Friedrich von Hayek was Right

May 1999 marked the 100th birth anniversary of Friedrich von Hayek (1899 – 1992), winner of a Nobel Prize in Economics and one of this century’s most eminent advocates of the classical liberal doctrine. To commemorate the occasion, the Lithuanian Free Market Institute held a seminar to discuss F. Hayek’s theories and their impact on western civilisation.
Regrettably, the name of Friedrich von Hayek does not say much to many people in Lithuania, even to those who are deemed to belong to the elite. This is understandable: No pro-socialist government could have tolerated F. Hayek or other scholars who had provided a theoretical justification for an inevitable collapse of socialism. For this reason F. Hayek’s works belonged for a long time in the remotest nooks of libraries’ special funds.
Today many boast of having foreseen ten or twenty years ago the fall of the Soviet empire. But it was F. Hayek and his teacher Ludvig von Mises who proved that the socialist system and other collectivist regimes are doomed in our world. This lesson about society and economy may be elucidated in several basic laws which no one has yet managed to refute.
First, people exchange goods seeking to better their well-being. Second, exchange is a tool for people to swap something of less value to them for something which they value more (this rule is valid for both parties to a contract). Third, that which people desire is reflected in prices (which show how much people give for one good or another). Fourth, if voluntary exchange and free prices are replaced by central planning or redistribution, there is no way people can find out what others prefer. Fifth, if information about other people’s wants is replaced by directives from central authorities, resources are wasted instead of being used to create commodities which are needed most.
F. Hayek (just like the whole Austrian School to which F. Hayek’s works belong) gave an excellent example of what economics should be and how to avoid pseudo-scientific prophesying and unrealistic planning. Most economists find it too difficult to understand and accept F. Hayek simply because their memorised concepts, formulas and curves appear to be insufficient. To understand F. Hayek, one should look at the fundamentals of the economy. F. Hayek’s works show that common concepts, formulas or curves are, often as not, useless.
It is hard to take no heed of the importance of F. Hayek and his works. F. Hayek is increasingly regarded as the most prominent economist of the century. Notably, his ideas have affected both the right and the left. F. Hayek is being translated into more and more languages (Lithuanian included) and increasingly quoted by economists, philosophers and lawyers the world over.
Sadly, it is not only socialist countries that do not accept (or if accept, do not follow) the principal and ingeniously simple conclusions of F. Hayek and his fellow thinkers. Lithuanian legislation, instead of establishing general and equal rules of conduct for all, is turning into a pile of unjustified privileges and absurd regulations.
Today we are witnessing a stubborn mistrust of market solutions and unyielding attempts to implement central planning and all kinds of regulations. People’s wants are being ignored and regulations tend to prescribe what one eats, wears or enjoys. Examples here are needless – they abound in every issue of The Free Market, and those who are curious about the “originals” may look through the parliament’s and government’s official records.
Reflections upon today’s Lithuania and F. Hayek’s ideas emanate a twofold observation. On the one hand, Lithuania is a remarkable example of the benefits unleashed market forces yield. On the other hand, if we consider the government’s open efforts to control the market and to impose countless regulations, restrictions and licences, a question emerges: Is this not the same “road to serfdom,” the perils and insidiousness of which F. Hayek predicted back in 1944?