Friedrich August von Hayek

Lorenzo McClellan

Life

Born in 1899 Vienna Studied with Ludwig von Mises Moved to London, then to Chicago and

finally to Germany. Won the Nobel prize in 1974

Business Cycle Theory

Hayek said “busts” were caused by badcentral bank policy.

If the bank lowered interest rates too much,credit would be too easy to get.

People would make bad businessassumptions, and the hollowness of thesewould eventually be discovered, resulting ina bust.

Hayek’s view of free markets andgovernment planning

Hayek said that the problem of communismwas that knowledge is diffuse. Centralplanning assumes the planners knoweverything necessary to run society. Theydo not.

Free markets allow people to each makedecisions based on their area of expertise,resulting in a “spontaneous” order.

“The peculiar character of the problem of arational economic order is determined precisely bythe fact that the knowledge of circumstances ofwhich we must make use never exists inconcentrated or integrated form but solely as thedispersed bits of incomplete and frequentlycontradictory knowledge which all the separateindividuals possess.”

---Hayek, The Use of Knowledge in Society

Influence

Hayek had many followers among the newconservatives of the 1980s.

Margaret Thatcher said his The Road to Serfdomwas “what we believe.”

Ronald Reagan appointed many Hayekians to highoffice.

George H.W. Bush gave him the presidentialmedal of freedom.

More influence

Jimmy Wales, the founder of Wikipedia,has said that Hayek’s ideas of diffuseknowledge inspired him to create anencyclopedia anyone can edit.

Works Cited http://freedomandwhisky.blogspot.com/1980c5.jpg (Illustration) http://www.montpelerin.org/images/photos/friedrichVonHayek2.jpg http://www.brisbanetimes.com.au/ffximage/2007/04/26/jimmywales55_wideweb__470x364,0.jpg studio52contact.blogspot.com frmarkdwhite.wordpress.com Hayek NY Times Obit by Sylvia Nasar Thatcher’s People by John Ranelagh Jimmy Wales interview on Youtube ‘The Use of Knowledge in Society,” by F.A. Hayek Hayek biography from Mises.org, by Peter G. Klein Hayek article on econlib.org