Friedrich Hayek Quotes

[Milton Friedman] believes in an oversimplified quantitative relationship between a measurable quantity of money and the price level. You must leave it to the discretion of the central bank to so adjust the supply of ultimate cash reserves as to keep the price level stable.

I don’t have many strong dislikes. I admit that as a teacher—I have no racial prejudices in general—but there were certain types, and conspicuous among them the Near Eastern populations, which I still dislike because they are fundamentally dishonest. And I must say dishonesty is a thing I intensely dislike. It was a type which, in my childhood in Austria, was described as Levantine, typical of the people of the eastern Mediterranean. But I encountered it later, and I have a profound dislike for the typical Indian students at the London School of Economics, which I admit are all one type—Bengali moneylender sons. They are to me a detestable type, I admit, but not with any racial feeling. I have found a little of the same amongst the Egyptians —basically a lack of honesty in them. If I advise speaking about honesty, I think honesty is really the best expression of what I call the morals of a civilized society. Primitive man lacks a conception of honesty.

I suggested before that the whole of economic history could be rewritten in terms of this gradual suppression of the primitive in­stincts by what we very mistakenly call “artificial” rules. Of course, they are not in the strict sense artificial. Nobody ever invented them. They were not the result of design. The new manners of conduct were not adopted because anybody thought they were better. They were adopted because somebody who acted on them profited from it and his group gained from it, and so these rules, without anybody under­ standing them—that is very important for the later part of my argu­ment—without anybody understanding in what way they benefited their community, gradually came to be generally accepted.

There can be no doubt that our innate moral emotions and instincts were acquired in the hundreds of thousand years—probably half a million years—in which Homo sapiens lived in small hunting and gathering groups and developed a physiological constitution which governed his innate instincts. These instincts are still very strong in us. Yet civilization developed by our gradually learning cultural rules which were trans­mitted by teaching and which served largely to restrain and suppress some of those natural instincts.

On the scale on which [tax cutting] is being tried, I'm a little apprehensive. I'm all for reduction of government expenditures but to anticipate it by reducing the rate of taxation before you have reduced expenditure is a very risky thing to do.

Since the value of freedom rests on the opportunities it provides for unforeseen and unpredictable actions, we will rarely know what we lose through a particular restriction of freedom.

There mere idea that the planning authority could ever possess a complete inventory of the amounts and qualities of all the different materials and instruments of production of which the manager of a particular plant will know or be able to find out makes the whole proposal a somewhat comic fiction. Once this is recognised it becomes obvious that what prices ought to be can never be determined without relying on competitive markets.

Both altruism and solidarity are very strong instincts which guided man in the small group. We were serving known other persons when his efforts were directed to the needs of familiar people. Now we have grown as rich as we are because we have replaced this by a system where we no longer work for the known needs of known other people, and no longer use the known assistance of other people, but where our effort is completely guided by price signals, which for the individual means that I must use my resources for the maximum success of what resources is sacrificed for the purpose, but the justification is not my benefit but in this way I benefit my fellow man most. So it does happen that so far as commercial activities economic activities are concerned we will benefit our fellow man most if we are guided solely by the striving for gain. We are then completely free how to use what we have earned and there of course the desire for being altruistic come in very strongly, but not in the ordering principle of our society.

I have certainly never contended that generally authoritarian governments are more likely to secure individual liberty than democratic ones, but rather the contrary. This does not mean, however, that in some historical circumstances personal liberty may not have been better protected under an authoritarian than democratic government. (...) More recently I have not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende. Nor have I heard any sensible person claim that in the principalities of Monaco or Lichtenstein, which I am told are not precisely democratic, personal liberty is smaller than anywhere else!

I don't like criticizing Milton Friedman not only because he is an old friend but because, outside of monetary theory, we are in complete agreement. Our general views on what is desired and what is not are almost identical until we get on to money. But if I told him what I said before, that I very much doubt whether monetary policy has ever done anything good, he would disagree. He personally is convinced that a good monetary policy is a foundation for everything.

An evil fate befall German efforts to defend the ideal of liberty in general and in the field of economics in particular, with the result that today I am almost the only survivor of a generation that set out in the wake of the First World War to devote all its energies to the preservation of a civilised society, a generation that set itself the task to build a better society in a systematic fashion and to learn to understand, and to some extent defend, a tradition that had civilised the world.

What is at issue is not union membership but compulsory union membership and not the right to strike but the right to compel others to strike. There is no need for any other explanation of why the British economy is decaying and the German highly prosperous. The trade unions, being politically sacrosanct, have been allowed to destroy the British economy, and since even somebody as sympathetic to labour as Lady Wootton has told us that “it is in fact the business of a union to be anti-social”, it is high time that somebody had the courage to eradicate that cancer of the British economy.

I think the basic misconception is to speak of the so-called “best” allocation of resources. What is the best? In common economics it is defined as what would be if we knew everything. Economists operate with the fictitious assumption that all the relevant data is known, but this is totally unrealistic. Nobody knows all the data. What we have is widely dispersed knowledge, which cannot be concentrated in one mind. To call the situation—which would use all the knowledge available—“optimal” is nonsense because it is by definition a non-achievable solution. Our problem is not the full utilization of all knowledge but the best use we can achieve with any known institutional structure. In that sense, some oligopolistic (and even monopolistic situations), represent the best possible utilization of knowledge that we can achieve. Even the action of a monopolist can be extremely beneficial.

I don’t believe we’re in for a crash now. It's much more likely that government will just conceal the continuation of inflation by price controls. But if anything is worse than an open inflation, it’s a repressed inflation. What you’re likely to get is not a violent deflation but increasing stagnation of productivity.

If craftsmen and blacksmiths were feared for transforming material substance, if traders were feared for transforming such intangible qualities as value, how much more will the banker be feared for the transformations he effects with the most abstract and immaterial of all economic institutions? Thus we reach the climax of the progressive replacement of the perceivable and concrete by abstract concepts shaping rules guiding activity: money and its institutions seem to be beyond the boundary of laudable and understandable physical efforts of creation, in a realm where the comprehension of the concrete ceases and incomprehensible abstractions rule.