Friedrich Hayek On The Mess Made By Economists

Trigger

Sheldon Richman of the The Future Of Freedom Foundation just wrote a very readable piece on Hayek’s acceptance of the Nobel Prize in economics 38 years ago titled “TGIF: Hayek’s Warning” (published 1/4/2013). But I am afraid his poignant observations will get lost in cyberspace not least because of the all too generic title.

Economists Have Made A Mess Then And Now

Hayek said on 12/11/1974 “On the other hand, the economists are at this moment called upon to say how to extricate the free world from the serious threat of accelerating inflation which, it must be admitted, has been brought about by policies which the majority of economists recommended and even urged governments to pursue. We have indeed at the moment little cause for pride: as a profession we have made a mess of things.” (Emphasis added. Source).

Had Hayek been alive today, he would have said the same about the recent financial crisis and the government debt crisis.

At the banquet speech in Oslo Hayek also wisely remarked “It is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess. … But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally. There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society - as the press tends to treat him till in the end he may himself be persuaded to believe. One [a Nobel laureate in economics] is even made to feel it a public duty to pronounce on problems to which one may not have devoted special attention.” (Emphasis added). Both thumbs up!

The Pretence of Knowledge

Hayek’s lecture in Stockholm was titled “The Pretence of Knowledge”. It should be required reading for all the Bernankes, Krugmanns etc. of this world. Too many leading economists are pretentious, immodest ideologues full of hubris!

To give a very brief summary of Hayek’s contention: The macroeconomic theories and models developed by economists are seriously flawed. Economics has aspired to be like a natural science or like mathematics, but latter deal with matter, energy, and abstract concepts, while economics deals with living organisms with a brain and conscience.

In his life, Hayek wrote more on the subject of pretense of knowledge and economics. He is therefore a great successor of Socrates.