Milton Friedman on the Difference Between Hayek and Mises on Gold

Below, Milton Friedman during an interview with Lanny Ebenstein, as reported in Chicagonomics.

The Friedman dislike for the great Ludwig von Mises and gold really becomes clear in this interview:

Mises was for the gold standard. [Friedrich] Hayek went around and around the bush on that...But he was not a gold nut like von Mises was.

-RW

When Hayek Abandoned Mises

By Gary North

Reality Check

In June 1960, I received in the mail two books: Frederick Hayek's The Constitution of Liberty and Ludwig von Mises's Human Action. I had ordered them from the Foundation for Economic Education. I paid $7.50 for Hayek's book; I paid $10 for Mises's book. In 1960, that was the equivalent in today's money of about $140. That was a lot of money for someone who had just come home from his first year in college.

I marked the inside cover of both books: June 1960. Over the next two years, I got each author to autograph his book.

I began reading The Constitution of Liberty (1960) almost immediately. I did not read Human Action (1949) until the summer of 1963. I read it after I had read Murray Rothbard's book, Man, Economy, and State (1962), which I also read in the summer of 1963.

In 1960, I regarded Hayek's book as one of the most profound books I had ever read. In retrospect, it was the first profound book that I had ever read. I have reread it two times since then, and I still regard it as a profound book. It is also a deeply flawed book. Part I of the book, The Value of Freedom, is a defense the ideal of freedom. Part II, Freedom of the Law, is his attempt to outline the kind of political order that is necessary to sustain freedom. Part III, Freedom in the Welfare State, is probably the most profound defense of conceptual errors in the history of the libertarian movement.

When I reached Section 5 of Chapter 16, I came to these words:

There are all kinds of public amenities which it may be in the interest of all members of the community to provide by common effort, such as parks and museums, theaters and facilities for sports -- though there are strong reasons why they should be provided by local rather than national authorities.

At that point, a yellow flag went up in my mind.

Read the rest here.

Did Friedrich Hayek Influence George Orwell?

Many of the ideas explained and illustrated in Orwell's 1984 come directly from Hayek's The Road to Serfdom, which Orwell read and reviewed.

— TakingHayekSeriously (@FriedrichHayek) October 20, 2014

A Used Book Dealer on Paul Krugman

Yesterday, I picked up a mint condition copy of Toward Liberty: Essays in Honor of Ludwig Von Mises on the Occasion of His 90th Birthday, from a used book dealer.

I talked to the proprietor for a bit and he told me that books by Ludwig von Mises, Friedrich Hayek and Murray Rothbard, he liked to carry. While he did have familiarity with these Austrian school economists by name, it didn't seem that he had any in depth knowledge of their theories.

Then, out of the blue, he said to me, "I carry Mises. Rothbard and Hayek, but I don't carry Paul Krugman. Krugman seems to just write about current hot topics and then interest in his books fades."

Israel Kirzner's Keynote Address on F. A. Hayek and the Nobel Prize

Prof. Israel Kirzner recently delivered the keynote address at a symposium discussing F. A. Hayek and the awarding of Nobel Prize to him 40 years ago.

The address is fascinating in that Kirzner attributes much of the resurgence in Austrian economics, following Hayek being awarded the Noble Prize, to the further examination by Austrians of the debates both Hayek and Ludwig von Mises had, with mainly advocates of central planning, between 1937 and 1948. Kirzner highlights the emphasis that both Mises and Hayek placed on subjectivism during the debates and points to this emphasis as extremely important in the advancement of Austrian school theory.

Kirzner, in passing, also recognizes Murray Rothbard's publication of Man, Economy and State as an important event in the re-emergence of Austrian economics.

Viewers will note that Kirzner in this lecture puts emphasis on where Mises and Hayek were mostly in sync and fails to credit any of the Austrian resurgence to areas where Hayek tended to wander away from the Misesian perspective.

Murray Rothbard: Hayek & His Lamentable Contemporaries

And a Happy New Year to Milton Friedman, from the Hayek Center

Taking Hayek Seriously (The Hayek Center) tweets:

We have no evidence Friedman had any understanding of Hayek's eco science & overwhelming evidence he completely lacked that understanding.

The Dark Side of Economist Oskar Morgenstern

Richard Ebeling emails a link to his review of the book, Von Neumann, Morgenstern and the Creation of Game Theory by Robert Leonard.

Oskar Morgenstern is best known as the co-developer, with mathematician John von Neumann, of game theory. Their book The Theory of Games and Economic Behavior is a classic.

But, Peter Klein notes:

Game theory can be fun and interesting. It’s central to current mainstream research in industrial organization and corporate strategy. It’s been taught to a generation of MBA students. Unfortunately, according to FastCompany, nobody in business actually uses it.

In his review, Ebeling writes:

...what is less well known is that Morgenstern was a prominent member of the Austrian School of Economics before the Second World War.

His first book was on Economic Forecasting (1928), which unfortunately has never been translated into English. He presented a biting and insightful analysis as to why quantitative models would never be able to successfully predict the economic future. His three fundamental arguments were (1) that historical events are too unique and interdependently complex to be reducible to statistical probability analysis; (2) any public forecast easily will result in people taking the forecast into consideration, and therefore acting in ways different than what the forecast presumed; and (3) how individuals act is dependent on their expectations of how they expect others to act, and understanding and interpreting people’s subjective meanings and intentions is not readily reducible to strictly quantitative categories and classifications for statistical study...

Leonard traces out the development of Morgenstern’s thinking in the 1920s and 1930a under the influence of Austrian Economists such as Ludwig von Mises and Hans Mayer, and his friendship with Karl Menger, Jr., the son of the founder of the Austrian School.

But what he also brings out is how Morgenstern increasingly turned against his “Austrian” roots...

Even worse, after 1934, with Hayek now a professor at the London School of Economics, and Mises teaching in Geneva, Switzerland, Morgenstern attempted to portray himself as the “leader” of the Austrian School in an Austria that was now a fascist-type authoritarian dictatorship. He worked as a senior advisor to the Austrian government, often offering policy advice far removed from a free market perspective...

In addition, Leonard points out that Morgenstern’s diary from this period is sprinkled with often heavily anti-Semitic sentiments, in spite of the fact that many of the members of the Austrian School at this time were Jewish (including Mises), and who had been among those encouraging and supportive of his own work and professional advancement.

As a side note, Ebeling tells us in his review that he took a course with Morgenstern and he is clearly shocked by some of the revelations about Morgenstern . See Ebeling's full review, here.

Krugman and DeLong versus Hayek and Mises

Mario Rizzo comments on the latest attacks by Paul Krugman (on Friedrich Hayek) and Brad DeLong (on Ludwig von Mises) and believes a major nerve has been touched. Under the title, Yes, Paul: It is Hayek versus Keynes, Rizzo writes:

...now comes Paul Krugman with his sometimes-echo Brad Delong (or is it vice versa?). Krugman thinks that Hayek was not an important “macro” economist; certainly not the rival or alternative to Keynes, either in the 1930s or today. In fact, Hayek embarrassed himself with his cycle and capital theory. Hayek’s brilliance as a monetary theorist (aka “macroeconomist”) is a figment of the political imaginations of those who love him for his “political” book, The Road to Serfdom.

Until just a little while ago, I thought it best to ignore the latest Krugmanic outburst, especially since there are excellent posts at Marginal Revolution and Café Hayek, just to mention two. And yet the recent obsession Krugman has with Hayek (and lately the obsession DeLong has with Mises) means that some nerve has been touched. Of course, it might simply be that Krugman needs material for his blogs and columns.

However, I think the real issue is this. Hayek’s approach attacks, root-and-branch, the macroeconomic way of thinking. It is not simply a challenge to a particular theory of the determinants of mass unemployment, inflation, business cycles and the like. Hayek is not accepting the rules of the game or the parameters of the sub-discipline of modern macroeconomics. Hayek does not want to argue that the government expenditure multiplier is 0.5 instead of 2.0, for example. He does not want to discuss just how much fiscal stimulus should be undertaken and what form it should assume.

In short, he does not want to focus on aggregate spending and aggregate consequences. Hayek’s approach says: Let us pierce the veil of aggregates and look at the distortive effects on relative prices and relative output produced by boom-time credit expansions. Let us look at the distortive effects that booms leave us as we work our way through a recession. Let us concentrate on sustainable lines of expenditure both during the boom and during the road out from the bust.

Suffice it to say this greatly erodes the intellectual capital of a field of economics – although one not noted for its successes. It mocks the claim that Keynes was a true revolutionary in economic thought. It opens the possibility that he was muddled, inconsistent and unaware of the contributions to monetary and business cycle theory made by the “classical economists” on the eve of the General Theory.

It also opens the possibility that Keynes’s economics was catapulted into prominence not so much by its technical or scientific excellence but the compatibility of its policy nostrums with the temper of the times.

Send in the Psychiatrists: Is Krugman Projecting?

After his idiotic attack on Friedrich Hayek, using, of all people, David Warsh as support for his absurd claims, could Krugman, as some psychiatrists might say, be doing a bit of projection, when he writes:

You have to wonder why Taylor thinks he can get away with this. Does he think that other economists can’t actually read research papers, and catch the misrepresentation? Or does he think of himself as writing solely for people so politicized that they don’t care if he gets it wrong?

A friend asked me last night, what could Krugman have possibly been thinking when accusing Hayek of not having any important influence in economics. Could Krugman have given us the answer when he wrote,"...does he think of himself as writing solely for people so politicized that they don’t care if he gets it wrong?"

Paul Krugman Stoops to a New Low

Paul Krugman today quotes a book reviewer to bash Friedrich Hayek.

Krugman writes:

David Warsh finally says what someone needed to say: Friedrich Hayek is not an important figure in the history of macroeconomics.

These days, you constantly see articles that make it seem as if there was a great debate in the 1930s between Keynes and Hayek, and that this debate has continued through the generations. As Warsh says, nothing like this happened.

Warsh, under the guise of writing economic opinion, regurgitates whatever pamphlet or book comes across his desk. Warsh doesn't hold opinions for more than the next column, yet this is the commentator that Krugman throws at his readers, as if Warsh has a sound opinion on Hayek, or could even be counted on to form one.

Here is Warsh writing, yesterday:

Everyone in Boston of a certain age knows the story of Rosie Ruiz, the marathoner who crossed the Boston finish line in 1980 at 2:31.56, flabby thighs and all, having barely broken a sweat. Despite mounting skepticism, she basked in the glory of having run the third-fastest female marathon in history – for a few days, that is, until a couple of students remembered seeing her jump out of the crowd half a mile from the finish.

Something of the sort has been going on recently with the shade of Friedrich von Hayek. The Austrian economist, who died in 1992 just short of what would have been his ninety-third birthday, never made false claims for himself – far from it: he knew all too well the loneliness of the long distance runner. And scrupulous work as editor by the late W.W. Bartley, interpreter Bruce Caldwell, and biographer Alan Ebenstein, have made it possible to see the man clear.

But the claims conservatives are making about the role he played as an economist are beginning to smack of Ruizismus. That is, they have jumped a caricature out of the bushes late in the day and claim that their guy ran a great race.... the fact remains that Hayek just didn’t contribute very much to the development of technical economics.

This is what Warsh wrote in 2007, after reading Bruce Caldwell:.