Don Boudreaux on The Essential Hayek

The month of October 2024 marks the 50th anniversary of F. A. Hayek winning the Nobel Prize. Winning such a prize is obviously a big deal, but someone wins one every year, so what’s the big deal about this guy? 

Well. Hayek’s contributions to the field of economics are significant because they spoke to more than simply economics. Spontaneous order, price signals as information, and the pretense of knowledge all might come to mind, but they might not. (Maybe you’re new to this! If so, helloooo there!) These concepts branch into philosophy, social structure, and the nature of the human mind. Stick with us to learn the depths and beauty of Hayekian thought, in the first of this series! 

Want to explore more?

• Profile in Liberty: Friedrich A. Hayek, at Econlib.
• Don Boudreaux on Reading Hayek, an EconTalk podcast.
• Elaine Sternberg, The Power and Pervasiveness of Spontaneous Order, at Econlib.
• Nicholas Wapshott on Keynes and Hayek, an EconTalk podcast.
• Hayek and Spontaneous Orders, at the Online Library of Liberty.

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Transcript

Juliette Sellgren 

Science is the great antidote to the poison of enthusiasm and superstition. Hi, I'm Juliet Sellgren, and this is my podcast, the Great Antidote named for Adam Smith, brought to you by Liberty Fund. To learn more, visit www.AdamSmithWorks.org. Welcome back. Today on September 16th, 2024, we're going to be continuing our series on Hayek in celebration of the 50th anniversary of his Nobel Prize. Now, that sounds like a mouthful, but the words were kind of short, so I feel like it's okay. Today we're going to be talking specifically about the Essential Hayek, his most important works, contributions, ideas, all of that. I'm excited to have Don Boudreaux on the podcast again for the third time, but it's been a while, to talk to us about this today. He is a professor of economics at George Mason and he's the author of The Essential Hayek. He also blogs at Cafe Hayek. So welcome back.

Don Boudreaux 

It's my pleasure to be here, Juliete.

Juliette Sellgren (1.13)

Since the last time you've been on the podcast, we've changed things up a little bit. So now I ask different questions for repeat guests. So it's time for a new one. What advice would you give your younger self and why?

Don Boudreaux (1.26)

Yeah, so as your listeners know, you alert your guests to the questions that are going to be asked. I thought about this. There's a lot of advice I would give to my younger self about lots of things, but I think the one that I'm settling on is I would advise my younger self to have learned a foreign language. Like most Americans, I don't know a foreign language, I speak only English. If I have to struggle, I can barely sort of given lots of time read basic French, but not enough to say I know French, but I don't speak a word of a foreign language. I would learn a foreign language. I'm convinced that people who know foreign languages have a dimension to their thinking ability and to their access to knowledge and information that we mono linguists are denied. And so that's what I would tell my younger self.

Juliette Sellgren 

Huh, that's good. I've never heard that one. Well, I guess it's a new question, but…

Don Boudreaux 

It's a new question.

Juliette Sellgren (2.24)

Yeah, but you would think that maybe it's kind of a similar enough question that maybe it would come up, but I guess not. So I guess on topic, Hayek spoke more than one language.

Don Boudreaux 

Like most very educated and cosmopolitan Europeans. He certainly did, yeah.

Juliette Sellgren 

What languages did he speak?

Don Boudreaux (2.46)

Well, I know of course his native language was German. He was born in Vienna. He became an English citizen, so he was fluent in English. He did the vast majority of his professional writing in English. We know he spoke French. I think he also spoke Italian, although I wouldn't swear to it, and he was probably moderately competent in some other languages. My guess is Bruce Caldwell would know this better than I. My guess is he could read classic or he grew Greek or Latin, but German English and French was certainly well within his competence.

Juliette Sellgren (3.27)

That is a lot of languages, and it's funny, I guess it makes sense being European and all, they think that speaking like six languages is normal, whereas I think I'm cool for speaking two and a half. So the standards differ maybe.

Don Boudreaux 

But you are cool for doing that.

Juliette Sellgren (3.48)

Oh, thanks. Okay, so let's get into Hayek. I mean, we've already been there a little bit, but let's keep going. I was preparing for this and I was thinking about how to start with Hayek. When we talk about studying a discipline, we always start with principles, right? So for micro we can identify trade creates value, marginal thinking, utility maximization, so on and so forth. We can argue about what those are, but generally they exist. There are these things that become the building blocks of our entire understanding of what we're talking about, and I think most thinkers and most academics fit really well within their discipline as building out a specific principle or having a pet issue that somehow derives from those principles, and you can fit them into this tradition really well. But Hayek, to me, those things are definitely true, but I think he also stands apart as someone who has his own set of principles that you could learn and understand and master in order to learn about him. I don't know how much that makes sense, but are there principles of Hayek, and if so, what are they?

Don Boudreaux (5.04)

There are, and what you just said indicates an essential truth about Hayek, and that is he was far more than an economist. He was a great philosopher, not just political philosopher by the way. I mean he was a natural philosopher. He had philosophy of language, he had a philosophy of mind. One relatively little known fact about Hayek is that when he was 53 years old, he published a book on the brain on cognitive psychology, I guess it would be called. It's called The Sensory Order, which nevertheless relates to Hayek's theory of knowledge, which was very closely or very importantly served as a foundation for his understanding of the economy. Hayek had a very, I hate the word holistic because I'm never quite sure what it means, but when you learn Hayek’s the corpus of his work, and I've read most of it, you see certain principles that run through it.

I would begin with the dispersion of knowledge. He was very aware that in society the amount of knowledge necessary to make our society what it is. The fact that we can, every morning we flip the switch and the lights go and we take it for granted. We go to the supermarket and it's got milk and beer and bread. The amount of knowledge that is put to use every day to make these to us or ordinary quotidian things happen is vast. And that is a theme that probably no theme was more constant throughout Hayek’s work than the complexity and the dispersion and the vastness of knowledge and how that knowledge somehow gets tapped into in human social and economic processes and prompts human beings to act in ways that result in an order that no one intended. So Hayek, he's impressed with the amount of knowledge that society uses, and then naturally then he's impressed with the order that we humans somehow managed to eke out of this dispersed knowledge. It's so vast and dispersed, no one could possibly grasp it all with one mind. So it's not the result of a human plan, it's not the result of a human design, and yet we look around and it's pretty darn orderly and not perfect. Hayek never claimed it to be perfect. So his basic principle is, principle is the right word.

(08:17):

The way he thought about society always returned to his appreciation for the complexity of the social relations that we have. Complex in large part because we all have access to different bits of knowledge, and somehow we're all able to tap into that knowledge in a way that allows us to interact with each other in productive ways that enable each of us to better pursue our own individual, our own individual goals that theme, one or the other from Hayek's, earliest work on the role of money and prices and how say a central bank by distorting the money supply can distort resource allocation. Through his very last work, The Fatal Conceit published in 1988, 4 years before he died, on basically the complexity of knowledge, and it's fatal for us to have the conceit that we imagine that we can comprehend all this knowledge in one central place. That theme was constant throughout Hayek, and it's astonishing to me how much fruit he was able, different kinds of fruit, different varieties to get from that one grounding and starting there with that knowledge. I'll stop there.

Juliette Sellgren (9.53)

Yeah, I think I don't even know where to go because there are so many different ways and they all connect and I'm trying to find the most efficient way, but it's like I don't have a price signal, so I don't have the information!

Don Boudreaux (10.06)

Yeah, very good. So ask, let's talk about Hayek's entree into economics.

So Hayek, he's born in May of 1899 in Vienna to an intellectual family, but even though he did not have a “von” in his name or they weren't super rich and he doesn't know what he wants to do, he gets interested in economics at a young age. He winds up. He was never a formal student of Ludwig von Mises, but it becomes close to Mises and Mises influences Hayek in the kind of economics that Ludwig von Mises did and the topics that Mises was working on. And in one of those topics was the role of money in an economy. And from that topic, there naturally arises the subsidiary questions, okay, what happens when money is messed with what happens when government messes with the money supply Hayek’s, earliest work in economics, most of this was in German, and so the only, I've read the only parts because I can't read German, but I have read translations of these papers. These were written in the late 1920s. Hayek is in his late twenties when he is writing these papers, they're very creative and brilliant.

They come to the attention. Hayek's work on theory, the role of money in how people use money in a way that either allows relative prices, the prices of bread relative to meat, relative to wheat, the inputs that go into making bread. He's interested in how money allows relative prices either to be aligned with each other, to enable human beings to make good economic decisions, or how money might be distorted in a way that causes those relative prices to be out of whack with each other, leaving human beings to make economic decisions that turn out later to not work. There's to create dis-coordination in the economy. So he writes these things in German.

I don't recall all the specific details, but the great British economist, Lionel Robbins, who is one year his senior, is very taken with Hayek's work on the role of money and relative prices and how money and its effect on relative prices might cause booms or busts as they were called back then in the economy. Lionel Robbins invites Hayek to deliver a series of lectures at the London School of Economics in 1931. Hayek delivers these lectures. They're a big hit in a lot of eyes. Other people were confounded. They had no idea what he was talking about. He was coming from a tradition that a lot of the British were unfamiliar with, but these lectures got hay. They were later published in English as one of Hayek’s earliest books called Prices and Production. These lectures got Hayek invited to, I think at first a visitor at the London School and then a permanent soon thereafter permanent faculty member.

So Hayek moves to England early on in the early 1930s. He's already in his early thirties, and this is just prior to John Maynard Keynes publishing his magnum opus in 1936, The General Theory of Employment, Interest and Money. So Hayek is in London writing all these highly theoretical, very abstract papers on the role of money and its impact on the macro economy and booms and busts. He is at an early age, he's still in his early to mid thirties. He is one of the top two or three most famous economists in the world, along with John Maynard Keynes in England, Joseph Schumpeter, who has been at Harvard, and you have Hayek. He's a very young man, very influential. Keynes publishes his magnum opus in 1936. Hayek later said that he regretted that he never published a review of it. There were reasons for that, reasons Hayek gave for never doing a review of the book, but Hayek’s star got completely eclipsed by Keynes because Keynes took the day.

(15:26):

And so the subject matter on which Hayek's early fame was built only lasted a few years in the early part of the 1930s, and by the last half of the 1930s, Hayek's monetary theory and theory of macroeconomics was basically cast into the historical dust bin, completely eclipsed by the work of John Maynard Keynes. But he was, it's astonishing. He's writing in not his native language in English, and already at the very tender age of 33, 34, he is one of the world's leading most celebrated economists. So that's early on. He then goes, and these things, if you know how worked, you can see how they're connected. He then gets involved and there's an overlap. In the time, Hayek was also participating in what is today called the Socialist Calculation Debate. Mises in 1920 wrote a long paper in German explaining that socialism can't work. And even if we grant that all the socialist planners are devoted public servants who would never be corrupted to pursue their own public interest, their own private interests at the expense of the public, the knowledge that the socialist planners would have to have in order for their plans to work according to the terms of the socialists themselves, we want to improve the material living standards for workers and ordinary people.

(17:21):

Mises argued that that knowledge is unavailable in a socialist economy because in a socialist economy, you don't have private property. If you don't have private property, you don't have private property market exchanges, so you don't have prices. If you don't have prices, then you lose the information conveyance system, which was what prices are. You lose the information that people need to make decisions, make economically correct decisions that allow prosperity to be built. So Hayek, Mises was attacked. And then a curious way, the socialist tried to use Mises and Oh, okay, that's a kind of good point. So we can have, we'll, will have the Socialist Planning Bureau create these prices, and Hayek then comes and says, no, no, no, you misunderstand me. So Hayek wrote this brilliant series of papers in the 1930s on the essential role of market prices, not fake prices set by government bureaucrats, the role of market prices in conveying, first of all, in eliciting information from different market participants, and then in conveying that information to people throughout the market that prompts individuals, both consumers and more importantly, producers and investors to act in a way as if they know much more than they in fact know, as if they know what the various different scarcities of resources and consumer goods are.

(19:10):

The prices alone prompt people, not alone, but prices play a huge role, an indispensable role in prompting individuals to act as if they're being guided by the hand of an omniscient central planner, but in fact, they're not. And so Hayek's very early on, he's very, very sensitive to the role of market prices. Again, first as these might, if they're distorted, how they might cause booms and busts in the macro economy, and then a few years later about the indispensability of prices for doing what he and is call rational economic calculation. So prices play a huge role. Let me just say one thing before I shut up. I know I'm talking a long time here.

(20:11):

Throughout all this, the Hayek has this recognition that the amount of information that people are using in a market economy as consumers, and again, even more importantly as producers and investors, the amount of information that they're using is vastly larger than the amount that any one mind could have. When you go out in the market to be an entrepreneur, to be an investor, or to be a consumer, you're responding to these price signals that reflect various scarcities. You don't realize what you're doing, you're just trying to make a buck. You're just trying to spend your money as wisely as possible. But it turns out these prices lead you to act in ways that coordinate your actions with millions of other people around the world in ways that prevent resources from being accessibly wasted and that allow investments to occur that fuel that economic growth. And so there's this complexity of the economy that's always in the background of Hayek’s thinking, and he's very concerned.

(21:32):

I'm just alluding back to what I said at the very beginning. He's very concerned about how this enormous complexity, which no human mind can begin to grasp. It's just completely beyond our comprehension, how this enormous complexity, somehow we have stumbled upon institutions, the price system of the market being the most single most important one. We have stumbled upon institutions that allow us to nevertheless engage with that complexity in a way that promotes our own material welfare. And so this is constantly a theme of Hayek- complexity reduced to the simplicity of various market signals, most importantly prices, probably what Hyatt now, now I'm inferring, but I think it's a good inference. One of the things Hayek got most frustrated with when encountering the economic pronouncements of particularly non-cost, but even a lot of economists is their failure to understand how complex the economy is. Hayek's constantly saying in one way or another, no, the economy's far more complex than your simple little theories or your simple little plans assume it to be. We just have to come to better grips with that complexity.

Juliette Sellgren (23.14)

It's funny because it's kind of like that quote of his, well, it's exactly like that quote of his that I'm going to misquote right now of the task of economics is to show to men how little they know about everything they think they know.

Don Boudreaux (23.28)

Yeah, it's not the most eloquent quotation by that comes from The Fatal Conceit, and you got it pretty close, and I too don't know exactly word for word, but he calls it the curious task. The curious task of economics is to explain to how little they know about what they believe they can plan, and that's it. So this is written in Hayek's last years in 1988, and it is a very nice summary of his whole life's work. Basically when I read that, I hear Hayek saying, because by 1988, just before the fall of the Iron Curtain, but people, by 1988, by then people understood that Soviet style communism was not working. It wasn't the enthusiasm that a lot of western intellectuals had for it back in the thirties and forties and even fifties had, by the 1980s completely disappeared. It was a basket case. And guy here, Hayek saying in his later years, he's 89 years old when that book is published saying, man, I told you so all you people all along kept thinking, wow, simple enough, we're going to bring some really smart people. We're going to give 'em a lot of computers and we're going to give 'em a lot of power to plan the economy. And I told you so it's too complex for you to plan.

Juliette Sellgren (25.08)

So something that I can imagine criticism, and I kind of feel like for myself, just teaching economics and understanding I, Pencil as much as I can, it is more complex than we can understand. So even a snapshot of a pencil, try aggregating that. You can't understand how complicated it gets, and that's the point.

Don Boudreaux 

That's the point.

Juliette Sellgren (25.34)

How would I kind of explain to my students or to someone who is kind of hearing us have this conversation who's thinking, well, that was then Hayek is old and gone and we have a lot of information nowadays.

Don Boudreaux (25.51)

Yeah. So yeah, this is a very, very good point. I'm glad you raised it. So when I was your age, this was just at the dawn of the personal computer revolution. So I'm a young undergraduate, first year graduate student, and oh, we've got all these microprocessors now so we can forget about Hayek because now we can process information a lot more quickly. Well, today, with you being your age now is artificial intelligence. Well, yeah, we were at sea until now, but now artificial intelligence will get us around the Hayek problem and this completely, these claims about the power of computing or the power of artificial intelligence to rid us of the need to rely on decentralized markets. As Hayek insisted, we had to rely upon completely misunderstands Hayek’s argument. I mentioned a moment ago that this debate that Hayek and Mises were engaged in together in the 1930s, it's called the socialist calculation debate.

(27:03):

That's an unfortunate term. This is not original to me. I can't remember who I first heard say this, but it's an unfortunate term. The problem isn't calculation so much. I mean, that is an issue, but what Miess and Hayek pointed to was knowledge gathering. And so you can have all the computing power in the world, you can have artificial intelligence as intelligent as you like. If it doesn't have the information, if these machines or these artificial intelligence devices don't have the information about the scarcity of iron ore in a particular part of the world, or Juliet Sellgren’s preference for one style of shoes over another style of shoes or Don Boudreau's preference for how much to work versus how much leisure to take.

(28:12):

If that information is not had in the central processing places, then the computers, they can't calculate. The virtue of the market is that it elicits from each of us as market participants, the information that we have to share with other people about the unique bits of knowledge that only we have. Again, most obviously, this is about our own preferences. Only you Juliette know your preferences really, really well. And when you go out as a consumer and you spend money in doing so, you reveal because of the price changes that your spending patterns creates, you reveal to the world what your preferences are in these prices. And then the producers respond to that. Property owners, people who own, I'm going to use a very old fashioned kind of example here, but iron ore mines, they're on the spot. They know very detailed knowledge about how much ore they think is left in the mine. What are the best access routes to the mine? What when the weather turns bad and the delivery trucks can't get to the mine, how to deal with the workers and their personalities who work at the mine so that you get more output from the workers, then less I'll put all this is very, very unique, nuanced, particular information on the spot, and the real problem is to get people to act on that information and the market, the private property market does that better than any other institution that we've ever stumbled on.

(30:25):

And so yeah, Hayek did die long before the AI revolution. He's been dead since 1992, but it doesn't matter. We still need the market to the market. I'll put it this way, the market today is no less important. The ability of people to buy and sell unobstructed by the state allowed to contract and experiment with different contracting terms, including prices and interest rates, the ability of people to do this is no less important today than it was a hundred years ago or than it was in 1944 when Hayek wrote The Road to Serfdom more than it was in 1992 when Hayek died. The ability of the market to cause people to observe their unique economic situations and then to act on that unique, on those unique bits of knowledge in ways that cause that knowledge to then be transmitted through the price system. That reliance on the market today is no less important than it was in the past.

(31:37):

In fact, Hayek would say in a way it's even more important. I'm kind of lucky to say that it was very important even in the past, but as our world becomes more complex, we now have 8 billion people in the world, not just 2 billion as was true I think when I was born. And then we have a lot more goods and services and the capital structure, the kinds of machines we have are different and more vary. Degree of labor specialization today is a lot higher than it was when Hayek was a young man. And as those complexities increase, it becomes even more important to rely on the market. Or lemme put it this way, it becomes even more absurd to imagine that we can turn over to some central planning bureau, to some government office of economic planning, the task of observing the economy with their statistical methods and with even their eyes, and to imagine that they can get all this information or even a tiny fraction of this information without relying on the market. They can't. The market's importance, its fundamental importance lies in its immense and unique ability to prompt people to act on their unique bits of knowledge in ways that cause those unique bits of knowledge to get incorporated into market signals. And that's something that no computer computers aren't even designed to do that it's not a calculation problem, it's a discovery problem. It's a challenge of discovering what knowledge is out there and how that knowledge, it can be integrated with the knowledge of information of countless other people.

Juliette Sellgren (33.39)

Well, and it's funny because for a multitude of reasons. First, I think what you said at the very beginning of this was entirely right. The reason why we care about ChatGPT talk about generative AI as replacing human beings. That's a separate issue. But really the reason why, especially academics, people who are concerned with knowledge care about this stuff is because of plagiarism and incorrect information. We care about the way that it aggregates and transmits information and what information it puts out. So it is exactly a price could be synonymous with in terms of an information transmitting mechanism, AI. And so it's just funny because that in a way, AI in a way exactly makes the case of why the price system is a priceless mechanism. I'm being silly. I see, unlike a lot of people, I don't spend a huge amount of time pondering AI, but I know other people have made this argument and the argument that I find most persuasive, at least at this point is that AI is just another tool. It's an incredibly impressive tool, but computers or impressive tools when they first emerge, I alluded earlier when I was your age, this is when personal computing is just emerge. Everybody is going to have computing at their fingertips. It turned out to be the case, and these tools allow us to do things that we couldn't before. Do they allow us to do things that we could do but do 'em a lot faster? But they cannot, by their very nature, they cannot. They're not designed to go out in the world and find all the dispersed information that's out there. That's not what they do.

(35:41):

They come into their own when information is fed into them and then they process it, they process it very quickly, and they may do some interesting things in that processing of the information. They don't have access to all the unique bits, Hayek in a famous phrase of the knowledge of the peculiar, peculiar particular circumstances of time and place. I think something like that. And it's that knowledge. It's just on the ground, everyday stuff, everyday bits of knowledge that intellectuals don't think about. We intellectuals think of knowledge as stuff that we can articulate, stuff that we can find in books, stuff that we can go to Google and find statistics on. And when Hayek talks about knowledge he has in mind things like, again, things like the unique knowledge of the plant manager about how to deal with a worker's strike, how to deal with what happens when the weather shuts down one particular road that leads to the factory, how to repair a machine, who to call to repair a machine that breaks down what ingredients might work as a good substitute for some other ingredient that the shipment of it got delayed.

(37:31):

We don't think about these things. The market works so incredibly efficiently that again, we ordinary people. We go to Amazon, we want to order something, there it is, we order it, it's on our doorstep sometime that same day, go to the supermarket. All this stuff's there. We’re completely blind to the literally trillions of decisions made every day by people, each one minor take away any one of these decisions and have any one of these decisions be made mistakenly. It's not going to change our life. But when you have trillions of these decisions be made every day, all of which you're feeding into each other through the market, if you got rid of those, if you said, look, we're going to get rid of all these trillions of people or hundreds of millions of people making trillions of decisions every day, and we're going to turn it over to a central planning board, we're going to give it to a bunch of government bureaucrats and they'll do a better job.

(38:42):

That's what high, that's just ludicrous. You don't understand the economic problem. The economic problem is how do we deal with unfathomable complexity? And the market is the answer as to how we deal with unfathomable complexity. And from a Hayekian perspective, it's important to say the fascinating thing about the real world is not that, well, markets sometimes fail. Of course they do. The fascinating thing is, my gosh, it's astonishing how well they work given that no one designed it, no one planned it, no one could even conceive of it. I'm repeating myself now about the complexity, about Hayek’s obsession with the complexity of the modern economy, but it is crucial to his work. And you cannot understand Hayek without understanding that he was always first and above all aware of this complexity and bothered by people's failure to come to grips with it.

Juliette Sellgren (40.04)

Something that's funny is that if you think about modern economists who are doing labor, for example, and they're calculating things like willingness to pay for having flexible schedules and whatever, all of those calculations, which you can criticize in a lot of ways where we know exactly what Hayek would say because we just talked about it. But even they are using this implicit acknowledgement of what Hayek says because they use prices and quantities in the market, hours worked and wages and all of that. And these decisions to then infer what would happen, whether or not that's right. That's kind of where the critique comes in. You're exactly right. It's a very good point. I mean, to do any kind of credible study along that line, you're correct that these researchers look at market prices and wages and they infer from those what the trade-offs are that people make about willingness to work or in other cases willingness to pay or their risk preferences. What Hayek would say in response to that is that might certainly useful for lots of scientific purposes. He would just issue this one warning that well, preferences do change and constraints do change. And so just because you estimated a willingness to work for the years 2020 through 2023 doesn't mean that that estimate is going to hold for the years 2026 through 2027. Human humans do change their preferences and the constraints within which we operate in the world also change. And when those change the past estimates, empirical estimates of the way people may tradeoffs. We have to be, we can't think of 'em as constants, as guides to the future. I mean, serious researchers know this is not unique to Hayek, but a lot of unserious researchers don't know it. They think they're doing science when they calculate how people may trade offs in the past and then say, well, okay, this is how people are going to make tradeoffs in the future and not necessarily. So.

Juliette Sellgren (42.38)

Yeah, and also I would say it's only even half right information because we don't know why we don't know the extent. A price doesn't really tell you how that thing aligns with every single other transaction and a single person is made. So it's only available to us through the market system that we can even make these inferences, but they're incomplete. So he won the Nobel Prize in 1974 for pioneering work in the theory of money and economic fluctuations and analysis of the interdependence of economic, social, and institutional phenomenon. This makes sense in light of what we've been talking about. But this rationale is kind of specific and kind of vague maybe, because what he's talking about is kind of all over the place, not in that and undriven, but that he talks about so much. So what do you think has been the most long lasting and significant of Hayek's contributions?

Don Boudreaux (43.40)

So I mentioned basically everything I've said. Astute listeners will know that I've been in Johnny OneNote over these past several minutes. High complexity, high complexity, price system complexity. It's high work on the complexity of the economy and the role of the price system in enabling human beings to deal with that complexity. So Hayek and his most famous justly, so academic work is the use the article, The Use of Knowledge in Society. By the way, I'm going to get back to a little bit of a backstory to the award. So Hayek was, he didn't win the award alone. He shared the 1974 award with the Swede Gunnar Myrdal, and Gunnar Myrdal was a famous man of the left. Hayek course was a famous man of Hayek, did not consider himself a conservative. He even wrote a famous article, Why I Am Not a Conservative, but he was considered to be a man of the political right.

(44:49):

And I think probably the Swedish central bankers who award the prize, I think they wanted to give it to Hayek, but he was so famous or infamous in many eyes as an apologist for the capitalist system, that they also wanted to give it to Myrdal. Or maybe they wanted to give it to Myrdal who was famous as socialist, and they wanted to balance that out with giving it to a famous anti-socialist. But both Hayek and Myrdal very early on in their early work did work in monetary theory. Gunner Myrdal's earliest work was at least some of his earliest work was in monetary theory.

(45:33):

I think it was appropriate. Hayek did very important work in monetary theory. So they mentioned that. But then as you just quoted, they go on to say this somewhat more vague thing about his studying the complex interrelationships of human actions in a modern economy. So if the question is to me is what is his single most important work? I would say it's “The Use of Knowledge in Society,” but it's really of a piece. I mean, again, I've read nearly every word Hayek has written in English, and I'm very aware, or maybe impressed is the better word, of how it all coheres together.

There is a theme that unites all of Hayek's work and for the umpteenth time. Now, it's this theme of the complexity, the social world relative to the pun of the human mind. And so we need a way to enable the puny human mind to deal with this enormous complexity in a way that doesn't destroy the complexity, but in a way that taps into it to create material prosperity for us and social cohesion. And that's what Hayek was always concerned about, and that's what he excelled, I think, at explaining a lot of people, at least judging from what they say about reading. When they read Hayek, it's clear to me they haven't really read Hayek. Oh yeah, Hayek. He's this guy that wrote this reactionary book in 1944 called The Road to Serfdom. He was apologizing for the capitalist order against central planning. And oh yeah, many years later, he met with Augusto Pinochet.

(47:44):

See, so he must be the Chilean dictator. So he must be a neoliberal, far right market fundamentalist who really only cared about increasing the profits for powerful corporations and the ordinary people and workers, their welfare be damned. This is, I think, a popular view that people have of what Hayek must be about. And it's just so far from reality. If you read Hayek, he was deeply scholarly, very incredibly learned, and always, always concerned with the ability, ensuring that the economy maintains its ability to satisfy not just even principally the needs of the oligarchs or the well to do, but ordinary people. And to insinuate that Hayek was some sort of capitalist apologist is ludicrous, but people insinuate that all the time because they haven't read him. They just read some second or third hand things about him and they leap to conclusions based upon this inadequate information about Hayek.

Juliette Sellgren (49.11)

Thank you so much for taking the time to come on the podcast. I learned a ton, and I know my listeners have as well. I have one last question for you, which is, what is one thing that you are currently working on to improve yourself or your skillset?

Don Boudreaux (49.25)

So I started this doing what I'm about to tell you a number of years ago, and I still try to do it. My efforts wax and wane, but I realized when I was in my thirties, and I'm well past that time now, that reading good literature is good for the brain. So my answer to your first question was learning a second language. I'm not going to learn a second. I'm too old to learn a second language. I'm not going to invest the time. I wish I'd have done it when I was earlier, but it's never too late to read good literature. And the value of reading good literature goes well beyond making you a more informed person for polite circles. So you can discuss what Middlemarch was. It was about if you happen to get asked about Middlemarch in a cocktail party conversation, really good literature written by the great writers like Hemingway, Fitzgerald, and George Elliot and Thomas Hardy, and I'm particularly taken with Leo, with Toto [Leo Tolstoy] reading, the Great Writers they wrote with.

(50:45):

It was such depth and complexity that when you read them without knowing it, your mind is being trained or it's being exercised in learning how to think at different levels at the same time. I dunno if that makes any sense, but the words that appear in the page say one thing, and that has a meaning. But it's all part of a deeper text that's going on deeper stories, deeper meanings that you can discover or infer. And so I find that, so whenever I have the opportunity, I pick up what I regard as classic literature, and I read it. And again, it's not only it is enjoyable, there's a reason Anna Karenina, for example, is a popular novel. It's a beautiful and wonderful story, but I feel that it improves my mind. It's almost like doing sit ups for my mind. It makes it stronger and better and more sharp.

Juliette Sellgren 

Once again, I'd like to thank my guests for their time and insight. I'd also like to thank you for listening to the Great Antidote Podcast. It means a lot. The Great Antidote is sound engineered by Rich Goyette. If you have any questions, any guests or topic recommendations, please feel free to reach out to me at great antidote@libertyfund.org. Thank you.