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Marroquín Axel Leijonhufvud interviews Friedrich A. Hayek (Part I) Layout: Get the Flash Player to see this player. Mark Video Segment: begin end play & Share more... [Hide] Copy and paste this link to an email or instant message: [Hide] Right click this link and add to bookmarks:

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About this video Dr. Hayek speaks with Dr. Axel Leijonhufvud primarily about his academic career and intellectual pursuits. First Dr. Hayek tells of his eclectic course of study at university, including law and psychology, in addition to the role of environmental influences. The various academic discussion groups in Vienna and London are described, including the major participants and topics. The Austrian School of Economics is defined, as well as its connections with libertarianism. Later, Dr. Hayek talks about the role of government in private enterprise, against the minimum wage, and the private provision of money. When the government controls the money supply, Dr. Hayek describes how it becomes a tool of the politicians and is not sustainable in the long run. The Road to Serfdom is given special attention, as it was the springboard to his future studies in political science. Finally, Dr. Hayek explains what he sees as the three sources of human values.





Credits Interview with Friedrich A. Hayek by Axel Leijonhufvud

Thanks to Pacific Academy Advanced Studies for permission to distribute this program.



Digitized by: New Media - UFM.

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Jack High Transcript LEIJONHUFVUD: Doctor Hayek, in your early studies you pursued not just law but psychology and economics at the law school in Vienna. Was this sort of triple threat competence common among your contemporaries? HAYEK: Well, common among that group who studied not merely for entering a profession but because of intellectual interest, yes; but it was a small part of the total student population. They were the same people who even in their subject would do more than was essential for examinations. Most of those who would voluntarily attend a seminar beyond the formal lectures would not be interested only in economics but would go outside. But it's partly, of course, connected with the whole organization of the study. I mean, in general, and certainly in all the nonexperimental subjects, instruction was almost entirely confined to formal lectures. There were no tests except three main examinations, mostly at the very end of your study; so beyond the purely formal requirement that the professor testified to your attendance in your lecture book, you were under no control whatever. You chose your own lectures. Very few of them were compulsory, and most of [the students] would not confine themselves to lectures required for their exam. We were entirely free, really, in what we did, provided that we were ready to be orally examined. You see, the examinations were oral examinations only. We did no written work at all for our whole study, or no obligatory written work. There were some practical exercises in legal subjects where we discussed particular things, but even they were not obligatory at that time. And in the law faculty, especially, I think, the majority of the students hardly ever saw the university, but went to coach and the coach prepared them for their final exam. So even the attendance of the lectures would be small, and the part of those who were really intellectually interested was even smaller. But I think what it amounts to, say of the 600 or 800 students in one year of law--it was larger in the immediate postwar period because many years had been compressed in that period--perhaps a hundred would attend the lectures; perhaps twenty would have an acute intellectual interest. But if you were in that group, you then constantly would meet the same men in your law lectures and the art history lectures, or in anything else. It all happened in one building. Except for the institutes and the experimental subjects, it was all in the university building; so even if you had in your regular program an hour free, you walked over to the philosophy faculty and tried different lectures, [some of] which you liked and [some of] which you did not like. LEIJONHUFVUD: And that is the atmosphere that you came to miss, eventually, in London. Do you feel that, in this respect, things have changed in your lifetime? In the universities you visit now, is it becoming more uncommon, perhaps? HAYEK: Oh, I'm sure that it has become more uncommon. I'm sure even in Vienna [it has become uncommon], although I've been very much out of contact with that university. In more than one respect, it's not what it used to be. It certainly is not in existence in England. But of course there's another point. In the continental universities at that time there was a very great break between the discipline of school and the complete freedom at the university. And a good many people got lost in that tradition. You had to learn to find your own way, and most of those who were any good learned to study on their own with just a little advice and stimulus from the lectures. LEIJONHUFVUD: But a great number of students did not finish their degrees? HAYEK: Oh, a great many fell by the way, yes. I think the proportion of those who entered the universities who completed must have been-- I don't suppose more than half of them who entered ever completed the course. LEIJONHUFVUD: What are your views on the advantages of specializing or of pursuing more than one field seriously, the way you and the best of your contemporaries did? HAYEK: Well, it certainly was very beneficial in our time, but it's possible that the amount of factual knowledge you have to acquire even for a first degree-- I think we were more likely and more ready to ask questions, but we knew factually less than a present-day student does. We were able to pick and choose very largely. It didn't matter if you neglected one subject, up to a point. I think on any sort of test of competence in our special subject we were probably less well trained than the present-day student. On the other hand, we preserved an open mind; we were interested in a great many things; we were not well-trained specialists, but we knew how to acquire knowledge on a subject. And I find nowadays that even men of high reputations in their subject won't know what to do for their own purposes if they have to learn a new subject. To us this was no problem. We constantly did it. We had the confidence, more or less, that if you seriously wanted to pursue a subject, you knew the technique of how to learn about it. LEIJONHUFVUD: Another aspect of that was that many of your contemporaries were very interested in methodology and philosophy and retained that interest throughout their careers. It's a common attitude that you often meet today that this is not worthwhile. But if you were not as competent, perhaps, in your specialized subjects, from the contrast between the various fields that you pursued came this interest in methodology. HAYEK: I'm not sure what the answer is. It may have been purely accidental in our circle that the interest in methodology was so high. It was, to some extent, brought by some of my colleagues who went elsewhere for a semester. When people like [Alfred] Schutz and [Felix] Kaufmann went to Freiburg to study under [Edmund] Husserl, or when [Herbert] Furth and [Ilse] Minz went to Heidelberg to study there for a semester, they brought back philosophical ideas, partly because an Austrian student going to another German university doesn't use that semester to continue law, but he looks around for other subjects. So we had special stimuli in our discussion circle who were interested in philosophical problems, and whether apart from these special reasons it would have been-- Well, of course, there was also a great general fashion in Vienna due to the influence of Mach on the whole intellectual outlook. There was this almost excitement about matters of scientific method due to the influence of Mach, very largely. All that came together, and there were probably more-- I don't know in Vienna of any other similar group like our little group, the Geistkreis. There may have been others, but I don't know them. LEIJONHUFVUD: Yes. Well, it was sort of carried on, this influence from Mach, by the Vienna Circle of [Moritz] Schlick and [Rudolf] Carnap, and by [Ludwig] Wittgenstein. HAYEK: But that was much more definitely a philosophical circle. But our group, while we happened to be all ex-law students, law was the least subject we ever considered in our circle. It was either the social sciences or literature or-- Well, sociology is a social science, but sociology in the widest sense. Felix Kaufmann brought in from the Schlick circle the approach of the natural sciences. There were a great deal of semipractical aspects. I mean, the fact that somebody like Alfred Schutz was, by profession, secretary of the banking association, but he was in one sense most philosophical, and he was most intimately connected with daily events. LEIJONHUFVUD: Do you feel that Vienna was uniquely good in producing this first-rate intellectual talent, who were also men of affairs at the same time? HAYEK: In that particular period, I don't know of any similar-- Well, yes, it seems to have been also [true] in Budapest. I have only learned about it much later, but in a way Budapest was even more productive than Vienna in the same period. There were a number of distinguished scientists with a broad interest compared with the population, and even more so if you compare it with the relevant population, which in Budapest was almost entirely, exclusively, the Jewish population, which of course was not true in Vienna. But I didn't know it at the time. LEIJONHUFVUD: But these were not ivory-tower people, either. HAYEK: Oh, no, very far from it. And the Vienna people, for the reasons I discussed already, were very far from ivory-tower people because they had to have a living. LEIJONHUFVUD: So it was partly out of necessity. How did it come about that you founded a circle like the Geistkreis? It included a great many people of later distinction. HAYEK: The initiative came from Herbert Furth, whom you know. He first approached me [about] whether I would join with him in asking Jewish people whom we had known in the university, partly active contemporaries in the law faculty, partly a few personal friends of his more than mine, like [Franz] Glück, the art historian-- Well, my contribution-- I had hardly any distinct contribution in the selection of persons. I think part of the reason is that I was away for the most important period of forming the circle. We formed it immediately after we left the university, but I remained only for a year and a half in Vienna before I went to America. The circle started on a very small scale during that period, but it grew while I was in America. I think that is the reason why Furth made a much more definite contribution to the composition than I did. LEIJONHUFVUD: What was the method of selection? Did you have something like a program in mind when you approached other people? HAYEK: No, not at all. I think at the beginning, Herbert Furth and I would just talk. This was a discussion group, selecting from the people we knew; then some other members might make suggestions, and if the rest of us knew about a man and agreed that he was-- LEIJONHUFVUD: But were you intent on making it an economics discussion? HAYEK: Oh, no, very far from it. I suppose the feeling was rather there were too many economists in it already. LEIJONHUFVUD: So did you try broadening it? HAYEK: Yes. I mean, after [Fritz] Machlup, [Gottfried] Haberler, and I-- We were part of the nucleus, and I think we felt that economics was sufficiently represented. LEIJONHUFVUD: So Machlup, Haberler, and yourself, and Furth. Can you mention some others? HAYEK: Well, [Furth] wasn't really an economist. He learned a lot of economics by that association, but he was not primarily interested in economics. He finally made use of this when he had to go to the United States to get a position as an economist, but in Vienna he was not an economist. LEIJONHUFVUD: He went to the Federal Reserve Board once he came here? HAYEK: Well, no, I think he began with a teaching post at one of the Negro universities in Washington. LEIJONHUFVUD: Howard [University]? HAYEK: Yes, I believe so. LEIJONHFVUD: So Furth and Kaufmann [were also members]. And who were some of the others? HAYEK: [Eric] Voegelin, Schutz--Alfred Schutz, the sociologist--Glück, the art and literary historian. There were one or two people who later left who were very active at the beginning. One or two Germans who had been students in Vienna and returned to Germany: a man called [Walter] Overhoff, who recently died; a man who became a very successful industrialist, whose name I cannot recall. There are several people of whom I have completely lost sight--if I could just remember their names--who were there in the beginning. Furth is the only one who has now a complete list. In fact, I passed on my list to him. He lost all his papers when he left Vienna; so he didn't bring anything himself. And when I found a carbon copy of a list he had sent me many, many years before, I returned it to him so that he should possess the essential information. LEIJONHUFVUD: Now, in this circle, Kaufmann would talk, for example, on logical positivism. And I suppose that you and Machlup and Haberler would give early versions of the papers you were working on. HAYEK: Yes, and I spoke on psychology, for instance. I did at that time expound to them what ultimately became my Sensory Orderbook [ The Sensory Order]. And I think I spoke about American economics when I came back from the United States. Kaufmann was much more generally [concerned with] scientific method. I remember, for instance, we got from him an extremely instructive lecture on entropy and its whole relation to probability problems, and another one on topology. This interest in relevant borderline subjects-- He was an excellent teacher, in the literal sense. After a paper by Kaufmann, you really knew what a subject was about. LEIJONHUFVUD: Do you remember some other topics that would seem perhaps far from economics and the concerns of an economist? HAYEK: Voegelin, who is now [in the United States], read a paper on Rembrandt, I remember; and Franz Glück, the literary man, spoke on [Adalbert] Stifter; and Voegelin, again, on semipolitical subjects; Schutz on phenomenology. I think there were very few economics papers, really, in that circle. LEIJONHUFVUD: So no restriction on subject matter whatsoever. What was the format? Did the famous Vienna cafes play any role? HAYEK: It was all in private homes. It went around from house to house--after dinner affairs. I suppose we were always offered a few sandwiches and tea. Sitting around in a circle or sometimes around a table, I suppose a normal attendance would be under a dozen--ten, eleven, something like that. LEIJONHUFVUD: Was it an exclusively male group? Were you antifeminist? HAYEK: No, it was impractical, under the then-existing social traditions, which created so many complications, to have a girl among us; so we just decided-- Our name was even given [to us] by a lady whom you probably have met, who resented being excluded, and so gave us the name Geistkreis in order to ridicule the whole affair. LEIJONHUFVUD: But it stuck, and you now remember it? HAYEK: Oh yes, we remembered it and accepted it. Her name is Stephanie Browne. Do you know her? LEIJONHUFVUD: Yes, yes. HAYEK: In fact, if you want the anecdotes of the time, she would be an exhaustive resource. LEIJONHUFVUD: Yes. Let me turn to the other circles in which you moved: first, in economics. There was [Hans] Meyer's seminar at the university, and then there was [Ludwig von] Mises's seminar that was, in effect, outside the university. Was the Mises seminar the more important? HAYEK: Oh, yes, very much the most important. Meyer's seminar was almost completely confined to marginal utility analysis. It took place at a time that was inconvenient to most of us who were already in a job. I'm not certain at all that I ever attended a seminar of Meyer's. I did see Meyer. Meyer was a coffeehouse man, mainly. If there was any place he was to be found, it was at the coffeehouse at Künstlercafe, opposite the university; and I did sit there with him and a group of his students many times in quite informal talk, which I'm afraid was much more university scandal than anything serious. Occasionally there were interesting discussions. You could get very excited, particularly if you strongly disagreed with somebody. And there were all these stories about his constant quarrels with Othmar Spann, which unfortunately dominated the university situation. But, on our generation his influence was very limited. Rosenstein-Rodan was the main contact. Of course, Rosenstein-Rodan and [Oskar] Morgenstern were for a time editing for Meyer the Vienna Zeitschrift, in fact. They were the two editorial secretaries and, in fact, ran it for all intents and purposes. Rosenstein-Rodan was never a member of the Geistkreis--I don't know why--and Morgenstern was. They were the main contacts to the Meyer circle. After I had returned from America, it was the Mises circle and later the Nationale Ökonomische Gesellschaft, in a more formal manner, which was the real center of discussion. And even the Mises seminar was by no means confined to economics. It was not so much general methodological problems but the relations between economics and history that were very much-discussed problems, to which returned. And there, in many ways, you had the same people as in the Geistkreis--but not exactly. There were some, like [Richard] Strigl, among the communists; and [Friedrich] Engel-Janoschi, the historian. I think he became later a member of the Geistkreis, after I had left. Yes, I'm sure he did. And the women, who were excluded from the Geistkreis--Stephanie Browne, Helene Lieser, and Ilse Minz--were all members of the Mises seminar but not of the Geistkreis. LEIJONHUFVUD: So how large was that group? How many regulars in the Mises seminar? HAYEK: Oh, it was about the same number, because the non-economists would not go. The real non-economists were nonsocial scientists. People like Voegelin and Schutz--oh, Schutz did attend--but Glück, the literary man, and these two Germans I mentioned before who disappeared, were the people who were not interested in economics. There were a good many not interested in economics in the Geistkreis but none in the Mises seminar, even if they were not technical economists. LEIJONHUFVUD: These seminars would go on year after year, and people would come-- You attended over six or seven years? HAYEK: From 1924 until I left: '24 through '31. LEIJONHUFVUD: And others must have been members for ten years. HAYEK: Oh, probably. You see, the thing went on until Mises left in '36, and it had started before I came back from America--I believe even before I went to America, but I didn't know about it. So people like Stephanie Browne and Helene Lieser and Strigl probably attended from 1923 to 1936. I think it must have gone on for thirteen years. That's probably a likely duration. LEIJONHUFVUD: So now this was outside the university, and it was not in [Mises's] capacity as a titular professor or anything like this. It was he who attracted people to the seminar? HAYEK: Entirely. It was in his office at the chamber of commerce in the evening. It always continued with a visit to the coffeehouse, and the thing was likely to have gone on from six to twelve at night. The whole affair would probably sit for two hours in the official seminar, and then-- LEIJONHUFVUD: How often? HAYEK: Every two weeks. In the real term-period, probably from late October to early June. LEIJONHUFVUD: Well, Mises ran at least two famous seminars in his life like this--maybe three: in Geneva as well. But I'm thinking now of, first, Vienna and then, much later in his life, a similar seminar in New York. HAYEK: Which I once attended, yes. But that was much more an academic institution. I mean, it was in a classroom with relatively large numbers attendant, while in his private seminar he was sitting at his ordinary desk, and there was a small conference table in the room, and we were grouped in the other corner of the room facing him at his desk. But it had no academic atmosphere at all, while in the New York seminar, which I knew, he was on a platform, and so it looked like an academic class. It was probably a much wider range-- There were real students there; there were no students in the Mises seminar in Vienna. We were all graduates or doctors. LEIJONHUFVUD: But maybe the Vienna seminar was the more fruitful one. HAYEK: I think it was, yes. LEIJONHUFVUD: That stimulated more people to do good work that then became real contributions. HAYEK: You know, when I think about it I see I forget a few older people who attended the Mises seminar. There was that interesting man, [Karl] Schlesinger, who wrote a book on money and who was a banker in Vienna; there was occasionally another, an industrialist, Dr. Geiringer. All of them used to come in. He was an industrialist. He must have been originally in industry, but at that time he was also a banker, but one of the joint-stock type. He was a private banker. And there may have been one or two other people. Yes, there was a high government official who occasionally came, a man named Forcheimer, mainly interested in sort of social security problems. The average age in the Vienna seminar must have been at least in the thirties, while as far as I could see as an occasional visitor in he New York seminar, it was much more a students' affair than the so-called Mises seminar in Vienna, which was a discussion club. LEIJONHUFVUD: Mises personally-- The view here in the United States, I think, is of Mises in his old age, and he's viewed very often, particularly by his enemies, of course, as very doctrinaire. Do you feel that he got doctrinaire with age? Was he a different man in Vienna back then than he became later? HAYEK: He was always a little doctrinaire. I think he was not so susceptible to take offense as he was later. I think he had a period of-- Well, he always had been rather bitter. He had been treated very badly all through his life, really, and that hard period when he arrived in New York and was unable to get an appropriate position made him very much more bitter. On the other hand, there was a countereffect. He became more human when he married. You see, he was a bachelor as long as I knew him in Vienna, and he was in a way harder and even more intolerant of fools than he was later. If you look at his autobiography, the contempt of his for most of the German economists was very justified. But I think twenty years later he would have put it in a more conciliatory form. His opinion hadn't really changed, but he wouldn't have spoken up as openly as in that particular very bitter moment when he just arrived in America and didn't know what his future would be. On the whole, I think he was softened by marriage. LEIJONHUFVUD: He mellowed personally, but he became more demanding of intellectual allegiance from-- HAYEK: Yes, he easily took offense even when-- I believe I'm the only one of his disciples who has never quarreled with him. LEIJONHUFVUD: And that includes all the disciples from Vienna? HAYEK: No, I'm speaking only about the old ones in Vienna. LEIJONHUFVUD: Yes, the old ones in Vienna. Now there were some other circles. The Austrian Economic Association was another forum where economists met. HAYEK: Yes. That had existed from before World War I and was still going when I took my degree--I attended one or two meetings--and then it died during the inflation period. The short but acute inflation period upset social life and a great many things. I think it was partly a question of expense. The economic society used to meet at a coffeehouse and hire a room there, and I think the expense of doing so during the height of the inflation was probably one of the contributing factors. We all were too busy; life was too hard. The reason why I then took the initiative of reconstituting [the association] was because I rather regretted the division which had arisen between the Mises and the Meyer circle. There was no forum in which they met at all, and by restarting this no-longer existing society there was at least one occasion where they would sit at the same table and discuss. And there were a good many people who either did not come to the Mises seminar or did not come to the Meyer seminar, including a few of the more senior industrialists and civil servants. So it was a larger group, I suppose, than either of the two other groups, which hardly ever counted more than a dozen. In the economic society, the Nationale Ökonomische Gesellschaft, numbers would go up to thirty or so. Even that wasn't large. Later it met in an office in a meeting hall of the banker's association. Helene Lieser was one of the secretaries. In fact, there were two women who were both very competent economists: Marianne Herzfeld--an older woman, although I believe she may be still alive or died only recently in Edinburgh--who wrote once a very good article on inflationism as a philosophy, or something like that; and Helene Lieser, of course. LEIJONHUFVUD: Lieser became secretary of the International Economic Association. HAYEK: Yes, for a time she was. Then she died relatively early--in her fifties or just about sixty. So that was a more mixed group. I believe the only paper I read there was my later pamphlet on rent restriction. LEIJONHUFVUD: You mentioned the inflation in the context of why the economic association died for a while. There's another thing that I think is interesting to discuss. We have now talked about the various circles in which you moved and the intellectual influence from the people that more-- Some of them dominated their circle, as Mises did to some extent. So there are those influences on you that, in part, determine what kind of work you did on what problems. But there are also the influences of events, the inflation being one. And of course when you came back from the war, you lived through the dissolution of the Austro-Hungarian Empire. The inflation came on top of that, and Vienna became a rather overgrown capital of a very small country. How much did events determine your lifelong interests, and to what extent did purely intellectual influences play a role? HAYEK: Intellectual influences became more and more predominating. I think in the beginning the practical ones were more important, and I can give you one illustration: I think the first paper I ever wrote--never published, and I haven't even got a copy-- was on a thing which had already occurred to me in the last few days in the army, suggesting that you might have a double government, a cultural and an economic government. I played for a time with this idea in the hope of resolving the conflict between nationalities in the Austro-Hungarian Empire. I did see the benefits of common economic government. On the other hand, I was very much aware of all the conflicts about education and similar problems. And I thought it might be possible in governmental functions to separate the two things--let the nationalities have their own cultural arrangements and yet let the central government provide the framework of a common economic system. That was, I think, the first thing I put on paper. LEIJONHUFVUD: Have you ever returned to those ideas? There are still areas of the world where the same problems occur. HAYEK: Yes, but my approach is so completely different. Yes, in a sense, the problem is the same, but I no longer believe that that sort of division is of any practical possibility. But in a way I played with constitutional reform at the beginning and the end of my career. LEIJONHUFVUD: Well, on the intellectual influences, then, which ones would you mention first from your student days? HAYEK: Personal influences or literary influences? LEIJONHUFVUD: Well let's take literary influences first, perhaps. HAYEK: Well, I think the main point is the accident of, curiously enough, Othmar Spann at that time telling me that the book on economics still to read was [Karl] Menger's Grundsetze. That was the first book which gave me an idea of the possibility of theoretically approaching economic problems. That was probably the most important event. It's a curious factor that Spann, who became such a heterodox person, was among my immediate teachers the only one who had been a personal student under Menger. The book which made [Spann] famous is Haupttheorien der Volkwirtschaftslehre, which in its first edition was a very good popular handbook. It's supposed to really have been a cribbed version of Menger's lectures on the history of England. LEIJONHUFVUD: Yes, I heard that. And personal influences? We have talked about Mises already, but are there also others? HAYEK: I mean, we have talked more about my contemporaries and to some extent about the influence of my father, which was of some importance. I don't think there are really any personal influences. At the university I did take an interest in a great many men, but no single man had a distinct influence on me. In a purely literary field, I was reading much more fine literature as a young man and, as you have probably become aware, I was a great Goethe fan. I am thoroughly familiar with the writings of Goethe and with German literature, generally, which is incidentally partly because of the influence of my father. My father used to read to us after dinner the great German dramas and plays, and he had an extraordinary memory and could quote things like the "Die Glocke," Schiller's poem, from beginning to end by heart, even in his-- I can't say his old age; he died at fifty-seven. He was, in the field of German literature, an extraordinarily educated man. As a young man before the war, and even immediately after, I spent many evenings listening to him. In fact, I was a very young man. Of course, I started writing plays myself, though I didn't get very far with it. But I think if you ask in this sense about general influence, Goethe is really probably the most important literary influence on my early thinking. LEIJONHUFVUD: In economics, let me come back to a question we have touched upon before. In the twenties in Vienna, was there such a thing as an Austrian school in economics? Did you and your contemporaries perceive an identification with a school? HAYEK: Yes, yes. Although at the same time [we were] very much aware of the division between not only Meyer and Mises but already [Friedrich von] Wieser and Mises. You see, we were very much aware that there were two traditions--the [Eugen von] Böhm-Bawerk tradition and the Wieser tradition--and Mises was representing the Böhm-Bawerk tradition, and Meyer was representing the Wieser tradition. LEIJONHUFVUD: And where did the line between the two go? Was there a political or politically ideological line involved? HAYEK: Very little. Böhm-Bawerk had already been an outright liberal, and Mises even more, while Wieser was slightly tainted with Fabian socialist sympathies. In fact, it was his great pride to have given the scientific foundation for progressive taxation. But otherwise there wasn't really-- I mean, Wieser, of course, would have claimed to be liberal, but he was using it much more in a later sense, not a classical liberal. Of course, Wieser and Böhm-Bawerk had been personally very close friends, although Wieser always refused to discuss economics. In fact, I am told he began to avoid Böhm-Bawerk because Böhm-Bawerk insisted on talking economics all the time. Of course, there's a famous episode which is rather similar: before the war, immediately before, [Alfred] Marshall used to go to the Austrian Dolomites for his summer holiday, and for a time Wieser went to the next village. They knew of each other but made no attempt to make contact. Then Böhm-Bawerk came on a visit and insisted on visiting them both, bringing them together to talk economics, with the result that neither Wieser nor Marshall returned. LEIJONHUFVUD: So Böhm-Bawerk apparently could be a bit of a bore, insisting on talking economics all the time. HAYEK: At least to his brother-in-law. No, not all the time. It was my grandfather who was a personal friend, co-mountain climber, and academic colleague of his, who was not interested in economics but was originally a constitutional lawyer and then became head of the Austrian statistical office. I don't think he talked economics with him but general politics--not technical economics, which my grandfather was not interested in. LEIJONHUFVUD: So what were the differences, then, between the Meyer circle and the Mises circle? HAYEK: Oh, things like the measurability of utility and such sophisticated points. Wieser and the whole tradition really believed in a measurable utility. LEIJONHUFVUD: Did not Meyer abandon that? HAYEK: Yes, of course, Meyer was most sophisticated about it, but he still adhered to this. He was puzzled by such questions as the sum of the utilities; or whether there was a decreasing utility or a total utility which was like the area under the curve; or was it a multiple of the marginal utility--such problems were hotly disputed. LEIJONHUFVUD: In Meyer's circle? HAYEK: Yes. LEIJONHUFVUD: But that doesn't explain a split between the two groups. HAYEK: Oh, there wasn't really. You see, Meyer--and also Rosenstein, perhaps--kept away from the Mises circle for political reasons. There were no very good Meyer pupils. I mean, [Franz] Mayr, who became his successor, while a very well-informed person, was really a great bore. He had no original ideas of any kind. There were one or two other very young men, whose names I cannot remember now, who died young and who had been more interesting. Of course, there was one very interesting person whom we haven't mentioned. There was, so to speak, an intermediate generation between the Mises-Meyer-[Joseph] Schumpeter generation and ours. This included Strigl, whom I have mentioned, who was a much more distinguished man than he is remembered for; there was a very interesting man, [Ewald] Schams, who wrote largely on semimethodological problems--very intelligent and well informed; and there was this curious man, Schönfeld, who later wrote under the name of [Hermann] Illig, a complicated story connected with Nazi anti-Semitic things. His adopted father, Schönfeld, was Jewish, but he himself was not Jewish so he changed the name into Illig. He was probably the only one who made original contributions on the Wieser-Meyer lines. While I could not now explain what it was, I believe there's more in his work than has yet been absorbed. I think if you want to get the upshot of the other tradition, it's in the work of Schönfeld more than anywhere else that it is to be found. LEIJONHUFVUD: That is interesting. HAYEK: Illig, I should say, because his main book is known as a book by Illig. LEIJONHUFVUD: But Strigl and these other two were older. And is that, in part, why there was no use for you and your contemporaries to wait around for a chair? HAYEK: Certainly, yes. We all expected that in justice Strigl should have become Meyer's successor, but I don't know whether he lived long enough or died before. Anyhow, we all took it for granted that the claim to the chair was Strigl's. LEIJONHUFVUD: Well, Meyer survived the war, didn't he? HAYEK: Oh, yes; you're right. Strigl died during the war, and Meyer survived it, but not in the active occupation of a professorship. He retired, and I believe the appointment was made to Mayr at a time--I'm not sure of that--when Strigl was still alive. I can't say for certain. Anyhow, we took it for granted that there was an obvious successor in the person of Strigl, and we all wished he'd get it. We all agreed he deserved it. LEIJONHUFVUD: You, Haberler, Machlup, Morgenstern, and several of the others as well moved from Austria, and only a couple of the members of the Geistkreis were still in Vienna when the Anschluss came. HAYEK: Well, yes, but the thing was-- I was the only one who was quite independent of politics. You see, at the age of thirty-two, when you're offered a professorship in London you just take it. I mean, there's no problem about who's competing. It was as unexpected as forty years later the Nobel Prize. It came like something out of the clear sky when I never expected such a thing to happen, and if it's offered to you, you take it. It was in '31, when Hitler hadn't even risen to power in Germany; so it was in no way affected by political considerations. In the later thirties, when Haberler and Machlup and Mises left, I think the clouds were so clearly visible that everybody tried to get out in time. So even if they are not technical refugees who were forced to leave, they had left because prospects were so very bad. Of course, Morgenstern was lucky at being in America on a visit when Hitler took over, and he just stayed. LEIJONHUFVUD: Yes, he told me that he got a telegram from some friend who said, "Do not return"--that he was known to be on a blacklist at that time. HAYEK: Very likely, yes. LEIJONHUFVUD: Now, in the twenties, were most of the economists in Vienna at that time liberals in the traditional sense? HAYEK: No, no. Very few. Strigl was not; he was, if anything, a socialist. Schams was not. Morgenstern was not. I think it reduces to Haberler, Machlup, and myself. LEIJONHUFVUD: So my previous question was: Was there an Austrian school? and you said yes, definitely. HAYEK: Theoretically, yes. LEIJONHUFVUD: In theory. HAYEK: In that sense, the term, the meaning of the term, has changed. At that time, we would use the term Austrian school quite irrespective of the political consequences which grew from it. It was the marginal utility analysis which to us was the Austrian school. LEIJONHUFVUD: Deriving from Menger, via either Wieser or Böhm-Bawerk? HAYEK: Yes, yes. LEIJONHUFVUD: The association with liberal ideological beliefs was not yet there? HAYEK: Well, the Menger/Böhm-Bawerk/Mises tradition had always been liberal, but that was not regarded as the essential attribute of the Austrian school. It was that wing which was the liberal wing of the school. LEIJONHUFVUD: And the Geistkreis was not predominately liberal? HAYEK: No, far from it. LEIJONHUFVUD: And what about Mises's seminar? HAYEK: Again, not. I mean you had [Ewald] Schams and Strigl there; and Engel-Janoschi, the historian; and Kaufmann, who certainly was not in any sense a liberal; Schutz, who hardly was--he was perhaps closer to us; Voegelin, who was not. Oh, I think the women members of the seminar were very devout Mises pupils, even in that sense. It's perhaps common that women are more susceptible to the views of the master than the men. But among the men, it was certainly not the predominant belief. LEIJONHUFVUD: So in the revival of interest in the Austrian school that has taken place in recent years in the United States-- HAYEK: It means the Mises school. LEIJONHUFVUD: It means the Mises group? HAYEK: I am now being associated with Mises, but initially I think it meant the pupils whom Mises had taught in the United States. Some rather reluctantly now admit me as a second head, and I don't think people like [Murray] Rothbard or some of the immediate Mises pupils are really very happy that they are not-- The rest are not orthodox Misesians but only take part of their views from Mises. LEIJONHUFVUD: In that group, an attempt is often made to draw connections between the particular interests in theoretical teachings of the Austrian school and liberal, I should say libertarian, ideology. Do you think that there is something in the theoretical tradition? HAYEK: Yes. Yes, I would very definitely maintain that methodological individualism does lead to political individualism. I don't think they would all admit it, but in the form in which I have now been led to put it--this idea of utilization of dispersed knowledge--I would maintain that our political conclusions follow very directly from the theoretical insights. But that's not generally admitted. I am not speaking about the opponents, of course, but among those of the original group, I think it's even-- Well, I think in the American Austrian school, yes, it is now generally admitted. The young people would not call one an Austrian who is not both a methodological individualist and a political individualist. But that applies to the younger school and was not the tradition. LEIJONHUFVUD: And, as far as you are concerned, those ideas belonged to the mid-thirties and after, and not to the Austrian school when it still was in Austria. HAYEK: Yes, you are quite right. LEIJONHUFVUD: You have developed your own views on methodology over the years. Did you have a conflict with Mises on methodological matters? HAYEK: No, no conflict, although I failed in my attempt to make him see my point; but he took it more good-naturedly than in most other instances. I believe it was in that same article on economics and knowledge where I make the point that while the analysis of individual planning is in a way an a priori system of logic, the empirical element enters in people learning about what the other people do. And you can't claim, as Mises does, that the whole theory of the market is an a priori system, because of the empirical factor which comes in that one person learns about what another person does. That was a gentle attempt to persuade Mises to give up the a priori claim, but I failed in persuading him. LEIJONHUFVUD: And you would not share his reliance on introspection? HAYEK: Well, up to a point, yes, but in a much less intellectual sense. You see, I am neither a utilitarian nor a rationalist in the sense in which Mises was. And his introspection is, of course, essentially a rationalist introspection. LEIJONHUFVUD: How do you think The Road to Serfdom stands up? HAYEK: Well, it was aimed against what I would call classical socialism; aimed mainly at the nationalization or socialization of the means of production. Many of the contemporary socialist parties have at least ostensibly given up that and turned to a redistribution/fair taxation idea--welfare--which is not directly applicable. I don't believe it alters the fundamental objection, because I believe this indirect control of the economic world ultimately leads to the same result, with a very much slower process. So when I was then talking about what seemed to be in imminent danger if you changed over to a centrally planned system, which was still the aim of most of the official socialist programs, that is not now of direct relevance. At least the process would be different, since I personally believe that even the-- Some parts of the present welfare state policies--the redistribution aspect of it--ultimately lead to the same result: destroying the market order and making it necessary, against the will of the present-day socialists, gradually to impose more and more central planning. It would lead to the same outcome. But my description of the process, and particularly the relative speed with which I assumed it would take place, of course, is no longer applicable to all of the socialist program. Partly I flatter myself-- the book has had partly the influence of making socialist parties change their program. LEIJONHUFVUD: Away from reliance on central planning and toward using the budget for redistribution of income? HAYEK: Exactly. I don't know whether I should say I flatter myself; I think socialism might have discredited itself sooner if it had stuck to its original program. LEIJONHUFVUD: So the road has been a different one, historically speaking. The Western European countries, the U.S., took a different road from your "road to serfdom." You're saying that along the present road, your pessimistic conclusions would take a longer time to materialize. HAYEK: Yes, and it's relatively more easy to reverse the process. No, once you had transferred the whole productive apparatus to government direction, it's much more difficult to reverse this, while such a gradual process can easily be stopped or can even be reversed more easily than the other process. LEIJONHUFVUD: That's what I wanted to ask. Obviously you feel that it's a downhill road, but can one apply the brakes? How far would you like to see the developments of the last thirty years reversed? What kind of society would you envisage that could evolve from the present starting point? HAYEK: Well, I would still aim at completely eliminating all direct interference with the market--that all governmental services be clearly done outside the market, including all provision of a minimum floor for people who cannot make an adequate income in the market. [It would then not be] some attempt to control the market process but would be just providing outside the market a flat minimum for everybody. This, of course, means in effect eliminating completely the social justice aspect of it, i.e., the deliberate redistribution beyond securing a constant minimum for everybody who cannot earn more than that minimum in the market. All the other services of a welfare state are more a matter of degree--how they are organized. I don't object to government rendering quite a number of services; I do object to government having any monopoly in any case. As long as only the government can provide them, all right, but there should be a possibility for others trying to do so. LEIJONHUFVUD: You do not object, then, to government's production of services, for example, if private production is not precluded. HAYEK: Yes. Of course there is one great difficulty. If government does it--supplies it below cost--there's no chance for private competition to come in. I would like to force government, as far as it sells the services, to do so at cost. LEIJONHUFVUD: Even if it is involved in also financing the demand. You say that you would allow a government to provide a minimum, a floor; are you then also thinking of special, particular functions--health care, for example--or are you thinking simply in terms of an income floor? HAYEK: Simply in terms of an income. From what I've seen of the British national health service, my doubt and skepticism has rather been increased. No doubt that in the short run it provides services to people who otherwise would not have got it, but that it impedes the progress of medical services--that there as much as anywhere else competition is an essential condition of progress--I have no doubt. And it's particularly bad because while most people in Britain dislike it, everybody agrees it can never be reversed. LEIJONHUFVUD: But the essential point is whether competition is provided or not, not whether the government is in this line of activities. HAYEK: Exactly. But you know I now extend it even to money. LEIJONHUFVUD: Yes. I was going to bring that up. But let's take that topic, then. You returned recently to your early interest in monetary theory. Let me ask, first, why you have come to focus on money again recently. It was an interest of yours through some time in the thirties. HAYEK: It was a difference between nearly all my friends, who were in favor of flexible exchanges, and my support of fixed exchange rates, which I had intellectually to justify. I was driven to the conclusion that I wanted fixed exchange rates, not because I was convinced that it was necessarily a better system but it was the only discipline on governments which existed. If you released the governments from that discipline, the democratic process, which I have been analyzing in different conditions, was bound to drive it into inflation. Even my defense of fixed exchange rates was, in a way, limited. I was against abandoning them only where people wanted flexible exchanges in order to make inflation easier. When the problem arose in Germany and Switzerland, when it was a question of protecting them against imported inflation, I was myself supporting [flexible exchanges]. In fact, I argued in Germany that Germany kept too long fixed exchange rates and was forced to inflate by them, which they ought not to have done. It was confirmed to me by the people of the German Bundesbank that they were aware of this, but they still had the hope that the system of fixed exchange rates would restrain the inflation [in the United States] from doing even more inflation, and that they brought deliberately the sacrifice of swallowing part of the inflation in order to prevent it from becoming too large in the rest of the world. That was very much my point of view; but that led me, of course, to the question of whether this was the best discipline on monetary policy, and to the realization that what I'd taken for granted--that the discipline of the gold standard was probably the only politically practicable discipline on government--could never be restored. Even a nominal restoration of the gold standard would not be effective because you could never get a government now to obey the rules of the gold standard. These two things forced me [to the conclusion]--and I first made the suggestion almost as a bitter joke--that so long as governments pursue policies as they do now, there will be no choice but to take the control of money from them. But that led me into this fascinating problem of what would happen if money were provided competitively. It opened a completely new chapter in monetary theory, and discovering there was still so much to be investigated never really made the subject again very interesting to me. I still hope--the two editions of the pamphlet on denationalizing money were done, incidentally, while I was working on my main book--to do a systematic book which I shall call Good Money. Beginning really with what would be good money--what do we really want money to be--and then going on to the question of how far would the competitive issue of money provide good money in terms of that standard. LEIJONHUFVUD: Would you agree that the most important step in this direction would have less to do with who issues money than simply separating the so-called unit of account, in which private parties make contracts, from the government-issued money, to get around, in effect, legal tender provisions and so on? HAYEK: Yes, in a way. You know, I started remarking against the idea of a common European currency, saying why not simply admit all the other currencies competing with yours, and then you don't need a standard currency. People will choose the one which is best. That, of course, led me to the extension: Why confine it to other government moneys and not let private enterprise supply the money? LEIJONHUFVUD: But there's a question that extends to other aspects of your work--to Law, Legislation and Libertyas well--that I would like to raise here, which bothers me and I think some other people as well. The process whereby the Western countries gave up first the gold standard, and then what you call a discipline--and I agree there is a discipline--of fixed exchange rates: Is that not an evolutionary process, and are you not, with these proposals, in effect rationally trying to reconstruct, rationally trying to controvert, as it were, a process of evolution? HAYEK: No, it's a process of evolution only within the limits set by the powers of government. Even within control there is still an evolutionary process, but so many choices are excluded by governmental powers that it's not really a process which tries out all possibilities but a process which is limited to a very few possibilities that are permitted by existing law. LEIJONHUFVUD: But you have referred to the development of democratic government into omnipotent government, and certainly the trend has been in that direction. Is that not a process of social evolution? HAYEK: Again, it's an inevitable consequence of giving a government unlimited powers, which excludes experimentation with other forms. A deliberate decision by a man has put us on a one-way track, and the alternative evolutions have been excluded. In a sense, of course, all monopolistic government limits the possibilities of evolution. I think it does it least if it confines itself to the enforcement of general rules of conduct, but I would even go so far as to say that even very good world government might be a calamity because it would preclude the possibility of trying alternative methods. I'm thoroughly opposed to a world government. LEIJONHUFVUD: Of any form? HAYEK: Any form. LEIJONHUFVUD: So to the question of what mistakes of evolution may be corrected by, as it were, rationalist intervention, you would answer by saying, well, there are certain processes of development where the course taken by the actual development has been dictated by-- HAYEK: --the use of force to exclude others. LEIJONHUFVUD: Yes. Are those the only instances in which you would interfere with spontaneous changes in social structure? HAYEK: It depends on what you mean by interfere. They are the only cases in which I would admit intervention in the sense of experimenting with an alternative without excluding what is actually happening. I think there may even be a case for government coming in as a competitor, as it were, with other developments. My objection is that government assumes a monopoly and the right to exclude other possibilities. LEIJONHUFVUD: So in certain sectors, for example, where we are dissatisfied with the private outcome, you would-- HAYEK: --let the government try and compete with private enterprise. LEIJONHUFVUD: I see. The most recent thing I've seen from your pen is your Hobhouse lectures. Could you briefly recap what you mean with the "three sources of human values"? HAYEK: Well, it's directed against the thesis, now advanced by the social biologists, that there are only two sources: innate, physiologically embedded tendencies; and the rationally constructed ones. That leaves out the whole of what we generally call cultural tradition: the development which is learned, which is passed on by learning, but the direction of which is not determined by rational choice but by group competition, essentially--the group which adapts more effective rules, succeeding better than others and being imitated, not because the people understand the particular rules better but [understand] the whole complexes better. That leads, of course, to the conclusion, which I have only added now in a postscript to the postscript, that we must realize that man has been civilized very much against his wishes. That, I think, is the upshot of the whole argument--that it's not in the construction of our intelligence which has created civilization, but really in the taming of many of our innate instincts which resisted civilization. In a way, you see, I am arguing against Freud, but the problem is the same as in Freud's Civilization and Its Discontents. I only don't believe that you can remove these discontents by protecting-- LEIJONHUFVUD: --becoming uncivilized. HAYEK: You can only become civilized by these repressions which Freud so much dislikes. LEIJONHUFVUD: I wonder how you would sum up your recent work, the position that you've arrived at now. I tried to think of it the other night when I knew I was coming here, and it seems to me that beyond the concrete issues, such as the denationalization of money, and beyond your proposals for constitutional reform, you are really addressing yourself to intellectuals in general, and that your basic plea is for intellectuals to respect unintelligible products of cultural evolution. HAYEK: Exactly. LEIJONHUFVUD: And to handle them a bit more carefully, and with more caution than was done by the main intellectual schools in your lifetime. HAYEK: Exactly. You see, I am in a way taking up what David Hume did 200 years ago--reaction against Cartesian rationalism. Hume was not very successful in this, although he gave us what alternative we have, but there's hardly been any continuation. Adam Smith was a continuation of Hume, up to a point even [Immanuel] Kant, but then things became stationary and our whole thinking in the past 150 years or 200 years has been dominated by a sort of rationalism. I avoid the word rationalism because it has so many meanings. I now prefer to call it constructivism, this idea that nothing is good except what has been deliberately designed, which is nonsense. Our whole civilization has not been deliberately designed. LEIJONHUFVUD: Thank you very much. Table of Contents Studying law, psychology and economics Changes in university culture Specialization in one academic field Interest in methodology Academics in Vienna Formation of the Geistkreis circle Discussion topics in the Geistkreis Members of the Vienna circle Topics other than economics in the Vienna circle Ludwig von Mises's seminar Members of the Mises seminar Contributions of the Vienna seminar Ludwig von Mises's personality Austrian Economic Association Events, environment and determination of academic interests Literary influences Personal influences Identity of the Austrian School Hans Meyer's seminar versus Ludwig von Mises's seminar Move out of Vienna Defining the Austrian School Connection between the Austrian School and libertarianism Methodology of economics Intent of The Road to Serfdom Role of government in the market Government and money Democratic government and social evolution Interfering in spontaneous changes Three sources of human values Final credits

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