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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  Privatdozents ,  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  Privatdozents ,  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,  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 


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  0  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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