Late last fall the Nobel committee awarded one of the two 1974 Nobel Prizes in Economic Science to Friedrich A. von Hayek. Unfortunately, the publicity in the liberal press concerning the simultaneous Nobel award to socialist Gunnar Myrdal tended to obscure recognition of the significance of the award to Hayek. For those in the know, however, the award was a long-overdue acknowledgement of the achievements of the man who is, in Murray Rothbard’s words, "the world’s most eminent free market economist and advocate of the free society. ''
Hayek was born in Austria in 1899. At the University of Vienna he received doctorates in both law and political science, and soon became the first director of the Austrian Institute of Economic Research. It was during those years (the 1920's) that Hayek developed the "Austrian" theory of the business cycle, building on work by Ludwig von Mises Using this theory, Hayek and Mises predicted the crash of 1929 and the subsequent Great Depression. The business cycle theory was formally set forth in Hayek's Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933).
From 1931 through 1949 Hayek represented the classical liberal (free market) viewpoint as professor at the London School of Economics. While there he wrote The Road to Serfdom (7944), probably his most famous book. This brilliant, popularly-written study shows how central planning leads to totalitarian control; its logical arguments and empirical evidence impressed even John Maynard Keynes, who wrote of the book, "'Morally and philosophically, I find myself in agreement with virtually the whole of it, and not only in agreement, but deeply moved by it.”
In 1950 Hayek accepted a position as Professor of Social and Moral Sciences at the University of Chicago. During this period he produced such major works as The Counter-Revolution of Science and The Constitution of Liberty, and edited Capitalism and the Historians. Although he returned to Europe in the 1960s to teach economics at the Albert-Ludwigs-Universitat of Freiburg, he remains Professor Emeritus at Chicago and a Fellow of the British Academy. He is currently Visiting Professor of Economics at the University of Salzburg. At age 75 Hayek is still actively thinking and writing. In 1973 the first volume of his major three-volume treatise on the free society, Law, Legislation, and Liberty, was published.
(Volume I covers "Rules and Order,"and drafts of Volume II, "The Mirage of Social Justice," and Ill, "The Political Order of a Free Society,"are already in existence.) Among Hayek's other works are Individualism and Economic Order, John Stuart Mill and Harriet Taylor, The Pure Theory of Capital, The Sensory Order, and Studies in Philosophy, Politics, and Economics.
In addition to his teaching and writings, one of Hayek's other main contributions to the cause of liberty was the creation, after World War II of the Mont Pelerin Society. This international organization consists of scholars in all the humane studies who are dedicated to the principles of political and economic freedom. Its primary purpose is to keep such people in touch with one another for mutual interchange of ideas, via meetings and exchange of papers.
Last summer Senior Editor Tibor Machan visited Hayek at his home in Salzburg, Austria. Their conversation ranged over a variety of subjects, from epistemology to political philosophy to psychology, focusing especially on Hayek's ideas of a natural evolution towards a free society, in the absence of government action to prevent it, and his concept of the 'Spontaneous order" produced by the market, in contrast to centrally planned order.
REASON is proud to present the highlights of this conversation, to give our readers a better appreciation of one of the intellectual giants of our time.
REASON: Dr. Hayek, your book, The Road to Serfdom predicted serious problems for England and America should these follow the policies of welfare statism–how do you see it now?
HAYEK: Well, now, I don't think I have anything to retract. Perhaps I did see the danger nearer, but it is a common experience that these tendencies take a long time to work themselves out; on the whole, though, the world is following the path I was afraid it would. In a way the thing has become more serious just now because we are now being driven into a planned society by inflation.
REASON: Do you see any serious differences between movement toward what might be called a Marxist socialist society and toward a non-Marxist socialist society in the West?
HAYEK: The use of "Marxist" in this connection is rather misleading because Marx never really had a program for the future socialist society. Most people who follow his philosophy have committed themselves to a centrally planned system and have started out with a radical reorganization of society. But basically I don't think there is much difference between the traditional continental socialism and what you call Marxist socialism. Except of course that in recent times the Western socialists have discovered that many of the aims of socialism can be achieved by distributing income via taxation and have therefore shelved a great deal of their programs of socialization or nationalization. To that extent there is a difference.
REASON: Do you find the totalitarian or repressive aspects of the communist bloc or socialist societies an integral part of socialism, or can socialism emerge and sustain itself with reasonable success without these measures?
HAYEK: It could maintain itself but it's not likely to escape that development because I'm sure a totalitarian socialism is incompatible with a really democratic system. Once you have abandoned democracy, any authoritarian government in power will be driven, just to maintain itself, to take all kinds of repressive measures, even if it doesn't intend to do so from the beginning.
REASON: Would you say, then, that a traditional relatively open society such as Austria will experience this kind of repression in the future if it continues with its socialistic economic policy?
HAYEK: If it carried its socialistic economic policy very much further! But I don't think this is very likely; Austria will not adopt a policy of socialization of industries. 1 think the Austrian way is much the same as the Swedish and the Norwegian. These do not rely so much on the direct control of industry but on the redistribution of income by taxation and similar means. That need not degenerate into a completely authoritarian system. The danger always exists because such a process can be run efficiently only within an authoritarian system.
REASON: Would you say that, in this connection, Ludwig von Mises' analysis to the effect that a mixed economy must degenerate into a fully planned economy is not entirely correct?
HAYEK: Mises was a little careless in the use of the term "must." What he meant to say is that if these aims are persistently pursued, it would necessarily have that consequence. If you argued with him he would not have denied that of course it is possible to avoid this if you do not consistently pursue the ends.
REASON: Do you think in general Professor von Mises' analysis of the impossibility of economic calculation under the principles of a planned economy has been borne out in practice?
HAYEK: Yes. Very definitely, yes.
REASON: Do such places as the communist countries rely very heavily on the free world's economies to rationally allocate their resources, to calculate prices, and so forth?
HAYEK: They rely on the free world very largely for technological knowledge. Because for their allocation they cannot, and they haven’t solved the problem in the least, and the actual waste of resources due to lack of rational calculation is enormous.
REASON: Between the conditions in Austria and Hungary there is an enormous difference in workmanship, the quality of housing, of roads, of manufacture. Budapest is an extremely dirty and neglected place, although it has the potential of being an incredibly beautiful city. From your knowledge, is this a function of politics, or is it more a function of general culture and the non-political aspects of the country?
HAYEK: I’m convinced it‘s entirely a function of the economic system and I’ve been confirmed on this. At a time when it was still easily possible to move from West Berlin into East Berlin, we would have the evidence of the difference between the two sides of the border, sometimes on the two sides of the same street.
REASON: Let me turn now to another issue–the organization that you’ve been involved with, and you were the founder of–the Mont Pelerin Society. Do you find it an effective organization for the purpose for which it was designed?
HAYEK: For the purpose that it was designed for, very much. But many people believe it was intended as a propaganda society, which it never was. It was intended to provide for its members an opportunity to clear their own minds on problems they haven’t themselves intensively studied. Each of us is a specialist and we want to be able to talk to specialists in the related subjects who are approaching the problems frorn the same general point of view. It has been a discussion society and not a propaganda society and as such I think it has been extraordinarily beneficial. Considering what I myself have learned in the discussions with my fellow members I must be most grateful for the opportunities it has given me.
REASON: In recent meetings, it has been observed that there has been a mixture of so–called purists and not-so-purists concerning a commitment to the principles of the free market. Would you agree with this observation?
HAYEK: Of course, it has shades of difference, and probably even extreme wings, and perhaps we have even made one or two mistakes in electing particular people. But on the whole, there is fair unanimity on the basic philosophy. Most disagreements are legitimate and occur on points where one can differ on what way exactly to draw the line.
REASON: Do you yourself believe the organization should get larger? That is, does it aim for large membership or is it pretty much a given number with a very restricted and limited membership?
HAYEK: That’s a very serious dilemma and I don‘t quite know what the answer is. It did owe its effectiveness mainly to the fact that it was small. It now mainly serves the interests of people from overseas countries who have little opportunity to discuss their problems with people of similar convictions. And there are so many people who would benefit from being admitted into the discussion that expansion is very difficult to resist. At the same time, the expansion of the society has made it a much less interesting place than it used to be when it was small.
REASON: Concerning your own development, it’s been quite evident that in recent years you’ve dealt more and more with philosophy, law, even sociology instead of technical economics. What are the reasons for this change of your focus of attention?
HAYEK: The main reason is that I’ve come to the conclusion that the actual differences on solution of practical problems are much less due to differences in technical economics than in basic philosophy. In fact, even with people with whom I agree on technical economics I find that I often disagree on practical issues of policy. So the issues need to be considered at different levels.
REASON: As you know there is in America a small faction of Austrian economists who do disagree with most other economists on technical issues. Do you think the Austrian approach in economics will be renewed?
HAYEK: One would have to define “Austrian” in a very wide sense to regard that as a possibility: But in a way when people defend microeconomics against macroeconomics, this could be called Austrian economics. In this wide sense, revival or renewal of the influence of the quasi-Austrian school would be very desirable and I hope will be forthcoming. In the narrow sense, the specific Austrian tradition has on the whole merged with the Laussanne and the Cambridge tradition to become part of what is called neoclassical economics. What we can hope for is just that this neoclassical tradition again becomes influential, not its specific Austrian branch which constitutes a particular phase in the neoclassical development.
REASON: I am curious what you might think about something Milton Friedman told us in a recent interview. Dr. Friedman maintains that economics is as much a science as any other, even hard or natural science. Would you comment?
HAYEK: I agree with him to some extent. I shall qualify this by pointing out that as the degree of complexity of the phenomena increases, what science can do is more and more limited. In economics, and the social sciences generally, you deal with a field where on the one hand we cannot apply the method of physics and the mechanical sciences because the number of determining factors is too large, and on the other hand the numbers are not yet large enough to rely on statistics and probabilities. The intermediate field, between where we can master all the individual events and where we can deal with the probabilities of large numbers, is a field where the capacity to predict is necessarily limited. This is not because our theories are inadequate but because it becomes practically impossible to ascertain all the factual data which would have to be introduced into the theory to arrive at specific predictions. That's one reason I was led to the study of the problems of scientific methods and philosophy generally. I have done an essay on the theory of complex phenomenon which deals with that very problem. But it would not be possible to treat these issues here, of course.
REASON: That's true, but I would like to take up one point. Your answer has the underlying premise that the difference is only one of complexity and not one of type. There is now a resurgence of an argument to the effect that when we reach the social sciences we have a type difference of the sort that renders science itself inadequate or inapplicable in this area. Perhaps the subject matter of economics is such that by its very nature it defies treatment scientifically. Have you come across this type of view?
HAYEK: Yes, of course. But it's an exceedingly confused discussion which is going on about this problem. It depends on what is meant by a type difference. I would admit and even emphasize that the nature of observation is different when we deal with human action from what it is when dealing with phenomena not human. We constantly interpret what constitutes human action on the basis of our knowledge of how the human mind works, which makes our whole perception of man acting different in character from our perception of physical events. In that sense the data from which we have to start in the social sciences are different from the data from which we start in the physical sciences. But the next step becomes the same. Once we have assembled the data, I don't think the construction of theories is essentially different from the physical sciences. It's a point on which I am now almost entirely accepting the recent argument of Karl Popper. I agree entirely with him particularly since he has taught me that what earlier physical scientists claimed to be their method really was in fact not what they did.
REASON: It has been held that Popper is more relativistic than even he admits. That is, he is charged with holding that scientific theories have philosophical presuppositions built into them and that the emerging scientific conclusions have a "coloration" that is more philosophical than scientific. At least there are passages in Popper where he is very close to Thomas Kuhn. I was wondering whether you go so far as to say that the sciences, especially the social sciences, are so philosophically tainted that eventually we may have to give them all up in favor of a newer perspective once the dominant philosophical theories change?
HAYEK: Not at all, but there is a conclusion that I would draw. I think it is quite possible that we may recognize that the utility and power of the social sciences is more limited than we had thought. But they would still remain the best we have. I don‘t think it means we can abandon them for something else. We haven’t got anything else.
REASON: Would you contend that when a social scientist, say the best there can be right now, maintains that something is a fact of human life, of human social life, that there is an objective status to this fact, independent of our present point of view, our beliefs, about ourselves? Are there such facts that could have an integrity for all time?
HAYEK: I am sure there are some facts in this sense which must tie facts for all human beings with whom we can communicate, whose structure of mind is sufficiently similar to our own so that some intercommunication is possible. It may well be that there are other things which appear as facts or are only that subjectively, for a more limited circle who have more in common than merely that minimum which is required in order to be able to communicate at all. And it may well be that there are certain things which are facts only to people who make very specific presuppositions which you can actually point out. But there is an irreducible basis of facts which must be facts for all the people with whom we can communicate at all. This seems to be certain.
REASON: There are a number of philosophical inquiries in the 20th Century for which this topic is central. Post-Kantian philosophy has been tremendously concerned with this issue. One of the major influences in America has been Ludwig Wittgenstein who of course himself is an Austrian. Have you had any thoughtl on Wittgenstein, to whom there are some references in your book?
HAYEK: You probably know that Wittgenstein was a distant cousin of mine. I never knew him well, but probably knew him over a longer period than any other person now living. He was ten years my senior. My earliest recollection of him was in 1917 and I had since seen him off and on on various occasions and have read his two main works very closely. All the other material which has been published from his manuscripts I haven’t. I don‘t think, frankly, that Wittgenstein’s work is very relevant to the social sciences. I’m not even sure whether the work produced during a certain phase of his life is anything as important as his present disciples make out. They’re very suggestive, deal with interesting problems, but I at least didn‘t derive much benefit from studying them.
REASON: I would like to ask you about your critique of rationalism. In your critique you seem to have opted for a Humian alternative, rather than an Aristotelian version of reason. Is this because of Hume’s politics or is it much more fundamental?
HAYEK: I think the basic thing is Hume’s general interpretation of society and human life. Hume has come closer to a critique of rationalism than any other author I knew. Again and again I‘ve found in Hume statements of ideas which I had already independently arrived at. I am impressed especially with Hume‘s account of the formation of social institutions of all kinds.
REASON: I was wondering whether in your interpretation of Hume‘s critique of rationalism you find it necessary to then take up his own analysis of human knowledge? Don’t you find yourself in the grips of radical empiricism and skepticism?
HAYEK: No. I think one can readily start with Hume and accept in the purely epistemological side the Kantian developments based on it. On the issue of the theory of knowledge, I am probably a Kantian more than anything else.
REASON: You would not believe that ultimately Kant‘s analysis still leads to a kind of subjectivism that is philosophically unacceptable? I realize these are complex issues. Since you have entered into philosophy very vigorously, our readers might be interested in how you would treat these more general problems.
HAYEK: I haven’t really formed fully developed views so as to articulate them. I have impressions on these issues but nothing I could readily state.
REASON: I should explain what brings on the worry about Kant. He turns out extremely formalistic, for instance, in his view of logic. Reality sort of "drops out" as inaccessible to human understanding. A variety of skepticism is left which, in the political realm, can undermine the self-confidence of the individual to deal with problems. It can lead to a call for collective undertakings and the entrusting of authority to some "important figure" as opposed to leaving the individual autonomous in a society. That's a large jump, but it should explain the worry.
HAYEK: Yes. I agree. It can do so and has done so in some instances. After all the later German idealists have become victims of exactly that, but I don't think that was a necessary development.
REASON: I would like to turn now to a particular issue of your own thought which has emerged in several contexts. Based on your essay "Not of Human Design but of Human Action," do you think the ideal of spontaneous order can be applied to all types of social problems?
HAYEK: It depends on what is meant here. Of course not all kinds of social phenomena are of spontaneous growth. A great many are deliberate constructions. All I would claim is that society rests to a large extent on structures which have not been deliberately designed, but which have grown up spontaneously, yet are indispensable for civilization, and on which much of our deliberate constructing rests or which is presupposed by what we deliberately do.
REASON: There appears to be a normative point to your analysis here, not just a historical one, to the effect that the spontaneous development of solutions to problems is a better, more successful, and more natural one to human life than those planned deliberately, in the organizational/collectivist sense. Is this on the right track?
HAYEK: I wouldn't deny that I believe it very often is true. Not always. To give you the most obvious example, I am still convinced that natural language as we use it contains a great many features which are most important to enable us to think and to communicate and which an artificial language would never contain. I mean by the difference, that as a result of long development there has been embodied in it more experience than any single man possesses and therefore could put into his constructions.
REASON: One of the questions that arises in connection with your idea of the spontaneous order, is whether diseconomies (as they are called) concerning pollution or land use could be left to that type of handling alone or do they require some more deliberate state action?
HAYEK: Oh, a very great many of them will require deliberate state action–you know after all this is a problem which has concerned economists for a long time. It has now been discovered by the public but this whole question takes one back to the old Cambridge tradition of Pigou and his successors who for fifty years have been dealing with exactly this problem. It's a question to what extent we can make the market system take account of these effects and to what extent this is impossible and we have therefore to find some substitute for it. It's still very largely an open question which probably has to be decided case by case–for which there's no general answer.
REASON: You wouldn't think, then, that those who maintain that everything from education to the roads and parks and even ocean beds can be handled in terms of the private property market system have really gotten a full case for their own conclusions?
HAYEK: I think they have made a very good case that we ought to leave the possibility open that the market may find solutions–I mean government should never claim a monopoly for this sort of thing because it may always be possible that somebody else may find a better method, but you can't be certain.
REASON: I see. Let me turn now for a moment to another issue in your own thinking–Professor Ronald Hamowy published an article in Il Politico some years ago in which he maintained that your idea that the rule of law implies only formal commitments, only formal procedural commitments, is not quite accurate and that these are not sufficient to retain what is necessary for a free society. In your book you touched on this criticism briefly. Could you elaborate it? Does your concept of the rule of law now admit of greater substantive implication?
HAYEK: Well I think Hamowy was right to the extent that my definition of the rule of law which would secure freedom was too wide. It's not sufficient that government coercion is limited to the enforcement of general rules because that might well include such things as control of religious beliefs and the like, but now I think the definition has to be extended. Government coercion is to be confined to the rules with a regard to conduct towards other persons. And in that form–that revised form–I think it would sustain my original position.
REASON: I would like to ask you about your evolutionary view of law. One of the things that you mention that does not seem to fit in that analysis, is for instance, murder. It seems to have been considered to be wrong in all forms of societies known to us. Do you think that there are any other limits on this evolutionary analysis of law? Are there some things that seem to transcend evolution, that are required in all human society?
HAYEK: I think a certain degree of truthfulness probably is also universally required and probably no society could function unless it could up to a certain point assume that people are truthful. But in most instances, even that of murder, I‘m not at all convinced that it is really universal.
REASON: As you conceive it, the evolution of society could not come to socialism. But isn’t the present state of affairs the product of evolution?
HAYEK: This can happen only when you regard the action of an authority which prevents evolution, and places its deliberate creations in its place, as part of the evolutionary process. I mean that evolution may create a situation in which selective evolution in a sense becomes impossible. I wouldn’t deny it.
REASON: The whole idea of evolution in human affairs (where deliberate planning is almost definitionally part of the human way) is somewhat paradoxical. It gives the impression of abandoning the very thing that is most human. Have you found this sort of criticism leveled at your views before?
HAYEK: Yes. But I don‘t fully understand what they really mean. What I object to essentially is the prevention of trying other ways than those which the majority regards as correct. So long as such alternatives can be tried, what I call the evolutionary process is still working. The way to stop it is to prevent people from trying alternatives. In all instances I mentioned before the government claims a monopoly on particular activities which are to be done in the government way only. Take one clear instance: education. If education is completely regulated by government you have excluded a great deal of the evolution of educational development and exploration. If government provides education and at the same time makes it impossible for people to get a different one, particularly if under the Friedman system of vouchers it can be had at no greater cost, then the evolutionary mechanism is preserved. So if the government makes a mistake it will be corrected by the alternatives which are still available.
REASON: You know there have been criticisms of the free society with the idea that it allows for degeneration just as much as development. Would you say that a free system would necessarily lead to the evolution that you are talking about? ,
HAYEK: In the free society, it would always be only part of the society which would degenerate. Maybe a very large part. But there would always be a nucleus available for a different development.
REASON: What are your views on anarchism in general–as an alternative to what many people have considered to be the dismal attempts to make political solutions apply to human affairs?
HAYEK: In the strict sense of anarchism, it is, in my opinion, wholly impossible to civilization. It is unduly optimistic as regards the intelligence it would require for people to sustain it. There‘s the kind of anarchism where if people were not compelled they would do all of the right things on their own. That I regard as factually unwarranted and highly unlikely. If it were possible, it would be a very desirable state. But that’s not the consistent type of anarchism, the one which believes that even if the instincts of the people were not good, somehow it would be desirable that the strong should subdue the weak. With that type of anarchism I find it very difficult to sympathize. I firmly believe, as I said before, that this sort of anarchism would not produce anything called civilization.
REASON: An area which has interested me enormously is the connection between ethics and the free society. Some who have sympathized with the classical liberal political philosophy have found it morally bankrupt. Such ideas as virtues, as norms, what an individual’s life should be as a human being, ideals in general have not gotten their due regard within the classical liberal, philosophical, political framework. How would you meet this kind of a challenge or criticism? It’s recently been voiced by Professor Irving Kristol at the Mont Pelerin Society last year where he challenged the classical liberal tradition. And people of the Straussian school of classical philosophy, Platonists and Aristotelians, although in enormous sympathy with the ideals of political liberty, have maintained that classical liberalism did not provide it with a sound enough moral foundation.
HAYEK: But why do they take it for granted that the political doctrine must include the view of what the individual shall believe on general moral issues? Isn't it enough that the political system makes it possible for the individual to have these ideas? It's not every political system which does. I think political philosophy is merely concerned with a framework within which certain developments are possible and it's not the task of political philosophy to prescribe to the individual the ideals he ought to hold.
REASON: I suppose the difficulty with that answer is that, be it as it may, the political philosopher still must answer the question: What is right for man in society?
REASON: To be able to answer to that question doesn't he also need some knowledge of the answer to the question what is right for man in general, as a human being, independent of whether he's in society or living his private life? If he does not know the answer to the more general ethical question, how is he going to ground his answer to the political question?
HAYEK: Well, isn't the idea that society or the political area is bound to ethics, a view of what is right for man, almost incompatible with the idea that a man ought to have freedom to decide on what he regards as right?
REASON: 1 don't think that's the case because from the fact that you know what is right for man, it does not follow that you must make him do it. Those are two different issues–the justification for the answer to what is right, is one thing and the justification for action, I will make him do what is right, is another. So I don't think that that's an adequate response to that challenge.
HAYEK: But if you don't affirm the second question, but only the first, I don't see why it should be necessary for political philosophy to have any view at all about what is right for man–unless the political system does something about it, it needn't concern itself with what is right for man.
REASON: I don't know how to pursue this without getting into some of the difficult details. This issue has been a serious concern to a number of people who have tried to defend a free society–they have generally believed that the socialists, the collectivists, have taken over what the Christians used to have a monopoly upon, namely a concern for the moral welfare of the people. It's a "spiritual" concern, which has of course enormous political implications, but it is nevertheless a concern that they think is necessary. It seems that philosophers, thinkers in general, who propound a world view, must have some answer to those questions, and unless they do, they haven't earned their position as contenders.
HAYEK: I wouldn't deny that the moral philosopher must have such views, but that doesn't mean that there must be a unitary view on that subject for a society or that institution must be based on a particular moral view about what is right. In fact that the ideal society should presuppose a common view about what is right and the freedom for each to form his own view on the subject do seem to me to be in conflict.
REASON: I think that there is no conflict between those two, because I can have the view that you ought to do X and yet I can also have the view that you ought to be free to discover what you ought to do. Those two propositions are not logically incompatible. One can be for the freedom of the individual and still maintain that one knows what that individual ought to do.
HAYEK: Yes. That leads to a very difficult problem if one pursues it.
REASON: In general do you find that your ideas and the framework you embrace both politically and economically find a greater receptivity in America than in contemporary Europe?
HAYEK: It's difficult to say. Everywhere it's a question of very small numbers. I have very little knowledge about recent developments in the States–on the whole my impression is, but I may be mistaken, that there are more young people in England taking interest than either in America or on the European continent. But it may just be that they have gathered together and I meet them as a group when I go there, while in the States, Germany and Europe, it's only in Germany and no other country of the continent, where it plays any role. Those interested are still mostly isolated individuals who don't have much contact among themselves.
REASON: Is there any development of the libertarian philosophy in Italy and France and Switzerland?
HAYEK: I know very little about the Latin speaking countries. In Italy and France I don't think there is. There may be a little in Switzerland, but all I hear from are two groups in Germany–in Freiburg and Cologne–where a few like minded people have found together.
REASON: REASON magazine itself now has a circulation of about 12,000 people in the States and in about fifteen other countries there are trickles of a few people around. We have always been wondering just what is happening in Austria itself since it gave rise to some of the major figures in libertarian study.
HAYEK: Yes. But that tradition in Austria has been torn during the war and Nazi years. Only in Germany is there an independent tradition which started in Freiburg with Eucken and is still effective. But in the other Continental countries I just have no knowledge of any development of any significance.
REASON: Do you find that your work is known, for instance, in Salzburg and students seek you out?
HAYEK: It wasn't when I arrived. And even now there is not a great deal of interest outside of the few who have come to my classes.
REASON: You still seem to prefer it in Europe–am I correct about that? Do you prefer living here? You've been in Freiburg and you've been in Salzburg for several years!
HAYEK: That is very largely for purely practical reasons. I think if I were completely free to choose I would live in England in spite of present political differences.
REASON: In general, I am curious as to how you see the prospects of liberty in our times or in the future?
HAYEK: What I expect is that inflation will drive all the Western countries into a planned economy via price controls. Nobody will dare to stop inflation in an ordinary manner because as things are at present, to discontinue inflation will inevitably cause extensive unemployment. So assuming inflation stops it will quickly be resumed. People will find they can't live with constantly rising prices and will try to control it by price controls and that of course is the end of the market system and the end of the free political order. So I think it will be via the attempt to regress the effects of a continued inflation that the free market and free institutions will disappear. It may still take ten years, but it doesn't matter much for me because in ten years I hope I shall be dead.
REASON: It matters a lot for me and for most of our readers, I can tell you. Is it likely that in America there would develop social revolution as a result of all this? I don't think that all the various factions of the American society can be brought together into a submissive totalitarian hold that would be required for a massive social planning. Do you find that to be a reasonable idea?
HAYEK: Yes. But what will happen I cannot really imagine because it will be constant pulling one way and pulling the other for the reason that inflation will be regarded as intolerable. The only way really to stop it will produce unemployment which would be regarded as equally intolerable and people will resort to price controls without knowing that this leads into worse matters. When they recognize it they will scrap the price controls and we'll again be at the beginning of the same affair. I don't know how many times we can go through the same cycle and certainly it will mean an increasing disappointment with governments. The governments will be unable to give the people what they clamor for and it will certainly be a time of constant political disruptions. My wish is that people would have courage to face a period of substantial though not necessarily very prolonged unemployment, with all provisions for the unemployed, and restore the price mechanism. But I think the chance that this will happen which to me seems to be the only way out for free system, is very small indeed.
REASON: That's what I'm afraid of. But it's not going to be the first time that people have chosen a pathvery different from freedom. Dr. Hayek, thank you very much for allowing us to visit and talk to you. We wish you good health and thank you again.