Hayek for the 21st Century

Biographer Bruce Caldwell on the Road to Serfdom author's enduring lessons about bad planning, distributed information, and the liberating power of choice.

Nick Gillespie from the January 2005 issue

In 1944, with World War II raging and the fate of the Free World far from clear, Friedrich A. Hayek (1889�1992), one of the great intellectual heroes of reason, published his best-known work. The Road to Serfdom became a bestseller even as it challenged the conventional wisdom that extensive, top-down economic planning would result in a more just and more efficient distribution of goods and services. Hayek, an Austrian who had immigrated to England, argued that such planning ultimately would lead to a stultifying society in which fewer and fewer people were satisfied as planners asserted more control. What's more, he drew disturbing connections between developments in relatively free societies such as Great Britain and the United States and totalitarian regimes such as Nazi Germany and the Soviet Union.

The Road to Serfdom was a publishing sensation but, as we noted in our "35 Heroes of Freedom" (December 2003), Hayek "paid a steep price--decades-long professional isolation--for daring to suggest that social democracy had something in common with collectivist tyrannies of the right and left." In the sort of happy ending history rarely delivers, Hayek, who was awarded a Nobel Memorial Prize in Economics in 1974, lived long enough to see his reputation restored and his ideas vindicated by world events, a tale told well in Daniel Yergin and Joseph Stanislaw's magisterial 1998 economic history, The Commanding Heights: The Battle for the World Economy.

To mark the 60th anniversary of the publication of The Road to Serfdom, reason interviewed Hayek's most recent explicator, Bruce Caldwell, author of Hayek's Challenge: An Intellectual Biography of F.A. Hayek, published in 2003 by the University of Chicago Press. Caldwell is a professor of economics at the University of North Carolina, Greensboro, and the general editor of The Collected Works of F.A. Hayek. In early October, he spoke with reason Editor-in-Chief Nick Gillespie about the origins of The Road to Serfdom, its continuing relevance, and Hayek's legacy in the 20th century--and in the 21st.

Reason: The Road to Serfdom was published in 1944. How did the book come into being?

Bruce Caldwell: In the 1930s, Hayek was writing articles criticizing the economics of socialism. Most people then saw socialism as the middle way between failed capitalism and totalitarianism of the Soviet and fascist varieties. By the late '30s, Hayek felt that he needed to write a broad-based attack on socialism. In Hayek's Challenge, I mention [sociologist] Karl Mannheim in particular as a figure who argued that planning was the only way to avoid totalitarianism, but everyone was making a similar sort of argument. Hayek turned that on its head and said that extensive planning of the economy was in fact the road to serfdom, to less and less freedom.

He was engaging a widespread belief that socialism was not only more just but more efficient than capitalism, that it was the way to make the world work better. Not just economics should be planned. Science should be planned. Everything should be planned. There was an influential magazine around at the time called Science. Virtually every third or fourth week, they'd run an editorial that said we need to have scientists helping plan all sorts of things. Not just the war effort, but everything about the economy to make it work better. This is what everyone who was "intelligent" thought.

If you look at the early 1930s, there was this sense that the Soviet Union had a huge commitment to science and scientific progress. Beatrice and Sidney Webb's two-volume, 1,000-page Soviet Communism: A New Civilization (1935) was filled with praise for the way the Russians were supposedly letting science work to make society much better. By the late '30s, once the purges and other things came to light, many people realized the Soviet Union was a monstrosity, but if you look a bit earlier, that wasn't the case. Hayek was reacting to books such as the Webbs'. Living in the current world, you have a hard time believing what sorts of things were being said back then that Hayek was reacting to.

Reason: What was the response when Serfdom first hit the bookstores?

Caldwell: The book appeared in England in March of 1944 and in the U.S. in September. He had a hard time getting an American publisher, but the University of Chicago agreed to bring it out. It was not expected to be a big seller in the U.S. They were figuring that it would maybe sell a couple of thousand copies, but it got very strong write-ups in a couple of the New York newspapers and demand was high for it. They did second and third printings, and in the spring of 1945 the Reader's Digest condensed version came out. That was done by [high-profile former communist] Max Eastman. That certainly made it [much] more popular and it got even more attention.

Hayek came over to the States on a ship in 1945 to do a publicity tour. He thought he was going to be mostly speaking at academic departments, but he ended up having big audiences.

Reason: Give us the stripped-down version of The Road to Serfdom's thesis.

Caldwell: Let's say you agree that the definition of socialism is the ownership of the means of production by the state. That means the state is making decisions about production. Under a wartime scenario this can work and even be productive, because everyone has shared values. Everyone believes that production should be aimed toward anything that is necessary to defeat the enemy.

Hayek's point is that when people are not under war conditions, they have many different values. So the question then becomes, if you have socialism, who makes the decision of what gets produced? If people have different values, they are going to disagree with the planners. The planners end up being frustrated because they are unable to decide what to produce and gain full consensus. So they completely take over the production process. Hayek argues that you can't make that neat separation between economics and politics that implicitly fills in the claims of the socialists.

In terms of the kind of full-blown socialism that Hayek was describing, I think his argument was shown to be absolutely correct. States that went to full socialization of production also placed considerable restrictions on personal liberty and decision making. You don't get the kind of choice that you get under a more liberal system...

Reason: ...choice very broadly defined, meaning lifestyle choice...