Hayek: A Collaborative Biography

The first half of the 20th century was a tragic time for classical liberals. Their philosophy, arguing for a limited state and a self-regulated economy, had dominated policies in the 19th century in the Western world. But from the late 19th and early 20th centuries, progressive intellectuals suspicious of capitalism were beginning to play a greater part in public discourse. In the war from 1914 to 1918, the classical liberal world came to an end, politically as well as intellectually. As Hayek (1967 [1951]) later remembered: ‘At the end of the First World War the spiritual tradition of liberalism was all but dead.’ The war had triggered a massive expansion of (military) government. It brought the first large-scale experiments with central coordination of resource allocation, production and distribution, as well as trade restrictions and strong regulation. After 1918, the liberal social order lay in ruins, in Russia and — to a lesser extent –in the Western countries as well. As a result of the huge build-up of public debt for war financing, the end of the Gold Standard and the subsequent rapid expansion of the paper money supply, hyperinflation emerged in Central Europe, with devastating consequences for social stability.

In mid-April 1948, F. A. Hayek ceased work on a relatively lengthy draft postscript to The Road to Serfdom.¹ Unfortunately, Hayek’s draft postscript — meant to appear in a new edition of Hayek’s book that was initially suggested by the University of Chicago Press in late 1945 — was never published.² Nevertheless, aspects of Hayek’s partially completed postscript — for example, Hayek’s late 1940s assessment of Clement Attlee’s Labour government — would later appear in Hayek’s 1956 preface to the first American paperback edition of The Road to Serfdom.³ Unsurprisingly, Hayek’s 1956 preface readily ceded that Britain had not gone totalitarian during the Attlee years. In early 1948, however, Hayek had provided a far less sanguine analysis of the way in which Attlee’s government was seemingly taking Britain down the road to serfdom.⁴ In particular, Hayek was much perturbed by the Attlee government’s late 1947 reintroduction of the wartime power to direct labour.

This chapter provides an overview of Arthur C. Pigou’s life and works, evaluating his general contribution to economics. Firstly, some aspects of Pigou’s biography are sketched in order to track his trajectory as an academic within the establishment of Cambridge University, and also to depict the main fields of scientific inquiry to which he dedicated his life. Secondly, it summarizes Pigou’s main ideas on welfare economics, industrial fluctuations, employment and applied economics. After that, in order to assess Pigou’s standing within the international community of economists, the paper retrieves the contemporary reviews of some of his most famous books such as Wealth and Welfare, The Theory of Unemployment and Lapses from Full Employment. Finally, the analytical disputes centred on Pigou’s theories about utility comparisons, and the determinants of employment are presented, along with a survey of the most recent appraisals of his work. In the end, a brief comment on Pigou’s intellectual career is offered.

In The Fatal Conceit: The Errors of Socialism, Friedrich August Von Hayek (1988, 7) declared:

The dispute between the market order and socialism is no less than a matter of survival. To follow socialist morality would destroy much of present humankind and impoverish much of the rest.

Between 3 October and 6 November 1976, F. A. Hayek spent five busy weeks in Australia, with more than 60 appointments, seminars, informal meetings and formal presentations (Appendix 1). He and his wife travelled almost the full length of the east coast, from Cairns and the Barrier Reef in Queensland to Melbourne, Canberra and Adelaide in the south, with excursions into the country in Victoria and Queensland. Roger Randerson, a finance journalist and economics commentator, masterminded the tour.The suggestion of a tour arose in 1975; but Hayek (1899–1992) did not pursue that proposal until he accepted an invitation to visit Japan late in 1976 and indicated to Randerson that he could fit in a short Australian tour. Initial inquiries yielded no major sponsors for the tour so Randerson (1912–1991) and Ronald Kitching (1929–2011) underwrote the costs. Eventually some 60 donors contributed sums ranging from AU$50 to AU$2000.

Privatization of property previously controlled by the state is the central tenet of the transition process from a communist to a non-communist state. In the vast majority of the socialist countries, the scale of privatization was truly unprecedented. In Russia, the chunks of former state property were acquired by a relatively small group of capitalists of national origins, while the construction of capitalist institutions remains (at the time of writing) incomplete. In contrast, in the central and eastern European and the Baltic states, foreign actors were heavily involved in privatization; capitalist institutions are constructed, but domestic capitalists are scarce (Eyal, Szelényi and Townsley 1998). A group of laggard reformers, including Belarus, Turkmenistan and Uzbekistan, postponed or avoided or significantly constrained privatization. In these countries, the state continues to dominate in the economy, while the private sector remains relatively small.