F.A. Hayek as a Political Economist: Economic Analysis and Values (review)

This book is a product of the first conference of the Association des Historiens de la Tradition Économique Autrichienne, held in Paris in 1999. The first part contains papers by Hébert on Hayek and the French engineers, and one titled "Moral Functionalism" by Birner, which turns out to be a defense of Durkheim against Hayek's strictures on constructivism. The paper by Hébert also defends French engineers against the charge of constructivism, arguing that some, such as Dupuit in particular, were not guilty of this. But Hébert then attempts to build a case for the idea that Carl Menger's work could somehow have stemmed from that of Dupuit. This is not convincing. That Dupuit was not a Saint-Simon-Comte type of constructivist is plausibly argued; but the idea that Dupuit's discussion of wants, which is, typically of an engineer, project-centered, somehow leads to Menger's famous table seems to me not a small step, as is claimed in the paper, but a very large one.

In part 2, Schmidt puts forward the intriguing idea that it would be possible to construct a novel form of game theory which would be compatible with the work of Hayek. While this is not entirely convincing—game theory ultimately involves a probability distribution however it is approached, whereas Hayek's approach has much more in common with that of his former graduate student George Shackle, who eschewed probability in favor of possibility—the paper, though short, is stimulating and well argued. The paper by Aréna attempts to cover, in fifteen pages, a huge topic—monetary theory from Hayek to Friedman—in order to establish that Hayek was an opponent of the quantity theory. The account of Hayek's monetary thought is straightforward and does not differ from one which anyone familiar with the work of Fisher, Hayek, and Mises would give. But, in attempting to deal with Friedman, Aréna relies on a single reference—a congressional submission by Friedman of 1958—and, principally, a 1988 paper by Bellante and Garrison. The latter part of the Aréna paper seems to me fundamentally misleading. While Hayek was an opponent of a Fisher-style quantity theory, because of the derivation of his work from the Mises version of Wicksell (neither of whom are cited in the paper) with its central distinction between the price levels of producer and consumer goods, the work of these writers is much closer to that of the quantity theorists than it is to the post-Keynesian endogenous money approach favored by their opponents, not least in France. Furthermore, Hayek's later (and unfortunate) arguments for the denationalization of money do not really alter this, because they are fundamentally inconsistent with it.

In part 3, we have papers by Nakayama, Moss, Butos and McQuade, Cubeddu, Bensaïd, and Garrouste. Nakayama's paper conflates two different ideas in Hayek. The first is Hayek's critique of the possibility of a planned economy—and here Nakayama fails to see that Hayek's critical argument is that without a market for factor services there is no way of computing cost. The second is the fundamental argument of The Road to Serfdom, concerning the loss of individual choice, the inevitability of escalating state control, and the road to dictatorship involved not merely in the continental Europe with which Hayek was familiar but, as Hayek saw it, in the pretensions of people like Laski in wanting to create a planned economy in Britain. The paper by Moss, in contrast, argues correctly that Hayek had to depart from Wieser's analogy of the economy as a household precisely because a household is provided with a great deal of information by the market.

A paper by Butos and McQuade attempts to deal with the problem of knowledge generation outside of markets—that is, in the wider context of institutions. The paper by...