Austrian-British political philosopher and economist Friedrich August von Hayek was born May 8, 1899 in Vienna into an aristocratic family with several prominent intellectuals in subjects such as statistics and biology. His grandfather was the renowned Franz von Juraschek. His father published a comprehensive botanical work when he worked as a doctor in the social welfare system of the State. On the maternal side, he was second cousin to the philosopher Ludwig Wittgenstein. When World War I broke out in 1914, Hayek lied about his age and got himself enrolled in the Austro-Hungarian army. He escaped serious injury and received a medal for his efforts. After the war, Hayek focused on an academic career. He received two doctorates, in Law in 1921 and political science in 1923, at the University of Vienna. He also studied psychology and economics. From being sympathetic to socialism, Hayek changed his political views.
In his article The Use of Knowledge in Society from 1945 Hayek argued that the price formation mechanism has ability to synchronize local knowledge, thus allowing individuals to achieve different and complex cases through spontaneous order. He was influenced by Ludwig von Mises private seminars, which also Fritz Machlup attended.
Hayek advocated classical liberalism and was opposed to socialism and collectivism. He received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1974 along with Gunnar Myrdal with the following statement by the Nobel Committee: “for their pioneering work in monetary and economic theory as well as for studies of the relationship between economic, social, and institutional phenomena.”
Hayek believed that all forms of collectivism could only exist with the support of the state.
Methodological base of his work is the theory of incomplete knowledge inherent in the description of a complex system. Hayek later expanded on this theory by using anthropological, cultural, and information-theoretic aspects.
As a result of incomplete knowledge, a centrally managed economy is fundamentally unworkable or at least greatly inferior to the market economy. Thus, in the 1920s, Hayek noted that in a society based on the division of labor a separation of the knowledge occurs.
Obtaining this knowledge is difficult due to the random nature of the economic activity, and the inconsistency of the interests of its members. Therefore, a separate planner will not be able to fairly accurately describe the overall planned economy. In order to provide the planner authority that would provide for the necessary amount of knowledge of central planning, centralized power exerted a significant effect on public life, evolving towards totalitarianism. While Hayek did not dispute the high moral goals of some socialists, he believed they proposed, in particular, the dangerous way of government intervention.
Hayek died March 23, 1992 in Freiburg im Breisgau, Baden-Wurttemberg.
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