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Economists - Friedrich August von Hayek (1899-1992)

Hayek, like Friedman was a great believer in free markets. Also like Friedman Hayek was awarded the Nobel Prize in Economics. This was given jointly with another economist called Myrdal in 1974 - just after Friedman received his Nobel prize. However, there the similarity ends - initially. Hayek, as you can guess from his name is Austrian and so is often considered as being a part of the 'Austrian school'. He was a passionate opponent to Socialism and along with another economist called Ludwig von Mises formed the Mont Pelerin Society. This society was pledged to give individuals the freedom to make their own economic choices and campaigned to make people aware of the dangers of Socialism.

Hayek was born in Vienna and from 1927 until 1931 was Director of the Austrian Institute for Economic Research. However, he was then drawn to the London School of Economics, but then at the University of Chicago from 1950 until 1962.

Hayek returned to Austria as a Visiting Professor of Economics at the University of Salzburg in 1969.

Hayek wrote prolifically and passionately. Much of his work is about the nature of free markets and freedom, and when he wasn't arguing the case for free markets he was arguing the case against Socialist planning. His main published works include:

  • Monetary theory and the trade cycle (1929)
  • The pure theory of capital (1941)
  • The road to serfdom (1944)
  • The constitution of liberty (1961)
  • The fatal conceit: the errors of Socialism (1988)

He also wrote a number of works that looked at philosophy and the development of ideas, often linking the two disciplines of economics and philosophy. He always argued the case for individual freedom and free markets. That way, he said, there would be proper incentives to work and save - the basis of an efficient economic system.

Even at the age of 92 when he died Hayek was still actively espousing the virtues of the free-market and he was regarded as something of an 'elder-statesman' of the libertarian movement. Hayek's society - the Mont Pelerin Society - became increasingly influential in the 1970s and 1980s as many politicians began to look for intellectual backing for their free-market beliefs.

Hayek did a considerable amount of work on the trade-cycle theories that were developed by his friend von Mises and combined them with theories on capital. He looked at how real wages will usually fall in a recession causing firms to switch to more labor-intensive methods of production. This in turn will lead investment to fall. In a boom time the opposite will occur.

Hayek also argued like Friedman that the growth of the money supply should be restricted, even if that led to high unemployment, as it was the only way to control inflation.

See also Hayek Center

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