John C. Medaille apparently wrote:
> Hayek himself had no qualms about working with Pinochet. 
> So its a bit questionable to cite the socialist tyrants
> and ignore Hayek's buddy.

Please back this with some kind of reference or citation.

It is true that Friedman, Buchanan, Tullock, Hayek, and
Brunner were connected with the Centro de Estudios Publicos,
a market-oriented think tank in Chile.  It is also true that
there is one infamous quote of Hayek's:

        "Personally I prefer a liberal dictator to democratic
        government lacking liberalism."

That statement has often been quoted tendentiously to
insinuate that Hayek endorsed Pinochet and, more
repugnantly, had not qualms about Pinochet's brutal human
rights violations.

The statement can be found Hayek's 1981 interview with the
newspaper El Mercurio.  The question he was asked was,
"What opinion, in your view, should we have of
dictatorships?"  Here is Hayek's response:

        "Well, I would say that, as long-term institutions,
        I am totally against dictatorships. But
        a dictatorship may be a necessary system for
        a transitional period. At times it is necessary for
        a country to have, for a time, some form or other of
        dictatorial power. As you will understand, it is
        possible for a dictator to govern in a liberal way. 
        And it is also possible for a democracy to govern
        with a total lack of liberalism. Personally I prefer
        a liberal dictator to democratic government lacking
        liberalism. My personal impression ? and this is
        valid for South America - is that in Chile, for
        example, we will witness a transition from
        a dictatorial government to a liberal government. 
        And during this transition it may be necessary to
        maintain certain dictatorial powers, not as
        something permanent, but as a temporary arrangement."


This statement does not endorse Pinochet, but uses Chile in
1981 as a possible case in which certain dictatorial powers
may be a necessary transitional step to democracy.  Of
course to assess Hayek's claim we would then have to discuss
what was happening under Allende (democratically elected and
overthrown with US complicity), why foreign powers were
meddling in Chile, etc.  His claim may or may not have been
defensible in the context of the time and of the knowledge
he had of Chile's circumstances.

It is hard for most people today to see past Pinochet'scompletely inexcusable and horrific brutality to objectively
assess his other contributions to Chile's history. 
I actually sympathize with this: I have this same problem
assessing Pinochet, just as I tend to focus on Castro's
roughly comparable thousands of executions and human rights
violations, and thereby overlook how he transformed one of
the richest islands in the Caribbean into one of the
poorest.  But as economists, the economic outcomes should
interest us as well.

In sum, on the evidence that I am aware of, it is *not*
reasonable to assert that Hayek endorsed Pinochet or was his
"buddy".  However, Hayek must have been aware of Pinochet's
shocking human right's violations of the previous decade. We
would like to see some clear signal of condemnation in the
interview, and we do not.  Assuming the published interview
is complete, I assess this as a modest moral failure on
Hayek's part.  On the other hand, we should ask about the
*context* of his 1981 statement.  The 1980s were a period of
growing individual liberty, increasing reliance on the
market, and strengthening democratic institutions (to the
extent that Pinochet was denied the presidency in 1988). 
A reasonable reading of the interview is that Hayek endorsed
this transition and expected and looked forward to the end
of dictatorship.  This expectation proved correct.

Cheers,
Alan Isaac