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Hayek, Coordination and Evolution demonstrates the continuing relevance and vitality of Hayek's ideas. Internationally renowned scholars representing both the left and the right critically assess Hayek's contribution to economics, political philosophy, legal theory, cognitive psychology and the history of ideas. Challenging mainstream traditions in all these fields, this controversial work provides a unique analysis of the ways that Hayek's legacy can help to solve problems in the contemporary social sciences and philosophy.

Contributors: Norman Barry, Marina Bianchi, Jack Birner, Meghnad Desai, Robert P. de Vries, Harry Garretsen, Roger W. Garrison, Willem Keizer, Inez Kotterman-van de Vosse, Karl Milford, D. P. O'Brien, Gerald P. O'Driscoll, Jr., Raymond Plant, Nikolas H. M. Roos, Peter Rosner, Jeremy Shearmur, Frank van Dun, Rudy van Zijp, Hans Visser, Ulrich Witt. ... Read more

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Customer Reviews (1)

Keynes and Hayek talked to each other,but didn't listen
Frowen has edited an interesting collection of essays covering Hayek's work on such topics as hisgeneral philosophy, his political and social philosophy,his approach to analyzing the role played by knowledge,information,partial knowledge and ignorance,his interactions with and critical assessments of Keynes's approach to capital theory,as well as Hayek's understanding of how society is able to solve the question of the economic coordinationof individual decision making problems intertemporally.I will concentrate the rest of the review on the essays(#1 and #11) contributed by Desai and Steele,as well as the comments of Holscher(who does a superb job in demonstrating the importance of the banker in making the credit available to the entreprenuer in order for him to even attempt to innovate),Chick,and Steele.A major error is made by Steele when he states that the "...General Theory incorporates no theory of capital".(p.258).Keynes's theory of capital is the standard analysis one finds specified in all current principles textbooks under the heading of Production Possibilities Frontier(PPF) or Curve analysis.In the 1930's-1940's this was called the Transformation Curve.Outside of one oblique reference on page 156,none of the author's of any of the essays mention this analysis when discussing Hayek's work and/or Keynes's work or the differences between Keynes and Hayek.This is the main problem with Desai's essay.The reader has no way of comparing the different positions of Keynes and Hayek because no yardstick is specified.This deficiency can be remedied by the use of the production possibilities frontier concept.There are two PPF's- the static and the dynamic.The static PPF assumes that the capital stock is held fixed in the short run and that in the short run there is no technological advance and/or innovation.Thus, the short run PPF can't shift.The long run PPF eliminates these assumptions ,it generally being the case that it is shifting outward over time as investment in improved kinds of capital goods reflects economic growth over time.Both kinds of PPF have an interior region and a boundary region.Only on the boundaryof the PPF's does the fact of resource scarcity constrain choice .A boundary position on either type of curve reflects the full employment of all resources available for use and allows for the existence of slack.Slack in the labor market would be given by the sum of frictional and voluntary unemployment.The existence of slackcapital goods would refer to machines and equipment undergoing maintenance,repair, retooling or upgrading.Assuming two basic kinds of goods,Keynes's consumption goods and investment goods,Pigou's wage goods and non wage goods,or Hayek's consumer goods and capital(producer)goods,an economy operating on the boundary would exhibit an inverse or negative relationship between both kinds of goods.An economy operating in the interior would exhibit a positive or direct relationship.Obviously,a general theory would have to deal with both cases.Thus,Keynes's theory emphasizes that the private sector by itself is usually operating in the interior of both PPF's .This is caused by the extreme difficulty of making correct intertemporal decisions ,made under conditions of uncertainty(partial knowledge or information or low weight of evidence or ambiguity,to use D. Ellsberg's term)or ignorance,about an optimal stock of capital(investment,nonwage) goods that is constantly subject to cyclical changes that are not periodic(anirregular regularity, a la Schumpeter).These changes are induced by technological advances and innovations that cluster together(swarms,in Schumpeter's words).The expected ,futurerate(and total amount)of profit of using these capital goods is generated over time (and, at a point of time,a stock)by the sale of the consumption goods that were created with the use of the stock of capital goods combined with labor services.Involuntary unemployment ,for Keynes,is directly due to the aggregated "failure" of business,as a whole,to solve the intertemporal optimal capital stock allocation problem.Businessmen,in the face of the uncertainty and ignorance of the future,either decide not to invest in capital goods or to spaceout,cut back or slow down their investment expenditures.They decide to increase their liquidity as a way of insuring themselves against ignorance and/or uncertainty.I find the following quote of Steele to be unsupported.Supposedly,"...Keynes's knowledge of capital theory was'widely recognized' to be 'inadequate'...It was this alleged deficiency that caused Keynes(as part of his General Theory)to make investment depend primarily upon the demand for consumption goods.This was a crucial error".(Steele.p.238)There is no error here.The refutation given by Hayek,that a fall in the relative prices of consumer goods will increase the relative profitability of more capitalistic production methods(the Austrian capital theory concept of roundaboutness)holds only on the boundary of the dynamic PPF.It is now obvious that Keynes and Hayek are talking about different positions on the PPF.A careful examination of the collected works of both Keynes and Hayek shows that neither of them took the time to state to the other what their assumptions were.Hayek appears to mean the pure theory of capital assuming a boundary position.Keynes(see Steele,p.241),in his dismissal of Hayek's correct boundary analysis,is clearly dealing with applied theory.In the 1920's-1930's,due to the Great Depression,Keynes simply assumed that Hayek was presenting an argument about an economy operating in the interior of its PPF.Note that nowhere in all of the Hayek-Keynes correspondence did Hayek (or Keynes)write a simple note of explanation to the other scholar, using the literary equivalent of the standard PPF analysis,explaining explicitly what they were assuming.The comment of Chick and the reply of Steele demonstrate that they are talking past each other.Contrary to Chick,Keynes'sgeneral theory includes the Hayekian position as a special case if the economy is operating on the boundary.In fact,if sufficient public goods investment eliminates the sub optimal stock of capital goodsproblem in the private sector and keeps the economy on boundary positions,Keynes's theory merges with Hayek's theory.Only in the interior does Keynes argue that investment is primarily a function of the EXPECTED(not actual) sales of consumer goods.On the boundary,an inverse relationship exists between consumer goods and capital goods.Investment would then be independent of actual consumer demand,but still be dependent on future,expected consumer demand.I recommend this book in its present form despite the fact that the reader will not be able to discern why the disagreements between Keynes and Hayek were never resolved unless he really understood his PPF analysis when he took his principles of economics courses. ... 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This work examines the Hayek-Keynes debate on business cycle theory and argues that the key issues at the heart of the controversy in the areas of money, interest and capital theory are much neglected in current macroeconomic modelling. ... Read more

Customer Reviews (1)

1.5 stars-Neither Cochran nor Glahe have any idea about what Keynes 's theory entails
This book is an expanded version of an article that first appeared in the academic journal,History of Political Economy(HOPE),in 1994.The first edition of the book came out in 1999.This review also applies to the 2010 second edition version since not a single sentence has been changed in the second edition from the first edition.
The authors have no idea about what the primary variables are in Keynes's theory of investment and capital formation over timein the GT which Keynes also uses to explain the business cycle.This is due to the fact that they never read the A Treatise on Probability (TP,1921) or chapters 12 and 13 of the GT .They substitute the confused Lerner- Hansen-Klein-Solow-Modigliani-Heller-Tobin discretionary ,demand management interpretation of Keynes, based on the continual use of expansionary and contractionary fiscal(changing tax rates)policy and monetary(changing interest rates) policy to " fine tune " the economy. Keynes's own theorycompletely rejected any such approach.Keynes's rejection of this approach is explicitly specified in chapter 10 in footnote 1 on pp.128-129,p.164 and in chapters 22,23 and 24 of the GT.The complete rejection of this approach canbe found on pp.225-410 of Volume 27 of the Collected Writings of John Maynard Keynes.

The Hayek-von Mises theory of the business cycle is practically identical to the loanable funds theory that postulates that investment and capital goods spending is an inverse function of one single variable,the real rate of interest.Only changes in the quantity demanded of capital goods,ceteris paribus,are considered.Hayek always starts his analysis from the boundary of the Production Possibilities Frontier (Curve).Two types of goods are considered ,consumption goods and capital(producer) goods.Hayek claims that the central bank,controlled completely by government bureaucrats and not by the private commercial banking industry,attempts to artificially increase spending in the private capital goods industry by increasing the supply of money so that the rate of interest will be artificially decreased below its natural rate.Given that capital goods spending is an inverse function of only one variable,the real rate of interest,an artificial boom/bubbleis set off as businessmen are induced to spendmore than they would have on capital goods.Note that none of the loans are flowing into the purely speculative financial money and stock markets under this theory.The result is malinvestment in the intertemporal structure of capital goods .This will later lead to a movement inside the PPF ,a bust, as businesses stop spending on capital goods once they realize that they were tricked by government bureaucrats into investing in capital goods that ultimately lead to losses.This process repeats over and over again.Government bureaucrats trick the businessmen into malinvestment again and againand again.A boom -bust cycle is generated throughout time.This is Hayek's and L von Mises's business cycle theory .This theory is obviously false.Note that there can be norole in the von Hayek-von Mises business cycle theory for expectations,uncertainty and the optimism/pessimism of businessmen.
Keynes's theory is presented below.

Capital formation is a function of four(five) variables.The first is the real rate of interest.The second is the marginal efficiency of capital(MEC).This incorporates businessmen's expectations of future profits/losses.This variablealone invalidates the von Hayek -von Mises theory since expectations of future losses [Keynes's third variable,lack of confidence in expectations and Keynes's fourth variable, pessimistic-optimistic animal spirits,will lead to insurmountable problems for the Hayek-Mises theory] will cause the investment demand schedule for capital goods to shift in sharply to the left ,irrespective of any decreases in the real rate of interest made by the central bank.The only way of fixing the von Hayek and von Mises theory is to assume that businessmen ALWAYS have positive expectations of future profits,ALWAYS are confident about the future and are ALWAYS optimistic about the future.Both von Hayek and von Mises implicitly assume this based on their theory of what makes the entrepreneur tick.Entrepreneurs are always confident,optimistic and expect future gains/profits ALL OF THE TIME.
Keynes's thirdvariable comes for his TP.Keynes's degree of confidence in the expectations underlying the MEC calculations is explicitly derived from his index to measure the weight of the evidence,w.Keynes integrates w into an original decision approach based on integrating nonlinearity and non additivity into the expected value and expected utility rules used by neoclassical economists.I have appended a discussion of this after my review of the earlier edition of this book for the interested reader.The problems raised by Keynes in this respect are simply ignored by Hayek .Keynes's fourth variable is specified in his discussions of " animal spirits " and refers to the optimism-pessimism of the entrepreneur.A fifth variable,the reliance by businessmen on conventions and crowd or group behavior in the case of low confidence,is excluded by Hayek and von Mises based on their methodological individualistic approach which disallows any impact by crowd -group behavior on individual decision making.
The authors of this book needed to completely revise/change their presentation from 1999,which ispractically identical to the 26 page presentation made in 1994 in HOPE .The authors could have presented their argument as an attack on a particular variate/ version of " Keynesian " economics.However,this is not what they have done.They have completely misrepresentedthe economics of Keynes as presented in Keynes's original arguments and analysis in his 1936 General Theory .I can't recommend this book even for Austrian true believers.



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Early in the last century the successes of science led a group of French thinkers to apply the principles of science to the study of society. These thinkers purported to have discovered the supposed 'laws' of society and concluded that an elite of social scientists should assume direct control of social life. The Counter-Revolution of Science is Nobel Laureate Friedrich Hayek's forceful attack on this abuse of reason. ... Read more

Customer Reviews (10)

A work of genius
Friedrich August von Hayek (1899-1992) was a great Austrian-born economist and philosopher. When one considers the breadth of his work and the acuity of his analysis, he may very well be the pre-eminent sociopolitical thinker of the 20th century.

No one has been such an outspoken advocate for liberty, or such a devastating foe of all forms of socialism--what Hayek often calls "collectivism." In The Counter-Revolution of Science (1952), he deconstructs the illusions of the early socialist thinkers, notably the false doctrine of "scientism," the misapplication of scientific methodology to social phenomena, particularly history.

History, Hayek explains, is not a real thing, subject to the methods of the natural sciences. If we are to undertake a study of zebras, we need not hesitate to employ these methods. We see before us a type of animal that is clearly distinguished from other species. There can be little doubt that a zebra is a zebra. Our subjects behave in accordance with the characteristics of their kind. They cannot change themselves, and there is no emotional or intellectual bond between researcher and subject.

All this is completely different when it comes to human history. Our subjects do not behave in a predictable fashion, and they can remake themselves. There are many bonds (and enmity) between researcher and subject. But most importantly, the creation of history is itself a subjective act. The actors are implementing what they believe to be "their" history of the moment; moreover, each individual has a different perception of his own behavior, his neighbor's behavior, and indeed everything else occurring in the world. To say that this phenomenon is subject to laws in the same sense as natural laws is a serious error.

When I read Hayek, I am always struck by his vast command of history, culture, philosophy, and economics, as well as by his matter-of-fact tone. His attitude is distinctly non-ideological; he is never the advocate of a party or "program."

Hayek warned us about flirtation with the wily seductress that is collectivism. Will we take heed?

Hayek on the Sciences
The other reviewers on Amazon have done an excellent job summarizing the main points in this book.I will briefly contribute to this discussion by detailing the arguments that stood out to me.

First of all, the book is dividied into two sections: (1) Scientism and the Study of Society; and (2) The Counter-Revolution of Science.The former expounds the differences and peculiar histories of both the social and natural sciences, while the latter seeks to understand the historical development of "scientism", finding its roots in the rationalistic tradition of French (continental) thought.

The first part is the more important section, and should be read carefully.Hayek traces the long escape of natural science from the anthropomorphic thought that characterized the Middle Ages.External events were believed to possess some transcendental reality.Slowly, however, science began to discover explanations of external reality that differed from our common sense perceptions."Facts", it was argued, are different from "appearances."Note that in this discussion Hayek is not attacking the character of science when it is conducted in its own proper sphere.Science has much to say about the relation of material things to other things (cause and effect, etc.).Scientific study errs, however, when it begins to substitute material explanations for human affairs.There are some phenomena that cannot be explained by their material characteristics.In fact, most phenomena involving human opinions and beliefs cannot be explained by natural science.Hayek gives several illuminating examples to illustrate his case:"words", "sentences", "crimes" "family", "exchange", "money" etc. clearly can only be understood by finding out what people think about these things and not from their objective characteristics.

In this book Hayek shows that the social sciences are fundamentally distinct from the natural sciences because men can only be understood through their beliefs and opinions.A very important work.

Understanding the Limits of Reason
The Counter Revolution of Science is an important book for several reasons. First, The CRS explains the futility of schemes to plan progress, the impossibility of efforts for the "human mind to lift itself up by its own bootstraps". What this means is that "the attempt of conscious reason to control its own development limits the very growth to what the human mind can could foresee".Freedom "releases the knowledge and energies of countless individuals that could never be utilized in a society consciously directed from the top". Second, the CRS explains how the mindset of the physical sciences, which focuses on objective factors, fails when applied to economics. Understanding economics requires an appreciation of subjectivity in human relations. Engineers pursue technical excellence according to objective scientific principles, without considering economic factors (i.e. scarcity), and worse still the application of mathematical methods from the social sciences creates a false and dangerous impression that society can itself be engineered. Third, Hayek examines the history of the developmentof `scientistic' ideas, whereby various thinkers (especially St Simon and Comte) popularized positivism, socialism, and corporatism. Finally, reading the CRS instills an appreciation of the humility of individualism and disdain for the hubris of collectivism in the reader.

Generally speaking, Hayek makes the importance of recognizing and respecting the limits of human reason abundantly clear.Hayek saw that modern collectivism was working to undo the intellectual progress made during the Age of Reason and the Enlightenment. Collectivism was antithetical to reason, and would lead us to a new Dark Age if not reversed. Persons of the left with surely find this absurd, and their revulsion to Hayek's thesis is consistent with his thesis. The Left does not reject reason explicitly, it abuses reason unwittingly. People on the Left truly believe that they are progressive and scientific, but this is a false belief. Socialists and Welfare State Liberals abuse human reason by failing to see its limits.

The background to this book is simple. Hayek started his career writing technical economics. Hayek's efforts were initially met with success. Hayek initially swayed professional opinion on business cycles. Hayek also forced socialists to revise their early proposals. Yet professional opinion turned against Hayek during the mid thirties. Why? Had they proved him wrong? Did they fail to understand why he was right? How was it that intelligent and educated people could not see the strength of Hayek's arguments? Hayek's technical economics show how the capitalist system functions. Yet Hayek misunderstood the way in which his peers understood the term `technical economics'. That is, Hayek erred by underestimating the influence of positivist and other ideas. Hence Hayek turned to explaining why economists and other educated people were unable to understand correct economic theories: they had embraced a false notion of rationalism.

I find the sections on Engineers particularly interesting. Hayek's views on the role of engineers in society are so diametrically opposed to Veblen's Engineers and the Price System that one must wonder why he did little more than mention Veblen in passing. The Counter Revolution of Science is one of Hayek's best books, and that is saying a lot. The Counter Revolution of Science was important in the twentieth century because it penetrated to the core of intellectual problems of that time. We live in a new century now, but the old problem of abusing reason remains. One need only look at the policies of Bush/Cheney and Obama/Emanuel to see how the social engineering mindset prevails in modern America.

The CRS represents Hayek at his best, insightful, informative, and well reasoned in his conclusions. These are important ideas too, given that people still believe in false notions of rationalism, whereby most people still trust that the so-called best and brightest can best plan society. The Counter Revolution of Science should be read by the entire educated public.

To overlook the problems doesn't mean to face them!
Friedrich von Hayek has been one of the most ardent exponents of the dreamy hopes of progress and happiness that supposedly, would be brought by the Industrial Revolution.

When the triumph of the polytechnic spirit as he calls it, covers and comprises the whole of human experiences, in such extent to deny any other value it becomes a new sect and really, all of who maintain this belief become heretics due its own fanaticism. He wants to prevent us about the enormous risk of reducing the science to "scientism."

The rereading of this text is especially helpful in these times in which we are immersed in what we might call an ethical deficit of huge proportions that has underpinned the pragmatism to unexpected places. So the fact to expect the science and technologybe by themselves the universal antidote, product of a superficial diagnosis or mistaking cause and effect, sooner or later a double cutting doge weapon.

Two brief examples may witness it: the use of DDT resolved a serious problem but also generated another one. And here we have: how to deal and even conciliate a dynamical vitality in our way of life without damage of our environment; because the imminent crisis of "the greenhouse effect" simply cannot wait any longer and obviously will demand and even affect a wide spectrum of the productive forces, no matter how effective negotiator you be at the moment to conciliate both interests in conflict.

The fallacy of misplaced concreteness (A.N. Whitehead)
In this book, F.A. Hayek sets some very important nerves blank.
Social sciences study the relations between men and things and between men and men. Some philosophers thought that social sciences should be treated like natural sciences and that the latter's laws were also valid for the former ones. This `scientistic' viewpoint led to the worst absurdities and aberrations in the history of philosophy.

One of the task of science is to constitute `wholes' by constructing models which reproduce the relationship between some of many phenomena observed in real life. `Wholes' (language, market, morals, money, social processes ...) are not natural `units' like flowers, but refer only to certain structures of relationships which we select because we think that we can discern connections between them. However, for some philosophers `wholes' are more than the aggregate of all constituent parts (e.g. human history, societies, economies) and are subject to relatively simple laws. This viewpoint led to the thesis that the coherence of these large entities must be subjected to conscious control.
As F.A. Hayek remarks, phenomena like language, markets, money or morals are not real artifacts, products of deliberate creation, but the outcome of spontaneous processes. There is a crucial difference between influencing spontaneous processes and attempting to replace them by organizations fabricated by conscious control. Nevertheless, for some philosophers, processes which are consciously directed are superior to any spontaneous ones. Man must have complete power to refashion everything in any way he desires. The outcome of these policies was pure determinism, relativism, totalitarianism, collectivism, compulsive planning.

A few examples quoted in this book:
For A. Comte, `freedom equaled the rational submission to the domination of natural laws. Liberty of conscience was an antisocial dogma and a revolting monstrosity.' `There is nothing good and nothing bad; everything is relative; this is the only absolute statement.'
For F. Hegel, `man cannot change the course of history, which is directed by the laws of the development of the human mind.' `All that is real is rational and all that is rational is real.'
The influence of these philosophers (and others) cannot be overestimated until today.

In this book, F. A. Hayek shows how the 'fallacy of misplaced concreteness' generated (generates) disastrous policies for hundreds of millions of humans.
Not to be missed.
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In this collection of writings, Nobel laureate Friedrich A. Hayek discusses topics from moral philosophy and the methods of the social sciences to economic theory as different aspects of the same central issue: free markets versus socialist planned economies. First published in the 1930s and 40s, these essays continue to illuminate the problems faced by developing and formerly socialist countries.

F. A. Hayek, recipient of the Medal of Freedom in 1991 and winner of the Nobel Memorial Prize in Economics in 1974, taught at the University of Chicago, the University of London, and the University of Freiburg. Among his other works published by the University of Chicago Press is The Road to Serfdom, now available in a special fiftieth anniversary edition. ... Read more

Customer Reviews (4)

Hayek's best and quintessential work
Hayek was one of the most important economists and social philosophers of the 20th century. This book contains his most important papers (the first five papers of the book, where he starts to build a new social and economic theory), with were perhaps the most important economic articles of the 20th century (yes, I am serious about this claim).

Even today, most economists are under equipped to deal with the problems that these papers grabbed and even solved about seven decades ago. Many of the fundamental problems of modern macroeconomics come from a lack of understanding of what Hayek already knew in the 40's, that macroeconomic problems are the result of intertemporal discoordination of production plans with consumption plans. While his paper on the meaning of competition makes the modern take on the theory of competition and industrial organization naive and immature by comparison: Most modern authors simply doesn't understand what economic competition is. Hayek shows what competition is all about and integrates the economics of information with it. As with industrial organization, the modern approach on information, mechanism design and games with imperfect information is inferior and unsatisfactory if compared to Hayek's treatment of these same problems, with he does in this book in a few dozen pages.

Hayek goes straight to the point and reveals to the reader what are the real problems of economics and what economics is supposed to do: Explain why individuals, acting in their 'little worlds' (their problem sets, or means/ends frameworks), produce social orders beyond their conscious design. That task was already set by Adam Smith in a crude form more than 200 years ago, Hayek sets the problem in its definitive form. The market is a process of competition between individuals that produces tendencies to integrate the knowledge discovered by millions of minds into a consistent set of action plans, this integration is brought by the price system and it is competition the process that produces the knowledge that the prices transmit.

If you wish to know about why Hayek is the most important classical liberal social scientist in the 20th century (well, I would say: THE most important social scientist), you must read this. If you want to know what's really behind the modern libertarian positions, you must be familiar with these papers. If you want to know what Austrian economics really is about, you must read this book. Absolutely obligatory for anybody who wishes to understand the world in with he or she lives.

Different Essays, Similar Themes
Individualism and Economic Order contains several classic essays. Chapter two (Economics and Knowledge) examines decentralized economic planning by individuals. Plan coordination among individuals requires each to form plans that contain relevant data from the plans of others. We each acquire this data through competition in markets. Every time someone adjusts their plans, others must also change their plans. So, initial plan coordination requires each to fully anticipate the actions of others. Since this is impossible, order will emerge as a result of successive trials by individuals in markets. The price system enables individuals to adjust their plans with each other through time. This is the foundation of Hayek's theories of spontaneous order and social evolution. Hayek was far ahead of his peers in examining expectations formation.

Chapter four (The Use of Knowledge in Society) is another classic. Hayek contends that the economic problem is really one how to make use of fragmented and widely dispersed data. As he indicated in chapter two, full knowledge of economic conditions reduces the economic problem to one of pure logic. Markets increase our ability to take advantage of division of labor and capital formation by extending the span of our utilization of resources beyond the span of any individual mind. The price system in markets does this by acting as a communications network. We can then each dispense with the need for conscious control over resources and rely on our own intimate knowledge of local economic conditions, and price information regarding general economic conditions. This proves that decentralized competitive systems will vastly outperform centrally planned systems.

Chapter five looks at the process of competition. Data regarding the least cost methods of satisfying consumer demand comes through the process of competition. The notion of competition as an end state, where we have attained perfect resource allocation, overlooks the importance of the actual processes by which market participants actually compete. Competition is a process of forming opinions and spreading information. It informs us regarding which alternatives are best and cheapest. Those who judge actual market outcomes with theoretical models that assume perfect information are putting the cart before the horse. Competition is the only means by which we can each acquire data on general economic conditions. Governmental bureaucrats do not simply know what the final outcomes of competition are supposed to be. This data is particular to the process of competition itself. We should therefore be wary of those who complain that markets do not deliver perfect competition based on perfect information. Markets are our best source on the data in question, albeit an imperfect one.

In chapter seven Hayek lays out the arguments that some make in favor of Socialism. Some claim that greater equality in incomes is worth the loss of efficiency that is inherent to Socialism. Others want to maintain some degree of free choice- consumer and occupational choice. Yet others want to restrict even these areas of personal choice. Socialists face a problem in trying to show how socialist planners could plan production in terms of satisfying consumer desires, without market prices. The labor theory of value did not explain actual behavior, but was instead an "a search after some illusory substance of value. Since we lack objective measures of the importance of the needs of different individuals, central planners face "a task which far exceeds the powers of individual men". In chapter eight Hayek points to specific informational problems that Socialist planners face. Of course, he deals with information in earlier chapters. But this chapter leads into the next. Chapter nine deals with proposals to simulate market competition under socialism. Hayek mentions that even if central planners have full knowledge of economic conditions, the calculations concerning the allocation of all resources is too difficult to perform. After dealing with the absurd notion of full information, Hayek turns to three issues. First, Socialists once aimed at overcoming the results of markets. Now they accept the results of market competition as a standard to aim at. Second, an omniscient and omnipresent dictator would also require omnipotence to plan an economy using their omniscience. Even if they had omniscience, the central planners would still have to work through an imperfect bureaucracy. So the notion of omnipotence is absurd. We must look at the actual bureaucratic problems that planners will face. Third, Perhaps, in a world of unchanging data Socialist planners could arrive at efficient prices for the means of production through trial and error. But, with changing data, the plans of the authority will never match the decisions of the 'man on the spot'. Hayek discusses incentive problems and knowledge problems at length, and also mentions the potential for abuse by concentrating power into the hands a few. This is the subject of his book "The Road to Serfdom".

The other chapters are not what I would call classics, but are generally of a high quality. Chapter eleven deals with an aspect of trade cycle theory. Chapter six (Free Enterprise and Competitive Order) deals with the limits of market and government and the influence of ideas. This is not Hayek's best effort in explaining these matters. Chapter one (Individualism, True and False) is much better. It discusses the drive to control individual action based on alleged notions of reason. True individualism requires humility towards the processes by which societal order emerges, not as a result of deliberate planning by any particular individual, but as an unintended consequence of self-serving individual interaction.

These are ideas that far too few appreciate. This book is key to understanding the way Hayek thought about social problems in general. The chapters might seem disjointed in the table of contents, but they have much in common. Anyone serious about understanding how society works should read this book, especially if they tend to disagree with the author's pro free market stance. Hayek is one of the worthiest opponents that Socialists face, and this book is one of his best.

One essay towers above the rest ...
own this book, please, if only for the essay "the use of knowledge in society". in a few short pages, hayek explores how to think about how people use and spread knowledge, and how that affects everyday economic behavior.

Interesting analysis of Individual behavior on the economy
F.A. Hayek, well-deserved recipient of the Nobel Prize in Economics, 1976, wrote several other deep books on political economy.This book is about how individuals are better decision-makers when it comes to their ownlives, and that a "Committee" of "Planners" cannotpossibly do a better job (How can you tell that someone else is happy? What they need?What they want?).It is no accident that countries withrelative freedom on economics are more productive and wealthier overall(US/Hong Kong) than countries with little or no economic freedom(India/sub-Sahara Africa) and lots of gov't planning. It can't be mereexploitation or culture, as India has the largest middle-class and a greatpopulation of educated people.India has more college-degree persons thanthe US, yet is significantly poorer.Hayek investigates this.A goodbook, especially for leftists and right-wing oligarchs.I used to be acommie too, but open your mind and put the rhetoric on hold, just for amoment. ... Read more

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Nobel prize-winner F.A. Hayek is one of the great thinkers of the 20th century, but up to now there has been no book for the non-specialist that describes his ideas and explains their significance. Eamonn Butler's clear, systematic, perceptive study fills this gap. Starting with a short survey of Hayek's life, Dr. Butler goes on to analyze all the main elements in his thought under six basic headings: Understanding How Society Works; The Market Process; Hayek's Critique of Socialism; Criticism of Social Justice; The Institutions of a Liberal Order; and The Constitution of a Liberal State.

Hayek's influence in helping a generation to understand the nature of society and the errors of collectivism goes far beyond that of any other writer of his period. Having been decades ahead of his time when he began to write, Hayek is proving to be one of the most seminal thinkers of our age. ... Read more

Customer Reviews (2)

Hayek Was No Lover of Laissez-Faire
Friedrich von Hayek, along with Ludwig von Mises, were among a number of Jewish-Austrian intellectuals to flee Vienna during the 1930s and the encroaching threat of Nazi Germany.This concise 170 paged book by Eamonn Butler, who was Director of the Adam Smith Institute in Britain, attempts to convey the essentials of Hayekian thought that grew out of the economic thought of over 25 books.

After a single paged preface and a 14 paged introduction "Hayek's life and work" are 6 chapters and an Epilogue: Chapter 1) Understanding how society works; Chapter 2) The market process; Chapter 3) Hayek's critique of socialism; Chapter 4) The criticism of social justice; Chapter 5) The institutions of a liberal order; Chaper 6) The constitution of a liberal state; Epilogue) Sense and sorcery in the social sciences.These chapters and epilogue are followed by notes, a select bibliography, and an index.

Some interesting tidbits are that "Hayek's 1941 work, "The Pure Theory of Capital", continues the same theme of looking under the surface of the averages and aggregates which economists like to talk about" and this same "theme was taken up again in "The Counter-Revolution of Science".Butler says that the "problem for any planner is that the 'facts' he must deal with are not concrete things, but are the relationships and behaviour [sic] of individuals themselves, something which nobody can predict in advance" (pp8-9).I suppose somebody forgot to pass Butler's insight along to the American advertising and marketing sector, because they spend 100 billion a year attempting to do what Butler maintains cannot be done - predict the behavior of consumers.

Another interesting aside is the story of Antony Fisher, who founded the Institute of Economic Affairs in London, England, at the suggestion of Hayek who "advised him to avoid politics, and do what he could in the field of ideas"(p12).Unwittingly, these free marketeers provided the camouflage for state corporatism that was appropriated by the Tories in both major parties.See Richard Cockett's "Thinking the Unthinkable".

Hayek is not just an economist, he is also a sociologist: "If we are to understand how society works, we must attempt to define the general nature and range of our ignorance concerning it" he wrote in "The Constitution of Liberty" on page 23(p13).Hayek came up with a sociological term he dubbed "constructivism": "man's mind is itself a product of the civilisation in which he has grown up and . . . it is unaware of much of the experience which has shaped it - experience that assists it by being embodied in the habits, conventions, language and moral beliefs which are part of its makeup"(p152).He adds that "we can only know the world as it is filtered through past experience"(p153).Hayek's recognition of cultural programming stands in contradiction of his earlier view that the actions of consumers cannot be predicted. Butler adds "Note the crucial distinction between Hayek's liberalism [of Scottish influence] and the 'laissez-faire' caricature"(p155).

Hayek is properly critical of socialism, but remains silent on corporate statism.He ignores the fact that corporations are creatures of the state and that in a free market there are no corporations.His silence is strange because he reviewed George Orwell's "1984", which told of Orwell's 1944 days at the BBC doing war propaganda for the British state in the guise of a futuristic novel.Hayek also wrote a nice piece on "The Confusion of Language in Political Thought" in "New Studies" that indicated he was familiar with the attempts of statists to camouflage their activities with the rhetoric of the free market.

In short, Hayek is no Murray Rothbard who understood that government is the problem, not the solution.Hayek, on the other hand, believes some government is necessary.Hayek does not address Robert Nozick's warning that government is similar to a cudgel where parties and individuals compete in order to wield it over others - the larger the cudgel, the more damage it can do.Witness the state terrorism being waged by Bush, Blairand their cronies by wielding the enormous cudgels in the form of U.S. and British governments.The result is American-powered British Empire in contradiction to every value that George Washington and the other Founding Fathers fought for when they fought 'against' the British, not for them as Bush does today.Hayek would be alarmed at today's growing collectivism.

Excellent introduction to Hayek
Professor Butler's "Hayek" is an excellent introduction to the works and thought of F. A. Hayek.I am familiar with many of F. A. Hayek's works, and was very impressed with the way that Professor Butler was able to capture the essence of F. A. Hayek's thought in such a clear and concise manner.I strongly recommend "Hayek" to anyone seeking an introduction to F. A. Hayek, or to anyone already familiar with F. A. Hayek who is interested in a brief summary of his works and thought. ... Read more

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By exploring the writings of Mandeville, Hume and Smith, this book offers a critique of Hayek's theory of cultural evolution and explores the roots of his powerful defence of liberalism. ... Read more

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F.A. Hayek (1899-1992) was among the most important economists and political philosophers of the twentieth century. He is widely regarded as the principal intellectual force behind the triumph of global capitalism, an 'anti-Marx' who did more than any other recent thinker to elucidate the theoretical foundations of the free market economy. His account of the role played by market prices in transmitting economic knowledge constituted a devastating critique of the socialist ideal of central economic planning, and his famous book The Road to Serfdom was a prophetic statement of the dangers which socialism posed to a free and open society. He also made significant contributions to fields as diverse as the philosophy of law, the theory of complex systems, and cognitive science. The essays in this volume, by an international team of contributors, provide a critical introduction to all aspects of Hayek's thought. ... Read more

Customer Reviews (1)

Hayek never provided a technical account of how uncertainty impacts the capitalist process.
This is an interesting collection of essays written on Hayek's contributions to economics,philosophy,and psychology.This review will concentrate on the 5 of the 14 essays( those essays were written byDesai,Skidelsky,Gamble,O'Hear,and Kukathas)that attempt to deal with Hayek's writings on knowledgeand uncertainty(by which Hayek meant complete and total ignorance a la his former student ,G L S Shackle).Hayek acknowledges that the knowledge used by entrepreneurs in their decision making about production and investment is incomplete,scattered,and available in tiny bits and pieces.Hayek acknowledges that decision making takes place under radical(complete and total ignorance)uncertainty.Hayek rejects the theoretical framework of standard neoclassical economics based on either the assumption of perfect and complete knowledge(perfect certainty) or the stochastic version, used by Milton Friedman,Robert Lucas, Eugene Fama,Mankiw and Prescott and Kydland,for example, that relies on the assumption of normality of all markets.Hayek,nevertheless,arrives at the SAME,IDENTICAL conclusion-that " free markets " will spontaneously generate a full employment level of output at noninflationary levels.A careful examination of Hayek's work on uncertainty and Knowledge ,which is not done by any of the authors in this book,reveals that Hayek has no model or analysis showing HOW decision making under uncertainty will generate the conclusion claimed.Hayek simply asserts that such a solution will be attained because uncertainty creates possible opportunities for entrepreneurs.However,all of the available evidence on decision making under uncertainty/ambiguity shows that the vast majority of entrepreneurs are AVERSE to making decisions under uncertain circumstances.Hayek has failed miseribly to present a theory of decision making under uncertainty.Keynes provided just such a theory in his A Treatise on Probability(1921).This theory forms the foundation of the GT.None of the authors of the essays in this book deal with this giant lacuna in Hayek's thought.Hayek had no theory of how uncertainty impacts the business decision making process(or how expectations are formed) over time.Hayek simply asserts.He does not reason from assumption to conclusion.Hayek's conclusion requires(a) that the majority of entrepreneurs are always confident in their expectations,which are always reliable,although Hayek has no model with a variable denoting degree of confidence ,independent ofdegree of probability,which also lacks specificity;and(b)that the majority of entrepreneurs are always optimistic and not pessimistic,although Hayek has no variable in his "model" explaining why entrepreneurs will always be optimistic about the future. .This is why there is no essay in this book that is titled "Hayek and Uncertainty".Hayek's results are due to assertions and claims about the magic of the marketplace .The magic of the market place is a more accurate description of the extreme looseness of Hayek's claim about the spontaneous generation of coordination mechanisms which,as is always the case,are spontaneously generated by the magic of the marketplace.Hayek never explains this process.Neither do any of the authors in this book. ... Read more

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Traditional political theory has placed the individualist libertarian, F.A. Hayek, and utilitarian socialist planners, Sidney and Beatrice Webb, at opposite ends of the political spectrum.This book argues that, far from being mutually antagonistic, the philosophies of Hayek and the Webbs are subtly different aspects of a single tradition. Drawing attention to the underlying sympathies and affinities linking their work and viewing all three as bona fide bearers of the liberal banner, Dr. Crowley explores the relationship between politics, economics, and sociology in the liberal intellectual tradition. Liberalism, he concludes, fails to take into account the idea of community and,in its search for objective knowledge, is essentially anti-political and therefore removed from the real world. ... Read more