There is a famous internet comparison of the world’s two most famous Hayek’s—Salma and Friedrich. Obviously, Salma is more well-known, but Friedrich may be gaining on her. He has appeared in numerous books and scholarly articles recently, but there is little agreement about who he was. Some portray him as an evil villain who has subjected the world to the horrors of “neoliberalism,” and its disruptive social effects. Others have argued that he is much closer to Rawls and Keynes and would have supported a generous welfare state to ameliorate the social problems his preferred policies generated. Still others view him as a heroic defender of libertarian views about the need to limit state intervention in society, and particularly in markets. Salma must be increasingly jealous, but probably confused about who exactly this nominal competitor was.

So who was Hayek? To answer that question I spoke with Bruce Caldwell, the editor of the Collected Works of FA Hayek for the University of Chicago Press and also the co-author with Hansjoerg Klausinger of the first volume of a new two-volume biography entitled Hayek: A Life, 1899-1950. We obviously addressed some material in the biography, but we also discussed who Hayek the person was to provide a better picture of the individual, the context he lived in, and what animated him intellectually. The picture that emerges is much more complex than either his supporters or critics fully realize.

A Liberal Boy from Vienna

Caldwell told me that the perspective taken in the biography was to “try to see the world the way Hayek saw it.” Hayek was raised in early-twentieth-century Vienna. He fought in the First World War, and lived through the Second World War in England during part of the Blitz. He observed the rise of fascism and the height of popularity for socialism and Soviet communism. He held academic positions in several countries and traveled the world. He also was surrounded by and interacted with what Caldwell calls “a wonderful cast of people.”

“Fritz” as they referred to him while he was young, was born into a lower ennobled family that was intellectual, took education seriously, and frequently pursued scientific interests outdoors. His father was a doctor, but his passion was botany. He was a sort of “plant geographer” and took the family on hikes collecting samples. Friedrich’s father read to him about exploring the North and South Poles, the advent of flight, and other new scientific discoveries. Hayek was raised in a world constrained by class and extended family. His tastes derived from “German-oriented culture” as Caldwell called it, particularly literary and theatrical material. Like his father, Fritz collected programs from plays and other performances he attended beginning at age 11.

His family and friends recognized he was very bright and intellectually advanced for his age, but Fritz chafed at the limits of the oppressive and formal Austrian education system. Hayek’s approach to education was to “drink things in, formulate them, intersperse them with his own ideas, and then come up with a particular view,” but he never took his formal education that seriously and was actually held back one year. What seem to be contradictions in the later Hayek may have originated in this very independent mind even at a young age. Hayek called himself a puzzler, as compared to someone who is a master of material, and as a student he approached learning similarly.

Hayek was athletic, excelling at tennis, rock climbing, and skiing. His upbringing and love of the outdoors extended into his adult life as he regularly vacationed in the Austrian Alps during the summers. Caldwell noted that those trips were “an essential part of his life” where “his batteries got charged, he planned the year ahead” outlining the intellectual projects he planned to pursue. While some came to fruition and others didn’t, he had a rhythm to his professional and personal life that revolved around being outdoors.

Hayek served in World War I on the Italian front, returning home unscathed despite several near-lethal incidents in observation balloons and airplanes. He then attended the University of Vienna. After three years of “classes” which were largely optional to attend, students took oral exams. Hayek, however, did things his own way. He was part of a small group (Caldwell estimates there were perhaps 30 members) of fellow students who actually did attend lectures and consulted with each other about which ones were interesting and worth attending, no matter the subject. For example, he sat in the lectures of the famed legal positivist Hans Kelsen, who was one of the authors of the Austrian Constitution, but also attended lectures in psychology, art history, economics, and other fields.

Political matters were very prominent in the aftermath of World War I. A new Austrian national political landscape emerged, in which all the major parties were either socialist, Marxist, or pan-German. Hayek rejected all of them because he was very much a defender of tolerance and discourse.

The large Austrian parties were “pretty awful in the views they embraced”—specifically anti-Semitism. For example the Pan German parties advocated Anschluss with Germany and “were emphasizing German culture. Hayek was fine with emphasizing German culture but many of these political parties had ‘Aryan Paragraphs’ which said if you’re Jewish you can’t be a member of it, and that was not something that he would have any part of.” The socialist party, influenced by Austro-Marxism, had no appeal for Hayek. Instead, he and one of his closest friends, Herbert Fürth, worked with a tiny party that was liberal, pro-democracy (including female suffrage), culturally tolerant, and secular. It performed so poorly it faded from history.

According to Caldwell the student population in Vienna at the time was “rife” with anti-Semitism, but this was common “in Anglo-Saxon areas as well. You go to Harvard, you go to Yale, you’re Jewish, it doesn’t work out so well for you.” Yet Hayek rejected this widely held prejudice out of hand.

Particularly important for the development of this progressive sensibility was an intellectual group founded by Hayek and Fürth, who was of Jewish descent.

Caldwell explains:

Fürth was really the person who was responsible for identifying people to join this group, and many of them were of Jewish descent or practicing Judaism, and it was through interacting with this group that Hayek came to realize that there was this whole additional culture, intellectual culture in Vienna that he had not experienced through his rather insular upbringing in the Hayek family. And he embraced it—he thought great!  And wondered whether he had Jewish blood because he said “these are my people! They’re really smart; they know about literatures that I didn’t know.” 

Through this group, Hayek was introduced to Italian, French, and other intellectual traditions outside of the largely Germanic views he’d previously learned.

During the next period of his life, Hayek interacted with many Jewish scholars, including Ludwig von Mises, Ludwig Lachmann, Fritz Machlup, and Karl Popper. As Caldwell put it, Hayek was “interested in ideas and he [was] a liberal. You’re going to judge people according to whether they’re good people…not according to things like race or whether they are Jewish.”

Caldwell believes that The Road to Serfdom “gives Hayek his 15 minutes of fame, [and] that becomes quite important in terms of his ability to create the Mont Pèlerin Society.”

Mises and Starting a Career

Mises had an enormous impact on Hayek. The celebrated economist welcomed him into his seminar in Vienna, got him a job with an inflation-protected salary in the postwar era of hyperinflation, and helped set up his first trip to America. Mises had also written two books on the exact two topics—monetary policy and socialism—that would define Hayek’s early research.

Mises eventually tapped Hayek for a position at the Austrian business cycle institute he had founded. Caldwell describes this as an awkward fit for Hayek. While it served as the springboard for his professional career, he was deeply skeptical about the ability of economists to predict business cycles, which was very much in vogue among the American institutionalists, such as Wesley Clair Mitchell whose seminar Hayek attended at Columbia during his trip to America. Mitchell and others believed theory was derived from data, and this approach reminded Hayek and Mises of the German Historical School, the first nemesis of the Austrian economists. And the forecasting that the institute was required to do was another thing Hayek did not feel particularly comfortable doing as an Austrian. This, Caldwell says, was a difficult “needle to thread” for Hayek.

Eventually, Hayek landed at the London School of Economics, which was fortuitous because of the quality of his colleagues and his growing enthusiasm for British liberalism. Support for economic planning and socialism were common in the 1930s, even in Britain. “The world is really starting to fall apart between the Great Depression and the rise of these various fascisms and totalitarian systems,” Caldwell observed. “This is a fraught time that’s going to get worse and worse.” Remembering that context is important for understanding Hayek.

As it became clearer that the Allies were going to win WWII, Hayek plainly saw the enthusiasm for economic and social planning by experts…. [and] the Soviet Union was the model these men of science admired.

At the LSE, he bonded with fellow liberal economist Lionel Robbins, but Hayek maintained his civil and discursive approach toward all of his ideologically diverse colleagues and students. Those descriptions of Hayek are very consistent: “He’s very understated; he’s interested in pursuing the truth, and he does so dispassionately. He’s not someone who gets excited,” particularly when contrasted with the more exuberant and flamboyant Robbins. In video interviews, Hayek was always trying to explain his opinions, not “trying to ram them down your throat.” Of course, Caldwell reminded me that as someone with a German accent in England at that time, perhaps not being too assertive was the best way to go!

Along with Arnold Plant and Robbins, Hayek ran what was known as the “Grand Seminar” in which some of the foundational work in modern economic theory was being formulated. Among the students who attended it were Ronald Coase (The Coase Theorem), Nicholas Kaldor and John Hicks (Kaldor-Hicks efficiency), Aaron Director, John Kenneth Galbraith, Ludwig Lachmann, Tibor Scitovsky, and many others. Visitors attending the seminar included Frank Knight, Jacob Viner, Wilhelm Röpke, and Joseph Schumpeter.

Hayek the Scholar

One of Hayek’s first major research projects at the LSE was The Pure Theory of Capital, which received a chilly reception from the economics community. The second was a serious work extending the Austrian critique of socialism. During the war, he wrote his most famous economics article—“The Use of Knowledge in Society.” As Caldwell explains, that paper addresses “how a well-functioning market system is a mechanism for coordinating human action in a world of dispersed and subjectively held knowledge—where people have different bits of knowledge.” This raises serious questions about the possibility of effective central planning. To cite Bastiat, “Paris gets fed” because markets can process the decentralized and specialized knowledge of the real world better than central planners can. “The Use of Knowledge” is still widely cited in economics today.

Hayek’s work in this highly productive period wasn’t tethered merely to economics. His Abuse of Reason project began as an intellectual history of how what Hayek called “scientism,” the misuse of quasi-scientific principles in studying human institutions, spread from thinkers such as Saint-Simon and Comte through other channels and ultimately informed approaches to what in the twentieth century would become the social sciences. This project was never completed, but the discussion of the French period which became The Counter-Revolution of Science is widely cited and influential. Another piece from this period entitled Scientism and the Study of Society addresses other methodological issues.

As it became clearer that the Allies were going to win WWII, Hayek plainly saw the enthusiasm for economic and social planning by experts. Many popular pieces were being written by “men of science” (natural scientists who were public intellectuals) and others, such as Hayek’s LSE colleague Harold Laski, about the need for planning the economy, social order, and scientific research. While the war effort bolstered support for the need for planning it was clear that the Soviet Union was the model these men of science admired.

These individuals, Caldwell explains, believed they were “fighting for a new Jerusalem….fighting for a new world after World War II is over, and that world should be a socialist world.”

These ideas were effectively promoted to a mass audience. So Hayek began a popular project of his own. Pivoting from a more intellectual response (the second volume of the Abuse of Reason), Hayek turned instead to the more accessible and persuasive The Road to Serfdom. It was a major international success. Interestingly, Caldwell points out that the book is strangely silent on the dangers of Soviet communism, but since the Soviets were then our allies, Hayek had to remove a lot of material in the text bashing the USSR. Still the message of the book is clear: the risks of government power and planning, no matter the type of regime, are great.

Caldwell believes that The Road to Serfdom “gives Hayek his 15 minutes of fame, [and] that becomes quite important in terms of his ability to create the Mont Pèlerin Society.”

The Big Tent

Aside from his numerous intellectual contributions to economics, politics, and law, the Mont Pèlerin Society has proven to be one of Hayek’s most lasting achievements. Caldwell describes Hayek as “a very skilled institution creator,” using the recognition he attained from The Road to Serfdom (driven in part by a Reader’s Digest abridgment) to launch the MPS. He traveled internationally, giving talks and meeting like-minded individuals, including Harold Luhnow. Luhnow was president of Volker Fund, an early supporter of Hayek’s work and other pro-liberty/free market initiatives throughout academia. These trips helped Hayek identify many of the attendees of the first meeting, and Volker helped pay travel expenses. 

“Between 1944 and 1946 he met people, often just a couple in each country, who shared his views that liberalism for the 20th century needed to be further developed, was certainly under attack, and maybe they could all get together to discuss its prospects.” But Hayek included a wide range of individuals at the first meeting. “There were vast differences of opinion among the various people who were there,” but this reflects how little intellectual support there was for liberalism in the late 1940s. For example, despite Hayek’s public debate with Keynes, Hayek always viewed Keynes as a liberal.

That first meeting has drawn a lot of attention from scholars opposed to “neoliberalism” today. As Caldwell said plainly, “This initial meeting of the Mont Pèlerin Society is taken by critics of neoliberalism in particular as the catalyst event in bringing together this cabal of corporate apologists and apologists for the plutocracy.” For a cabal, they certainly didn’t agree on much as can be seen in the transcripts of the meeting which Caldwell himself published in a separate book Mont Pèlerin 1947.

Hayek was trying to forge a network of sympathizers, but Caldwell believes Hayek the puzzler had another project at that first MPS meeting—to “figure out what the fundamental ideas of liberalism in the twentieth century might look like.” He “really wanted to avoid an organization that would be taking specific policy stances or putting out think tank papers.” Instead, he envisioned “a discussion group of like-minded people to try to iron out what our differences are and what the similarities are.” Caldwell believes that Hayek himself was defending this exact position—“it’s the ideas stupid”—in his 1949 article “The Intellectuals and Socialism.”

And this project can be seen from the opening session of the first MPS meeting. The topic was “Free Enterprise or the Competitive Order?” He’s drawing a contrast immediately between laissez faire and a more classical liberal order with constraints: hardly the raging neoliberal his opponents wish to paint him as today. Even more interestingly, the first three speakers were himself, Aaron Director from the University of Chicago, and Walter Eucken, an ordoliberal. All three are competitive order advocates, not defenders of laissez faire such as Mises and Henry Hazlitt, who were also at the first meeting. Hayek stacked the deck against laissez faire.  “What is this liberal order if it’s not just laissez faire?” Caldwell asked me. In many ways this explains why Hayek occupies a unique position among defenders of liberty.  He maintained close relationships with “liberals” and advocates for a very limited government.

Now Caldwell admits that “by the 1970s he’s (Hayek) really much closer to Mises, but in trying to construct this conversation among all these various people at this point he does have this broader view but he wants to figure out exactly what that broader view means.” Interestingly one of the first seminars Hayek ran at Chicago was titled “Liberalism from Locke to Mises” so his definition of the term was broad indeed.

Caldwell pointed to a very interesting difference between the Hayek of the first MPS and the Hayek of The Constitution of Liberty, which includes a chapter on the danger of unions, but nothing on the dangers of private sector or enterprise monopolies. In the 1940s, most economists assumed that markets could lead to monopoly. But by the 60s, that view had faded and Hayek’s writing reflected the change. This change alienated some of his older liberal allies. Walter Lippmann upon receiving his copy of The Constitution of Liberty sent a reply complaining about Hayek’s failure to deal with the monopoly question. It demonstrates once again the needle Hayek is trying to thread. “Among libertarians, the Constitution of Liberty might be viewed as allowing for too much intervention by the government.” Yet the liberal Lippmann was also uncomfortable with the work. “So it is this ongoing conversation he is engaged in and enjoys engaging in.” 

When Hayek was presented with either fascism or communism, he chose neither and pursued liberal ends.

While Hayek’s search for the meaning of liberalism certainly evolved, so did society’s re-embrace of socialism, and Caldwell sees this as an immense frustration for Hayek:  

You think of the changes that are taking place in societies in the 60’s and the 70s, and he’s saying ‘You know we fought these battles about socialism back in the 30s and laid out some really good arguments and here people are bringing back this stuff? And ignoring any of the problems associated with it?’ So I think he became kind of fed up with the vacuity of the arguments of opponents.”

Hayek believed people were falling prey to “scientism”—and failing to look at the arguments or weigh the real-world evidence.

Caldwell shares a letter from a former student who characterized Hayek as someone who reached his conclusions about socialism logically:

he was someone who looked like he got the opinions that he held through a process of thinking it through, the dispassionate scholar, these are just the facts of the matter. This is a system that has really deep flaws. And you can put it into effect but it’s going to cause massive suffering.

Despite this frustration with the continuing popularity of socialism and his increasing doubts about the efficacy of government Hayek never was impressed with or supported anarcho-capitalism. Caldwell is still working on a second volume, which deals with the 60s and 70s but he called Hayek “unimpressed” with Rothbard. However, he acknowledges that the question of how much or how little government intervention Hayek would have allowed in his liberal order is tough to nail down.

A Failure to Communicate

I ended my discussion with Caldwell by reviewing Hayek’s relationship with his two families—his mother and siblings he had in Austria, and his wife and two children in England. Once the Anschluss occurred, Hayek, along with his wife and children, became a naturalized British citizen. The correspondence that survives between his family members who lived under the Nazi regime shows Hayek’s firm opposition to the Nazis and, regrettably, their initial support for the regime.

The situation with his wife and children is much more complicated and shows us that Hayek was less dispassionate in his personal life. Caldwell says as a father and husband Hayek was “the worst communicator, and all of the problems that arise from his family arise from this absence of communication.” Hayek had a long-standing affection for a cousin who had married someone else while Hayek was visiting America for the first time. Hayek then married his wife, Hella and had two children.

At some point in the 1930s, he and his cousin discussed divorcing their spouses and marrying one another, but the war intervened. After the war, Hayek was unable to split amicably with his wife, and a very ugly divorce drama unfolded. His friendship with Lionel Robbins, who took Hella’s side, was a casualty of the whole affair. In the end, Hayek’s move to the University of Chicago ended both the marriage and (at least for a while) the relationship with Robbins.

Who Was Hayek?

Too often, those who wish to paint him as a Machiavellian monster or a bleeding-heart quasi-socialist ignore the world Hayek lived in and the experiences that shaped him. When Hayek was presented with either fascism or communism, he chose neither. When the mainstream social norms were anti-Semitism, nationalism, and little flexibility in personal relationships, he pursued more liberal ends.

Not all of Hayek’s choices were defensible, which makes him human. But it’s easy to forget that he wasn’t reacting to a “socialism” like that of the Nordic countries, although I doubt he would have been a huge fan of the Norwegian model of society. He was a self-proclaimed liberal in speech, markets, and personal lives in the era of Hitler and Stalin. He was an avowed multiculturalist for his time and, as some of his fans on the left remind us, he was not opposed to some form of a welfare state. He was hardly a full-throated supporter of laissez faire, although he moved in that direction as his life went on. 

He was less imperfect than many other twentieth-century intellectuals. There is something in Hayek for everyone and quite a bit to think about. He was quite possibly the most important economic liberal in the world in the later part of the twentieth century. He may never reach the heights of Salma, but there is much to admire in this unique individual who through puzzling, drinking it all in, building an independent life from an insular background, networking, living by principle and good fortune, went on to help shape the materially richer and freer world we currently live in.

Editor’s note: Corrections have been made to this essay related to certain biographical details.