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John Gray: The Friedrich Hayek I knew, and what he got right – and wrong

How could liberal values be renewed in a time of political tribalism? It was a question Hayek could not answer. Instead, he came up with a mix of evolutionist pseudo-science and rationalistic designs for an ideal liberal regime. Having abandoned his youthful socialism under the influence of the doctrinaire market economist Ludwig von Mises (1881-1973), Hayek came to believe that a process of social evolution would impel humankind in the direction of the values he favoured. His legacy to liberal thinking has been a type of scientism – the mistaken attempt to apply the methods of the natural sciences when examining the human world. It’s an ironical outcome, given that he was a forceful critic of scientism in economics. In his speech on receiving the Nobel Prize in 1974, Hayek described the efforts of economists to mimic the methods of the natural sciences as having produced a “pretence of knowledge”.

A major reason for Hayek’s shift into social philosophy was that he believed – correctly – that he had lost the debate with John Maynard Keynes about the causes of the Great Depression.

Keynes recognised that bold action by governments is sometimes the only way in which the economy can be lifted out of depression – as when Roosevelt (to whom Keynes had written an open letter in 1933) successfully adopted some aspects of Keynesian thinking in the New Deal.

No doubt markets transmit information in the way that Hayek claimed. But what reason is there to believe that – unlike any other social institution – they have a built-in capacity to correct their mistakes? History hardly supports the supposition. Moods of irrational exuberance and panic can, and often do, swamp the price-discovery functions of markets.

… he never accepted Keynes’s core insight that large-scale economic discoordination could be the result of the workings of the market itself. For him it was always government intervention that accounted for market disequilibrium. More sceptical as well as more radical in his turn of mind, Keynes questioned the self-regulating powers of the market. His work on the theory of probability disclosed insuperable gaps in our knowledge of the future; all investment was a gamble, and markets could not be relied on to allocate capital rightly. There were booms and busts long before the emergence of modern central banking. Left to its own devices, the free market can easily end up in a dead end like that of the 1930s.

Keynes’s own experience told against Hayek’s theories. As one of the 20th century’s most successful speculative investors, playing the markets on behalf of his college from a phone at his bedside before he got up for the day, he understood – in a way that the inveterately professorial Hayek did not – the ineradicable uncertainty of economic life.

Keynes had an acute sense of the risks posed to social stability by misguided economic policies. In contrast, Hayek consistently ignored these hazards.

It may have been a half-conscious awareness of the limitations of this rationalistic philosophy that fuelled his evolutionary speculations. Underpinning his defence of the free market was a belief in what he called “spontaneous order in society” – the idea that, if only human beings were not subject to oppressive governments, they would evolve in ways that allowed them to live together in peace and freedom. This was not a view held by Hayek’s friend and LSE colleague Karl Popper, who gently demolished it when I talked with him, or by the conservative philosopher Michael Oakeshott, also a colleague at the LSE, who dismissed it – accurately – as “rubbish”.

Hayek was doing no more than reviving a recurrent modern delusion – the belief that history obeys evolutionary laws, which somehow underpin a process of progressive social development.

The spread of capitalism over the past decades is a result of human decisions, not the workings of some imagined evolutionary process. Communism collapsed in the former USSR not because it was less productive than capitalism (though this was certainly the case) but because the Soviet state became embroiled in an Afghan war it could not win, while losing control of parts of eastern Europe and the Baltic states.

Carroñeros, de Xavier Vidal-Folch

European ‘alliance of national liberation fronts’ emerges to avenge Greek defeat

El clamor de la Tierra y de los pobres, de Julio L. Martínez, rector de la Universidad Pontificia Comillas ICAI-ICADE

Dirá alguno: «Con la teología hemos topado», es decir, con el salto irracional de la fe que la hace «incuestionable por definición» (G. Sorman). Ahí hay ignorancia o tergiversación interesada. La ciencia teológica es una forma especial de conocimiento que, en el caso cristiano, ha de conjugar razón y revelación. Ese conocimiento goza de plena racionalidad no en el sentido de que sus contenidos sean demostrables, sino en el sentido de que es del todo racional creer y de ser «razón informada por la fe» y no reemplazada por ella, a la luz del Evangelio y la experiencia humana. No creo que sea precisamente la «teología pública» la que hoy empobrece a la razón; al contrario, abre aspectos muy significativos de la racionalidad y la motivación humanas.

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