The Road to Ideology. How Friedrich Hayek Became a Monster

What does it take to kill a monster?

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By David Sloan Wilson

Any serious student of economics can’t help but notice that the academic and popular versions are as different from each other as Dr. Frankenstein and his monster. Take Friedrich Hayek, for example. His books could fill a bookshelf and the commentary could fill a small library, but the monstrous version can only speak in two-word sentences. “Government bad! Market good!” Likewise the monstrous version of Adam Smith, the father of economics, can only say “Invisible hand!”

Just as Dr. Frankenstein couldn’t prevent his monster from running amok, it seems that economists can’t do anything to stop the monsters they created from sowing confusion wherever they go. Some economists act genuinely alarmed but I strongly suspect that others like it that way. They are mad economists and the monsters do their dirty work for them.

The creation of the Hayek Monster is well documented and nicely summarized in a 2010 New York Times article prompted by the sudden appearance of Hayek’s 1944 book The Road to Serfdom on the New York Times best seller list. That book was Hayek’s own attempt at popularization but it received two other boosts by a Reader’s Digest version in 1945, which sold more than a million copies, and a cartoon version that was published by the General Motors Corporation in Look Magazine during the same year and widely distributed by GM as a pamphlet. By then the transformation from man to monster was complete. According to the cartoon version, any step in the direction of government planning leads to a totalitarian state. The final panel of the cartoon shows John Q. Citizen being shot by a firing squad.

I’m not here to demonize Friedrich Hayek the man. I’m here to demonize Friedrich Hayek the Monster.  The man was complex and so was his time. He was horrified by what happened in Germany and his native Austria that led to World War II. His fear that even liberal political regimes can become totalitarian was well founded. Nevertheless, not a single prediction made in The Road to Serfdom materialized and Hayek himself modified his own views. Even in The Road to Serfdom he wrote: “Nor is the preservation of competition incompatible with an extensive system of social services—so long as the organization of these services is not designed in such a way as to make competition ineffective over wide fields.”  Later he pioneered evolutionary and complex systems thinking in economics, which was way ahead of his time. Some have even described me as a modern-day Hayek in my approach to economics based on the multilevel selection of complex systems.

So let’s have more of some of Hayek’s ideas, appropriately updated to reflect  cumulative scientific knowledge between then and now, including: (1) the proper birth of complexity science, aided by major advances in computational methods; and (2) major advances in the study of human psychology, behavior, and culture from an evolutionary perspective.

But let’s drive a stake through the heart of Hayek the Monster. Otherwise this cultural demon will continue to run amok, as he did in the 1940’s with the publication of the cartoon version of Hayek’s thinking, in the 1980’s with laissez-faire policies in the Reagan and Thatcher administrations, and again in 2010 when Glenn Beck called The Road to Serfdom “a Mike Tyson (in his prime) right hook to socialism in Western Europe and the United States”, causing it to rocket to the top of the New York Times bestseller list. You’d think that people who were just starting to emerge from the wreckage of the 2008 financial crisis, brought on in part by previous invocations of Hayek the Monster, would know better.

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What does it take to kill a monster? In part, the full participation of the academic economics community, whose credibility has been strained almost to the breaking point after a series of economic policy failures. Too many experts wring their hands as if nothing can be done to educate the public, which makes me wonder if some of them are perfectly happy to let the public remained misinformed. The academic community has a responsibility to state that Hayek’s predictions in The Road to Serfdom proved to be entirely wrong and his ideas that still have merit, such as viewing economic systems as self-organizing products of cultural group selection, do not support free market fundamentalist views. Economic experts who claim otherwise should answer to other economic experts.

I’m well aware that complex ideas must be simplified to reach and animate mass audiences. Two-word sentences might be needed, but the words can be chosen to represent the best of our current knowledge, which can be defended with many words when challenged. The term “Middle-Out Economics” is a good example. It’s catchy and can be defended by the experts much more successfully than “Government bad! Market good!”

At the Evolution Institute, we call this the science to narrative chain. Science is necessary to solve the problems of modern existence but it is not sufficient on its own. There must also be compelling narratives capable of reaching and animating large audiences. And the narratives must be anchored to the science by a chain of intermediate material so that anyone can learn more, no matter where they start out on the chain. A strong science to narrative chain prevents narratives from becoming monsters.

Evonomics is a link in the science to narrative chain for the subject of economics. If you follow up on any article in Evonomics, you’ll find that it’s anchored in good science. That doesn’t mean that it’s proven and final, but it does mean that it is the best of our current knowledge and at the frontier of debates among the experts. Evonomics is a monster-free zone.

I have focused on the Hayek Monster in this essay, but other monsters also need to be dispatched, including the Invisible Hand monster, the Equilibrium Monster, the Command and Control Monster, and the Trickle-Down Monster, which lumber around in the popular imagination even though they are six feet under in the graveyard of academic thought.

After we have done away with the monsters, we can turn our attention to the ideas of people such as Hayek that still have merit according to the best of our current scientific knowledge. In my next essay, I’ll discuss what Hayek got right about evolution and complexity and how he made a wrong turn.

28 October 2015

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  • Mat Cauthon

    This is a poorly written article that is just a silly political attack piece on two actual economists. If you spent some time actually reading and understanding the works of Adam Smith and FA Hayek, you would know that their works involve much more that the simplistic memes that you boil them down to. The question is not how we slander great economists. Rather, the question is how we should eliminate the anger and stupidity of the perpetrators of Evonomics.

  • kmne68

    I’d rather not see such ideas further developed. Developing them can only mean justifications for centralization and increased government intrusion into markets.

    • Christian McCormack

      This closed-minded attitude is precisely the problem.

  • Mauricio de Freitas Bento

    Can’t this evonomics have at least one article that is not just an attack on free market ideas?

    • Justin Goro

      The saddest thing is that someone opposed to the free market is masquerading as evolutionary when the free market is natural selection to government’s ‘intelligent’ design.

      • The free market is an ideology, a utopia. There is no free market. Every government of every nation has taxes, tariffs and trade restrictions on certain goods and on certain other nations. If the free market were a fact, the firms within each nation would be competing directly with firms in other nations regardless of resources and demand. Ironically, the free market idea is closest to trade agreements, but no free marketer believes in agreements, only governments do!!

  • Helga Vierich

    “Hayek was most original when he ­argued that the market is a means of discovering and transmitting information that is dispersed throughout society. It was this insight into the knowledge-creating function of markets that enabled him to formulate a decisive argument against central economic planning…”

    “…Generations of socialists have maintained that the failings of the Soviet economy were because of historical causes extraneous to the planning system: a lack of democracy rooted in tsarist traditions of despotism, the underdevelopment of the Russian economy when the Soviet system came into being, and Stalin’s deformation of Lenin’s supposedly more benign inheritance.

    As Hayek perceived, none of these factors can account for the universal failings of planned economies, which have followed a similar pattern in countries as different as Czechoslovakia and Mongolia, East Germany and Cuba. The fundamental reason for the failures of central economic planning is that economic knowledge cannot be centralised. More than the love of power or the inevitability of corruption, it is the limitations of human knowledge that make socialist planning an impossible dream. Here Hayek’s argument was unanswerable.

    The trouble is that it also applies to unfettered market capitalism. No doubt markets transmit information in the way that Hayek claimed. But what reason is there to believe that – unlike any other social institution – they have a built-in capacity to correct their mistakes? History hardly supports the supposition. Moods of irrational exuberance and panic can, and often do, swamp the price-discovery functions of markets.”

    • zjohn

      “But what reason is there to believe that – unlike any other social institution – they have a built-in capacity to correct their mistakes?”
      unlike other social institutions? Like what? Government:? Government is worse than markets at self-correction and even detrimental to the proper functioning of markets in terms of enforcing accountability for true wrong-doing. How so? Special interests and the sophistry and fear-mongering they push to ease the disruption of markets in their own favor.

      The facade of elections doesn’t change this. Misguided laws and regulations that pervert incentives, create unintended consequences, curtail freedom and responsibility, pick winners and losers and many other effects are seldom dismantled or overturned. Lack of perfection in the “democracy” of markets playing out every minute of every day with consequences both good and bad for the actors involved is in no way a green light for the corrupt and heavily compromised bludgeon of self-interested government officials who are elected by self-interested people for many reasons both clear and convoluted. I’ll take the pain of healthy markets over the heavy-handed “cure” of government.

    • Derryl Hermanutz

      Unfettered capitalism is not “market” capitalism. It is transnational corporate capitalism, populated by nation-size conglomerates that are governed by a small number of men acting as the Board of Directors and Executive. E.g. in 2008, Exxon had gross revenues of $408 billion, and the nation of Venezuela had a gross domestic product of $405 billion. The 9 member Board of Exxon “centrally controlled” a private economy larger than the total economy of a 19 million population nation. Hayek identified centralized control of economies as the Road to Serfdom. Unfortunately he focused only only government control, and seemed unaware that corporations had been oligopolizing ownership and control of industries since the late 1800s.

  • Egmont Kakarot-Handtke

    Hayek: mad, bad, or just another incompetent economist?
    Comment on David S. Wilson on ‘The Road to Ideology. How Friedrich Hayek Became a Monster’

    You say “Science is necessary to solve the problems of modern existence but it is not sufficient on its own. There must also be compelling narratives capable of reaching and animating large audiences.” (See intro)

    This is a huge misunderstanding. Science is about knowledge and not about animating large audiences. Genuine scientists are as happy as can be when the large audience goes to the Circus Maximus and makes thumb up when the gladiator kills the lion or vice versa. Remember what Plato wrote above the entrance of the first academy about non-scientists? No, not directly “* off” but “Let None But Geometers Enter Here.”

    Your second misunderstanding is that Hayek was an economist and that economics is a science. This is downright ridiculous.

    First of all, it is of utmost importance to distinguish between political and theoretical economics. The main differences are
    (i) The goal of political economics is to push an agenda, the goal of theoretical economics is to explain how the actual economy works.
    (ii) In political economics anything goes; in theoretical economics scientific standards are observed.

    Theoretical economics has to be judged according to the criteria true/false and nothing else. The history of political economics since Adam Smith can be summarized as perpetual violation of well-defined scientific standards.

    The fact of the matter is that theoretical economics has been hijacked by the agenda pushers of political economics. Smith and Ricardo fought against the precapitalistic order, Marx and Keynes were agenda pushers, so were Hayek and Friedman, and so are Krugman and Varoufakis.

    Hayek, of course, had the right to write political pamphlets, to defend capitalism, to support Thatcher, and to found a political club like Mont Pelerin. One thing, though, should be perfectly clear: the moment an economist starts with politics he leaves economics, understood as a science, for good. It is the mixture that is toxic.

    Ask yourself: when Krugman supports the Democrats, Wren-Lewis and Keen support Corbyn, when Varoufakis fights for democratizing the Eurozone, has this anything to do with scientific research? What have they and Hayek in common? Neither has a scientifically valid theory about how the economy works. Hayekian economics never satisfied the criteria of material and formal consistency. His economics was not good enough for science but good enough for politics.

    Political economics is for animating large audiences, theoretical economics is not and never will be. Politics has to be clearly separated from science and thrown out of economics — the sooner, the better. Let’s start with Hayek!

    Egmont Kakarot-Handtke

    • The point has been for several decades that science is deeply implicated in political processes and that science itself is political. If we take the starting points of any of the well-known economists, the problematic situation of inequality, the solutions to the economic imbalance requires political decisions and implementation. You can rail on about the autonomy of science but it is not really autonomous, only relatively autonomous. To accomplish social change, a scientifically informed politics is necessary.

  • Jukka Aakula

    50% I agree, 50% I disagree.

    “Viewing economic systems as self-organizing products of cultural group selection” was a great idea of Hayek. Hayek is too black and white in Road to Serfdom but “The Fatal Conceit: The Errors of Socialism” also is a wonderful book and not only when it comes to cultural group selection but also when it comes to critizising the “fatal conceit” of the left-wing intellectuals.

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  • Thunder_Hole

    Interesting article. I know better the Jesus monster and a few others better. But it is odd how my first thoughts about your article were about religion. I have often considered that most populist economic and political movements functioned with religious and dogmatic sectarianism. As movements, they have to have a membership and a carefully designed border of who is in and who is outside. So great thoughts, ideas, and systems are reduced to slogans and sound bites. And the people say “amen,” or shout “heretic!” My first observation of this was communism, and it took several years for me to convince a Marxist friend in grad school that this was the case. When he saw the similarities, he was quite surprised to see that you could build an entire religious superstructure without a deity nervously perched on top. This recent batch of conservatives are a bit different, but do the same thing, except they also tend to conflate and co-opt fundamentalist Christianity with their populist ideology. The result is such disturbing monsters as seen Huckabee’s buried article, “Atlas Hugged.” Oi. What led me to share this post is not so much your essay, that I found quite interesting, but the comments on it that so mimic deeply offended grandmas seeing their children tell their grand children that there is no Santa Claus. Glad I found your page today.

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  • Jorge Besada

    This article is fantastic because it is a great example of how some famous intellectual who might have made good contributions to one field jumps into economics and spews complete disastrous nonsense. It will soon be a complete embarrassment that an article in a website supposedly about evolution and economics, can attack F.A. Hayek, the man who did the most to link and properly explain the interplay between evolution and economics and everything. As Hayek wrote over 30 years ago :

    “We understand now that all enduring structures above the level of the simplest atoms, and up to the brain and society, are the results of, and can be explained only in terms of, processes of selective evolution…” (Hayek F. , 1981, p. 158)

    Mr. Wilson will eventually become aware of Matt Ridley’s new book “The Evolution of Everything” and hopefully that great book can show him the error he is making.

    • It is useful to take a critical attitude, especially towards Hayek, one of the founders of neoliberalism.

      • Jorge Besada

        I’m sorry but I have no idea or care to find out what “neoliberalism” is and this does not change the points made in my small reply. Mr. Wilson is committing a gigantic intellectual error. Thankfully not at bad as those committed by Lenin.

        • If you are in fact interested in economics but claim that you care not about neoliberalism, then you know nothing about economics or the past 30-90 years of economic history!!

          • Jorge Besada

            So my lack of familiarity with what some people ascribe the the word “neoliberalism” makes you reach the conclusion that I “know nothing about economics” ???? I see some serious errors with your ability to think rationally. I think you need a basic course in logic. Just kidding though. I know these are just some comments in a website. I’m pretty sure you would not really make such a mistake. I don’t care to get into some silly argument online. I made my point, we will see who made a gigantic intellectual error as Hayek’s ideas continue to be rediscovered and properly understood and thus appreciated.

          • Sorry, Jorge, neoliberalism is not some esoteric or archaic school. It is the train of thought in economics which has been driving the global system for the past 30 years or more. So, if you think you know a bit of economics and are unfamiliar with neoliberalism, guess what, you fail.

          • Jorge Besada

            Fred, this is the second time you conclude that I know very little about economics simply because I was not familiar with the meaning some people ascribe to the word “neoliberalism” . This is the second time you make an obvious logical fallacy. Are you serious? Does my lack of familiarity with that term really leads to my lack of knowledge about economics? Is that a logical conclusion you can be very certain about? I have read dozens of economics books, real treatises like Ludwig von Mises’ ‘Human Action’ and George Reisman’s massive “Capitalism” and dozens, perhaps even over 100 economics and history of economics related books. The fact that the meaning of the word “neoliberalism” did not ring a bell with me simply means that you can know about economics without understanding that word, not the other way around as your ignorant position implies.

          • gregworrel

            “Neoliberalism” appears to be a term used by those opposed to free market economics as a pejorative for those who are proponents of the free market. It is not a term typically used by free market economists. Often, free market proponents refer to themselves as “classical liberals.” So, when someone like Fred uses the term, and cannot imagine how anyone can “know a bit of economics” without being familiar with the term, it is a safe assumption that he doesn’t spend much time reading the people who argue for the ideas he doesn’t like, i.e., people who actually understand free market economics.

          • Are you trying to claim that free market economists do not use the term neoliberal, or liberal? You seem to be saying that ‘neoliberal’ is a pejorative term that is not addressed by free market economists – they are essentially doing what they do without responding to how their “challengers” have characterized them! Now, this is incredible because there is in fact no free market, free market is a wish not a reality. Trade agreements are not considered to be a ‘free market’ because they do cut others out of the agreement! So, the neoliberal effort to convert entire national economies over to a free market policy has not yet overcome the welfare economics at the heart of every single nation. Now, I realize that welfare economics and neoliberal economics are at loggerheads and that the neoliberal thrust has been gaining ground, but I do not think that either camp is unaware of each other. So, anyone who claims that they have never heard of ‘neoliberalism’ is patently ignorant! No insult, just a fact!

          • gregworrel

            I read a number of free market economists regularly and have for years and I have never seen any of them refer to themselves as “neoliberal.” They will use the term “classical liberal,” “libertarian,” “anarchist,” or “anarcho-capitalist.” Never “neoliberal.” I have only recently seen the term anywhere and it was used by those who favor government intervention in the economy such as yourself. You reveal your own ignorance that you are unaware of how the term is used.

            To say that there is no free market is an absurdity. There are certainly some transactions that are more subject to government intervention than others but our economy is largely a free market economy.

          • From David Harvey 2005 A Brief History of Neoliberalism

            The two economic engines that have powered the world through
            the global recession that set in after 2001 have been the United
            States and China. The irony is that both have been behaving like
            Keynesian states in a world supposedly governed by neoliberal
            rules. The US has resorted to massive deficit-financing of its militarism
            and its consumerism, while China has debt-financed with
            non-performing bank loans massive infrastructural and fixedcapital

            True blue neoliberals will doubtless claim that
            the recession is a sign of insufficient or imperfect neoliberalization,
            and they could well point to the operations of the IMF and the
            army of well-paid lobbyists in Washington that regularly pervert
            the US budgetary process for their special-interest ends as evidence
            for their case. But their claims are impossible to verify, and,
            in making them, they merely follow in the footsteps of a long line
            of eminent economic theorists who argue that all would be well
            with the world if only everyone behaved according to the precepts
            of their textbooks.

            But there is a more sinister interpretation of this paradox. If we
            lay aside, as I believe we must, the claim that neoliberalization is
            merely an example of erroneous theory gone wild (pace the
            economist Stiglitz) or a case of senseless pursuit of a false utopia
            (pace the conservative political philosopher John Gray2), then we
            are left with a tension between sustaining capitalism, on the one
            hand, and the restoration/reconstitution of ruling class power on
            the other.

            If we are at a point of outright contradiction between
            these two objectives, then there can be no doubt as to which side
            the current Bush administration is leaning, given its avid pursuit
            of tax cuts for the corporations and the rich.

            Furthermore, a global
            financial crisis in part provoked by its own reckless economic
            policies would permit the US government to finally rid itself of
            any obligation whatsoever to provide for the welfare of its citizens
            except for the ratcheting up of that military and police power that
            might be needed to quell social unrest and compel global discipline. (p152-3)

          • gregworrel

            Exactly as I said, it is being used by someone as a pejorative to refer to those he disagrees with. I read your quoted text and it comes off as nonsensical. “…we are left with a tension between sustaining capitalism, on the one hand, and the restoration/reconstitution of ruling class power on the other.” What the hell does that even mean? The rest of it is equally indecipherable. Upon looking him up, I see that he is not an economist but an anthropologist. Maybe that explains it.

          • “you fail”? Really?

      • Andrew

        Hayek receives more than enough (unwarranted) criticism. I can think of many other economists from the past century that are needing it more.

        • When considering a particular movement in an academic field that directly affects policymakers, identifying the assumptions in use is relevant. Hayek, Strauss, Friedman provide some of the underlying assumptions that policymakers are using today in their neo-liberal and/or neo-conservative beliefs. Hayek does come in for some criticism, but he also comes in for quite a bit of analysis where the effort is to understand his position, in contrast to Kenynesianism for example, and how his theories are being used in politics, e.g. privatization. What I think is a pertinent issue to address is Hayek’s notion of ‘price signals’ where we use price as a value standard. I don’t think this necessarily works, but it is a good example of an issue that could be argued about.

  • Gordon Stewart

    This guy gets paid by the Gubment …of course

  • Mateo Villalba

    Wow, some comments here seems like members of a sect defending the infallibility of their leader.

  • Henry George

    If anyone is sincerely interested in understanding precisely why the economics profession as a whole continues to fail the society it presumes to serve, read the book “The Corruption of Economics” by Mason Gaffney and Fred Harrison:

  • Rory Short

    Yes please.

  • Rick Derris

    ” You’d think that people who were just starting to emerge from the wreckage of the 2008 financial crisis, brought on in part by previous invocations of Hayek the Monster, would know better.”

    I’m done. Time to tap out from this article. Yup, Hayek is responsible for the CRA and Countrywide Financial. I’m shocked there isn’t a “blame the repeal of Glass-Steagal” phrase in that sentence, the same Glass-Steagal that never regulated Lehman.

    Clicking away and going to read Investor’s Business Daily instead.

  • merkin

    This comment train is similar to what you get any time you criticize Hayek, Mises or Milton Friedman for that matter. People talking past one another, people asking for proof of the validity of your position without offering you any for their assertions, the creation of cartoonish and extreme characterizations of others’ positions to make them easier to tear down.

    The Atlantic article is right, while the economy is complex what we want from the economy isn’t. We want widespread prosperity that is distributed fairly through the population. And we want our children to have opportunities for a better life than we had.

    Capitalism is the proven economic system to provide these things, not any form of state central planning, socialism or authoritarian communism. These are extremes that require a change in the economy that we have today, a mixed mode private and government partnership economy that has developed over three thousand years of trial and error. And these extreme systems also require a change in basic human nature, a submission of the individual wants to the common good.

    But this is also true of the Austrian/Libertarian and the free market fundamentalist economics so prevalent in the comments to this post. Free market fundamentalism is also an extreme system requiring changes to our current economy, changing today’s economy to an economy that has never existed, which can probably never exist, and most certainly cannot exist with the complex industrial economy that we have today. It, like the other 19th century idyllic proposed economic system, Marxism, is only suited to the artisan and agrarian pre-industrial economy that spawned it.

    The self-regulating, self-organizing free market doesn’t exist today, not because jackbooted governments prevented it, but, ironically, because of the choices that the market made freely. We have sticky prices and wages because human nature imposed them. We have inflation prefered over deflation because in a debt based money economy deflation is destructive. We don’t have a gold standard because the market operates poorly with one, the economy wants a money supply that grows with the economy, not one that constrains growth. We have administered prices and, except for commodities, we largely compete based on innovation, not price, because innovation propels growth and competition on price results in reduced profits and low growth. We need government regulation of the economy to improve competition, to suppress bad behavior, to reduce rents, increase the stability of the markets, and to impose externalities on transactions to reflect societal needs for low pollution, safe workplaces, the protection of children, etc. We don’t need the Austrians’ information filled prices because we can do market studies.

    The self-regulating free market would require forcing the market away from these inclinations, presumably by the government. Ironically, again.

    Government and the economy grew up together. From the first time that a tribal chief divided up the proceeds from the hunt or vouched for a tribal member in a trade, the economy and the government complemented each other. It is folly to say that they can be separated. Our government is complex because our economy is complex.

    A capitalistic economy needs the redistribution of income and wealth because, not too surprisingly, capitalism favors the capitalists and concentrates the proceeds from the economy into ever fewer hands.

    • Austrian, liberal economists (in line with arguments of Hayek) also generated the concept of ‘ordoliberalism’, where the market is regulated by legal rules and institutions that are to ensure the long-term, sustainable ‘survival’ of the competitive economic process, using the distributed knowledge of market participants to deal with uncertain futures and allow the generation of innovative solutions for the benefit of the members of the society by protecting the weaker, less knowledgeable and restraining the economic and psychological power of the economicaly stronger, more knowledgeable as well as the ruthless, immoral. This seems perfectly in line with the goals of evonomics!

      Main example Germany after WW II implemented by Ludwig Erhard, a liberal who joined the christian-‘conservative’ CDU to balance its *socialist*(!) tendencies. It worked quite well with a set of enabling conditions (university system, science, apprenticeship system, practical know-how, much demand after destruction) as well as constraints (lots of destruction, loss of people and knowledge, lack of capital).