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Leo Rosten interviews Friedrich A. Hayek (Part II)


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Relating his professional contacts to his research, Dr. Hayek tells several anecdotes and describes the influence of numerous colleagues on his work. Tracing the rise of Keynesianism, Dr. Hayek recounts how his review of The General Theory was ignored. Dr. Hayek examines the rise and fall of Keynesianism, how Keynes’s ideas evolved throughout his career, and his perceived ability to manipulate public opinion. Hayek's rejection of Freudianism is explored and he explains the differences of opinion he had with Ludwig von Mises.


Interview with Friedrich A. Hayek by Leo Rosten (Part II)
Thanks to Pacific Academy Advanced Studies for permission to distribute this program.

Digitized by: New Media - UFM.
Digitization: Mario Estrada, Jorge Samayoa; content analysis: Alex Weller; content reviser: Daphne Ortiz, Jennifer Keller; publication: Rebeca Zuñiga

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HAYEK: Our discussion turned in a direction which I was always tempted not to speak about.  This is supposed to be about my past, not what I am going to do--that's really not the purpose.  But at the moment I'm writing an essay under the title "The Reactionary Character of the Socialist Conception," which is all based on the idea that--I explained part of it--natural instincts are being released by, on the one hand, the discipline of a gradually evolved commercial ethics being discredited; on the other hand, rationalism telling people, "Don't believe anything which cannot be explained to you."  
I'm having great fun writing this out.  It's all meant to be the basis of a public debate, which we intend to hold someday in Paris, on the question, "Was socialism a mistake?" for which I have gained the support of a dozen members of the Mont Pelerin Society.  The great problem is how to determine the opposite team, because if we select it, it won't have any credibility.  So we have finally decided to postpone the thing, which we meant to hold this coming April, for a year, and try to write out the whole thing as a challenge and then ask the other side to form a team from their midst. 
ROSTEN: Wouldn't Abba Lerner be someone-- 
HAYEK: Abba Lerner was certainly on my list, but I have since been told he hardly any longer believes in socialism.  That's my trouble; the people I knew, who were very honest people, mostly have lost their belief in socialism.  I had Solzhenitsyn on my list, and two days after I had put his name down, he declared publicly at Harvard [University] that he was no longer willing to defend socialism. 
ROSTEN: Well, I think you'll find plenty of intellectuals in the United States who do.  Well, you know, in talking to you, we've really neglected--and I would like to repair that neglect--going back to your experiences in England: first, the London School of Economics, where you met Lionel Robbins. 
HAYEK: Well, Robbins, of course, got me into the London School of Economics.  I didn't know him before, but he got very interested in an essay I had done criticizing-- Do you remember the names of [William] Foster and [Waddill] Catchings?
ROSTEN: Yes, Waddill Catchings.
HAYEK: Yes.  I had written an essay called "The Paradox of Saving," which fascinated Robbins; so he asked me to give these lectures on prices and production that led to my appointment.  We found that Robbins and I were thinking very much on the same lines; he became my closest friend, and still is, although we see each other very rarely now.  
For ten years we collaborated very closely, and the center of teaching at the London School of Economics was our joint seminar.  Robbins, unfortunately, before he had achieved what he ought to have done-- He might have written "the" textbook for this generation--and he had it all ready--but with the outbreak of the war he was drawn into government service.  
That's a real tragedy in the history of economics.  Up to a point, he has since become a statesman as much as an economist, and I don't think he would any longer want to do this sort of thing. 
ROSTEN: Would this have been a textbook on the price system? 
HAYEK: Yes, just a textbook of economic theory, essentially of the functioning of the market.  He was a brilliant teacher, a real master of his subject.  Unlike the English of that period, he was not at all insular; he really knew the literature of the world.  In a sense, modern economics is his creation, by bringing together what was then a number of diverse schools: the English tradition of Marshall, the Swedish tradition, the Austrian tradition--bringing all these together.  
And he did it very effectively in his lectures, which were masterly.  If those had been turned into a textbook, it might have changed the development of economics.  Unfortunately, war came and he never did it.
ROSTEN: Was Alfred Marshall much of an influence on you? 
HAYEK: Not at all.  By the time I came to read Marshall, I was a fully trained economist in the Austrian tradition, and I was never particularly attracted by Marshall.  I later discovered [H. B.] Wicksteed, who was a very important English economist.  I was more influenced, if influenced [at all], by some of the Americans: John Bates Clark, [Frank A.] Fetter, and that group.  But Marshall never really appealed to me.  
I think this somewhat timid acceptance of the Marshall utility approach--the famous two-scissors affair: it's partly cost and so on--his kind of analysis of the market positions, did not appeal to me. 
ROSTEN: How did you get on with [William] Beveridge?  Had Beveridge written the Beveridge Report by then? 
HAYEK: No.  He never wrote it; he was incapable of doing this.  I have never known a man who was known as an economist and who understood so little economics as he.  
He was very good in picking his skillful assistants.  The main part, the report on unemployment, was really done by Nicholas Kaldor.  And I think Kaldor, through the Beveridge Report, has done more to spread Keynesian thinking than almost anybody else.  Beveridge, who was a splendid organizer--no, not organizer, because he wasn't even good at detail--but conceiving great plans, in formulating them, he was very impressive.  
But he literally knew no economics.  He was the type of a barrister who would prepare, given a brief, and would speak splendidly to it, and five minutes later would forget what it was all about. 
ROSTEN: That's extraordinary. 
HAYEK: Everybody knows one famous story: just as I came to London they had written that book on free trade, and then came in '31 the reversal of English policy.  Beveridge quite naively turned to his friends, with whom he had just written a book on free trade, and said, "Oughtn't we now to write a book on tariffs'?" 
ROSTEN: I thought he opposed tariffs. 
HAYEK: Oh, he had!  The book on tariffs was opposed to it.  But after the 1931 change, he suddenly thought that it might after all be a good thing to have a little protection, but his friends of course refused it.  I don't mind putting this on the record now; there was an even more comic scene.  
Fortunately, he knew that he didn't know much economics; so when he made public speeches, he would let either Robbins or myself look through the draft.  Even in the mid-thirties, there was one proposal which was frightfully inflationary; so I pointed out to him, "If you do this, you'll get a great rise in prices."  As usual, he took the comment.  
Fortunately, I saw a second draft of the same lecture, which contained the sentence, "As Professor Hayek has shown, an increase in the quantity of money tends to drive up prices."  This was a very great new discovery.  One could talk at great length about this extraordinary person. 
ROSTEN: What about the others at the London School, such as Harold Laski, who were very much in the Fabian tradition, out of which you came, in one way or another? 
HAYEK: Harold Laski, of course, at that time had become a propagandist, very unstable in his opinions.  There were many other people whom I greatly respected, like old [Richard Henry] Tawney.  I differed from him, but he was a sort of socialist saint, what you Americans call a do-gooder, in a slightly ironic sense.  But he was a man who really was only concerned with doing good--my Fabian socialist prototype--and a very wise man. 
ROSTEN: You're talking about The  [Sickness of an] Acquisitive SocietyTawney. 
HAYEK: Yes.  Curiously enough, Laski and I had a good deal of contact because we are both passionate book collectors.  It was only that way.  And he was frightfully offended by my The Road to Serfdom.  He was very egocentric and believed it was a book written especially against him. 
ROSTEN: Really?  He didn't know economics? 
HAYEK: No, not at all.  And as I say, he must have been a very acute thinker in his youth, but by the time I really came to know him, he had become not only a propagandist but even to the students-- He still had the capacity of getting students excited at first, but even they noticed after two or three months he was constantly repeating himself.  And he was extraordinarily inconsistent. 
ROSTEN: In his private life he was extremely generous to the refugees.  He concealed his generosity. 
HAYEK: Yes, and he was generous to his students.  He would do anything to help his students.  But he was wholly unreliable, both his stories and his theoretical views.  I was present one evening in August 1939, when he held forth for half an hour on the marvels of Communist achievement.  Then we listened to the news, and the story of the Hitler-Stalin Pact came through.  
And when we finished the news, he turned against Communism and denounced them as though he had never said a word in their favor before. 
ROSTEN: That's amazing.  Now this was the period, of course, when John Maynard Keynes was coming into international repute, and I'd love you to talk about him. 
HAYEK: Well, I knew him very well.  I made his acquaintance even before I had come to England, in '28, at the meeting of the Trade Cycle Research Institute.  There we had our first difference on economics--on the rate of interest, characteristically--and he had a habit of going like a steamroller over a young man who opposed him.  
But if you stood up against him, he respected you for the rest of your life.  We remained, although we differed in economics, friends till the end.  In fact, I owe it to him that I spent the war years at King's College, Cambridge.  He got me rooms there.  And we talked on a great many things, but we had learned to avoid economics. 
ROSTEN: You avoided economics?
HAYEK: Avoided economics. 
ROSTEN: But you took on [The] General Theory [of Employment, Interest and Money], didn't you, the moment that it appeared? 
HAYEK: No, I didn't; I had spent a great deal of time reviewing his [A] Treatise on Money, and what prevented me from returning to the charge is that when I published the second part of my very long examination of that book, his response was, "Oh, I no longer believe in all this." 
ROSTEN: He said so? 
HAYEK: Yes. 
ROSTEN: How much later was this? 
HAYEK: That was '32, and the Treatisecame out in '30.  He was already then on the lines towards The General Theory, and he still had not replied to my first part when six months later the second part came out.  
He just said, "Never mind, I no longer believe in this."  That's very discouraging for a young man who has spent a year criticizing a major work.  I rather expected that when he thought out The General Theory, he would again change his mind in another year or two; so I thought it wasn't worthwhile investing as much work, and of course that became the frightfully important book.  
That's one of the things for which I reproach myself, because I'm quite convinced I could have pointed out the mistakes of that book at that time. 
ROSTEN: But, did you seriously think that he would say, "Oh, I no longer believe in the tradeoff between unemployment" and so forth? 
HAYEK: I am sure he would have modified.
ROSTEN: You think he did change? 
HAYEK: He would have modified his ideas.  And in fact, my last experience with him--I saw him last six weeks before his death; that was after the war--I asked him whether he wasn't alarmed about what his pupils did with his ideas in a time when inflation was already the main danger.  
His answer was, "Oh, never mind, my ideas were frightfully important in the Depression of the 1930s, but you can trust me: if they ever become a danger, I'm going to turn public opinion around like this."  But six weeks later he was dead and couldn't do it.  I am convinced Keynes would have become one of the great fighters against inflation. 
ROSTEN: Do you think he could have done it? 
HAYEK: Oh, yes.  He wouldn't have had the slightest hesitation.  The only thing I blame him for is that what he knew was a pamphlet for the time, to counteract the deflationary tendencies in the 1930s, he called a general theory.  It was not a general theory.  It was really a pamphlet for the situation at a particular time.  
This was partly, I would say, due to the influence of some of his very doctrinaire disciples, who pushed him-- There's a recent essay by Joan Robinson, one of his disciples, in which she quite frankly says they sometimes had great difficulty in making Maynard see the implications of his theory. 
ROSTEN: I'm interested in the fact that you think it would have been that easy to have reversed opinion, coming out of a deflationary period. 
HAYEK: Well, I don't think so, but Keynes--
ROSTEN: Oh, he thought so.  I see. 
HAYEK: Keynes had a supreme conceit of his power of playing with public opinion.  You know, he had done the trick about the peace treaty.  And ever since, he believed he could play with public opinion as though it were an instrument.  And for that reason, he wasn't at all alarmed by the fact that his ideas were misinterpreted.  "Oh, I can correct this anytime."  That was his feeling about it. 
ROSTEN: It did not upset him when his name or authority was used?  He had a great influence on politicians, didn't he? 
HAYEK: More in this country even than in England.  He had gained great influence in his capacity during the war, when he was advising the government, but of course then he was essentially updating the Breton Woods agreement.  In the end he had become very powerful, but of course till the war he partly was a protester and partly liked the pose of being disregarded and neglected by official opinion. 
ROSTEN: In the United States, he was in Washington, and when he left the White House--he had already talked to Secretary of the Treasury [Henry] Morgenthau and so on--he made the politically indiscreet remark, which went around all of Washington, that he was quite surprised by how little President Roosevelt knew about economics. 
HAYEK: Surprised?
ROSTEN: He said.
HAYEK: Yes, I think it was a very deliberate indiscretion. 
ROSTEN: You think he said that intentionally.  Was he given to that?
HAYEK: Well, I know he had such a low opinion of the economic knowledge of politicians generally that he cannot really have been surprised. 
ROSTEN: How do you think he will rank in the history of economic theory and thought? 
HAYEK: As a man with a great many ideas who knew very little economics.  He knew nothing but Marshallian economics; he was completely unaware of what was going on elsewhere; he even knew very little about nineteenth-century economic history.  His interests were very largely guided by esthetic appeal.  
And he hated the nineteenth century, and therefore knew very little about it--even about the scientific literature.  But he was a really great expert on the Elizabethan age. 
ROSTEN: I'm absolutely astounded that you say that John Maynard Keynes really didn't know the economic literature.  He had surely gone through it. 
HAYEK: He knew very little.  Even within the English tradition he knew very little of the great monetary writers of the nineteenth century.  He knew nothing about Henry Thornton; he knew little about [David] Ricardo, just the famous things.  But he could have found any number of antecedents of his inflationary ideas in the 1820s and 1830s.  When I told him about it, it was all new to him. 
ROSTEN: How did he react?  Was he sheepish?  Was he--
HAYEK: Oh, no, not in the least.  He was much too self assured, convinced that what other people could have said about the subject was not frightfully important.  At the end--well, not at the end-- There was a period just after he had written The General Theorywhen he was so convinced he had redone the whole science that he was rather contemptuous of anything which had been done before. 
ROSTEN: Did he maintain that confidence to the end? 
HAYEK: I can't say, because, as I said before, we had almost stopped talking economics.  A great many other subjects--his general history of ideas and so on--we were interested in.  And, you know, I don't want you to get the impression that I underestimated him as a brain; he was one of the most intelligent and most original thinkers I have known.  
But economics was just a sideline for him.  He had an amazing memory; he was extraordinarily widely read; but economics was not really his main interest.  His own opinion was that he could re-create the subject, and he rather had contempt for most of the other economists. 
ROSTEN: Does this tie in with your two kinds of minds?  You wrote in Encountersome years ago a piece-- 
HAYEK: Curiously enough, I will say, Keynes was rather my type of mind, not the other.  He certainly could not have been described as a master of his subject, as I described the other type.  He was an intuitive thinker with a very wide knowledge in many fields, who had never felt that economics was weighty enough to-- 
He just took it for granted that Marshall's textbook contained everything one needed to know about this subject.  There was a certain arrogance of Cambridge economics about-- They thought they were the center of the world, and if you have learned Cambridge economics, you have nothing else worth learning. 
ROSTEN: What was their reaction to The Road to Serfdom
HAYEK: Well, Keynes, of course, took it extraordinarily kindly.  He wrote a very remarkable letter to me, but I think he was the only one in Cambridge to do so.  That, I think, shows very clearly the difference between him and his doctrinaire pupils.  His pupils were really all socialists, more or less, and Keynes was not. 
ROSTEN: What was he?  How would you describe him politically? 
HAYEK: I think here the American usage of the term liberal is fairly right, fairly close to what he was.  He wanted a controlled capitalism. 
ROSTEN: And he thought that he could control it.
HAYEK: Oh, yes. 
ROSTEN: Or at least advise those in power.  Is it true that he said, "I am no longer a Keynesian"? 
HAYEK: I haven't heard him say so; it's quite likely.  But, after all, Keynesianism spread only just about the time of his death.  You mustn't forget that he died as early as '46, just as the thing became generally accepted.  In fact, I sometimes say that his death made him a saint whose word was not to be criticized.  
If Keynes had lived, he would greatly have modified his own ideas, as he always was changing opinion.  He would never have stuck to this particular set of beliefs.  And you could argue with him.  
Since we are speaking about him, curiously enough the two persons I found most interesting to talk to for an evening were Keynes and Schumpeter, two economists who were the best conversationalists and the most widely educated people in general terms I knew--with the difference that Schumpeter knew the history of economics intimately and Keynes did not. 
ROSTEN: Had Keynes read Schumpeter? 
HAYEK: I would assume yes, but he wasn't reading much contemporary economics, either.  He probably had an idea [of him].  I have seen them together; so I know he knew Schumpeter.  But I doubt whether he carefully studied any of Schumpeter's-- Schumpeter's book on capitalism, which I mentioned before, came out in wartime, when he was much too busy to read anything of the kind.  
And Schumpeter's earlier works, I would suspect Keynes had read the brochure Schumpeter wrote on money, because that was in his immediate field, but probably nothing else. 
ROSTEN: I'm interested in your earlier comment about the fact that here is a man of immense intelligence, great imagination, wide learning, and so on, and yet was not an economist.  
I'm not clear whether you mean he didn't have the kind of mind that excels in economics--just as in mathematics, say, you can find people who are brilliant but who, given mathematics, are just hopeless--or do you mean he didn't have the kind of mind that makes for first-rate economists? 
HAYEK: Oh, yes, he had.  If he had given his whole mind to economics, he could have become a master of economics, of the existing body.  But there were certain parts of economic theory which he had never been interested in.  
He had never thought about the theory of capital; he was very shaky even on the theory of international trade; he was well informed on contemporary monetary theory, but even there he did not know such things as Henry Thornton or [Knut] Wicksell; and of course his great defect was he didn't read any foreign language except French.  
The whole German literature was inaccessible to him.  He did, curiously enough, review Mises's book on money, but later admitting that in German he could only understand what he knew already. 
ROSTEN: What he had known before he read the book.  How would you distinguish the streams that economics took in Austria and Sweden and England during your time? 
HAYEK: Well, in England--unfortunately, Sweden and Austria were moving on parallel lines--if [W. Stanley] Jevons had lived, or if his extraordinarily brilliant pupil Wicksteed had had more influence, things may have developed in a different direction; but Marshall established almost a monopoly,
and by the time I came to England, with the exception of the London School of Economics, where Edwin Cannan had created a different position, and where Robbins was one of the few economists who knew the literature of the world--he drew on everything--England was dominated by Marshallian thinking.  And this idea that if you knew Marshall there was nothing else worth reading was very widespread. 
ROSTEN: Now, what happened when you came to the University of Chicago?  How did you find that? 
HAYEK: Well, I was in Chicago not in the economics department; I was on the Committee on Social Thought, and I greatly welcomed this, because I had become a little tired of a purely economics atmosphere like the [London] School of Economics.  I wanted to branch out, and to be offered a position to be concerned with any borderline subject in the social sciences was just what I wanted.  
When I came to Chicago, Jacob Viner had already left, but I had known him before, and it was his influence as much as Frank Knight's influence-- So, on the whole, I found there this very sympathetic group of Milton Friedman and soon George Stigler; so I was on very good terms with part of the [economics] department, but numerically it was the econometricians who dominated then.  
The Cowles Commission was then situated in Chicago; so the predominant group of Chicago economists had really very little in common.  Just Frank Knight and his group were the people whom I got along with. 
ROSTEN: Frank Knight was a remarkable person, and he was at heart an anarchist.  His contempt for all forms of government, or the intelligence or the capacity of people to manage things, was such that he seemed to me to end up as a kind of a philosophical anarchist. 
HAYEK: Yes, of course, I know no person more difficult to describe, and who was capable of taking the most unexpected positions on almost anything.  But he was extraordinarily stimulating, even in conversation.  And his influence was wholly beneficial.  
It's hardly an exaggeration to say that all the leading economic theorists in this country above the age of fifty, or even forty-five, come out of the Frank Knight tradition, even more than the Harvard [tradition].  Earlier it was the [Frank W.] Taussig tradition and Harvard, but in the generation slightly younger than myself, I think nearly all the first-class economists at one time or another have been pupils of Frank Knight. 
ROSTEN: Yet, as I remember, he only wrote one book: Risk, uncertainty and Profit.  A remarkable book.
HAYEK: Yes, all the others are collections of essays.
ROSTEN: Did you know that he once gave a lecture entitled "Why I Am a Communist"? 
HAYEK: I've heard that, yes. 
ROSTEN: It was one of the most hilarious experiences I had, because we couldn't believe our eyes or ears when we heard this.  And what it came down to was the fact that the country was going to ruin so fast, and that the growth of governmental power was so great, 
and the federation--people from politics and the New Deal--that only a strong Communist threat could awaken the American people to the need for change and the growth of a conservative movement. 
HAYEK: I've heard him later take a very similar position again, then, to my complete surprise; it was on that occasion that I was told about the earlier lecture.  But he was completely unpredictable as to what position he would take.  
I will tell you one amusing episode about Frank Knight: when I had called that first meeting on Mont Pelerin, which led to the formation of the Mont Pelerin Society, I had already had the idea we might turn this into a permanent society, and I proposed that it would be called the Acton-Tocqueville Society, after the two most representative figures.  
Frank Knight put up the greatest indignation: "You can't call a liberal movement after two Catholics!"  And he completely defeated it; he made it impossible.  As a single person, he absolutely obstructed the idea of using these two names, because they were Roman Catholics. 
ROSTEN: He was a midwesterner, and he had a kind of a dry and original way of thinking.  You knew Viner?
HAYEK: Oh, yes, I knew him quite well. 
ROSTEN: Isn't it interesting to you that Viner wrote three papers, I believe, in which he demolished the then-current theory that wars are caused by governments protecting private profits.  And he did this extraordinary piece of research in England, France, Russia, and Germany on the origins of the First World War, and in effect pointed out it was exactly the opposite [cause].  
How did that revolution in thinking and a breakthrough in research-- Why didn't that have a greater effect? 
HAYEK: I don't know.  In general, Viner, who was one of the most knowledgeable persons and most sensible persons, had an extraordinarily little effect on the literature.  And to my great regret I am told that the manuscripts of three books on which he was working for his last years are not usable.  For some reason or other he seems to have himself become a little uncertain.  
Incidentally, since you have read these essays of mine on the two types of mind-- I didn't mention it in that essay, but the contrast between Knight and Viner seems to me an ideal illustration of the case.  Viner was a perfect master of his subject; he was a greater master of the whole subject than anyone I know.  And of course Knight was very much what I called the "muddlehead." 
ROSTEN: Well, from the way you describe Frank Knight, he was a kind of hick John Maynard Keynes.  That is, kind of a midwestern rover. 
HAYEK: Yes, yes. 
ROSTEN: He had a remarkable founding, or basis, in philosophy, for example.  But he surprised you; he would always come up--because I studied under all the people we've been talking about; I was lucky enough for that--he would always surprise you by coming up with a quotation from some very obscure philosopher of the Middle Ages, about whom he knew a great deal. 
HAYEK: But you knew he also knew the history of economics very well; he knew exactly-- In that respect, he was quite unlike Keynes.  You could hardly mention an ancient or nineteenth-century economist and Knight wouldn't know all about it.  But it was not in the sense that he had made traditional theory his own and that he automatically gave the official reply to any subject.  
There were some people who had no reason to think because they had the answer ready on everything from the literature they had read.  Frank Knight was one of the people who had to think through everything before he formed-- 
ROSTEN: You mean [think through] anew. 
HAYEK: Think anew, yes. 
ROSTEN: That is an interesting comment.  It gave him this quality that endeared him to students of not answering off-the-cuff or, you know, you press a button--
On the contrary, he took students very seriously; he would get annoyed, he would argue, he would show his discontent, and then he would suddenly go into, "But don't you realize the theological implications?" when you were talking about the Federal Reserve Bank or something. 
HAYEK: I don't know how early that was.  When I knew him in the fifties, of course, he was preoccupied with religion.  Though he was always fundamentally atheistic in the antireligious attitude, his greatest interest was religion. 
ROSTEN: He was agnostic, I would say, not an atheist.  He was obviously a man who would refuse to take as firm a position as saying "I know" or "There is no God."  Quite the contrary.  But, unlike Viner, he was unpredictable: for example, his anarchism.  Viner was all of a piece. 
HAYEK: Oh, yes. 
ROSTEN: And he was enormously homogeneous and wide ranging in his thought.
HAYEK: I was driven once, in a similar discussion about the two men, to describe them both as wise.  And then I found I was using wise in altogether different senses in describing the one and the other.  
I find it very difficult to define it, but I would say that in a sense Frank Knight was a more profound but much less systematic thinker while Viner had a rounded system, where he attempted to reconcile everything with everything else.  Viner could have written a very good textbook.  
Incidentally, the first four chapters of Risk, Uncertainty and Profit, which of course Knight did when he was very young, or relatively young, was at that time the best summary of the current state of theory available anywhere.  Robbins, when I came to London, was giving his students the first chapter of Risk, Uncertainty and Profitas an introduction to economic theory, and it was then the best one which was available. 
ROSTEN: Did you find the intellectual atmosphere at the University of Chicago wider, so to speak, than at the London School of Economics? 
HAYEK: Well, there were interdisciplinary contacts.  What I enjoyed in Chicago was returning to a general university atmosphere from the narrow atmosphere of a school devoted exclusively to social sciences.  The faculty club, the Quadrangle Club, in Chicago was a great attraction.  
You could sit with the historians one day and with the physicists another day and with the biologists the third.  In fact, I still know of no other university where there is so much contact between the different subjects as in the University of Chicago. 
ROSTEN: Or as much contact between the undergraduate student and the faculty.
HAYEK: Yes, that too.
ROSTEN: That tradition, I hear, has still maintained.  I should have thought that you would have found yourself returning to a more congenial university. 
HAYEK: In a sense, yes, I had become a little tired of economics after twenty years at the London School of Economics.  And of course economics drove me into the examination of political problems.  I had already come to the conclusion that with our present political constitution you could not expect government to pursue a sensible economic policy--we're forced to do something else--and that has occupied me ever since. 
ROSTEN: Can you give me an example of why this didn't occur to you sooner?  Let me put it this way: the constant argument, whether it's on a very high level or just a journalistic level, is the constant argument between the economist and, say, the sociologist, or the economist and the political scientist, who say: 
"You're not dealing with a model in the abstract; you can't say that it's a political problem and therefore you have nothing to say about it."  So surely you ran into the interferences with economics because of-- We started out earlier talking about the way in which you were raised in a family, which I thought was a very vivid way of pointing out what is ultimately going to be a problem intellectually, when you deal with what is called the real world. 
HAYEK: I think I was just taken in by the theoretical picture of what democracy was--that ultimately we had to put up with many miscarriages, so long as we were governed by the dominant opinion of the majority.  
It was only when I became clear that there is no predominant opinion of the majority, but that it's an artifact achieved by paying off the interests of particular groups, and that this was inevitable with an omnipotent legislature, that I dared to turn against the existing conception of democracy.  That took me a very long time.  
In fact, I'd been mainly interested in borderline problems of economics and politics since before the outbreak of war--'38-'39--when I had planned this book on what I was going to call "The Abuse and Decline of Reason."   The Counter-Revolution of Science, which I wrote as the beginning of this study of the rationalist abuse of constructivism, as I now call it, came out of this.  
Conceptually, I had the big book on the decline of reason ready, and I used the material I had prepared then to write The Road to Serfdomas a pamphlet applied to contemporary affairs.  So it's really over the past forty years that my main interest is so much broader than technical economics, but it's only gradually that I've been able to bring the things really together.  
They arose out of the concern with the same problems, but to treat it as a coherent system, I think I have only succeeded in just completing Law, Legislation and Liberty
ROSTEN: Did you find many of the political scientists responsive to what you were thinking and doing? 
HAYEK: Very few at that time.  There was one good man, not very original but sensible, at the London School of Economics--[Kingsley] Smellie, if you remember him.  There are a few now developing.  There is a man now [in the United States], the Italian [Giovanni] Sartori, who has seen more or less the same problems.  But the general answer is no.  I had very little real either contact with the political scientists or sympathetic treatment of my ideas. 
ROSTEN: But on the Committee on Social Thought you certainly had sociologists like Ed Shils.  I think he was then there, wasn't he?
HAYEK: Yes.  Ed Shils was the only sociologist.  Of course, he was a very intelligent man, but he remained a puzzle to me to the end.  I never quite-- He's an extremely knowledgeable and well-informed man--you can talk with him on everything--but if he has a coherent conception of society, I have yet to discover it.  He probably has, but I may be unjust.  
But he was the only sociologist-- We had philosophers, we had art historians, and of course the chairman was a very considerable economic historian, John Neff.  We had an anthropologist, [Robert] Redfield, who was one of our members.  
It was an extremely interesting club.  There was a classical scholar, David Green, who was interested in the social ideas of the ancient Greeks.  Oh, it was a fascinating group.  And if I may say so, the first seminar I held there was one of the great experiences of my life.  
I announced in Chicago a seminar on scientific method, particularly the differences between the natural and the social sciences, and it attracted some of the most distinguished members of the faculty of Chicago.  We had Enrico Fermi and Sewall Wright and a few people of that quality sitting in my seminar discussing the scientific method.  That was one of the most exciting experiences of my life. 
ROSTEN: Do you find the newer, younger, so-called neoconservatives, whether Chicago or not?  What do you think of them?  Some of them have appeared in the Mont Pelerin Society. 
HAYEK: The economists among them are very good; I'm not so impressed by the people who think along these lines in political science and so on.  But there are a few people now in philosophy, still little-known people, who seem to be very good.  
So I am rather hoping that these ideas are now spreading.  Of course, I think the main thing is that there are economists who are working outside their fields, like Jim Buchanan and [the one] in South Carolina, and some of the people working at UCLA.  
I mean, what I said before--that you cannot be a good economist except by being more than an economist-- I think is being recognized by more and more of the economists.  This narrow specialization, particularly of the mathematical economists, is, I believe, going out. 
ROSTEN: If you were to name five books, ten books, as you look back on your life-- Each of us does this.  I was struck by this fact the other day, reading someone who happened to read [Adventures of] Huckleberry Finnat the age of nine and said, "It was an experience from which I never recovered."  But if you look back over your own background, your own reading, which five or ten books would you say most influenced your thinking? 
HAYEK: That's a tall order to do at a moment's notice. 
ROSTEN: Yes, you're a tall man. 
HAYEK: There is no doubt about both [Karl] Menger's Grundsetzeand [Ludwig von] Mises's On Socialism.  Menger I at once absorbed; Mises's was a book with which I struggled for years and years, because I came to the conclusion that his conclusions were almost invariably right, but I wasn't always satisfied by his arguments.  
But he had probably as great an influence on me as any person I know.  On political ideas, I think the same is true of the two men I mentioned before in another connection: [Alexis de] Tocqueville and Lord [John] Acton. 
ROSTEN: Do you know how long Tocqueville was in the United States? 
HAYEK: Oh, I did know; I have read the diary.  A few months, wasn't it? 
ROSTEN: Unbelievable. 
HAYEK: Yes.  And, of course, I will say that as a description of contemporary America that great book is probably not a very good book; but [it was] extraordinarily prophetic.  He saw tendencies which only became really effective much later than he wrote. 
ROSTEN: Let me go back to something you just said, which interested me very much, on Ludwig von Mises, when you said you agreed with his conclusions but not with the reasoning by which he came to them.  Now, on what basis would you agree with the conclusions if not by his reasoning? 
HAYEK: Well, let me put it in a direct answer; I think I can explain.  Mises remained to the end a strict rationalist and utilitarian.  He would put his argument in the form that man had deliberately chosen intelligent institutions.  
I am convinced that man has never been intelligent enough for that, but that these institutions have evolved by a process of selection, rather similar to biological selection, and that it was not our reason which helped us to build up a very effective system, but merely trial and error.  
So I never could accept the, I would say, almost eighteenth-century rationalism in his argument, nor his utilitarianism.  Because in the original form, if you say [David] Hume and [Adam] Smith were utilitarians, they argued that the useful would be successful, not that people designed things because they knew they were useful.  
It was only [Jeremy] Bentham who really turned it into a rationalist argument, and Mises was in that sense a successor of Bentham: he was a Benthamite utilitarian, and that utilitarianism I could never quite swallow.  
I'm now more or less coming to the same conclusions by recognizing that spontaneous growth, which led to the selection of the successful, leads to formations which look as if they had been intelligently designed, but of course they never have been intelligently designed nor been understood by the people who really practice the things. 
ROSTEN: So Freud did influence you, in the sense that he exposed the enormous power of the not-rational, or of the rationalizing mechanisms, for the expression of self-interest in the psychological sense. 
HAYEK: It may be; I'm certainly not aware of it.  My reaction to Freud was always a negative one from the very beginning.  I grew up in an atmosphere which was governed by a very great psychiatrist who was absolutely anti-Freudian: [Julius] Wagner-Jauregg, the man who invented the treatment of syphilis by malaria and so on, a Nobel Prize man.  
In Vienna, Freud was never-- But, of course, that leads to a very complicated issue: the division of Viennese society [into] the Jewish society, the non-Jewish society.  
I grew up in the non-Jewish society, which was wholly opposed to Freudianism; so I was prejudiced to begin with and then was so irritated by the manner in which the psychoanalysts argued--their insistence that they have a theory which could not be refuted--that my attitude was really anti-Freudian from the beginning.  But to the extent that he drew my attention to certain problems, I have no doubt that you are right. 
ROSTEN: Two comments on that.  You know Bertrand Russell's famous statement--he didn't mention Aristotle--that [although] it has been said that man is a rational animal, "All my life I have been searching for evidence to support this."  Did you know Russell? 
HAYEK: Oh, I knew him, yes, but I had never heard this.  I knew him fairly well.  In the final years of the war, he was back in Cambridge, and while I was still in Cambridge I saw him.  
Even before, he once came to talk to my seminar, and then I was in correspondence with him about [Ludwig] Wittgenstein.  
ROSTEN: Oh, yes.
HAYEK: He, in fact, gave me the whole set of letters which Wittgenstein had written to him, and I had started writing a biography on Wittgenstein around these letters when the literary executors stopped me.  They didn't give me permission to publish his letters before they had published them, and in the meantime I lost interest.  
I had a certain duty, because I am still the only person who knew Wittgenstein both in Vienna and in London.  You know, he was a cousin of mine, a distant one. 
ROSTEN: No, I did not know. 
HAYEK: Oh, yes, he was a second cousin of my mother's, strictly speaking, and I did not know him much in Vienna; but I knew the family, the family background and all that.  And then I was in contact with him in England. 
ROSTEN: Was he Jewish? 
HAYEK: Three-quarter.  The common great-grandmother, his and mine, was of a stern country family, who married into these Jewish Vienna connections.  So three of his grandparents were Jewish. 
ROSTEN: You got interested in Wittgenstein very early, before you were working on your material in philosophy. 
HAYEK: Yes, I read the Tractatus [Logico-philosophicusJ as soon as it appeared, just because I-- My knowledge of the whole thing was curiously indirect: his eldest sister, who was a second cousin, was also a very close friend of my mother's; so this elderly lady--well, she wasn't so elderly then--was talking frequently about her youngest brother, of whom she was very fond, but he was just one of at that time five Wittgenstein brothers whom I didn't really know apart.  I saw them as distant relations.  
I first made his acquaintance--I wrote also an article about my recollection of Wittgenstein in Encounter--at the railway station in Bad Ischl, [Austria], in August 1918, as we were both ensigns in the artillery in uniform, on the point of returning to the front.  We traveled to Vienna together, and it was the first time I really had a long conversation with him.  
But the point I have only remembered since I wrote that essay is that, of course, in his rucksack he carried already the manuscript of the Tractatus
ROSTEN: Did he really?
HAYEK: No doubt, because he was on the way to the front, and he was captured by the Italians with the Tractatuson him. 
ROSTEN: Did Russell know any economics?
ROSTEN: Was he interested at all?
HAYEK: No.  He was very suspicious of it as a science.
HAYEK: He didn't think it was a scientific subject. 
ROSTEN: I once asked him this question, which will interest you because of the precision of his speech.  I said, "But just suppose that, much to all of our dismay, you left this earth and now found yourself standing before the Throne.  There is the Lord in all of His radiance.  What would you say?"  
And, he looked at me as though I was some idiot and said, "Why, I would say, 'Sir, why didn't you give me better evidence?'" which is quite typical. 
HAYEK: Yes.  Oh, yes. 
ROSTEN: At Chicago you found a kind of fellowship, which included the physical scientists and the philosophers.  You haven't mentioned any of the Chicago group of philosophers. 
HAYEK: I don't know.  Keyworth was the only one I was at all-- 
ROSTEN: The law school-- did many of them come to your seminars? 
HAYEK: Not much, really.  I used to know [Harold] Katz fairly well; I used to know [Edward] Levi, but not well, really; the only one I knew fairly well was [Max] Rheinstein. 
ROSTEN: Did Mortimer Adler play any part in-- 
HAYEK: No, he had left Chicago practically the year I arrived.  He was an influence there; everybody talked about him.  But, in fact, I believe I have never encountered him in person. 
ROSTEN: Oh, really?  
HAYEK: Yes. 
ROSTEN: Well, he has tried to do, in a very different way, things on freedom and liberty, but with no foot in the economic or political structure.  He's much more legalistic and philosophical. 
HAYEK: I came across his influence rather via [Harry] Hutchins.  Hutchins I knew fairly well, and I could see that Hutchins was relying on Adler and his ideas.  That made me read some of Adler's stuff. 
Dock windowTable of Contents
Essay, "The Reactionary Character of the Socialist Conception"
Lionel Robbins
Waddill Catchings
Alfred Marshall
William Beveridge
Harold Laski
John Maynard Keynes
Keynes's influence
Keynes's knowledge of economics
Keynes's politics
Keynes and Schumpeter
Competing schools of economics
Experience at University of Chicago
Frank Knight
Jacob Viner
Frank Knight
Intellectual atmosphere at University of Chicago
Modeling the real world
Theory of democracy
Committee on Social Thought, University of Chicago
Five favorite books
Disagreements with Ludwig von Mises
Sigmund Freud
Bertrand Russell
Ludwig Wittgenstein
Professors at University of Chicago
Final credits
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