Friedrich Hayek Austrian economist Date of Birth: 08.05.1899 Country: Austria

Biography of Friedrich August von Hayek

Friedrich August von Hayek was an Austrian economist born in Vienna. He was the son of August von Hayek, a healthcare official and biology professor at the University of Vienna, and Felicitas von Hayek. His maternal grandfather was a professor of public law at the University of Vienna and the head of the Central Statistical Office of Austria.

In 1917, after finishing school, Hayek was drafted into the Austrian army and served as an artillery officer on the Italian front. Upon returning to Vienna in 1918 after the peace treaty, Hayek enrolled at the University of Vienna, where he studied law, economics, philosophy, and psychology. While initially attracted to the ideas of socialism and nationalism, which were the prevailing ideologies in post-war Vienna, he eventually became a fierce opponent of these ideologies. His first step in the fight against these ideologies, which would become the focus of his life, was the organization of the Association of Democratic Students at the university.

After receiving his law degree from the University of Vienna in 1921, Hayek began working at the Austrian Office for the Settlement of Military Claims, which was then headed by economist Ludwig von Mises. He also resumed his studies at the University of Vienna and obtained a doctorate in economics in 1923. Following the completion of his dissertation, Hayek spent a year in the United States as a research assistant to Jeremy Jenks at New York University. He also attended a course on the business cycle at Columbia University taught by Wesley Mitchell and John Clark, and participated in the collection of statistical data for the journal "Business Annals."

Returning to Austria for government service in 1924, Hayek became a member of Mises' private seminar, which consisted of influential economists and philosophers who met several times a month to discuss current economic issues. Inspired by the empirical research on the business cycle being conducted in the United States at the time, Hayek convinced the Austrian government in 1927 to create an institute for similar research in Austria. Throughout the 1920s, Hayek published numerous articles on the trade cycle, monetary theory, and economic policy.

In 1929, he began lecturing at the University of Vienna, and the following year he was invited to deliver four lectures at the London School of Economics (LSE). These lectures, published in 1931 as "Prices and Production," laid the foundation for Hayek's appointment as a visiting professor at the LSE, where he later became a professor of economics and statistics.

During his time in London, Hayek was involved in one of the longest economic debates of the 1930s. In 1930, John Maynard Keynes published his work "A Treatise on Money," to which Hayek wrote a review for the journal "Economica." In response, Keynes asked the Italian Marxist economist Piero Sraffa to write a review of Hayek's book "Prices and Production" for the "Economic Journal," which Keynes edited. This led to a lengthy and heated debate with various prominent figures in British economics taking part.

Hayek's theory of the trade cycle was based on the Austrian theory of capital. According to Hayek, there is an equilibrium structure of capital formation. During a period of economic expansion (as was the case in the late 1920s), there is forced savings resulting from credit expansion (even with unchanged price levels), leading to an accumulation of capital beyond desired levels. Eventually, this capital accumulation compared to voluntary savings leads to a crisis. Hayek's theory anticipated Milton Friedman's monetarist explanation of the Great Depression.

At the same time, Hayek argued that depressions were caused by excessive consumption combined with misguided economic policies. He believed that high unemployment was not caused by insufficient aggregate demand, as Keynes argued, but by distortions in relative prices. These distortions, according to Hayek, were the result of unforeseen changes in the money supply, leading to imbalances between supply and demand for labor throughout the economy. Hayek maintained that only the market mechanism could correct these imbalances and restore equilibrium, while expansionary and interventionist government policies were unnecessary and unproductive.

Hayek's contributions to economic theory also include his book "The Pure Theory of Capital," published in 1941. In this book, instead of defining capital as a tangible and measurable factor, Hayek started to consider the time duration required to transform raw materials into finished goods. This approach was in line with early Austrian capital theory.

In addition to his contributions to monetary economics, Hayek also criticized socialism. His critique of socialism was not based on a belief in the efficiency of capitalism (as emphasized by welfare economics), but on the belief that centralized socialist planning could never respond as quickly as the market mechanism to fluctuations in supply and demand. Furthermore, according to Hayek, socialism lacks information about consumer preferences and the commercial production technology necessary for calculating equilibrium prices and quantities of goods. Hayek argued that the main advantage of free markets is that prices contain all the information needed for consumers and firms to make rational economic decisions at much lower costs than any other system.

Hayek's book "The Road to Serfdom" (1944) was his attack on socialism. Using political arguments, Hayek addressed the book to the general reader. He argued that democratic governments, which embraced socialist goals such as income redistribution and interventionist tactics in market relations such as price controls, inevitably turned into totalitarian regimes. Similarly, any attempt to introduce competitive markets in a totalitarian state would ultimately cause political upheaval because the freedom of choice inherent in markets is incompatible with autocratic goals.

Hayek's book "The Road to Serfdom" was a great success and earned him several invitations to visit the United States in the post-war years. In 1950, Hayek left his position at the LSE and became a professor of social sciences and morality at the University of Chicago, where he remained until 1962.

The years spent in Chicago were highly productive for Hayek. He led an interdisciplinary seminar, which included George Stigler and Milton Friedman among its participants. He also published a large number of books, articles, brochures on the history of social thought, legal theory, scientific methodology, and even psychology. In 1963, he returned to Europe to take up the position of professor of economic policy at the University of Freiburg in West Germany. After retiring in 1968, he moved to the University of Salzburg, where he spent nine years, but found little interest in his economic views or political philosophy among his colleagues or students. In 1977, he returned to Freiburg and never left again.

Hayek shared the Nobel Memorial Prize in Economic Sciences in 1974 with Gunnar Myrdal for their pioneering work in the theory of money and economic fluctuations and their deep analysis of the interdependence of economic, social, and institutional phenomena. In his Nobel lecture, Hayek criticized economists for their uncritical acceptance of "pseudo-scientificity" and their tendency to predict the consequences of expansionary monetary and fiscal policies based on what he called the "pretense of knowledge."

In 1926, Hayek married Helene von Fritz. They have a son and a daughter. After divorcing his first wife, he married Helene von Witterlich in 1950. He obtained British citizenship in 1938.

In addition to the Nobel Prize, Hayek received numerous other awards, including the Medal for Achievements in Science and Art from the Austrian government in 1976. He was a member of the British Academy, the Austrian Academy of Sciences, and the Argentine Academy of Economic Sciences. He also received many honorary degrees and titles.