Chapter 2: Hayek and His Socialist Friends

When F. A. Hayek moved to Britain in the early 1930s from his native Austria, he was immediately struck by what he saw as the same attitude among British intellectuals as he experienced among German thinkers during the 1920s. In fact, as he wrote to Lionel Robbins on July 21, 1931,

As Bruce Caldwell¹ highlights, Hayek thought the problem lay with the fact that the previous generation of economists in their zeal to reject eighteenth and nineteenth centuries classical political economy had focused their efforts on criticizing the theoretical approach to social science, with the consequence of discrediting economic reasoning in general. In this assessment, Hayek and Robbins were in agreement that a defense of economic theory had to be mounted for the current generation. In fact, this project to ground economic discourse in sound theory motivated many of their joint ventures between 1930 and 1950 that included not only their own books and articles, but the translations and reprints they marshaled into publication and the visitors and seminar culture they created at the London School of Economics (LSE).² This dismissal of the teachings of classical political economy by intellectuals and the current generation of trained economists meant that once the intellectual discipline that economic theory imposed was relaxed, all manner of utopian schemes could be offered to address social ills – from poverty to monopoly power to depression. The necessary scientific and philosophical task of submitting the various proposals for social reform to critical analysis capable of sorting the postulated desirable from the potentially feasible, and ultimately from the actually viable, was simply abandoned by the specialist as well as the general intelligentsia. This is the consequence of the rejection of the teachings of economics and political economy that the German Historical School accomplished and that was being replicated in the United Kingdom and the United States. The value-free analysis of value-laden proposals through strict means/ends examination was rejected, and with that, Hayek and Robbins argued, the barbarians would be soon at the gates.