that legislation 
ought to be held to a minimum. That is, deliberately 
planned law ought to be used only when it is quite clear 
that something has gone wrong with the evolving law. 
HAYEK: Yes. But even more important, the legislation, 
in a strict sense, ought to be confined to general rules, 
where what we now call legislation is largely orders or 
commands issued to particular groups--granting privileges 
to some and imposing special duties on others--which is 
incompatible to the general idea that [law] should be 
based on abstract rules only. We now call "law" a great 
many things which are not law in my sense. 

BORK : Well, yes. If I understand it, as an evolutionary 
body of law grows up, based upon the unarticulated assump- 
tions of the group and what makes it work well, those 
assumptions then have to be articulated as disputes arise 
and courts decide them. That articulation is neces- 
sarily abstract and general. And in order to preserve 
the benefits of a system like that, you would like the 
legislator to follow the model of legislating abstract, 
general rules rather than-- 

As I recall, you think a large part of our present 
difficulty arises from the fact that we have placed in one 
legislature two quite different kinds of duties: one is 
that of announcing just rules of conduct, which are abstract 



291 



and general and whose consequences are in many cases 
unforeseeable; and also the function of running the 
government and making rules of organization. 
HAYEK: Perfectly correct. That is exactly what I am 
trying to expound in that last volume of Law, Legislation 
and Liberty , " which I have yesterday completed reading the 
proof . 

BORK: Well, I wanted to understand the relationship 
between that, because — Is it your thought that because 
we have a legislature which makes rules of organization 
for the government, that the frame of mind, the command 
frame of mind that that inculcates, infects its general 
lawmaking function? 



292 



TAPE: BORK I, SIDE TWO 
TAPE DATE: NOVEMBER 4, 19 7 8 

BORK: --so that it does that--it legislates generally, 

in that fashion, when it shouldn't. 

HAYEK: Well, the legislature no longer knows what laws 

are. It constantly mixes up general rules and orders for 

specific purposes. In fact, most of our legislatures 

don't understand any law. 

BORK: All right, I won't disagree with that. [laughter] 

But democracy, you say, results rather naturally in 

groups demanding privileges and in legislatures becoming 

end-oriented and passing specific rules to advance specific 

groups. And then there's a whole theory of democracy that 

this interest-group struggle is what it's all about. Why 

do you think that necessarily leads away from freedom? 

HAYEK: Because all this legislation is a discriminating 

legislation which deprives some people of rights which others 

have. Every license given to anybody means that somebody 

else is not allowed to do it, and ultimately it leads to 

a sort of cooperative state. 

BORK: You mean the sheer proliferation of regulations leads 

to the point where everything is regulated, because if any 

one group gets privileges, others will demand them, and 

finally the entire society may be permeated by rules. It 

is that feature that leads to the lack of freedom. You 



293 



refer in the first two books to the need for institu- 
tional invention, to bring law back to its proper function, 
and I wonder if you would describe to us just the nature of 
the institutional innovation you have in mind. 
HAYEK: What I have in mind is very largely the role of 
corporations, where we have very blindly applied the rules 
of law which have been developed to guide the individual. 
Now, I have no doubt that the problem of delimitation of 
a protected sphere which we have learned for the individual 
cannot in the same unchanged form apply to very big 
organizations. They have physical powers which the 
individual does not have, and in consequence, we probably 
shall gradually have to invent new restrictions on what 
an organized group can do, which are distinct from the 
restrictions for the individual. 

I wouldn't like to call it invention, because I am 
now sure you can't at once design such a system, but I 
think that's the direction in which we ought to aim, to 
guide evolution. These are the problems which we ought 
to face much more consciously and to experiment in this 
direction. It's not a problem we can solve overnight. 
BORK: No, I was thinking of your suggestion which I have 
heard about that we have two houses of a legislature. 
I was going to ask you about that. 
HAYEK: Oh, I see, yes. I am very much convinced that if 



294 



democracy is not to destroy itself, it must find a method 
of limiting its power without setting above the represen- 
tatives of the people some higher power. That, I think, 
can only be done by distinguishing between two different 
representative assemblies: one confined to legislation 
in the classical sense of laying down general rules of 
conduct; and the other directing government under the rules 
laid down by the first. Thus, we get a limitation which 
results in nobody having the power to do certain things 
at all. You see, one assembly has only the power of laying 
general rules; the other can only, within these general 
rules, organize the means entrusted to government for its 
own purpose. There will be no authority who can lay down 
discriminating rules of any kind. 

BORK: Well, that's what I wanted to ask you about, 
because the idea is new to me, and it's interesting, 
provocative. But, for example, if we had a legislature 
laying down general rules, would, for example, our 
current labor legislation qualify as general rule? 
Legislation authorizing the organization of unions, col- 
lective bargaining, strikes, and so forth. 
HAYEK: I think you have very sharply to distinguish. 
I think the law should prevent all uses of coercion, which 
would include the prevention of poster picketing, the 
prevention of union f irms--exclusive rights for a union 



295 



to allow employment in the thing. It would really come 
to the exclusion of what I call the privileges granted 
to unions in the present sense — the authorization of the 
use of force, which only the unions have and which, of 
course, in the case of England is particularly flagrant, 
because there it was introduced by a single law in 1906, 
when the unions were exempt from the ordinary law. But 
the same thing has resulted largely by jurisdiction in 
this country and, to some extent, on the Continent. Such 
legislation I think would be impossible if you had, on 
the one hand, only general rules equally applicable to all, 
and on the other hand, governmental powers which did not 
extend to granting to anyone special privileges. There 
would still be a problem of government services being 
unequal, but that, I think, would be a ver^' minor problem. 
BORK: Welfare programs? 

HAYEK: Certain welfare programs, yes. Your question of 
welfare states is an exceedingly difficult thing to discuss 
briefly, because it is such a mixture of completely dif- 
ferent things. I mean, there are certain services which 
certain governments can render without discrimination; 
there are others which it could render, but only by very 
different methods from which it is now employing. But 
I'm sure there is one group [of services] which could not 
be achieved in such a system, and that is deliberate 



296 



redistribution of incomes. What you could do is to 
provide a uniform floor for people who cannot earn a 
certain minimum in the market, for whom you can provide 
in this form; but anything beyond this, any deliberate 
attempt to correct the distribution according to supposed 
principles of social justice, is ultimately irreconcil- 
able with a free society. 

BOFIK : I think that must be related to your point, in 
your book, that any attempt for the society to produce 
real equality is ultimately inconsistent with the direction 
of a free society. 
HAYEK: Material equality, yes. 

BORK : And that is because equality does not occur--! 'm 
guessing--naturally , and therefore requires pervasive 
regulations to be produced? 

HAYEK: Well, let me say the same thing, but in a slightly 
different form. You can allow people to choose their 
occupations only if the price offered to them represents 
their usefulness to the other people. Now, usefulness to 
your fellows is not distributed according to any principles 
of justice. Now, if you rely on prices and incomes to 
direct people to what they ought to do, you must neces- 
sarily be very unequal. 

BORK: But any free society has many elements of coercion 
in it, and to have a progressive income tax for the purpose 



297 



of redistribution of wealth is inconsistent with the 
principle of a free society only in that it is a principle 
which, if extended-- 

HAYEK: Well, the point is, it's no principle. If you 
could have progressive income tax according to some 
general rule which was really a general rule, it would be 
all right; but the essence is that progression is no rule, 
and the thing becomes purely arbitrary. 

Let me say, incidentally, I have no objection to 
progression to the extent that it is needed to make the whole 
tax burden equal in compensation--the progression of the 
income tax compensating for the regressive effect of 
indirect taxes. But I think the aim of taxation, if it is 
based on general rules, should be to make the net burden 
of taxation proportional and not progressive, because once 
you have progressive, the thing becomes purely arbitrary. 
It becomes ultimately an aiming at burdening particular 
people along these lines. 

BORK: You have identified the cons tructivist-rationalist 
fallacy, i.e., that a single mind can know enough to direct 
a society rationally. Is there a connection between that 
and what appears to be a growing egali tarianism in this 
society? The modern passion is for increasing equality. 
HAYEK: Yes. I'm sure there is, although so far as I can 
see — Oh, in fact, that agrees with what you just suggested. 



298 



Egalitarianism is very definitely not a feeling but an 
intellectual construction. I don't think the people at 
large really believe in egalitarianism; egalitarianism 
seems to be entirely a product of the intellectuals. 
BORK: Well, that's what I wondered: if you agree with 
the argument of [Joseph] Schumpeter, carried on by 
[Irving] Kristol and others, that in fact a large part of 
our social movement is due to the class struggles between 
intellectuals and the business classes, and that intel- 
lectuals tend to be constructivist-rationalists . 
HAYEK: Very much so. I don't think I am as skeptical 
about the possibilities as either Schumpeter or Kristol 
is. In fact, this is my present attempt to make the intel- 
lectuals feel intellectually superior if they see through 
socialism. [laughter] 

BORK: You're an apostle to the intellectuals, and you're 
going to-- Well, that's quite a task. But I guess 
Schumpeter's point — and Kristol's point--is that it's a 
class struggle, and intellectuals, in order to achieve 
power, use the weapon of equality, which politicizes and 
which extends the powers of government. 

HAYEK: Yes, but they're not quite as sinister as they make 
them appear. I think the intellectuals really believe 
that egalitarianism is a good thing but do not understand 
the function of inequalities in guiding our system. I 



299 



think you can persiiade them that for the people at large, 
egalitarianism would not have beneficial effects. They 
believe it would. 

BORK: Well, it's curious that, if it's mere intel- 
lectual error rather than intellectual error caused by 
group interest, so many economists are egalitarians, and 
economists who seem to understand the workings of the 
market system. 

HAYEK: I'm afraid they don't. [laughter] No, quite 
seriously, within economics a whole branch has grown up 
which is closely connected, though perhaps not neces- 
sarily, with the mathematical approach. For the reason 
I gave initially, because they assume the data are really 
given, they overlook the problem of utilization of knowledge, 
They start out from the assumption, which there is no need 
for in a system where everything is known anyhow, and there- 
fore they really do not understand how the market operates. 
In all these ideas of using the equations of [Vilfredo] 
Pareto to direct socialist systems, things which [Oskar] 
Lange and that group suggested, they are really based on 
the idea that there is no problem of utilizing dispersed 
knowledge. They imagine that because they have this 
fictitious data, which they assume to be given to them, this 
is a fact, and it isn't. 

BORK: Well, I'm sure that's true, but I do seem to see 
economists, who know better, discounting incentive effects. 

300 



TAPE: BORK II, SIDE ONE 
TAPE DATE: UNSPECIFIED 

BORK: Doctor Hayek, I think that if there's one area 
in which I disagree with you slightly, it is about-- 
We were discussing the intellectuals, and I guess it is 
that I see something a little more sinister about them 
[laughter] than you do. Isn't it significant that, as 
you watch the intellectual classes, they tend to move the 
society always in one direction? That is, towards more 
regulation, towards more intervention, towards more 
politicization of the economy. And that you notice on 
campuses, at least the campuses I'm familiar with, an 
enormous resistance by very bright people to what are 
really fairly basic and simple ideas in economics, which 
suggests--may suggest-- that something more than intel- 
lectual error is at work. 

HAYEK: Is it really? You know, the resistance against 
being guided by something which is unintelligible to them 
is, I think, quite understandable in an intellectual. Go 
back to the origin of it all. Descartes, of course, 
explicitly argued only that we should not believe anything 
which we did not understand, but he immediately applied 
it that we should not accept any rules which we did not 
understand. And the intellectual has very strongly this 
feeling that what is not comprehensible must be nonsense. 



301 



and to him the rules he's required to obey are unintel- 
ligible and therefore nonsense. He defines rational almost 
as intelligible , and anything which is not intelligible 
to him is automatically irrational, and he is opposed 
to it. 

BORK : Well, I'll give you an example. Among academic 
economists and among academic lawyers who deal with 
economics, antitrust, for example, there has been an enormous 
acceptance of certain theories about oligopoly, about 
concentrated industries: that where you have three, four, 
five, six firms in a market, they wi ll--without colluding, 
necessarily, as a monopolist would behave--learn to act 
together, as if they were a monopolist. There seems almost 
no evidence for that theory, but it's enormously popular; 
and it seems that without a predisposition on the part of 
intellectuals to dislike the private sector and to dislike 
freedom in the economic sphere, that that theory could 
hardly become as popular as it has become. 

HAYEK: Yes, but that dislike, I think, is due to it being 
unintelligible to them. They want to make it intelligible 
--trans lucent--to them. They think nothing can be good 
unless it is demonstrated to you that in the particular 
case it achieves a good object. And that, of course, is 
impossible. You can only understand the structure as 
the principle of it, but you couldn't possibly demonstrate 



302 



that in the particular event the particular change has 
a purpose, because it always is connected with the whole 
system which is the rule. We can only understand in 
principle, but not in detail. 

So I think I would give [the intellectuals] the 
benefit of the doubt, at least. I think in most 
instances it's a deeply ingrained intellectual attitude 
which forces them to disapprove of something which seems 
to them unintelligible, and to prefer something which is 
visibly directed to a good purpose. 

BORK: Do you think it has to do with the nature of intel- 
lectual work? 

HAYEK: Yes. The whole training of the scientists — Of 
course, scientists are pretty bad, but they're not as bad 
as what I call the intellectual, a certain dealer in 
ideas, you know. They are really the worst part. But 
I think the man who's learned a little science, the little 
general problems, lacks the humility the real scientist 
gradually acquires. The typical intellectual believes 
everything must be explainable, while the scientist knows 
that a great many things are not, in our present state of 
knowledge. The good scientist is essentially a humble 
person. But you already have the great difference in that 
respect between, say, the scientist and the engineer. The 
engineer is the typical rationalist, and he dislikes any- 
thing which he cannot explain and which he can't see how 

303 



it works. What I now call constructivism I used to call 
the engineering attitude of mind, because the word is 
very frequently used. They want to direct the economy as 
an engineer directs an enterprise. The whole idea of 
planning is essentially an engineering approach to the 
economic world. 

BORK : I suppose if we include in intellectual classes 
not merely people who have intellectual competence but 
people whose work is with ideas, whether or not they're 
very good at ideas, that includes journalists, profes- 
sionals, government staffs, and so forth. They, not having 
the full intellectual understanding of the difficulties, 
would tend to be more arrogant in their assumptions about 
what planning can do. Perhaps it is the explosion of 
those classes in modern times that has led to the 
accelerating-- 

HAYEK : It's partly the specialization. You see, the 
modern specialist is very frequently not an educated 
person. He knows only his particular field, and there he 
thinks, particularly if he is in any of the mechanical 
subjects, that he ought to be able to explain everything, 
and that he can master the detail of it. I find, for 
instance, that on the whole, physical scientists are 
much more inclined to a dirigist attitude than the 
biological scientist. The biological scientists are 



304 



aware of the impenetrable complexity; they know that 
you sometimes can only explain the principle on which 
something works, not being able to specify in detail 
how it ought to work. The physicist believes that you 
must be able to reproduce every intellectual model in 
detail, that you really master everything. That's why 
I've come to the conclusion that the physical sciences 
are really the sciences of the simple phenomena. 

As you move from the physical sciences to the biological 
and the social sciences, you get into more and more 
complex phenomena. The essence of complex phenomena is 
that you can explain the principle on which they work, but 
you never can master all the data which enter into this 
complex phenomena. Therefore, even a perfect theory does 
not yet enable you to predict what's going to happen, 
because you have a perfect theory but you never know all the 
data you have to insert into the scheme of the theory. 
BORK : Well, if the biologists are led to modesty by the 
fact that they deal with complex systems, why isn't the 
same thing true of sociologists, who are not noted for 
their modesty, or for a number of other desirable attributes 
they're not noted for? 

HAYEK: Because the whole science of sociology is based on 
the idea that you can explain society by a very simple 
model. I don't see any justification for the existence 



305 



of the theoretical science of sociology, just as there is 
[no justification for the] existence of the theoretical 
science of naturology. I mean, the separate problems 
of society are difficult enough. To assume that you can 
have a simple theoretical model which explains the 
functioning of society is just unfounded. Sociologists 
have done admirable empirical work on detailed questions, 
but I don't think there is such a thing as a science of 
sociology. 

BORK : Do you think the reason they haven't been led to 
a modesty which would be more becoming to them is that 
they started with a theory about the possibility of under- 
standing the entire society, which has prevented them from 
seeing the impossibility of it? 

HAYEK: Yes. It's very typical thinking that was invented 
by Auguste Comte, who is the prototype of my scientistic 
approach. 

BORK: I want to go back for a moment to the question of 
generality as a desirable attribute of law, because I don't 
fully understand it. Why would it not be possible, for 
example, to state a progressive income tax in terms of 
generality? Anybody who makes more than $50,000 is taxed 
at a 70 percent rate. Why is that not a general law 
which has unforeseeable consequences, because we certainly 
don't know who's going to make that much money? 



306 



HAYEK: On the whole, yes, I think the point is exactly 
that it is aimed against a class of known people. 
BORK : You mean we know their names. But I suppose one 
might almost say that about criminal-- 
HAYEK: In each group, people will know who are the 
people who will pay the higher rate, but not for the 
nation at large. 
BORK: And not for the future? 

HAYEK: It depends how far you extend the future. 
BORK: Well, but how does that differ from the criminal 
law? We adopt a law against armed robbery. We can 
identify sociological classes who will be more affected 
by that law than anybody else. We can identify, perhaps 
in some cases, individuals. 

HAYEK: Well, the purpose of the law is not to punish 
these people, but to prevent them from doing it. It's 
an entirely different thing to exclude a certain kind of 
conduct. 

BORIC: But suppose a socialist society, or people with 
socialist impulses--say that we think it's quite bad to 
have a society in which people have more than $50,000 
annually, and the purpose of our law is to prevent you 
[from doing so] . In fact, the income tax rate is 100 
percent at $50,000. That would be a general law and would 
meet the attributes of-- Maybe it's a bad social policy. 



307 



but as law it doesn't lack generality, does it? 
HAYEK: This is a thing which has troubled me a great 
deal. What sense discriminating taxation, which makes 
income classes a basis of discrimination, can still be 
brought under the concept of a general law or not. 
It's perhaps more of a feeling than anything I can 
precisely justify. That you can carry the idea of 
progression to a point where it certainly is aimed at 
particular people, there is no question; that the principle 
of progression can be abused, I am certain. Whether you 
can draw any line within which it is not likely to be 
abused, I doubt rather. [laughter] 

BORK: Yes. I find the attribute of generality, rather 
than specificity, a very difficult one in many cases. 
HAYEK: Oh, yes. I have tried to avoid the terms as much 
as possible. The "rules which affect unknown people in 
particular circumstances that are also unpredictable" is 
the phrase which I prefer to use. This, in fact, has been 
elaborated--arrived at — by many of the nineteenth-century 
legal philosophers. 

BORK: Yes, but it excludes an awful lot of the social 
legislation that society demands today. It's social 
legislation drawn to say that society demands it, but it 
has certainly grown up through democratic procedures. 
HAYEK: Oh , it certainly has. But the question is precisely 



308 



whether the powers of the democratic representatives 
ought to extend to measures which are aimed at particular 
people or even particular known groups of people. 
BORK: Let me understand that. Your objection to that could 
be of two sorts. It could be that there's something 
inherently wrong with aiming at a known group. I'm not 
sure why that's true. 

HAYEK: With coercive measures. To apply coercion in 
a discriminating fashion in the service functions of 
government is merely a limitation of coercive law. 
BORK: But why is it wrong to aim — For example, we 
regularly take--we used to until the all-volunteer army 
came in, but I guess we're going to do away with that 
eventually--we used to conscript coercively people of 
a defined class to do our fighting for us, and that would 
seem to be a law of the very kind that you're objecting to. 
HAYEK: Well, the problem is that it's a discrimination 
between males and females. The normal thing is, of course, 
that every man has to [register at] a certain phase of 
his age; so if he was not suitable for armed service, 
[service would be extended to] another of the duties. It 
should be the same for all men. 

The problem is one of the distinction between sexes. 
But even there, people have been insisting that women 
should do some sort of national service instead. 



309 



BORK: Well, in fact, some of them are insisting that 
women be put into fighting. I've heard Margaret Mead 
object to that on the grounds that it would make wars 
too savage. [laughter] 

HAYEK: Probably true. You've heard the stories about the 
French Revolution--the behavior of the women in the 
revolutionary crowd--which rather confirms the notion 
that women are much worse-- [laughter] 

BORK: Yes, we conscripted men in order to moderate war. 
[laughter] As we discussed your position, I was wondering 
whether there aren't constructivis t aspects of your own 
outlook. That is, you put upon the intellectual or the 
lawmaker the need to understand a system and how it 
operates, and then to make adjustments in the system which 
has evolved. 

HAYEK: No, I'm afraid that's not what I mean. In fact, 
I'm convinced that you don't leave it to the lawmakers to 
judge; they don't possess the capacity to decide. I want 
to do it in the form of a reconstruction of the mechanism: 
two distinct bodies with different tasks, so defined that 
a constitutional court could distinguish whether either 
of the two bodies had exceeded their tasks. You confine 
the one to laying down what I call "laws in the strict 
sense," which for brevity we sometimes use the phrase 
"general law." I think this must be defined much more 
carefully. 

310 



The other, under these laws, is entitled to organize 
services, but nothing else. Services means directing 
resources put under the command of government, but not in 
the position to direct the private citizen at all. I 
think the mechanism of such a constitution would force 
the authorities to limit themselves, because it would 
just be a situation in which nobody would have set power 
to do those kinds of things. My constitution indeed involves 
that certain things could not be done at all by anybody. 
BORK: Well, you put an awful lot of weight on judges 
there, and I have some familiarity with judges. What you're 
going to do , I gather, is have one legislative body 
which may pass only general rules of just conduct; and 
you'll [also] have a court which will have the power to 
say whether those are in fact general rules of just 
conduct. You have somehow to insulate that court from 
the philosophy of constructivist gradualism, because if 
the judges — 

Well, in this country, already our experience under 
the American Constitution is that for many years the 
Supreme Court of the United States struck down laws inter- 
fering with matters within states, on the grounds that they 
were not interstate commerce and that federal power 
extended only to interstate commerce. The political 
attitude of the country changed, and the country demanded 



311 



more regulation--or the New Deal demanded more regula- 
tion. The court gave way. And the court has now almost 
completely abandoned that form of protection. It has now 
moved on [to the point]--and I think it's signif icant-- 
that the most frequently used part of the Constitution now 
is the equal-protection clause, by which the court is 
enforcing the modern passion for equality. I wonder, given 
that kind of institutional history, whether any institu- 
tional innovation can save us, or whether it isn't really 
just an intellectual/political debate that will save us? 
HAYEK: You know, in my opinion the American Constitution 
failed essentially because it contains no definition of what 
a law is, and that, of course, deprives the Supreme Court of 
guidance. I believe that, instead of having the Bill of 
Rights, you need a single clause saying that coercion can be 
exercised only according to and now following a definition 
of law which is of some language which of course explicates 
what I, in a brief phrase, call general rules. That would, 
in the first instance, make all special protected rights 
unnecessary, and it would include all. It excludes all dis- 
criminatory action on the part of government, and it would, 
of course, give the court guidance. 

The court is still necessary because I am sure that no 
definition of law you can now put into words is perfect. 
You will, in the course of time, have to improve that 
definition. That would be the essential task of that court. 



312 



But it understands that that is its main task. I don't 
think this perversion of the task of the Supreme Court 
which has taken place in the United States would take 
place. You can't exclude it, but I am optimistic. 
BORK: Well, I guess I have a little gloomier view of the-- 
HAYEK : Well, I'm not surprised that somebody who's been 
watching the development of the Supreme Court takes a 
gloomy view of it. [laughter] 

BORK: You know, there is something like what you suggest 
in the Constitution now, which is the equal-protection clause, 
It's like your rule of no discrimination. Two things happen: 
one is that somebody has to classify what things are alike, 
in order to know whether there is discrimination. 
HAYEK: I know that. I know. 

BORK: — and that means that you've handed the power-- the 
ultimate power of legislation--to a court. That's why I 
suppose I'm a little bit gloomy about the possibility of 
telling a court, "No discrimination," and then leaving 
it to them to say which things are alike and which things 
are different, in order to define discrimination. 
HAYEK: Well, if you confine that prohibition of discrimi- 
nation to the coercive action of government, I think it 
becomes much more precise. In the American interpreta- 
tion it has become everything which has different effects 
on the people--they interpret this as discrimination. 



313 



It doesn't require that "discrimination" be what the 
government does. 

BORK: Well, I don't want to pursue this too far, but 
I'm reminded of a Supreme Court case which raised this 
in extreme terms. Oklahoma passed a statute which said, 
in effect, that criminals convicted for the third time 
for a crime of violence--a felony involving violence-- 
should be sterilized. The theory was that it was genetic. 
Nobody knows. But the Supreme Court looked at that law and 
said, "Well, a bank robber who robs for the third time 
will be sterilized, but an embezzler in the bank will not 
be." Those people are alike; that's discriminatory; the 
law failed. That's my point. Once you give this power to 
define discrimination, that kind of thing will be done. 
HAYEK: Yes, I have no ready answers for this. 
BORK: Well, my suspicion is that kind of rule transfers 
power from popular assemblies to courts. The other thing 
about it, if I may pursue it for a moment, is that no two 
people probably agree which things are alike and which 
things are different. We all classify things slightly 
differently, and so if you have a court voting on it, 
although each justice may be perfectly consistent, the 
output of the court will become incoherent, because you'll 
get very different results as the vote shifts on different 
issues. That's only a way of expressing my own reservations 



314 



about institutional cures to what are philosophical 
problems . 

HAYEK: But it seems to me that you're thinking too 
much about the question of equality of effects and not 
equality of government action. On equality of effects, no 
two people will agree. I am entirely in agreement with you 
on this. But when it comes to equality of treatment by 
government--and not including under "treatment" the 
whole results for the people, but only what the govern- 
ment does--I still believe you can maintain this. 
BORK : I certainly hope you prove to be correct on that. 
You were talking, before we began to tape this-^I thought 
it was quite interesting, and I was hoping you would 
repeat it--about your views that the Marxists have the 
price theory upside down, or backwards, and I wonder if 
you'd expound on that. 

HAYEK: Well, the belief that prices are determined by 
what people have done is misleading. The function of 
prices is to tell people what they ought to do, and the 
Marxist idea is caused by a very primitive conception of 
the task of science. To think of everything being 
explainable in terms of a single cause and a single 
effect doesn't help us to understand complex, self- 
maintaining structures. We constantly have a sort of 
reverse causation. The thing is being maintained only 



315 



by certain reverse effects, something like the negative 
feedback effect and that sort of thing. In that sense, 
prices must be interpreted as signals for what people 
ought to do and cannot be said as determined by what 
people have done. 

I would go so far as [to say] that nobody--and therefore 
no Marxist who believes that prices are determined by past 
events--can ever understand the economic system. Marxism-- 
and every other "objective" theory of value, even the 
Ricardian — blinds you to the essential function of prices 
in securing a coordination in the market. The most 
typical instance is-- We have already spoken about John 
Stuart Mill. John Stuart Mill, who stuck to the objective- 
value theory of [David] Ricardo, was led by this to argue 
that while there are laws of production there are no 
laws of distribution--we are free to determine the 
distribution--just because he did not understand that it 
was the prices which told people what they ought to do. 
BORK: Dr. Hayek, clearly, in your work, you see a strong 
relationship between property, and its security, and 
freedom. I wonder if you could describe that relationship 
as you see it for us. 

HAYEK: Well, to be able to pursue one's own aims it is 
essential to know what means are available to one. I think 
that's only possible by some recognized procedure which 



316 



decides about the sphere of command of the resources 
which each person has. We must all, at any one moment, 
know which means we can use for our own purposes, and we 
can aim at changing that protected sphere by acquiring 
new means, which then are at our use or disposal. In 
fact, the general aim at acquiring means that one can 
later use for one's own purposes seems to me essential 
to freedom and can be satisfied by some rules of property 
in the material means of production. 

BORK : Property is essential to freedom, I suppose--are 
you saying?--because it gives you an independence of 
government which you would not otherwise have? 
HAYEK: Independence of government and my fellows. It's 
really a sphere in which I cannot be coerced. And if 
freedom is freedom from coercion, it depends really on my 
being able to assemble a set of means for my purposes. 
That is the essential condition for the rational pursuit 
of an aim I set for myself. If I am at each stage dependent 
on, as it were, the permission or consent of any other 
person, I could never systematically pursue my own ends. 
BORK: I think this must go back to our prior discussion 
of the fact that we are becoming a free society in some 
sense — the sense of permissiveness toward what may be 
said, what may be done, sexual permissiveness, and so 
forth. But what you're saying is that, at the same time. 



317 



we're becoming more heavily regulated in our property 
rights, which are crucial, and these other freedoms will 
prove illusory if we lose our control of property rights. 
HAYEK: It depends on what you mean by regulated. I would 
confine regulation to the approval or disapproval of 
particular ends pursued. It is merely a question of 
delimiting this sphere of means I can use for my own 
purposes; so long as I can determine for what ends I use 
them, I am free. 

BORK: No, I was thinking of the overall condition of 
freedom in the society. I suppose what the point would 
be is that the government is now so heavily confiscating 
and regulating property that if those freedoms ultimately 
disappear, these other freedoms that we think we have will 
disappear in consequence — once the government has control 
of the economic base. 

HAYEK: Yes. You know, that's a field in which I have 
great difficulty, particularly when it comes to the 
problem of expropriation for any purpose. That, of course, 
is the most severe infringement of the principle of 
private property, and one where I have to admit there 
are circumstances in which it is inevitable. It's a most 
difficult point to draw my line. I think the only precaution 
I would wish is by way of the rules of compensation; I 
would even be inclined to devise some multiple compensation 



318 



in the case of expropriation to put a required limit on 
expropriation. 

But apart from this very troubling issue of expro- 
priation, I think all limi tations--certainly all discrimina- 
tory infringements of property rights — I object to. 
I think I ought to bring in here another point. Most of 
the real need for such measures is probably on a local 
and not on a national sphere, and I'm inclined, in a way, 
to give the local authorities power which I would deny to 
the central government, because people can vote with their 
feet against what the local governments can do. 
BORK : And do. This concept of the protection of property, 
of course, is now in tension, or in opposition to, 
demands made in the name of social justice. You think 
that social justice is not only used as a concept for the 
wrong purposes but you, in fact, think it is no concept, I 
gather . 

HAYEK: It's completely empty. I'm convinced it's completely 
empty. You see, justice is an attribute of human action, 
not of the state of affairs, and the application of the 
term social justice assumes a judgment of the justice of 
a state of affairs irrespective of how it has been brought 
about. That deprives it of its meaning. Nothing to do 
with justice is an attribute of human action. 
BORK: But you yourself have a preference for a certain kind 



319 



of a society, which has a maximum amount of freedom in 

it. And I suppose you wouldn't call that a socially just 

society, but what general term would you use to describe 

it? 

HAYEK: Well, I think I would just stick to "the free 

society," or "the society of free men"--"free persons." 

BORK : But doesn't the demand for social justice merely 

mean-- It's a shorthand for a preference for a different 

kind of society. 

HAYEK: Well, it's used like that, no doubt, but why then 

speak about justice? It's to appeal to people to support 

things which they otherwise would not support. 

BORK: I see. Your objection really is that it's a form of 

fraudulent rhetoric — 

HAYEK: Yes. 

BORK: --because it implies a standard of justice against 

which a society can be measured. 

HAYEK: Yes, exactly, exactly. 

BORK: And actually what they're talking about is a set of 

preferences, not a standard for measurement. 

HAYEK: Well, it's really a pretense that there is some 

common principle which people share with each other. 

But if they were deprived of the use of this term, they 

would have to admit it's their personal preference. 

BORK: It's an unfair form of rhetoric. I see. All right. 



320 



Now, you make the strong statement in your book that the 
necessity for rules arises out of ignorance. But you also 
can see, I gather, that there are other reasons for rules. 
For example, you say at one point that in a society of 
omniscient persons--where everybody knew all the facts 
and all of the effects of actions--there would be no room 
for a conception of justice , because everyone would know 
the effects of an action and the relative importance of 
those effects. But suppose the interests of omniscient 
persons differ, and they adopt different modes of conduct 
producing different effects. Is it impossible to have a 
concept of justice merely because you're omniscient? I 
mean, doesn't justice--and therefore rules--have something 
to do not only with ignorance or omniscience but with 
evil or minority interests? 

HAYEK: Perhaps my statement is too strong. Omniscience 
itself would not be sufficient, but omniscience would at 
least create the possibility of agreeing on the things 
which, without omniscience, you can't [agree on]. While 
you may be unable to agree even with omniscience, without 
it, it's clearly totally impossible. [laughter] 
BORK : Yes, you could have evil omniscient persons. So 
the rules depend, or arise, not merely because of ignorance 
but because of disagreement about morals — 
HAYEK: Socially. 



321 



BORK: --and disagreement about interests. Now, in 

this area of societies which evolve spontaneously, for 

which you show a strong preference, I mentioned earlier 

that there are societies that evolved in an unfree way. 

But you said, well, when they're unfree they don't evolve, 

and therefore we can't say that evolution leads to unfreedom. 

It has been suggested that feudal structures really 

evolved spontaneously. 

HAYEK: I don't think so. They arose from military 

conquest. 

BORK: Always? Or were there occasions where-- 

HAYEK: I haven't come across it. I haven't really 

examined history on this, but in the European history 

with which I am most familiar, it's fairly clear that it 

was military bands which conquered the country. It seems 

that the German tribes were expanded from Germany south 

and west. Conquerors of the country established a feudal 

regime. The conqueror acquiring the land and having 

people working as serfs on it seems to have been the 

origin of-- 

BORK: Or I suppose you would suggest that sometimes it 

may have grown up in defense against, for the need for 

protection against, outsiders, but — 

HAYEK: Yes, of course. It need not have been a foreign 

conqueror; it very frequently was the need for establishing 



322 



a military class in defense, who then became dominant 

in a feudal way. But it was really military organization 

rather than economic organization for feudalism. 

BORK: I was wondering, because it seemed to me at times 

in your book that you were identifying the evolutionary 

society as the good society, and the evolutionary law as 

the good law. Yet you also had another value, which was 

freedom, and I guess what you're really saying, as I 

understand it now, is that in fact those two become one. 

HAYEK: Yes. 

BORK: If it evolves, it will be a free society. 

HAYEK: Evolution creates a possibility of choice only 

under freedom. If you do not have freedom, the thing is 

directed by a superior authority. You have no longer a 

selective evolution, where the better and the more effective 

succeeds, but what succeeds is determined by those who 

are in power. 

BORK: Oh, I see, it's the process of evolution that is 

indistinguishable from freedom; but that is not to deny 

that the process of evolution may lead to an unfree state. 

HAYEK: It may well do that, yes. That's why freedom needs 

safeguards . 

BORK: That's why the need for legislation. 

HAYEK: Yes. Legislation ought to be a safeguard of 

freedom, but it can be used to suppress freedom. That's 



323 



why we need principled legislation. 

BORK: We certainly do, but I think I've expressed my 
doubts about that. Well, that really means, then, if 
we're talking about an evolutionary society--one without 
strong central direction; one in which property is safe- 
guarded--that your conception of justice is really closely 
bound up with a capitalist order, or at least a free- 
market order? 

HAYEK: A free-market order based on private property, yes. 
You know, that's a very old theory. I think John Locke 
already argued that-- In fact, he asserts at one stage 
that the proposition which can be demonstrated, like any 
proposition of Euclid, is that without property there can 
be no justice. 

BORK: Well, I'm having a little trouble with that word 
justice . Is justice, in your thought, anything other than 
those rules which are required to maintain freedom? Does 
it have any other content than that? 

HAYEK: I don't think you have rules of conduct, but you 
emphasize rules that determine a state of affairs. We 
can even describe a desirable state of affairs in the form 
of rules. They should not be rules of conduct; rules of 
conduct [should be] only for a dictator, not for the 
individuals. Rules of individual conduct which lead to 
a peaceful society require private property as part of 



324 



the rules. This is the way I would put it. 

BORK : Yes, but we've discussed what you call the vexing 

question of the relationship between justice and law, and 

I'm not quite sure what justice is in this context except 

those attributes of law which lead to a free society. Is 

that it, or are there more requirements of justice? 

HAYEK: I think it is uniformity for all people. 

BORK: But is ["uniformity for all people"] derived from 

the need for freedom, or is that derived from an independent 

moral base? 

HAYEK: I think it derives from the need for freedom. If 

laws are not uniform, it means that somebody can discriminate; 

it means there are some people who are really subject to 

the people who can discriminate. Being independent of the 

coercion of other people excludes any such discrimination 

by an authority. 

BORK: So the whole concept of justice describes those 

attributes of law which we have identified as being 

necessary for the maintenance of a free society, and 

there is no other source. 

HAYEK: Yes. 

BORK: Now, you also talk about — in your second volume 

particularly — what it is that a judge or a legislator 

must do to develop a system of law. You describe, for 

example, the judge or the legislator when he faces a 



325 



situation not faced before and not recognized before. 
You write of his need to understand all of the rules 
the society already has in order to frame a new rule which 
is consistent and compatible with those and not contradictory. 
Doesn't that really plunge you into a requirement of some- 
thing approaching omniscience and get you into the trouble 
that the constructivist-rationalists have? 
HAYEK: Not really omniscience. To pick a task for any 
brain, you can try until you gradually achieve it. But 
the condition is merely a double consistency. It's, on the 
one hand, compatibility of any one rule with the rest of 
the rules--not only logical compatibility but also aiming 
at the same ultimate results. I mean, the rules can conflict 
not only logically but also by aiming at different results 
which then conflict with the others. So you have to aim 
at consistency in the system in this double sense: non- 
contradiction between the rules themselves and noncontra- 
diction between the ends at which they aim. 
BOFIK: That raises two kinds of problems for me. You say 
that no single mind can really do that. When I think of, 
not a single mind but, say, a Supreme Court of nine people 
trying to do that, I begin to despair of the possibility 
of developing law with that precision and intellectuality. 
But in addition to that-- 
HAYEK: Well, the law makes mistakes in its development 



326 



v/hich can later be corrected. 

BORK: Well, yes, or compounded. [laughter] But why is 

consistency in rules required? Why may not a society 

take inconsistent moral positions on issues? 

HAYEK: Because necessarily the decisions are uncertain. 

Wherever there is a conflict, that means there are two 

possible conclusions to be resolved-- two different conclusions. 

You obey either the one or the other, and whichever you 

choose, you get a different result. And I think the aim 

is-- 

BORK: Oh, I see what you mean. You mean it's alright 

to have a rule that applies there and a rule that applies 

over here to different subject matters, and they may be 

philosophically and morally inconsistent, but that's all right 

as long as they don't conflict in the individual case 

where a decision has to be made. 

HAYEK: But they're bound soon to conflict in an individual 

case. 

BORK: Of course, it has been said--and I was raised to 

believe it, probably by legal positivists whom I didn't 

recognize in their guise (actually by legal realists)-- 

that law really is like a system of parables, and for 

every parable that looks in one direction, there is its 

exact opposite. And that's what gives judges freedom. 

"A stitch in time saves nine," but "Haste makes waste." 



327 



And law is inevitably like that because human life is like 

that. So clear general rules become in a sense impossible, 

and what results is a set of opposing conceptions between 

which the judge chooses in individual cases. 

HAYEK: On the basis of what? 

BORK: Well, that we don't know. Well, we do know, 

unfortunately. He may choose because many judges have 

become constructivist-rationalists and have decided to 

improve the society, which is quite bad; he may choose 

because he doesn't quite understand, which is quite common; 

or he may choose because he thinks the temper of the times-- 

the general era of moral expectations in which he lives-- 

says that in this case he chooses "A stitch in time saves 

nine" rather than "Haste makes waste." At the margin 

where these two compete, it's almost an intuitional 

judgment. 

HAYEK: Yes, what it amounts to is that the judge is not 

really guided by the inherent structure of the law, but 

by certain extralegal ideological concepts. That's just 

what I would like to exclude. [laughter] 

BORK: I'm afraid that's what's inevitable. That's what's 

troubling me about-- 

HAYEK: Is it really inevitable? You see, it's so much 

more marked in the United States than elsewhere that I 

wonder whether this is not really the result of a peculiar 

tradition. 

328 



BORK : Well, let me merely suggest that it may be so much 
more marked here than elsewhere precisely because we 
have a written constitution, which gives judges an enormous 
power that they do not possess elsewhere. 

HAYEK: But is this a necessary fact of a constitution, or 
is it the effect of a particular form of constitution? 
BORK: I would think it's a necessary effect of saying to 
judges, "Here is holy writ. You are the sole interpreters 
of it." That begins to develop attitudes of mind and 
gives great freedom, because that holy writ is neces- 
sarily written in very general terms. 

HAYEK: You know, this may lead away from what you are 
saying, but it reminds me that my whole theory leads me 
to deny that a constitution is a character of law. A 
constitution is an instrument of organization; it is not 
an instrument of rules. And perhaps the American 
Constitution tries too much to be law, and ought to be 
understood merely as principles of organization rather 
than principles of conduct. 

BORK: In effect, they should have stopped with the first 
three Articles defining the Congress, the presidency, and 
courts. Stopped and not continued. 



329 



TAPE: BORK II, SIDE TWO 
TAPE DATE: UNSPECIFIED 

HAYEK: You know, I probably mentioned in my book the funny 
story of German legal philosophy in the last century. 
When they had elaborated what I think is a very fine 
definition of what law--as they called it, "law in the 
material sense"--meant, suddenly somebody pointed out 
that they excluded the constitutional law from law. It 
so shocked them that they abandoned the whole thing. 
[ laughter] 

BOFIK: Well, yes, it would be possible to have a constitu- 
tion which is merely organizational, and which, as you say-- 
HAYEK : --which, in limiting the powers of government and 
legislation to coercion only according to formal rules, 
would delimit power, not lay down any rules of law. We 
would just say that people had no other power than that. 
BORK: Dr. Hayek, I think you just laid down a rule of law 
with that. [laughter] 

HAYEK: Well it depends on whether you call this a rule 
of law. It's a rule of organization determ.ining what powers 
particular people have. 



330 



TAPE: BORK III, SIDE ONE 
TAPE DATE: UNSPECIFIED 

BORK: Doctor Hayek, early on in your latest work you 
refer to EcJmund Burke approvingly, and I, too, like 
Edmund Burke and his approach to matters. But Burke is 
essentially a man of moral principles, but a very prag- 
matic man about moral principles, and one who does not 
try to lay down general rules for the society. I wonder 
if there is perhaps in your own position a tension--almost 
rising toward an inconsistency--in that approving of an 
evolutionary formation of law, approving of Burke, you 
nonetheless begin to construct pretty hard rules about what 
law must be about. 

HAYEK: There's no distinction between rules and principles 
in this respect. I'm afraid you use it in an American 
jurisprudence way, perhaps slightly differently from the 
way I mean. I'm suggesting tests which the law must 
satisfy, not contents of the law. And I think that is all 
we can do about any kind of system of thought. 

In fact, I'm rather pleased to see that there is an 
extraordinary similarity between my test of legal rules 
and [Karl] Popper's test of empirical rules. [There is] a 
certain similarity: neither of them says anything about 
material content, but they both define certain characteris- 
tics which any rule that fits into the system of a free 



331 



society must satisfy. But, of course, the temptation, 
particularly if you--as I do in my volume threo--venture 
into providing a constitutional setup, is to go beyond 
it. But even that is meant more to exemplify what kind 
of system would satisfy my criteria, and the particular 
example is much less important than the illustration of 
how the principles could be put into effect. 
BORK: I see. But I suppose a Burkian might say that 
the attributes of law, or the principles, ought to be 
allowed to evolve as well. 

HAYEK: They will. I'm not laying down the law; I'm 
offering something to choose from. Evolution is always 
the selection between alternatives. 

BORK: I suppose, as a lawyer who is somewhat dubious 
about the power of law to control large events and move- 
ments, I would offer this suggestion: perhaps your 
position places really too much emphasis on law, in 
the sense that you think law with proper attributes can 
control the direction of the society, or at least prevent 
the society from moving in the wrong direction; whereas I 
would suggest that much of our history suggests that law 
is really powerless to withstand strong social, philosoph- 
ical, political movements, and will reflect those movements 
rather than stop them. 
HAYEK: Yes, I'm afraid that is true. But I try to 



332 



operate on political movements. You know, my general 
attitude to all of this has always been that I'm not 
concerned with what is now politically impossible, but I try 
to operate on opinion to make things politically possible 
which are not now. 

BORK: I quite agree with that. I quite agree with that, 
but I was-- It leads me to the thought that perhaps the 
importance of your work is more in its demonstration that 
certain opinions and certain movements are bad than perhaps 
in its ability to state the necessary attributes of good 
law, because the real moving force will be in the opinions 
about society, rather than in opinions about what character- 
istics law must have to be just. 

HAYEK: Well, my definition of what characteristics law 
must have to be just is, of course, also an attempt to 
work on opinion to make this sort of thing more acceptable, 
but my main concern, of course, is to create an apparatus 
which prevents the abuse of governmental powers. 
BORK: Perhaps I come away from your work, which I found 
enormously stimulating, less convinced that the apparatus 
can save us than that your explanation of the way a society 
operates leads me to believe that legislators and judges 
ought to be persuaded to greater modesty about their 
powers, about their intellectual understanding, and that 
would be a sufficient lesson for them to carry away. 



333 



HAYEK: Yes, but there's another point. You know, I'm 
frankly trying to destroy the superstitious belief in our 
particular conception of democracy which we have now, 
which is certainly ultimately ideologically determined, 
but which has created without our knowing it an omnipotent 
government with really completely unlimited powers, and 
to recover the old tradition, which was only defeated 
by the modern superstitious democracy, that government 
needs limitations. For 200 years the building of constitu- 
tions aimed at limiting government. Now suddenly we have 
arrived at the idea where government, because it is 
supposedly democratic, needs no other limitations. What 
I want to make clear is that we must reimpose limitations 
on governmental power. 

BORK: That's entirely true. Whether that can be done 
through law and constitutions is the remaining question. 
What we see in America, I think, is a government becoming 
much more powerful; but part of government-- the courts-- 
applying rules which are supposed to limit government but 
in fact enhance the power of courts. 

HAYEK: Nobody could believe more strongly that a law is 
only effective if it's supported by a state of public 
opinion, which brings me back--I'm operating on public 
opinion. I don't even believe that before public opinion 
has changed, a change in the law will do any good. I think 



334 



the primary thing is to change opinion on these matters. 

When I say "public opinion," it's not quite correct. 
It's really, again, the opinion of the intellectuals of 
the upper strata which governs public opinion. But the 
primary thing is to restore a certain awareness of the 
need [to limit] governmental powers which, after all, has 
existed for a very long time and which we have lost. 
BORK: Well, in that I couldn't agree with you more, and 
I think that may be an appropriate place for me to stop. 
Thank you very much. 
HAYEK: That was very enjoyable. 
BORK: I enjoyed it very much. 



335 



TAPE: HAZLETT I, SIDE ONE 
TAPE DATE: NOVEMBER 12, 19 78 

HAZLETT: Among contemporary social philosophers, I think 
it's safe to say that you have pursued the idea of a 
spontaneous order the furthest. I'd like to ask: What 
is the litmus test for deciding whether some specific 
action of government is part of a spontaneous order, 
[as opposed to] an attempt to impose a solution by con- 
struction? 

HAYEK: I think [it depends on] whether the government 
merely enforces abstract rules of conduct or makes people 
serve particular concrete ends. The enforcement of abstract 
rules of conduct, in the sense in which a general law is 
equally applicable to all, only determines the formation 
of a type of structure, without deciding anything about 
the purpose at which men ought to aim. If men are told 
what end to serve, it's no longer a spontaneous order; 
it becomes an organization serving a particular purpose. 
HAZLETT: Now, you give the Roman constitution as an example, 
within a legal setting, of a spontaneous evolutionary 
process; yet at any particular time during the period 
when the Roman constitution was developed, it was 
certainly imposed upon the citizens. Isn't this type of 
situation a paradox? 
HAYEK: No, you see, I think it's not appropriate to 



336 



speak of a Roman constitution at all. The form of 
government was changing all through the process, and the 
constitution was a method of determining the organization 
of government. I was speaking about the evolution of 
private law, which under the Roman tradition, determines 
the extent of the coercive powers of government. And 
this law developed, in that sense, spontaneously. 

The judges tried to articulate, in words and judgments, 
moral conceptions which had gradually grown up, constantly 
improving them, and even modifying them, in order to make 
them internally more consistent. It was a process of 
growth like this, of what essentially is a system of rules 
of individual conduct, which as tradition made people 
accept as the limitations of governmental power over-- I 
can't say the individual; I must say the free individual, 
because you had a large population of slaves, which was 
not included. As far as the free citizen of Rome was 
affected for, say, the first 300 years since Christ — the 
classical period of the Roman Empire--you could say that 
the powers of government were effectively reduced to what 
is my ideal, because it was the spontaneously developed 
system of rules of conduct which was all that government 
could enforce, apart from taxation, which I will leave out 
for the present moment. 
HAZLETT: What mistakes, in terms of the available state 



337 



of knowledge, did the authors of the United States 
Constitution make? 

HAYEK: Oh, in entrusting both the function of government 
and the function of legislation, in the true sense, to 
a single body--in fact, two houses of Congress--which 
both can lay down rules of conduct and instruct government 
what to do. Once you have this situation, you no longer 
have government under the law, because those who govern 
can make for themselves whatever law they like. 
HAZLETT: Many theorists have commented that your writings- 
political philosophy — are much more in the tradition of 
James Madison than they are in the tradition of Thomas 
Jefferson. 

HAYEK: Perfectly correct. 

HAZLETT: What differences do you perceive along these 
lines? 

HAYEK: Oh, Madison was essentially concerned in limiting 
government; Jefferson was much more concerned in making 
government do good. 

HAZLETT: In the Constitution of Liberty , you chart the 
divergence of liberalism in the nineteenth century into a 
libertarian wing and a socialist wing. Of course, in the 
twentieth century the socialist wing has been over- 
whelmingly dominant, but is it possible at this late date, 
however, that liberalism is again splitting into two 



338 



schools, and that now we are seeing the reemergence of 
a classical liberal tradition? 

HAYEK: I hope so. Among the young people, certainly, in 
the last five or ten years, this has been springing up, 
not only in the United States but also on the European 
continent. And in the last few months, even in France, 
a country which I thought was least hopeful, a group of 
young people who are libertarians with a well-founded 
intellectual argument [have been] appreciating the points 
we have just been discussing — that the power of government 
should be limited, on the one hand, to enforcing rules 
of individual conduct, and, on the other hand, without 
coercive powers, rendering certain services. 

I like to say that when I was very young, only very 
old people still believed in that kind of liberalism; 
when I was in my middle age, nobody except myself and 
perhaps [Ludwig von] Mises believed in it; and now I've 
lived long enough to find the thing is being rediscovered 
by the young. That makes me fairly optimistic, not for 
the near future, because it would take twenty years or so 
before these young people will have any power; but my 
other phrase is that if we survive the next twenty years-- 
if the politicians don't destroy civilization — I think there 
is good hope for mankind. 
HAZLETT: Along those lines about how possible it is to 



339 



turn back the flood of government regulation, in California 
we've seen a massive groundswell of opinion on this thing 
called Proposition 13; yet now it seems that this tax- 
cutting measure will leave as a chief legacy, besides 
cutting property taxes, the imposition of rent controls in 
many parts of the state of California. It seems that the 
dynamics of the welfare state are very much involved in 
this. Do you think that it really is possible to turn 
back the tide? 

HAYEK: I hope so. I'm by no means certain, but I devote 
all my efforts — My concern is to operate on public opinion, 
in the hope that public opinion will sufficiently change 
to make such a development possible. 

But if I may say so--I hope you are not offended--! 
don't believe the ultimate decision is with America. You 
are too unstable in your opinion, and if opinion has been 
turning in the right direction the last few years, it 
may be turning in the wrong direction again in the next 
few years. While it's sometimes a great advantage to be 
able to change opinion very rapidly, it also creates a 
certain amount of instability. I think it must become a 
much more general movement, and for that reason, I am 
rather more hopeful about what is happening among the young 
people in Europe nowadays than what's happening here, 
perhaps also because in Europe the intellectual tendencies 



340 



are more likely to capture public opinion lastingly. 

While though at present you have an equally promising 

group of young intellectuals in this country, it does 

not mean that in ten years' time they will have gained 

public opinion. 

HAZLETT: Do you have any examples in mind of countries 

that, once having flirted with socialism or the welfare 

state, have been able to reins titute the rule of law? 

HAYEK: Oh, very clearly Germany after World War II, 

although in that case it was really the achievement of 

a single man almost. 

HAZLETT: Ludwig Erhard. 

HAYEK: Ludwig Erhard, yes. 

HAZLETT: Let's take a look at the spontaneous order 

idea in terms of a specific issue. In this country 

the affirmative action program has to do with racial quotas, 

HAYEK: Explain to me what it means. I've never really 

understood what "affirmative action" is supposed to mean. 

HAZLETT: Well, it's founded on the argument that if the 

government treats everyone equally now, in terms of race, 

that it will implicitly be sanctioning past discrimination. 

Hence, it is necessary for the state to take so-called 

affirmative action, and for private employers to take 

affirmative action, in hiring minorities and groups that 

the government classifies as having been discriminated 



341 



against, and favoring them over groups that have been 
classified as not having been discriminated against. 
HAYEK: Achieve nondiscrimination by discrimination, 
[laughter] 

HAZLETT: Well, that's exactly the question that has been 
posed by this. But the question is, from your political 
philosophy, doesn't the spontaneous order idea, which is 
to let things work themselves out , inherently favor or 
inherently bias, let's say, the outcome in favor of past 
discriminations or past inequities? 

HAYEK: It accepts historical accidents. But after all, 
civilization rests on the fact that people are very 
different, both in their location and their gifts and 
their interests, and unless we allow these differences to 
exist irrespective of whether we in the particular case 
think they are desirable or not, I think we shall stop the 
whole process of evolution. 

After all, the present civilization rests on the fact 
that some people have settled in places which are not very 
conducive to their welfare, some people have been moving 
to parts of the world where conditions are not very good, 
and that we are using this great variety of opportunities. 
And variety of opportunities means always difference of 
opportunities. I think if you try to make the opportunities 
of all people equal you eliminate the main stimulus to 



342 



evolution. Let me say what I wanted to say a moment 
ago. What you explained to me about the meaning of 
affirmative action is the same dilemma which egalitarianism 
achieves: in order to make people equal you have to 
treat them differently. If you treat people, so far as 
government is concerned, alike, the result is necessarily 
inequality; you can have either freedom and inequality, or 
unfreedom and equality. 

HAZLETT: I'd like to go to a different line of thought. 
Many philosophers right now, and economists, are concerned 
with the bias of democracy toward big government. The 
idea is that subsidies which go to powerful special 
interests, which are very specific, and the taxes and higher 
prices that are caused by the costs of government programs, 
are diffused over a wide audience of consumers and tax- 
payers, so that it is in the interest of the lobbies of 
special interests to go ahead and spend money to get these 
favors from the state; whereas it's not in the interest 
of consumers and taxpayers to organize on one specific 
issue. 

Now, this is somewhat different than your reasoning 
about the growth of government in The Road to Serfdom , and 
the intellectuals and socialism, in that you basically 
attribute the rise of big government to a misunderstanding 
or a mistake — that socialism really does not deliver what 



343 



it promises. And here these people are saying that 
actually the tendency towards big government is a rational 
process in the sense that people act in their own self- 
interest. How do you reconcile these two views? 
HAYEK: Well, they are two different things , but which 
operate in the same direction. So far as people act 
under socialist influence, they work in-- What I did not 
fully understand at that time is that the democratic 
process, quite apart from socialist ideology, has the same 
tendency . 

I should strictly say the "unlimited democracy," 
because unlimited democracy is not guided by the agreement 
of a majority but is guided by the necessity of buying 
the support of a sufficient number of small groups to form 
a majority. It's a very different thing. The original 
conception of democracy was that people actually agreed 
on governmental action, and it was assumed that on each issue 
there was a majority view and a minority view. The fact is, 
of course, that the thing doesn't work that way. You have 
to build up a majority, which then acts. And you build up 
a majority and count on the present system of unlimited 
powers of the government only to grant special privileges 
to a sufficient number of small groups. Now, that is 
not a thing I had clearly seen at the time of writing The 
Road to Serfdom, but it is the main theme of the present 



344 



book I'm now publishing, of which the final volumes are 
in the press and coming out early next year. 

I think that so long as we have a so-called democratic 
or representative legislature, which at the same time 
can legislate and govern, we no longer have a limited 
government but rather a government which, because it is 
unlimited, is forced to grant an ever-increasing number of 
special privileges to particular groups. What originally 
democracy aimed at is only possible in a limited democracy, 
where government is under the law and where therefore two 
different bodies must be concerned in laying down the law, 
on the one hand, and operating under that law, on the other. 
HAZLETT: Institutionally, how does separating these two 
different legislative functions make it more difficult for 
special interests to influence legislation? Don't 
lobbyists then just have to buy two lunches? 
HAYEK: Well, no, certain things become wholly impossible. 
If you can use coercion only in the execution of general 
rules, certain things are completely impossible. Government 
just would not have the power to grant special privileges, 
and that will become clear if the thing has to be spelled out. 
My truly legislative assembly could only lay down general 
rules equally applicable to all, and the other could only 
coerce in enforcing these rules; the second wouldn't have 
the power to do more, nor would have the first. 



345 



Now, to preserve this, you would have, in a third 
instance, a truly constitutional court, which would decide 
what one could do, what the other could do, and what 
nobody could do. But I think this combination could, in 
the long run, fully achieve what I aim at, provided that 
they are elected on quite different principles. I must 
explain that later. 



346 



TAPE: HAZLETT I, SIDE TWO 
TAPE DATE: NOVEMBER 12, 19 7 8 

HAYEK: On conditions, it is really possible, as I 
believe the nineteenth century rightly believed it to 
be possible, to draw sharp logical distinctions between 
what are general rules of law and what are specific 
commands. I am not claiming that we have solved all 
the problems involved there; in fact, that would be the 
task of my constitutional court gradually to elaborate 
this. 

But the nineteenth century had actually evolved a 
definition of law in what they called the "material sense" 
of the word, in contrast to the purely "formal sense," 
as a general rule applicable to an unknown number of future 
instances, referring only to individual conduct, with one 
or two more qualifications like this. That and our present 
knowledge seems to be a pretty adequate definition, although 
I'm not sure that in practical cases it would always suffice. 
But that's a typical task of a court; if the principle is 
laid down, the court can work it out. 
HAZLETT: As an advocate of a really revolutionary 
reform, in terms of our governmental structure, don't 
you run the risk of being accused of being a constructionist 
or a rationalist? 
HAYEK: No. First, I'm quite sure this has to be gradually 



347 



achieved, once the ideal is recognized, and institutions 
have of course to be designed, even if they develop. I 
only object against the whole thing made to singly 
designed institutions. Our spontaneous order of society 

is made up of a great many organizations, in a technical 
sense, and within an organization design is needed. And 
that some degree of design is even needed in the framework 
within which this spontaneous order operates, I would 
always concede; I have no doubt about this. 

Of course, here it gets into a certain conflict with 
some of the modern anarchists, but I believe there is one 
convincing argument why you can't leave even the law to 
voluntary evolution: the great society depends on your 
being able to expect that any stranger you encounter in a 
given territory will obey the same system of rules of law. 
Otherwise you would be confined to people whom you know. 
And the conception of some of our modern anarchists that 
you can have one club which agrees on one law, another club 
agrees on another law, would make it just impossible to 
deal with any stranger. So in a sense you have, at least 
for a given territory, a uniform law, and that can only 
exist if it's enforced by government. So the only qualifica- 
tion you must have is that the law must consist of abstract 
rules equally applicable to all, for an unknown number of 
future instances and so on. 



348 



HAZLETT: If the spontaneous order has a beneficial 
effect on legal institutions, would the United States, 
for instance, be better off just to abolish the federal 
government and to have fifty state governments try 
different institutions? 

HAYEK: What I would favor, in a case like this, is to 
have a common law in my sense of general rules, but 
devolve practically all governmental functions to smaller 
units. I dream of all governmental functions performed by 
local units competing with each other for citizens. 
HAZLETT: You mentioned before that libertarian political 
movements are springing up in this country and in Europe. 
What major differences do you perceive between your 
philosophy and the idea of a spontaneous order and the 
libertarians, who in many cases are nearer anarchism in 
their philosophy? 

HAYEK: Well, of course, I can't generalize about this, 
because within this large number you have everything from 
pure anarchists to people who are much too interventionist 
for me; so I would be somewhere in the middle of that group. 
HAZLETT: You have written almost alone on the subject, in 
The Constitution of Liberty , of the separation of the 
concept of value and the concept of merit--that good 
people don't deserve more money but that, in the economic 
system, people get money for a lot of reasons that we 



349 



can't even describe. And this is a subtle point. I 
don't know if libertarians, even people that agree with 
your political conclusions, have caught on to this. Do 
you find that this point is being missed? 
HAYEK: I think it has been missed, and when I put it 
in The Constitution of Liberty , I even followed it up 
to its ultimate conclusion. I think it's all a matter 
of the basic difference between the attitudes we developed 
in the closed, face-to-face society and the modern, 
abstract society. The idea of merit is an idea of our 
appreciation of known other persons in the small group-- 
what is commonly called the face-to-face society; while in 
the greater open society, in apparent terms, we must be 
guided purely by abstract considerations, and merit cannot 
come in. 

Incidentally, this is a point which, curiously enough, 
has been seen by Immanuel Kant. He puts it perfectly 
clear ly--yes , I think he uses the equivalent of merit-- 
that merit cannot be a matter of general rule. 
HAZLETT: Of course, in society as a whole the social 
justice concept is still quite prevalent, and there are 
even many very popular philosophers who advocate that any 
sort of good fortune or luck that is economically beneficial 
to individuals be taxed away. 
HAYEK: Well, it's absolutely essential that individuals 



350 



are making use of luck, and if it's no longer worthwhile 
to pursue pure luck, very desirable things will be left 
out. 

I think the old concept of social justice is a mis- 
conception in the sense that a conception which applies 
to individual conduct only is applied to a spontaneous process 
which nobody directs, and in fact the concept is wholly 
empty, because no two people can agree what social justice 
would be. 

HAZLETT: What do you make of Alexander Solzhenitsyn ' s 
criticism of Western society? 

HAYEK: I'm a little puzzled by it. I'm a great admirer 
of Solzhenitsyn, but my interpretation [of his criticism] 
was [that it must have been the result of] just shock by 
too great a difference between what he had known and was 
familiar with and what he experiences in the United States — 
the politics, the many peculiar features of the United 
States that are essential to a free society. I was not 
greatly impressed by this; in fact, I was a little disil- 
lusioned in my admiration for Solzhenitsyn when he came 
out with that statement, although in a way it is a good 
illustration of one of my main points. Namely, that civili- 
zation disagrees with a great many of our innate instincts, 
and most of the people haven't reconciled themselves with 
that fact. Civilization has certain costs and involves 



351 



certain constant disappointments of what we call natural 
needs. Solzhenitsyn is still a man who relies a great 
deal on natural instincts, and to discover that there are 
so many natural instincts which the advanced civilization 
does not satisfy oppresses him. So I can understand it, 
but I don't think his argument is compatible with the 
argument for a free society. 

HAZLETT: He has objected, of course, to the hedonism and 
lack of responsibility that is found in a free society. 
Is it simply a product of him having very little experience 
in a free society that this bothers him so much? 
HAYEK: It bothers him more, but of course he shares it 
with so many of our own philosophers that it can't be 
surprising, really. It's shocking [coming from] a man who 
has been protesting so loudly against the extreme form 
of tyranny, but when you reflect upon it, you must almost 
expect it in his situation. That he should come to the 
resignation at v;hich somebody has arrived who has studied 
for a long time the extent to which to achieve civilization 
we had to renounce many of our natural instincts, you can- 
not really expect from a man whose whole concern has been 
that his natural instincts have been oppressed by that 
system. That even civilization requires restraints on 
natural instincts he has not yet discovered. 
HAZLETT: Looking at the Russian dissidents, who certainly 



352 



face a heroic battle in our time vis-a-vis the concept 
of liberty, are you disappointed by the lack of libertarianism 
in some of their thoughts? 

HAYEK: Emotionally, perhaps; intellectually, no. I 
understand too well that this is almost an inevitable 
situation. We admire these people for what they dislike, but 
that they have not a clear idea of what would be desirable 
is so little surprising that we ought really not to be 
upset by it. One is naturally upset if a man with whom one 
feels he's been agreeing all the time suddenly turns, like 
Solzhenitsyn , against Western civilization. It comes as a 
shock, but in fact psychologically nothing is more natural 
than that. 

HAZLETT: Of course, it might be disappointing that somebody 
as brilliant as a Solzhenitsyn has as difficult a time 
understanding the principles of a liberal society as he 
does. So that might cause some consternation. 
HAYEK: It naturally does. But, you know, when you turn 
to modern Western literature, there's very little chance 
of finding a satisfactory explanation of the workings of 
Western society. And I must say, I was a little apprehen- 
sive when I heard that Solzhenitsyn was moving to America 
and probably getting in the hands of American intellectuals-- 
not scholars but the makers of opinion, who are fundamen- 
tally not the most sensible people you can wish for. 
[laughter] 

353 



HAZLETT: Going back to the intellectual reversion in 
Western society, let's take a look at Europe. Where 
do you feel the brightest currents are coming from? 
HAYEK: Well, I only know really about three coiintries 
now: England, Germany, and France. I think it began 
really in Germany, with a very small group, at first at 
the university where I finally taught and am now living-- 
Freiburg. They influenced Erhard, and for a time in the 
fifties and sixties, a small group of German intellectuals 
were leading. 

There is now a similar development in England, which 
in a way is perhaps intellectually more founded, largely 
turning round a single institution, the Institute of 
Economic Affairs [lEA] . They have pursued the very sensible 
policy of not so much talking about general principles 
but illustrating them by investigating one particular 
issue after another in detail. Extremely well done. 

[There is] a French movement of very recent date; I 
only learned about it last summer. There are now half a 
dozen young French economists who think like the so-called 
Austrians in this country, and like most of these English 
people or the Freiburg [people] or the social-market- 
economy school in Germany. I found this so encouraging 
because I always felt that the French situation was the 
most hopeless. And that there should be, from the 



354 



intellectual end, a reaction I think is more promising 
than almost anything else. I can never generalize about 
Italy; I don't know what's happening there. There are 
some extreme individualists and some extreme so-called 
communists, but both seem, when you analyze it, to be really 
anarchists . 

HAZLETT: Now, going back to France, the so-called new 
philosophers have received an enormous amount of publicity 
in France and internationally. What do you perceive their 
value as? 

HAYEK: They are very muddled, really. My hope is for not 
a nouveau philosophe but a nouveau economiste , which is 
a distinct group and which in fact is criticizing the 
nouveaux philosophes . 
HAZLETT: On what grounds? 

HAYEK: On having still retained much too much of the 
socialist preconceptions. The new philosophers are merely 
disappointed with Russia and the Russian doctrine; they 
still imagine that you can preserve the idealist element 
behind it and only avoid the excesses of the communist 
parties. On the fundamentals, they do not think very 
differently. They are essentially people who have been 
disillusioned with one idea, but have not yet a clear 
conception of an alternative. But apparently these new 
young economists really believe in a libertarian system. 



355 



HAZLETT: Why have the liberals lost in Germany? Why 
are they no longer influential, as they once were? 
HAYEK: Well, with the usual rules of the parliamentary 
system in which they function, they realize that with the 
present type of democracy, government is inevitably driven 
into intervention, even against its professed principles. 
It's always the sort of cynicism of people who still 
believe it would be nice if we could stick to our liberal 
principles, but it proves in practice to be impossible. 
So they resign themselves reluctantly, and perhaps some 
more cynically. They believe other people are getting 
out things from the process of corruption; so they decide 
to participate in it. It's quite cynical. 
HAZLETT: Well, so what does a politician do? You just 
wrote a foreword for a book by a former secretary of the 
treasury, William Simon. A Time for Truth , which became 
a best-seller in this country, is very widely read now. 
What would a Bill Simon, a secretary of the treasury, do 
under those political constraints? 

HAYEK: Well, I'm afraid so long as we retain the present 
form of unlimited democracy, all we can hope for is to slow 
down the process, but we can't reverse it. I am pessimistic 
enough to be convinced that unless we change our constitu- 
tional structure, we are going to be driven on against 
people's wishes deeper and deeper into government control. 



356 



It is in the nature of our political system, which has 
now become quite as bad in the United States as anywhere 
else. What we have got now is in name democracy but is not 
a system in which it is the opinion of the majority which 
governs, but instead where the government is forced to 
serve a sufficient number of special interests to get a 
majority. 

HAZLETT: A political tactic that has just developed very 
recently in this country on the part of libertarians, and 
Milton Friedman has certainly been a leader here, is this 
idea of the referendum--Proposition 13, obviously, was 
the case in point--to allow people as a whole to vote 
against, in general, big government. That seems to be the 
tactic now. Do you think that this really has-- 
HAYEK: It's not the ultimate solution, but it may not only 
delay or slow down the process; it may do even more. It 
may affect opinions in the right direction. People may 
come to understand what the trouble is. So I'm all in 
favor of it, particularly since I have been watching the 
thing operating in Switzerland, where again and again 
referendums stopped action which the politicians believed 
they had to take in order to satisfy the majority. Then 
it turned out when they asked the majority that the 
majority turned them down. It happened so frequently in 
Switzerland that I became convinced that this is a very 



357 



useful brake on the bad features of our present-time 
democracy. I don't think it's a longtime solution, but 
it might give a sufficiently long pause for the public to 
appreciate what the dangers are. 

HAZLETT: You mention the Institute for Economic Affairs 
as having tremendous influence in Britain. Is this 
really the solution, to stimulate intellectual discourse 
from a free-market standpoint? 

HAYEK: Oh, I'm sure you can't operate any other way. You 
have to persuade the intellectuals, because they are the 
makers of public opinion. It's not the people who really 
understand things; it's the people who pick up what is 
fashionable opinion. You have to make the fashionable 
opinion among the intellectuals before journalism and the 
schools and so on will spread it among the people at large. 
I oughtn't to praise them because the suggestion of the 
Institute came from me originally; so I let them on the 
job, but I'm greatly pleased that they are so successful. 
HAZLETT: So if a businessman says to you, "What can I do?" 
from the state down, your suggestion is to send a check 
to the lEA or a reasonable facsimile. 

HAYEK: Oh, yes. Of course, do the same thing here. In 
fact, the man who has founded, on my advice, the London 
Institute is now creating similar institutes in this 
country, in Los Angeles and San Francisco and New York, and 



358 



he has already done one in Vancouver, which is nearly as 

good as the London one. 

HAZLETT: The Frazer Institute, I think you're referring to. 

HAYEK: Yes. 

HAZLETT: Earlier this year the London Times captioned 

your photograph with the title "F. A. Hayek, the greatest 

economic philosopher of the age." I daresay that twenty 

years ago, it would have had a different title. 

HAYEK: Oh, very definitely. 

HAZLETT: In your mind, what is the reason for the respect 

that your ideas are currently garnering, when so recently 

they met with open hostility? 

HAYEK: Well, I think the main point is the decline of the 

reputation of [John Maynard] Keynes. Thirty years ago there 

were two — I may sound curious myself saying this, but I 

believe about 1946, when Keynes died, Keynes and I were 

the best-known economists. Then two things happened: 

Keynes died and was raised to sainthood; and I discredited 

myself by publishing The Road to Serfdom . [laughter] And 

that changed the situation completely. For the following 

thirty years, it was only Keynes who counted, and I was 

gradually almost forgotten. Now the failure of the Keynesian 

system--inf lation , the return of unemployment, all that-- 

first confirmed my predictions in strictly the economic 

sphere. At the same time, my studies of politics provided, 



359 



I believe, answers for many problems which had begun to 
bother people very seriously. There is a good reason why 
I am being rediscovered, so to speak. 

HAZLETT: Well, if Keynes were alive today, how different 
do you think the political climate would be? 
HAYEK: I think very likely it would be very different. 
Keynes was very capable of rapidly changing his opinion. 
In fact, he was already, when I talked to him the last time, 
very critical of his pupils who in the postwar period were 
still agitating for inflation; and he assured me that if 
his ideas would ever become dangerous, he would turn public 
opinion around in a moment. Six weeks later he was dead 
and couldn't do it. But I wouldn't dare to say what his 
development would have been; he had been so much an 
intuitive genius, not really a strict logical reasoner, 
that both the atmosphere of the time, the needs of the 
moment, and his personal feelings might have swayed his 
opinions very much. I regard him as a real genius, but 
not as a great economist, you know. He's not a very 
consistent or logical thinker, and he might have developed 
in almost any direction. The only thing I am sure is 
that he would have disapproved of what his pupils made of 
his doctrines. 

HAZLETT: Joseph Schumpeter's Capitalism, Socialism and 
Democracy was written just two years before your The Road 



360 



to Serfdom . What influence did Schumpeter ' s book have on 
you? 

HAYEK: None, because my book was practically ready before 
his came out. You see, I rewrote and rewrote for 
stylistic reasons, but the whole argument was on paper 
before Schumpeter 's book came out. 

HAZLETT: Are you optimistic about the survival of freedom? 
HAYEK: Not very. I think I said so before in this conver- 
sation that if the politicians do not destroy civilization 
in the next twenty years, there's good hope; but I am by 
no means certain that they shan't succeed in destroying 
it before then, 

HAZLETT: So the long run is positive but the short run 
looks bleak. 
HAYEK: Yes. 
HAZLETT: Thank you very much. 



361 



TAPE: ALCHIAN I, SIDE ONE 
TAPE DATE: NOVEMBER 11, 19 7 8 

ALCHIAN: Let's continue with the discussion of some of 

your early students--Mrs . Lutz, Vera Lutz. Where did 

you first have her as a student? Was this in Vienna? 

HAYEK: At the London School of Economics. 

ALCHIAN: Was she married then to-- 

HAYEK: No. Oh, no. 

ALCHIAN: Did you arrange that? [laughter] 

HAYEK: Almost. I sent her to study [at the University 

of] Freiburg, and [Friedrich] Lutz was still in Freiburg. 

She came back bringing Lutz to London, and after a while 

they married. 

ALCHIAN: This was Swiss Freiburg? 

HAYEK: No, the Freiburg where I am now; Freiburg in 

Breisgau. 

ALCHIAN: Yes, I see. 

HAYEK: Lutz himself was a pupil of [Walter] Eucken in 

Freiburg. At that time, which was already after the Nazis, 

Freiburg was the only German university which still had 

a fairly independent and active intellectaul life. She 

was doing the thesis on the development of central banking, 

and particularly the free-banking discussion in the middle 

of the nineteenth century. So I sent her to Freiburg to 

become familiar with the German literature, and there she 



362 



met Lutz and induced him to come to London, in turn. And 

ultimately they married. 

ALCHIAN: My recollection is that they were an attractive 

couple when I got to know them, which was maybe ten years 

ago. But I suspect that when she was young, she might 

have been a pretty good-looking woman. 

HAYEK: She was a very good-looking woman, and extremely 

intelligent. But she wasn't really very female; she 

had too much of a male intelligence. [laughter] 

ALCHIAN: Well, our chauvinism comes out. Let's go to 

a male student. What about [Tibor] Scitovsky. Did he just 

show up in one of your classes? 

HAYEK: Oh, no. In that case, his father brought him to 

me from Budapest. 

ALCHIAN: Were you in Vienna? 

HAYEK: No, I was already in London, He brought him to 

London and wanted somebody who was familiar with Central 

European conditions. So he came to me and brought a young 

boy saying, "Will you look after him a little while he is 

a student; this is his first time in a foreign country." 

And then we got on very well together. I believe he did 

his thesis under [Lionel] Robbins. 

When you ask about my pupils during this English 
period, in most instances I won't know whether he was really 
formally Robbins 's or mine. We had a common seminar, and 



363 



it was pure chance which of us undertook to supervise 
a thesis. So in most instances I wouldn't know whether 
he was formally Robbins's or my pupil. It was really a 
joint seminar and a joint arrangement. 

ALCHIAN: How did you run the joint seminar? Did you assign 
topics to students, or did you and Robbins pick a topic 
and discuss it? 

HAYEK: There was always a main topic for the whole 
year, which-- I think in justice I can say Robbins did all 
the organizing work, including choosing the general topic. 
But once it came to discussion, I more or less dominated 
discussion. [laughter]. 

ALCHIAN: Well, did the two of you dominate the discus- 
sion, or were the students doing most of the discussing? 
HAYEK: Oh, very much. You see, we had gradually developed 
a sort of-- It was a large seminar; I suppose thirty or 
forty people attended. But there was always a front row 
of people who had been members of the seminar for two 
or three years already, and they dominated the discussion. 
This included not only students: there were people like 
John Hicks, who was a regular member of the seminar; 
Freddy Bennan was a regular member of the seminar; after a 
while, of course, [Nicholas] Kaldor had emerged-- 
ALCHIAN: He took over. Yes, I see. 
HAYEK: So after a while, I would say almost that whole 



364 



front row were assistants and junior lecturers at the 
London School of Economics [LSE] . 

ALCHIAN: Do you recall any of the seminar topics or main 
themes? 

HAYEK: I think it began and dominated almost all the — 
ALCHIAN: This was 1930-31? 

HAYEK: Oh, '31 or '32. I started teaching in London in 
the autumn of '31; I suppose it was in that year that 
we started on the theory of production. It turned on a 
paper model of the production function which somebody 
had made. And [Roy] Allen and Hicks were evolving their 
own theories. 

ALCHIAN: This is R.G.D. Allen? 

HAYEK: R.G.D. Allen and John Hicks were developing their 
own theories. I don't know whether I ought to mention it- 
I doubt whether John Hicks remembers it--but it's almost 
a joke of history that I had to draw Hicks 's attention, 
who came from [Alfred] Marshall, to indifference curves. 
[ laughter] 

ALCHIAN: That was a well-planted seed, all right. How 
did you happen to know about indifference curves? 
HAYEK: Oh, I had of course spent all my early years on 
utility analysis and all these forms, and we had in 
Vienna-- [Paul] Rosenstein [-Rodan] wrote that great 
article on marginal utility, and with him we waded 



365 



through the whole literature on the subject of marginal 
utility, including-- I was very attracted, in a way, by 
the indifference-curve analysis. I thought it was really 
the most satisfactory form, particularly when it beccime 
clear that it unified the theory of production and the 
theory of utility with a similar apparatus. So by the 
time I came to London, although I had never been thinking 
of it in algebraic terms, the geometry of it was very 
familiar to me. 

ALCHIAN: That's an aspect of background on Hicks I 
wasn't aware of; I wondered how come he suddenly got into 
that. Well, I wanted to go back to that seminar. Since 
I do some teaching, I like to know what others do. 
[tape recorder turned off] 

HAYEK: International trade was one year the main subject. 
ALCHIAN: And again it was you and Robbins who-- 
HAYEK: Well, from '31 till '40, till Robbins went into 
government service at the beginning of the war, every year 
we had this common seminar, which was the center of the 
graduate school in economics; and people who were sitting 
in were not only those younger junior teachers at LSE , and 
assistants who gradually became teachers, but people like 
Arnold Plant, who regularly sat in with us without taking 
an active part. But he was extremely helpful with his 
great practical knowledge. 



366 



Occasionally, but only the first few years, even 
T[heodore] Gregory, who was the senior of the department, 
would still come in, but he was already somewhat remote. 
I think it is true to say that although formally, through 
the early part of the period, Robbins, I, and Gregory, 
the senior, were the three professors of economics, with 
Plant as professor of commerce joining in, Gregory was 
gradually getting interested outside the school of economics; 
so his influence was comparatively small. I don't know; I 
may be forgetting-- Barrett Wale also came. 
ALCHIAN: Oh, Barrett Wale, yes. Those are all familiar. 
I started my studies of economics in 1933 and '34, and those 
names were well known then. Where did these meetings 
occur? 

HAYEK: In the seminar room, which was then behind the 
refectory of the London School of Economics, where we had 
a sort of small hand library on the side for things we 
most frequently used. We usually held it in the afternoon. 
ALCHIAN: If I were to go there now, could you tell me how 
to get there? 

HAYEK: No, you wouldn't find the same room. In the course 
of reconstruction, it has disappeared. 

ALCHIAN: Now, were the topics for each week assigned, or 
did somebody have a paper? 
HAYEK: Oh, there were papers, but the discussion of any 



367 



paper might go on for several weeks. 

ALCHIAN: Independently of the paper itself, sometimes. 
Although you said that you maybe dominated the discussion 
after Robbins started, were there some of the people there 
who were very forceful personalities? 
HAYEK: Abba Lerner was very important. 

ALCHIAN: By virtue of intellectual power, rather than by — 
HAYEK: Yes. Among those people who started as students 
and continued as assistants and senior lecturers, [Nicholas] 
Kaldor, Abba Lerner, and for a time even Hicks took the 
position almost of a junior lecturer, and then rose gradually 
to a dominating personality. There were two or three 
others whom I have lost sight of. There was the unfor- 
tunate Victor Edelburg. I don't know whether you know him. 
ALCHIAN: I know of him. Did he die early? 

HAYEK: Well, I think he is finally in a lunatics institu- 
tion. 

ALCHIAN: Oh, is that right? 

HAYEK: He completely went to pieces. And a man called 
Iraki, whom I have completely-- [He was] not Japanese; 
Iraki is also a Japanese name. [There was also] Ardler, 
who I believe is now with the international bank somewhere. 
There was, as I say, a group of six or eight very senior 
students who were ultimately graduate assistants, who 
throughout the years — Of course, there was a constant 



368 



flow of American visitors. I think every year we had one 
or two junior American lecturers, and even junior profes- 
sors were passing through and spending a year with us, 
including-- Who was the former president of (University 
of California] Berkeley, who has recently — 
ALCHIAN: Kerr? Clark Kerr? 
HAYEK: Not Kerr, no. 
ALCHIAN: Hitch? Charlie Hitch? 
HAYEK: Yes, it's Hitch. 

ALCHIAN: Yes, he was an Oxford scholar. 
HAYEK: He was one of them. Arthur [D, ] Lewis, who 
played a similar role in the seminar later. 
ALCHIAN: Did Abba Lerner still wear — Was he then not 
wearing neckties and wearing open-toed shoes? 
HAYEK: Sandals, yes. Well, he was a very recent convert 
to civilization. [laughter] 

ALCHIAN: He told me that when he was a very young child, 
they were so poor his mother used to put water in the milk, 
and he always thereafter liked skim milk. 

HAYEK: Very likely, very likely. He was then a Trotskyist 
who had, before he came to the university, I believe, failed 
in business and become interested in economics because he 
had failed in business. But from the beginning, he was 
extremely good. 
ALCHIAN: He failed in what? 



369 



HAYEK: In business. He had been a practical businessman 
of some kind--some sort of small shop or something. I 
never found out quite what it was. 
ALCHIAN: Smuggling books, maybe. [laughter] 
HAYEK: Possibly. In the end — Well, that, I think, ought 
to be under lock and key for the next twenty-five years. 
ALCHIAN: Although he would probably tell it himself if he 
were here, I don't want to press on a matter which would 
be under lock and key. 

HAYEK: No, I don't think it would benefit to make it public 
now. I was going to say simply this: in the end, we had 
the problem that both Kaldor and Lerner were clearly such 
exotic figures that we couldn't keep them both in the 
department. And one of very few points on which Robbins 
and I ever disagreed was which of the two to retain, 
[laughter] 

ALCHIAN: I'd heard that there was a dispute. My impression 
or recollection — you needn't correct it or say it's right 
or wrong--was that you favored Lerner and he favored 
Kaldor. 

HAYEK: Yes, that's perfectly correct. 
ALCHIAN: They all make mistakes. [laughter] 
HAYEK: I don't think it was a mistake. 
ALCHIAN: No, I think that you were right. 
HAYEK: It would have done a great deal of good to England 



370 



if Lerner had stayed and Kaldor had gone to America, 
[laughter] 

ALCHIAN: Oh, you've wished that all your life. [laughter] 
Lerner' s become a very good friend of mine. In fact, his 
book Economics of Control was the first book I read after 
the war, about 1945, when I was in Texas in the air force. 
I had a chance to go to a library, and I pulled off the 
shelf Lerner's Economics of Control . I just saw this 
book--how it got there I don't know. It was in Fort Worth, 
Texas. And I also pulled off the shelf later an article 
by the economist at Princeton [University] who was writing 
an attack on Marshallism--! forget who that was. It's just 
as well that I've forgotten his name, because it was a 
terrible article. I read it and was so distressed that 
I said, "What's this? What's happened in economics in the 
year that I've been away?" Then I read Lerner's book, and 
it was a very influential book. 

HAYEK: I still think it's a very good book. He's mistaken 
some points, but-- 
ALCHIAN: Yes, it's very good. 

HAYEK: Oh, another person who was for a time a member of 
the seminar--it ' s obvious why I remember him after Lerner — 
was Oskar Lange. 

ALCHIAN: Yes, he was one of my teachers, but-- 
HAYEK: Oh, was he? 



371 



ALCHIAN: Yes, he was here at Stanford [University] and came 
once a week to give a course in mathematical economics. 
We learned standard mathematics, but no economics as such. 
We just learned how to formulate the models, and then we 
would walk from the campus to what was then the railway 
station, and he'd tell me some things about why socialism 
was a good thing. Somehow it never quite took. Fortunately, 
I should say. In those seminars did you go to a black- 
board very much? Are you a blackboard user? 
HAYEK: Not I personally. Occasionally for a diagram, but 
the blackboard was used much by people like Hicks and Allen, 
[laughter] 

ALCHIAN: Somehow I've never seen you at a blackboard. I 
wondered what you'd be like; whether you'd use it a lot. I 
cannot work without a blackboard, just to make marks, if 
nothing else. Were you always white-haired? Of course 
not. [laughter] 
HAYEK: Oh, no. 

ALCHIAN: Were you very dark-haired, or light, or blond? 
HAYEK: It was a darkish brown, and I think I retained it 
into my late fifties. 

ALCHIAN: And how did you have it? Was it always parted 
on the side? 

HAYEK: Oh, parted. It was just a little fuller than it 
is now. [laughter] 



372 



ALCHIAN: Never a severe problem for you? You never wore 

it in wild manners to annoy your parents? 

HAYEK: Oh, I did once. You see, I now use as a very 

effective opening with American students the phrase: 

"Fifty years ago, when I first grew a beard in protest 

against American civilization--" [laughter] 

ALCHIAN: Well, there's still some left; a little bit left, 

I see. So there's a mild protest. But when did you first 

grow a beard? 

HAYEK: On my visit here in '23 and '24. 

ALCHIAN: Oh, you came in '23 and '24, then. Let's see, 

you were then about twenty. 

HAYEK: I was the first Central European student who came 

over on his own without a Rockefeller [fellowship], on 

the basis of a quasi invitation from Jeremiah W. Jenks , 

if that name still means anything. He was the author of 

the standard book on trusts, and [he was] president of the 

Alexander Hamilton Institute at New York University [NYU]. 

He came to Vienna in '22, where I met him and explained 

to him that I was anxious to go to America to improve 

my knowledge of economics. He assured me by saying, "I 

am going to write a book about Central Europe; so if you 

come over next fall, I can employ you for a time as a 

research assistant." 

Now, that was immediately after the end of the inflation 



373 



in Austria; so to collect enough money even to pay my 
fare was quite a problem. I had saved even the money 
on the cable announcing that I would arrive. As a result, 
when I arrived in New York, I found that Professor Jenks 
was on holiday and left instructions not to be communicated 
with. So I had arrived in New York on March 23 with 
exactly twenty-five dollars in my pocket. Now, twenty- 
five dollars was a lot of money at that time. So I started 
first presenting all my letters of introduction, which 
[Joseph] Schumpeter had written for me, and which earned 
me a lunch and nothing else. [laughter] 

ALCHIAN: Well, that's more than most letters today will 
earn you. Was this in New York, or was this in Boston? 
HAYEK: New York. With the help of another five dollars 
which somebody had slipped in the box of cigarettes they 
gave me after the luncheon, I lasted for over two weeks on 
that money. Finally I was down to--after having reduced 
my ambitions more and more--accepting a post as a dishwasher 
in a Sixth Avenue restaurant. I was to start next morning 
at eleven o'clock. But then a great relief came to me-- 
but that I never started washing dishes is a source of 
everlasting regret now. [laughter] But on that morning, 
a telephone call came. Professor Jenks had returned and 
was willing to employ me. 
ALCHIAN: Well, I was just about to say we have one thing 



374 



in common. I also worked as a dishwasher when I first 

came to Stanford. But you do not have that honor on your 

record. 

HAYEK: Oh, there's one episode in connection with this. 

I was then working for Jenks for six months in the New 

York Public Library on the same desk with [Frederick] 

Macaulay . 

ALCHIAN: Oh, the bond man of the National Bureau? 

HAYEK: Yes, and Haggott Beckhart and Willard Thorp. 

Thorp got me to do the parts on Germany and Austria in 

his business annals. You will find in the preface that 

in fact almost my first publication is a contribution to 

the business annals. 

ALCHIAN: Was Jenks at NYU at that time? 

HAYEK: Jenks was at NYU, yes. But I spent much of my time 

in New York gate-crashing at Columbia [University], without 

having any formal contact with Columbia. 

ALCHIAN: My first year I did the same thing. 

HAYEK: I read the last paper in the last seminar of John 

Bates Clark. 

ALCHIAN: Oh, you had the honor or the privilege of going 

to one of his seminars? 

HAYEK: He invited me personally, and that was one effect 

of the Schumpeter letters of introduction. 

ALCHIAN: This reminds me that when I was in New York in 



375 



1939, I gate-crashed again on the lectures of (Harold] 
Hotelling and Abraham Wald. And I've been very, very 
pleased to think back on having seen them. Let me 
switch a little bit to some of your works. In '30-31 
you gave the lectures which became Prices and Production . 
HAYEK: In January of '31, yes. 

ALCHIAN: Why was that the topic you talked about? 
HAYEK: Oh, I was extremely lucky. In fact, I owe my 
career very largely to a fortunate accident. Of course, by 
that time I was invited to speak on a subject I had more 
or less already published — that book on monetary theory and 
the trade cycle. Robbins, who did not know me personally, 
made this the occasion of asking me to give the lectures; 
but the form which the lectures took was due to a fortunate 
accident. 

I had accepted writing the volume on money for the 
great German Grundriss der Sozialokonomik, which still 
hasn't got that volume [laughter], because one or two 
people died, and I went off to England before completing 
it. But what I had already done for what was meant to be 
a great textbook on money was a part of the history of 
money and monetary theory. So I arrived in London to 
lecture on monetary theory better informed about the 
English monetary discussions of the nineteenth century than 
anyone in my audience, and the great impression I made was 



376 



really knowing all about the discussions at the beginning 
of the nineteenth century, which even Gregory didn't 
know as intimately as I did at that time. Of course, 
nobody knew why I had this special knowledge, but it became 
extremely useful. The first lecture of Prices and 
Production really gives a sketch of the development of 
these ideas. 

The ideas themselves were also due almost to an 
accident. When I came back from the United States in 
'24, I wrote an article on American monetary policy since 
the Federal Reserve Act, which had a passage suggesting 
that an expansionist credit policy leads to an over- 
development of capital goods industries and ultimately to 
a crisis. I assumed that I was just restating what 
[Ludwig von] Mises was teaching, but [Gottfried] Haberler, 
who was as much a pupil of Mises, said, "Well, it needs 
explanation; that is not sufficient." So I first put in 
that article a very long footnote--about [number] 25-- 
sketching an outline of what ultimately became my explana- 
tion of industrial fluctuations. Then I started writing 
that, first in the monetary theory and the trade cycle, and 
then — 

At this moment, when I had in my mind a clear conception 
of the theory, but hadn't worked it out in detail, T 
uniquely had the faith in my being able to give a simple 



377 



explanation without being aware of all the difficulties 
of the problem. And in this fortunate position, I was 
asked to give these lectures. So I gave what I still 
admit is a particularly impressive exposition of an idea, 
which if I had become aware of all the complications, I 
couldn't have given. A year later it probably would have 
been a highly abstruse argument which nobody in the 
audience would have understood. But at this particular 
fortunate juncture of my development, I was able to explain 
it in a way which impressed people, in spite of the fact that 
I still had considerable difficulties with English. 

I had had this year in the United States before, but 
I had never lectured in English. In fact, I am told, or 
have been told since, that so long as I stuck to my 
manuscript I was partly unintelligible; but the moment 
I found I could explain freely, without following the 
manuscript, I became intelligible. 

ALCHIAN: I wanted to ask one line of questioning, but 
I'm going to divert for a moment to another line, and 
then come back to this, if I don't forget. The other 
question was going to be: Do you write your manuscripts 
by longhand, or do you talk them out and have somebody — 
HAYEK: I write and write and write. I begin with cards, 
with notes, and I always carry this sort of thing with me. 
[shows cards] 



378 



T^LCHIAN: Those little five-by-eight cards. I see. 

HAYEK: And all my ideas I first put down in this form. 

Then I still write it out in longhand from these cards 

the first time, and that is the longest process. Then 

I still go on myself typing it out in what I suppose is a 

clean manuscript. 

ALCHIAN: You type it yourself? 

HAYEK: Yes. And then starts the problem of correcting, 

giving it to a typist, correcting it again; so I suppose 

everything of substance which I have written has been in 

written-out form three or four times before I send it to 

the — 

ALCHIAN: I want every graduate student to hear that, 

because I tell them, "You've got to write, and rewrite, and 

rewrite," and they resist strongly the idea that they 

should rewrite. If they can just get it down in black 

and white, they think that's it. 

HAYEK: At the moment I'm very unhappy, because this 

epilogue to the Hobhouse Lecture, which I have only 

finished in May and is going finally into print now, with 

the result that as I was correcting the page proofs, I 

finally had to insert at the end of the book additions to 

the text. [laughter] I always get the best formulations 

of my ideas after they have already been on paper. 

ALCHIAN: Yes. For some people, [Fritz] Machlup for one. 



379 



when I read his work I can see the man talking, T can hear 
him, just by the words that come out. And somewhat 
similarly with you, when I read your work, I can see you 
standing there talking, because the sentences of your 
written material are very much like your oral sentences. 
They are well phrased, well put together. 

The first time I ever heard you--I think maybe it 
was at Princeton in maybe '57; I'm not sure where--you 
got up and gave a spontaneous lecture, and all I could 
say was, "I don't know what he was saying, but how can 
he phrase that so beautifully, so elegantly?" You've 
always done that; that's a remarkable talent that some 
have. How did you develop it, or was it just natural? 
Whatever natural may mean. 

HAYEK: It was comparatively late, and I learned it, I 
think, in the process of acquiring English as a lecturing 
language. I don't think I could have done it in German 
before. I certainly learned a great deal in acquiring 
a new language for writing, although I have retained one 
effect of my German background: my sentences are still 
much too long. [laughter] 

ALCHIAN: Yes, they are long. But they're put together 
well. Karl Brunner, who is a very good friend of mine, has 
the same thing. He says, "If you can say it long, you 
can say it longer in German." 



380 



Let me go back to Prices and Production , because 
it has a particularly warm place in my heart. The first 
book in my first year in upper-division work in economics-- 
in 19 34, the year I came to Stanford--we took a technical 
book that was not a textbook. There were two books: one 
was Adolf Berle's The Modern Corporation and Private 
Property ; and your book. Prices and Production . I tried 
to go to the library and get that book that I had used, 
but I couldn't find it. Those two books I've read, and 
I've reread them, and they've both been influential. One 
I think is grossly full of error-- The Modern Corporation 
and Private Property ; yours may be grossly full of error, 
but I haven't yet caught them all. 

But, nevertheless, it was a book that set a tone 
of thinking for me. I reread it again, knowing I was going 
to get a chance to talk to you. There's one point in 
there I wanted to make to you. In the first lecture, you 
quote [David] Ricardo, I believe, on [Thomas] Malthus's 
fourth saving doctrine. I don't recall having read it 
earlier--it was the first time I read it--but fifteen or 
twenty years ago I did some work on inflation and the 
fourth saving doctrine. I was impressed when I read that 
particular quote that you had there, because it contains, 
I think, the correct and the incorrect implications of 
that doctrine. Then I began to look at the rest of your 



381 



work to see whether you rested upon the correct or 
the incorrect doctrine, and fortunately you rested on the 
correct doctrine, I think. [laughter] But I want to 
explore it again. 

I won't press you on it, but let me just say that 
there are two doctrines in there: one is that when you 
increase the stock of money, as so eloquently said by 
Ricardo, the larger stock of money chases the same amount 
of goods, and someone has to go with less. And the quote 
does correctly say, "Those who have money, lose the value 
of their money." Then he goes on to make the next 
statement, which, as it turns out--I will assert here--is 
incorrect. And that is that business firms make large, 
unusual profits because of this. There is the seed of-- 
Instead of simply saying that the wealth transfer goes from 
money holders to those who first get the money to spend, 
he goes on to say there's a transfer of wealth from 
wage earners to-- Although he doesn't say wage earners, 
he says there is a gain to the businessman, that is, 
those who are selling, with a price lag, and that's in 
error. It's just the first thing that counts. 

So, in reading your first chapter through, I was 

paying particular attention to see which of these two you 

rested your argument on. Fortunately, whether you know it 

or not, it was not on the second one. It was on the first 

one. 

382 



HAYEK: Well, you know, I don't suppose I saw it as 
clearly as I see the thing now, but I think it all began 
with my becoming aware that any assumption that prices 
are determined by what happened before is wrong, and that 
the function of prices is to tell people what they ought 
to do in the future. 

ALCHIAN: That's the modern rational expectation. You 
can see it in there. As I read it through last week-- 
HAYEK: Forgive me for interrupting, but it's of course 
the other way around. It's by discovering the function 
of prices as guiding what people ought to do that I 
finally began to put it in that form. But so many things-- 
The whole trade-cycle theory rested on the idea that prices 
determined the direction of production. 

You had, at the same time, the whole discussion of 
anticipations. I found out that the whole Mises argument 
about calculation really ultimately rested on the same idea, 
and that drove me to the '37 article, which then became the 
systematic basis of my further development. 
ALCHIAN: I was struck that that first essay would be an 
interesting essay to look at on the history and development 
of ideas--how the error, the erroneous part of it, was 
picked up by [John Maynard] Keynes, when he talked about 
excess-profits taxes and the lag of wages behind prices, 
and then picked up by E. J. Hamilton, who had this big 



383 



explanation of the development of society as a result of 
inflation which hurt the wage earners and transferred 
wealth to the merchants. That's all fallacious, and the 
evidence disproves it as well. But in the Ricardo state- 
ment they are both there, and I looked to see — As I say, 
to repeat myself, you're stuck with the right part. 
Consciously or unconsciously, I don't care; it doesn't 
make any difference. 

What's also interesting is that I just read a paper-- 
some thoughts by Axel Leijonhufvud on the Wicksellian 
tradition. I read it, I guess, in the last couple of 
days, at the same time [I reread yours]. And the similarity 
between that chapter, your first chapter, and [Knut] 
Wicksell's exposition is quite strong and clear. Again, 
in reading that paper of Axel's I can again see how the 
error that--I call it error--came in Keynes ' s work, in 
the Treatise and more in the General Theory explicitly, 
where he again — I shouldn't say again--where he also 
abandoned the so-called rational-expectations idea of 
prices depending on foresight. He slipped into making the 
error that somehow we expect prices to go down some more 
tomorrow; so we wait for them until they do go down--an 
error the denial of which is the basis for the very recent 
work on rational expectations. 

But I do remember my earlier work here at Stanford with 



384 



Holbrook Working, who kept telling me that all prices 
reflect future anticipations. So when we got to Keynes's 
book on the general theory, Ed Shaw, who was then a professor 
here at Stanford, gave a course which I and two others took, 
and he just tore that general theory apart for the 
errors it made in economics. One of them was this one 
about expectations. 

That's a long digression, but I'm going to go back 
and say that in that first chapter, there are these two 
points, and I was just curious to know whether or not you 
looked back yourself at what you'd written to see if you 
were consciously aware of having gone down the right path 
rather than the other path, which led to the kind of 
error that was in [Keynes's] General Theory ? 
HAYEK: You know, I am almost inclined to give the famous 
answer which [Arthur] Pigou once gave to an inquiring 
American professor: "I am not in the habit of reading my 
own books." [laughter] 

ALCHIAN: That's a very good trait, yes. But I put this 
in here not so much to tell you but, since this is an 
oral history--and I hope that in maybe ten or twenty years 
in the future, parts of it will be made available to other 
graduate students-- that they will give some heed to what 
I've said in looking back and trying to evaluate the role 
of your work in the development of-- 



385 



HAYEK: One point which deserves mention in this con- 
nection is that Keynes knew appallingly little about 
nineteenth-century economics, or about nineteenth-century 
history. He hated the nineteenth century for esthetic 
reasons. [laughter] While he was a great expert on 
Elizabethan history, he just disliked the nineteenth 
century so much that beyond Marshall and just a little 
John Stuart Mill and Ricardo, he knew nothing of the 
literature and very little about the history of the 
period. 

ALCHIAN: I can't resist the remark that I've read, I think, 
all of Keynes's work, and the one that I regard as superbly 
good was the tract on monetary reform, where he does not 
make the error he made later on. 

HAYEK: That reminds me of another thing: it sounds 
almost ludicrous today that it shouldn't have been 
generally known, but while I was working in America in 
•23 and '24, my first essay on monetary theory was never 
published because Keynes's book came out--the one you 
mentioned, the tract on monetary reform. But I had taken 
great pains to demonstrate what I thought was the new 
argument that he couldn't at the same time have a stable 
price level and stable exchange rates, which was a 
completely new idea. But Keynes put it that way, and so 
there was no point in publishing my article. [laughter] 



386 



ALCHIAN: Well, that's the way it goes. In Prices and 

Production , on page 29 of the second edition, I ran across 

a sentence I didn't remember you having made at that time. 

You made the prediction about the future, which turned out 

to be wrong, unfortunately. You said something to the 

effect--! don't have the exact quotation--that in the 

future the theorists will abandon the concept of a general 

price level and concentrate on relative price effects 

in the change of the quantity of money. 

HAYEK: It was a wish. [laughter] 

ALCHIAN: It was a wish, and I think it's beginning to 

now come about. The recent work on monetary economics 

is emphasizing now more the relative price effect, but up 

to the very recent time it's all been on general price 

level. 

HAYEK: The future was just a little more recent than 

before. [laughter] 

ALCHIAN: Well, that may be correct. That leads me to a 

question I wanted to ask you, which is again a side issue 

and something I'd like to contemplate, but I'm unable to 

get anyplace. And that is predicting what it's going to 

be like a hundred years from now. Have you ever tried that, 

and are you totally frustrated by it? 

HAYEK: No, I am much encouraged by the developments among 

the younger economists now. 



387 



ALCHIAN: By "frustration" I meant not dislike but just 
the inability to-- I feel helpless in trying to predict. 
HAYEK: Well, after all, I now see that these things are 
having effects forty years later than I hoped they would, 



388 



TAPE: ALCHIAN I, SIDE TWO 
TAPE DATE: NOVEMBER 11, 19 7 8 

HAYEK: The general phrase which I am using so often that 
you probably have heard of it is that I am pessimistic 
in the short run, optimistic in the long run. If the 
politicians don't destroy the world in the next thirty 
years, I think there's good hope for it. But the chances 
are not very good. [laughter] 

ALCHIAN: That's a shame. But do you have any predictions 
or beliefs, not about economics but about the state of 
society? 

HAYEK: I think the great danger is that the so-called 
fight against inflation will lead to more and more 
controls and ultimately the complete destruction of the 
market. 

ALCHIAN: Oh, I'm convinced of that, rightly or wrongly, 
hopefully or unhopefully. 

HAYEK: I hope that on Monday there will be a letter from 
me in the Wall Street Journal , which just suggests that 
I hope they would put in every issue in headline letters 
the simple truth: "Inflation is made by government and its 
agents. Nobody else can do anything about it." 
ALCHIAN: --for the benefit of government and its agents, 
[laughter] But I just gave a talk at the Southern Economic 
Consolidation meetings in Washington on Thursday, and I 



389 



criticized [President] Carter, not in name, for complaining 
about human rights abroad while destroying them at home 
by denying us property rights here. I said the way to 
do it is to have an inflation, put on controls, and that's 
the politician's best friend. I'm convinced it's true. 

Did you know William Hutt? 
HAYEK: Oh, very well indeed. 

ALCHIAN: Well, you haven't mentioned him yet, and I 
kind of thought you did. I was interested in where you 
met him and — 

HAYEK: I met him through Lionel Robbins , and it may not 
have much to do with the story, but it's an amusing story. 
Bill Hutt had been a fighter pilot in World War I. And 
on that particular day he had bought his first car, and he 
had never driven a car before. He took Lionel and me up to 
Lionel's home in that car driving fighter-pilot style, 
[laughter] 

ALCHIAN: Without parachutes. 

HAYEK: It was a somewhat exciting experience. No, I 
came to know him very well indeed, and sympathized with 
him very much. I am rather proud of having invented the 
title of his book Economics and the Public for him, and 
I think fundamentally we are very much in agreement. 
ALCHIAN: His book The Theory of Vital Resources , I think, 
is a superb book. 



390 



HAYEK: Excellent. 

ALCHIAN: Much ignored. In fact, many ideas that I thought 
I had developed, and others had developed, I have discovered, 
in looking back, that there they are! I've had a copy of 
the book made — it's been out of print--but now I think it's 
back in print again. 

HAYEK: I think he's much underestimated. I don't know. 
You see, he sometimes impresses people as being naive by 
having an extraordinary gift of putting things in a very 
simple manner. 

ALCHIAN: That's right. The first time I met him, I 
couldn't believe it was the same Bill Hutt who wrote 
this book. But as I got to know him better, I appreciated-- 
HAYEK: Well, I spent some time with him in South Africa 
once, when I came to know him and his wife. 
ALCHIAN: Were you touring the South African wine country 
when you were there? He's a great wine buff. 
HAYEK: Yes, he took me to a wine-sampling party. 
[ laughter] 

ALCHIAN: Just as I've had the pleasure of having you 
in my home, he was in my home once, too, and we served 
him a particularly good wine, it turned out. I had no idea 
he knew wines, and he just liked the wine and compli- 
mented us . 
HAYEK: Well, I think he was president of a wine society. 



391 



ALCHIAN: So we were very pleased about that. I want 
to, for the record, I guess, tell a little episode about 
your visit to our house. You know, in our house we've 
had four Nobel Prize winners, now that I think about it. 
We've had you, [Paul] Samuelson, [Milton] Friedman, Hicks, 

[Wassily] Leontief. When you walked into our house-- You 
impressed my wife enormously, because the first time she 
met you, you walked in, and we happened to have on the little 
table a Greek kylix. You walked up to it, the first 
thing--you didn't say hello to anybody--you walked up to 
it, and you said, "Oh, 400 B.C.," or something like that. 

[laughter] She nearly fell over. So you were a big hit 

on that. Where did you learn about wines? 

HAYEK: Well, as I say, beyond Burgundies, I have never 

been very expert. Burgundies I jus t liked very early 

and took every opportunity to drink them. 

ALCHIAN: Did your parents have wine every night at dinner? 

HAYEK: No. So far as they drank anything, it was beer 

rather than wine. I am not particularly fond of the 

Viennese wines, although I discovered since-- 

ALCHIAN: Green wines? 

HAYEK: Up on the Danube [River], slightly north of Vienna, 

they produce some very good ones. But the famous Vienna 

Grinzinger and so on, and Gumpoldskirchner , I didn't 

particularly care for. In general, till fairly recently, 



392 



my preference was red wines. It's only now that in this 
fortunate position at Freiburg, where all around they 
produce first-class, very small vintages of white wines, 
that I'm getting very interested in wines. 
ALCHIAN: That means, then, you like to drink your wine 
before dinner. Usually the red wine is something you'll 
drink with dinner. Is that right? 

HAYEK: Both. I drink it normally with dinner, except 
occasionally after dinner in the evening I take a bottle 
of wine to my desk and go on drinking. [laughter] 
ALCHIAN: Do you have any favorite? Is there a white wine 
or a sweet white wine? 

HAYEK: Yes, but they are very specialized. Mark graefler 
of the south--south of Freiburg--now. 

ALCHIAN: If I wanted to go to see where you grew up, 
could you have drawn a map and said, "Go to this little 
place, and you'll see where I was a child, where I grew up"? 
HAYEK: [That would be] very difficult, because, you see, 
my father was a district physician and was moved around 
Vienna. So we were living, in my childhood, in four 
different districts of Vienna, and there is no particular 
one which I feel very much at home in. And of course, in 
general, Vienna has so much changed. Present-day Vienna 
I no longer feel at home in. 
ALCHIAN: How about London? 



393 



HAYEK: In London, of course, we had our little village 

in Golders Green, a Hampstead Garden suburb, where all 

the economists lived: the Robbinses and I were practically 

neighbors, Arnold Plant, Frank Paish, George Schwartz; we 

all lived in that region. 

ALCHIAN: Do they have little porcelain plaques on the 

wall saying-- [laughter] We should do that. We'd have 

them all around. 

HAYEK: Well, if you ever are in London, the one who still 

lives in the same house is Lionel Robbins. 

ALCHIAN: He does? 

HAYEK: Yes, he still lives in the same house. 

ALCHIAN: Do you know the address, or has it escaped you? 

HAYEK: 10 Midway Close. 

ALCHIAN: I'll have to get that recorded. I want to ask 

you one question which is impertinent. But it's serious, 

and I hope that maybe later you will be willing maybe to 

answer it. Forgive me for asking it, but I detect a 

strong respect for moral standards and their importance in 

society. Now, all of us, I'm conjecturing, in our lifetime 

have faced problems where we have said, "Here is a moral 

standard, and I want to break it." I have done that, and 

I've thought back at times, "How did I justify that?" I 

said, "Well, I justified it." You must have had some; I'm 

assuming you've had some. Would you be willing, in that 



394 



private tape of yours, to maybe indicate what some of them 
were? and what went through your mind at the time, if that 
happened, and what your response would be now to someone 
in the same situation? 

I was impressed by this when you were talking to 
Bob Bork about the sense in which our moral standards and 
restraints are part of our civilization. I liked that 
very much — why, I don't know — but I thought one way-- I've 
been thinking myself of things I've done that I would not 
want to discuss even on a tape maybe, but still it would 
be interesting if in, say, fifty years we could-- 
HAYEK: Well, if it's on that unmarked tape, I'm quite 
willing to talk about it. There's only one thing-- 
ALCHIAN: I'm not trying to inquire. I just want to raise 
the issue. 

HAYEK: There's no reason for [hesitation] when it's 
after your lifetime. I know I've done wrong in enforcing 
divorce. Well, it's a curious story, I married on the 
rebound when the girl I had loved, a cousin, married 
somebody else. She is now my present wife. But for 
twenty-five years I was married to the girl whom I 
married on the rebound, who was a very good wife to me, but 
I wasn't happy in that marriage. She refused to give me 
a divorce, and finally I enforced it. I'm sure that was 
wrong, and yet I have done it. It was just an inner need 

to do it. 

395 



ALCHIAN: You'd do it again, probably. 

HAYEK: I would probably do it again. 

ALCHIAN: You have children by your first marriage? 

HAYEK: By my first marriage only. 

ALCHIAN: I see. Is your first wife still living? 

HAYEK: No, she is dead now. 

ALCHIAN: I see. Well, let me ask, where are your children 

now? 

HAYEK: In England. 

ALCHIAN: Are they a boy and a girl, or two boys? 

HAYEK: A boy and a girl. The boy is married; he's a 

doctor, or rather has become now a bacteriologist. He 

is staff bacteriologist to a big hospital in Torquay, and so 

he lives in Devon, in ideal conditions. He has three 

children--an English girl is his wife. My daughter is 

unmarried, an entomologist, a specialist in beetles in 

the British Museum of Natural History in London. 

ALCHIAN: Oh, she puts all the pins through all the 

beetles? [laughter] 

HAYEK: No, you see, beetles are a very — There are more 

beetles as a species than all the other animals together, 

with the result that at any one time there is in the world 

only one expert on any one group of beetles. So she is the 

world expert on one particular group of beetles. 

ALCHIAN: They will take over the world someday, I suppose. 

HAYEK: Maybe. 

396 



TAPE: ALCHIAN II, SIDE ONE 
TAPE DATE: NOVEMBER 11, 1978 

ALCHIAN: Professor Hayek, can I use the name "Fritz"? 
Where did that develop? 

HAYEK: My mother called me like that, and I dislike it 
particularly. [laughter] Of course, my friends in 
London picked it up, but it so happens that there are few 
Christian names which I like less than my own. [laughter] 
ALCHIAN: Does [Fritz] Machlup feel the same way? 
HAYEK: No, no, he is quite happy about it. To me it 
reminds me too much of the Fritz, the Prussian emperor. 
ALCHIAN: Speaking of the Prussian emperor, you had served 
in the Austrian army, I believe, and you had done 
mountain climbing as a-- 

HAYEK: Oh, yes, mountain climbing and skiing were my 
only hobbies. 

ALCHIAN: What climb is the one which you regard as the 
best climb, or the one you are most pleased to have made? 
HAYEK: Oh, some of the really difficult rock climbing 
was done in the Dolomites--the famous Tre Cime [de 
Lavaredo] , the small one, which is quite a difficult climb. 
But it wasn't so much the technique of rock climbing which 
fascinated me, partly because for that purpose you had 
to get a guide. I was a guideless mountaineer in finding 
my way on difficult, but not exceedingly difficult. 



397 



terrain — combinations of ice and rock; that really 

interested me. 

ALCHIAN: They were unplanned climbs. 

HAYEK: Well, in a sense. Finding your way in difficult 

terrain where you knew there was one possible way to get 

through the face of a mountain, which needn't be technically 

difficult. But you knew you would get stuck unless you 

found the one possible way through. 

ALCHIAN: You weren't a mountain climber of the type of 

Alfred Marshall, who used to just take strolls in the 

Swiss mountains. There's a famous picture of Alfred 

Marshall revising his textbook. 

HAYEK: No, I was much more serious. I made the English 

Outbound Club, for which you have to provide a fairly long 

list of successful climbs. 

ALCHIAN: How old were you during most of this? Were these 

in the twenties? 

HAYEK: In the twenties. It was while I was climbing 

with my brothers. The moment I had to climb with my 

wife, I had to have a third person, usually a guide, because 

I couldn't have her belay me on a glacier and so on. It 

was all before '26. 

ALCHIAN: What climbing techniques did you use? Now they 

have little pitons. 

HAYEK: I detest all these artificial kinds. 



398 



ALCHIAN: Oh, very good. 

HAYEK: I would use a piton for belaying, but I would 

not do anything which I could not have done without the 

artificial means. 

ALCHIAN: I see. So climbing El Capitan would not be of 

any interest. 

HAYEK: No, no. 

ALCHIAN: You haven't mentioned Marshall at all among the 

people with whom you had any contact or interest. Is there 

some reason? 

HAYEK: Of course, I never saw him. I might have seen 

him, but my first visit to England was in '26, just after he 

had died. I read Marshall. In fact, when I tried to read 

Marshall first, my English was not yet good enough; I 

had to read him in a German translation. I didn't find 

him to appeal very much to me; I don't know. I never became 

as familiar with Marshall as all my English colleagues were. 

That really meant that I was moving, to some extent, in a 

different intellectual atmosphere than nearly all my 

colleagues. Not so much at the London School of Economics, 

of course. They were brought up on [Edwin] Cannan rather 

than Marshall, and there was a certain critical attitude 

towards Marshall, even among [Lionel] Robbins, [Arnold] 

Plant, and so on. [John] Hicks was a complete Marshallian 

when he came, and it was really in discussion-- I probably 



399 



had more theoretical discussions with John Hicks in the 
early years of the thirties than with any of the other 
people. As I mentioned before, you know, it was I who 
drew his attention to indifference curves, and it was from 
him that I began to appreciate Marshall, up to a point. 
But it was never very sympathetic to me; it's not a thing 
which I felt at home in. 

ALCHIAN: Perhaps it might have been more appropriate 
for the Nobel Prize to have gone to you and Hicks 
together, and [Kenneth] Arrow and [Gunnar] Myrdal together. 
HAYEK: Oh, surely. [laughter] 

ALCHIAN: Where did you first read or hear of Adam Smith? 
Or do you recall? 

HAYEK: I certainly read Adam Smith first in German; not 
very early in my studies. I knew Adam Smith mainly through 
the history of economics--lectures and so on--and it 
probably was very late that I read right through The Wealth 
of Nations . At first the part on public finance didn't 
interest me at all; I only came to appreciate the semi- 
political aspects of it very much later. Being brought 
up on the idea that the theory of value was central to 
economics, I didn't really fully appreciate him. I think 
he's the one author for whom my appreciation has steadily 
grown, and is still growing. 
ALCHIAN: I think that's true for most economists. Where 



400 



did you get your first formal education in economics? 
HAYEK: Well, in [Friedrich von] Wieser's lectures. 
ALCHIAN: What were they like? Did he just come in 
and give a lecture? 

HAYEK: No, they were most impressive. He knew by heart 
his own book, so much so that we could follow his lecture 
in the book. He spoke in absolutely perfect German, in 
very long sentences, so that we amused ourselves making 
note of all the subsidiary sentences. We would wonder 
whether he could get all the auxiliary words in there right. 
And he did! [laughter] He did it equally perfectly when 
he inserted [something] in his original text. Unless you 
followed it in writing, you would not know how he could 
remember this very big book — The Theory of Social Economy 
--in that perfect form. Occasionally he would pause with 
a certain trick. He had a golden hunting watch in a leather 
thing, and if he was in doubt about words he would pull 
that out, spring it open, look at it, close it, put it back, 
and continue his lecture. [laughter] 

ALCHIAN: I guess we puff on a pipe as an excuse to do 
something like that. Didn't you mention that [Karl] Menger's 
book was more influential? 

HAYEK: Yes. This was before I went to Wieser's lectures. 
It's very curious; the man who drew my attention to 
Menger's book was Othmar Spann. I don't know if the name 



401 



means anything to you. He was semicrazy and changed 
violently from different political persuasions--f rom 
socialism to extreme nationalism to Catholicism, always 
a step ahead of current fashions. By the time the Nazis 
came into power, he was suspect as a Catholic, although 
five years before he was a leading extreme nationalist. 
But he drew my attention to Menger's book at a very early 
stage, and Menger's Grundsetze , probably more than any 
other book, influenced me. 

ALCHIAN: Would [George] Von Tungeln have been available 
to you? 

HAYEK: Von Tungeln, no. I came to know him very late. 
ALCHIAN: How large was Wieser's class? Was it, say, 

twenty? 

HAYEK: No, it was a formal class to which he lectured. 
They were a special kind of lectures, and particularly 
if the lecturer was His Excellency, the ex-minister, nobody 
would dare to ask a question or interrupt. We were just 
sitting, 200 or 300 of us, at the foot of this elevated 
platform, where this very impressive figure, a very handsome 
man in his late sixties, with a beautiful beard, spoke these 
absolutely perfect orations. And he had very little personal 
contact with his students, except when, as I did, one came 
up afterwards with an intelligent question. He at once 
took a personal interest in that individual. 



402 



So he would have personal contacts with 5 or 6 of the 
300 that were sitting in his lectures. In addition, 
you attended his seminar one year--that, again, was a 
very formal affair--for which somebody produced a long 
paper which was then commented upon by Wieser. But 
personally I ultimately became very friendly with him; he 
asked me many times to his house. How far that was because 
he was a contemporary and friend of my grandfather's, I 
don't know. 

This reminds me of the fact that in Vienna--! would 
have to restrict it to non-Jewish intelligentsia--there was 
a very small circle where everybody knew everybody else. 
It so happened the other day that somebody was asking 
me about the famous people from Vienna from the period, 
beginning with [Erwin] Schrodinger--of course, I knew him 
as a young man--and [Karl von] Frisch, the man [who 
studied] the bees, he was an old friend of my father, and 
so it went on all through the list, till it came to Freud. 
No, that was a different circle. I had never met him, 
and that is because it was a Jewish circle as distinct from 
the non- Jewish one. Although I moved a good deal later on 
the margin of the two groups — there was a sort of inter- 
mediate group--the purely Jewish circle in which Freud 
moved was a different world from ours. 
ALCHIAN: Were there any Jewish economists in the Jewish 

group there? 

403 



HAYEK: [Ludwig von] Mises, with whom, of course, I was 
very close indeed. Well, that's not correct. Mises was not 
of the Jewish group. He was Jewish, but he was rather 
regarded as a monstrosity--a Jew who was neither a 
capitalist nor a socialist. But an antisocialist Jew who 
was not a capitalist was absolutely a monstrosity in 
Vienna. [laughter] 

ALCHIAN: Or anyplace. As a university student, or even 
shortly thereafter, what were the major topics of interest 
in economics? Were they tactical questions, or were they 
questions of socialism, or were they questions on inflation, 
or was there any dominant set of themes? 
HAYEK: You know, to me you have to distinguish very 
sharply between two periods: before I went to America and 
after, when I still retained my connection with the 
university. The early period was very short. I did my 
degree in three years--the law degree with veterans' 
privileges--as I've mentioned before. So, in that period, 
before I went to America, I did not take part a great deal 
in discussion. Except, perhaps, for the two years I was 
already with Mises, between '21 and '23. Then the main 
interests were, on the one hand, pure value theory — and I 
was working on imputation--and Mises 's ideas on socialism. 

As I was starting for America, I had got bored with 
these two subjects; I still wrote up the article on 



404 



imputation I had been working on, but I turned in America 
to monetary theory. I was largely interested by the great 
discussions which were then carried on about Federal 
Reserve policy, on the idea they had mastered the trade 
cycle. I was in constant contact with Haggott Beckhart 
who was writing his book on the discount policies of the 
Federal Reserve system, and it was he who led me in all 
these discussions on the possibility of controlling the 
presumed cycle. And it was in America that my interest in 
monetary theory started, for which I had the background of 
a strong influence of the [Eugen von] Bohm-Bawerk tradition. 

I believe I also mentioned already that I didn't 
know Bohm-Bawerk as an economist personally, although 
he, like Wieser, his exact contemporary, was a friend of 
my grandfather's. And I actually saw him in the home of my 
grandfather before I knew what economics was. But in the 
Mises seminar the shade of Bohm-Bawerk was dominating; he 
was the common base upon which we talked and understood 
each other. But even in his work, his writings on marginal 
utility were perhaps more important than his work on interest. 
I think nearly everybody had some reservations on his 
interest theory, while everybody accepted his article on 
marginal utility as the standard exposition, really, of the 
marginal-utility theory. 

When I came back I had changed in my interests from 



405 



value and socialism to problems of capital interest and 
money. And I had, in fact, in the United States started 
writing a thesis at New York University under the title 
"Is the Stabilization of the Value of Money Compatible with 
the Functions of Money?" I think you can still find in 
the files of New York University a registration for a 
doctor's degree under this subject. But when I came back, 
I was soon asked to write that missing volume for the great 
Encyclopedia of Economics , the Grundriss der Sozialokonomik ^ 
which was practically finished then except that the 
authors who were to write the volume on money had died one 
after the other before supplying it. So I finally under- 
took it but didn't do it, because in the end, before I had 
done it, I went to London. So I at first had to interrupt 
working on it, and then before I returned to it. Hitler 
had come to power, and the publisher came to visit me in 
London to ask me to be released from the contract, because 
he could no longer publish in this German work the work of 
an author who had moved to England. 

This was a great relief to me, because my interests 
had moved to other tasks. To write, while I was starting 
a professorship in London, a great treatise in German was 
clearly impracticable. But it was in the work on that-- 
Well, I'll say one intermediate step (I achieved] out of 
my American thesis was a plan for what I believe I intended 



406 



to call "Investigations into Monetary Theory." Again only 
one long article was ever written and published, that 
called "The Intertemporal Equilibrium of Prices and the 
Changes in the Value of Money," I think, in the Welt - 
wirtschaf liches Archiv . This, I believe, is probably the 
most characteristic product of my thinking of that 
period, before I turned definitely to industrial fluctua- 
tions and the history of monetary theory. It was really 
only the history of monetary theory that I did for that 
extended textbook; I never started on the systematic 
part of it. 

And that was the stage at which I was invited to give-- 
Oh, there's one other feature I ought to mention: while 
I was in America, I got interested in the writings of 
[William] Foster and [Waddill] Catchings, and there was 
then this competition for the best critique of Foster and 
Catchings, in which I did not take part. I afterwards 
regretted this, because I thought the products were all 
so poor that I could have done better. When I had to 
give my formal lecture for being admitted to the honorary 
position of Privatdozent , I chose a critique of Foster 
and Catchings on the title "The Paradox of Saving" for that 
lecture. I published it in German, and Lionel Robbins read 
that particular essay, which led him to invite me to give 
the lectures in London. 



407 



In those lectures I drew on what I had done for my 
textbook on money, and of course the move to — Well, then 
I was asked by Robbins--! think it was even before, or 
was it when I was giving the lectures?--to do the review of 
[John Maynard] Keynes's Treatise . So I had a year or two 
which I invested in reviewing that thing. Again, this had 
a curious outcome, which is the reason why I did not 
return to the charge when he published the General Theory . 
When I published the second part of my essay on Keynes, his 
response was, "Well, never mind, I no longer believe that." 
[laughter] 

ALCHIAN: The General Theory ? 

HAYEK: No, the second part of my review of his Treatise . 
I think this was very unfortunate, because the second part 
of the Treatise was probably the best thing Keynes ever 
did. 

ALCHIAN: Yes. You mentioned that Robbins saw your critique 
of Foster called "The Paradox of Saving," and that's 
what caused — 

HAYEK: — caused him to invite me to give these lectures. 
ALCHIAN: I was going to inquire how he came to hear about 
you, or know of you. In Vienna you worked with the 
reparations group — 

HAYEK: No, no, it wasn't the reparations commission. The 
peace treaty, I believe through the same truce of the 



408 



German peace treaty, made arrangements for the payment of 
private debts between two countries which got blocked by 
the outbreak of war. Incidentally, the claims the Austrians 
had on the Allies would be credited to a reparations 
account, but that was only an incidental aspect of it. 
The main thing was just clearing these debts, which had been 
outstanding for five years, with extremely complicated 
provisions because of currency changes and so on. I got 
the job because I knew law, economics, and several languages. 

Now, by that time I had returned from America; I used 
to speak French fairly well, which I have almost completely 
forgotten; and I knew even some Italian, which I had 
picked up in the war. The three foreign languages, plus 
law, plus economics, qualified me for what was comparatively 
a very well-paid job. Well paid for a government office, 
because it was a temporary position; I was not a regular 
civil servant but a temporary civil servant, with a much 
higher salary than I would have had. So it was quite an 
attractive position, even if it hadn't been that Mises 
became my official head. 
ALCHIAN: That's where you met him? 

HAYEK: Yes. I believe, again, I told the story already. 
I was sent to him by an introduction from Wieser, in 
which I was described as a promising young economist. 
Mises, reading this, [said], "Promising young economist? 
I've never seen you at my lectures!" [laughter] 

409 



ALCHIAN: We are still the same. When you went to work 

in Vienna, did you carry a briefcase every day with your 

lunch in it to work and back? 

HAYEK: No, we had a sort of canteen in the building, or 

in the ministry opposite. So I lunched there. 

ALCHIAN: Were you married then? 

HAYEK: Not initially. I married while I was in this job. 

ALCHIAN: When did you write that piece on rent control, 

and what was the motivation? 

HAYEK: Oh, the cause was simply that I was irritated by 

the fact that no economist had dealt with it. It seemed 

to me such a clear demonstration of what effects price 

fixing had. And none of the local economists paid any 

attention to it. There were even a few of the social 

policy people who were all in favor of it and proved that 

they didn't understand any economics. 

ALCHIAN: When was this--what year — do you recall? 

HAYEK: I believe '22, if I am not mistaken. 

ALCHIAN: In Vienna? 

HAYEK: In Vienna. It was a paper I read to our economics 

club. There had been an economics club which died during 

the inflation period--! don't know why--and I still had 

been as a guest at the meetings before it had died. Then 

I more or less revived it; my main purpose was to bring 

Mises ' s admirers together at the same desk, because they 



410 



were not on very good relations, really. That had 

created some difficulty for us younger people--we had to be 

on good terms with [Hans] Meyer in order to have any 

prospects at the university. We were more attracted by 

Mises, and so we revived this institution, which apart from 

the Mises seminar was the other occasion for general 

discussions of economics. And my one paper to the club 

was the one on rent restriction, which then was published 

as a pamphlet, in an enlarged form. 

ALCHIAN: Is that still easily available? Do you knov; where? 

HAYEK: Not easily. A partial translation is contained in 

a brochure on rent control, or rent restrictions, which the 

London Institute [of Economic Affairs] published; but it's 

not complete. 

ALCHIAN: Do you have a complete set of your works? 

HAYEK: I have one, yes. 

ALCHIAN: It has not been published as such, or as a 

collector's series, has it? 

HAYEK: No, no, they have not been reprinted; but there 

is, of course, a complete list of my publications in that 

Machlup volume. 

ALCHIAN: But a list is quite different from the — 

HAYEK: Yes. 

ALCHIAN: Would you be tolerant of a proposal to have the 

works all piablished and made available? 



411 



HAYEK: Well, of course, everything in recent years which 
is worth republishing I have collected, but only what 
appeared in English; not the early things I published in 
German. There aren't many, and they have some defects 
which would have to be very carefully looked into. There 
are things like that article, "The Intertemporal Equilibrium 
of Prices and the Changes in the Value of Money," the one 
on American monetary policy, the one on imputation. I 
suppose yes; but they would require translating and some 
revision. For instance, I only discovered years later that 
in the article on American monetary policy, the printer 
ultimately mixed up the pages. [laughter] They don't 
occur in the proper sequence. 

ALCHIAN: Is it true that Mrs. Hayek has been checking some 
of the translations? I had the impression she did. 
HAYEK: She did some of the translating. Three of my 
books were essentially done by her: The Counter-Revolution 
of Science , one other of the early ones, and finally, 
she practically redid The Constitution of Liberty . There 
was a complete translation which was unsatisfactory. 
ALCHIAN: You wrote that originally in German? 
HAYEK: Oh, no, I wrote it in English. It had been 
translated by somebody else, but it was very poor, and 
she redid it. 
ALCHIAN: I see what you mean. So we have your monetary 



412 



theory work in the United States, rent control, and-- 

Where would the capital theory interest come in? Or can 

you identify a place where you got involved in capital 

theory? 

HAYEK: Oh, yes. I think it was essentially after 

Prices and Production that I couldn't elaborate this 

without elaborating capital theory. You see, I was 

relying on it in its simple, Bohm-Bawerkian form, and I 

very soon became aware that with the average period of 

production, you didn't get anywhere. It was planned as 

a two- volume work: one on static and one on dynamic. I 

took so long on the static part that I was finally glad of 

the excuse of the outbreak of war to bring out something 

which wasn't really finished, pretending that I never 

knew if it would be published at all if I delayed, and 

without having even started on what I intended to be the 

second dynamic volume. Well, I never did it. 

ALCHIAN: Are you referring to The Pure Theory of Capital ? 

It came out in '41. 

HAYEK: The Pure Theory of Capital is the first part of 

what was intended to be a two-volume work: The Pure Theory 

of Capital and The Dynamics of Capital . 

ALCHIAN: Again, I've looked at that lately, and my thought 

was that had [Irving] Fisher not written his theory of 

interest book, with the words, the algebra, and the arithmetic 



413 



illustrated, that your book would probably be better 
known and more widely used. Do you have any conjectures 
as to whether that's true? 

HAYEK: Well, you know, capital theory is an extraordinary-- 
I forget; there is a good English word for it--a thing which 
refuses simple treatment. There was another very important 
book in the Wicksellian tradition, by a man called Ackerman, 
which is really very important, but nobody understands it 
[laughter] because it's so complex and difficult. I think 
the same is very largely true of my book. It's become 
too difficult because the subject is too difficult. 
Friedrich Lutz once told me one day that after he finds 
the things himself, he finds I have already said them, 
because he never learned it from my book and had to work it 
out himself. 

ALCHIAN: In The Pure Theory of Capital I was taken by the 
similarity between your position and that of Joan 
Robinson and Passenetti and the others at the current 
English Cambridge school, who are objecting to the 
classical simple homogeneous model. I don't want to 
associate you with that Cambridge school, but nevertheless, 
there is a similarity. 

HAYEK: I've been told so before, particularly by [Ludwig] 
Lachmann , who carefully followed this discussion. I 
haven't followed it. 



414 



ALCHIAN: Well, you might find it entertaining, because 
Joan Robinson is saying you cannot use a simple concept 
of capital and understand capital theory, and there's been 
a big debate on that. My own impression is that they 
are quite right, but when I read your work, or even the 
work of Fisher, I often wonder why anybody thought 
otherwise. 

HAYEK: Well, I have no doubt you are right, because, as I 
say, Lachmann, who probably knows my work better than almost 
anybody else, has told me the same thing. But since they 
came out, I never could return to that interest. 
ALCHIAN: Why not? Or do you know why not? 
HAYEK: Oh, I've become much too interested in the semi- 
philosophical policy problems--the interaction between 
economics and political structure. 
ALCHIAN: Those are more difficult problems. 
HAYEK: They are in a way more difficult, and of course 
much more difficult to come to clear conclusions. But I 
have been engaged in them so long-- You know, it was 
The Road to Serfdom which led me to The Constitution of 
Liberty . Having done The Constitution of Liberty , I found 
that I had only restated in modern language what had been 
the classical- liberal view; but I discovered there were 
at least three issues which I had not answered systematically, 
I cannot now enumerate them; it'll come back to me in a 
moment. 

415 



So I felt I had to fill the gaps, and I believe that 
in a way the thing on which I have now been working for 
seventeen years, which I have now at last finished-- 
Law, Legislation and Liberty --is probably a much more 
original contribution to the thing. It's not merely a 
restatement, but I have developed my own views on several 
issues--on the whole relation between rule and order, on 
democracy, and the critique of the social justice concept, 
which were absolutely essential as complements to the 
original ideas, answering questions which traditional 
liberalism had not answered. But that was such a big and 
long — I never imagined, in either case — Well, in fact. 
The Constitution of Liberty I did relatively quickly. I 
wrote the three parts in three successive years, and then 
took a fourth year to rewrite the whole thing. So I must 
have done The Constitution of Liberty — well, we have '78 
now-- Yes, since I formed the conception--! didn't immedi- 
ately start working on it--it's been seventeen years. 
ALCHIAN: I was going to ask, do you have a work schedule 
during the day? Do you in the morning do work of rewriting? 
HAYEK: It has changed in the course of time by a great deal. 



416 



TAPE: ALCHIAN II, SIDE TWO 
TAPE DATE: NOVEMBER 11, 19 7 8 

HAYEK: Most of my life I could work most all morning and 

then again in the evening. The evening is out now for 

any original work; I can only read in the evening. And 

my steam lasts for two hours only even in the morning, 

or something like that. I usually, if I am not disturbed, 

as soon as I have read my newspaper, I sit down to work 

and work for two hours. Sometimes a cup of coffee helps 

me on a little longer, but not very much longer. 

ALCHIAN: When you're working, are you at your desk writing, 

or do you pace and think, or what works? 

HAYEK: In an easy chair, leaning back and writing on my 

knees. 

ALCHIAN: I see. That's a nice comfortable way. You 

don't go to sleep often and wake up five minutes later? 

HAYEK: Oh, no. Well, if I try to do it in the afternoon, 

it happens to me. [laughter] I should say I have my 

reading periods and my writing periods. When I really want 

to read extensively, I cannot write at the same time. 

ALCHIAN: You mean during the same week or so, or during 

the same day? 

HAYEK: Oh, sometimes it's a question of two or three months 

that I do only reading, practically. Well I'm making notes 

all the time, but I don't attempt to pursue systematically 



417 



a train of thought. While once I settle down to writing, 
I consult books, but I no longer read systematically, at 
least on that subject. In the evening I will be reading 
something else. 

ALCHIAN: In general, for many of your articles, when you 
have written them, did you foresee when you started what 
you were going to say, or did you take a topic and then 
work and work and pretty soon out came a finished product 
which was entirely different than what you thought you 
were going to be saying? 

HAYEK: Mostly the latter. There are a very few short 
pieces which I saw clearly beforehand, and could write out 
at once. But the normal process, one which I already 
described, is of collecting notes on cards, rearranging 
them in a systematic order, writing it out in longhand in 
a systematic order. So in only very few exceptional cases 
I just sat down and wrote an article. 

ALCHIAN: Let me just make this comment to purge my mind. 
If you could have one of your books or articles destroyed 
because you wish you had never published it, is there any 
such work? It was a waste of time and you should have never 
written it? 

HAYEK: I think there are things which I published 
prematurely. For instance, the article, that early one, on 
the "Intertemporal Equilibrium of Prices and the Changes in 



418 



the Value of Money," which I believe contains some 
important ideas, was clearly prematurely published. I 
didn't see the things yet in the right way; it would have 
been wiser not to publish it at that time, although that 
probably would have meant that I would have never published 
those ideas at all. They exist only in the imperfect form. 
Others — Well, I would have to think of those that I have 
not republished, which I have probably forgotten. [laughter] 
ALCHIAN : If you remember what they are, we'll know which 
ones they should have been. Was there pressure in the 
twenties, as there is now, to so-called "publish or perish"? 
Or was publication a matter of getting yourself acquainted 
with other people, letting them know what you're doing--a 
mode of communication rather than to establish your prestige? 
HAYEK: Well, of course, it was in this sense very strong 
in Austria for getting the Pri vat dozen teur . You had to 
publish, relatively early, a major piece of work. It was 
not a question of a number of articles; it had to be one 
substantial work. But that's the only thing corresponding 
to the "publish or perish," which I experienced, but 
partly of course because I was so extremely fortunate to 
get, at the age of thirty- two, as good a professorship as I 
could ever hope to get. I mean, if you are at thirty-two a 
professor at the London School of Economics, you don't have 
any further ambitions. [laughter] 



419 



ALCHIAN: But there was an episode when I first heard of 
your work through Prices and Production and, let me call 
it the debate, or discussion, with [Frank] Knight over 
The Pure Theory of Capital . Do you have any memories of 
that, or stories you might tell us? 

HAYEK: No, it was really a very distant affair. I had 
known Knight slightly; he had been on a visit to Vienna 
in the twenties, but I didn't know him at all well. All 
the discussions in which I got involved, except with 
Keynes, whom I knew fairly well, were really with distant 
targets of persons who were not live figures to me: Knight, 
[Arthur] Pigou, whom I also came to know later quite well. 
There was still another one I got engaged in--one or two 
Germans and some others. Those were all discussions with 
distant figures and were not really continued as discus- 
sions. I commented on their work once and left it at that. 
ALCHIAN: They were very hard articles to read, and the one 
by Knight was very difficult. In fact. Knight's attitude, 
I guess, was that capital is just a big homogeneous mass — 
HAYEK: I never understood really in what sense it was a 
mass at all. It was not a magnitude in any sense. 
ALCHIAN: In fact, there was this theory of bombing during 
the war, when some of the bombing experts said, "Let us 
pick certain topics and destroy specific capital," and the 
Knightians said, "Oh, no, all capital in time is substitutable. 



420 



Bomb anything; you're bombing capital. So just go out 
and dump the bombs on Germany--any old place." That was 
known as the Knightian theory of bombs. [laughter] 
HAYEK: You know, of course. Knight was a very puzzling 
figure. He was a man of such intelligence, and yet capable 
of going so wrong on particular points--for the moment only, 
though; a year later he would see it. But he got com- 
mitted to a particular thing and pursued it to its 
bitter end, even when it was wrong. 

ALCHIAN: Well, to someone like me who had known of your 
works-- Prices and Production , The Pure Theory of Capital -- 
finding The Road to Serfdom suddenly after the war was a 
jolt. I said to myself, "What does he know about this? 
What's he doing writing on a subject like this?" But if 
one knows your history, it's not at all surprising. But 
at that time it was a very surprising event for me to see 
that book come out. 

HAYEK: When I started in '39 on these articles that beccime 
The Counter-Revolution of Science , this was the beginning 
of a plan to write a major book called The Abuse and Decline 
of Reason . Whereas what I published is the beginning of 
the study of the abuse of reason--what I now call the con- 
structivist approach--the decline of reason was to be some- 
thing of which ultimately The Road to Serfdom beccime a 
popular advance sketch. 



421 



So I had the whole idea in my mind when external 
circumstances of environment made it necessary for me to 
explain to my English colleagues that they were wrong in 
their interpretation of the Hitler movement. Particularly 
Sir William Beveridge, as he was then, who was incredibly 
naive on all these things. He firmly believed that the 
bad German capitalists had started a reaction against the 
promising socialist developments. So I wrote out my basic 
idea in a memorandum to him and expanded it into an article, 
and then Gideons here asked me to supply it enlarged into 
a pamphlet. 

Then I just had plenty of time during the war. You 
see, I was in that fortunate position of being already a 
British subject, so I could not be molested; but being an 
ex-enemy, I was therefore not drawn into any war job. 
And having practically no students for the war period, I 
had plenty of time. So after I had finished The Pure Theory 
of Capital , I did not have any other plans; so I gradually 
enlarged this pamphlet into a book. I was restricted only 
by the fact that the Russians were then our allies; so I 
had to tame down what I said about communism. I may have 
perhaps overemphasized the totalitarian developments of 
the Nazi kind, while not saying much about the other. 

Though it was the outcome of a fairly long period of 
development of my thinking, still at that time I thought it 



422 



was a pcimphlet for the time, for a very specific purpose: 
persuading my English--what you would call liberals-- 
Fabian colleagues that they were wrong. That the book 
caught on in America was a complete surprise to me; I 
never thought the Americans would be the least interested 
in that book. 

ALCHIAN: Yet if one looks back at your earlier thinking 
on socialism, when you were in the Vienna area, and your 
collectivist economic planning essays, the book isn't 
surprising if one is aware of that other material. 
HAYEK: You know, the planning book had a curious effect on 
my thinking, because it was the thinking on the planning 
problem which drew my interest to the methodological 
problems, to the real problem of the philosophical 
approach to the social sciences. It was quite unexpected. 
I first intended to publish merely a collection of translations 
of the things which had remained unknown in the English 
literature, when I was told that I had to write an explana- 
tion of the environment in which the discussion had taken 
place. Then there was some discussion at the beginning 
about the problems. So I wrote a concluding essay dealing 
with the recent literature. But that was all very much 
unplanned and unintended, although doing it had effects on 
my further thinking. 
ALCHIAN: Did you ever know Thomas Nixon Carver? 



423 



HAYEK: I visited him once, on my first visit to America. 
It was one of the letters of introduction from [Joseph] 
Schumpeter. And I did, during these fifteen months in 
America, travel as far as Boston to the north, Washington 
to the south, and Bear Mountain, [New York] , to the west 
ALCHIAN: That covers it. [laughter] 

HAYEK: And at Harvard I delivered my letters to [Frank] 
Taussig and Carver, and I made the acquaintance of both 
gentlemen. Carver took me to his country club and gave 
me a big luncheon, which I almost abused. [laughter] All 
I remember is that he was frightfully offended that I-- He 
and John Hobson in England had published books under a 
similar name--something about distribution; I forget what 
it was--and my mentioning his and Hobson 's book in one 
sentence greatly offended him. [laughter] 
ALCHIAN: When I first went to UCLA, he walked into my 
office and asked if [Benjamin] Anderson was present. I 
said, "No, who shall I say came?" He said, "Tell him Carver 
was here." And as he left I thought, "Well, there was a 
famous Carver, but it couldn't be him. He must have died 
many years ago." But he lived past ninety in Santa Monica, 
and he and his wife celebrated their seventy-fifth wedding 
anniversary. 

Two things you wrote that had a personal influence 
on me, after your Prices and Production, were "Individualism 



424 



and Economic Order" and "The Use of Knowledge in Society." 

These I would regard as your two best articles, best in 

terms of their influence on me. 

HAYEK: "Economics and Knowledge"--the '37 one--which is 

reprinted in the volume, is the one which marks the new 

look at things in my way. 

ALCHIAN: It was new to you, too, then? Was it a change 

in your own thinking? 

HAYEK: Yes, it was really the beginning of my looking at 

things in a new light. If you asked me, I would say that 

up till that moment I was developing conventional ideas. 

With the '37 lectures to the Economics Club in London. 

my presidential address, which is "Economics and Knowledge," 

I started my own way of thinking. 

Sometimes in private I say I have made one discovery 
and two inventions in the social sciences: the discovery 
is the approach of the utilization of dispersed knowledge, 
which is the short formula which I use for it; and the 
two inventions I have made are denationalization of money 
and my system of democracy. 

ALCHIAN: The first will live. [laughter] How did you 
happen to get into that topic? When you had to give this 
lecture, something must have made you start thinking of 
that. 
HAYEK: It was several ideas converging on that subject. 



425 



It was, as we just discussed, my essays on socialism, 
the use in my trade-cycle theory of the prices as guides 
to production, the current discussion of anticipation, 
particularly in the discussion with the Swedes on that 
subject, to some extent perhaps Knight's Risk, Uncertainty 
and Profit , which contains certain suggestions in that 
direction--all that came together. And it was with a 
feeling of a sudden illumination, sudden enlightenment, 
that I — I wrote that lecture in a certain excitement. I 
was aware that I was putting down things which were fairly 
well known in a new form, and perhaps it was the most 
exciting moment in my career when I saw it in print. 
ALCHIAN: Well, I'm delighted to hear you say that, because 
I had that copy typed up to mimeograph for my students 
in the first course I gave here. And Allan Wallace, whom 
I guess you must know, came through town one day, and I 
said, "Allan, I've got a great article!" He looked at it, 
started to laugh, and said, "I've seen it too; it's just 
phenomenal!" I'm just delighted to hear you say that it 
was exciting, because it was to me, too. 

But when did the idea hit you? When you started to 
write this paper, started to think about it, there must 
have been some moment at which you could just suddenly see 
you had something here. Was there such a moment at which 
you said, "Gee, I've got a good paper going here"? 



426 



HAYEK: It must have been in the few months preceding 
that, because I know I was very unhappy about having to 
give the presidential address to the Economics Club. 
Then I hit on that subject, and I wrote it out for that 
purpose. How long it was exactly before the date [of the 
address] I couldn't say now, but I do know that the idea 
of articulating things which had been vaguely in my mind in 
this form must have occurred to me when I was thinking of 
a subject for that lecture — the presidential address at 
the London Economics Club. 

ALCHIAN: Well, that was a very influential article, I must 
say. There's the [David] Ricardo effect, on which you've 
done some work. Do you have any recollections about getting 
into that? I guess I should go back and say one thing on 
this bit about use of knowledge and individualism. I would 
have conjectured that your rent control article might have 
had some carry-over on that. If one perceives that, he 
can begin to see this broader issue. 

HAYEK: Well, I was recently surprised at how much I had 
forgotten about that article; I hardly knew any longer that 
it existed. It must have played a very important role in 
my actual thinking, but I find it very difficult to recall 
now exactly what role it played. It somehow fitted in with 
my concern with the direction of investment, and the role 
which prices and interest rates played in governing the 



427 



direction of investment. But I cannot at the moment-- 
Maybe the next time when we talk it will come back. It 
usually happens that my mind-- My memory is now a slow 
process. I usually remember things a little later than I 
wish I would. 

ALCHIAN: It'd be interesting to compare that article with 
the one by [George] Stigler and [Milton] Friedman on the 
same subject to see what similarities there are. 
HAYEK: Oh, they are very similar indeed. If I am not 
mistaken, they are both reprinted in that pamphlet of the 
London Institute. 

ALCHIAN: The lEA [Institute of Economic Affairs]? 
HAYEK: Yes. 

ALCHIAN: Oh, I see. I'll check. I'm a trustee of that 
board, and I should know what they're doing. Let me, then, 
return for a couple of minutes to that Ricardo effect, which 
again came through, I guess, in the capital-value theory. 
HAYEK: Yes. That was the main result of trying to provide 
a foundation for Prices and Production in elaborating the 
theory of capital. And it was certainly in the course of 
working on The Pure Theory of Capital that I became aware 
of this fact that the price of labor really very largely 
determined the form of investment--that the more expensive 
labor was, the more capital-intensive you made production. 
Then I think it was a pretty sudden event that made me think 



428 



that this is the same thing I have been arguing in Prices 
and Production , in a slightly different form. The curious 
thing is that so many people did not see that it was the 
same argument in a different form. 

ALCHIAN: I think they're discovering it now. Even the 
reswitching theory that's coming out of the Cambridge school 
on the connection between interest rates and the so-called 
ratio of labor to capital is essentially the same. 
HAYEK: You know, I have just published an article in the 
London Times on the effect of trade unions generally. It 
contains a short paragraph just pointing out that one of 
the effects of high wages leading to unemployment is that 
it forces capitalists to use their capital in a form where 
they will employ little labor. I now see from the reaction 
that it's still a completely new argument to most of the 
people. [laughter] 



429 



TAPE: CHITESTER I, SIDE ONE 
TAPE DATE: UNSPECIFIED 

CHITESTER: I'd like to start talking about something 
that — In the United States right now, there's a fad, and 
you may or may not be aware of it. Everybody's running. 
They're all out running marathons. The New York marathon 
a week ago had 11,000 people in that run. They go out 
and brutally throw themselves through twenty-six miles of 
activity. Do you have any reactions to those kinds of 
things in society? Why are people all over the United 
States running? Do you have a perception on that? 
HAYEK: Oh, I can see [why], in general. I mean, it was 
conspicuous that the Americans did no longer walk. My 
wife used to say that they would soon lose the capacity to 
walk. I think some doctor discovered this, but why things 
spread like this, again, is a typical American thing. It's 
not only difficult to generalize about the Americans in 
space, but it's equally difficult to generalize about them 
in time. Every time we have come to the States, it has 
changed. 

CHITESTER: Is that unique in the world? 

HAYEK: I think it's unique among grown-up people. It's 
very common with the young. When I lecture to the revolu- 
tionary young people, I say the reason I have no respect 
for your opinions is because every two years you have 



430 



different opinions. And I think that is true to some 
extent of the Americans. This is, in a sense, a virtue. 
You change your opinions very rapidly; so if you adopt some- 
thing very absurd one time, there's a good chance you will 
have forgotten about it next year. 

CHITESTER: Do you think that the running is simply a fad 
in that sense? It's an expression-- 

HAYEK : No, I think there is something else about it--a 
feeling that you ought to exercise your body, that you have 
had not enough exercise. What amazes me is how rapidly a 
thing like that can spread. In another country it would 
come very slowly and through to a certain part of the popula- 
tion; but last time I was in the States and I had to stay 
in a hotel in Greenwich Village, there was, in the middle of 
the town in the morning, a stream of people jogging before 
me. In a town it looked very curious; here on the campus, 
of course, it seems quite natural. 

CHITESTER: Yes, when people run up and down city streets 
it does give you a-- Within your comments it's interesting 
that there seems to be something unique, then, in the United 
States. You mentioned the speed with which the fad 
develops. Do you have any sense of what this difference is? 
HAYEK: No, I don't really know. Perhaps it's the degree 
of constant communication with the media (now one has to 
call it media; it used to be the press) which is much 



431 



greater than you would expect of a people with the same 
general level of education. Compared with current 
influences, the basic stock of education is rather low. 
It's the contrast between the two. The European peasant 
has less basic education but is not subject to the same 
stream of constant current information. Usually people 
who are subject to such a stream of current information 
have a fairly solid stock of basic information. But 
Americans have this flood of current information impacting 
upon comparatively little basic information. 
CHITESTER: That's interesting. I sense maybe even the 
chicken and the egg--that the currency for current informa- 
tion tends to drive out the other. You know, schools focus 
on current things, on current materials, rather than, in a 
sense, on the basics. 

HAYEK: Yes, probably. I haven't thought about that, but 
it fits in with what I said. 

CHITESTER: That would be why, for example, classical 
education is no longer at all a common thing in the United 
States. 

HAYEK: You see, I used to define what the Germans call 
Bildung, a general education, as familiarity with other 
times and places. In that sense, Americans are not very 
educated. They are not familiar with other times and places, 
and that, I think, is the basic stock of a good general 



432 



education. They are much better informed on current 

affairs . 

CHITESTER: Yes, that's true. Newspaper magazines are 

devoured in the United States, although that's true in 

other countries, isn't it? 

HAYEK: Yes. But I doubt whether the Americans are book 

readers. You see, if you go to a French provincial town, 

you'll find the place full of bookstores; then you come 

to a big American city and can't find a single bookstore. 

That suggests a very fundamental contrast. 

CHITESTER: Yes, that's interesting. I understand that 

in many communities it's hard to find bookstores. We're 

always chasing around looking for appropriate books. From 

your point of view, which is-- How many years have you been 

observing the human affair? You're how old? 

HAYEK: I'm in my eightieth year. I've passed into my 

eightieth year; I will be eighty next May. 

CHITESTER: Eighty next May. Well, you certainly then have 

a perspective of a very long period of time that you've 

observed things. 

HAYEK: I've known the United States for fifty-seven years. 

CHITESTER: Fifty-seven years. Within your own experience, 

your personal experience, is this tendency for rapid change-- 

You made the comment earlier that in the United States it's 

different because, though it's a characteristic of the young, 



433 



in the United States it seems to prevail throughout the 

entire society. Can you identify changes in your own 

experience? 

HAYEK: Changes in the United States? 

CHITESTER: No. I'm sorry. Changes in how you approach 

things. 

HAYEK: Oh surely, surely. Very much so, not to speak 

about the great break of the First VJorld War. I grew up 

in a war, and I think that is a great break in my recollected 

history. The world which ended either in 1914 or, more 

correctly, two or three years later when the war had a real 

impact was a wholly different world from the world which 

has existed since. The tradition died very largely; it 

died particularly in my native town Vienna, which was one 

of the great cultural and political centers of Europe but 

became the capital of a republic of peasants and workers 

afterwards. While, curiously enough, this is the same as 

we're now watching in England, the intellectual activity 

survives this decay for some time. The economic decline 

[in Austria] already was fairly dreadful, [as was] cultural 

decline. So I became aware of this great break very acutely, 

But, as I said, if you leave this out of account and 
speak only of the last fifty or sixty years, yes, I suppose 
in all spheres, but in the political sphere very noticeably, 
[there has been great change]. One of my favorite gags is 



434 



to say that when I was a very young man nobody except 
the very old men still believed in classical liberalism; 
when I was in my middle age nobody except myself did; 
and now I find that nobody except the very young believe 
in it-- 

CHITESTER: That's interesting! 

HAYEK: — and that gives me some hope in the future of 
the world, 

CHITESTER: Yes, truly. You mentioned change earlier, 
and the fact that change has occurred so rapidly in the 
United States. Is it a positive thing? I assume that 
you do have some reservations, though, about rapid change. 
HAYEK: Oh, yes. I think it's a very serious problem so 
far as moral change is concerned. While, on the one hand, 
I believe that morals necessarily evolve and should change 
very gradually, perhaps the most spectacular and almost 
unique occurrence in our lifetime was a fashion which 
refused to recognize traditional morals at all. What was 
the final outbreak of the counterculture was the people who 
believed that what had been taught by traditional morals 
was automatically wrong, and that they could build up a 
completely new view of the world. 

I don't know whether that had ever occurred before. 
Perhaps it came in the form of religious revolutions, which 
in a sense are similar; but this sense of superiority of 



435 



the deliberately adopted rules of conduct as against 
all the cultural and traditional rules is perhaps, in the 
moral field, the most spectacular thing I've seen happening 
in my lifetime. It certainly began in-- Well, I have to 
correct myself at once. It did happen in Russia in the last 
century. But in my lifetime, it happened the first time 
in the forties and fifties and started from the English- 
speaking world--I'm not quite sure whether it began in 
England or the United States — and that created in some 
respects a social atmosphere unlike anything I can remember 
or has happened in Western European history. 

When I think about it, the attitude of the Russian 
intelligentsia in the middle of the nineteenth century 
seems to have been similar. But, of course, one hasn't 
really experienced this; one knows this from novels and 
similar descriptions. Perhaps even the time of the French 
Revolution [was similar]; I don't think it went as deeply 
even then. 

CHITESTER: The most current example, in the sixties and 
the change there, that's one that I have some personal 
familiarity with. Is there any sense in which that 
was simply a fad--going back to what we were talking about 
earlier — that spread rapidly? Are there any similarities? 
Is there any similarity to how quickly the running thing 
has evolved and how quickly ideas in this sense-- 



436 



HAYEK: Oh, yes, particularly in the sense that the 

Americans are more liable to this sort of quick change. 

There is a much more deeply ingrained tradition on the 

Continent than there is in American urban life. I don't 

know American rural life at all, and I may do injustice 

to the rural America. All I see is the urban America, 

and urban America certainly [represents] often an instability 

and changeability which I have not come across anywhere 

else. 

CHITESTER: Do you perceive a balance to that? It would 

seem to me you have to have some balance in society or 

that would run amok, so to speak. 

HAYEK: The very balance consists in the fact that they 

are passing fashions. They have great influence for the 

moment, but I should not be surprised if — In this case, 

I might be surprised, but let me just give an example: if 

I come back again, say, in two years, which is my usual 

interval, I shall find people are no longer jogging. 

CHITESTER: Yes. Or the ones who do are in some way 

different from the others. There is a hard core that I 

assume would continue, but their motivation is different 

than those of the balance. 

HAYEK: Oh, no, I don't think jogging is to me a very 

good illustration, because if I were eighteen or twenty 

I feel I might do it myself. [laughter] But most of the 

follies I observe are of the kind I wouldn't do myself. 

437 



CHITESTER: Yes, but certainly, as a class, it's dif- 
ferent than the musical, for example-- the way music 
changes and the styles of music. I think you've mentioned 
the fact that it does have another element to it, which 
is the physical well-being of the individual supposedly 
involved. So it's more than simply something to do. So 
I agree it's probably a more complex one. But it certainly 
is something that has come about very rapidly in the United 
States. 

HAYEK: Oh, very rapidly, yes. 

CHITESTER: Do you feel in the long run that these kinds 
of rapid changes have a role to play in world society? 
Is the experience here in the United States of any guidance 
to the world? It seems to me we have a society in which 
change is something we have to deal with. 
HAYEK: Surely. 

CHITESTER: We have books written about that: Future Shock 
and these other popularized approaches. 

HAYEK: You see, my problem with all this is the whole 
role of what I commonly call the intellectuals, which I 
have long ago defined as the secondhand dealers in ideas. 
For some reason or other, they are probably more subject to 
waves of fashion in ideas and more influential in the 
American sense than they are elsewhere. Certain main 
concerns can spread here with an incredible speed. 



438 



Take the conception of human rights. I'm not sure 
whether it's an invention of the present administration or 
whether it's of an older date, but I suppose if you told 
an eighteen year old that human rights is a new discovery 
he wouldn't believe it. He would have thought the United 
States for 200 years has been committed to human rights, 
which of course would be absurd. The United States 
discovered human rights two years ago or five years ago. 
Suddenly it's the main object and leads to a degree of 
interference with the policy of other countries which, 
even if I sympathized with the general aim, I don't think 
it's in the least justified. People in South Africa have 
to deal with their own problems, and the idea that you can 
use external pressure to change people, who after all have 
built up a civilization of a kind, seems to me morally a 
very doubtful belief. But it's a dominating belief in the 
United States now. 

CHITESTER: It clearly is. Is that true in other countries, 
or, again, is that unique within the United States? Do we 
as a people tend to rush headlong into everything? 
HAYEK: I can't quite judge whether in countries like 
England and Germany the thing is being followed to please 
the United States or whether it is a spontaneous movement. 
My feeling is that it is very largely done because they 
feel they have to conform with what the United States does. 



439 



CHITESTER: That's interesting, too. So you have two 
aspects of it: one is the direct involvement of the United 
States, and the other is the indirect influence it has on 
its partners in the world, so to speak. 

HAYEK: It's so clear that in some respects America is 
bringing pressure on the other countries in respects 
that are by no means obvious that they are morally right. 
I have been watching in two countries now the pressure 
brought by the United States to inflate a little more. Both 
Germany and Japan are under pressure from the United States 
to help by inflating a little more, which I think is both 
unjustified and unjust. Yet it's, I think, indicative of 
the extent to which certain opinions which are generated in 
Washington are imposed upon the world. 

An early instance was the extreme American anti- 
colonialism: the way in which the Dutch, for instance, 
were forced overnight to abandon Indonesia, which 
certainly hasn't done good to anybody in that form. This, 
I gather, was entirely due to American pressure, with 
America being completely unaware that the opposition to 
colonialism by Americans is rather a peculiar phenomenon. 
CHITESTER: Well, as a class, don't those kinds of 
intrusions into policy matters worldwide represent a failure 
to perceive cause-and-ef f ect relationships clearly? Isn't 
that part of it? 



440 



HAYEK: Yes. Too great a readiness to accept very 

simplified theories of explanation. 

CHITESTER: The thing that occurs to me, too, is that the 

one axe--in this case, in the anticolonial spirit to 

divest the Dutch of their holdings in Indonesia--was 

perceived to be a good. And yet you've said it certainly 

was not a good. 

HAYEK: I could not conceive an experience in any other 

country which I had--I forget what year it was--in the 

United States, when suddenly every intellectual center 

was talking about [Arnold] Toynbee. Toynbee was the 

great rage. Two years later I think everybody's forgotten 

about him again. 

CHITESTER: Do you have a problem with that personally? 

How has your currency risen and fallen? Has there been 

a cycle? Do you find there are periods in which people 

are-- 

HAYEK : Oh, very much so, and to a different extent in 

different countries. I had a fairly good reputation as 

an economic theorist until 1945, or '44, when I published 

The Road to Serfdom . Even that book was accepted in Great 

Britain by the public at large as a well-intentioned 

critical effort which had some justification. It came in 

America just at the end of the great enthusiasm for the 

New Deal, and it was treated even by the academic community 

very largely as a malicious effort by a reactionary to 

441 



destroy high ideals, with the result that my reputation 
was downtrodden even among academics. You know, it 
affects me to the present day. I have--this is always 
apparently inevitable--since my Nobel Prize been collecting 
quite a number of honorary degrees. But not one [have I 
received] from what you call a prestigious university. 
The prestigious universities still regard me as reactionary; 
I am regarded as intellectually not quite reputable. 

So it happens that while in the more conservative 
places I am still respected, in intellectual circles, 
at least until quite recently, I was a rather doiobtful 
figure. There was one instance about four or five years 
after I had published The Road to Serfdom , when a proposal 
of an American faculty to offer me a professorship was 
turned down by the majority. It was one of the big 
American universities. So I had a long period, which I 
didn't particularly mind, when at least among the intel- 
lectuals my reputation was very low-down indeed. I think 
it has recovered very slowly in more recent years, perhaps 
since I published The Constitution of Liberty , which seems 
to have appealed to some people who did not completely share 
my position. So it has been slowly rising again. 

But in a way, you know, I didn't mind, because I 
hadn't been particularly happy with my predominantly 
political reputation in the forties and fifties, and later 



442 



my reputation rested really again on my purely scientific 

work, which I didn't particularly mind. 

CHITESTER: If I recall, in your foreword or introduction 

to The Road to Serfdom , you specifically made that comment: 

that you were venturing into this area with a good deal 

of trepidation and hesitation, but that you felt compelled 

to do it because you saw threats to liberty. Yet despite 

that, it was not accepted in that spirit. 

HAYEK: No, it wasn't accepted in the United States; but 

in England the general opinion was ready for this sort of 

criticism. I don't think I had in England a single unkind 

criticism from an intellectual. I'm not speaking about 

the politicians; both [Clement] Atlee and [Hugh] Dalton 

attacked the book as one written by a foreigner. They had 

no better argument. But intellectuals in England received 

it in the spirit in which it was written; while here I 

had, on the one hand, unmeasured praise from people who 

probably never read it, and a most abusive criticism from 

some of the intellectuals. 

CHITESTER: It's currently more popular, is it not? Isn't 

it coming back? 

HAYEK: It's being rediscovered, yes. 

CHITESTER: It's the kind of book that the lay reader, 

the lay public, it would seem to me, can deal with as opposed 

to a more technical economics book. The use of the word 



443 



foreigner in the exchange you mentioned in Britain is an 
interesting one. It relates to some other things that 
we were talking about. I wanted to ask. this question 
earlier, and I think maybe this would be an appropriate 
time. To what extent does--and I know you've done some 
recent thinking about this--culture , in some definition, 
play a role in the ordering of world activities. You 
mentioned the intervention, in this respect, of the United 
States, and it would seem to me that some element of that, 
of the wrongness of that, is based on an inability, it 
would seem to me-- that doesn't mean we're inept--of one 
culture to fully understand and deal with another. Do 
you have any thoughts on that? 

HAYEK: There's something in that, but it is not necessarily 
the culture into which you were born that most appeals to 
you. Culturally, I feel my nationality now is British 
and not Austrian. It may be due to the fact that I have 
spent the decisive, most active parts of my life between 
the early thirties and the early fifties in Britain, and 
I brought up a family in Britain. But it was really from 
the first moment arriving there that I found myself for the 
first time in a moral atmosphere which was completely con- 
genial to me and which I could absorb overnight. 

I admit I had not the same experience when I first came 
to the States ten years earlier. I found it most interesting 



444 



and fascinating, but I did not become an American in the 

sense in which I became British. But I think this is an 

emotional affair. My temperament was more like that of the 

British than that of the American, or even of my native 

fellow Austrians. That, I think, is to some extent a 

question of your adaptability to a particular culture. 

At one time I used to speak fairly fluent Italian; I 

could never have become an Italian. But that was an 

emotional matter. I didn't have the kind of feelings which 

could make me an Italian; while at once I became in a 

sense British, because that was a natural attitude for 

me, which I discovered later. It was like stepping into 

a warm bath where the atmosphere is the same as your body. 

CHITESTER: It suggests a very fascinating way of classifying 

personality types. 

HAYEK: It probably is. 

CHITESTER: You could classify them by the culture within 

which they would feel most comfortable. It suggests that 

ethnic association, ethnic relationships, are a matter of 

personality, not one's birthright or even one's place of 

habitation. 

HAYEK: Yes; oh, yes. 

CHITESTER: What was it about the British? Can you identify, 

in any way, why you felt comfortable with it? What is it 

about you that makes you feel comfortable with the British? 



445 



HAYEK: The strength of certain social conventions which 
make people understand what your needs are at the moment 
without mentioning them. 

CHITESTER: Can you give us an example? 

HAYEK: The way you break off a conversation. You don't 
say, "Oh, I'm sorry; I'm in a hurry." You become slightly 
inattentive and evidently concerned with something else; 
you don't need a word. Your partner will break off the 
conversation because he realizes without you saying so that 
you really want to do something else. No word need to be 
said about it. That's in respect for the indirect indica- 
tion that I don't want to continue at the moment. 
CHITESTER: How would that differ in the United States? 
More direct? 

HAYEK: Either he might force himself to listen too 
attentively, as if he were attentive, or he might just 
break off saying, "Oh, I beg your pardon, but I am in a 
hurry." That would never happen--I can't say never happen-- 
but that is not the British way of doing it. 
CHITESTER: How does it differ from the Austrian? 
HAYEK: Oh, there would be an effusion of polite expres- 
sions explaining that you are frightfully sorry, but in 
the present moment you can't do it. You would talk at 
great length about it, while no word would be said about it 
in England at all. 



446 



CHITESTER: And from your point of view it is a question 
of-- Is it the comfort of shared-- It's like you don't 
have to--there's the old saying--you don't have to tell 
someone you love them if you love them. 

HAYEK: You might sit together with somebody and you don't 
have to carry on a conversation. 



447 



TAPE: CHITESTER I, SIDE TWO 
TAPE DATE: UNSPECIFIED 

CHITESTER: And you find that very comfortable personally. 

HAYEK: I find it very congenial to me . It's a way in 

which I would act naturally. 

CHITESTER: Does it in any way relate to your intellectual 

persuasion or convictions? Is there any continuity between 

the two? 

HAYEK: It may well be, but I'm not aware of it. I shouldn't 

be surprised if somebody discovered that my general way of 

thinking made me fit better into this sort of convention 

than into any other. 

CHITESTER: Because, again, that would suggest itself in 

terms of how ideas flow and are developed and supported. 

Doesn't that suggest that a culture has an important role 

to play in sustaining certain ideas? 

HAYEK: You might find an answer to this by studying the 

difference between British literature and literature of 

other countries. I shouldn't be surprised, but I can't 

give evidence offhand. 

CHITESTER: Another quick thought: The Road to Serfdom , 

you said, was received quite favorably in Britain, except 

for the politicians. As a reflection now, from the point 

of view of 19 78, it would seem it did not have the required 

effect. Do you have any thoughts about that?--the corollary 



448 



being that the United States has, at least to this point 
in time, not suffered quite as much a diminution of liberty 
that seems to be apparent in Britain. 

HAYEK: You know, in a sense I believe the British intel- 
lectuals in their majority are less committed to a doctrine 
of socialism than, say, the Harvard [University] intel- 
lectuals. They still have their great sympathy with the 
trade-union movement and refuse to recognize that the 
privileged position which the trade unions have been given 
in Britain is the cause of Britain's economic decline. 

But the British Labour party is not predominantly 
a socialist party but is predominantly a trade-union party, 
which is something very different. And although there are 
always some doctrinaire socialists in the government, I 
think they are a small minority. It's not, from a socialist 
position, as bad as it seems to be in Russia, where 
Solzhenitsyn assures us there's not a single Marxist to 
be found in Moscow. But I doubt whether there are more 
than two or three radical socialists to be found--maybe 
five or six — among the leading figures of the British Labour 
party. It is essentially a trade-union party. 
CHITESTER: But doesn't it, though, still incorporate the 
basic kinds of threat to personal freedom in the long 
term that you envision in-- 
HAYEK: Oh, yes. In the effect, of course, they are driven 



449 



by their policies, which are made necessary by the trade 
unions, into ever-increasing controls, which make things 
only worse. Yet, in addition--but even that was initially 
caused by the trade-union problems-- [ there was] dominance 
of Keynesian monetary theories. But it is rather important 
to remember that even in the 1920s, when [John Maynard] 
Keynes conceived his theories, it all started out from the 
belief that it was an irreversible fact that wages were 
determined by the trade unions. They had to find a way 
around this, and he suggested the monetary way to circumvent 
this effect. 

CHITESTER: Let me come back to some things that I feel 
more comfortable with. I ' d be very fascinated to chat with 
you a little bit about what it is that has made you excited 
about life. I sense a sparkle in the eye, a get up in the 
morning with a challenge. What is it? How would you identify 
that? 

HAYEK: On the whole I am healthy. I say this now because 
I had a fairly recent period in my life in which I was not. 
There is evidently some physical reasons for it; the doctors 
don't agree. But from my seventieth to my seventy-fifth 
year, what you say just would not have applied. Before and 
afterwards it did. So my answer must really be that now 
and for most of my life I have been a healthy person. 
CHITESTER: Of course, "healthy" means both physically and 



450 



mentally in that sense. 

HAYEK: These things are very closely related. You know, 

I belong to the people who really regard their mental 

process as part of the physical process, to a degree of 

complexity which we cannot fully comprehend. But I do not 

really believe in metaphysically separate mental entities. 

They are a product of a highly developed organism far beyond 

anything which can be explained, but still there is no 

reason to assume that there are mental entities apart from 

physical entities. 

CHITESTER: Now, obviously you are referring to Freud and 

the whole Austrian psychologists and the school there, 

which clearly, as a fellow countryman, you would have 

direct feelings about. 

HAYEK: In my recent lecture, I have a final paragraph 

in which I admit that while apart from many good things, 

some not so good came from Austria; much the worst of it 

was psychoanalysis. [laughter] 

CHITESTER: Why do you feel that? Why do you feel 

psychoanalysis suffers from that? 

HAYEK: Well, there are two different reasons. I think 

that it has no scientific standing, but I won't enter into 

this. It becomes a most destructive force in destroying 

traditional morals, and that is the reason I think it is 

worthwhile to fight it. I'm not really competent to fight 

it on the purely scientific count, although as you know 



451 



I've also written a book on psychology, which perhaps 
partly explains my scientific objections. But it is 
largely the actual effect of the Freudian teaching that 
you are to cure people's discontent by relieving them of 
what he calls inhibitions. These inhibitions have 
created our civilization. 

CHITESTER: Yes, indeed they have. It is interesting, as 
you were saying, that feeling good is something certainly 
most of us want to achieve. The feeling good--let's stay 
with that for a minute--and the obeying, if you would, or 
the following, of a moral structure seems to contribute 
to that, doesn't it? 

HAYEK: Yes, the way I put it now is that good is not the 
scime thing as natural. What is good is largely a cultural 
acquisition based on restraining natural instincts. And 
Freud has become the main source of a much older error 
that the natural is good. What he would call the artificial 
restraints are bad. For our society it's the cultural 
restraints on which all depends, and the natural is 
frequently the bad. 

CHITESTER: Now, one thought that occurs to me in trying 
to explore that further is a feeling of good, for example, 
among a group of individuals who recognize in each other, 
or several of them, something which in a way, I think, you 
were getting at when you commented on the British: they 



452 



acquiesce to a common set of behavioral standards, 
and the feeling of good comes out of the kind of mutual 
flow of recognition back and forth that occurs. If I 
walk into a group of these people, I feel good because 
I know they identify that I'm meeting their standards. 
HAYEK: Yes, but that leads to a very fundamental issue: 
they conflict between common concrete ends and common 
formal rules which we obey. Our instincts, which we have 
acquired in the primitive band, do serve known needs of other 
people and [urge us] to pursue with other people a known 
common goal. This is something very different from 
obeying the same rules. 

The great society, in which we live in peace with 
people whom we do not know, has only become necessary 
because we have learned, to some extent, to suppress the 
natural instinct that it's better to work for a common 
goal with the people with whom we live and to work for the 
needs of people whom we know. This we had to overcome to 
build the great society. But it's still culturally strange 
to our natural instincts, and if anybody like Freud then 
comes out with, "The natural instincts are the good ones ; 
free them from artificial restraints," it becomes the 
destroyer of civilization. 

CHITESTER: The word artificial gets thrown around an awful 
lot. Freedom from artificial restraints. Are the restraints 
artificial? 

453 



HAYEK: No, I was really inconsistent by using the term 
in that connection, because I stress that the confusion 
in this field is largely due to the dichotomy, which 
derives from the ancient Greeks, between the natural and 
the artificial. Between the natural and the artificial 
is the cultural, which is neither natural nor artificial, 
but is the outcome of a process of selection. This was 
not a deliberate process but is due to the fact that certain 
ways of behaving have proved more successful than others, 
without anybody understanding why they were more successful. 
Now that, of course, is neither natural nor artificial; 
I think the only word we have for it is cultural . The 
cultural is between the natural, or innate, and the 
artificial, which ought to be confined to the deliberately 
designed. The way in which we can describe it is the 
cultural. 

CHITESTER: The use of artificial by proponents of directed 
change, it seems to me, is that kind of distortion. To 
use it as a rhetorical weapon; to say to someone, "Why, 
that's artificial; you shouldn't be doing that." Again, 
the Freudian thing: remove your inhibitions and you're 
going to be a wonderful person and enjoy life. The 
argument, then, is that these inhibitions are artificial, 
and they clearly are not. You're saying that, to the degree 
that they are voluntarily agreed to--even subconsciously-- 



454 



that they certainly-- Would you call that artificial or 

not? Is that a midground? 

HAYEK: I think this is intermediate ground for which 

we have no other word but culture, which people confuse 

with artificial. But the cultural is not artificial, 

because culture has never been designed by anybody. It's 

not a human invention; in fact, I go so far as to say that 

it's not the mind which has produced culture but culture 

that has produced the mind. This would need a great deal 

of examination. 

CHITESTER: Yes. There's an interesting — and I know you've 

dealt with this--problem which this suggests, in that 

cultural restraints seem to be a necessity within a 

society. How does the individual achieve freedom and 

liberty within those constraints? 

HAYEK: Freedom has been made possible by the restraint on 

freedom. It's only because we all obey certain rules 

that we have a known sphere in which we can do what we 

like. But that presupposes a restraint on all of interfering 

in the protected sphere of the other, which in the end 

comes to private property, but is much more than private 

property and material things. 

I like to say that primitive man in the small band 
was by no means free. He was bound to follow the predom- 
inant emotions of his group; he could not move away from 



455 



his group; freedom just did not exist under natural 
conditions. Freedom is an artifact. Again, the word 
artifact is the one we currently use, but it is not the 
result of design, not deliberate creation, but of a cultural 
evolution. And this cultural evolution produced abstract 
rules of conduct which finally culminated essentially in 
the private law--the law of property and contract--and 
a surrounding number of moral rules, which partly support 
the law, partly are presupposed by the law. 

The difference between law and morals is essentially 
that the law concerns itself with things where coercion 
is necessary to enforce them and which have to be kept 
constant, while morals can be expected as the acquired 
traditional traits of individual conduct which are also 
to some extent experimental. Thus, it's not a calamity 
if you find a person you have to deal with who does not 
obey current morals, whereas it is a calamity if you find 
that a person with whom you have to deal does not obey 
the law. 

CHITESTER: Can you give us two specific examples of this? 
I mean one specific example of each. 

HAYEK: Well, I must be assured that people are made to 
keep contracts if I am to make contracts and rely on 
them. There is the whole field of honesty. You know, 
there are kinds of honesty which, if they did not exist. 



456 



would make normal life impossible. And there are minor 
kinds of honesty which are not defined by the law and which 
the law does not define because they are not essential. 
CHITESTER: So, if I were to enter into an effort to 
violate a contractual agreement, that is a level of 
dishonesty that would be dealt with by the law. And, 
as you said, this would be of the calamitous type. On 
the other hand, if I chose to do something that violates 
your sense of propriety, that is not calamitous. It may 
be calamitous to our relationship, but it's not calamitous 
in the sense-- 

HAYEK : I can still live a sensible life even if people 
around me will not follow certain morals; but it is 
absolutely essential — and I think this is perhaps important 
to state, because [it defines] the difference between my 
view and some of my friends who lean into the anarchist 
camp--that within the territory where I live I can assume 
that any person that I encounter is held to obey certain 
minimal rules. I cannot form voluntary groups of people 
who obey the same rules and still have an open society. I 
must know that within the territory in which I live, any 
unknown person I encounter is held to obey certain basic 
rules -- 

CHITESTER: And not his own. 
HAYEK: --certain common, basic rules which are known to me. 



457 



CHITESTER: This is then the weakness of a concept that 
bases everything on voluntary association, because the 
stranger has his own voluntary association and you 
have yours, and there's no commonality. 

HAYEK: Libertarianism quite easily slides into anarchism, 
and it's important to draw this line. An open society in 
which I can deal with any person I encounter presupposes 
that certain basic rules are enforced on everybody within 
that territory. 

CHITESTER: A thought occurs to me--the difficulties in 
Africa of bringing into existence some form of nation-states, 
It seems to me that the tribal kinds of organization are 
an example of that. 

HAYEK: Sure. Certainly. Very much so. 

CHITESTER: The tribes have their own voluntary rules, but 
they're all different. 

HAYEK: Well, it's very doubtful whether you can, under 
these conditions, impose the whole apparatus of a modern 
state. I think if you achieve over the period of the next 
few generations the minimum that people within the ter- 
ritory will all learn to obey the basic rules of individual 
conduct, that's the optimum we can hope for. 
CHITESTER: Well, that's something. It's worth something. 
I want you to answer one more question, and then we'll 
take a break. You indicated that your cycle of coming 



458 



J 



to the United States was about every two years. Is this 

one of those? Has it been about that long since you've 

been here? When was the last time you visited? 

HAYEK: Oh, only eighteen months ago. 

CHITESTER: So you've shortened the cycle. [laughter] 

HAYEK: It just so happens — I think I can tell you 

roughly — I was in the United States in '45, '46, '47, 

'50, then from '50 to '62 I lived here, and since '62-- 

The next few years it was probably every three or four 

years, and then there was a period of ill-health when I 

hardly traveled at all. But since then, I must have been 

here every two years. 

CHITESTER: What is the one thing this trip that you've 

noticed has changed. What's the thing that impacted on 

you as being the most recent fad or change or whatever? 

Has there been any? 

HAYEK: Well, I've been here too recently, because even 

jogging was already popular eighteen months ago. [laughter] 

And I have, except for a single day in Seattle, been only 

just one week on the campus and haven't left the campus of 

Stanford. 

CHITESTER: You didn't visit the King Tut exhibit in 

Seattle did you? 

HAYEK: No. I have seen this exhibition before, not only 

in Cairo itself but I have seen the exhibition in London. 



459 



CHITESTER: At what point in your visits to the United 
States was there a period in which you were absolutely 
abashed at the changes that occurred? 

HAYEK: Oh, of course between '24 and '45 it was a different 
country. The experience of the New Deal, of the Great 
Depression, and so on had changed the atmosphere to an 
extent that — The exterior, of course, was familiar, but 
the intellectual atmosphere had changed completely. So 
far as the intellectual atmosphere was concerned, I came 
in '45 to a country wholly different from what I remembered 
from '24. 



460 



TAPE: CHITESTER II, SIDE ONE 
TAPE DATE: UNSPECIFIED 

CHITESTER: I can't resist talking some more about snuff. 

You said you have this shop in London. 

HAYEK: Yes, it's a very special snuff. It's a very old 

shop, Fribourg and Treyer, which like an English shop, 

still uses the same label which they used in the eighteenth 

century. And I've now discovered and tried his thirty-six 

different snuffs. The one I decided was much the best 

has the beautiful name of Dr. James Robertson Justice's 

Mixture. 

CHITESTER: That sounds good. 

HAYEK: And it is very good. 

CHITESTER: Why do you use snuff? 

HAYEK: Well, I was stopped from smoking by the doctor some 

five years ago and was miserable for a long time. I was a 

heavy pipe smoker. Then by chance I found in my own 

drawer of my desk an old snuffbox which I had used years 

ago at the British Museum when I was working long hours in 

the museum. And finally my neighbor [in the museum] just 

joked at how silly it was to go out every hour for a 

cigarette. He said he used snuff and that relieved him 

completely of the longing. 

So I got snuff for the same purpose, which worked, but 
I didn't acquire the habit then. I put it aside and later 



461 



found it. And as I was miserable not being allowed to 

smoke, I found that old snuffbox in my drawer and took 

some snuff and found the longing for a cigarette at once 

stopped. So I started taking it up and I've become 

completely hooked. It is as much a habit-forming thing, 

and you get all the nicotine you want; but the worst thing 

about smoking, of course, is the tar, which you don't 

get [with snuff]. So I get my pleasure without the real 

danger. 

CHITESTER: Do you have a collection of snuffboxes? 

HAYEK: A small collection, yes. I'm beginning to acquire-- 

CHITESTER: Like wine, cheeses, and things like that. 

HAYEK: It's only something like two or three years that 

it has become really a habit. 

CHITESTER: How do you feel about the question of cigarette 

smoking. You know in the United States there's a lot of 

pressure for people to quit. 

HAYEK: Well, it's probably sensible so long as they don't 

legislate about it. I think there's even a case for 

preventing it in public places where it annoys other people, 

but even that doesn't require legislation. I think 

restaurants would have their choice of customers. But I am 

convinced that cigarettes are harmful, although my own 

brother, the late anatomist, was the one who argued most 

convincingly that it was not cigarettes but the effusion of 



462 



cars and so on which was the main cause of lung cancer. 

But I'm afraid he died of heart disease, I think largely 

induced by smoking. [laughter] 

CHITESTER: Well, one pays the piper at some point. Do 

you ascribe to the theory — Mark Twain said, well, he 

had to have a certain amount of moderately sinful behavior 

so he would have something to throw overboard as he got 

older and needed redemption. He said he wouldn't give 

up smoking cigars because he felt he needed that at some 

point in the future so that he would have something to give 

up. 

HAYEK: Well, I don't intend to give this up. 

CHITESTER: You don't intend to give it up. [laughter] Very 

good. There's an aspect of any individual who's involved 

in creative work that fascinates me. And when I say 

creative work, I don't limit it to intellectual: [I 

include] people who work with their hands, even a farmer. 

A farmer to me is involved in very creative work. [What 

I notice] is that there is an excitement about what one 

does. It's one of those intangibles. It's like asking 

what is love or how do you describe the sense of love. 

But I personally feel excited about being involved in 

things. You must have had-- 

HAYEK : Yes, although I get more excited by exposition, 

oral exposition, than by quiet writing. I can't eat after 



463 



I've given a lecture. Even my ordinary university 
lectures-- I used to, at Cambridge, lecture from twelve 
to one and had to postpone lunch to two. I couldn't 
possibly eat after I came back from a lecture; just 
too much excited from giving a lecture. In quiet work, 
of course, there is some excitement of a different sort. 
Elation, but it's purely pleasant and doesn't have any 
lasting effect like the effort of explaining it to somebody 
else. That is an excitement of a different nature, and 
lecturing, of course, is in general a very peculiar 
experience. 

I will tell you a story, although it may lead off 
the point. My second visit to the United States in 1945 
was occasioned by the publication of The Road to Serfdom . 
I was asked to come over to give five series of lectures 
at five universities. I imagined very sedate academic 
lectures, which I had written out very carefully, and I 
came--it was still war--in a slow convoy. And while I was 
on the high seas, the condensation of The Road to Serfdom 
in the Reader's Digest appeared. So when I arrived I 
was told the program was off; the University of Chicago 
Press had handed over the arrangements to the National 
Concerts and Artists Organization; and I was to go on a 
public-lecture tour around the country. I said, "My God, 
I have never done this. I can't possibly do it. I have 



464 



no experience in public speaking." [They said], "Oh, it 
can't be helped now." "Well, when do we start?" "You are 
late. We've already arranged tomorrow, Sunday morning, 
a meeting at Town Hall in New York." 

At first it didn't make any impression on me; I 
rather imagined a little group of old ladies like the 
Hokinson women in the New Yorker . Only on the next morning, 
when I was picked up at my hotel and taken to a townhouse, 
I asked, "What sort of audience do you expect?" They said, 
"The hall holds 3,000 but there's an overflow meeting." 
Dear God, I hadn't an idea what I was going to say. "How 
have you announced it?" "Oh, we have called it 'The Rule 
of Law in International Affairs.'" My God, I had never 
thought about that problem in my life. So I knew as I 
sat down on that platform, with all the unfamiliar para- 
phernalia--at that time it was still dictating machines — 
if I didn't get tremendously excited I would break down. 
So the last thing that I remember is that I asked the 
chairman if three-quarters of an hour would be enough. 
"Oh, no, it must be exactly an hour." 

I got up with these words in my ear, without the 
slightest idea of what I was going to say. But I began 
with a tone of profound conviction, not knowing how I would 
end the sentence, and it turned out that the American 
public is an exceedingly grateful and easy public. You 



465 



can see from their faces whether they're interested or not. 
I got through this hour swimmingly, without having any 
experience, and if I had been told about it before, I would 
have said, "I can't possibly do it." I went through the 
United States for five weeks doing that stunt [laughter] 
everyday, more or less, and I came back as what I thought 
was an experienced public lecturer, only to be bitterly 
disappointed when I went back to England. 

Soon after I came back I was asked to give a lecture 
to some public group at Manchester, and I tried to do ray 
American stunt. With the stolid north English citizens 
not moving a muscle in their faces, I very nearly broke 
down because I could not be guided by their expression. 
It's the sort of lecturing you can do with the American 
audience but not the British audience. [laughter] It was 
a very instructive experience. 

CHITESTER: Yes. I can understand. I can understand it 
from the one side, having done public speaking to American 
audiences and knowing even there that there is clearly 
much more responsiveness than what I understand is true 
of European audiences. But even there, there is a range, 
in that many times you have an audience that is very, 
very flat. 

HAYEK: Well, after all, you see, the New York audience 
apparently was a largely favorable one, which helped me. 



466 



I 



I didn't know in the end what I had said, but evidently 
it was a very successful lecture. 

CHITESTER: Well, I'm sure you've also had the experience 
of--there you were talking about feedback essentially--the 
feeling on the part of the audience that they like what 
you're saying, encouragement, the movement of heads. 
Wouldn't you get that out of students also? 
HAYEK: No, one doesn't get it. I think I ought to have 
added that what I did in America was a very corrupting 
experience. You become an actor, and I didn't know I had 
it in me. But given the opportunity to play with an 
audience, I began enjoying it. [laughter] 
CHITESTER: It's very tempting, yes. It becomes a show 
more than a communication; it's entertainment. Coming 
back to the other question, why do you work? 
HAYEK: At this time, it's the only thing I enjoy. I 
have lost all the other hobbies. I haven't many. It was 
essentially mountain climbing and skiing. My heart will 
no longer play; so I had to give that up completely. I 
did a certain amount of photography, which was the other 
hobby I had; but the professionals have become so much 
better than anyone can hope to be that I no longer really 
enjoy it. I can't equal these people; so I've given that 
up, except when I travel I take snaps. 

So I no longer have any hobbies, and there's no 



467 



difference between hobby and work, particularly since I 
am retired I no longer have any subject where I have 
to keep up. That can be a chore, if you have to give 
the same lecture year after year and have to inform the 
students what has happened. You have to read all sorts 
of stuff you don't care in the least about. But now in 
my retired state the work is my pleasure. 
CHITESTER: Do you think hobbies and work are the same? 
HAYEK: Unfortunately, not normally; but they can be. 
That's the most fortunate state you can be in. If you 
feel that what you enjoy most is also useful to the other 
people, this is an ideal position. 

CHITESTER: In terms of achievement, now, obviously you 
can look at hobbies and work as you've said: when others 
benefit from it, it becomes work. I guess this is maybe 
one of the ways — 

HAYEK: In my case there was one particular thing: you 
see, I write in a language which is not my native 
language. So as an adult I went through the pleasure of 
learning to master a new language. And while my spoken 
English is not faultless, I pride myself-- If I have time, 
I can write as good English as anyone. And to learn 
this and to see myself even in middle age constantly make 
progress in learning what is an art was a very enjoyable 
experience. 



468 



CHITESTER: Achievement again. Is that a key? 
HAYEK: Yes, achievement. Or, to some extent, something 
unforeseen arising out of your work. For example, the 
pleasure I can get out of what may be childish: a good 
formulation. To give an illustration: the next article 
I'm going to write as soon as I'm rid of other things is 
going to be called "Mill's Muddle and the Muddle of the 
Middle," I think that's a good title. [laughter] 
CHITESTER: It's a delightful title. And that's a source 
of enjoyment? 
HAYEK: Yes. 

CHITESTER: The reason I'm interested in this is that it 
seems to me that individuals, in coming at the questions 
of value, questions of society, the question of enjoyment 
has to be in there. 
HAYEK: Oh, yes. 

CHITESTER: And it seems it is so often corrupting. Why 
is it corrupting? 

HAYEK: Because our instincts, which of course determine 
the enjoyment, are not fully adapted to our present civili- 
zation. That's the point which I was touching on before. 
Let me put it in a much more general way. What has helped 
us to maintain civilization is no longer satisfied by 
aiming at maximum pleasure. Our built-in instincts--that 
is, the pleasure which guides us--are the instincts which 



469 



are conducive to the maintenance of the little roving 
band of thirty or fifty people. The ultimate aim of 
evolution is not pleasure, but pleasure is what tells us 
in a particular phase what we ought to do. But that 
pleasure has been adapted to a quite different society 
than which we now live in. So pleasure is no longer an 
adequate guide to doing what life in our present society 
wants. That is the conflict between the discipline of 
rules and the innate pleasures, which recently has been 
occupying so much of my work. 

CHITESTER: That suggests that we're outgrowing the useful- 
ness of our native instincts. 

HAYEK: Yes, yes. And it does raise the question whether 
the too-rapid growth of civilization can be sustained-- 
whether it will mean the revolt of our instincts against 
too much imposed restraints. This may destroy civilization 
and may be very counterproductive. But that man is capable 
of destroying the civilization which he has built up, by 
instincts and by rules which he feels to be restraints, is 
entirely a possibility. 

CHITESTER: Yes, that's a kind of a terrifying thing. 
HAYEK: Oh, yes. 

CHITESTER: It suggests that there's no way out. 
HAYEK: Well, there is no way out so long as-- It's not only 
instincts but there's a very strong intellectual movement 



470 



which supports this release of instincts, and I 
think if we can refute this intellectual movement-- To 
put it in the most general form, I have to revert to 
[the idea that] two things happened in the last hundred 
years: on the one hand, an always steadily increasing 
part of the population did no longer learn in daily life 
the rules of the market on which our civilization is based. 
Because they grew up in organizations rather than partici- 
pating in the market, they no longer were taught these 
rules. At the same time, the intellectuals began to tell 
them these rules are nonsense anyhow; they are irrational. 
Don't believe in that nonsense. 

What was the combination of these two effects? On 
the one hand, people no longer learned the old rules; on 
the other hand, this sort of Cartesian rationalism, which 
told them don't accept anything which you do not understand, 
[These two effects] collaborated and this produced the 
present situation where there is already a lack of the 
supporting moral beliefs that are required to maintain 
our civilization. I have some--! must admit--slight hope 
that if we can refute the intellectual influence, people 
may again be prepared to recognize that the traditional 
rules, after all, had some value. Whereas at present 
the official belief is, "Oh, it's merely cultural," which 
means really an absurdity. That view comes from the 
intellectuals; it doesn't come from the other development. 

471 



CHITESTER: And it comes also from some elements of the 

science community. 

HAYEK: Oh, yes. 

CHITESTER: The scientist-technologist point of view. 

HAYEK: Very much so. To the extent to which science is 

rationalistic in that specific sense of the Cartesian 

tradition, which again comes in the form of, "Don't 

believe in anything which you cannot prove." And our 

ethics don't belong to the category of that which you 

can prove. 

CHITESTER: Don't you feel, though, that the average 

individual finds that to be difficult. I , as a person, 

have a sense of joy, of excitement, and it is not based 

on a rational perception. And I am fairly willing to 

accept it as such. Isn't there a way we can somehow 

or other sublimate the changes in society. As you've 

said, the native ability doesn't work anymore. But yet 

there ought to be some way to relate those instincts to a 

changing society. 

HAYEK: I hope it can be done. You see, these instincts, 

of course, are the source of most of our pleasure in the 

whole field of art. There it's quite clear; but how you 

can evoke this same sort of feeling by what comes essentially 

to these rules of conduct which are required to maintain 

this civilized society, I don't know. 



472 



CHITESTER: Those people who work for themselves, who 

are not guided by a master, must they not as a class have 

that as a motivation? Doesn't that have to be an element? 

HAYEK: No doubt they have some such motivation, but 

that's not a thing you can create; perhaps it can spread 

by imitation, by example. But I wouldn't know any way in 

which you can systematically teach it. 

CHITESTER: I would assume that statistically it can be 

shown that a lot of people who work for themselves don't 

do so for purely economic gain, because it can be shown 

that they could do better in a different situation. 

HAYEK: Surely, surely. You know, I am in the habit of 

maintaining that so far as literary production is concerned, 

there's no justification for copyright because no great piece 

of writing has been done for money. And I don't think our 

literature would be much poorer if it were not a way of 

making a living. 

CHITESTER: That's true. I think many people are motivated 

to write for other than monetary reasons. 

HAYEK: Surely. 

CHITESTER: I think [Charles] Dickens was also, in certain 

circumstances, writing in exchange for dollars. 

HAYEK: Yes, I think he did have to write and perhaps in 

this case a compulsion was a good thing, but there are 

very few instances. If you ask the question, which great 



473 



works of literature would we not have if it hadn't been 
for the incentive of earning an income from it, the number 
is very small indeed. 

CHITESTER: Let's go back. You said that today you work 
because you get enjoyment out of it. If we go back fifty 
years in Hayek's existence, and if I were to take one thing 
away from you that would have changed your attitude toward 
what you were doing so that you no longer would have 
cared to proceed with it, what would that one thing be? 
HAYEK: Well, I suppose the one thing which might have 
changed my own development would have been if there didn't 
exist that esteem for intellectual work which in an 
academic environment-- You see, my determination to 
become a scholar was certainly affected by the unsatisfied 
ambition of my father to become a university professor. It 
wasn't completely unsatisfied; he was by profession a 
doctor. He became a botanist, and his main interest became 
botany. He became ultimately what's called an "extraordinary 
professor" at the university. At the end of his life it was 
his only occupation, but through the greater part of my 
childhood, the hope for a professorship was the dominating 
feature. Behind the scenes it wasn't much talked about, but 
I was very much aware that in my father the great ambition 
of his life was to be a university professor. 

So I grew up with the idea that there was nothing 



474 



higher in life than becoming a university professor, 
without any clear conception of which subject I wanted to 
do. It just seemed to me that this was the worthwhile 
occupation for your life, and I went through a very long 
change of interests. I grew up with biology in my background, 
I think it was purely an accident that I didn't stick to 
it. I was not satisfied with the sort of taxonomic work 
in botany or zoology. I was looking for something 
theoretical at a relatively early stage. 

When I was thirteen or fourteen my father gave me 
a treatise on what is now called genetics--it was then 
called the theory of evolution--which was still a bit too 
difficult for me. It was too early for me to follow a 
sustained theoretical argument. I think if he had 
given me the book later, I would have stuck to biology. 
In fact, my interests started wandering from biology to 
general questions of evolution, like paleontology. I got 
more and more interested in man rather than, in general, 
nature. At one stage I even thought of becoming a 
psychiatrist. 

And then there was the experience of the war. I was 
in active service in World War I. I fought for a year in 
Italy, and watching the dissolution of the Austro- 
Hungarian Empire turned my interest to politics and 
political problems. So it was just as the war ended and 



475 



I came back that I decided-- Well, I didn't even decide 
to do economics. I was hesitating between economics and 
psychology. Although my study was confined to three 
years at veterans' privileges, and I did a first-class 
law degree, I divided my time essentially between 
economics and psychology. And it was for essentially 
practical reasons that I decided on economics rather than 
psychology. Psychology was very badly represented at the 
university. There was no practical possibility of using 
it outside a university career at that time, while 
economics offered a prospect. 

Finally I got definitely hooked by economics by 
becoming acquainted with a particular tradition through 
the textbook of Karl Menger, which was wholly satisfactory 
to me. I could step into an existing tradition, while my 
psychological ideas did not fit into any established 
tradition. It would not have given me an easy access to 
an academic career. So I became an economist, although 
the psychological ideas continued to occupy me. In fact, 
they still helped me in the methodological approach to the 
social sciences. I finally wrote out the ideas I had 
formed as a student thirty years later--or nearly 
thirty years later--in that book The Sensory Order . And 
I still have a great interest in certain aspects of 
psychology, although not what is predominantly taught under 



476 



that name, for which I have not the greatest respect. 

CHITESTER: What's your reaction at this point about 

having achieved what your father desired? He desired 

to be a professor as an ultimate and as a measure of 

achievement. Is there a secret wish somewhere in 

Professor Hayek that, knowing what you now know, you 

might have attempted to strive to achieve some other 

objective? 

HAYEK: I think my choice was right. I'm satisfied with 

the choice. There was a period when the possession of 

a professorship gratified me, and I think it's appropriate 

to my old age that I'm now relieved of any formal duties. 

In fact, up to a point I still enjoy teaching. I have a 

marvelous arrangement. The German universities are in 

that respect ideal. You are just relieved of duties, but 

you retain your rights. So I can still teach, and I do 

it in the easy manner of joining in with one of my active 

colleagues who takes the responsibility and I sit in in 

the seminar, which is the absolutely ideal position at my 

age. 

CHITESTER: You're making a hobby out of your vocation in 

that sense. 

HAYEK : Yes . 



477 



TAPE: CHITESTER II, SIDE TWO 
TAPE DATE: UNSPECIFIED 

CHITESTER: That's interesting. Is it important, in the 
sense of joy that one achieves , that there is external 
recognition of excellence? 

HAYEK: Yes, although I don't think I was ever guided 
in the choice of the subjects I worked on by the aim at 
recognition. But when it comes it's very pleasant. But 
I would not have very much regretted having spent my life 
on something which I still thought was important but had 
not found recognition. I might have found it an inconve- 
nience if it didn't bring an adequate income; but it 
would not have been a major obstacle to me if I was 
convinced something would ultimately be recognized as 
important, perhaps after my death. 

In my lifetime I have found no little recognition. 
In fact, recognition in that sense, except in a very 
narrow group of colleagues, is a new experience to me. 
There was one period of popularity after the publication 
of The Road to Serfdom , but so far as public recognition 
is concerned-- As we mentioned before, the period 
between ' 50 and ' 70 was a period when I--you could 
almost say--had become relatively unknown. 

I've always regretted a remark I made to my wife 
in 1950, which I think was true at that time but ceased 



478 



soon to be true, that when [John Maynard] Keynes died I 

was probably the best-known economist. At that time, 

as a result of the controversy between us, we were the two 

leading economists. But when Keynes died he became a 

saint and I was forgotten. It was a curious development. 

Between '50 and '70, I was known to a few specialists 

but not by the public at large. 

CHITESTER: In periods of time like that, you need a 

guidepost against which to judge your achievements. 
We all do this. We have measuring tools. 

HAYEK: I was sufficiently settled. By the age of fifty 
or the early fifties, one might say your habits, but 
certainly your immediate aims, are very much settled. 
I never had any ambition for public activity. In fact, 
at a very early stage I came to the conclusion that for an 
economist it was not a good thing to be involved in 
government. Long before I confirmed it in my own 
experience, I used to say that in the twenties England 
and Austria produced good economists because they were 
not involved in policy matters, and Germany and America 
produced bad economists because they were all tied up in 
politics . 

I have by my migrations avoided getting tied up in 
politics. I left Austria almost immediately--it was by 
accident--af ter I had been called to sit on the first 



479 



governmental committee; I left England after twenty years — 
it takes much longer there--just after the Colonial Office 
had begun to use me for public matters; I was never long 
enough in the United States to be used for public affairs; 
and of course in Germany, when I arrived I was an old man. 
I think it was no longer a practical problem. 

So I'm almost unique among economists of some reputa- 
tion of practically never having been tied up in government 
work, and I think it has done me a lot of good. [laughter] 
Government work corrupts. I have observed in some of my 
best friends, who as a result of the war got tied up in 
government work, and they've ever since been statesmen 
rather than scholars. 

CHITESTER: Isn't there a problem that you have to deal 
with in that regard? I understand and am very sympathetic 
to that perspective. How does one translate, then, from 
the theoretical to the practical and political? Who is the 
intermediary? Is there a class of individuals, then, that 
must lie between the intellectual and the politician? How 
do you bridge the gap? 

HAYEK: The economists whom we train who do not become 
academics also do economics. After all, we are training, 
unfortunately, far too many and certainly many more than 
ought to go into academic life. And I don't mind even 
people of first-class quality going into politics. All 



480 



I'm saying is they no longer have the right approach to 
the purely abstract theoretical work. They are beginning 
to think about what is politically possible, while I 
have made it a principle never to ask that question. 
My aim is to make politically possible what in the present 
state of opinion is not politically possible. 
CHITESTER: A parallel I see to what you're saying is in 
the case of Dr. Milton Friedman, who spent a number of 
years of his work in the very theoretical [realm] without 
involvement in the political. 

HAYEK: I think he is rather an exception by not getting 
corrupted by it. 

CHITESTER: He has now become more involved because he 
has many specific suggestions for political solutions, 
which are — and he would clearly admit to this--compromises 
of his own theory. 

HAYEK: Well, personally I think he has invested so much 
in a particular scheme of monetary policy that he refuses 
to consider what I regard as the ultimate solution of the 
problem: the denationalization of money and the privatization 
[of it] . That is so much beyond the scope of his aims that 
he rejects it outright. I think it is politically 
impractical now. I believe he even sees the theoretical 
attraction, but he doesn't think it's worth pursuing because 
it's not practical politics. 



481 



CHITESTER: It's interesting that--and this is something 
I don't have a clear feel for but I have a sense of--the 
yeoman farmer as well as the theoretical intellectual, 
who both stay out of politics and do their own work, 
are much more closely aligned in that sense than is the 
intellectual who is working theoretically and the one 
who essentially sells himself to the political process. 
HAYEK: Well, of course, there is a limit. You see, I'm 
very interested in politics; in fact, in a way I take part. 
I now am very much engaged in strengthening Mrs. [Margaret] 
Thatcher's back in her fight against the unions. But I 
would refuse to take any sort of political position or 
political responsibility. I write articles; I've even 
achieved recently the dignity of an article on the lead 
page of the London Times on that particular subject. I'm 
represented in England as the inspirer of Mrs. Thatcher, whom 
I've only met twice in my life on social occasions. 
I enjoy this, but on the principle that I will not ask, 
under any circumstances, what is politically possible now. 
I concentrate on what I think is right and should be done 
if you can convince the public. If you can't, well it's so 
much the worse, but that's not my affair. 
CHITESTER: It seems to me that there is another related 
problem that this suggests. You work obviously within a 
scholarly framework. The average person is not in a position 



482 



to be able to deal with the subtleties of your efforts 
because they don't have the basic education that permits 
them to do that. How does the translation between your 
work and thoughts and the need for the average person to 
have some sensitivity in regard to them occur? 
HAYEK: Well, I think under normal circumstances it ought 
not to be too difficult, because what I call the intel- 
lectuals, in the sense in which I defined it before--the 
secondhand dealers in ideas--have to play a very important 
role and are very effective. But, of course, in my 
particular span of life I had the misfortune that the 
intellectuals were completely conquered by socialism. So 
I had no intermediaries, or hardly any, because they were 
prejudiced against my ideas by a dominating philosophy. 
That made it increasingly my concern to persuade the 
intellectuals in the hopes that ultimately they could be 
converted and transmit my ideas to the public at large. 

That I cannot reach the public I am fully aware. I 
need these intermediaries , but their support has been 
denied to me for the greater part of my life. I did not 
teach ideas which, like those of Keynes, had an immediate 
appeal and whose immediate relevance for practical problems 
could be easily recognized. How much I was worried about 
these problems long ago you will see when you look into 
an article I wrote, oh, fully twenty-five years ago called 



483 



"The Intellectuals and Socialism." This was actually 
published in the University of Chicago Law Review but is 
reprinted in my volume of Studies in Philosophy, Politics 
and Economics . There I've tried to explain that the 
general rule of the intellectuals is the reason why the 
intellectuals of this century, I must say since about the 
beginning of the century, were so attracted by the 
socialist philosophy that they really became the main 
spreaders of socialism. 

Socialism has never been an affair of the proletarians, 
It has always been the affair of the intellectuals, who 
have provided the workers' parties with the philosophy. 
And--I believe I've used this phrase already today — that's 
why I believe that if the politicians do not destroy the 
world in the next twenty years, there's good hope. 
Because among the young people there is a very definite 
reversion. There is an openness, which is the most 
encouraging thing that I've seen in recent years, even in 
the countries where intellectually the situation seemed 
to me most hopeless, largely because it was completely 
dominated by the Cartesian rationalism. 

In France there is now the same reversion which 
has been taking place in England and America and Germany 
for some years. This was the first time even in France 
that a group of nouveaux economistes , who were thinking 



484 



essentially along the same lines which I am thinking, 
opposed the nouveaux philosophes . That was the most 
encouraging experience I've had in recent times. 
CHITESTER: Changing to a somewhat different approach, 
what kinds of people-- How would you describe an individual 
whom you have the greatest difficulty dealing with, in 
terms of personality or attitude? 
HAYEK: May I give a personal example? 
CHITESTER: Please do. 

HAYEK: I don't think there could ever be any communica- 
tion between Mr. [John Kenneth] Galbraith and myself. I 
don't know why, but it's a way of thinking which I think 
is wholly irresponsible and which he thinks is the 
supreme height of intellectual effort. I think it's 
extremely shallow. I go so far as that when in this 
recent plan, which had to be postponed, of challenging an 
opposite group of socialist intellectuals, he was one of 
three whom I would exclude. I won't use the exact phrase, 
which would be libelous and which I don't want to be 
recorded, but he and two others I on principle excuse 
because they think in a way with which I could not 
communicate. 

CHITESTER: Can you give us a better sense of what the 
characteristics of this are? 
HAYEK: I don't want to be offensive, but it's a certain 



485 



atribute which is common to journalists of judging opinions 
by their likely appeal to the public. 

CHITESTER: In other words, you in this instance, would 
feel that Galbraith is more of a journalistic type. 
HAYEK: Yes, very much so. 

CHITESTER: Do you find journalism generally to be 
superficial? 

HAYEK: It's always dangerous to generalize because there 
are some exceedingly good men among them to whom it does 
not apply. But in terms of numbers, yes. 
CHITESTER: And the basic corrupting element is, as you 
said, the desire to appeal, to try to second-guess what's 
going to be accepted or not. 

HAYEK: And it's a necessity to pretend to be competent 
on every subject, some of which they really do not under- 
stand. They are under that necessity, I regret; I'm sorry 
for them. But to pretend to understand all the things you 
write about, and habitually to write about things you do 
not understand, is a very corrupting thing. 

CHITESTER: You cover a broad range of interests in intel- 
lectual areas. What are some that you are totally 
incompetent in? Or let me put it another way. Let me make 
it more specific, because that's too general. What area 
do you receive questions about on a most frequent basis 
that you feel is categorically beyond your professional area 
of competence? 

486 



HAYEK: Well, apart from certain parts of the arts, where 
my interests are very limited, religion. I just lack the 
ear for it. Quite frankly, at a very early stage when I 
tried [to get] people to explain to me what they meant 
by the word God , and nobody could, I lost access to the 
whole field. I still don't know what people mean by God. 
I am in a curious conflict because I have very strong 
positive feelings on the need of an "un-understood" moral 
tradition, but all the factual assertions of religion, which 
are crude because they all believe in ghosts of some kind, 

have become completely unintelligible to me . I can never 
sympathize with it, still less explain it. 
CHITESTER: That's fascinating because one of the things 
that has occurred to me--it's an irritant, a f rustration-- 
because of my own personal desires to communicate certain 
precepts, is that the sense that motivates the "religious" 
person is something that is very powerful. In a way, if 
one could find a way to use that motivation as a basis of 
support and understanding for, say, the precepts of a 
liberal free society, it could be extremely effective. 
HAYEK: In spite of these strong views I have, I've never 
publicly argued against religion because I agree that 
probably most people need it. It's probably the only way 
in which certain things, certain traditions, can be 
maintained which are essential. But I won't claim any 



487 



particular deep insight into this. I was brought 

up essentially in an irreligious family. My grandfather 

was a zoologist in the Darwinian tradition. My father and 

my maternal grandfather had no religious beliefs. In 

fact, when I was a boy of I suppose eight or nine, I 

was presented with a children's Bible, and when I got too 

fascinated by it, it somehow disappeared. [laughter] 

So I have had little religious background, although 
I might add to it that having grown up in a Roman Catholic 
family, I have never formally left the creed. In theory 
I am a Roman Catholic. When I fill out the form I say 
"Roman Catholic," merely because this is the tradition in 
which I have grown up. I don't believe a word of it. 
[laughter] 

CHITESTER: That's interesting. Do you get questions 
about religion? I would assume a lot of people confuse 
your interest in a moral structure with religion, 
HAYEK: Very rarely. It so happens that an Indian girl, 
who is trying to write a biography of myself, finally 
and very hesitantly came up with the question which was put 
to Faust: "How do you hold it with religion?" [laughter] 
But that was rather an exceptional occasion. Generally 
people do not ask. I suppose you understand I practically 
never talk about it. I hate offending people on things 
which are very dear to them and which doesn't do any harm. 



488 



CHITESTER: Doesn't your thinking in terms of a moral 
structure--the concept of just conduct — at least get 
at some very fundamental part of religious precepts? 
HAYEK: Yes, I think it goes to the question which people 
try to answer by religion: that there arc in the sur- 
rounding world a great many orderly phenomena which we 
cannot understand and which we have to accept. In a way, 
I've recently discovered that the polytheistic religions 
of Buddhism appeal rather more to me than the monotheistic 
religions of the West. If they confine themselves, as 
some Buddhists do, to a profound respect for the existence 
of other orderly structures in the world, which they admit 
they cannot fully understand and interpret, I think it's an 
admirable attitude. 

So far as I do feel hostile to religion, it's against 
monotheistic religions, because they are so frightfully 
intolerant. All monotheistic religions are intolerant 
and try to enforce their particular creed. I've just been 
looking a little into the Japanese position, where you 
don't even have to belong to one religion. Almost every 
Japanese is Shintoist in one respect and Buddhist in the 
other, and this is recognized as reconcilable. Every 
Japanese is born, married, and buried as a Shintoist, but 
all his beliefs are Buddhist. I think that's an admirable 
state of affairs. 



4 89 



CHITESTER: And it's one of those activities, which we 
discussed earlier, where it is not a calamitous thing-- 
one ' s personal decisions don't affect substantially the 
society around. 

Going back to the question I asked you about people 
you dislike or can't deal with, can you make any additional 
comments in that regard, in terms of the characteristics 
of people that trouble you? 

HAYEK: I don't have many strong dislikes. I admit that 
as a teacher — I have no racial prejudices in general — but 
there were certain types, and conspicuous among them the 
Near Eastern populations, which I still dislike because 
they are fundamentally dishonest. And I must say dishonesty 
is a thing I intensely dislike. It was a type which, in 
my childhood in Austria, was described as Levantine, typical 
of the people of the eastern Mediterranean. But I encountered 
it later, and I have a profound dislike for the typical 
Indian students at the London School of Economics, which I 
admit are all one type--Bengali moneylender sons. They 
are to me a detestable type, I admit, but not with any 
racial feeling. I have found a little of the same amongst 
the Egyptians--basically a lack of honesty in them. 

If I advise speaking about honesty, I think honesty 
is really the best expression of what I call the morals of 
a civilized society. Primitive man lacks a conception of 



490 



honesty; even medieval man would put honor higher than 
honesty, and honor and honesty have turned out to be very 
different conceptions. I became very much aware of the 
contrast and quite deliberately began to be interested 
in the subject. [For example,] the different moral outlook 
of an officer and a broker in the stock exchange. In my 
traditional environment the officer was regarded as a 
better kind of person. I have come to the conviction that 
the broker at a stock exchange is a much more honest 
person than an average officer. In fact, the officer--and 
I knew them in the Aus tro-Hungarian army--who made 
debts which he could not pay was not shameful. It did 
not conflict with his honor, but of course it was dishonest. 
I sometimes like to shock people by saying that probably 
the most honest group of men are the members of the 
stock exchange. They keep all their promises. 
CHITESTER: Yes they do. In that sense, one could say 
that the bookie on the streets of Manhattan-- 
HAYEK : I suppose so, but I have no experience with them, 
[laughter] 

CHITESTER: I don't either, but I understand that at least 
within the enforcement potential that exists there, a 
bookie always pays his bets and can be totally trusted. 
HAYEK: That's completely comparable to the stock exchange 
people. 



491 



CHITESTER: Honor, you're suggesting, then, involves 
precepts that are not susceptible to statistical analysis. 
Honor is a more-- 

HAYEK: The robber baron was a very honored and honorable 
person, but he was certainly not an honest person in the 
ordinary sense. The whole traditional concept of aristocracy, 
of which I have a certain conception-- I have moved, to 
some extent, in aristocratic circles, and I like their 
style of life. But I know that in the strict commercial 
sense, they are not necessarily honest. They, like the 
officers, will make debts they know they cannot pay. 
CHITESTER: How about intellectual dishonesty? 
HAYEK: Well, of course, that's the thing I particularly 
dislike, but it's not so easy to draw the line. Strictly 
speaking, of course, every moral prejudice which enters into 
your intellectual argument is a dishonesty. But none of 
us can wholly avoid it. Where to draw the line, where you 
blame a person for letting nonintellectual arguments 
enter into his intellectual conclusions, is a very difficult 
thing to decide. One has to pardon a great deal in this 
field to the human and unavoidable. 

CHITESTER: It's very difficult also because the individual — 
HAYEK: To come back to the journalists, in their environment, 
under the conditions in which they work, they probably 
can't be blamed for what they do, and still more so for 



492 



the politicians. It's one of my present arguments that 
we have created institutions in which the politicians 
are forced to be partial, to be corrupt in the strict 
sense, which means their business is to satisfy particular 
interests to stay in power. It's impossible in that 
situation to be strictly honest, but it's not their fault. 
It's the fault of the institutions which we have created. 



493 



INDEX 



Abel, D. , 23 
Abrams, Mark, 91 
Acton, John, 126-27, 136 
Adler, Mortimer, 142 
Alexander Hamilton 

Institute, 373 
Allen, R.G.D. , 365, 372 
Alter, Viktor, 106 
Anderson, Benjamin, 424 
Aristotle, 21, 102, 139 
Arrow, Kenneth, 400 
Ashton, T. S. , 84, 85 
Atlee, Clement, 443 
Austrian Economic Associa- 
tion. See Nationale 
Okonomische Gesell- 
schaf t 
Austrian Institute of Trade 
Cycle Research, 114, 
154, 273 
Austrian school of economic 
theory, 261, 476 
-and classical liberal 

ideology, 55, 5 7 
-main figures in, 13, 15, 

16, 49-50, 56, 273 
-similarity to the Brit- 
ish tradition in eco- 
nomic theory, 19 3-96 
-and subjectivist eco- 
nomics, 241, 242, 258 
-and trade cycle theory, 
183-86 
Austro-Hungarian Empire 
-academic life in, 3-6, 

9, 272, 419 
-collapse of, 1-2, 46-47, 

272-73, 409, 434, 475 
-Jewish community in, 4, 

6 
-nationalities in, 47, 
174 

Bailey, Samuel, 202 
Barone, Enrico, 225 
Beckhart, Haggott, 375, 405 



Bennan, Fred, 188, 274, 364 
Bentham, Jeremy, 137, 207 
Berle, Adolf, 381 
Beveridge, William, 111-13, 

183, 228, 278, 422 
Bismarck, Otto von, 281 
Bohm-Bawerk, Eugen von, 405 
-and the Austrian school, 

13, 55, 248, 405 
-as an economic theorist, 

178, 190, 244-45, 405 
-personal qualities, 50- 
51, 244-45 
Boring, Edwin, 153 
Bork, Robert, 395 
Breton Woods agreement, 118 
British Labour party, 449-50 
British Museum, 461 
Browne, Stephanie, 37, 39, 

40 
Bruckner, Anton, 8 
Brunner, Karl, 380 
Buchanan, James, 135 
Burke, Edmund, 331, 332 

Cairncross, Alec, 97 

Cannan, Edwin, 124, 399 

Carnap, Rudolf, 32 

Carter, James Earl 

("Jimmy") , 389 

Cartesian rationalism, 69- 
70, 277, 279, 301-2, 
471-72, 484 

Carver, Thomas Nixon, 423-24 

Catchings, Waddill, 109, 
407 

Chisholm, Brock, 163 

Clark, John Bates, 111, 375 

Coase, Ronald, 247 

Committee on Social Thought, 
University of Chi- 
cago, 124, 133-34, 
246, 261, 264 

Comte , Auguste, 83, 257, 
277, 279, 283, 306 



494 



Constitution of Liberty , 

The * 
Counter-Revolution of 

Science , The . See 

IWH 
Cournot, A. A., 202 
Cowles Commission, 124 

Dahrendorf, Ralf, 266-67 
Dalton, Hugh, 443 
Darwin, Charles, 271 
Degenf eld-Schonburg , 

Ferdinand, 16 
Descartes, Rene, 279, 301. 

See also Cartesian 

rationalism. 
Dicey, A. V. , 275 
Dickens, Charles, 473 
Dickinson, Henry, 250-51 

Eccles , John, 237 
Edelburg, Victor, 368 
Ehrlich, Henrik, 106 
Einstein, Albert, 154 
Engel-Janoschi , Friedrich, 

39, 56 
Erhard, Ludwig, 341, 354 
Eucken, Walter, 362 
Euclid, 324 

Fabian socialism, 11, 50, 

71, 73, 113, 423 
Federal Reserve Act, U.S., 

377, 405 
Fermi, Enrico, 134, 262 
Fetter, Frank A. , 111, 178 
Feuerbach , Ludwig, 21-22 
Finer, Herman, 78, 79 
Fisher, Irving, 178, 413, 

415 
Foster, William, 109, 407, 

408 
Frazer Institute, 359 
French Revolution, 310, 4 36 
Freud, Sigmund. See also 

Freudianism 
-theory of repressions and 



civilization, 68, 75, 
162-63, 238, 451, 452, 
453 
-and the Viennese Jewish 
intellectual circle, 8, 
138, 403 
Freudianism 

-affect on traditional 
morals, 162-63, 238-39, 
281-82, 451-52, 453, 
454-55 
-dogmatism of, 19, 74, 

138, 236, 451 
-theory of repression and 
civilization, 75-76, 238, 
452, 453, 454-55 
Friedman, Milton, 95, 124, 

357, 392, 428, 481 
Frisch, Karl von, 7-8, 403 
Fromm, Erich, 163 
Furth, Herbert, 31, 33, 34, 
35 

Galbraith, John Kenneth, 

485-86 
Geistkreis, 17, 55 

-members of, 33-37,38-39 
-topics of discussion, 31- 
36 
Gluck, Franz, 33, 36, 39 
Goethe, Johann Wolfgang von, 

49 
Gomperz, Heinrich, 5 
Great Depression, 75, 116, 

460 
Green, David, 134 
Gregory, Theodore, 367, 377 
Grundriss der Sozialokonomik 
("Encyclopedia of 
Economics"), 376, 406 

Haberler, Gottfried, 18, 34, 

53, 54, 55, 179, 377 
Hamilton, E. J. , 383-84 
Hammond, Barbara, 84 
Hammond, J. L., 84 
Hayek, Friedrich A., family 
-antireligious orienta- 
tion, 20 



* This and subsequent indexed works by Friedrich A. von 
Hayek are compiled on p. 501, in an Index of Works by Hayek 
(IWH) . 

495 



Hayek, Friedrich A., family 
(continued) 
-brother, 24, 271, 462-63 
-children, 271, 396 
-father, 21, 22, 49, 270, 

403, 474-75, 477, 488 

-first wife, 395-96 

-maternal grandfather, 

20, 51, 403, 405, 488 

-paternal grandfather, 

20, 270, 488 
-second wife, 395, 412 
Hegel, Georg Wilhelm 

Friedrich, 83, 279 
Herzfeld, Marianne, 45 
Hicks, John, 368, 372, 392, 
399-400 
-as economic theorist, 
183, 243-44, 257, 365, 
399-400 
-relationship with Hayek, 
180-81, 248, 364, 366, 
399-400 
Hitch, Charles, 369 
Hitler, Adolf, 83, 278, 

281, 406, 422 
Hobhouse lectures, 68, 236 

238, 283, 379 
Hobson, John, 4 24 
Hogg, Quintin, 206 
Hotelling, Harold, 376 
Hughes, Jonathan, 211 
Hume, David, 69, 137 
Humphrey, Hubert, 187 
Husserl, Edmund, 31 
Hutchins, Harry, 142 
Hutt, W. H. , 85, 97, 250, 
390-91 

Illig, Hermann, 52-53 

Industrial Revolution, 84, 
85 

Institut fur Sozialwissen- 
schaften ("Institute 
for Social Sci- 
ences" ) , 266 

Institute of Economic 

Affairs, 99-100, 
354, 358, 411, 428 

International Economic 
Association, 45 



Jefferson, Thomas, 338 
Jenks , Jeremiah W. , 73, 373, 

374, 375 
Jevons, W. Stanley, 123, 203 
Jewkes, John, 9 7 
Johnson, Lyndon, 165 
Jung, Carl G. , 163 

Kaldor, Nicholas, 111, 183, 

364, 368, 370-71 
Kant, Immanuel, 69, 350 
Kaufmann, Felix, 31, 32, 36, 

56 
Kelsen, H, , 276 
Keynes, John Maynard, 114, 
121, 128 
-as economic theorist, 
118-20, 122-23, 181-83, 
194, 229, 359, 360, 386, 
479 
- General Theory of Employ - 
ment, Interest and Money , 
The , 115-17, 119-20, 384, 
385, 408 
-influence on economic 
policy and public 
opinion, 115-18, 121-22, 
182, 359-60, 383, 386, 
450, 483 
-personal qualities, 118- 

20, 122-23 
-relationship with Hayek, 

114-15 
- Treatise on Money , A, 
115, 384, 408 
Knight, Frank, 74 

-as economic theorist, 

125-26, 128-29, 148, 

177-78, 220, 260-61, 

420-21, 426 

-interest in religion, 

129, 261 
-quality of mind, 125-27, 

128-29, 130, 245, 421 
-relationship with Hayek, 
124-25, 260, 420 
Kristol, Irving, 299 
Kuznets, Simon, 154 



Lachmann , Ludwig, 
415 



191, 414, 



496 



Lange, Oskar, 250, 300, 

371-72 
Laski, Harold, 78, 113-14 
Law, Legislation and Lib- 



erty 



See IWH 



45- 



Lei jonhuf vud. Axel, 384 
Lenin, V. I. , 83, 166-67 
Leontief, Wassily, 187, 

392 
Lerner, Abba, 108-9, 250, 

368, 369-71 
Letwin, Shirley, 2 34 
Levi, Edward, 142 
Lewis, Arthur D. , 369 
Lieser, Helene, 39, 40 

46 
Lippmann , Walter, 247 
Lloyd, Don, 202 

John, 324 

Economics 

275, 425, 
London School of 

71 
-academic atmosphere of, 

10-11, 131, 263, 399 
-faculty, 78, 109-10, 
237, 363-65, 366-69 
Lorenz, Konrad, 8 
Lutz, Friedrich, 362, 363, 

414 
Lutz, Vera, 362-63 



Locke , 
London 



Club, 
427 

Economics , 



Macaulay, Frede 

Mach, Ernst, 16 

Machlup, Fritz, 

55, 179, 

379, 397 

Madison, James, 

Maitland, F. W. 

Malthus, Thomas 

Marcuse, Herber 

Marshall, Alfre 

-as economic 

111, 119, 12 

193, 248, 36 

-and the Engl 

ist traditio 

-personal qua 

51, 398 



rick, 375 

-18, 31 
34, 53, 54, 
245, 250, 

, 411 
102, 338 

, 275 

, 381 

t, 266 

d 

theorist, 

0, 123-24, 

5, 399-400 

ish social- 

n, 203-4 

lities, 50- 



-relationship with Hayek, 
110-11, 399 
Marx, Karl, 82, See also 

Marxism 
Marxism 

-appeal of 79-80, 82-83, 

264-66 
-doctrinaire forms, 12, 

74, 236 
-price theory, 315- 
16 
Max Planck Institut, 266 
Mayr, Franz, 52, 53 
Mead, Margaret, 310 
Menger, Karl, 13, 14, 242 
-and the Austrian school, 

55, 194, 476 
- Grundsetze , 48, 136, 174, 

248, 273, 401, 402 
-intellectual influence 
on Hayek, 71, 136, 174, 
241, 248, 273, 401, 402, 
476 
Meyer, Hans, 5 3 

-as economic theorist, 15- 
16, 38, 49-50, 51-52, 180 
-economics seminar at the 
University of Vienna, 37- 
39, 45, 51-52 
-personal qualities, 15-16, 
38, 180, 411 
Mill, James, 207 
Mill, John Stuart, 213, 386, 
469 
-influence on economic 

theory, 201, 203-4 
-as social theorist, 201- 
3, 207, 282-83, 316 
Minz, Use, 31, 39 
Mises, Ludwig von, 52, 54, 
73, 123, 163, 249 
-and the Austrian school, 
49, 50, 55-56, 194, 225, 
241 
-economics seminar, 38, 
39-42, 45, 51, 55-56, 
179-80, 404, 405, 410-11 
-as economic theorist, 57- 
58, 136-38, 176, 241-42, 
339 



497 



Mises , Ludwig von (contin- 
ued) 
-intellectual influence 
on Hayek, 13, 136, 175- 
76, 241, 248, 273, 274, 
377, 383 
-intellectual struggles 
against socialism, 12- 
13, 186-87, 250, 404 
-personal qualities, 5, 
42-44, 57, 409 
Mont Pelerin Society, 10 8, 

126-27, 135 
Montesquieu, Charles Louis 

de Secondat, 211 
Morganstern, Oskar, 38, 53, 

54, 55, 179, 190 
Morgenthau, Henry, 118 
Myrdal, Gunnar, 99, 400 

National Bureau of Economic 

Research, 143-44, 

375 _ 
Nationale Okonomische 

Gesellschaf t 

("Austrian Economic 

Association"), 39, 

44-45 
Neff, John, 134 
Neurath, Otto, 17 
New Deal, 75, 77, 126, 229, 

280, 312, 441, 460 
New York Piiblic Library, 

25, 143, 375 
Nobel, Alfred, 204 
Nozik, Robert, 234 

Oakeshott, Michael, 233-35 
Overhoff, Walter, 35 

Paish, Frank, 394 
Pareto, Vilfredo, 248, 300 
Philippovich, Eugen, 13 
Pigou, Arthur, 385, 420 
Plant, Arnold, 366, 367, 

394, 399 
Polanyi, Michael, 246-47 
Political Economy Club, 

201-2 



Popper, Karl, 8, 253 

-intellectual influence, 

18-20, 74, 236-37 
-philosophical affinity 
with Hayek, 235-36, 263, 
331-32 
Prices and Production . See 

IWH 
Proposition 13 (California 
Primary Ballot, 
1978) , 267, 340, 357 
Public Interest (periodical) , 

97 
Pure Theory of Capital , The. 
See IWH 

Quadrangle Club, University 
of Chicago, 131, 263 

Rathenau, Walter, 11, 12, 

71, 73 
Rawls, John, 218-19 
Redfield, Robert, 134 
Rheinstein, Max, 142 
Ricardo, David, 119, 202, 

316, 381, 382, 384, 
386, 427, 428 
Road to Serfdom , The . See 

IWH 
Robbins, Lionel, 74 

-collaboration with Hayek 
at the London School of 
Economics, 109-10, 112, 
177, 363-65, 366-69, 370 
-as economic theorist, 

110, 194, 245, 399 
-relationship with Hayek, 
109, 376, 390, 394, 407, 
408 
Robinson, Joan, 117, 414, 415 
Rockefeller Foundation, 26, 

72, 373 

Roman Catholicism, 20-21, 

488 
Roman Empire, 3 37 
Roosevelt, Franklin, 75, 81, 

118 
Rosenstein-Rodan, Paul, 38, 

52, 179, 365-66 



498 



Rothbard, Murray, 56 
Rougier, Louis, 247 
Russell, Bertrand, 139, 
141, 204, 245 

Samuelson, Paul, 97-98, 

183, 392 
Sartori, Giovanni, 133 
Schanis , Ewald, 52, 55, 56 
Schiller, Johann Christoph 

Friedrich von, 49 
Schlesinger, Karl, 42 
Schlick, Moritz, 17, 32 
Schmitt, Carl, 277-78 
Schrodinger, Erwin, 7, 

253, 403 
Schumpeter, Joseph, 375, 

424 
-as economic theorist, 
17, 52, 88, 100, 198, 
299 
-relationship with Hayek, 
72-73, 122, 360-61, 374 
Schutz, Alfred, 31, 32, 35, 

36, 39, 56, 249-50 
Schwartz, George, 374 
Scitovsky, Tibor, 363 
Sensory Order , The . See IWH 
Shackle, George, 243-44, 

247, 257, 260 
Shaw, Ed, 385 
Shaw, George Bernard, 160, 

204 
Shils, Edward, 133-34 
Simon, William, 356 
Smellie, Kingsley, 133 
Smith, Adam, 69, 71, 72, 

137, 211, 400 
Solzheni tsyn , Alexander, 

109, 265, 351-53, 

449 
Spann, Othmar, 14-15, 38, 

48, 401-2 
Stifter, Adalbert, 36 



Stigler, George, 


124, 


203, 




428 






Strigl 


, Richard, 


39, - 


iO, 




52, 53, 55 


., 56 




Studies in Philosophy 


1 




Politics and 






Economics . 


See 


IWH 



Talmon , J . L. , 165 
Taussig, Frank W. , 125, 424 
Tawney, Richard Henry, 113 
Taylor, Frederick, 23-24 
Taylor, Harriet, 283 
Thatcher, Margaret, 482 
Thomas, Norman, 75 
Thornton, Henry, 119, 123 
Thorp, Willard, 143, 375 
Tocqueville, Alexis de , 

76, 126-27, 136 
Torrens, Robert, 202 
Toynbee, Arnold, 441 
Twain, Mark, 463 



United States C 

101, 311 

-Bill of Righ 

208-9, 312 
-equal-pro tec 

312, 313 
-the framers, 
208, 210, 33 
-weaknesses i 
168-71, 208- 
United States S 
312 
-consistency 
-definitions 

nation, 314- 
-ideological 
12, 313 



onstitution , 

, 329 

ts, 168-70, 

tion clause, 

101-2, 171, 
8 

n conception, 
9, 338 
upreme Court, 

in 1 aw , 3 26 

of discrimi- 

15 

stance, 311- 



Vienna Zeitschrift (period- 
ical) , 38 
Vienna. See also Geistkreis; 
Vienna, University 
of; Vienna Circle 
-intellectual atmosphere, 
6-9, 16-20, 31-33, 238, 
403, 434 
-Jewish community, 6, 7, 
8-9, 33, 138, 403-4 
Vienna, University of 

-academic life, 24-25, 27- 

31, 253, 269, 476 
-economics faculty, 13-16 
Vienna Circle, 17, 32 
Viner, Jacob, 74, 124, 127- 

28, 129-30, 245 
Vinogradof f , P. , 275 



499 



Voegelin, Eric, 35, 36, 39, 

56 
Von Tungeln, George, 402 

Wagner-Jauregg, Julius, 138 

Wald, Abraham, 376 

Wale, Barrett, 367 

Wall Street Journal , 96-97 

Wallace, Allan, 426 

Walras, Leon, 202 

Weber, Max, 249 

Weber, Warren, 146-47 

Weismann, August, 22 

Whitehead, Alfred North, 

245 
Wicksell, Knut, 123, 384, 

414 
Wicksteed, H. B. , 111, 123 
Wieser, Friedrich von, 13, 
15, 16, 73, 180, 
273, 409 
-and the Austrian school, 

49-51, 274, 405 
-intellectual influence 
on Hayek, 14, 248, 274, 
401, 403 
-personal qualities, 244- 
45, 400, 401, 402 
Wittgenstein, Ludwig 

-philosophical positions, 

32, 140, 252, 254 
-relationship with Hayek, 

139-41, 251-53 
-and the Wittgenstein 
family, 8-9, 140, 252 
Wootton, Barbara, 77, 229 
Working, Holbrook, 385 
World War 1 , 1, 11, 434 , 

475 
Wright, Sewall, 134, 262 



500 



INDEX OF WORKS BY HAYEK 



Constitution of Liberty , 
The 
-argument of, 215, 230- 

32, 338, 349-50, 415 
-popularity of, 230, 

267, 442 
-writing of, 412, 416 
Counter-Revolution of 
Science , The 
-evolution of institu- 
tions, 270 
-rationalist construc- 
tivism, 132-33, 277, 
278-79, 421 
-social science method- 
ology, 196-97 
-writing of, 412, 421 

Law, Legislation and Lib - 
erty , 133, 279, 416 

-civilization and repres- 
sion, 75 

-constitutional reform, 
199, 213 

-evolution versus ratio- 
nalist construction, 65, 
232, 283-84 

-limitations on govern- 
ment, 206, 277-78, 292 

-social justice, 218-19 

Prices and Production , 413, 
420, 421, 425 
-English monetary theory, 

377 
-and Malthus's fourth 
saving doctrine, 381- 
82, 385 
-theory of industrial 
fluctuations, 377-78 
-theory of prices and 
capital, 384-85, 387, 
428-29 
Pure Theory of Capital , The, 
413-14, 420, 421, 
422, 428 



Road to Serfdom , The, 121, 
360, 464, 478 

-argument of, 59-60, 
105-6, 198-99, 343, 415, 
422-23, 443, 448-49 

-controversy surrounding, 
76-79, 113, 181, 228-29, 
271, 359, 441-42 

-intent in writing, 59, 
76, 133, 197-98, 227-28, 
278, 344, 421-22, 443 

Sensory Order , The, 36, 152- 
53, 255-56, 271-72, 
476 

Studies in Philosophy, Pol - 
itics and Economics , 
484 



501 










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