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EH.NET BOOK REVIEW 
 
Published by EH.NET  (June 1998) 
 
Stephen F. Frowen, ed., _Hayek: Economist and Social Philosopher   A 
Critical Retrospect_. New York: St. Martin's Press, 1997, xxvi + 324 pp. 
$59.95 (cloth), ISBN: 0-312-12902-5. 
 
Reviewed for EH.NET by Steven Horwitz, Department of Economics, St. 
Lawrence University, Canton, NY. <[log in to unmask]> 
 
 
                         HAYEK: ONCE OVER LIGHTLY 
 
 
Reviewing an edited collection is always difficult, mainly because the 
range of contributions, in both content and quality, is often so vast.  In 
the case at hand, the challenge is even greater because the work of Hayek 
that serves as the basis for these papers is itself so broad.  The papers 
and comments are mostly by European scholars and are taken from a 
conference memorializing the first anniversary of Hayek's death. Collected 
by Stephen Frowen, an Honorary Research Fellow in the Department of 
Economics at University College London, the papers in _Hayek: Economist and 
Social Philosopher_ span the range of Hayek's contributions, from his work 
in technical economics, to his social philosophy, to his work on the 
philosophy of mind.  Although the main papers vary in their quality, what 
emerges from the best of them is a fairly consistent picture of the main 
themes of Hayek's work, and perceptive suggestions about where work in the 
Hayekian tradition could go next.  I will approach the contents 
thematically. 
 
The contribution by Barry Smith looks at Hayek's work on theoretical 
psychology.  Hayek's 1952 book _The Sensory Order_ has been the subject of 
renewed interest in the last few years as Hayek scholars have examined the 
relationship between his view of the mind and his economics and political 
philosophy.  Smith's paper nicely explicates Hayek's "connectionist" view 
of the mind and contrasts it with the "symbolic" approach employed by many 
in artificial intelligence who are attempting to model the human mind.  For 
Hayek, the mind is a spontaneous order, analogous to those of the social 
world that have long interested him, that emerges out of the particular 
patterns of neural firings that take place in the brain.  Of particular 
importance in this view is that we are unable to be consciously aware of 
all that we "know."  Several of Hayek's well-known contributions to 
economics in the 1930s and 40s focused on the role of knowledge in economic 
theory and as several contributors to this volume note, the roots of that 
epistemological stance can be found in Hayek's work on the structure of the 
mind, which began in the early 20s. 
 
The papers by Manfred Streit and Steve Fleetwood show the relationship 
between the concern with tacit knowledge and the way in which we understand 
social action and social order.  Streit concisely lays out the connections 
between our "constitutional ignorance," the role of spontaneous order, and 
the view of humans as rule-followers.  Our ignorance prevents us from 
designing social orders, such as a market economy, whole-cloth.  The same 
ignorance prevents us from understanding all of the possible causes and 
consequences of our individual choices.  Thus, as individuals we must rely 
on rules, social conventions and norms as substitutes for detailed explicit 
knowledge, and, as a society we must rely on broader social rules and 
institutions to coordinate the choices made by those individuals.  Those 
rules and institutions embody the tacit knowledge of tradition.  Streit 
nicely applies this Hayekian approach to basic issues in competition 
policy, industrial policy, and the transition from "plan" to market.  Of 
particular interest is his comparison of Hayek to Eucken and the "strong 
state" view of the German ordo-theorists. 
 
Fleetwood's excellent paper argues that Hayek's work on "social rules of 
conduct" is best understood as an extension of his earlier work on the 
price system as a telecommunication device.  Social norms and institutions 
supplement the communicative role of prices.  Fleetwood is clear to show 
how these broader institutional considerations derive from Hayek's work on 
the nature of knowledge and ignorance.  We need these non-price 
institutions because neither our own minds, nor prices alone, are 
sufficient to ensure economic coordination.  Mark Perlman's paper in the 
volume also argues that Hayek's emphasis on the market as an institution 
sets him apart from the strict neoclassical tradition and finds him in the 
company of many American institutionalist economists. 
 
Several of the papers in the volume take up various issues in Hayek's 
contributions to monetary theory and macroeconomics.  Hansjorg 
Klausinger looks at the evolution in Hayek's thinking on monetary 
policy by contrasting his early commitment to "neutral money" to his 
later proposals for competitive currencies.  Klausinger rightly notes 
that Hayek was always concerned to find that monetary policy 
which would eliminate inflation, and that his eventual move to competitive 
currencies was based on his empirical observation that, mostly due 
to seigniorage considerations, central banks would be unable to 
resist the temptation to inflate.  Klausinger does not point out that even 
with properly-motivated actors, centrally directing the money supply faces 
the same sorts of epistemological barriers as Hayek saw confronting 
attempts at centrally directing economic resources in general.  Klausinger 
also does not ask the question of whether a system of competing currencies 
would be an effective way of reaching the neutral money policy norm that 
Hayek so clearly favored in his early work.  I would argue that the answer 
to that question is "yes," if "competitive currencies" is understood as a 
"free banking" system as found in Selgin (1988) rather than competing, fiat 
currencies. 
 
G. R. Steele's "Hayek and Keynes on Capital" does a good job in exploring 
the role that capital played in the Hayek-Keynes debate of the 1930s.  In 
particular, he notes that Keynes's unfamiliarity with the German language 
tradition blinded him to the Bohm-Bawerkian foundations of Hayek's capital 
and monetary theory.  This point is central, I would argue, to any attempt 
to reassess those debates.  From a Hayekian perspective, Keynes might best 
be read as taking Wicksell's core insights and yanking them off of their 
Bohm-Bawerkian foundations. 
 
Ray Richardson on Hayek and the trade unions and Otmar Issing on currency 
competition both raise the issue of whether particular policy 
pronouncements or broad historical interpretations one finds in Hayek have 
sufficient empirical support.  Richardson nicely shows how Hayek's 
wholesale condemnation of the coercive role of trade unions is never backed 
up with any evidence, and that what evidence does exists suggests that the 
efficiency-damaging effects of British unions have not been nearly as bad 
as Hayek seems to suggest.  Issing is skeptical of Hayek's call for an end 
to central bank-produced fiat currency mainly because we have such little 
knowledge of the likely outcome of a competitive system.  Although it is 
true that Hayek argued for competition precisely on the grounds that we 
cannot know what the future holds, it is equally true that monetary 
historians have produced some substantial evidence on the actual workings 
of competitive monetary systems prior to central banking.  A good deal of 
that evidence shows that such systems were far better behaved that 
traditionally believed.  Issing is either unaware of that work or has 
chosen to ignore it.  What these two papers do point out, however, is that 
Hayek scholars are going to need to do a better job in convincing 
economists and policy makers that their theoretical and political claims 
can be empirically substantiated. 
 
Overall, this collection is a good introduction to the broad themes of 
Hayek's work.  One general complaint is that too many of the papers seem 
unaware of the numerous contributions to Hayekian scholarship on this side 
of the Atlantic.  As a result, several papers simply reiterate themes that 
have been pursued, often better, by other writers in recent years. 
Nonetheless, I would still recommend this book to those looking for a very 
broad and sympathetically critical exploration of Hayek.  More serious 
Hayek scholars, however, are likely to find the recent edited collections 
by Birner and Van Zijp (1994), Colonna and Hagemann (1994), and Colonna, 
Hagemann, and Hamouda (1994) more satisfying. 
 
References: 
 
Birner, Jack and Rudy van Zijp, eds.. 1994.  _Hayek, Co-ordination, and 
     Evolution:  His Legacy in Philosophy, Politics, Economics, and the 
     History of Ideas_. New York: Routledge. 
 
Colonna, Marina and Harald Hagemann, eds.. 1994.  _Money and Business 
     Cycles: The Economics of F. A. Hayek_, vol. 1, Aldershot, UK: Edward 
     Elgar. 
 
Colonna, Marina, Harald Hagemann, and Omar Hamouda, eds.. 1994. 
     _Capitalism, Socialism, and Knowledge: The Economics of F. A. Hayek_, 
     vol. 2, Aldershot, UK: Edward Elgar. 
 
Selgin, George A.. 1988.  _The Theory of Free Banking:  Money Supply Under 
     Competitive Note Issue_, Totowa, N.J.:  Rowman and Littlefield. 
 
 
Steven Horwitz is Associate Professor of Economics at St. Lawrence 
University in Canton, NY. He is the author of _Monetary Evolution, Free 
Banking, and Economic Order_ (Westview, 1992) and the forthcoming 
_Microfoundations and Macroeconomics: An Austrian Perspective_ (Routledge). 
He has also published numerous papers on Hayek and the Austrian school. 
 
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