Friedrich August Von Hayek, born in Vienna on May 8, 1899, came from a family of Viennese intellectuals, was characterized as a philosopher, jurist and economist. He became known for the defense he made to liberalism and for criticism of the planned economy and socialism, as indicated in his book on the road to servitude, that the application of this doctrine leads to totalitarianism and is therefore a danger for individual freedom.
His extensive work is comprised of 25 books and about 130 different articles. His work is not limited to economics, but also encompassed political philosophy, legal anthropology or history, and in general everything that refers to the social sciences. He is a faithful representative of the Austrian school, which professes heterodox economic thinking, based on methodological individualism, which conceptualizes that social phenomena result from the motivations and actions of individuals.
This Austrian school is characterized by its strong and critical position towards Marxist, monetarist, Keynesian and neoclassical economic theories. Even when there are different points of view regarding the economic policy that Austrians handle, the Austrian school tends to be seen as the economic science of the free market. He was a professor in London, where he is best known for the support he gives to free market capitalism. It was in the First World War and after that experience what defined his career, hoping to help society not to make the mistakes that gave rise to the war. In 1974, Hayek won the Nobel Prize in Economics, for his pioneering work with the theory of money and its economic fluctuations. He lived in Germany, United Kingdom, Austria and the USA.
His economic thinking
He thought that in order to genuinely recover from the economic contraction, not only adequate expenditure was required, but also the return of sustainable production, which means, a production free from the distortions of an era of much boom-collapse. same time, caused by easy money. After the economic depression of the 20s, he dedicated himself to promoting the idea that private investment and not that of the government, would be the one that would give prosperity and sustainable economic growth. According to Hayek, the main cause of economic depressions is the excessive creation of credits by banks, which leads to excessive spending. The expansion was the illusion, the fall represents reality.
Friedrich Von Hayek’s economic advice
This Austrian thinker left us through his experience, a series, which we could call economic advice, remember that he also wrote about many other things, such as law, history, philosophy, and their relations with economic sciences. They are advice or quotes about the market and about the spontaneous order.
The pricing system becomes a recording instrument that automatically collects all the relevant effects of individual actions, and at the same time, its guidance. In his book Road to Serfdom, published in 1944, he states that centralized planning of the price system is not only eliminated with a democratic system of government, but, on the contrary, this can weaken democracy and promote authoritarianism.
The role of the economy
The role of the economy is to teach the human being, what little they really know and know, about what they imagine they can design. It is important to note that much of Hayek’s approach is the development of the ideas and approaches of Von Mises, who we talked about in the previous article entitled the future of the economy according to Von Mises and who argued that socialism was technically impossible.
The extensive order
It consists of a mechanism that is able to collect and take advantage of a wide range of disseminated knowledge, which no agency that plans is capable of apprehending or controlling. For him, the monopoly of the state in the issuance of the coins was something that ultimately always ended up to the detriment of the people, so he proposed that private entities could create their own coins to compete with each other, as if it were products, this would be an innovative concept to date and is basically something similar to what is done with cryptocurrencies today.
The spirit of the company
We are in a society in which today’s generation has grown in a world in which the school and the press represent the spirit of commercial enterprise, as a dishonorable way, and the attainment of some benefit, as something immoral, and where giving employment to one hundred people is considered an exploitation, but if it is honorable to exercise command over as many people.
Liberalism without an intervening state
Von Hayek, with his fundamental economic theory, in view of the current state of monetary macroeconomics, defends the idea that liberalism, without an intervening state, becomes a system that could lead capitalist economies to dynamic economic equilibrium, and which can be defined as optimal, within the framework of the new synthesis between the new classics and the new Keynesians.
The economic cycles are caused by monetary factors and have as a consequence real effects on the price structure in relation to the economy, which, if there is a disturbance in the price balance, necessarily causes changes in the structure of production , generating, as a consequence, a social impact.
His position as a defender of liberalism, was to defend the neutrality of money, since that implies that an economy can go without money that is issued by the state. The neutrality of money does not occur in the short, medium or long term. The implications that this principle of neutrality of money has within the modern macroeconomic analysis could be very relevant, if it applies, for example, to theories of adaptive and rational expectations, or also, to monetary policy in general. Friedrich Von Hayek dies on March 23, 1992, at age 93 in the City of Freiburg in Brisgovia, in Germany.
What do you think about this topic? Which advice of Von Hayek caught your attention the most?
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