June 14, 2024

Hayek vs Rothbardians

Hayek vs Rothbardians

In social science disagreements are very common. Two scholars in a room are very unlikely to agree on everything. Economics being a very vast field makes it even worse. Despite being from the same school of thought there can be disagreement. Austrian Economics is no exception to this.

The school was started by Carl Menger, one of the founding economists of the marginal revolution (utility concept). After Menger, two economists carried his legacy: Bohm Bawek and Friedrich Wieser. Both of them were great in their ways of economics. Bawerk on the one hand is popular for his theories on capital, time, and interest whereas on the other hand, Wieser was one to coin the term “Marginal utility” and “opportunity cost” expanding Menger’s theory of utility.

Now this divides Austrian Economics into two: The Bawerkian and Wieserian strands. Both of them taught brilliant economists of the next generation. Bawerk was a teacher of Mises and Wieser was Hayek’s teacher. It shouldn’t be misinterpreted that Bawerk and Wieser were some rivals or had a cold war. Both were a great team and friends. It’s just that both had different subjectivist approaches. As mentioned already, disagreements are part of social science. It’s not necessary that two economics of the two approaches can’t work together too when they don’t differ much.

Hayek builds the Business cycle theory on Mises’s foundation and Capital theory on vital Bawerk’s works. Even though his most important theory is based on knowledge and information and price system that comes from Wieser, he was also highly influenced by Mises and Bawerk. After Wieser died in 1926, it was Mises that Hayek looked up to. But, it is sad that an American group in Austrian Economics that was born later started making differences between the Bawerkian and Wisersian sides (or more specifically Misesian and Hayekian). It is important to understand that disagreements don’t always mean rivalry and also all are here for economics only whether it be monetarists, Keynesians, or Austrians.

In this scientific quest, ideology becomes toxic. The good parts of ideology can hardly be remembered because they play a big role in getting closer to building a cult and far away from science. Rothbard and his followers tend to ignore it. Rothbard was very harsh on Hayek (on topics he disagreed with). Though it is true at many times he was very respectful to him too. Why wouldn’t he? Because when it comes to citing business cycle theory, capital theory, competition theory, philosophy of science, jurisprudence, etc… then it’s Hayek whom Rothbard needed. So even if there are chances that Rothbard attempted to completely reject Hayek, it was impossible for him.

The same goes for his followers too. You can disagree with Hayek but you can’t put him out completely too! This goes for all schools of thought. But, Rothbard and his followers, the so-called “Misesians” never hesitated much to trash talk on Hayek. It would be right to call it trash-talking because most of them lack facts. Rothbardians tried and still try to put Mises above Hayek. This is because Hayek is the most successful Austrian Economist, he won Nobel Prize, and he is the face of Austrian Economics in the mainstream. This fact is just not liked by Rothbardians. Why?

Probably this started with Hayek’s book “The Constitution of Liberty”. Where many disliked the way Hayek listed many works that government must do. Many feared that this coming from a big name like Hayek would affect the anti-government image of Libertarianism. Due to this, even though much of economics and philosophy of science is accepted by Rothbardians, Hayek’s political theory is highly criticized too.

Another issue was Hayek’s knowledge problem. A theory that must be Hayek’s biggest contribution to economics. This theory leads to what is now called “information economics”. Probably all Rothbardians have some sort of problem with this theory, but some agree while others completely reject it. They mutually believe that the theory wasn’t needed in the socialist calculation debate started by Mises.

Mises already debunked socialist planning and Hayek’s theory wasn’t needed in this, as per their belief.  To make it more clear, it was just that Hayek’s theory gained huge popularity, today it is like a universal fact in economics and such a situation is very rare where all legitimate economists seem to agree on something. This theory was taken as a rebuttal to socialism and probably other collectivist approaches too in economics. Hayek’s theory shadowed Mises’s Calculation Problem which is less talked about today and could be most likely the reason behind the controversy.

Another is Hayek winning Nobel Prize. Though on this Rothbard wrote beautiful words about Hayek but there are his followers and probably him too that think some sort of “politics” happened. Hayek won the award for his work in knowledge and information and also for Business cycle theory. But, it is claimed that this was a theory of Mises and he deserved it too. Hayek was awarded this just after his death by the committee to avoid Mises.

Though it might be true that to avoid controversy Hayek was awarded after Mises death but that doesn’t make any factual claim on this. It was still Hayek’s theory! Mises lead the foundation of the theory and plays a very important role but the theory was still Hayek’s. If Rothbard had to read material on it then whose work would have helped him? That’s surely Hayek’s Monetary Theory and the Trade Cycle and Prices and Production. It must not be forgotten how important the role is played by Knut Wicksell too in this, but it’s still not going to be his theory. It’s Hayek’s all the way. So kudos to the Nobel committee. Nobody is trying to take away anyone’s contribution but work credits are needed to be proper, that’s important for academia. Many economists would have derived their theory on some motivation and influence but that doesn’t take away their theory.

And there might be other issues too. Though the fundamental is how Hayek was sympathetic to the role of government. This hurt the Rothbardians who support anarchy. But, Hayek never claimed to be anti-government and definitely not an anarchist too. He believed the free price system to give real and vital knowledge and thus believed the free market to be an efficient option over others. But, there is definitely social science outside economics whether we call it by the term “externalities” or something else. Also, not every economic efficiency can be claimed to be handed to the market. There can be improvements made without adversely affecting the market system. Hayek being a great economist was a great political philosopher too and must definitely not be underestimated in that area.

Hayek understood way more than we know. He wasn’t an ideologist or some cult leader. He was a great philosopher and a brilliant economist who was not driven by such factors in his scientific and philosophical quest. Hayek acknowledged that government intervention is not an efficient option in the economy but he wasn’t anti-government expert as many assume him to be. He is also claimed to be kind in his time to socialist scholars too and was a great friend of Keynes who was his biggest rival then in academics. This was Hayek and this is something youngsters (like the author himself) can learn.  

Though Hayek being a great thinker is well acknowledged by Rothbardians and especially Rothbard who was much more sympathetic and respectful to him than his followers. But, jealousy can be a dangerous factor to a person at times. Their jealousy towards Hayek being better and more renowned than Mises is what brought hatred in them. This is why we now then see out of nowhere that a scholar is attacking Hayek in one way or the other. But, we would never see this from a Hayekian. So obviously there is a problem on one side that’s causing this unnecessary controversy.

Fortunately, all this started happening after Mises died, or maybe not much fortunate too because Mises would have definitely disregarded this behavior. It wouldn’t be wrong to say that if Mises had the option to choose between Hayek and Rothbard then he would choose Hayek with no second thoughts.

It’s funny when so-called “Austrian experts” come out making statements that Hayek doesn’t belong to the school of thought, a legend that has contributed to the school of thought and importantly to economics multiple more times than them. But why isn’t Hayek part of the school? Because he believed in the role of government? so did Menger and most importantly Mises too. Removing Hayek from self-claimed groups of Austrian economics and Libertarianism is not affecting his legacy. His contribution to social science will still remain one of a kind.

His knowledge problem comes from Menger, his price signals theory comes from Wieser, his business cycle theory comes from Mises, and his capital theory comes from Bawerk. With that, Hayek proposed his own monetary theory of private currencies too. He is undoubtedly the best Austrian Economist ever! The kind of disrespect he gets is very disheartening. Hayek is definitely in the debate of greatest economist in the history and not just in Austrian circle.

He might have not studied under Mises but he was very influenced by his works. Mises’ sociological and monetary works were life-changing for Hayek that made him believe in the market. Mises in a way would have regretted that someone like Hayek wasn’t his student. Mises acknowledged that Hayek was the brightest amongst his generation in Vienna and his wife also said, “Ludwig met every new student hopeful that one of them might develop into a second Hayek”. 

Then why is there a need to make a difference that leads to nothing but some unnecessary ideological battle distracting scholars and students from doing real work? Hayek alone expanded the insights of Menger-Bawerk-Wieser-Mises. If a great scholar like him didn’t differentiate them unfavorably then why should we do? 

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