 Well, good afternoon. My name is Tom Palmer. I'm a senior fellow here at the Cato Institute. And it's my very distinct pleasure to welcome you to the FA Hayek Auditorium of the Institute for a discussion of two new books on one of the most interesting and stimulating and centrally important intellectuals of the 20th century, the man for whom this auditorium was named FA Hayek. Next month will be the 60th anniversary of the publication of Hayek's most famous or most popular book, The Road to Serfdom. In 1944, it represented a real turning point in the 20th century in the battle between collectivist totalitarianism and individualist liberalism, with liberalism understood in the classical sense of the term. And so this seemed a fitting occasion to sponsor a discussion of Hayek's contributions to knowledge and to the defense of liberty and even civilization itself. We have the authors of both books here with us, as well as a distinguished commentator, all of whom I will introduce shortly. Before doing so, however, I'd like to note that in the lobby outside, we have some photos and other mementos of Hayek's involvement with the work of the Cato Institute and also to mention what a huge influence he had on Cato's work and mission. And that influence was not only institutional, it was personal as well. Now indulge in just one example. I recall quite a few years ago, attending a public lecture that he gave, and I was really struck by the answer he gave to one of the questions. And it was the form of the answer rather than the content that was so striking and made such an impact on me. A question had been posed to him, and he answered at his very distinctive Austro-British accent, something like the following. He said, I take it from the questions that you believe such and such. The fellow said yes. He said, hmm, I also held that opinion for about 50 years, but lately I've been thinking about it a great deal and have concluded it was a fundamental error. And I thought, if I ever get to be that old, I want to be just like that. Always opening to rethinking important questions, listening to critics, and being willing to modify cherished beliefs because the fundamental commitment is to finding or at least groping after the truth. Let me turn to introducing then our presenters. Alan Ebenstein is the author of Hayek's Journey, The Mind of Fridjish Hayek. I should point out these books are available at amazon.com and LFB.com as well. Alan received his PhD in political philosophy from the London School of Economics, which is where Hayek taught for many years. He's the author of a number of books, notably on the works of Edwin Kanan, a very important figure at the London School of Economics who revived a great deal of influence in the work of Adam Smith and was very influential when Hayek went to the London School of Economics. He's also the author of a companion volume to this one called Fridjish Hayek, a biography. He has taught economics and political theory at Santa Barbara and at Anioc University and is currently a private businessman. Bruce Caldwell, who's the author of Hayek's Challenge, an intellectual biography of F.A. Hayek, is the Joe Rosenthal Excellence Professor in the Department of Economics at the University of North Carolina in Greensboro. He's the author of Beyond Positivism, economic methodology in the 20th century and of many articles and economics journals. He's also, notably, the general editor of the collected works of F.A. Hayek, published like this book by the University of Chicago Press. And finally, our commentator this afternoon is Dick Armey, a rather well-known figure in this town as he was until rather recently Majority Leader of the House of Representatives. He's currently serving as co-chairman of Citizens for a Sound Economy. Before coming to Washington, D.C., however, he was chairman of the Department of Economics at the University of North Texas. And I think it's reasonable to say that Dr. Armey is the finest economist ever to serve as the Majority Leader of the House of Representatives. I'm going to ask each of our presenters to introduce to you some of the results of their years of research and thought on this important thinker followed by Dr. Armey's comments and then general discussion and questions from the floor. Why don't we start with Alan? Up here, please. Well, it's a pleasure to be able to introduce some comments on Friedrich Hayek. Hayek was a great admirer of the Cato Institute and in fact, one of his last letters when he was very old in 1990 was to Ed Crane and writing on the collapse of communism of the Berlin Wall. Hayek wrote that he could not be more pleased by the, quote, the ultimate victory of our side in the long dispute of the principles of the free market and will at the moment only say that I hardly expected to live to experience this. Hayek is someone whose lifetime spanned almost the entire 20th century he was born in 1899. He died in 1992. He had an incredibly productive career starting in the 1920s and extending really through the 1980s. And as Tom indicated, his major work or the work for which he is most well-known popularly is The Road to Serfdom, which was originally published in England in 1944. I think it was this month however, we're already in February and I believe or was it published in February or March? Do you know, it was March. All right, well, Tom knows better than I do. And it was subsequently published in the United States six or seven months later in the fall and was a great success. Most of my focus and my comments will be on Hayek's political thought and political philosophy. That's the area of my own background. And it's something that I think that his work in this area is really among his most lasting and permanent work and in any event. After The Road to Serfdom in 1944, Hayek followed up his work in political philosophy with three other major volumes which really were his primary focus for the next 40 years which were in 1960, The Constitution of Liberty from 1973 to 1979, Law Legislation and Liberty and then a work published in 1988, The Fatal Conceit, The Errors of Socialism. I think that the fundamental aspect of Hayek's thought with respect to socialism and the difference between free market capitalism and socialism was that socialism was wrong on the facts and I think that this is a very important aspect of his thought. It's not that if humanity were good enough, wouldn't it be a great thing if socialism could be realized? If only humanity were more altruistic, socialism could be realized. Those were the sorts of arguments that were used foreign against socialism earlier in the 20th century. But I think that Hayek's contribution stemming in large part from his teacher and mentor Ludwig von Mises was that the fundamental dispute between socialism and capitalism was not an ethical dispute but was a factual dispute over which system would best deliver, literally be able to deliver the goods of economic productivity. When he originally put forward his ideas in the 1930s and 40s, that socialism was not the most effective way of producing goods and services. He was, of course, ridiculed. However, time as we've all seen has proven Hayek right and I think that that's a very revelatory finding because what it indicates is that what the current consensus is about an issue can be completely wrong and that what the best minds, the most intellectual representatives of certain viewpoints are putting forward as the way that the world is, is in fact not the way necessarily that the world is. So I think that Hayek's idea that socialists were wrong about the facts was absolutely crucial to his comprehensive thought and is one of the conclusions that in his final work, The Fatal Conceit, he emphasized. Whence does Hayek's influence stem? I think that in large part stems from his utopian aspect and sometimes Hayek has seen as a rather stiff, dour figure, very precise, very scholarly and not necessarily a visionary in a utopian, but I don't think that's correct because I think that Hayek was fundamentally a utopian. He wrote in Law, Legislation and Liberty, which was his major work in political philosophy following the Constitution of Liberty, that it is not to be denied that to some extent the guiding model of the overall order will always be in utopia, something to which the existing situation will be only a distant approximation and which many people will regard as wholly impractical. Yet it is only by constantly holding up the guiding concept of an internally consistent model which could be realized by the consistent application of the same principles that anything like a framework for a functioning spontaneous order will be achieved for an effective spontaneous order, effective framework for a functioning spontaneous order will be achieved. So he had this idea that it was very important that there was a visionary aspect to political thought and economic thought and that it's not enough simply to look at piecemeal incremental reform in the sense that he thought that that was how reform is most likely to be achieved in a practical manner and he certainly was not someone who advocated typically revolutionary or decisive change, but at the same time it was important that there be some sort of inspirational ideal that would provide people intellectually the opportunity to understand the direction in which the larger system should be moving. He frequently said throughout his career that the purpose of the economist or political philosopher is to make possible what today is politically impossible. And I think that that too is one of the cornerstones of Hayek's thought. It's not just this emphasis on facts, it's this emphasis that things truly can be different than the way they are today, that the way we run and operate our societies is not something that's carved in stone, that societies can evolve, they will evolve, and that if we have the right ideals that we can create better societies. Since I'm gonna talk mostly on Hayek's political thought, there were several issues that I thought that would be relevant to current discussion that would be worthwhile to discuss as to what Hayek's views would be. And these issues, these five issues would be one, freedom of association, two, the legalization of drugs, three, a more communitarian and voluntary society, four, diminution of the role and extent of government, and five, expansion of free trade. And there's obviously much inter-pollination and connection among these. With respect to the idea of freedom of association, I think that Hayek would argue that this is something that is truly being lost in our society or has been lost in our society, and that in the same way that it's inappropriate for government to attempt to micromanage the details of economic production, similarly, it's inappropriate for government to attempt to micromanage people's individual moral decisions in their lifetimes. The essential libertarian principle is that people should be able to do whatever they wish as long as they are not approximately and in the first instance, harming someone else. And that includes the ability to associate with individuals with whom individuals feel that they have similar views. I think that the practical emanation of greater emphasis on freedom of association in our system is greater emphasis on decision-making at the state and local level. In law legislation and liberty, Hayek wrote, discussed the transformation of local and even regional governments into quasi-commercial corporations competing for citizens. He wrote in the Constitution of Liberty on competition between municipalities. He remarked in an interview, I'm inclined to give the local authorities power which I would deny to the central government because people can vote with their feet against what the local governments do. I think that Hayek's view on the issue of diversity is not so much that all communities have the same sorts of characteristics, but there can be very different sorts of communities in a society in which people in one area can believe and practice differently than people in other areas. And again, I think that the idea of freedom of association is very important one and an area where Hayek's thought today would find a practical emanation. In the area of legalization of drugs, I think that Hayek would be emphatic that adults should be able to do whatever they wish as long as they are not harming someone else. And I think that his argument in favor of legalization of drugs would not so much be a prudential one of the costs of the war on drugs, but I think rather his argument would be a freedom argument that as much as individuals made to cry other individual's choices, that ultimately it's vital for individuals to be able to develop their own moral standards and moral judgments and make the decisions that they think are best for them, even if they're wrong in that judgment, that freedom is the overriding principle. And basically it's something that Hayek's view in this area was certainly that it's inappropriate for government to attempt to micromanage people's individual lives and that as much as possible, individuals should be able to make those decisions themselves. He also in the road to serfdom talked about that morality only has value when individuals have the opportunity to choose. It is in the act of choosing that people develop their humanity and that by denying people the right to make choices, he says the person who has made to do the good thing in all instances has no moral merit. In the area of a more communitarian and voluntary society, Hayek definitely would have favored a more voluntary society with more social services being provided at local and state levels rather than at the federal level, the privatization and competition in the area of provision of social services, the voluntary and charitable aspect of these services. And it's something that he saw that as a better society and it's something that when he talked about this communitarian element of trying to do things at the local and state levels, he said that to re-entrust the management of most service activities of government to smaller units would probably lead to the revival of a communal spirit, that it creates a better society when instead of trying to do things at a national, federal level, we do them at a state and local and voluntary level. This is very related, it's very interrelated to the idea of trying to reduce the role and extent of government in general, particularly at a national level. I think that where we could look for progress in the long run of are we moving more toward a Hayekian society would be is government percentage of gross national product declining, are the pages in the federal register each year being reduced, is there less regulation? Basically, his view was that if you allow people to have more freedom in their lives that it will create a much better society as well as be more economically optimal. These are obviously reinforcing goals. If the percentage of the gross national product that the federal government is diminishing then that's gonna be leading to more activity at local and voluntary levels and once again a more communitarian society. Finally, in the area of expanding free trade, I think that Hayek would have been completely opposed to efforts to restrict free trade at any level, particularly those individuals in the political, those individuals who believe that somehow we're not benefiting people around the world to allow free trade to the maximum extent, simply just don't know how economies operate and that it's something that's completely not just unjust to our own people and depriving them of a better livelihood but so much more so really in many respects depriving people around the world of a better livelihood. It's something that by creating the broadest markets possible that by creating the broadest possible markets possible there'll be the greatest economic growth. Well, I had better let Bruce comment. Bruce is of course the general editor of Hayek's Collective Works and has just written an excellent book which I'm currently reading, Hayek's Challenge. But to conclude my own comments, Hayek was once again I think primarily a visionary and utopian philosopher in many respects in his political philosophy and what he wrote in the 1940s, the late 1940s when the prospects for freedom seemed dark was that we must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal utopia using liberal in the classical 19th century definition of the term. What we lack is a liberal utopia, a truly liberal radicalism. The main lesson which the true liberal must learn from the success of the socialists is that it was their courage to be utopian which is daily making possible what only recently was utterly remote. Thank you very much. Which one is it, either one? Okay. Good afternoon. In my remarks today, I'm gonna start out just by saying how I first got interested in Hayek and then I hope to convey at least a little bit to you how that interest ultimately turned into a real fascination. I didn't come to Hayek as so many people probably in this room and others who know of his work either as a conservative or a libertarian, although, and I didn't know it at the time, I had libertarian tendencies but I didn't think of myself in those ways. But I came to Hayek as an historian of economic thought and my interest as an historian, I think it's easy to understand why an historian would find Hayek an interesting figure. As Lanny said, he lived a long time, 1899 to 1992. He wrote a tremendous amount. There's actually a huge archives at the Hoover Institution at Stanford. I think it's currently at about 120 boxes at this point. And he was a very controversial writer which is an attractive thing for an historian as well because as a result, he had people who really liked him. He had people who really disliked him. They were offering interpretations and one of the jobs of an historian is to try to sort through the interpretations, try to figure out which ones might be reasonable, which ones not. But I think what really clenched it for me as an historian of economic thought in particular was that Hayek managed to be at the right place at the right time, virtually all of his life. He grew up in a fiend de siècle of Vienna which was a hotbed of intellectual activity in Western Europe. Among his earliest teacher was Friedrich von Wieser but soon he came under the sway Ludwig von Mises. One of his classmates, people that he took courses with with Oscar Morgenstern who went on to be one of the co-developers of game theory. When he finished up his time at university, Joseph Schumpeter, another, you may not know all these names but to economists, these are wonderful names. Each one of them worthy of indeed has biographies written about them. Schumpeter gives him letters of introduction to all of the leading American economists. He gets to the United States and meets all of them and manages to sit in on Wesley Clare Mitchell's history of economic thought class which I'll come back to the significance of the specific class that he sat in on in a little bit of time. Wesley Clare Mitchell was one of the fathers of American institutionalism, a set of views with which Hayek would later contend. When he came back to Vienna, he worked for a while, worked on finishing up his degree and was invited by Lionel Robbins to the London School of Economics to give four lectures in the early 1930s. If you go to the London School of Economics today and find the library, it's the Robbins Library. I mean, this was the person who was a very big figure now, he was 31 years old at the time when he invited Hayek over to give these lectures. Hayek ends up staying at the LSE for a number of years, about 20 years almost. As soon as he gets there, he gets embroiled in a, at the time, academically violent, not physically violent, but a violent exchange with John Maynard Keynes. This is before Keynes had written the general theory but Hayek was already disagreeing with it. Later on, he interacts with people like Frank Knight and Oscar Long in the mid-30s. He invites into his seminar an obscure young philosopher named Carl Popper who he ends up ultimately bringing Popper to the London School of Economics. Not he alone, but he was instrumental in getting Popper his appointment at the London School of Economics. He's also having meetings with people like Carl Polanyi, people outside of economics who are significant thinkers. After World War II, he starts, he is a principal in founding the Mont Pelerin Society, two of the people that he invites to that are George Stigler and Milton Friedman who would soon become his colleagues later at the University of Chicago. So if you were interested, as I am as an historian, in trying to come to grips with the development of economics in the 20th century, Hayek is a perfect figure, a vehicle for trying to understand how that development took place from a very different point of view from the mainstream view in economics because he typically, as I'll mention a bit later, attended to disagree with a lot of developments there. So you can understand then how I might get interested. The fascination part comes as I got deeper into my subject. I found that trying to tell Hayek's story was extremely difficult. This is a complex, complex figure who I was trying to figure out. And one of the things that I found most challenging about Hayek was his constantly changing research topics. We're all trained in the late 20th century or mid to late 20th century when I was trained as specialist, but this is a guy who would just roam all over the map. He started out as a monetary theorist working within an Austrian tradition of monetary theory. In the 1930s, he switches over and starts his analysis of socialism and the problems with socialism. As Lanny pointed out, he convinced no one with his analysis. So he thought, well, what I must do is go and try to develop a little bit of broader analysis. And he started what he called his abusive reason project during the war. One of the books that came out of that was The Road to Serfdom, which everyone knows about. But another is a set of essays, Scientism and the Study of Society, that are incredible essays on the methodology of the social sciences and how we can better understand certain social sciences. The Road to Serfdom gives him his 15 minutes of fame. And he immediately embarks on a totally new project, writing a book that ultimately became the sensory order, a book in theoretical psychology, a book that when I first read it, I couldn't make Hezner tales of. It was a difficult book to try to figure out what was going on, but just the audacity to break out and write a book in theoretical psychology when you're known as an economist and also as someone who's contributing to political thought of the day in The Road to Serfdom was quite incredible. Of course, he then goes on and does other things. He goes to the University of Chicago, and that's when he starts his phase when he's working mostly in political theory and political philosophy. But he's also, again, writing articles on the methodology of science and trying to figure out what it is about certain sciences that make them so hard to handle, so hard to deal with, so hard to get precise predictions from. Here, his papers, The Theory of Complex Phenomenon or Degrees of Explanation, are some of the standard citations. So I mean, the questions that an historian faces in that is why was he doing it? Why was he making these switches? What was going on in his head to switch from this field to that field? How can you tie that and weave that together to make a plausible story? And I found that a challenging thing to do, and it was something that kept me busy for quite a number of years. Now, further complications were added by the fact that Hayek disagreed with just about everybody he came into contact with. I mean, this was not, I don't think in his nature, he just simply disagreed with many people. He was, if you want to continue the analogy, the right person at the right time with the wrong ideas, at least that's what everyone else thought. He disavowed, for example, socialism. When everyone viewed socialism as the middle way, that capitalism had collapsed in the Great Depression and that there was totalitarianism of fascisms and communisms on various fronts. And the middle way was socialism. That was the, he said this is the model of the middle was his phrase that he used. He didn't buy it a bit. When the Keynesian Revolution came along, well, he had actually disavowed the Keynesian Revolution before it started. He had started his arguments with Keynes before the general theory was even written. And indeed, when the general theory came along, he didn't even review it. He thought that Keynes was not someone important enough to do, it wasn't quite that. It's actually a fairly complex and rich story, but he ended up not even reviewing it. Just time and time again, his book on psychology was ignored. Many of his works were viewed as the work of a reactionary or a radical and just not paid attention to. Some of the worst parts of it, I think, for Hayek was not so much when people disagreed with him as when they just met his work with indifference. What's wonderful, of course, is his response to all of that. When he finds all of the intelligentsia arrayed against him in various forms, his response is, how can so many supposedly smart people be so wrong? How am I gonna show them that they're just wrong? So he goes about trying to figure out ways of showing people the errors of their beliefs. And in doing that, he made recourse to history. One of the things that I liked about Hayek is his use of history in trying to say, this is the origin of these erroneous ideas. He does this particularly in this abusive reason project. This is why people today keep thinking this way. It has its origins back in these old, bad ideas that just filtered their way down and now are dominating us. And these are some of his arguments that he makes in that essay. And he also uses history to draw on a classical liberal tradition, a Scottish Enlightenment tradition, that he viewed as something that had been supplanted by this other tradition that he was trying to revive. And indeed, he played a very big role in helping to revive that tradition. Obviously not alone, there was many others doing it, but he did play an important role. Now, in addition to using history, he also asked deep questions about the nature of social reality and why the models that economists were using and the ways of thinking about it then current were missing things about reality, that if you look with a general equilibrium theory at the way a market works, it has certain insights, but there's a bunch of things it misses, and these are things that are important to the real functioning of a market economy. So he looks at the world and he says, well, actually the world is different from the way these models have told us it is, and indeed the models are misleading. And his conclusions that he came up with actually were methodological. And remember, I actually started out with at least as much interest in his methodological ideas as anything else. He asked questions about what further was possible in social science. The working subtitle of my book, the subtitle is an intellectual biography of F.A. Hayek and the University of Chicago Press Marketing Department kindly provided me with that subtitle and took away the one that I wanted because they said, well, this is a better subtitle because it is an intellectual biography, and fair enough. But I also, the working subtitle up until that point was F.A. Hayek and the Limits of Social Science. And I think one of his most profound messages actually is that we can do a lot less in the world than we hope to. And certainly then what we thought we could do back in the age of positivism that he fought in for so long. In telling Hayek's story, I just wanna say one last thing about the way I structured the book and trying to tell the story because it might, if any of you actually do get it, it's a little bit strange. I start out with the Austrian School of Economics. I don't start out with Hayek. And the reason I do this is I think it's absolutely essential to understand if you're gonna understand Hayek, to understand the tradition in which he was working. Not only to explicate to some extent the Austrian viewpoints, but to point out that this was a tradition that was born in battle. The German Historical School and the Austrian Economists were fighting about the nature of social science and whether history versus theory is more important. And many of those debates of those early days are echoed in debates that took place within economics about the relative importance of theory versus empirical work. So it's important for that aspect, but also to see where Hayek was coming from. But equally important, Hayek came from a tradition that was working against socialist ideas and positivist ideas. These are philosophical ideas, the latter. And crucially, within the Austrian viewpoints, socialism and positivism were linked. This is interesting because among economists, especially after Milton Friedman, positivism is often associated with free market economics. So in terms of unraveling some of those ideas, I gave some background. The second part is about Hayek's journey, simply trying to tell the story, as I said, about the development of his ideas. And the final section is an attempt to assess his legacy. And this is a final fascinating aspect that I'd like to share with you about Hayek. Everyone, as Lanny said, thought he was wrong. Today, in field after field, people are saying, gosh, he was pretty close to right, not just economics. I attended a conference at Great Barrington, Massachusetts over this past summer. Nobel Prize winners like Vernon Smith and Douglas North love Hayek's work. But in addition, there was Gerald Adelman there, who's a Nobel Prize winner in biology, saying that Hayek's work on the sensory order on cognition and the workings of the mind, he said it was incredible that he was getting these kinds of insights 50 years ago when he experimentally didn't have access to any of the sorts of things that they have now. And well, it's just fun to work on a figure like that. And the final aspect in that legacy, and this is another part of why I chose the book titled Hayek's Challenge, is I think if we take Hayek seriously, he challenges even today some of the directions within economics. And so I think he has some valuable things to say, not just in ways that people acknowledge his insights into the nature of socialism, but into the nature of economic phenomena more generally. So thanks very much. Well, thank you, guys. First of all, let me just say I have not read either one of these two books because I am already profoundly convinced they're too difficult for me, but I will. I am intrigued by the subject and will be picking them up shortly. Some place along the line, out of frustration with an editor who knew better how my book should be titled than I did, that common malady, some place along the line out of that frustration I coined what is, for me, a personal model, freedom works. I think of this as sort of a practical ideology. Freedom is good, and freedom works. Servitude is bad, and servitude doesn't work. I don't think I'm unique in that. I think there are many of us that could go along. And I think most of us who believe in freedom as both the better practical alternative and the better moral alternative would be in this generation at this time pursuant to higher. I'm going to suggest to you that from the period of time 1930 to 1980, intellectual devotion to freedom was in high jeopardy in this country in the world. This was a period of time after the Great Depression when it was easy to believe that capitalism fails and easy to believe that various forms of statism, socialism, communism is a better alternative. It was particularly easy to believe that since you would be more likely to be trained in the latter than the former in any formal academic experience you might have. I hold to a conviction that the ideas of the left are both superficial and audacious and therefore quite comforting to most people most of the time. The ideas of the right are both deep and humble and therefore less attractive to most of the people most of the time. And from the period 1930 to 1980, the ideas of the left there with their superficiality and their audacity ran rampant, certainly in America but I'm sure across the globe. Why did I pick that time? Well, obviously I start with the 30s and the Great Depression as making it possible to see before your very eyes the failure of freedom and the success of servitude. Why do I pick 1980 for the end of this period of sort of intellectual and moral malaise? Because in 1980 Ronald Reagan was elected President of the United States and our ideas had won. And I'll go into that. But without Hayek there wouldn't have been a Ronald Reagan. There wouldn't have been a Jack Kemp. There wouldn't have been a Dick Army. There wouldn't have been a Phil Crane. And there wouldn't be today a half a dozen or so young heroes that we have in the Congress of the United States, people like Flake from Arizona. I can name some furthest, but Jeff Flake is clearly the young Ryan from Wisconsin to me from Pennsylvania. There wouldn't be these people. Why do I say that? I had all my formal academic training in between 1963 and 1968. I had enough academic training to have had permanent brain damage. In all of my years of schooling, clear through to a PhD, I never saw presented to me in the classroom, and I dare say few people did, by way of any assignment or, for that matter, recommended reading. Anything from Hayek, Von Mises, Ryan, and very little from Schumpeter. What we got exposed to was Keynesians and the American Institution of School, which would barely qualify as worthwhile sociology if there were such a thing as worthwhile sociology. And, of course, the sort of the highlight of this period of time was the works of John Kenneth Galbraith, who everybody must understand had to have known better than to believe what he wrote because he had his formal training in agricultural economics. But obviously, he weren't. Galbraith, I hold up as an example of where we were during this time, which I would call academic and moral fattishness. It was easy to be popular if you were superficial and audacious. Of course, the great conflict, intellectual conflict of the 20s and the 30s, was between Keynes and help me out here. Who did he ridicule in the general theory? It'll come to me. Pigu. Pigu. Yeah, had there been a Pagoovian revolution, we'd have been miles further. But why was Keynes, why did he reign over Pigu? Because he ran with the beautiful people. And Pigu was a scholar, somewhat eccentric. Why did Galbraith outshine Milton Friedman in our time? Because Galbraith ran with the beautiful people. You could read Galbraith, understand him, and appreciate him if you were committed to never thinking about it. You couldn't get past the introduction to Friedman unless you were committed to deep, hard, and humbling thought. And so one of the things that I would say about Hayek during this period of time, when most of us were raised, Hayek shines through as a person of courage and conviction. It would have been so easy for a man of his intellect to go with the flow and gain all the applause. It would have been so much easier for him to have been superficial and audacious, and therefore easy in the classroom, easily understood, and highly regarded. It would have been so much easier for him to have said, let me tell all the people in high office how they can empower themselves with further jurisdiction over other people and be both more effective and more morally acceptable. But he didn't do these things. He resisted all the great temptations of the time for anybody who chose to labor in academic vineyards. The great temptation to put himself, his standing, his career, his position in the community ahead of his ideas. Hayek demonstrates that a person who would have the devotion to the point that the idea is bigger than the man. The idea is bigger than the time. The idea is bigger than the moment. The idea is bigger than me. And let me serve the idea rather than allow the idea to serve me. I think we need to stop every now and then and realize there are very few heroes in all of academia who would have the courage of their convictions to put themselves second to the ideas, to stand down from the instant fame and social standing because they have a conviction about ideas. Hayek also stands out in that he gave us the breakthrough work. Most of us who discovered these deeper ideas about humility and freedom and dignity and what works and what doesn't work, most of us found our way through the road to serve them. He was one of the few of these scholars that gave us something that those of us at a time when we were uninitiated could, as it were, get our teeth into, could understand, comprehend. Most of us found this book because of some intuition that we had, some disaffection we had with what we were being exposed to, some longing for something that was deeper and more meaningful. But most of us would not have found our way beyond this book if we hadn't had this as our bathwinder. I put the road to serve them down as very big. We wanted to take a look at all of these people that we revered today, Von Mises. There was no easy path except first through the road to serve them. I remember Jack Kemp talking about how he used to read the road to serve them in airplanes to and from football games. Take a look at the collective works of Von Mises and Schumpeter and Hayek himself. You wouldn't find very many people capable of reading those in airplanes between football games and on buses. But the road to serve them broke the ice. It seems to me that the conclusion that we can come to once we find this is twofold. Capitalism is both morally and intellectually superior to any form of collectivism. I want to argue with it. Capitalism is both morally and intellectually superior to any form of collectivism. Why do I dare say this is an audacity on my part? I'm not going to be applauded in the Washington Post for having said this. I'm not going to be celebrated at Harvard or MIT or Yale or possibly maybe at Chicago but very few places. Let me put it a little strong, more direct. All forms of collectivism are morally and intellectually inferior to capitalism. When I look at people who are devoted to collectivism, I want to say shame on you. The Lord God Almighty gave you the intellectual capacity to rise above the superficiality of what it is you're espousing and just plain human decency in the fundamentals of just plain respect ought to give you the ability to rise above the immorality of what you expel. The first and most important cornerstone here is freedom. Now, I don't know that von Mises, and certainly not Ayn Rand, Schumpeter, or very many of these intellectual thinkers would connect freedom as I do to my religious conviction. But freedom is, to me, a gift the Lord God Almighty. But nobody could objectively look at the history of humankind and say that in any time, in any place, there was any value that was greater than personal, liberty, and individual freedom. In the lives of this species, we call on Earth human beings. Where does it come from? I have my own point of view. I'm sure Ayn Rand would be very disappointed in me for it. But I have my own point of view of where it comes from. But nobody would dispute that it is there. Army's asking me, if you want to see a man working like a barred mule, watch him when he works for himself and his family. Freedom works. Capitalism, freedom, freedom of enterprise. It encourages the best we have, and it punishes our failures, creative destruction. Capitalism punishes immorality. And all forms are governments. Even in its most necessary and benevolent form, government is fundamentally about making people do what they will not do voluntarily. And I don't know, you can take the sweetest, kindest act of government that you can think of. It is still about making somebody do what they will not do voluntarily. And if you want something that works better, have something that works because people choose freely and voluntarily to do so. And yes, because it's in their best interest to do so. And then secondly, and I think the great insight that we get from Hayek, probably more clearly than anybody else, information. The market is the greatest information processing system in the world. Take all the computer capabilities we have in this modern and wondrous electronic age, they can't do for you what the market was doing 100 years ago. Collect, sort, fragment, condense, and distribute information to the right decision maker at the right time for the right purpose for the optimal choice. Nobody can do that. And that was focused on by Hayek and brought clear. Because Hayek made this so clear in my understanding, gave me Army's axiom number one, the markets rational the government's done. And I chose the word dumb shamelessly for the alliteration. There's no doubt about it. But it is not rational. It is not possible to process information. Collectivism is unworkable because it's unworkable. It can't process the basic data. Nobody can know. How do I know? I may know that the price of tea has gone up or go down. But I don't know about the flood. I don't know about the drought. I don't know about the labor unrest. I don't know. And I don't care. All I got one data point given me by the market at the time I need it, when I need it. And it tells me everything as opposed to that which was required by central planning authority. When I struggled through the university learning against all that I was exposed to and teaching against all that I was expected to teach the principles of rational thought, rational systems, and freedom and liberty, I then eventually came to Washington. I came to Washington and I found that most of Washington, I'm sure it's true in most state governments, most of city councils, most of government is seduced by the audacities of power. The presumption of power. We can make this work our way by making you do what we ask of you. There were a few heroes of freedom that we found in Washington. First and foremost, Ronald Reagan was certainly Jack Kemp at an earlier time, Phil Crane before them. And we have these heroes now. None of these people would be here without Hayek. None of them would know and understand what they know without Hayek. And I would say as I go on now and I look forward to my post congressional, my post in government experience, I have been left more free to and more capable of advocating freedom because freedom works. And able to understand, I think, what I'm talking about most of the time because of Hayek. And had I not found the road to serfdom, I would not have found any of the rest of it. So that's my great thank you to Frederick Hayek. He broke the ice for me. He gave me an insight into a world of understanding that this nation in all of its great universities would have denied me. And you did the same for countless others. Thank you very much. We have some opportunity for some questions from the floor. So if you wait, we have microphones here that can be brought to you. If you'd identify yourself, let's start with this gentleman right here. I'm Jay Baker. My understanding is that when Hayek came to the University of Chicago, he did so at least in part because the president of the university, President Hutchins, was determined to have him on the faculty. But I've also heard it said that at that time, the economics department, where he might logically go, was just as determined that his place not be in that department. And so he ended up on a rather peculiar, at least academically peculiar organization called the Committee on Social Thought. And I'm wondering if there's any truth to that characterization of how he came to be on the Committee on Social Thought. This is a question that is of some interest among individuals who are interested in Hayek. And we may not have complete unanimity here, but we may. Basically, I don't think that it was Hutchins who was seeking to bring Hayek to Chicago. I think he supported it. But it was really John Neff, who was the head of the Committee on Social Thought, who was the real strong advocate for Hayek to come to Chicago. With respect to the economics department, Neff has a line in his autobiography to the effect that the economists didn't want him because the road to serfdom was too popular a work for a respectable scholar to perpetrate, or something along those lines. And I asked Milton Friedman the direct question, what about this line from Neff? And he was just emphatic that the road to serfdom had nothing to do with Hayek not being taken into the economics department at the University of Chicago, that basically it was more that Hayek's Austrian economic approach was not consistent with the approach at the University of Chicago. From a technical perspective, it wasn't an ideological question. It was more a technical question that it was just a different brand of economics than was being practiced in the University of Chicago at that time. And that therefore, that's why I went to the Committee on Social Thought, which was, from Hayek's perspective, in many ways, a much nicer position because he had more flexibility. He didn't have to teach. He could start to expand into political thought, philosophy, and so forth. So that's my impression of Hayek's coming to Chicago. Bruce may have different views on that. No, I think that that's, I agree with Lanny's description. I might just further add that the Coles Commission was at Chicago at that time. And these were econometricians, many of whom I think would have been unhappy with the way that Hayek's work, Hayek was often very critical of empirical work. So I think that that probably would have made him suspect in their view. And in the late 80s, no, early 80s, I think Hayek did an interview with Shahadi, a man at the LSE. And Hayek's own view was that it was the econometricians that were likely the ones who had opposed his coming in there. But when you're dealing with academic politics, you're talking about a committee room. You don't know what was actually said. Even sometimes, there's a wonderful book out about an incident that happened between a Wittgenstein, a Wittgenstein's Pope, where all the people in the room couldn't agree on what happened in a famous incident. And so it's often quite difficult to reconstruct what kind of causes may have come to that kind of conclusion or led to that conclusion. Steve Hanky, Johns Hopkins, and the Cato Institute. Bruce, in your remarks today, you give the impression that Hayek was switching from field to field and operating at a stratospheric level in each one of these fields. And that the switching was, in effect, the result of the fact that you're dealing with a unique genius kind of. However, in the book, your book, you indicate when Hayek was asked about that, or maybe this was one of your comments. I can't quite remember. But Hayek, in effect, said, well, we were trained to be able to do that in Vienna. Now, the interesting thing, of course, now the training in economics is just the opposite. You're trained to stay in the narrowest little pigeonhole in the world and can't move around with any flexibility. I wish you'd elaborate a little bit more on Hayek's comment. Well, we were trained to be that way because it's clear they all were. I mean, he wasn't the only rambler moving around from field to field at a very top level. But in your book, you just really let it just kind of drop and you didn't say anything about it. But I didn't note it and agree that that's a truth. But I'd be curious what you have to say about that. Sure. The way that the university system was set up in Vienna, students would take any classes that they felt that they wanted to sit in on. And they would often just simply the good students would seek out good professors and take their classes. And they would end up taking their exams at the end of a second or a third year. And it was often the bad students would simply get coaches to coach them up on the exams. The good students would just simply dip in lots of different fields. So he had this, he said in some of his reminiscences that he was trained from that process to always feel confident in going in and learning a field up himself, just getting up on a field on his own because of that background. I'll also simply point out, and then Lenny may have some further comments on this. Another example of that was after a couple of years at university, he was getting on the nerves of one of these professors. He went to the professor's class and took the class. And then there was a seminar. And the professor finally kicked him out of the seminar because he kept asking these questions that were embarrassing to the professor, he's smarter than a professor. And he was running into this sort of problem. So he and some friends formed a group called the Geist Christ where they would just meet on their own. And typically people would give papers in areas outside their training. So he would have art historian, psychologist, economist, et cetera there. And not always, but very often people would simply investigate something that wasn't in their field. And then there'd be others who were in that field that would comment on it. So it was really the Vienna coffee house culture and academic culture of that time. It was really quite wonderful, I think. Right here. Hi. I enjoyed Mr. Army's division between a superficial audacious on the one side and a deep and humble. I think that really is quite valuable. But doesn't that raise a question? If it's true that in the democracy, in the capitalist democracy, that the superficial audacious succeed for periods of time, doesn't that raise a question about whether the extent to which one can predict or one can depend on freedom working or capitalism continuing to work? And I had two things in mind that I was wondering if you could comment on. One is simply people could be unwise, obviously, in who they vote for, led by the hopes you suggested and the division you made between the audacious and the deep and humble. And the second thing is that capitalism itself, people have argued that capitalism itself is a decaying factor politically that it causes moral decay and think of Tocqueville's argument. I mean, no one would call Tocqueville for being a socialist, but he's pointed out that capitalism, weakens religion, disrupts ties between people, coarsens people, leads to all kinds of morally negative effects. And just thinking about Hollywood, for instance, it seems like there's some truth to that. Let me just say first of all, I think one of the expressions I use purposefully, I hope may be your fact. I said that what passes for intellectual activity on the part of the left is superficial and audacious and comforting. I mean, here's the free lunch. There's where you're free of personal responsibility while you stretch your social responsibility. You're free of thinking while you emote. And you're very stylish, by the way, along the way and subject to a great deal of applause. The, as full as seductions, on the right, on the side of freedom, these are not comfortable lessons. It's, first of all, it's intellectually rigorous and demanding, it's deep thought. It's, it requires your personal responsibility and it punishes immorality. There are no rewards that are unearned. Capitalism will elicit the best you have to offer and reward you accordingly and punish you for your feelings. So it's not a very comfortable thing. The biggest problem though you have is people love freedom, governments love power. Now the problem you have is once people get into positions of public authority and power, is they then rationalize the imposition of their better judgment and their jurisdiction in the lives of other because of what's good for them. Two great audacities of big government are, one, that you are incapable and therefore the government must protect you from your foolishness. Or two, you are not ethical and therefore the government must protect others. Now you look on, take Washington as an example, how many examples of intellectual and moral accomplishment do you find in the government of the United States from which you would model your life in the performance of their official duties as compared to in the private sector. In the home, in the church. As far as capitalism threatening religious value, I, my own view is quite the contrary to the total. I personally will tell you the reason people in any generation, in any culture at any time in the history of the world value personal liberty so high is because personal liberty is a unique gift from the Lord God Almighty to people, not to dumb animals. And somehow at some level we know this and we treasure it. So my own view is capitalism will foster religion if it really compliment religion, encourage religion, not certainly not work against it. I'm going to jump the queue for a moment and pose a question for our presenters about the Hayekian research agenda, if you will. Hayek organizes much of his life about a set of questions or problems that he faced rather than answers that he already knew. His work in monetary theory and the trade cycle, he was interested in explaining trade cycles. He wanted to understand how markets and prices worked. He was deeply concerned about why intellectuals were so attracted to power and collectivism and he inaugurated his abusive reason project, his later work in understanding spontaneous orders and applying the idea more broadly beyond merely markets but to all sorts of other institutions. If you were to think about what would be big problems or questions that someone influenced by this tradition would want to undertake, let's say I limit you to two, what would they be? Do you mean current questions? I have in mind if you look out, I see a number of graduate students in the audience are some of the sorts of things they might devote the next 40 years to. To think of Hayekian timescales. I could use some help with the Hayek collected works actually that would be fine but more seriously, I see Hayek not as starting a Hayekian tradition in economics per se, rather I see Hayek as contributing to a much broader tradition in which people who are doing work in public choice in transactions, cost analysis, property rights theory, history of ideas, Vernon Smith's work, the new institutional economics with Doug North. I mean I mentioned North and Vernon Smith, these are two people who have a great deal of respect for Hayek and define in some ways the sorts of research that they're doing in a very Hayekian framework. So rather I would want to rephrase your question to say where would Hayek fit into this larger tradition? I think it's a tradition that is very complimentary to what often passes as the mainstream in economics. It's not meant to supplant it so much as to say, well there's a bunch of questions that this other tradition is just simply not focusing on or perhaps the tools are not the right tools for addressing these questions. And Hayek and others within that alternative tradition I think provide some of those tools and questions. Two areas I think it's an excellent question. One is the application of the idea that government shouldn't micromanage the economy to government shouldn't micromanage morality. And I think this follows up on Mr. Armie's comments that I'd agree that if you give people freedom they'll choose a more conservative social order. And the problem in our society now is that there are so many institutions and public policies that prevent people from choosing that more conservative social order. So I think the application of Hayek's ideas from economics to issues of social, more general social policy would be one area. The second area which I think is a fascinating area of Hayek's research program is the whole idea of unarticulated or nonverbal knowledge, how knowledge is communicated. And these are just wonderful ideas that Hayek himself did not develop as much as he could have. But the whole idea of how knowledge is communicated and nonverbal knowledge in particular is communicated through institutions, I think would be another area. I agree, I mean, to me, you can start with Adam Smith in visible hand, a mystery or you know, Schumpeter's creative destruction or as we now know in greater depth, the price system and the price is that data point. That single data point that condemns reams of knowledge. I don't think we fully understand this at all, but I think we have standing on the shoulders of these folks, the inescapable understanding that freedom and that free flow of information, that automatic mysterious sorting and collecting and condensing and distributing of data can never be matched. And I think it's very important because we went through a period of time with our computers that we thought we could do it now with computers. But you know, we can take all the computer capability in the world and we cannot match it. It is truly a miracle. So I mean, I usually often use the expression, the miracle of the market is how it gets all the right information to the right people at exactly the right moment so they can think this. The next time you sit down and make a decision, go to lunch tomorrow and decide what you're gonna eat. Look at the prices. Look at all the information in the world about that, handful of little choices you don't have, don't need, don't want, and would never bother yourselves with. Central Planner can't ignore that information, only you can. Back there. I'm Dane Von Breiken, record with the U.S. testing, one, two, three. Okay. I'm Dane Von Breiken, record with the United States Bill of Rights Foundation and it seems like the underlying theme of this talk is certainly about capitalism and liberty and my question goes primarily, I guess, to Mr. Army but I thought all of you could comment on it. Mr. Army, I know that you're interested in the flat tax and you've been promoting that idea but I would like to ask all of you what liberty and particularly Mr. Army, you mentioned the dignity of liberty and freedom and I'd like for y'all to address what dignity and liberty is there when individuals on the 15th of April every year have to be like little minions shaking in their boots, putting their tax returns in the mailbox and almost a pathological fear of an agency of the government called the Internal Revenue Service and I was wondering if maybe you could address the possibility and by the way, under capitalism, what capitalist ideal is it and do you think it is a good one to tax the wages of labor? That that should be a site for a tax base. So if you could address it from the capitalist point of view should we be taxing wages and under the liberty and dignity the process of literally opening your life up and explaining yourself to the government what's supposed to be a servant government? Why you don't see that as a reversal of role where government should be reportable to the people not the other way around, thank you. Let me also add if you could tie it somehow to Hayek's life and thought. Well, first of all, I think, I mean, even the most devoted libertarian, I imagine he's in this room, would have to acknowledge that some government is necessary. You gotta have a system of justice, you have some system of order, some police protection, whatever. To the extent that some government to provide order is necessary that government must be funded. Government should be funded by imposing taxes. Then you come down to the question, what is the most civilized and respectful way to do that? The reason I go with a flat tax is one, it removes the two great audacities that give you this nightmare that frightens people to death. The two great corruptions of the current American tax code are one, income redistribution and two, social engineering. There's only one legitimate reason to have a tax code. That is to raise money. That's the only possible legitimate reason you can have for doing it. So you should do it in the simplest, most direct way possible. My idea of fairness is treat every dollar's worth of income exactly the same as every other dollar's, irrespective of whether it's earned from the provision of land, labor or capital through the production process. There are all three essential components of production. They should all three be taxed according. If there's an indignity with your face on April 15, that dignity is first born out of the fact that we have a government that's grown far beyond what is either necessary or productive in your life. And therefore it must be funded. And then the audacities of control that I mentioned of income redistribution and social engineering that further complicate your life and intimidate you. But it is not impossible to have a civilized tax system if we can have a civilized government. Okay, we have time for I think just two more relatively quick questions this gentleman here. Hi, my name is Ted Gubhard. I don't remember which, but either Mr. Caldwell or Mr. Ebenstein mentioned that von Wieser was Hayek's principal teacher in Vienna as a young man. If I remember correctly, von Wieser's contributions to technical economics fall in the areas of opportunity cost and pushing the idea of marginalism forward. But he was anything in his political philosophy, anything but a classical, 19th century classical liberal as Hayek's principal teacher, how did Hayek come to depart so far from von Wieser in his own philosophical outlook? Yeah, I was the one who mentioned von Wieser. That's right. Well, the young Hayek was basically a social Democrat. He was, walked by and sat in on some of von Mises's classes and thought von Mises was just too extreme. So, early on he was a good leftist college student. His experience though with von Mises was I think probably definitive in getting him, as he put it, gradually to change his mind because what he said was he didn't like the way von Mises put things, but as he thought about the arguments he thought that the arguments were right. And he worked with von Mises in a government office after the war and so got to see him in that context. And in addition to working alongside of him, von Mises's book on socialism came out when Hayek knew him and he apparently had the manuscript in the drawer while they were working side by side. And then finally after his trip to the United States he came back and joined von Mises's circle, the Mises Christ and I think it was that period of about a decade in the 1920s that his views gradually changed. So. Thanks, Julian Sanchez, Reason Magazine. Mr. Caldwell mentioned Hayek's cousin Wittgenstein who's also in his own way sort of obsessed with rules and order. I wonder if you have anything to add to John Gray's tragically short discussion of the strong affinities between their thought. In particular the extent to which Wittgensteinian strain in Hayek's thinking is in tension with the highly reductionist account of human behavior that is at the foundation of von Mises theory. John Gray is an interesting person whose views on Hayek have been in lots of different places changing over time. And in my estimation his views have deteriorated of late. So it's difficult for me to make much sense of some of the things he says. Now the particular argument that you're referring to though is not one that I'm familiar with, I'm afraid. So what was his claim exactly if you could, again? Can you get a microphone over there please? Well there were certain parallels between, for example Wittgenstein's emphasis on the idea that rule systems are not subject to a certain kind of foundational analysis that for example it made no sense to think of set theory as providing a foundation for mathematics. The sense in which rule following at some level just represents a will to go on in a certain way rather than expressing. And was he attributing Hayek's ideas about this to his study of Wittgenstein? Is that the point that Gray is making? He was suggesting that there was an affinity, I don't know whether he, I don't recall why he. Right, I mean I think the similarities in their views have been mentioned by other writers and this is actually one of the real interesting but occasionally pitfall sorts of things with trying to do intellectual history is very often people want to attribute influence when there's certain similarities in people's thought. And it isn't my view that in anything that I've come across that Wittgenstein was an influence, of course they were cousins, I mean they were distant cousins, Hayek and Wittgenstein. So he knew of Wittgenstein's work but as far as I know, I haven't seen anything that would lead me to believe that Hayek was so influenced. Although the similarities might be there. Can I make a quick comment too? And once again because you mentioned here from Reason, I believe that either in late 1974 or early 1975, Reason published an interview with Hayek where he's asked about the influence of Wittgenstein on his thought and his response is something to the effect, well there are a number of stimulating ideas and it's very interesting but he didn't think it really influenced him that much. So I think Gray overestimates the influence of Wittgenstein on Hayek. Okay, well let me just make one comment about what an inspiration Hayek has been to people all around the planet. I remember I went to a birthday party for him at the Chamber of Commerce in Vienna and two checks came up during the when they were still under communism and very quietly said, Ich bin Hayekian. Because they had the copies of his books in photocopy and some of his translations that they would pass carefully from hand to hand. And they came to Vienna hoping to find other people interested in these ideas and fortunately stumbled across a birthday party for Hayek that was being held by the grandson of Rudolf Hilfeding who was the great Marxist in Vienna and his grandson is a classical liberal and has been doing a great deal to resurrect interest in that Austrian tradition of liberalism. Before we go upstairs for a toast and some refreshments upstairs to toast Hayek's memory I'd like to point out there are copies of the books available for sale out here. For anyone else amazon.com or lasafarebooks.com you can get them there as well. So I hope you'll join me in thanking our presenters for a stimulating program. Thank you.