Freidrich Hayek (1899-1992) is an influential economist best known for his theory of prices and support for libertarianism. Hayek has also made contributions to Austrian school of economics. Economist, Bradford Delong says,
The basic problem is that there are three Hayeks:
the (absolutely brilliant) price-system-as-information-aggregator Hayek.
the (absolutely bonkers) business-cycle 'liquidationist' Hayek.
the (absolutely wrong ) social-democracy-is-evil Hayek.
The first was a genius. The second was a moron--his could never make his arguments cohere either conceptually or empirically, but he kept doubling down on them and wound up in infinite reputational bankruptcy. The third was wrong--I would say blinded ex ante by ideology, others would say proved wrong ex post by events. The problem is that the modern-day Hayekians are by-and-large uninterested in the good Hayek (1), and interested only in the bad Hayeks (2) and (3)...
This post is a collection of quotes from Hayek regarding his main contributions to economics.
"The misconception that costs determined prices prevented economists for a long time from recognizing that it was prices which operated as the indispensable signals telling producers what costs it was worth expending on the production of the various commodities and services, and not the other way around. It was the costs which they had expended which determined the prices of things produced... It was this crucial insight which finally broke through and established itself about a hundred years ago through the so-called marginal revolution in economics." (Coping with Ignorance, 1978)
"I don't know what monetarism is... If it means the particular version of Milton Friedman, I think it has because he imagines that he can achieve - ascertain - a clear quantity relationship between a measurable quantity of money and the price level. I don't think that is possible." (Interview with F. A. Hayek, 1983)
Critique of socialism
"Questions about the influence of socialism are increasingly more difficult to answer as the word socialism has so many meanings." (quoted in Friedrich Hayek: A Biography by Ebenstein)
"The more the state 'plans' the more difficult planning becomes for the individual." (The Road to Serfdom, 1944)
"There mere idea that the planning authority could ever possess a complete inventory of the amounts and qualities of all the different materials and instruments of production of which the manager of a particular plant will know or be able to find out makes the whole proposal a somewhat comic fiction. Once this is recognised it becomes obvious that what prices ought to be can never be determined without relying on competitive markets." (Two Pages of Fiction, 1982)
"The reasons why the adoption of a system of central planning necessarily produces a totalitarian system are fairly simple. Whoever controls the means must decide which ends they are to serve." (Planning, Science and Freedom, 1941)
Critique of democracy
"The mechanism by which the interaction of democratic decisions and their implementation by the experts often produces results which nobody has desired is a subject which would deserve much more careful attention than it usually receives." (The Political Ideal of the Rule of Law, 1955)
"A limited democracy might indeed be the best protector of individual liberty and be better than any other form of limited government, but an unlimited democracy is probably worse than any other form of unlimited government, because its government loses the power even to do what it thinks right if any group on which its majority depends thinks otherwise." (Letter to the Times, 1978)
Microeconomics and macroeconomics
"What has done much damage to microeconomics is striving for a pseudo-exactness by imitating methods of the physical sciences which have to deal with what are fundamentally much more simple phenomena." (Coping with Ignorance, 1978)
"I believe it is only microeconomics which enables us to understand the crucial functions of the market process: that it enables us to make effective use of information about thousands of facts of which nobody can have full knowledge." (Coping with Ignorance, 1978)
"It seems to me more and more that the immense efforts which during the great popularity of macroeconomics over the last thirty or forty years have been devoted to it, were largely misspent, and that if we want to be useful in the future we shall have to be content to improve and spread the admittedly limited insights which microeconomics conveys." (Coping with Ignorance, 1978)
Philosophy of economics
"I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it... The Nobel Prize confers on an individual an authority which in economics no man ought to possess." (Nobel Banquet Speech, 1974)
This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence." " (Nobel Banquet Speech, 1974)
"You cannot successfully use your technical knowledge unless you are a fairly educated person, and, in particular, have some knowledge of the whole field of the social sciences as well as some knowledge of history and philosophy." (On being an economist, 1991)