Category Archives: Economics

Foreign Influence= Australian Weakness

Fear is false evidence appearing real. True friendship is transparency.

It is not the fault of a foreign country when it influences Australia. It is the belief in powerlessness in Australian leaders that compromise sovereignty for economic advantage as they have been conditioned to believe that is more important than democratic principles. The fault line in the sand is within which attracts the problem from with-out. It they truly believed in democracy they would not allow disproportionate influence.

It you don’t want donations to influence then ban donations.

If our government seriously wants to stop Chinese or other foreign interference then values is where you must focus. What you focus on expands. Do not underestimate the strength of balanced decision making weighing up all sides to Advance Australia Fair. If all politicians operated from a base of community services, principled decision making and had the courage to be willing to sacrifice economic gains external influences would disappear.

Lao Tzu’s message is directed to both leaders in China and Australia. For those who do not want to hear criticism are in denial of the violence they project covertly or overtly in the name of friendship or freedom. The most genuine friend will be the one who holds the mirror up to those in denial so they can see themselves without their story.

Only love will sacrifice everything to reveal the truth that sets all free.  Yet there is no sacrifice when you no longer attach your identity to materialism. True freedom comes from allowance not domination. You can be free in prison. You can be imprisoned in a mansion. A person is respected when what they say and do aligns. This means the inner truth and outer appearance are integrated. This is what creates a “great” leader.

This blog is inspired by the Four Corners documentary on Chinese influence in Australia (see below).  This message from Lao Tzu sums up the real issue from an ancient sage in China.  We have to go deeper if we wish to stop the conflict. It is not about cleverness, cyber security, bioterrorism, it is about “who we are” as a people and what we believe in. What is true? What is important? What serves the Australian people?

Below this video is the Four Corners Documentary entitled “Interference: China’s covert political influence campaign in Australia” | Four Corners.

Four Corners holds a mirror up, perhaps life is sending China and Australia a message – like attracts. Eventually truth surfaces, you cannot control anyone, as nature will rebalance to find harmony. Truth tellers are natural rebalancers that feel the impulse to speak the truth to perceived power, this rebalances power dynamics.

The Chinese people are not the enemy. Criticism is not the enemy. Greed is the enemy as it has no culture, no identity, no name yet quietly it corrupts and erodes innocence as insecurity (not enough) is the home of greed. The problem to solve is insecurity. In conflict resolution we teach “solve the problem do not hate the person”. We seek wise solutions as no problem is intractable when you understand human nature not in the sense of “know your enemy” but in the sense of “understand your potential friend”.

So those dominating are never free until the pain of denial becomes too great and they must change. What you resist persists what you look at disappears, society disappears because “you are me”. When I hurt you I hurt myself.  Truth is not about belief it is about clarity to see through the illusion of the lies we tell ourselves that become cultural stories. Many surround themselves with “yes” people they call loyal or glee clubs they call friends (clubs) to reinforce the lie as the truth.  Yet truth cannot be faked, it is what it is and unifies naturally.  Lao Tzu demonstrates real justice which is based on wisdom (divine law) not law (legislation) or the constitution. Wisdom looks into the root of behaviours that cause imbalance (or disharmony) in society.

The wise do not control or force behaviour change through pain, they recognise to rebalance one must honour only truth. that is why we call a Justice “Your Honour”. Truth sets both parties free as they evolve through respecting unbiased decisions. Truth leads to unity which some call social order, real order is natural resonance which requires no social contract as harmony is the outcome. 

I contemplated the endless lies we speak identifying as this country or that, this power or that, pro this or anti that. I shake my head as confusion not Confucius is the outcome which is the maze with no exit. That is why violence escalates my friends. You are fighting yourselves believing it is the “other”. The cyber wars, 5G mmwave (US), sub-6 spectrum (China, world), exploiting labour, connectivity, smart cities, city deals, buying up resources to control or predict outcomes to feel secure. 

When truth is the centre-peace, you can predict harmony as you understand universal lore.  This always works to the highest good of all, as the sum of the parts is the whole. Yet we are still at a primitive stage believing in self interest, economic growth, security as force, personal fortunes whilst the planet traverses tipping points, the icecaps melt, the magnetic fields weaken, resources redirect away from those in greatest need and we call this security as Earth Inc (titanic) sinks.  This is a false economy.

I did smile at Peter Dutton making a moral stand on the relationship between Sam Dastyari and Huang Xiangmo, when he too met with him.

The issue of access due to lobbyists when ordinary Australians, like myself, can’t get access.  Santoro charged $20,000 for access. This is greed.  How is that democratic? We have no economic value yet we are citizens and our taxes pay for their privilege. Is this how we advance Australia fair? This is about allegiances.  For whom do political figures work? Who places them in positions of power?  Who elects the faceless faces who have disproportionate influence?  What happens to the Australian public? Are they truly safe?

Australia has interfered in East Timor and I am sure if we drilled own we could find the mirror here in so many cases where other foreign influences have manipulated us into issues that are not relevant to the Australian people.  The real work for Australian politicians, intelligence and law enforcement is to look within if you genuinely want to change what is happening outside.

I think of the murdered Assistant Police Commissioner Colin Winchester, he comes to me in inspiration these days as I feel for his case. My own father believed the accused David Eastman was a miscarriage of justice, he wrote many Letters to the Editor.  In 2014, after 2 decades in jail, David Eastman was released. He was later awarded $9 million in compensation.  The police must be protected when they uncover crimes or confront illegal power. Colin Winchester was going to testify in Queanbeyan against cannabis growers. The cannabis growers were known as the Bungendore 11 and linked to the Italian mafia who started two crops in NSW in the 1980s under the supervision of the police informant.

Immediately I go to the murder of Donald Mackay. The murder of Liberal Party candidate and Griffith anti-drug crusader Mr Mackay was Australia’s first political assassination. It is alleged it was at the hands of the Calabrian mafia, apparently the same group as Winchester.  A quick search provides more insight into what creates corruption, money laundering, drug trade and illegality

My thoughts turn to poverty, corruption, greed and powerlessness parading as power. The same mirror that others can see themselves caught up in.  So how do we help them exit what is, a self defeating circle of pain and fear intensifying a culture of violence?  I see the links as all the same root cause. Yet we still spend energy making the “other” wrong yet we won’t look into where we are “wrong”.  Byron Katie speaks of projection and she is right.  We have to question our own thinking every time we see an enemy, imagine if every side did this.

When I was teaching truth to children, I gave them a blind spot test. They look at two dots, cover one eye and then one dot disappears. The eyes play tricks. The dot represents what we deny, refuse to see, the reality is, it is there, but we won’t see it as we are right the other wrong.  The other is the “enemy”. The Christians say in relation to judgement “take the log out of your own eye” until we do, we blame the world for what is our own blindness, our own weakness contributing to a values free world. At what point do we stop what we want the other to stop. Until you stop the other won’t as what you think about you bring about. This is the law of attraction. We create our reality, remember! We blame others but we don’t see ourselves as the same.  We are all in it together. This is a truism.


This article by the Guardian provides insight into the hypocracy that we witness in politics.  Peter Dutton is now Home Affairs Minister with the power to decrypt and access every citizen’s information inclusive of the Covidsafe app for contact tracing without a warrant.  

In the story below Malcolm Turnbull asked Scott Morrison to deal with Petter Dutton. Yet he did not do anything to reinforce values and sovereignty, there is no leadership by example when there is nothing to see here when clearly there is.  

Scott Morrison says of Peter Dutton’s meeting with Chinese billionaire: ‘Nothing to see here’ – as it happened

Going back to Lao Tzu’s example  we do not go to the root of the problem of “greed” as we are persuaded that economic growth is more important than Australian sovereignty, it would be argued as pragmatic “the way things are done”.  Is it serving the Australian people’s true interests? This is why Australians become disheartened, why social order breaks down, it is because Australians don’t know who to trust anymore as all seem amoral.  We then lose respect for those in power as they don’t respect themselves. This is loss of face.  We respect integrity and honesty.

This article demonstrates the hypocracy as each follow the  money not values to ensure the real security of Australians. So we are indeed stuck between a rock and a hard place. The enemy is within, not outside. So in my view $270 billion on new weapons only escalates the problem and diverts precious resources. We have to learn to think differently if we want to reclaim our sovereignty and dignity as Australians. I always see the Man from Snowy River, as so many forget or don’t remember our heritage. Clancy allowed this stranger to come on the ride with other bushmen. They were rounding up horses in the high country. There was one colt that was wild and free.  Everyone was too scared to follow the colt of Old Regret down the sheer mountain face. It was the man from Snowy River who showed courage, others thought suicide! as he jumped the log and headed down a near vertical cliff face. He didn’t think of himself, he went for it, took the risk and his story was told in years to come by Banjo Paterson. Banjo was reminding Australians of courage in the face of great risk. We don’t respect those who feather their own nests at the expense of the public. We respect those who truly represent us as they have taken our taxes and given us narratives of democratic representation.  We discover it is they who stand back, too afraid to confront what they fear, saying this is the way it is, no choice, this is the future.  Clancy and this stranger from the high country would say “bullshit mate”. You define your own reality.  You take the reins. You don’t hang back. You take a leap of faith (remember Indiana Jones) not a great leap forward. You decide what you want on behalf of Australians and commit to it.  This is leadership. This is integrity. This is power.  But if you sell out “freedoms” and weakly claim it is a trade off for a higher standard of living, you have sold out to the highest bidder. You will lose everything as life will not support you, as greed takes from life. Why? You are out of balance or indeed harmony. Life will rebalance. As nature is the power. So if you suppress, oppress and control others the pendulum swings back the other way as it must, as all are part of nature, to restore balance we must speak up and be heard. Whistle-blowers are being nudged from within. So for those who say one thing and do another, the children are watching. They will copy and call it “the way things are done”. If you speak with integrity what you believe you live, then others will feel inspired. That is how you restore Australian sovereignty. You live as an example of what it means to be a genuine Australian. We are waiting for you.  I wonder who you will be?

Malcolm Turnbull says PM must ‘deal with’ Peter Dutton China allegations

Turnbull says Scott Morrison must address claims about Dutton’s meeting with Huang Xiangmo as a matter of national security

‘Dutton has a lot to explain’: Malcolm Turnbull on Dutton’s meeting – video

Malcolm Turnbull has called on Scott Morrison to “deal with” Peter Dutton after allegations that the immigration minister met the former Australian resident billionaire Huang Xiangmo after he paid $10,000 to a lobbyist.

Turnbull, who introduced foreign interference laws in 2017, said the allegations contained in a Four Corners-Nine newspapers report regarding a meeting between Dutton and Huang following a payment to former Liberal minister turned lobbyist Santo Santoro were “very troubling”.

“The allegation is that Santo Santoro received money in return for securing privileged access to the minister on behalf of Huang Xiangmo and all of that, in circumstances where there has been rising concern about lobbyists, about foreign influence,” Turnbull said.

“Look, Peter Dutton has got a lot to explain about this.”

Earlier in the day, Morrison had defended the government’s record citing Turnbull’s foreign interference laws and highlighting instead former Labor senator Sam Dastyari’s resignation after rolling controversies regarding his relationships to Chinese-linked donors, including Huang.

“All I know is Sam Dastyari had to resign in disgrace over foreign interference and behaving in a reckless and shameful way, betraying his own country,” Morrison said.

“I think when it comes to these issue, our government’s record is squeaky clean.”

But Turnbull said Morrison could not waive off the allegations and he used Dastyari’s example as a reason for his successor to move quickly on the issue.

“Remember the furore that arose about Senator Dastyari. All the same issues have arisen again and this has to be addressed at the highest level of security, priority, urgency by the prime minister,” Turnbull said.

“The buck stops with him. I know what it is like to be prime minister and, ultimately, you are responsible and so Scott Morrison has to deal with this.”

“Scott Morrison is the prime minister and you can’t waive this off and say it is all part of gossip and the bubble. This is the national security of Australia.”

Asked later about Turnbull’s comments, Morrison said he had spoken to Dutton.

“I have spoken to Peter Dutton and there are no issues here that troubled me,” Morrison said. “No suggestion that Peter in any way, shape or form has sought or been provided with any benefit here.”

The allegations relate to the desire by Huang for Australian citizenship. The Four Corners investigation revealed Huang tried to speed up a citizenship ceremony for his wife and children late in 2014.

Dastyari claimed he was surprised that after passing on the ceremony application to Dutton’s office, it was approved within two weeks in the holiday period in January 2015.

According to the report, when Huang applied for his own citizenship in late 2015, he was already being investigated by ASIO. He was worried about his access so consulted Santoro who had boasted Dutton was one of his “best friends”.

Huang put Santoro on a retainer in 2016, according to the report, and in the same year, Huang, Dutton and the minister’s senior staffer had lunch at Master Ken’s restaurant in Sydney’s Chinatown.

Dutton rejected the allegations as a “beat up” and said he met Huang as a “significant leader in the Chinese community”. Huang’s bid for citizenship failed.

“I have had that one meeting with him over lunch. I have never seen him since. What has he got from me? He is now offshore and is prevented from coming back into Australia,” said Dutton.

Dutton said that the transactions for lobbying businesses on both sides of parliament was an issue for lobbyists.

“There are lobbyists who are registered on both sides of parliament, people that operate as lobbyists,” he said.

“Their transactions and how they conduct their business is an issue for them.

Dutton said while he had never met Huang when his family’s citizenship ceremony was approved, it would be unusual for a minister to knock it back.

“You take at face value what somebody like Sam Dastyari, as a member of parliament, was vouching for and they ask for the ceremony and it would be very unusual for a minister of the day to knock that back,” Dutton said.

“So if Mr Dastyari has not been above board or misrepresented the reason for the citizenship ceremony then I think that is something that he, and frankly, Mr Shorten need to explain.”

Bill Shorten described the Four Corners revelations as unhealthy.

“It is explosive and very surprising revelations on Four Corners last night about the conduct of the minister in charge, one of the ministers in charge of national security where it is cash for access and meeting people connected to the Chinese government.

“This is very unhealthy.”

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The Road to Serfdom (slavery) is Not Freedom (choice)

In the public interest.

Serfdom created out of technocratic ideologies that replace labour with automation, deomcracy with compliance is the resurfacing of totalitarianism in systems theory that again, have no concept of socio-emotional reality, equality, self determination and choice. It reflects the imbalance between the public and private interests with philosophies of totalitarianism. We are moving towards fascism in my view.

In truth Fascism has its roots in the masculine that has disconnected from empathy for the ‘other’. Fascist dictators want the world in their image, they regard any form of difference, challenge as ‘the enemy’ and they seek to repress or silence this form of expression. Psychologically the root in fascism is in inadequacy and insecurity (fear) which is protected by a facade of a hard veneer that bullies to frighten the other. This mindset gains confidence when surrounded by those who are subservient, not unlike the Napoleon form of leader who demands respect. They rule with an iron fist and are intolerant to changes from what is proscribed doctrine, they feel secure in unquestioned ideologies.

Across history these leaders have emerged out of great crisis, traumatic events and poverty to restore control in what may be perceived as out of control. They see obedience as loyalty and this is rewarded. The perception of reality is distorted and it is always from their perspective, they cannot and do not desire to see the other side as it can shake their world view. They are seekers of power not truth. Power seekers must be right (righteousness) as this gives them a feeling of power. The power is what they are addicted to as it inflates their sense of self worth and value as the opposite is the default. They love to feel powerful, loved, respected and in control. They are the extreme form of domination politics and economics.

I found Hayek’s ideas reflective of similar problems today given the loss of individual freedom (freedom of speech, self determination), totalitarianism, loss of freedom, repression, democracy seeks equality, ensure advantages gained are greater than the social costs, negative externalities“) cannot effectively be regulated solely by the marketplace, deforestation, of some methods of farming, or of the smoke and noise of factories, not be confined to the owner of the property in question, or to those willing to submit to the damage for an agreed compensation.[34] The government also has a role in preventing fraud. Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all the principle of laissez-faire capitalism“. In the book, Hayek writes that the government has a role to play in the economy through the monetary system (a view that he later withdrew),[55] work-hours regulation, social welfare, and institutions for the flow of proper information.

Hayek states in relation to deprivation and homelessness: “There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

So Hayek and Keynes are not opposites there are overlaps. The concern is that central planning becomes ‘big brother’ which removes liberties yet what Hayek and Keynes didn’t know is that in 2020 we are entering the very totalitarian state promulgated by the very ideologues of Hayek and Friedman who argue for aspects of these economic ideologies to justify the removal of freedoms, the selling off of assets, reducing employment (automation), environmental damage, corruption (government/business) in garnering business, unfair trade deals, price fixing, industrial segments reshaping the world in their image (digitisation), surveillance capitalism, collapsing of social welfare, data gathering and no privacy. These are the very things that the classical liberal and Keynesian economists did not want. Yet the ideologies are used to increase the freedom, wealth and control of a small number of persons globally who want total power. This is the real state of play in my view.

I believe the real serfdom is to be implemented through compliance, removal of the money system (cash), forced use of chipped cards/people to track all activity, removal of human rights, moving people into cities, Smart Cities IT IoT grid, no Bill of Rights (freedoms), legislation favouring specific groups over others to allow abuse under the guise of freedom, users pay in courts (only those with money can have just outcomes), right wing ideological/religious concentration preserving white male dominance for fear of women changing the game and so on. I don’t say this as a feminist it is becoming clear after extensive research as I seek to understand the problem. I had no idea about misogyny until I experienced unequal treatment and was informed. I was truly surprised.

So let’s have a look at the Road to Serfdom by Friedrich Hayek. His form of fear of Fascism arises from central planning. My description above refers to the desire for power which can come from both sides of political ideologies. the challenge is to find the balance between oversight in economic planning and encouraging of individualism as a form of freedom of expression. However, in our current society most people are unable to express their freedom, they are still enslaved in systems of work that are task orientated serving the corporation not the individual. The truth can be obscured by economics and economists who haven’t worked in the system. I worked in 400 companies and I saw the servitude first hand. I always knew the people have extraordinary potential, I knew this from a young age.

The Road to Serfdom

Reference: Wikipedia

The Road to Serfdom (German: Der Weg zur Knechtschaft) is a book written between 1940 and 1943 by Austrian British economist and philosopher Friedrich Hayek. Since its publication in 1944, The Road to Serfdom has been an influential and popular exposition of market libertarianism. It has been translated into more than 20 languages and sold over two million copies (as of 2010).[1][2][3] The book has also made a significant impact on twentieth-century conservative and libertarian economic and political discourse, and is often cited today by commentators.

The Road to Serfdom was to be the popular edition of the second volume of Hayek’s treatise entitled “The Abuse and Decline of Reason”,[4] and the title was inspired by the writings of the 19th century French classical liberal thinker Alexis de Tocqueville on the “road to servitude”.[5] In the book, Hayek “[warns] of the danger of tyranny that inevitably results from government control of economic decision-making through central planning.”[6] He further argues that the abandonment of individualism and classical liberalism inevitably leads to a loss of freedom, the creation of an oppressive society, the tyranny of a dictator, and the serfdom of the individual. Hayek challenged the view among British Marxists that fascism (including National Socialism) was a capitalist reaction against socialism. He argued that fascism, National Socialism and socialism had common roots in central economic planning and empowering the state over the individual.

The book was first published in Britain by Routledge in March 1944, during World War II, and was quite popular, leading Hayek to call it “that unobtainable book”, also due in part to wartime paper rationing.[7] It was published in the United States by the University of Chicago Press in September 1944 and achieved great popularity. At the arrangement of editor Max Eastman, the American magazine Reader’s Digest published an abridged version in April 1945, enabling The Road to Serfdom to reach a wider popular audience beyond academics.



Writing in the era of the Great Depression, the rise of autocracies in Russia, Italy and Germany, and World War II, Hayek wrote a memo to the director of the London School of Economics, William Beveridge, in the early 1930s to dispute the then-popular claim that fascism represented the dying gasp of a failed capitalist system. The memo grew into a magazine article, and he intended to incorporate elements of the article into a book much larger than The Road to Serfdom. However, he ultimately decided to write The Road to Serfdom as its own book. He sent the manuscript to three American publishing houses, all of them rejecting it.[8]

Friedrich Hayek

The book was originally published for a British audience by Routledge Press in March 1944 in the United Kingdom. The book was subsequently rejected by three publishers in the United States, and it was only after economist Aaron Director spoke to friends at the University of Chicago that the book was published in the U.S by the University of Chicago Press on September 18, 1944.[9][10] The American publisher’s expectation was that the book would sell between 900 and 3,000 copies. But the initial printing run of 2,000 copies was quickly sold out, and 30,000 copies were sold within six months. In 2007, the University of Chicago Press estimated that more than 350,000 copies had been sold.[11]

A 20-page version of the book was then published in the April 1945 issue of Reader’s Digest,[12] with a press run of several million copies. A 95-page abridged version was also published in 1945 and 1946.[13] In February 1945, a picture-book version was published in Look magazine, later made into a pamphlet and distributed by General Motors.[14] The book has been translated into approximately 20 languages and is dedicated “To the socialists of all parties“. The introduction to the 50th anniversary edition is written by Milton Friedman (another recipient of the Nobel Prize in Economics 1976).

In 2007, the University of Chicago Press issued a “Definitive Edition”, Volume 2 in the Collected Works of F. A. Hayek series. In June 2010, the book achieved new popularity by rising to the top of the bestseller list following extended coverage of the book on The Glenn Beck Program. Since that date, it has sold another 250,000 copies in its print and digital editions.


Hayek argues that Western democracies, including the United Kingdom and the United States, have “progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past”.[15] Society has mistakenly tried to ensure continuing prosperity by centralized planning, which inevitably leads to totalitarianism. “We have in effect undertaken to dispense with the forces which produced unforeseen results and to replace the impersonal and anonymous mechanism of the market by collective and ‘conscious’ direction of all social forces to deliberately chosen goals.[16] Socialism, while presented as a means of assuring equality, does so through “restraint and servitude“, while “democracy seeks equality in liberty“.[17] Planning, because it is coercive, is an inferior method of regulation, while the competition of a free market is superior “because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority”.[18]

Centralized planning is inherently undemocratic in Hayek’s view, because it requires “that the will of a small minority be imposed upon the people”.[19] The power of these minorities to act by taking money or property in pursuit of centralized goals, destroys the Rule of Law and individual freedoms.[20] Where there is centralized planning, “the individual would more than ever become a mere means, to be used by the authority in the service of such abstractions as the ‘social welfare‘ or the ‘good of the community‘”.[21] Even the very poor have more personal freedom in an open society than a centrally planned one.[22] “[W]hile the last resort of a competitive economy is the bailiff, the ultimate sanction of a planned economy is the hangman.”[23] Socialism is a hypocritical system, because its professed humanitarian goals can only be put into practice by brutal methods “of which most socialists disapprove”.[24] Such centralized systems also require effective propaganda, so that the people come to believe that the state’s goals are theirs.[25]

Hayek argues that the roots of National Socialism lie in socialism,[26] and then draws parallels to the thought of British leaders:

The increasing veneration for the state, the admiration of power, and of bigness for bigness‘ sake, the enthusiasm for “organization” of everything (we now call it “planning”) and that “inability to leave anything to the simple power of organic growth” … are all scarcely less marked in England now than they were in Germany.[27]

Hayek believed that after World War II, “wisdom in the management of our economic affairs will be even more important than before and that the fate of our civilization will ultimately depend on how we solve the economic problems we shall then face“.[28] The only chance to build a decent world is “to improve the general level of wealth” via the activities of free markets.[29] He saw international organization as involving a further threat to individual freedom.[30] He concluded: “The guiding principle that a policy of freedom for the individual is the only truly progressive policy remains as true today as it was in the nineteenth century.”[31]

The role of government

Although Hayek believed that government intervention in markets would lead to a loss of freedom, he recognized a limited role for government to perform tasks of which free markets were not capable:

The successful use of competition as the principle of social organization precludes certain types of coercive interference with economic life, but it admits of others which sometimes may very considerably assist its work and even requires certain kinds of government action.[32]

While Hayek is opposed to regulations that restrict the freedom to enter a trade, or to buy and sell at any price, or to control quantities, he acknowledges the utility of regulations that restrict legal methods of production, so long as these are applied equally to everyone and not used as an indirect way of controlling prices or quantities, and without forgetting the cost of such restrictions:

To prohibit the use of certain poisonous substances, or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition. The only question here is whether in the particular instance the advantages gained are greater than the social costs they impose.[33]

He notes that there are certain areas, such as the environment, where activities that cause damage to third parties (known to economists as “negative externalities“) cannot effectively be regulated solely by the marketplace:

Nor can certain harmful effects of deforestation, of some methods of farming, or of the smoke and noise of factories, be confined to the owner of the property in question, or to those willing to submit to the damage for an agreed compensation.[34]

The government also has a role in preventing fraud:

Even the most essential prerequisite of its [the market’s] proper functioning, the prevention of fraud and deception (including exploitation of ignorance), provides a great and by no means fully accomplished object of legislative activity.[35]

The government also has a role in creating a safety net:

There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.[36][37]

He concludes: “In no system that could be rationally defended would the state just do nothing.”[35]


Since publication, Hayek has offered a number of clarifications on words that are frequently misinterpreted:



In 2007, the University of Chicago Press estimated that more than 350,000 copies of The Road to Serfdom have been sold.[40] It appears on Martin Seymour-Smith‘s list of the 100 Most Influential Books Ever Written, and it made #1 on Human Events: Top Ten Books Every Republican Congressman Should Read in 2006.[41] It was influential enough to warrant mention during the 1945 British general election, when according to Harold Macmillan, Winston Churchill was “fortified in his apprehensions [of a Labour government] by reading Professor Hayek’s The Road to Serfdom[42] when he warned in an election broadcast in 1945 that a socialist system would “have to fall back on some form of Gestapo“. The Labour leader Clement Attlee responded in his election broadcast by claiming that what Churchill had said was the “second-hand version of the academic views of an Austrian professor, Friedrich August von Hayek”.[43] The Conservative Central Office sacrificed 1.5 tons of their precious paper ration allocated for the 1945 election so that more copies of The Road to Serfdom could be printed, although to no avail, as Labour won a landslide victory.[44]

Political historian Alan Brinkley had this to say about the impact of The Road to Serfdom:[45]

The publication of two books … helped to galvanize the concerns that were beginning to emerge among intellectuals (and many others) about the implications of totalitarianism. One was James Burnham’s The Managerial Revolution … [A second] Friedrich A. Hayek’s The Road to Serfdom … was far more controversial—and influential. Even more than Burnham, Hayek forced into public discourse the question of the compatibility of democracy and statism … In responding to Burnham and Hayek … liberals [in the statist sense of this term as used by some in the United States] were in fact responding to a powerful strain of Jeffersonian anti-statism in American political culture … The result was a subtle but important shift in liberal [i.e. American statist] thinking.


The Road to Serfdom has been the subject of much praise and much criticism. It was placed fourth on the list of the 100 best non-fiction books of the twentieth century[46] compiled by National Review magazine, was ranked #16 in reader selections of the hundred best non-fiction book of the twentieth century administered by Modern Library,[47] and appears on a recommended reading list for the ‘libertarian right’ hosted on the Political Compass test website.[48]

John Maynard Keynes said of it: “In my opinion it is a grand book … Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.”[49] However, Keynes did not think Hayek’s philosophy was of practical use; this was explained later in the same letter, commenting: “What we need therefore, in my opinion, is not a change in our economic programmes, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger ahead is the probable practical failure of the application of your philosophy in the United States.”[50]

George Orwell responded with both praise and criticism, stating, “in the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said too often – at any rate, it is not being said nearly often enough – that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamt of.” Yet he also warned, “[A] return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the state.”[51]

Milton Friedman described The Road to Serfdom as “one of the great books of our time,” and said of it:

I think the Adam Smith role was played in this cycle [i.e. the late twentieth century collapse of socialism in which the idea of free-markets succeeded first, and then special events catalyzed a complete change of socio-political policy in countries around the world] by Friedrich Hayek’s The Road to Serfdom.[45]

Herman Finer, a Fabian socialist, published a rebuttal in his The Road to Reaction in 1946. Hayek called Finer’s book “a specimen of abuse and invective which is probably unique in contemporary academic discussion”.[52]

In his review (collected in The Present as History, 1953) Marxist Paul Sweezy joked that Hayek would have you believe that if there was an over-production of baby carriages, the central planners would then order the population to have more babies instead of simply warehousing the temporary excess of carriages and decreasing production for next year. The cybernetic arguments of Stafford Beer in his 1973 CBC Massey Lectures, Designing Freedom [53] – that intelligent adaptive planning can increase freedom – are of interest in this regard, as is the technical work of Herbert A. Simon and Albert Ando on the dynamics of hierarchical nearly decomposable systems in economics – namely, that everything in such a system is not tightly coupled to everything else.[54]

Mises Institute libertarian/anarcho-capitalist economist Walter Block has observed critically that while The Road to Serfdom makes a strong case against centrally planned economies, it appears only lukewarm in its support of a free market system and laissez-faire capitalism, with Hayek even going so far as to say that “probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all the principle of laissez-faire capitalism”. In the book, Hayek writes that the government has a role to play in the economy through the monetary system (a view that he later withdrew),[55] work-hours regulation, social welfare, and institutions for the flow of proper information. Through analysis of this and many other of Hayek’s works, Block asserts that: “in making the case against socialism, Hayek was led into making all sort of compromises with what otherwise appeared to be his own philosophical perspective – so much so, that if a system was erected on the basis of them, it would not differ too sharply from what this author explicitly opposed”.[56]


The ideas advocated in The Road to Serfdom have been criticized by many academics.

Jeffrey Sachs argues that empirical evidence suggests social-welfare states, with high rates of taxation and social outlays, outperform the comparatively free-market economies.[57] William Easterly wrote a rebuttal[58] and Sachs wrote a counter-rebuttal.[59]

Gordon Tullock has argued Hayek’s analysis incorrectly predicted governments in much of Europe in the late 20th century would descend into totalitarianism. He uses Sweden, in which the government at that time controlled 63 percent of GNP, as an example to support his argument that the basic problem with The Road to Serfdom is “that it offered predictions which turned out to be false. The steady advance of government in places such as Sweden has not led to any loss of non-economic freedoms.” While criticizing Hayek, Tullock still praises the classical liberal notion of economic freedom, saying, “Arguments for political freedom are strong, as are the arguments for economic freedom. We needn’t make one set of arguments depend on the other.”[60] However, according to Robert Skidelsky, Hayek “safeguarded himself from such retrospective refutation”. Skidelsky argues that Hayek’s argument was contingent, and that, “By the 1970s there was some evidence of the slippery slope … and then there was Thatcher. Hayek’s warning played a critical part in her determination to ‘roll back the state.'”[61]

Economic sociologist Karl Polanyi made a case diametrically opposed to Hayek, arguing that unfettered markets had undermined the social order and that economic breakdown had paved the way for the emergence of dictatorship.[62]

Barbara Wootton wrote Freedom under Planning[63] after reading an early copy of The Road to Serfdom, provided to her by Hayek. In the introduction to her book, Wootton mentioned The Road to Serfdom and claimed that “Much of what I have written is devoted to criticism of the views put forward by Professor Hayek in this and other books.”[64] The central argument made in Freedom under Planning is that “there is nothing in the conscious planning of economic priorities which is inherently incompatible with the freedoms which mean most to the contemporary Englishman or American. Civil liberties are quite unaffected. We can, if we wish, deliberately plan so as to give the fullest possible scope for the pursuit by individuals and social groups of cultural ends which are in no way state-determined.”[65] Wootton criticizes Hayek for claiming that planning must lead to oppression, when, in her view, that is merely one possibility among many. She argues that “there seems hardly better case for taking for granted that planning will bring the worst to the top than for the opposite assumption that the seats of office will be filled with angels”.[66] Thus, Wootton acknowledges the possibility that planning may exist alongside tyranny, but claims that it is equally possible to combine planning with freedom. She concludes that “A happy and fruitful marriage between freedom and planning can, in short, be arranged.”[67] However, Frank Knight, founder of the Chicago school of economics, disputes the claim that Freedom under Planning contradicts The Road to Serfdom. He wrote in a scholarly review of the Wootton book: “Let me repeat that the Wootton book is in no logical sense an answer to The Road to Serfdom, whatever may be thought of the cogency of Hayek’s argument, or the soundness of his position.”[68]

Eric Zencey wrote that the free market economy Hayek advocated is designed for an infinite planet, and when it runs into physical limits (as any growing system must), the result is a need for centralized planning to mediate the problematic interface of economy and nature. “Planning is planning, whether it’s done to minimize poverty and injustice, as socialists were advocating then, or to preserve the minimum flow of ecosystem services that civilization requires, as we are finding increasingly necessary today.”[69]

See also


The Road to Serfdom. University of Chicago Press. 1944. Paul Ormerod (16 December 2006). “The fading of Friedman”. Prospect. Retrieved 26 December 2010. “Bestsellers in Books”. Retrieved 10 December 2010. On 9 June 2010, the book became the #1 book sold at, achieving best seller status. Ebenstein 2003:107Friedrich Hayek: A Biography. University of Chicago Press. 2003. p. 116. ISBN9780226181509. Ebeling, Richard M. (May 1999). “Friedrich A. Hayek: A Centenary Appreciation”. The Freeman. 49 (5). Archived from the original on 15 April 2013. Ebenstein 2003:128Hayek & Caldwell 2007:1 “Aaron Director, Founder of the field of Law and Economics”. Retrieved 4 September 2019. “The Publication History of The Road to Serfdom by F. A. Hayek”. Retrieved 4 September 2019. Hayek & Caldwell 2007:1OCLC76656715OCLC802584460, 13355651“The Road to Serfdom, by F. A. Hayek – why the continual expansion of the state endangers liberty”. 9 July 2006. ISBN978-1500345600. Hayek 1994:16 Hayek 1994:24 Hayek 1994:29 Hayek 1994:41 Hayek 1994:77 Hayek 1994:80–96 Hayek 1994:106 Hayek 1994:115 Hayek 1994:139 Hayek 1994:191 Hayek 1994:168 Hayek 1994:1183–198 Hayek 1994:200 Hayek 1994:128 Hayek 1994:230 Hayek 1994:240–260 Hayek 1994:262 Hayek 1994:42 Hayek 1994:43 Hayek 1994:44 Hayek 1994:45 “Hayek on Social Insurance”. The Washington Post. Free to Die By PAUL KRUGMAN, New York Times, 15 September 2011 Hayek & Caldwell 2007:54–55 From the preface to the 1976 edition. Hayek & Caldwell 2007:45 From the foreword to the 1956 American paperback edition. Hayek & Caldwell 2007:1“Top 10 Books Every Republican Congressman Should Read”. Human Events. Townhall Media. 21 November 2006. Harold Macmillan (1969). Tides of Fortune, 1945–1955. Harper & Row. p. 32. ASINB0014BRAYS. “Hayek, life and times”. Retrieved 14 May 2007. David Willetts; Richard Forsdyke (1999). After the Landslide: Learning the Lessons of 1906 and 1945 (PDF) (PDF). Centre for Policy Studies. p. 59. “Quotes on Hayek”. “NR’s List of the 100 Best Non-Fiction Books of the Century”. National Review. Archived from the original on 17 March 2011. “100 list of the 100 best non-fiction books by Modern Library”. Random House. Archived from the original on 6 March 2012. Retrieved 23 June 2012. Compass, The Political. “The Political Compass”. Retrieved 30 June 2016. Thomas W. Hazlett (2002). “The Road from Serfdom – Forseeing the Fall F.A. Hayek interviewed by Thomas W. Hazlett”. Reason magazine. No. July 1992. Archived from the original on 3 February 2005. Retrieved 23 June 2012. Kenneth R. Hoover (2003). Economics as Ideology. Rowman and Littlefield Publishers. p. 152. ISBN0-7425-3113-9. “Review of the Road to Serfdom by F. A. Hayek, etc”. As I Please, 1943–1945: The Collected Essays, Journalism & Letters. 3. George H. Nash (3 April 2004). “Hayek and the American Conservative Movement” (PDF). Indianapolis. “The 1973 CBC Massey Lectures, “Designing Freedom””. See (full references on Herbert A. Simon entry) Simon’s papers in his collected Models of Bounded Rationality, a qualitative discussion in his Sciences of the Artificial, and a full presentation of the mathematical theory by P.J. Courtois in his Decomposability: queueing and computer system applications (Academic Press, 1977). The papers in the section “The Structure of Causal Systems” of Vol. 3 of Models of Bounded Rationality (MIT Press, 1997) provide a summary and review of Simon’s work in this area. Friedrich August von Hayek (1990). The Denationalization of Money – The Argument Refined – An Analysis of the Theory and Practice of Concurrent Currencies (PDF). The Institute Of Economic Affairs. ISBN9781610165204. Block, Walter (1996). “Hayek’s Road to Serfdom” (PDF). Journal of Libertarian Studies. Center for Libertarian Studies. 12 (2): 339–365. Retrieved 17 February 2010. Jeffrey Sachs (October 2006). “The Social Welfare State, beyond Ideology”. Scientific American. William Easterly (15 November 2006). “Dismal Science. The Wall Street Journal. Greg Mankiw (27 November 2006). “Why Hayek Was Wrong: Sachs Responds to Easterly”. Greg Mankiw’s Blog – Random Observations for Students of Economics. Walker, Michael A., ed. (5–8 October 1986). “Freedom, Democracy, and Economic Welfare”. Freedom Democracy and Economic Welfare. Proc. of an International Symposium on Economic, Political, and Civil Freedom. Napa Valley: The Fraser Institute. p. 61. Archived from the original on 10 March 2012. Retrieved 12 April 2010. Skidelsky, Robert (2006). Feser, Edward (ed.). The Cambridge Companion to Hayek. Cambridge University Press. pp. 82–110. ISBN9781139827584. Karl Polanyi; Joseph E. Stiglitz (1944). The Great Transformation: The Political and Economic Origins of Our Time. Fred L. Block. Beacon Press. ISBN9780807056431. Chester I. Barnard (January 1946). “Freedom under planning”. Southern Economic Journal. Southern Economic Association. 12 (3): 290–300. doi:10.2307/1052278. JSTOR1052278. Wootton 1945, pp. 5. Wootton 1945, pp. 158. Wootton 1945, pp. 163. Wootton 1945, pp. 159. Knight, Frank (1946). “Freedom Under Planning”. Journal of Political Economy. 54 (5): 451–454. doi:10.1086/256402.

  1. “The Other Road to Serfdom”. The Daily Kos. 20 April 2010.


Further reading

Keynesian Economics Rebalancing Trade

In the public interest. John Maynard Keynes is the reason we have a social welfare system as he argued for government intervention as it was common sense that a government inject funds into an economy, particularly during downturns. The safety net was to ensure that people were not begging on the street and had income to spend which also created stimulus. In-fact the welfare state is an excellent stabiliser of an economy given Reserve Banks (Central Banks) affecting growth and recession through changes to economic levers (interest rates, bonds).

It is noteworthy that Keynes came from a loving family. This is important in formulating what he realised was important. The social fabric.

Pauperising the public through government spending cuts across the board and specifically in welfare programs and then cutting taxes for those in upper income brackets is not a stimulus measure but a reward for donations/deals which creates distortions in the economy. Moreover, the so called asset recycling (without public referendum or even yields) transfers power to the private sector as the public has no say over this asset. this is particularly noteworthy in large infrastructure/utility assets whereby there has been cross subsidisation of essential services.

Privatisation is more costly as the asset attracts users pay where as it was free to the public when government owned. The myth of government inefficiency and incompetence has been propaganda, in my view, to promote the argument that the private sector is more efficient. The private sector will minimise costs, inclusive of wages (as a cost of production) as it seeks to maximise profit. The social costs rise in this model. Pump priming of the economy is contracted. Profits are not necessarily reinvested into the company or the nation state, those profits can go overseas and be invested in other high yield assets or illegal activities.

The nature of self interest and greed rewarded ensures distortions is so-called rational economic decisions that do not have a vested interest in public wellbeing, opinion other than stimulating consumption as the basis of the social contract. The citizen thus becomes a consumer and anyone not consuming is of zero value given cost accounting. This is why welfare is cut as the modus operandi for the private sector is self interest the government modus operandi is re-election (to be seen as accountable to the public). However, the reality is that government/business relations have fused through lobbying, donations and class together with right wing doctrines and economics philosophies (free markets, freedom, libertarianism, neo-conservatism, economic rationalism, deregulation etc.). This ideological mantra is now overlayed over the top of government evaluations of efficiency and budgets. In economics the budget is not supposed to balance as it is expected that governments will spend as this pump primes and helps to influence economic stability. Internally within government today private contractors are replacing internal expertise which was typically local citizens with foreign contractors in many instances (albeit based in Australia Pty Ltd) who gain access to government systems, policies, processes and people. Relationships and control is built around access and design. Thus specific ideologies by certain economists have been used to privatise government rather than guide economic policies to ensure social wellbeing which was why government was invented. John Maynard Keynes demonstrated social awareness, principles and courageous discourse to challenge free markets and social harm. Moreover sophisticated social policy ensured government spending allocations went to those most in need to ensure social stability as the mainstay of a strong economy. Other business model perspectives regard social spending as a waste of public money as it does not yield profits in a narrow free market orientation. The free market is about deregulation not freedom of thought, it is unfetted capitalism which drives to remove any obstacles to profit. The trickle down is the argument but as government privatises there will not be a trickle down and we will see the poverty gap grow, indifference grow and communities based on class who are gated with surveillance rather than the egalitarian society that Australia has experienced as unique in the world.

The social cost is the real cost that will impact economic growth together with the emerging ecological crisis based on human imbalance. Inequality drives to the heart of imbalance and has its roots in family breakdown and gender inequality. These basic foundations are what develop the resiliency in the human race, ideological extremes only serve to exacerbate fundamental conflicts that have not been resolved through dialogue, intelligent problem solving and a real desire for a better future for all. This is the real crisis of consciousness that is occurring. So let’s go to John Maynard Keynes and remember why economics was created in the first place.

An excerpt from below:

During the Great Depression of the 1930s, Keynes spearheaded a revolution in economic thinking, challenging the ideas of neoclassical economics that held that free markets would, in the short to medium term, automatically provide full employment, as long as workers were flexible in their wage demands. He argued that aggregate demand (total spending in the economy) determined the overall level of economic activity, and that inadequate aggregate demand could lead to prolonged periods of high unemployment. Keynes advocated the use of fiscal and monetary policies to mitigate the adverse effects of economic recessions and depressions. He detailed these ideas in his magnum opus, The General Theory of Employment, Interest and Money, published in 1936. In the mid to late-1930s, leading Western economies adopted Keynes’s policy recommendations.

John Maynard Keynes

John Maynard Keynes, 1st Baron Keynes[2] CB FBA (/keɪnz/ KAYNZ; 5 June 1883 – 21 April 1946), was a British economist, whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in mathematics, he built on and greatly refined earlier work on the causes of business cycles, and was one of the most influential economists of the 20th century.[3][4][5][6] Widely considered the founder of modern macroeconomics, his ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots.[7]

During the Great Depression of the 1930s, Keynes spearheaded a revolution in economic thinking, challenging the ideas of neoclassical economics that held that free markets would, in the short to medium term, automatically provide full employment, as long as workers were flexible in their wage demands. He argued that aggregate demand (total spending in the economy) determined the overall level of economic activity, and that inadequate aggregate demand could lead to prolonged periods of high unemployment. Keynes advocated the use of fiscal and monetary policies to mitigate the adverse effects of economic recessions and depressions. He detailed these ideas in his magnum opus, The General Theory of Employment, Interest and Money, published in 1936. In the mid to late-1930s, leading Western economies adopted Keynes’s policy recommendations. Almost all capitalist governments had done so by the end of the two decades following Keynes’s death in 1946. As a leader of the British delegation, Keynes participated in the design of the international economic institutions established after the end of World War II but was overruled by the American delegation on several aspects.

Keynes’s influence started to wane in the 1970s, partly as a result of the stagflation that plagued the Anglo-American economies during that decade, and partly because of criticism of Keynesian policies by Milton Friedman and other monetarists,[8] who disputed the ability of government to favorably regulate the business cycle with fiscal policy.[9] However, the advent of the global financial crisis of 2007–2008 sparked a resurgence in Keynesian thought. Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the crisis by President Barack Obama of the United States, Prime Minister Gordon Brown of the United Kingdom, and other heads of governments.[10]

When Time magazine included Keynes among its Most Important People of the Century in 1999, it stated that “his radical idea that governments should spend money they don’t have may have saved capitalism.”[11] The Economist has described Keynes as “Britain’s most famous 20th-century economist.”[12] In addition to being an economist, Keynes was also a civil servant, a director of the Bank of England, and a part of the Bloomsbury Group of intellectuals.[13]


Early life and education

King’s College, Cambridge. Keynes’s grandmother wrote to him saying that, since he was born in Cambridge, people will expect him to be clever.

John Maynard Keynes was born in Cambridge, Cambridgeshire, England, to an upper-middle-class family. His father, John Neville Keynes, was an economist and a lecturer in moral sciences at the University of Cambridge and his mother Florence Ada Keynes a local social reformer. Keynes was the first born, and was followed by two more children – Margaret Neville Keynes in 1885 and Geoffrey Keynes in 1887. Geoffrey became a surgeon and Margaret married the Nobel Prize-winning physiologist Archibald Hill.

According to the economic historian and biographer Robert Skidelsky, Keynes’s parents were loving and attentive. They remained in the same house throughout their lives, where the children were always welcome to return. Keynes would receive considerable support from his father, including expert coaching to help him pass his scholarship exams and financial help both as a young man and when his assets were nearly wiped out at the onset of Great Depression in 1929. Keynes’s mother made her children’s interests her own, and according to Skidelsky, “because she could grow up with her children, they never outgrew home”.[14]

In January 1889 at the age of five and a half, Keynes started at the kindergarten of the Perse School for Girls for five mornings a week. He quickly showed a talent for arithmetic, but his health was poor leading to several long absences. He was tutored at home by a governess, Beatrice Mackintosh, and his mother. In January 1892, at eight and a half, he started as a day pupil at St Faith’s preparatory school. By 1894, Keynes was top of his class and excelling at mathematics. In 1896, St Faith’s headmaster, Ralph Goodchild, wrote that Keynes was “head and shoulders above all the other boys in the school” and was confident that Keynes could get a scholarship to Eton.[15][16]

In 1897, Keynes won a scholarship to Eton College, where he displayed talent in a wide range of subjects, particularly mathematics, classics and history. At Eton, Keynes experienced the first “love of his life” in Dan Macmillan, older brother of the future Prime Minister Harold Macmillan.[17] Despite his middle-class background, Keynes mixed easily with upper-class pupils.

In 1902 Keynes left Eton for King’s College, Cambridge, after receiving a scholarship for this also to read mathematics. Alfred Marshall begged Keynes to become an economist,[18] although Keynes’s own inclinations drew him towards philosophy – especially the ethical system of G. E. Moore. Keynes joined the Pitt Club[19] and was an active member of the semi-secretive Cambridge Apostles society, a debating club largely reserved for the brightest students. Like many members, Keynes retained a bond to the club after graduating and continued to attend occasional meetings throughout his life. Before leaving Cambridge, Keynes became the President of the Cambridge Union Society and Cambridge University Liberal Club. He was said to be an atheist.[20][21]

In May 1904, he received a first-class BA in mathematics. Aside from a few months spent on holidays with family and friends, Keynes continued to involve himself with the university over the next two years. He took part in debates, further studied philosophy and attended economics lectures informally as a graduate student for one term, which constituted his only formal education in the subject. He took civil service exams in 1906.

The economist Harry Johnson wrote that the optimism imparted by Keynes’s early life is a key to understanding his later thinking.[22] Keynes was always confident he could find a solution to whatever problem he turned his attention to and retained a lasting faith in the ability of government officials to do good.[23] Keynes’s optimism was also cultural, in two senses: he was of the last generation raised by an empire still at the height of its power and was also of the last generation who felt entitled to govern by culture, rather than by expertise. According to Skidelsky, the sense of cultural unity current in Britain from the 19th century to the end of World War I provided a framework with which the well-educated could set various spheres of knowledge in relation to each other and life, enabling them to confidently draw from different fields when addressing practical problems.[14]


In October 1908, Keynes’s Civil Service career began as a clerk in the India Office.[24] He enjoyed his work at first, but by 1908 had become bored and resigned his position to return to Cambridge and work on probability theory, at first privately funded only by two dons at the university – his father and the economist Arthur Pigou.

By 1909 Keynes had published his first professional economics article in The Economic Journal, about the effect of a recent global economic downturn on India.[25] He founded the Political Economy Club, a weekly discussion group. Also in 1909, Keynes accepted a lectureship in economics funded personally by Alfred Marshall. Keynes’s earnings rose further as he began to take on pupils for private tuition.

In 1911 Keynes was made the editor of The Economic Journal. By 1913 he had published his first book, Indian Currency and Finance.[26] He was then appointed to the Royal Commission on Indian Currency and Finance[27] – the same topic as his book – where Keynes showed considerable talent at applying economic theory to practical problems. His written work was published under the name “J M Keynes”, though to his family and friends he was known as Maynard. (His father, John Neville Keynes, was also always known by his middle name).[28]

First World War

The British Government called on Keynes’s expertise during the First World War. While he did not formally re-join the civil service in 1914, Keynes traveled to London at the government’s request a few days before hostilities started. Bankers had been pushing for the suspension of specie payments – the convertibility of banknotes into gold – but with Keynes’s help the Chancellor of the Exchequer (then Lloyd George) was persuaded that this would be a bad idea, as it would hurt the future reputation of the city if payments were suspended before it was necessary.

In January 1915, Keynes took up an official government position at the Treasury. Among his responsibilities were the design of terms of credit between Britain and its continental allies during the war and the acquisition of scarce currencies. According to economist Robert Lekachman, Keynes’s “nerve and mastery became legendary” because of his performance of these duties, as in the case where he managed to assemble – with difficulty – a small supply of Spanish pesetas.

The secretary of the Treasury was delighted to hear Keynes had amassed enough to provide a temporary solution for the British Government. But Keynes did not hand the pesetas over, choosing instead to sell them all to break the market: his boldness paid off, as pesetas then became much less scarce and expensive.[29]

On the introduction of military conscription in 1916, he applied for exemption as a conscientious objector, which was effectively granted conditional upon continuing his government work.

In the 1917 King’s Birthday Honours, Keynes was appointed Companion of the Order of the Bath for his wartime work,[30] and his success led to the appointment that would have a huge effect on Keynes’s life and career; Keynes was appointed financial representative for the Treasury to the 1919 Versailles peace conference. He was also appointed Officer of the Belgian Order of Leopold.[31]

Versailles peace conference

Main article: Heavenly Twins (Sumner and Cunliffe)

Keynes’s colleague, David Lloyd George. Keynes was initially wary of the “Welsh Wizard,” preferring his rival Asquith, but was impressed with Lloyd George at Versailles; this did not prevent Keynes from painting a scathing picture of the then-prime minister in his Economic Consequences of the Peace.

Keynes’s experience at Versailles was influential in shaping his future outlook, yet it was not a successful one. Keynes’s main interest had been in trying to prevent Germany’s compensation payments being set so high it would traumatize innocent German people, damage the nation’s ability to pay and sharply limit her ability to buy exports from other countries – thus hurting not just Germany’s economy but that of the wider world.

Unfortunately for Keynes, conservative powers in the coalition that emerged from the 1918 coupon election were able to ensure that both Keynes himself and the Treasury were largely excluded from formal high-level talks concerning reparations. Their place was taken by the Heavenly Twins – the judge Lord Sumner and the banker Lord Cunliffe whose nickname derived from the “astronomically” high war compensation they wanted to demand from Germany. Keynes was forced to try to exert influence mostly from behind the scenes.

The three principal players at Versailles were Britain’s Lloyd George, France’s Clemenceau and America’s President Wilson.[32] It was only Lloyd George to whom Keynes had much direct access; until the 1918 election he had some sympathy with Keynes’s view but while campaigning had found his speeches were only well received by the public if he promised to harshly punish Germany, and had therefore committed his delegation to extracting high payments.

Lloyd George did, however, win some loyalty from Keynes with his actions at the Paris conference by intervening against the French to ensure the dispatch of much-needed food supplies to German civilians. Clemenceau also pushed for substantial reparations, though not as high as those proposed by the British, while on security grounds, France argued for an even more severe settlement than Britain.

Wilson initially favored relatively lenient treatment of Germany – he feared too harsh conditions could foment the rise of extremism and wanted Germany to be left sufficient capital to pay for imports. To Keynes’s dismay, Lloyd George and Clemenceau were able to pressure Wilson to agree to include pensions in the reparations bill.

Towards the end of the conference, Keynes came up with a plan that he argued would not only help Germany and other impoverished central European powers but also be good for the world economy as a whole. It involved the radical writing down of war debts, which would have had the possible effect of increasing international trade all round, but at the same time thrown the entire cost of European reconstruction on the United States.

Lloyd George agreed it might be acceptable to the British electorate. However, America was against the plan; the US was then the largest creditor, and by this time Wilson had started to believe in the merits of a harsh peace and thought that his country had already made excessive sacrifices. Hence despite his best efforts, the result of the conference was a treaty which disgusted Keynes both on moral and economic grounds and led to his resignation from the Treasury.[33]

In June 1919 he turned down an offer to become chairman of the British Bank of Northern Commerce, a job that promised a salary of £2000 in return for a morning per week of work.

Keynes’s analysis on the predicted damaging effects of the treaty appeared in the highly influential book, The Economic Consequences of the Peace, published in 1919.[34] This work has been described as Keynes’s best book, where he was able to bring all his gifts to bear – his passion as well as his skill as an economist. In addition to economic analysis, the book contained pleas to the reader’s sense of compassion:

I cannot leave this subject as though its just treatment wholly depended either on our pledges or on economic facts. The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable, – abhorrent and detestable, even if it was possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe.

Also present was striking imagery such as “year by year Germany must be kept impoverished and her children starved and crippled” along with bold predictions which were later justified by events:

If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing.

Keynes’s followers assert that his predictions of disaster were borne out when the German economy suffered the hyperinflation of 1923, and again by the collapse of the Weimar Republic and the outbreak of the Second World War. However the historian Ruth Henig claims that “most historians of the Paris peace conference now take the view that, in economic terms, the treaty was not unduly harsh on Germany and that, while obligations and damages were inevitably much stressed in the debates at Paris to satisfy electors reading the daily newspapers, the intention was quietly to give Germany substantial help towards paying her bills, and to meet many of the German objections by amendments to the way the reparations schedule was in practice carried out”.[35][36]

Only a small fraction of reparations was ever paid. In fact, the historian Stephen A. Schuker demonstrates in American ‘Reparations’ to Germany, 1919–33, that the capital inflow from American loans substantially exceeded German out payments so that, on a net basis, Germany received support equal to four times the amount of the post-Second World War Marshall Plan.

Schuker also shows that, in the years after Versailles, Keynes became an informal reparations adviser to the German government, wrote one of the major German reparation notes, and supported the hyperinflation on political grounds. Nevertheless, The Economic Consequences of the Peace gained Keynes international fame, even though it also caused him to be regarded as anti-establishment – it was not until after the outbreak of the Second World War that Keynes was offered a directorship of a major British Bank, or an acceptable offer to return to government with a formal job. However, Keynes was still able to influence government policy making through his network of contacts, his published works and by serving on government committees; this included attending high-level policy meetings as a consultant.[33]

In the 1920s

Keynes argued against a return to the gold standard at parity with pre-war sterling valuation after World War I

Keynes had completed his A Treatise on Probability before the war but published it in 1921.[33] The work was a notable contribution to the philosophical and mathematical underpinnings of probability theory, championing the important view that probabilities were no more or less than truth values intermediate between simple truth and falsity. Keynes developed the first upper-lower probabilistic interval approach to probability in chapters 15 and 17 of this book, as well as having developed the first decision weight approach with his conventional coefficient of risk and weight, c, in chapter 26. In addition to his academic work, the 1920s saw Keynes active as a journalist selling his work internationally and working in London as a financial consultant. In 1924 Keynes wrote an obituary for his former tutor Alfred Marshall which Joseph Schumpeter called “the most brilliant life of a man of science I have ever read.”[37] Marshall’s widow was “entranced” by the memorial, while Lytton Strachey rated it as one of Keynes’s “best works”.[33]

In 1922 Keynes continued to advocate reduction of German reparations with A Revision of the Treaty.[33] He attacked the post-World War I deflation policies with A Tract on Monetary Reform in 1923[33] – a trenchant argument that countries should target stability of domestic prices, avoiding deflation even at the cost of allowing their currency to depreciate. Britain suffered from high unemployment through most of the 1920s, leading Keynes to recommend the depreciation of sterling to boost jobs by making British exports more affordable. From 1924 he was also advocating a fiscal response, where the government could create jobs by spending on public works.[33] During the 1920s Keynes’s pro stimulus views had only limited effect on policy makers and mainstream academic opinion – according to Hyman Minsky one reason was that at this time his theoretical justification was “muddled”.[25] The Tract had also called for an end to the gold standard. Keynes advised it was no longer a net benefit for countries such as Britain to participate in the gold standard, as it ran counter to the need for domestic policy autonomy. It could force countries to pursue deflationary policies at exactly the time when expansionary measures were called for to address rising unemployment. The Treasury and Bank of England were still in favor of the gold standard and in 1925 they were able to convince the then Chancellor Winston Churchill to re-establish it, which had a depressing effect on British industry. Keynes responded by writing The Economic Consequences of Mr. Churchill and continued to argue against the gold standard until Britain finally abandoned it in 1931.[33]

During the Great Depression

The Great Depression with its periods of worldwide economic hardship formed the backdrop against which the Keynesian Revolution took place. The image is Florence Owens Thompson by photographer Dorothea Lange taken in March 1936.

Wikiquote has quotations related to: The General Theory of Employment, Interest and Money

Keynes had begun a theoretical work to examine the relationship between unemployment, money, and prices back in the 1920s.[38] The work, Treatise on Money, was published in 1930 in two volumes. A central idea of the work was that if the amount of money being saved exceeds the amount being invested – which can happen if interest rates are too high – then unemployment will rise. This is in part a result of people not wanting to spend too high a proportion of what employers payout, making it difficult, in aggregate, for employers to make a profit. Another key theme of the book is the unreliability of financial indices for representing an accurate – or indeed meaningful – an indication of general shifts in purchasing power of currencies over time. In particular, he criticized the justification of Britain’s return to the gold standard in 1925 at pre-war valuation by reference to the wholesale price index. He argued that the index understated the effects of changes in the costs of services and labor.

Keynes was deeply critical of the British government’s austerity measures during the Great Depression. He believed that budget deficits during recessions were a good thing and a natural product of an economic slump. He wrote, “For Government borrowing of one kind or another is nature’s remedy, so to speak, for preventing business losses from being, in so severe a slump as the present one, so great as to bring production altogether to a standstill.”[39]

At the height of the Great Depression, in 1933, Keynes published The Means to Prosperity, which contained specific policy recommendations for tackling unemployment in a global recession, chiefly counter-cyclical public spending. The Means to Prosperity contains one of the first mentions of the multiplier effect. While it was addressed chiefly to the British Government, it also contained advice for other nations affected by the global recession. A copy was sent to the newly elected President Franklin D. Roosevelt and other world leaders. The work was taken seriously by both the American and British governments, and according to Robert Skidelsky, helped pave the way for the later acceptance of Keynesian ideas, though it had little immediate practical influence. In the 1933 London Economic Conference opinions remained too diverse for a unified course of action to be agreed upon.[40]

Booknotes interview with Robert Skidelsky on John Maynard Keynes: Fighting for Freedom, 1937–1946, 28 April 2002, C-SPAN

Keynesian-like policies were adopted by Sweden and Germany, but Sweden was seen as too small to command much attention, and Keynes was deliberately silent about the successful efforts of Germany as he was dismayed by their imperialist ambitions and their treatment of Jews.[40] Apart from Great Britain, Keynes’s attention was primarily focused on the United States. In 1931, he received considerable support for his views on counter-cyclical public spending in Chicago, then America’s foremost center for economic views alternative to the mainstream.[25][40] However, orthodox economic opinion remained generally hostile regarding fiscal intervention to mitigate the depression, until just before the outbreak of war.[25] In late 1933 Keynes was persuaded by Felix Frankfurter to address President Roosevelt directly, which he did by letters and face to face in 1934, after which the two men spoke highly of each other.[40] However, according to Skidelsky, the consensus is that Keynes’s efforts only began to have a more than marginal influence on US economic policy after 1939.[40]

Keynes’s magnum opus, The General Theory of Employment, Interest and Money was published in 1936. It was researched and indexed by one of Keynes’s favorite students, later the economist David Bensusan-Butt.[41] The work served as a theoretical justification for the interventionist policies Keynes favoured for tackling a recession. The General Theory challenged the earlier neoclassical economic paradigm, which had held that provided it was unfettered by government interference, the market would naturally establish full employment equilibrium. In doing so Keynes was partly setting himself against his former teachers Marshall and Pigou. Keynes believed the classical theory was a “special case” that applied only to the particular conditions present in the 19th century, his theory being the general one. Classical economists had believed in Say’s law, which, simply put, states that “supply creates its demand“, and that in a free market workers would always be willing to lower their wages to a level where employers could profitably offer them jobs. An innovation from Keynes was the concept of price stickiness – the recognition that in reality workers often refuse to lower their wage demands even in cases where a classical economist might argue it is rational for them to do so. Due in part to price stickiness, it was established that the interaction of “aggregate demand” and “aggregate supply” may lead to stable unemployment equilibria – and in those cases, it is the state, not the market, that economies must depend on for their salvation.

Caricature by David Low, 1934

The General Theory argues that demand, not supply, is the key variable governing the overall level of economic activity. Aggregate demand, which equals total un-hoarded income in a society, is defined by the sum of consumption and investment. In a state of unemployment and unused production capacity, one can only enhance employment and total income by first increasing expenditures for either consumption or investment. Without government intervention to increase expenditure, an economy can remain trapped in a low employment equilibrium – the demonstration of this possibility has been described as the revolutionary formal achievement of the work.[42] The book advocated activist economic policy by government to stimulate demand in times of high unemployment, for example by spending on public works. “Let us be up and doing, using our idle resources to increase our wealth,” he wrote in 1928. “With men and plants unemployed, it is ridiculous to say that we cannot afford these new developments. It is precise with these plants and these men that we shall afford them.”[39]

The General Theory is often viewed as the foundation of modern macroeconomics. Few senior American economists agreed with Keynes through most of the 1930s.[43] Yet his ideas were soon to achieve widespread acceptance, with eminent American professors such as Alvin Hansen agreeing with the General Theory before the outbreak of World War II.[44][45][46]

Keynes himself had only limited participation in the theoretical debates that followed the publication of the General Theory as he suffered a heart attack in 1937, requiring him to take long periods of rest. Among others, Hyman Minsky and Post-Keynesian economists have argued that as result, Keynes’s ideas were diluted by those keen to compromise with classical economists or to render his concepts with mathematical models like the IS–LM model (which, they argue, distort Keynes’s ideas).[25][46] Keynes began to recover in 1939, but for the rest of his life his professional energies were largely directed towards the practical side of economics – the problems of ensuring optimum allocation of resources for the war efforts, post-war negotiations with America, and the new international financial order that was presented at the Bretton Woods Conference.

In the General Theory and later, Keynes responded to the socialists who argued, especially during the Great Depression of the 1930s, that capitalism caused war. He argued that if capitalism were managed domestically and internationally (with coordinated international Keynesian policies, an international monetary system that didn’t put the interests of countries against each other, and a high degree of freedom of trade), then this system of managed capitalism could promote peace rather than conflict between countries. His plans during World War II for post-war international economic institutions and policies (which contributed to the creation at Bretton Woods of the International Monetary Fund and the World Bank, and later to the creation of the General Agreement on Tariffs and Trade and eventually the World Trade Organization) were aimed to give effect to this vision.[47]

Although Keynes has been widely criticized – especially by members of the Chicago school of economics – for advocating irresponsible government spending financed by borrowing, in fact he was a firm believer in balanced budgets and regarded the proposals for programs of public works during the Great Depression as an exceptional measure to meet the needs of exceptional circumstances.[48]

Second World War

Keynes (right) and the US representative Harry Dexter White at the inaugural meeting of the International Monetary Fund‘s Board of Governors in Savannah, Georgia in 1946

During the Second World War, Keynes argued in How to Pay for the War, published in 1940, that the war effort should be largely financed by higher taxation and especially by compulsory saving (essentially workers lending money to the government), rather than deficit spending, in order to avoid inflation. Compulsory saving would act to dampen domestic demand, assist in channeling additional output towards the war efforts, would be fairer than punitive taxation and would have the advantage of helping to avoid a post-war slump by boosting demand once workers were allowed to withdraw their savings. In September 1941 he was proposed to fill a vacancy in the Court of Directors of the Bank of England, and subsequently carried out a full term from the following April.[49] In June 1942, Keynes was rewarded for his service with a hereditary peerage in the King’s Birthday Honours.[50] On 7 July his title was gazetted as “Baron Keynes, of Tilton, in the County of Sussex” and he took his seat in the House of Lords on the Liberal Party benches.[51]

As the Allied victory began to look certain, Keynes was heavily involved, as leader of the British delegation and chairman of the World Bank commission, in the mid-1944 negotiations that established the Bretton Woods system. The Keynes plan, concerning an international clearing-union, argued for a radical system for the management of currencies. He proposed the creation of a common world unit of currency, the bancor, and new global institutions – a world central bank and the International Clearing Union. Keynes envisaged these institutions managing an international trade and payments system with strong incentives for countries to avoid substantial trade deficits or surpluses.[52] The USA’s greater negotiating strength, however, meant that the outcomes accorded more closely to the more conservative plans of Harry Dexter White. According to US economist J. Bradford DeLong, on almost every point where he was overruled by the Americans, Keynes was later proved correct by events.[53]

The two new institutions, later known as the World Bank and the International Monetary Fund (IMF), were founded as a compromise that primarily reflected the American vision. There would be no incentives for states to avoid a large trade surplus; instead, the burden for correcting a trade imbalance would continue to fall only on the deficit countries, which Keynes had argued were least able to address the problem without inflicting economic hardship on their populations. Yet, Keynes was still pleased when accepting the final agreement, saying that if the institutions stayed true to their founding principles, “the brotherhood of man will have become more than a phrase.”[54][55]


After the war, Keynes continued to represent the United Kingdom in international negotiations despite his deteriorating health. He succeeded in obtaining preferential terms from the United States for new and outstanding debts to facilitate the rebuilding of the British economy.[56]

Just before his death in 1946, Keynes told Henry Clay, a professor of social economics and advisor to the Bank of England,[57] of his hopes that Adam Smith‘s “invisible hand” could help Britain out of the economic hole it was in: “I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”[58]


Prime Minister Clement Attlee with King George VI after Attlee won the 1945 election

Keynesian ascendancy 1939–79

Main article: Keynesian Revolution

From the end of the Great Depression to the mid-1970s, Keynes provided the main inspiration for economic policymakers in Europe, America and much of the rest of the world.[46] While economists and policymakers had become increasingly won over to Keynes’s way of thinking in the mid and late 1930s, it was only after the outbreak of World War II that governments started to borrow money for spending on a scale sufficient to eliminate unemployment. According to the economist John Kenneth Galbraith (then a US government official charged with controlling inflation), in the rebound of the economy from wartime spending, “one could not have had a better demonstration of the Keynesian ideas.”[59]

The Keynesian Revolution was associated with the rise of modern liberalism in the West during the post-war period.[60] Keynesian ideas became so popular that some scholars point to Keynes as representing the ideals of modern liberalism, as Adam Smith represented the ideals of classical liberalism.[61] After the war, Winston Churchill attempted to check the rise of Keynesian policy-making in the United Kingdom and used rhetoric critical of the mixed economy in his 1945 election campaign. Despite his popularity as a war hero, Churchill suffered a landslide defeat to Clement Attlee whose government’s economic policy continued to be influenced by Keynes’s ideas.[59]

Neo-Keynesian economics

Main article: Neo-Keynesian economics

Neo-KeynesianIS–LM model is used to analyse the effect of demand shocks on the economy

In the late 1930s and 1940s, economists (notably John Hicks, Franco Modigliani, and Paul Samuelson) attempted to interpret and formalise Keynes’s writings in terms of formal mathematical models. In what had become known as the neoclassical synthesis, they combined Keynesian analysis with neoclassical economics to produce neo-Keynesian economics, which came to dominate mainstream macroeconomic thought for the next 40 years.

By the 1950s, Keynesian policies were adopted by almost the entire developed world and similar measures for a mixed economy were used by many developing nations. By then, Keynes’s views on the economy had become mainstream in the world’s universities. Throughout the 1950s and 1960s, the developed and emerging free capitalist economies enjoyed exceptionally high growth and low unemployment.[62][63] Professor Gordon Fletcher has written that the 1950s and 1960s, when Keynes’s influence was at its peak, appear in retrospect as a golden age of capitalism.[46]

In late 1965 Time magazine ran a cover article with a title comment from Milton Friedman (later echoed by U.S. President Richard Nixon), “We are all Keynesians now“. The article described the exceptionally favourable economic conditions then prevailing, and reported that “Washington’s economic managers scaled these heights by their adherence to Keynes’s central theme: the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government.” The article also states that Keynes was one of the three most important economists who ever lived, and that his General Theory was more influential than the magna opera of other famous economists, like Adam Smith‘s The Wealth of Nations.[64]

Keynesian economics out of favour 1979–2007

Main article: Post-war displacement of Keynesianism

Keynesian economics were officially discarded by the British Government in 1979, but forces had begun to gather against Keynes’s ideas over 30 years earlier. Friedrich Hayek had formed the Mont Pelerin Society in 1947, with the explicit intention of nurturing intellectual currents to one day displace Keynesianism and other similar influences. Its members included the Austrian School economist Ludwig von Mises along with the then young Milton Friedman. Initially the society had little impact on the wider world – according to Hayek it was as if Keynes had been raised to sainthood after his death and that people refused to allow his work to be questioned.[65][66] Friedman however began to emerge as a formidable critic of Keynesian economics from the mid-1950s, and especially after his 1963 publication of A Monetary History of the United States.

On the practical side of economic life, “big government” had appeared to be firmly entrenched in the 1950s, but the balance began to shift towards the power of private interests in the 1960s. Keynes had written against the folly of allowing “decadent and selfish” speculators and financiers the kind of influence they had enjoyed after World War I. For two decades after World War II the public opinion was strongly against private speculators, the disparaging label “Gnomes of Zürich” being typical of how they were described during this period. International speculation was severely restricted by the capital controls in place after Bretton Woods. According to the journalists Larry Elliott and Dan Atkinson, 1968 was the pivotal year when power shifted in favour of private agents such as currency speculators. As the key 1968 event Elliott and Atkinson picked out America’s suspension of the conversion of the dollar into gold except on request of foreign governments, which they identified as the beginning of the breakdown of the Bretton Woods system.[67]

Criticisms of Keynes’s ideas had begun to gain significant acceptance by the early 1970s, as they were then able to make a credible case that Keynesian models no longer reflected economic reality. Keynes himself included few formulas and no explicit mathematical models in his General Theory. For economists such as Hyman Minsky, Keynes’s limited use of mathematics was partly the result of his scepticism about whether phenomena as inherently uncertain as economic activity could ever be adequately captured by mathematical models. Nevertheless, many models were developed by Keynesian economists, with a famous example being the Phillips curve which predicted an inverse relationship between unemployment and inflation. It implied that unemployment could be reduced by government stimulus with a calculable cost to inflation. In 1968, Milton Friedman published a paper arguing that the fixed relationship implied by the Philips curve did not exist.[68] Friedman suggested that sustained Keynesian policies could lead to both unemployment and inflation rising at once – a phenomenon that soon became known as stagflation. In the early 1970s stagflation appeared in both the US and Britain just as Friedman had predicted, with economic conditions deteriorating further after the 1973 oil crisis. Aided by the prestige gained from his successful forecast, Friedman led increasingly successful criticisms against the Keynesian consensus, convincing not only academics and politicians but also much of the general public with his radio and television broadcasts. The academic credibility of Keynesian economics was further undermined by additional criticism from other monetarists trained in the Chicago school of economics, by the Lucas critique and by criticisms from Hayek’s Austrian School.[46] So successful were these criticisms that by 1980 Robert Lucas claimed economists would often take offence if described as Keynesians.[69]

Keynesian principles fared increasingly poorly on the practical side of economics – by 1979 they had been displaced by monetarism as the primary influence on Anglo-American economic policy.[46] However, many officials on both sides of the Atlantic retained a preference for Keynes, and in 1984 the Federal Reserve officially discarded monetarism, after which Keynesian principles made a partial comeback as an influence on policy making.[70] Not all academics accepted the criticism against Keynes – Minsky has argued that Keynesian economics had been debased by excessive mixing with neoclassical ideas from the 1950s, and that it was unfortunate that this branch of economics had even continued to be called “Keynesian”.[25] Writing in The American Prospect, Robert Kuttner argued it was not so much excessive Keynesian activism that caused the economic problems of the 1970s but the breakdown of the Bretton Woods system of capital controls, which allowed capital flight from regulated economies into unregulated economies in a fashion similar to Gresham’s law phenomenon (where weak currencies undermine strong currencies).[71] Historian Peter Pugh has stated that a key cause of the economic problems afflicting America in the 1970s was the refusal to raise taxes to finance the Vietnam War, which was against Keynesian advice.[72]

A more typical response was to accept some elements of the criticisms while refining Keynesian economic theories to defend them against arguments that would invalidate the whole Keynesian framework – the resulting body of work largely composing New Keynesian economics. In 1992 Alan Blinder wrote about a “Keynesian Restoration”, as work based on Keynes’s ideas had to some extent become fashionable once again in academia, though in the mainstream it was highly synthesised with monetarism and other neoclassical thinking. In the world of policy making, free market influences broadly sympathetic to monetarism have remained very strong at government level – in powerful normative institutions like the World Bank, the IMF and US Treasury, and in prominent opinion-forming media such as the Financial Times and The Economist.[73]

Keynesian resurgence 2008–09

Main article: 2008–09 Keynesian resurgence

The economist Manmohan Singh, the then prime minister of India, spoke strongly in favour of Keynesian fiscal stimulus at the 2008 G-20 Washington summit.[74]

The global financial crisis of 2007–08 led to public skepticism about the free market consensus even from some on the economic right. In March 2008, Martin Wolf, chief economics commentator at the Financial Times, announced the death of the dream of global free-market capitalism.[75] In the same month macroeconomist James K. Galbraith used the 25th Annual Milton Friedman Distinguished Lecture to launch a sweeping attack against the consensus for monetarist economics and argued that Keynesian economics were far more relevant for tackling the emerging crises.[76] Economist Robert J. Shiller had begun advocating robust government intervention to tackle the financial crises, specifically citing Keynes.[77][78][79] Nobel laureate Paul Krugman also actively argued the case for vigorous Keynesian intervention in the economy in his columns for The New York Times.[80][81][82] Other prominent economic commentators who have argued for Keynesian government intervention to mitigate the financial crisis include George Akerlof,[83] J. Bradford DeLong,[84] Robert Reich,[85] and Joseph Stiglitz.[86] Newspapers and other media have also cited work relating to Keynes by Hyman Minsky,[25] Robert Skidelsky,[14] Donald Markwell[87] and Axel Leijonhufvud.[88]

A series of major bailouts were pursued during the financial crisis, starting on 7 September with the announcement that the U.S. Government was to nationalise the two government-sponsored enterprises which oversaw most of the U.S. subprime mortgage market – Fannie Mae and Freddie Mac. In October, Alistair Darling, the British Chancellor of the Exchequer, referred to Keynes as he announced plans for substantial fiscal stimulus to head off the worst effects of recession, in accordance with Keynesian economic thought.[89][90] Similar policies have been adopted by other governments worldwide.[91][92] This is in stark contrast to the action imposed on Indonesia during the Asian financial crisis of 1997, when it was forced by the IMF to close 16 banks at the same time, prompting a bank run.[93] Much of the post-crisis discussion reflected Keynes’s advocacy of international coordination of fiscal or monetary stimulus, and of international economic institutions such as the IMF and the World Bank, which many had argued should be reformed as a “new Bretton Woods”, and should have been even before the crises broke out.[94] The IMF and United Nations economists advocated a coordinated international approach to fiscal stimulus.[95] Donald Markwell argued that in the absence of such an international approach, there would be a risk of worsening international relations and possibly even world war arising from economic factors similar to those present during the depression of the 1930s.[87]

By the end of December 2008, the Financial Times reported that “the sudden resurgence of Keynesian policy is a stunning reversal of the orthodoxy of the past several decades.”[96] In December 2008, Paul Krugman released his book The Return of Depression Economics and the Crisis of 2008, arguing that economic conditions similar to those that existed during the earlier part of the 20th century had returned, making Keynesian policy prescriptions more relevant than ever. In February 2009 Robert J. Shiller and George Akerlof published Animal Spirits, a book where they argue the current US stimulus package is too small as it does not take into account Keynes’s insight on the importance of confidence and expectations in determining the future behaviour of businesspeople and other economic agents.

In the March 2009 speech entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People’s Bank of China, came out in favour of Keynes’s idea of a centrally managed global reserve currency. Zhou argued that it was unfortunate that part of the reason for the Bretton Woods system breaking down was the failure to adopt Keynes’s bancor. Zhou proposed a gradual move towards increased use of IMF special drawing rights (SDRs).[97][98] Although Zhou’s ideas had not been broadly accepted, leaders meeting in April at the 2009 G-20 London summit agreed to allow $250 billion of special drawing rights to be created by the IMF, to be distributed globally. Stimulus plans were credited for contributing to a better than expected economic outlook by both the OECD[99] and the IMF,[100][101] in reports published in June and July 2009. Both organisations warned global leaders that recovery was likely to be slow, so counter recessionary measures ought not be rolled back too early.

While the need for stimulus measures was broadly accepted among policy makers, there had been much debate over how to fund the spending. Some leaders and institutions, such as Angela Merkel[102] and the European Central Bank,[103] expressed concern over the potential impact on inflation, national debt and the risk that a too large stimulus will create an unsustainable recovery.

Among professional economists the revival of Keynesian economics has been even more divisive. Although many economists, such as George Akerlof, Paul Krugman, Robert Shiller, and Joseph Stiglitz, supported Keynesian stimulus, others did not believe higher government spending would help the United States economy recover from the Great Recession. Some economists, such as Robert Lucas, questioned the theoretical basis for stimulus packages.[104] Others, like Robert Barro and Gary Becker, say that empirical evidence for beneficial effects from Keynesian stimulus does not exist.[105] However, there is a growing academic literature that shows that fiscal expansion helps an economy grow in the near term, and that certain types of fiscal stimulus are particularly effective.[106][107]

Reception and views


Keynes’s economic thinking only began to achieve close to universal acceptance in the last few years of his life. On a personal level, Keynes’s charm was such that he was generally well received wherever he went – even those who found themselves on the wrong side of his occasionally sharp tongue rarely bore a grudge.[108] Keynes’s speech at the closing of the Bretton Woods negotiations was received with a lasting standing ovation, rare in international relations, as the delegates acknowledged the scale of his achievements made despite poor health.[23]

Austrian School economist Friedrich Hayek was Keynes’s most prominent contemporary critic, with sharply opposing views on the economy.[42] Yet after Keynes’s death, he wrote: “He was the one really great man I ever knew, and for whom I had unbounded admiration. The world will be a very much poorer place without him.”[109]

Lionel Robbins, former head of the economics department at the London School of Economics, who engaged in many heated debates with Keynes in the 1930s, had this to say after observing Keynes in early negotiations with the Americans while drawing up plans for Bretton Woods:[42]

This went very well indeed. Keynes was in his most lucid and persuasive mood: and the effect was irresistible. At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived – the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the limit of ordinary human achievement.

Douglas LePan,[42] an official from the Canadian High Commission, wrote:

I am spellbound. This is the most beautiful creature I have ever listened to. Does he belong to our species? Or is he from some other order? There is something mythic and fabulous about him. I sense in him something massive and sphinx like, and yet also a hint of wings.

Bertrand Russell[110] named Keynes one of the most intelligent people he had ever known, commenting:[111]

Keynes’s intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool.

Keynes’s obituary in The Times included the comment: “There is the man himself – radiant, brilliant, effervescent, gay, full of impish jokes … He was a humane man genuinely devoted to the cause of the common good.”[44]


As a man of the centre described by some as having the greatest impact of any 20th-century economist,[38] Keynes attracted considerable criticism from both sides of the political spectrum. In the 1920s, Keynes was seen as anti-establishment and was mainly attacked from the right. In the “red 1930s”, many young economists favoured Marxist views, even in Cambridge,[25] and while Keynes was engaging principally with the right to try to persuade them of the merits of more progressive policy, the most vociferous criticism against him came from the left, who saw him as a supporter of capitalism. From the 1950s and onwards, most of the attacks against Keynes have again been from the right.

Friedrich Hayek, one of Keynes’s most prominent critics

In 1931 Friedrich Hayek extensively critiqued Keynes’s 1930 Treatise on Money.[112] After reading Hayek’s The Road to Serfdom, Keynes wrote to Hayek[113] “Morally and philosophically I find myself in agreement with virtually the whole of it”, but concluded the letter with the recommendation:

What we need therefore, in my opinion, is not a change in our economic programmes, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger is the probable practical failure of the application of your philosophy in the United States.

On the pressing issue of the time, whether deficit spending could lift a country from depression, Keynes replied to Hayek’s criticism[114] in the following way:

I should… conclude rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers wholly share your moral position. Moderate planning will be safe enough if those carrying it out are rightly oriented in their minds and hearts to the moral issue.

Asked why Keynes expressed “moral and philosophical” agreement with Hayek’s Road to Serfdom, Hayek stated:[115]

Because he believed that he was fundamentally still a classical English liberal and wasn’t quite aware of how far he had moved away from it. His basic ideas were still those of individual freedom. He did not think systematically enough to see the conflicts. He was, in a sense, corrupted by political necessity.

According to some observers,[who?] Hayek felt that the post-World War II “Keynesian orthodoxy” gave too much power to the state, and that such policies would lead toward socialism.[116]

While Milton Friedman described The General Theory as “a great book”, he argues that its implicit separation of nominal from real magnitudes is neither possible nor desirable. Macroeconomic policy, Friedman argues, can reliably influence only the nominal.[117] He and other monetarists have consequently argued that Keynesian economics can result in stagflation, the combination of low growth and high inflation that developed economies suffered in the early 1970s. More to Friedman’s taste was the Tract on Monetary Reform (1923), which he regarded as Keynes’s best work because of its focus on maintaining domestic price stability.[117]

Joseph Schumpeter was an economist of the same age as Keynes and one of his main rivals. He was among the first reviewers to argue that Keynes’s General Theory was not a general theory, but a special case.[118] He said the work expressed “the attitude of a decaying civilisation”. After Keynes’s death Schumpeter wrote a brief biographical piece Keynes the Economist – on a personal level he was very positive about Keynes as a man, praising his pleasant nature, courtesy and kindness. He assessed some of Keynes’s biographical and editorial work as among the best he’d ever seen. Yet Schumpeter remained critical about Keynes’s economics, linking Keynes’s childlessness to what Schumpeter saw as an essentially short term view. He considered Keynes to have a kind of unconscious patriotism that caused him to fail to understand the problems of other nations. For Schumpeter “Practical Keynesianism is a seedling which cannot be transplanted into foreign soil: it dies there and becomes poisonous as it dies.”[119]

President Harry S. Truman was skeptical of Keynesian theorizing: “Nobody can ever convince me that government can spend a dollar that it’s not got,” he told Leon Keyserling, a Keynesian economist who chaired Truman’s Council of Economic Advisers.[39]

Views on race

Keynes sometimes explained the mass murder that took place during the first years of communist Russia on a racial basis, as part of the “Russian and Jewish nature”, rather than as a result of the communist rule. After a trip to Russia, he wrote in his Short View of Russia that there is “beastliness on the Russian and Jewish natures when, as now, they are allied together”. He also wrote that “out of the cruelty and stupidity of the Old Russia nothing could ever emerge, but (…) beneath the cruelty and stupidity of the New Russia a speck of the ideal may lie hid”, which together with other comments may be construed as anti-Russian and antisemitic.[120]

Some critics have sought to show that Keynes had sympathy with Nazism, and a number of writers described him as antisemitic. Keynes’s private letters contain portraits and descriptions, some of which can be characterized as antisemitic, others as philosemitic.[121][122] Scholars have suggested that these reflect clichés current at the time that he accepted uncritically, rather than any racism.[123] On several occasions Keynes used his influence to help his Jewish friends, most notably when he successfully lobbied for Ludwig Wittgenstein to be allowed residency in the United Kingdom, explicitly in order to rescue him from being deported to Nazi-occupied Austria. Keynes was a supporter of Zionism, serving on committees supporting the cause.[123]

Allegations that he was racist or had totalitarian beliefs have been rejected by Robert Skidelsky and other biographers.[23] Professor Gordon Fletcher wrote that “the suggestion of a link between Keynes and any support of totalitarianism cannot be sustained”.[46] Once the aggressive tendencies of the Nazis towards Jews and other minorities had become apparent, Keynes made clear his loathing of Nazism. As a lifelong pacifist he had initially favoured peaceful containment of Nazi Germany, yet he began to advocate a forceful resolution while many conservatives were still arguing for appeasement. After the war started he roundly criticised the Left for losing their nerve to confront Hitler:

The intelligentsia of the Left were the loudest in demanding that the Nazi aggression should be resisted at all costs. When it comes to a showdown, scarce four weeks have passed before they remember that they are pacifists and write defeatist letters to your columns, leaving the defence of freedom and civilisation to Colonel Blimp and the Old School Tie, for whom Three Cheers.[42]

Views on inflation

Keynes has been characterised as being indifferent or even positive about mild inflation.[124] He had indeed expressed a preference for inflation over deflation, saying that if one has to choose between the two evils, it is “better to disappoint the rentier” than to inflict pain on working class families.[125] He also supported the German hyperinflation as a way to get free from reparations obligations. However, Keynes was also aware of the dangers of inflation.[46] In The Economic Consequences of the Peace, he wrote:

Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.[124]

Views on trade imbalances

Keynes was the principal author of a proposal – the so-called Keynes Plan – for an International Clearing Union. The two governing principles of the plan were that the problem of settling outstanding balances should be solved by “creating” additional “international money”, and that debtor and creditor should be treated almost alike as disturbers of equilibrium. In the event, though, the plans were rejected, in part because “American opinion was naturally reluctant to accept the principle of equality of treatment so novel in debtor-creditor relationships”.[126]

The new system is not founded on free-trade (liberalisation[127] of foreign trade[128]) but rather on the regulation of international trade, in order to eliminate trade imbalances: the nations with a surplus would have an incentive to reduce it, and in doing so they would automatically clear other nations deficits.[129] He proposed a global bank that would issue its currency – the bancor – which was exchangeable with national currencies at fixed rates of exchange and would become the unit of account between nations, which means it would be used to measure a country’s trade deficit or trade surplus. Every country would have an overdraft facility in its bancor account at the International Clearing Union. He pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a “negative externality” on trading partners, and posed, far more than those in deficit, a threat to global prosperity.[130]

In his 1933 Yale Review article “National Self-Sufficiency,”[131][132] he already highlighted the problems created by free trade. His view, supported by many economists and commentators at the time, was that creditor nations may be just as responsible as debtor nations for disequilibrium in exchanges and that both should be under an obligation to bring trade back into a state of balance. Failure for them to do so could have serious consequences. In the words of Geoffrey Crowther, then editor of The Economist, “If the economic relationships between nations are not, by one means or another, brought fairly close to balance, then there is no set of financial arrangements that can rescue the world from the impoverishing results of chaos.”[133]

These ideas were informed by events prior to the Great Depression when – in the opinion of Keynes and others – international lending, primarily by the U.S., exceeded the capacity of sound investment and so got diverted into non-productive and speculative uses, which in turn invited default and a sudden stop to the process of lending.[134]

Influenced by Keynes, economics texts in the immediate post-war period put a significant emphasis on balance in trade. For example, the second edition of the popular introductory textbook, An Outline of Money,[135] devoted the last three of its ten chapters to questions of foreign exchange management and in particular the “problem of balance”. However, in more recent years, since the end of the Bretton Woods system in 1971, with the increasing influence of Monetarist schools of thought in the 1980s, and particularly in the face of large sustained trade imbalances, these concerns – and particularly concerns about the destabilising effects of large trade surpluses – have largely disappeared from mainstream economics discourse[136] and Keynes’ insights have slipped from view.[137] They are receiving some attention again in the wake of the financial crisis of 2007–08.[138]

Personal life

Painter Duncan Grant (left) with Keynes


Keynes’s early romantic and sexual relationships were exclusively with men.[139] Keynes had been in relationships while at Eton and Cambridge; significant among these early partners were Dilly Knox and Daniel Macmillan.[17][140] Keynes was open about his affairs, and from 1901 to 1915 kept separate diaries in which he tabulated his many sexual encounters.[141][142] Keynes’s relationship and later close friendship with Macmillan was to be fortunate, as Macmillan’s company first published his tract Economic Consequences of the Peace.[143]

Attitudes in the Bloomsbury Group, in which Keynes was avidly involved, were relaxed about homosexuality. Keynes, together with writer Lytton Strachey, had reshaped the Victorian attitudes of the Cambridge Apostles: “since [their] time, homosexual relations among the members were for a time common”, wrote Bertrand Russell.[144] The artist Duncan Grant, whom he met in 1908, was one of Keynes’s great loves. Keynes was also involved with Lytton Strachey,[139] though they were for the most part love rivals, not lovers. Keynes had won the affections of Arthur Hobhouse,[145] and as with Grant, fell out with a jealous Strachey for it.[146] Strachey had previously found himself put off by Keynes, not least because of his manner of “treat[ing] his love affairs statistically”.[147]

Political opponents have used Keynes’s sexuality to attack his academic work.[148] One line of attack held that he was uninterested in the long term ramifications of his theories because he had no children.[148]

Keynes’s friends in the Bloomsbury Group were initially surprised when, in his later years, he began pursuing affairs with women,[149] demonstrating himself to be bisexual.[150] Ray Costelloe (who would later marry Oliver Strachey) was an early heterosexual interest of Keynes.[151] In 1906, Keynes had written of this infatuation that, “I seem to have fallen in love with Ray a little bit, but as she isn’t male I haven’t


able to think of any suitable steps to take.”[152]


Lydia Lopokova and Keynes in the 1920s

In 1921, Keynes wrote that he had fallen “very much in love” with Lydia Lopokova, a well-known Russian ballerina and one of the stars of Sergei Diaghilev‘s Ballets Russes.[153] In the early years of his courtship, he maintained an affair with a younger man, Sebastian Sprott, in tandem with Lopokova, but eventually chose Lopokova exclusively.[154][155] They were married in 1925, with Keynes’s former lover Duncan Grant as best man.[110][139] “What a marriage of beauty and brains, the fair Lopokova and John Maynard Keynes” was said at the time. Keynes later commented to Strachey that beauty and intelligence were rarely found in the same person, and that only in Duncan Grant had he found the combination.[156] The union was happy, with biographer Peter Clarke writing that the marriage gave Keynes “a new focus, a new emotional stability and a sheer delight of which he never wearied”.[28][157] Lydia became pregnant in 1927 but miscarried.[28] Among Keynes’s Bloomsbury friends, Lopokova was, at least initially, subjected to criticism for her manners, mode of conversation, and supposedly humble social origins – the last of the ostensible causes being particularly noted in the letters of Vanessa and Clive Bell, and Virginia Woolf.[158][159] In her novel Mrs Dalloway (1925), Woolf bases the character of Rezia Warren Smith on Lopokova.[160] E. M. Forster would later write in contrition about “Lydia Keynes, every whose word should be recorded”:[161] “How we all used to underestimate her”.[158]

46 Gordon Square, where Keynes would often stay while in London. Following his marriage, Keynes took out an extended lease on Tilton House, a farm in the countryside near Brighton, which became the couple’s main home when not in the capital.[162]

Blue plaque, 46 Gordon Square

Support for the arts

Keynes thought that the pursuit of money for its own sake was a pathological condition, and that the proper aim of work is to provide leisure. He wanted shorter working hours and longer holidays for all.[48]

Keynes was interested in literature in general and drama in particular and supported the Cambridge Arts Theatre financially, which allowed the institution to become one of the major British stages outside London.[110]

Keynes’s interest in classical opera and dance led him to support the Royal Opera House at Covent Garden and the Ballet Company at Sadler’s Wells. During the war, as a member of CEMA (Council for the Encouragement of Music and the Arts), Keynes helped secure government funds to maintain both companies while their venues were shut. Following the war, Keynes was instrumental in establishing the Arts Council of Great Britain and was its founding chairman in 1946. From the start, the two organisations that received the largest grants from the new body were the Royal Opera House and Sadler’s Wells.

Like several other notable British authors of his time, Keynes was a member of the Bloomsbury Group. Virginia Woolf‘s biographer tells an anecdote of how Virginia Woolf, Keynes, and T. S. Eliot discussed religion at a dinner party, in the context of their struggle against Victorian era morality.[163] Keynes may have been confirmed,[164] but according to Cambridge University he was clearly an agnostic, which he remained until his death.[165] According to one biographer, “he was never able to take religion seriously, regarding it as a strange aberration of the human mind.”[164]


Keynes was ultimately a successful investor, building up a private fortune. His assets were nearly wiped out following the Wall Street Crash of 1929, which he did not foresee, but he soon recouped. At Keynes’s death, in 1946, his net worth stood just short of £500,000 – equivalent to about £20.5 million ($27.1 million) in 2018. The sum had been amassed despite lavish support for various good causes and his ethic which made him reluctant to sell on a falling market, in cases where he saw such behaviour as likely to deepen a slump.[166]

Keynes built up a substantial collection of fine art, including works by Paul Cézanne, Edgar Degas, Amedeo Modigliani, Georges Braque, Pablo Picasso, and Georges Seurat (some of which can now be seen at the Fitzwilliam Museum).[110] He enjoyed collecting books; he collected and protected many of Isaac Newton‘s papers. In part on the basis of these papers, Keynes wrote of Newton as “the last of the magicians.”[167]

Keynes successfully managed the endowment of King’s College, Cambridge, with the active component of his portfolio outperforming a British equity index by an average of 8% a year over a quarter century, earning him favourable mention by later investors such as Warren Buffett and George Soros.[168]

Political causes

Keynes was a lifelong member of the Liberal Party, which until the 1920s had been one of the two main political parties in the United Kingdom, and as late as 1916 had often been the dominant power in government. Keynes had helped campaign for the Liberals at elections from about 1906, yet he always refused to run for office himself, despite being asked to do so on three separate occasions in 1920. From 1926, when Lloyd George became leader of the Liberals, Keynes took a major role in defining the party’s economic policy, but by then the Liberals had been displaced into third party status by the Labour Party.[14]

In 1939 Keynes had the option to enter Parliament as an independent MP with the University of Cambridge seat. A by-election for the seat was to be held due to the illness of an elderly Tory, and the master of Magdalene College had obtained agreement that none of the major parties would field a candidate if Keynes chose to stand. Keynes declined the invitation as he felt he would wield greater influence on events if he remained a free agent.[28]

Keynes was a proponent of eugenics. He served as director of the British Eugenics Society from 1937 to 1944. As late as 1946, shortly before his death, Keynes declared eugenics to be “the most important, significant and, I would add, genuine branch of sociology which exists.”[169]

Keynes once remarked that “the youth had no religion save communism and this was worse than nothing.”[163] Marxism “was founded upon nothing better than a misunderstanding of Ricardo“, and, given time, he (Keynes) “would deal thoroughly with the Marxists” and other economists to solve the economic problems their theories “threaten to cause”.[163]

In 1931 Keynes had the following to say on Marxism:[170]

How can I accept the Communist doctrine, which sets up as its bible, above and beyond criticism, an obsolete textbook which I know not only to be scientifically erroneous but without interest or application to the modern world? How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and the intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement? Even if we need a religion, how can we find it in the turbid rubbish of the red bookshop? It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here, unless he has first suffered some strange and horrid process of conversion which has changed all his values.

Keynes was a firm supporter of women’s rights and in 1932 became vice-chairman of the Marie Stopes Society which provided birth control education. He also campaigned against job discrimination against women and unequal pay. He was an outspoken campaigner for reform of the laws against homosexuality.[48]


Tilton House, 2017

Throughout his life, Keynes worked energetically for the benefit both of the public and his friends; even when his health was poor, he laboured to sort out the finances of his old college.[171] Helping to set up the Bretton Woods system, he worked to institute an international monetary system that would be beneficial for the world economy. In 1946, Keynes suffered a series of heart attacks, which ultimately proved fatal. They began during negotiations for the Anglo-American loan in Savannah, Georgia, where he was trying to secure favourable terms for the United Kingdom from the United States, a process he described as “absolute hell”.[38][172] A few weeks after returning from the United States, Keynes died of a heart attack at Tilton, his farmhouse home near Firle, East Sussex, England, on 21 April 1946, at the age of 62.[14][173] Against his wishes (he wanted for his ashes to be deposited in the crypt at King’s), his ashes were scattered on the Downs above Tilton.[174]

Both of Keynes’s parents outlived him: his father John Neville Keynes (1852–1949) by three years, and his mother Florence Ada Keynes (1861–1958) by twelve. Keynes’s brother Sir Geoffrey Keynes (1887–1982) was a distinguished surgeon, scholar, and bibliophile. His nephews include Richard Keynes (1919–2010), a physiologist, and Quentin Keynes (1921–2003), an adventurer and bibliophile. Keynes had no children; his widow, Lydia Lopokova, died in 1981.


Notes Granted 16th May 1944 [175] Motto Me Tutore Tutus Eris


See also


Notes and citations

Bradley W. Bateman; Toshiaki Hirai; Maria Cristina Marcuzzo, eds. (2010). The Return to Keynes. Harvard University Press. p. 146. ISBN9780674053540. Cairncross, Alec. “Keynes, John Maynard, Baron Keynes (1883–1946)”. Oxford Dictionary of National Biography (online ed.). Oxford University Press. doi:10.1093/ref:odnb/34310. (Subscription or UK public library membership required.) Yergin & Stanislaw 2002, pp. 39–42. Sloman, John (22 October 2008). “How to kick-start a faltering economy the Keynes way”. BBC. Cohn, Steven Mark (2015). Reintroducing Macroeconomics: A Critical Approach. Taylor & Francis. p. 111. ISBN978-1-317-46120-3. Davis, William L.; Figgins, Bob; Hedengren, David; Klein, Daniel B. (May 2011). “Economic Professors’ Favorite Economic Thinkers, Journals, and Blogs” (PDF). Econ Journal Watch. 8 (2): 126–46. Skidelsky, Robert (26 October 2010). Keynes: The Return of the Master. Cambridge: Public affairs. ISBN978-1-58648-897-0. Krugman, Paul (1995). Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. W.W. Norton. p. 43. ISBN978-0-393-31292-8. In 1968 in one of the decisive intellectual achievements of postwar economics, Friedman not only showed why the apparent tradeoff embodied in the idea of the Phillips curve was wrong; he also predicted the emergence of combined inflation and high unemployment … dubbed ‘stagflation. “To Set the Economy Right”. Time. 27 August 1979. Retrieved 13 November 2008. Chris Giles; Ralph Atkins; Krishna Guha. “The undeniable shift to Keynes”. Financial Times. Retrieved 23 January 2009. Reich, Robert (29 March 1999). “The Time 100: John Maynard Keynes”. Time. Retrieved 18 June 2009. “The IMF in Britain: Toothless truth tellers”. The Economist. 11 May 2013. Retrieved 2 October 2013. “Maynard Keynes”. The Bloomsbury Group. 22 August 2007. Retrieved 26 May 2012. Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 14, 43–46, 456, 263, 834. ISBN0330488678. Sources:


Thorpe, D.R. (2010). Supermac: The Life of Harold Macmillan. Chatto & Windus. p. 27. McGee, Matt (2005). Economics – In terms of The Good, The Bad and The Economist. S.l.: IBID Press. p. 354. ISBN1-876659-10-6. OCLC163584293. Moggridge, Donald Edward (1992). Maynard Keynes: An Economist’s Biography. Oxford: Routledge. pp. 52–81. ISBN9781134798667. Keynes, Milo (29 November 1979). Essays on John Maynard Keynes. Cambridge University Press. ISBN9780521296960. Cave, Peter (1 March 2009). Humanism: A Beginner’s Guide. Oneworld Publications. ISBN9781780740294. David Gowland. “Biography of Baron John Maynard Keynes”. Archived from the original on 16 June 2011. Retrieved 29 May 2009. Aschheim, J.; Tavlas, G. S.; Heinsohn, G.; Steiger, O.; Wood (editor), John Cunningham (1994). “The Monetary Thought-Ideology Nexus: Simons verses Keynes; Marx and Keynes – Private Property and Money”. John Maynard Keynes: Critical Assessments, pp. 101–120, 135. Second. ISBN978-0-415-11415-8. “No. 11879”. The London Gazette. 6 November 1906. p. 1124. Hyman Minsky (16 April 2008). John Maynard Keynes , chapter 1. and McGraw-Hill Professional. ISBN978-0-07-159301-4. See Keynes, John Maynard (1913). Indian Currency and Finance. London: Macmillan & Co. “No. 28711”. The London Gazette. 18 April 1913. p. 2809. Clarke, Peter (2009). Keynes: The Twentieth Century’s Most Influential Economist. Bloomsbury. pp. 1, 56–59, 80. ISBN978-1-4088-0385-1. Spiegel, Henry William (1991). The Growth of Economic Thought. Durham, UK: Duke University Press. p. 602. ISBN0-8223-0973-4. “No. 30111”. The London Gazette (Supplement). 1 June 1917. p. 5456. “No. 31928”. The London Gazette (Supplement). 1 June 1920. p. 6175. McDonough, Frank (1997). The Origins of the First and Second World Wars. Cambridge University Press. pp. 43–46. ISBN1-4051-0664-6. Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 217–220, 245, 260–265, 283, 342–355. ISBN0-330-48867-8. “John Maynard Keynes”. Policonomics. Retrieved 26 May 2012. Henig, Ruth (1995). Versailles and After, 1919-1933 (second ed.). Routledge. p. 65. ISBN978-1-134-79873-5. Marks, Sally (September 2013). “Mistakes and Myths: The Allies, Germany, and the Versailles Treaty, 1918–1921”. The Journal of Modern History. 85 (3): 632–659. doi:10.1086/670825. JSTOR10.1086/670825. For nearly forty years, historians of twentieth-century diplomacy have argued that the Versailles treaty was more reasonable than its reputation suggests and that it did not of itself cause the Depression, the rise of Hitler, or World War II” (p. 632). Marks also claims that the book is a “brilliant but warped polemic” (p. 636) that is “long-discredited by scholars” and which Keynes regretted writing (p. 656). Schumpeter, Joseph (2003). Ten Great Economists. Simon Publications. p. 271. ISBN1-932512-09-8. Pressman, Steven (1999). Fifty Major Economists. Routledge. pp. 99–104. ISBN978-1-134-78082-2. Cassidy, John (10 October 2011). “The Demand Doctor”. The New Yorker. Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 494–500, 504, 509–510. ISBN0-330-488678. Tribe, Keith (1997). Economic Careers: Economics and Economists in Britain, 1930–1970. London: Routledge. p. 61. ISBN0-415-14708-5. Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 530, 572, 586, 750, 789, 833. ISBN0-330-488678. Hazlitt, Henry (1995) [1960]. The critics of Keynesian Economics. Irvington-on-Hudson, N.Y.: Foundation for Economic Education. ISBN978-1-57246-013-3. Harris, Seymour E. (2005). The New Economics: Keynes’s Influence on Theory and Public Policy. Kessinger Publishing. p. xxii, 46. ISBN1-4191-4534-7. Martin, Kingsley (16 March 1940). “Mr Keynes Has A Plan”. Picture Post. Fletcher, Gordon A. (1989). Keynesian Revolution and Its Critics: Issues of Theory and Policy for the Monetary Production Economy (second ed.). Palgrave Macmillan UK. pp. xix–xxi, 88, 189–191, 234–238, 256–261. ISBN978-1-349-20108-2. See Donald Markwell, John Maynard Keynes and International Relations: Economic Paths to War and Peace, Oxford University Press, 2006. Universal Man Richard Davenport-Hines Collins 2015 “No. 35279”. The London Gazette. 19 September 1941. p. 5489.
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Ram, N (17 November 2008). “Keynesian warning is one of seven ‘big messages’: Manmohan”. The Hindu. Retrieved 8 October 2015. “The Rescue of Bear Stearns Marks Liberalization’s Limit”. Financial Times. Retrieved 13 November 2008. (registration required) James K. Galbraith. “The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus” (PDF). The University of Texas. Retrieved 28 February 2009. Robert Shiller: The sub prime solution. Google Video. Retrieved 13 November 2008. “The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It”. Princeton University Press. Archived from the original on 13 October 2008. Retrieved 13 November 2008. Shiller, Robert (19 May 2012). “Reviving ‘animal spirits’ to raise confidence”. Retrieved 26 May 2012. Krugman, Paul (5 January 2009). “Fighting Off Depression”. The New York Times. Retrieved 15 August 2009. Krugman, Paul (23 January 2009). “Stuck in the Muddle”. The New York Times. Retrieved 15 August 2009. Krugman, Paul (15 June 2009). “Stay the Course”. The New York Times. Retrieved 15 August 2009. Coy, Peter (22 March 2009). “Kill or cure? US stimulus kicks up a storm”. The Independent. UK. Retrieved 8 June 2010. “Is Obama’s stimulus working?”. Los Angeles Times. 19 August 2009. “EconoMonitor ” The Mini Depression and the Maximum-Strength Remedy”. 9 November 2008. Archived from the original on 4 October 2009. Retrieved 26 May 2012. “Chasing Stiglitz: Obama’s economic team is missing the one guy who’s been right all along”. 3 December 2008. Retrieved 5 December 2013. Donald Markwell. “Keynes and International Economic and Political Relations” (PDF). Trinity College, University of Melbourne. Retrieved 3 July 2009. Leijonhufvud, Axel (1969). On Keynesian Economics and the Economics of Keynes. Oxford University Press. ISBN0-19-500948-7. Stratton, Allegra (20 October 2008). “Darling invokes Keynes as he eases spending rules to fight recession”. The Guardian. London. Retrieved 13 November 2008. Sam Coates (20 October 2008). “Spend, spend, spend: Alistair Darling adopts John Maynard Keynes doctrine”. The Times. London. Retrieved 14 June 2009. (subscription required) Paul Maidment (9 November 2008). “China Announces Massive Stimulus Package”. Forbes. Archived from the original on 12 November 2008. Retrieved 11 November 2008. “A global survey of stimulus plans”. Vox EU. Retrieved 14 June 2009. Chang, Ha-Joon (20 October 2008). “The economics of hypocrisy”. The Guardian. London. Retrieved 27 November 2008. Markwell, Donald (2006). John Maynard Keynes and International Relations: Economic Paths to War and Peace. Oxford University Press. ISBN0-19-829236-8. Antonio Spilimbergo; Steve Symansky; Olivier Blanchard; Carlo Cottarelli. “Fiscal Policy for the Crisis” (PDF). International Monetary Fund. Retrieved 3 July 2009. Chris Giles; Ralph Atkins; Krishna Guha. “The undeniable shift to Keynes”. Financial Times. Retrieved 23 January 2009. (registration required) Jamil Anderlini (23 March 2009). “China calls for new reserve currency”. Financial Times. Retrieved 13 April 2009. (registration required) Zhou Xiaochuan (23 March 2009). “Reform the International Monetary System”. People’s Bank of China. Archived from the original on 24 September 2015. Retrieved 13 April 2009. Norma Cohen (24 June 2009). “OECD foresees end to global slide”. Financial Times. Retrieved 26 June 2009. (registration required) Krishna Guha; Sarah O’Connor; Michael Mackenzie (8 July 2009). “IMF says world is pulling out of recession”. Financial Times. Retrieved 9 July 2009. (registration required) “Recession Loosens Grip But Weak Recovery Ahead”. International Monetary Fund. 8 July 2009. Retrieved 9 July 2009. Bertrand Benoit; Quentin Peel & Chris Bryant (28 March 2009). “Merkel warns on stimulus”. Financial Times. Retrieved 20 July 2009. (registration required) Mark Gilbert (17 July 2009). “Keynes Arouses Fed as ECB Looks for Monetary Exit”. Bloomberg. Retrieved 22 July 2009. “The other-worldly philosophers”. The Economist. 16 July 2009. Retrieved 20 July 2009. Robert J. Barro, Gary Becker, Wall Street Journal editorials, 24 August 2011, and 2 September 2011 Romer, Christina D. (7 November 2011). “What do we know about the effects of fiscal policy? Separating evidence from ideology” (PDF). Lecture at Hamilton College. Guajardo, Jaime; Leigh, Daniel; Pescatori, Andrea (July 2011). “Expansionary Austerity: New International Evidence” (PDF). IMF Working Paper, WP/11/158. International Monetary Fund. SSRN1886910. Retrieved 18 January 2012. Using this new dataset, our estimates suggest fiscal consolidation has contractionary effects on private domestic demand and GDP. McCann, Charles Robert (1998). John Maynard Keynes – critical responses. 4. Taylor & Francis. p. 21. ISBN0-415-15193-7. Wapshott, Nicholas (2011). Keynes Hayek: The Clash that Defined Modern Economics. W. W. Norton. p. 206. ISBN978-0-393-08311-8. Hoggard, Liz (21 October 2008). “Ten things you didn’t know about Mr Keynes”. Evening Standard. Archived from the original on 22 January 2010. Retrieved 8 September 2019. Russell, Bertrand (1967). The Autobiography of Bertrand Russell: 1872–1914. Unwin Paperbacks. p. 97. Hayek, Friedrick August von (August 1931). “Reflections on the Pure Theory of Money of Mr. J.M. Keynes” (PDF). Economica. 11. Retrieved 20 May 2008. Hoover, Kenneth R. (2008). Economics as Ideology. Lanham, Maryland: Rowman & Littlefield. p. 152. ISBN978-0-7425-3113-0. Heilbroner, Robert (2000). The Worldly Philosophers. pp. 278–8. ISBN0-671-63482-8. Hazlett, Thomas W. (July 1992). “The Road from Serfdom”. Reason. Archived from the original on 13 October 2008. Retrieved 20 May 2008. Dransfield, Robert; Dransfield, Don (2003). Key Ideas in Economics. Nelson Thornes. p. 81. ISBN0-7487-7081-X. Friedman, Milton (Spring 1997). “John Maynard Keynes”. Economic Quarterly. Federal Reserve Bank of Richmond. 83/2. Thomas K. McCraw (7 February 2009). “Dividends from Schumpeter’s Noble Failure”. Harvard Business School. Retrieved 21 June 2009. Symour E Harris; Joseph Schumpter (1 March 2005). The New Economics: Keynes’s Influence on Theory and Public Policy [Keynes the Economist by Schumpter]. and Kessinger Publishing. pp. 73–101. ISBN978-1-4191-4534-6. A Short View of Russia, Essays in Persuasion, (London 1932) John Maynard Keynes, 297–312 Reder, Melvin W. (2000). “The Anti-Semitism of Some Eminent Economists”. History of Political Economy. 32 (4): 833–856. doi:10.1215/00182702-32-4-833. Chandavarkar, A. (2000). “Was Keynes Anti-Semitic?”. Economic and Political Weekly. 35 (6 May 2000): 1619–1624. JSTOR4409262. Nina Paulovicova. “The Immoral Moral Scientist. John Maynard Keynes”. University of Alberta. Retrieved 14 June 2009. Daniel Yergin; Joseph Stanislaw. “Keynes on Inflation”. PBS. Retrieved 30 June 2009. Tabb, William K. (2002). Reconstructing Political Economy: The Great Divide in Economic Thought. Routledge. p. 151. ISBN9780203049310. Crowther, Geoffrey (1948). An Outline of Money. Second Edition. Thomas Nelson and Sons. pp. 326–29. “What Is Deregulation?”. Investopedia. 25 June 2019. Retrieved 5 September 2019. Deregulation is the reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. “What Is Trade Liberalization”. Investopedia. 18 April 2019. Retrieved 5 September 2019. Trade liberalization is the removal or reduction of restrictions or barriers on the free exchange of goods between nations. Costabile, Lilia (December 2007). “Current Global Imbalances and the Keynes Plan (PDF)”. Political Economy Research Institute. Retrieved 5 September 2019. Stiglitz, Joseph (5 May 2010). “Reform the euro or bin it | Joseph Stiglitz”. The Guardian. Keynes, John Maynard (June 1933). “National Self-Sufficiency”. Mount Holyoke College. The Yale Review Vol. 22, no. 4. Retrieved 5 September 2019. Grewal, David Singh (September 2009). “What Keynes warned about globalization”. Seminar Magazine. New Delhi, India. ISSN0971-6742. Retrieved 5 September 2019. Crowther, Geoffrey (1948). An Outline of Money. Second Edition. Thomas Nelson and Sons. p. 336. Crowther, Geoffrey (1948). An Outline of Money. Second Edition. Thomas Nelson and Sons. pp. 368–72. Crowther, Geoffrey (1948). An Outline of Money. Second Edition. Thomas Nelson and Sons. Krugman, P; Wells, R (2006). Economics. Worth Publishers. Duncan, R (2005). The Dollar Crisis: Causes, Consequences, Cures. Wiley. Monbiot, George (18 November 2008). “Clearing Up This Mess”. George Monbiot Website. Archived from the original on 23 January 2009. Retrieved 5 September 2019. Robert L. Heilbroner (11 May 1986). “The man who made us all Keynesians”. The New York Times. Retrieved 20 May 2008. Strachey 1994, pp. 123, 127, 715. The Sex Diaries of John Maynard Keynes The Economist, 28 January 2008, Evan Zimroth (Clare Hall, Cambridge) Archived 24 November 2009 at the Wayback Machine O’Grady, Sean. “John Maynard Keynes: New biography reveals shocking details about the economist’s sex life“, The Independent. 12 March 2015; accessed 19 November 2015. Thorpe, p.18 Strachey 1994, p. 103. Strachey 1994, pp. 108-110. Strachey 1994, pp. 181–183. Strachey 1994, p. 128. Bartlett, Bruce (7 May 2013). “Keynes’s Biggest Mistake”. The New York Times. Adam Trimingham, “A man of numbers”, The Argus, 12 November 2012. Sources describing Keynes as bisexual include:

Strachey 1994, p. 129. Moggridge, Donald Edward (1995). Maynard Keynes: an economist’s biography. Routledge. p. 104. D. E. Moggridge (1992). Maynard Keynes: an economist’s biography. Routledge. p. 395. I again fell very much in love with her. She seemed to me perfect in every way. The unlikely Lydia LopokovaThe Telegraph, 25 April 2008, Rupert Christiansen “The firebird of Gordon Square” Kathryn Hughes, The Guardian, 19 April 2008 Justin Wintle (2002). “Keynes, John Maynard”. Makers of Modern Culture. 1. Psychology Press. p. 270. ISBN978-0-415-26583-6. “Keynes, John Maynard (1883–1946)”. glbtq. Archived from the original on 2 October 2012. Retrieved 21 November 2008. Lady Talky, Alison Light, London Review of Books, Vol. 30 No. 24, 18 December 2008 “Review: Keynes and the Celestial Dancer”, by Anand Chandavarkar, Reviewed work(s): Lydia and Maynard: Letters between Lydia Lopokova and Maynard Keynes by Polly Hill; Richard Keynes, Economic and Political Weekly, Vol. 25, No. 34 (25 August 1990), p. 1896 Polly Hill; Richard Keynes, eds. (1989). Lydia and Maynard: letters between Lydia Lopokova and John Maynard Keynes. André Deutsch. p. 97. E.M. Forster (1987). Commonplace Book. p. 195. Lydia Keynes, every whose word should be recorded, said to me as I was leaving her flat the other night: “You know I once tumbled from the stairs and believe me I paid the price.” I took the sentence down before I forgot it. “Tilton House homepage”. Retrieved 2 October 2013. Quentin Bell. Virginia Wolf, A Biography. 2 (revised Edition 1996 ed.). The Hogarth Press. 1972. p. 177. Skidelsky, Robert (1 January 1994). John Maynard Keynes: Volume 1: Hopes Betrayed 1883–1920. Penguin Books. p. 86. ISBN014023554X. Lubenow, William C (1998). The Cambridge Apostles, 1820–1914. Cambridge University Press. ISBN0-521-57213-4. See John Maynard Keynes by Skidelsky (2003), pp. 520–21, p. 563 and especially p. 565 where Keynes is quoted as “It is the duty of a serious investor to accept the depreciation of his holding with equanimity … any other policy is anti-social, destructive of confidence and incompatible with the working of the economic system.” Keynes, John Maynard (1956). James R. Newman (ed.). The World of Mathematics (2000 ed.). Dover. p. 277. ISBN0-486-41153-2. Chambers, David; Dimson, Elroy (Summer 2013). “Retrospectives: John Maynard Keynes, Investment Innovator”. Journal of Economic Perspectives. American Economic Association. 27 (3): 213–228. doi:10.1257/jep.27.3.213. Keynes, John Maynard (1946). “The Galton lecture, 1946: Presentation of the society’s gold medal”. Eugenics Review. 38 (1): 39–40. PMC2986310. PMID21260495. On February I4th, I946, before a large gathering of Fellows, Members and guests at Manson house, London, Lord Keynes, On behalf of the Eugenics Society, presented the first Galton Medal… Opening the proceedings, Lord Keynes said: It is a satisfaction to take part in the presentation of the first Galton Gold Medal, both in piety to the memory of the great Galton and in recognition of a worthy and appropriate recipient of a medal established in his name. Keynes, John Maynard (1931). Essays in Persuasion. New York, W.W. Norton & Co. ISBN0-393-00190-3. Fraser, Nick (8 November 2008). “John Maynard Keynes: Can the great economist save the world?”. The Independent. United Kingdom. Retrieved 20 November 2008. Marr, Andrew (2007). A history of modern Britain. London: Macmillan. p. 12. ISBN978-1-4050-0538-8. “Lord Keynes Dies of Heart Attack. Noted Economist Exhausted by Strain of Recent Savannah Monetary Conference”. The New York Times. 22 April 1946. Retrieved 10 February 2010. John Maynard Lord Keynes, distinguished economist, whose work for restoring the economic structure of a world twice shattered by war brought him world-wide influence, died of a heart attack today at his home in Firle, Sussex. His age was 63. Wilson, Scott. Resting Places: The Burial Sites of More Than 14,000 Famous Persons, 3d ed.: 2 (Kindle Location 25430). McFarland & Company, Inc., Publishers. Kindle Edition.

  1. “The Coat of Arms No. 226” (PDF). The Heraldry Society. Retrieved 11 October 2019.


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Friedrich Hayek

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Friedrich Hayek
BornFriedrich August von Hayek
8 May 1899
Vienna, Cisleithania, Austria-Hungary
Died23 March 1992 (aged 92)
Freiburg im Breisgau, Baden-Württemberg, Germany
Institution1931–1950 LSE1950–1962 University of Chicago1962–1968 University of Freiburg
FieldEconomicsPolitical scienceLawPhilosophyPsychology
School or
Austrian School
Alma materUniversity of Vienna
(Dr. jur., 1921; Dr. rer. pol, 1923)
ContributionsEconomic calculation problemCatallaxyDispersed knowledgePrice signalSpontaneous orderHayek–Hebb model
Awards1974 Nobel Memorial Prize in Economic Sciences1984 Companion of Honour1991 Presidential Medal of Freedom
Information at IDEAS / RePEc

Friedrich August von Hayek CH FBA (/ˈhaɪək/ HY-ək, German: [ˈfʁiːdʁɪç ˈʔaʊɡʊst ˈhaɪɛk]; 8 May 1899 – 23 March 1992), often referred to by his initials F. A. Hayek, was an Austrian-British economist and philosopher best known for his defence of classical liberalism. Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for his “pioneering work in the theory of money and economic fluctuations and […] penetrating analysis of the interdependence of economic, social and institutional phenomena”.[1] His account of how changing prices communicate information that helps individuals co-ordinate their plans is widely regarded as an important achievement in economics, leading to his Nobel Prize.[2][3][4]

Hayek served in World War I during his teenage years and said that this experience in the war and his desire to help avoid the mistakes that had led to the war drew him into economics.[5][6] At the University of Vienna, he studied economics, eventually receiving his doctoral degrees in law (1921) and in political science (1923).[5][7] He subsequently lived and worked in Austria, Great Britain, the United States, and Germany; he became a British subject in 1938. Hayek’s academic life was mostly spent at the London School of Economics, the University of Chicago, and the University of Freiburg. Although he is widely considered as a leader of the Austrian School of Economics, he also had close connections with the Chicago School of Economics.[5][8][9][10] Hayek was also a major social theorist and political philosopher of the 20th century.[11][12] His most notable work, The Road to Serfdom, has sold over 2 million copies (as of 2010).[13][14]

Hayek was appointed a Companion of Honour in 1984 for “services to the study of economics”.[15][16] He was the first recipient of the Hanns Martin Schleyer Prize in 1984.[17] He also received the Presidential Medal of Freedom in 1991 from President George H. W. Bush.[18] In 2011, his article “The Use of Knowledge in Society” was selected as one of the top 20 articles published in The American Economic Review during its first 100 years.[19]



A timeline of Hayek[20]

Early life

An ethno-linguistic map of Austria–Hungary, 1910

Friedrich August von Hayek was born in Vienna to August von Hayek and Felicitas Hayek (née von Juraschek). His father, from whom he received his middle name, was born in 1871 also in Vienna. He was a medical doctor employed by the municipal ministry of health with a passion for botany, about which he wrote a number of monographs. August von Hayek was also a part-time botany lecturer at the University of Vienna. His mother was born in 1875 to a wealthy conservative and land-owning family. As her mother died several years prior to Hayek’s birth, Felicitas received a significant inheritance, which provided as much as half of her and her husband’s income during the early years of their marriage. Hayek was the oldest of three brothers, Heinrich (1900–1969) and Erich (1904–1986), who were one-and-a-half and five years younger than him.[21]

His father’s career as a university professor influenced Hayek’s goals later in life.[22] Both of his grandfathers, who lived long enough for Hayek to know them, were scholars. Franz von Juraschek was a leading economist in Austria-Hungary and a close friend of Eugen Böhm von Bawerk, one of the founders of the Austrian School of Economics.[23] Hayek’s paternal grandfather, Gustav Edler von Hayek, taught natural sciences at the Imperial Realobergymnasium (secondary school) in Vienna. He wrote works in the field of biological systematics, some of which are relatively well known.[24]

On his mother’s side, Hayek was second cousin to the philosopher Ludwig Wittgenstein. His mother often played with Wittgenstein’s sisters and had known him well. As a result of their family relationship, Hayek became one of the first to read Wittgenstein’s Tractatus Logico-Philosophicus when the book was published in its original German edition in 1921. Although he met Wittgenstein on only a few occasions, Hayek said that Wittgenstein’s philosophy and methods of analysis had a profound influence on his own life and thought.[25] In his later years, Hayek recalled a discussion of philosophy with Wittgenstein when both were officers during World War I.[26] After Wittgenstein’s death, Hayek had intended to write a biography of Wittgenstein and worked on collecting family materials and later assisted biographers of Wittgenstein.[27] He was related to Wittgenstein on the non-Jewish side of the Wittgenstein family. Since his youth, Hayek frequently socialized with Jewish intellectuals and he mentions that people often speculated whether he was also of Jewish ancestry. That made him curious, so he spent some time researching his ancestors and found out that he has no Jewish ancestors within five generations.[28] The Surname Hayek uses the German spelling of the Czech surname Hájek.

Hayek displayed an intellectual and academic bent from a very young age. He read fluently and frequently before going to school.[29] At his father’s suggestion, as a teenager he read the genetic and evolutionary works of Hugo de Vries and August Weismann and the philosophical works of Ludwig Feuerbach.[30] In school, Hayek was much taken by one instructor’s lectures on Aristotle’s ethics.[31] In his unpublished autobiographical notes, Hayek recalled a division between him and his younger brothers who were only a few years younger than him, but he believed that they were somehow of a different generation. He preferred to associate with adults.[29]

Austro-Hungarian artillery unit appearing in The Illustrated London News in 1914

In 1917, Hayek joined an artillery regiment in the Austro-Hungarian Army and fought on the Italian front. Much of Hayek’s combat experience was spent as a spotter in an aeroplane. Hayek suffered damage to his hearing in his left ear during the war[32] and was decorated for bravery. During this time, Hayek also survived the 1918 flu pandemic.[33]

Hayek then decided to pursue an academic career, determined to help avoid the mistakes that had led to the war. Hayek said of his experience: “The decisive influence was really World War I. It’s bound to draw your attention to the problems of political organization”. He vowed to work for a better world.[34]

Education and career

University of Vienna’s main building seen from across the Ringstraße

At the University of Vienna, Hayek earned doctorates in law and political science in 1921 and 1923 respectively and also studied philosophy, psychology and economics. For a short time, when the University of Vienna closed he studied in Constantin von Monakow‘s Institute of Brain Anatomy, where Hayek spent much of his time staining brain cells. Hayek’s time in Monakow’s lab and his deep interest in the work of Ernst Mach inspired his first intellectual project, eventually published as The Sensory Order (1952). It located connective learning at the physical and neurological levels, rejecting the “sense data” associationism of the empiricists and logical positivists.[35] Hayek presented his work to the private seminar he had created with Herbert Furth called the Geistkreis.[36]

During Hayek’s years at the University of Vienna, Carl Menger‘s work on the explanatory strategy of social science and Friedrich von Wieser‘s commanding presence in the classroom left a lasting influence on him.[30] Upon the completion of his examinations, Hayek was hired by Ludwig von Mises on the recommendation of Wieser as a specialist for the Austrian government working on the legal and economic details of the Treaty of Saint Germain. Between 1923 and 1924, Hayek worked as a research assistant to Professor Jeremiah Jenks of New York University, compiling macroeconomic data on the American economy and the operations of the Federal Reserve.[37]

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Initially sympathetic to Wieser’s democratic socialism, Hayek’s economic thinking shifted away from socialism and toward the classical liberalism of Carl Menger after reading von Mises’ book Socialism. It was sometime after reading Socialism that Hayek began attending von Mises’ private seminars, joining several of his university friends, including Fritz Machlup, Alfred Schutz, Felix Kaufmann and Gottfried Haberler, who were also participating in Hayek’s own more general and private seminar. It was during this time that he also encountered and befriended noted political philosopher Eric Voegelin, with whom he retained a long-standing relationship.[38]

LSE’s Old Building

With the help of Mises, in the late 1920s he founded and served as director of the Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) in 1931 at the behest of Lionel Robbins. Upon his arrival in London, Hayek was quickly recognised as one of the leading economic theorists in the world and his development of the economics of processes in time and the co-ordination function of prices inspired the ground-breaking work of John Hicks, Abba P. Lerner and many others in the development of modern microeconomics.[39]

In 1932, Hayek suggested that private investment in the public markets was a better road to wealth and economic co-ordination in Britain than government spending programs as argued in an exchange of letters with John Maynard Keynes, co-signed with Lionel Robbins and others in The Times.[40][41] The nearly decade long deflationary depression in Britain dating from Winston Churchill‘s decision in 1925 to return Britain to the gold standard at the old pre-war and pre-inflationary par was the public policy backdrop for Hayek’s dissenting engagement with Keynes over British monetary and fiscal policy. Well beyond that single public conflict, regarding the economics of extending the length of production to the economics of labour inputs, Hayek and Keynes disagreed on many essential economics matters. Their economic disagreements were both practical and fundamental in nature. Keynes called Hayek’s book Prices and Production “one of the most frightful muddles I have ever read”, famously adding: “It is an extraordinary example of how, starting with a mistake, a remorseless logician can end in Bedlam”.[42] Many other notable economists have also been staunch critics of Hayek, including John Kenneth Galbraith and later Paul Krugman, who wrote that “the Hayek thing is almost entirely about politics rather than economics”.[43][44]

Notable economists who studied with Hayek at the LSE in the 1930s and 1940s include Arthur Lewis, Ronald Coase, William Baumol, the aforementioned John Kenneth Galbraith, Leonid Hurwicz, Abba Lerner, Nicholas Kaldor, George Shackle, Thomas Balogh, L. K. Jha, Arthur Seldon, Paul Rosenstein-Rodan and Oskar Lange.[45][46][47] Some were supportive and some were critical of his ideas. Hayek also taught or tutored many other LSE students, including David Rockefeller.[48]

Unwilling to return to Austria after the Anschluss brought it under the control of Nazi Germany in 1938, Hayek remained in Britain. Hayek and his children became British subjects in 1938.[49] He held this status for the remainder of his life, but he did not live in Great Britain after 1950. He lived in the United States from 1950 to 1962 and then mostly in Germany, but also briefly in Austria.[50]

In 1947, Hayek was elected a Fellow of the Econometric Society.[51]

The Road to Serfdom

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Main article: The Road to Serfdom

Hayek was concerned about the general view in Britain’s academia that fascism was a capitalist reaction to socialism and The Road to Serfdom arose from those concerns. It was written between 1940 and 1943. The title was inspired by the French classical liberal thinker Alexis de Tocqueville‘s writings on the “road to servitude”.[52] It was first published in Britain by Routledge in March 1944 and was quite popular, leading Hayek to call it “that unobtainable book” also due in part to wartime paper rationing.[53] When it was published in the United States by the University of Chicago in September of that year, it achieved greater popularity than in Britain.[54] At the instigation of editor Max Eastman, the American magazine Reader’s Digest also published an abridged version in April 1945, enabling The Road to Serfdom to reach a far wider audience than academics. The book is widely popular among those advocating individualism and classical liberalism.[55]


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In 1950, Hayek left the London School of Economics. After spending the 1949–1950 academic year as a visiting professor at the University of Arkansas, Hayek was brought on by the University of Chicago, where he became a professor in the Committee on Social Thought. Hayek’s salary was funded not by the university, but by an outside foundation, the William Volker Fund.

Hayek had made contact with many at the University of Chicago in the 1940s, with Hayek’s The Road to Serfdom playing a seminal role in transforming how Milton Friedman and others understood how society works.[56] Hayek conducted a number of influential faculty seminars while at the University of Chicago and a number of academics worked on research projects sympathetic to some of Hayek’s own, such as Aaron Director, who was active in the Chicago School in helping to fund and establish what became the “Law and Society” program in the University of Chicago Law School.[57] Hayek, Frank Knight, Friedman and George Stigler worked together in forming the Mont Pèlerin Society, an international forum for neoliberals.[58] Hayek and Friedman cooperated in support of the Intercollegiate Society of Individualists, later renamed the Intercollegiate Studies Institute, an American student organisation devoted to libertarian ideas.[50][59]

University of Chicago from the Midway Plaisance

Hayek’s first class at Chicago was a faculty seminar on the philosophy of science attended by many of the University of Chicago’s most notable scientists of the time, including Enrico Fermi, Sewall Wright and Leó Szilárd. During his time at Chicago, Hayek worked on the philosophy of science, economics, political philosophy and the history of ideas. Hayek’s economics notes from this period have yet to be published. Hayek received a Guggenheim Fellowship in 1954.[60]

After editing a book on John Stuart Mill‘s letters he planned to publish two books on the liberal order, The Constitution of Liberty and “The Creative Powers of a Free Civilization” (eventually the title for the second chapter of The Constitution of Liberty).[61] He completed The Constitution of Liberty in May 1959, with publication in February 1960. Hayek was concerned that “with that condition of men in which coercion of some by others is reduced as much as is possible in society”.[62] Hayek was disappointed that the book did not receive the same enthusiastic general reception as The Road to Serfdom had sixteen years before.[63]

Freiburg, Los Angeles and Salzburg

Freiburg around 1900

From 1962 until his retirement in 1968, he was a professor at the University of Freiburg, West Germany, where he began work on his next book, Law, Legislation and Liberty. Hayek regarded his years at Freiburg as “very fruitful”.[64] Following his retirement, Hayek spent a year as a visiting professor of philosophy at the University of California, Los Angeles, where he continued work on Law, Legislation and Liberty, teaching a graduate seminar by the same name and another on the philosophy of social science. Preliminary drafts of the book were completed by 1970, but Hayek chose to rework his drafts and finally brought the book to publication in three volumes in 1973, 1976 and 1979.

University of Salzburg (below, foreground) since the mid 1980s as seen from city center

Hayek became a professor at the University of Salzburg from 1969 to 1977 and then returned to Freiburg, where he spent the rest of his days. When Hayek left Salzburg in 1977, he wrote: “I made a mistake in moving to Salzburg”. The economics department was small and the library facilities were inadequate.[65]

Nobel Memorial Prize Winner

On 9 October 1974, it was announced that Hayek would be awarded the Nobel Memorial Prize in Economics along with Swedish economist Gunnar Myrdal. The reasons for the two of them winning the prize are described in the Nobel committee’s press release.[66] He was surprised at being given the award and believed that he was given it with Myrdal to balance the award with someone from the opposite side of the political spectrum.[67]

During the Nobel ceremony in December 1974, Hayek met the Russian dissident Aleksandr Solzhenitsyn. Hayek later sent him a Russian translation of The Road to Serfdom.[67] He spoke with apprehension at his award speech about the danger the authority of the prize would lend to an economist,[68] but the prize brought much greater public awareness to the then controversial ideas of Hayek and has been described by his biographer as “the great rejuvenating event in his life”.[69]

British politics

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In February 1975, Margaret Thatcher was elected leader of the British Conservative Party. The Institute of Economic Affairs arranged a meeting between Hayek and Thatcher in London soon after.[70] During Thatcher’s only visit to the Conservative Research Department in the summer of 1975, a speaker had prepared a paper on why the “middle way” was the pragmatic path the Conservative Party should take, avoiding the extremes of left and right. Before he had finished, Thatcher “reached into her briefcase and took out a book. It was Hayek’s The Constitution of Liberty. Interrupting our pragmatist, she held the book up for all of us to see. ‘This’, she said sternly, ‘is what we believe’, and banged Hayek down on the table”.[71]

In 1977, Hayek was critical of the Lib–Lab pact in which the British Liberal Party agreed to keep the British Labour government in office. Writing to The Times, Hayek said: “May one who has devoted a large part of his life to the study of the history and the principles of liberalism point out that a party that keeps a socialist government in power has lost all title to the name ‘Liberal’. Certainly no liberal can in future vote ‘Liberal'”.[72] Hayek was criticised by Liberal politicians Gladwyn Jebb and Andrew Phillips, who both claimed that the purpose of the pact was to discourage socialist legislation.

Lord Gladwyn pointed out that the German Free Democrats were in coalition with the German Social Democrats.[73] However, Hayek was defended by Professor Antony Flew, who stated that—unlike the British Labour Party—the German Social Democrats had since the late 1950s abandoned public ownership of the means of production, distribution and exchange and had instead embraced the social market economy.[74]

In 1978, Hayek came into conflict with Liberal Party leader David Steel, who claimed that liberty was possible only with “social justice and an equitable distribution of wealth and power, which in turn require a degree of active government intervention” and that the Conservative Party were more concerned with the connection between liberty and private enterprise than between liberty and democracy. Hayek claimed that a limited democracy might be better than other forms of limited government at protecting liberty, but that an unlimited democracy was worse than other forms of unlimited government because “its government loses the power even to do what it thinks right if any group on which its majority depends thinks otherwise”.

Hayek stated that if the Conservative leader had said “that free choice is to be exercised more in the market place than in the ballot box, she has merely uttered the truism that the first is indispensable for individual freedom while the second is not: free choice can at least exist under a dictatorship that can limit itself but not under the government of an unlimited democracy which cannot”.[75]

Influence on central European politics

President Ronald Reagan listed Hayek as among the two or three people who most influenced his philosophy and welcomed Hayek to the White House as a special guest.[76] In the 1970s and 1980s, the writings of Hayek were also a major influence on some of the future postsocialist economic and political elites in Central and Eastern Europe. Supporting examples include the following:

There is no figure who had more of an influence, no person had more of an influence on the intellectuals behind the Iron Curtain than Friedrich Hayek. His books were translated and published by the underground and black market editions, read widely, and undoubtedly influenced the climate of opinion that ultimately brought about the collapse of the Soviet Union.[77] — Milton Friedman (Hoover Institution)

The most interesting among the courageous dissenters of the 1980s were the classical liberals, disciples of F.A. Hayek, from whom they had learned about the crucial importance of economic freedom and about the often-ignored conceptual difference between liberalism and democracy.[78] — Andrzej Walicki (History, Notre Dame)

Estonian Prime Minister Mart Laar came to my office the other day to recount his country’s remarkable transformation. He described a nation of people who are harder-working, more virtuous – yes, more virtuous, because the market punishes immorality – and more hopeful about the future than they’ve ever been in their history. I asked Mr. Laar where his government got the idea for these reforms. Do you know what he replied? He said, “We read Milton Friedman and F.A. Hayek.”[79] — United States Representative Dick Armey

I was 25 years old and pursuing my doctorate in economics when I was allowed to spend six months of post-graduate studies in Naples, Italy. I read the Western economic textbooks and also the more general work of people like Hayek. By the time I returned to Czechoslovakia, I had an understanding of the principles of the market. In 1968, I was glad at the political liberalism of the Dubcek Prague Spring, but was very critical of the Third Way they pursued in economics.[80] — Václav Klaus (former President of the Czech Republic)


In 1980, Hayek, a non-practising Roman Catholic,[81] was one of twelve Nobel laureates to meet with Pope John Paul II “to dialogue, discuss views in their fields, communicate regarding the relationship between Catholicism and science, and ‘bring to the Pontiff’s attention the problems which the Nobel Prize Winners, in their respective fields of study, consider to be the most urgent for contemporary man'”.[82]

Hayek was appointed a Companion of Honour (CH) in the 1984 Birthday Honours by Elizabeth II on the advice of British Prime Minister Margaret Thatcher for his “services to the study of economics”.[15][16] Hayek had hoped to receive a baronetcy and after being awarded the CH sent a letter to his friends requesting that he be called the English version of Friedrich (i.e. Frederick) from now on. After his twenty-minute audience with the Queen, he was “absolutely besotted” with her according to his daughter-in-law Esca Hayek. Hayek said a year later that he was “amazed by her. That ease and skill, as if she’d known me all my life”. The audience with the Queen was followed by a dinner with family and friends at the Institute of Economic Affairs. When later that evening Hayek was dropped off at the Reform Club, he commented: “I’ve just had the happiest day of my life”.[83]

In 1991, President George H. W. Bush awarded Hayek the Presidential Medal of Freedom, one of the two highest civilian awards in the United States, for a “lifetime of looking beyond the horizon”. Hayek died on 23 March 1992 in Freiburg, Germany and was buried on 4 April in the Neustift am Walde cemetery in the northern outskirts of Vienna according to the Catholic rite.[84] In 2011, his article “The Use of Knowledge in Society” was selected as one of the top 20 articles published in The American Economic Review during its first 100 years.[19]

The New York University Journal of Law and Liberty holds an annual lecture in his honour.[85]


The business cycle

Main article: Austrian business cycle theory

Parts of a business cycle

Parts of a business cycle

Actual business cycle

Actual business cycle

Hayek’s principal investigations in economics concerned capital, money and the business cycle. Ludwig von Mises had earlier applied the concept of marginal utility to the value of money in his Theory of Money and Credit (1912) in which he also proposed an explanation for “industrial fluctuations” based on the ideas of the old British Currency School and of Swedish economist Knut Wicksell. Hayek used this body of work as a starting point for his own interpretation of the business cycle, elaborating what later became known as the Austrian theory of the business cycle. Hayek spelled out the Austrian approach in more detail in his book, published in 1929, an English translation of which appeared in 1933 as Monetary Theory and the Trade Cycle. There, Hayek argued for a monetary approach to the origins of the cycle. In his Prices and Production (1931), Hayek argued that the business cycle resulted from the central bank‘s inflationary credit expansion and its transmission over time, leading to a capital misallocation caused by the artificially low interest rates. Hayek claimed that “the past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process”.

Hayek’s analysis was based on Eugen Böhm von Bawerk‘s concept of the “average period of production”[86] and on the effects that monetary policy could have upon it. In accordance with the reasoning later outlined in his essay “The Use of Knowledge in Society” (1945), Hayek argued that a monopolistic governmental agency like a central bank can neither possess the relevant information which should govern supply of money, nor have the ability to use it correctly.[87]

In 1929, Lionel Robbins assumed the helm of the London School of Economics (LSE). Eager to promote alternatives to what he regarded as the narrow approach of the school of economic thought that then dominated the English-speaking academic world (centred at the University of Cambridge and deriving largely from the work of Alfred Marshall), Robbins invited Hayek to join the faculty at LSE, which he did in 1931. According to Nicholas Kaldor, Hayek’s theory of the time-structure of capital and of the business cycle initially “fascinated the academic world” and appeared to offer a less “facile and superficial” understanding of macroeconomics than the Cambridge school’s.[88]

Also in 1931, Hayek critiqued John Maynard Keynes‘s Treatise on Money (1930) in his “Reflections on the pure theory of Mr. J.M. Keynes”[89] and published his lectures at the LSE in book form as Prices and Production.[90] For Keynes, unemployment and idle resources are caused by a lack of effective demand, but for Hayek they stem from a previous unsustainable episode of easy money and artificially low interest rates. Keynes asked his friend Piero Sraffa to respond. Sraffa elaborated on the effect of inflation-induced “forced savings” on the capital sector and about the definition of a “natural” interest rate in a growing economy (see Sraffa–Hayek debate).[91] Others who responded negatively to Hayek’s work on the business cycle included John Hicks, Frank Knight and Gunnar Myrdal.[92] Kaldor later wrote that Hayek’s Prices and Production had produced “a remarkable crop of critics” and that the total number of pages in British and American journals dedicated to the resulting debate “could rarely have been equalled in the economic controversies of the past”.[88]

Hayek continued his research on monetary and capital theory, revising his theories of the relations between credit cycles and capital structure in Profits, Interest and Investment (1939) and The Pure Theory of Capital (1941), but his reputation as an economic theorist had by then fallen so much that those works were largely ignored, except for scathing critiques by Nicholas Kaldor.[88][93] Lionel Robbins himself, who had embraced the Austrian theory of the business cycle in The Great Depression (1934), later regretted having written the book and accepted many of the Keynesian counter-arguments.[94]

Hayek never produced the book-length treatment of “the dynamics of capital” that he had promised in the Pure Theory of Capital. After 1941, he continued to publish works on the economics of information, political philosophy, the theory of law and psychology, but seldom on macroeconomics. At the University of Chicago, Hayek was not part of the economics department and did not influence the rebirth of neoclassical theory that took place there (see Chicago school of economics). When in 1974 he shared the Nobel Memorial Prize in Economics with Myrdal, the latter complained about being paired with an “ideologue”. Milton Friedman declared himself “an enormous admirer of Hayek, but not for his economics. I think Prices and Production is a very flawed book. I think his [Pure Theory of Capital] is unreadable. On the other hand, The Road to Serfdom is one of the great books of our time”.[94]

The economic calculation problem

Main article: Economic calculation problem

Building on the earlier work of Mises and others, Hayek also argued that while in centrally planned economies an individual or a select group of individuals must determine the distribution of resources, these planners will never have enough information to carry out this allocation reliably. This argument, first proposed by Max Weber, says that the efficient exchange and use of resources can be maintained only through the price mechanism in free markets (see economic calculation problem).

In 1935, Hayek published Collectivist Economic Planning, a collection of essays from an earlier debate that had been initiated by Mises. Hayek included Mises’s essay in which Mises argued that rational planning was impossible under socialism.

Some socialists such as H. D. Dickinson and Oskar Lange responded by invoking general equilibrium theory, which they argued disproved Mises’s thesis. They noted that the difference between a planned and a free market system lay in who was responsible for solving the equations. They argued that if some of the prices chosen by socialist managers were wrong, gluts or shortages would appear, signalling them to adjust the prices up or down, just as in a free market. Through such a trial and error, a socialist economy could mimic the efficiency of a free market system while avoiding its many problems.

Hayek challenged this vision in a series of contributions. In “Economics and Knowledge” (1937), he pointed out that the standard equilibrium theory assumed that all agents have full and correct information. However, in the real world different individuals have different bits of knowledge and furthermore some of what they believe is wrong.

In “The Use of Knowledge in Society” (1945), Hayek argued that the price mechanism serves to share and synchronise local and personal knowledge, allowing society’s members to achieve diverse and complicated ends through a principle of spontaneous self-organization. He contrasted the use of the price mechanism with central planning, arguing that the former allows for more rapid adaptation to changes in particular circumstances of time and place.[95] Thus, Hayek set the stage for Oliver Williamson‘s later contrast between markets and hierarchies as alternative co-ordination mechanisms for economic transactions.[96] He used the term catallaxy to describe a “self-organizing system of voluntary co-operation”. Hayek’s research into this argument was specifically cited by the Nobel Committee in its press release awarding Hayek the Nobel prize.[66]

Criticism of collectivism

Front cover art for Hayek’s book Individualism and Economic Order, 1948

Hayek was one of the leading academic critics of collectivism in the 20th century. Hayek argued that all forms of collectivism (even those theoretically based on voluntary co-operation) could only be maintained by a central authority of some kind. In Hayek’s view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible. In his popular book The Road to Serfdom (1944) and in subsequent academic works, Hayek argued that socialism required central economic planning and that such planning in turn leads towards totalitarianism.[97]

In The Road to Serfdom, Hayek wrote:

Although our modern socialists’ promise of greater freedom is genuine and sincere, in recent years observer after observer has been impressed by the unforeseen consequences of socialism, the extraordinary similarity in many respects of the conditions under “communism” and “fascism”.[98]

Hayek posited that a central planning authority would have to be endowed with powers that would impact and ultimately control social life because the knowledge required for centrally planning an economy is inherently decentralised, and would need to be brought under control.

Though Hayek did argue that the state should provide law centrally, others have pointed out that this contradicts his arguments about the role of judges in “discovering” the law, suggesting that Hayek would have supported decentralized provision of legal services.[99]

Hayek also wrote that the state can play a role in the economy, specifically in creating a safety net, saying:

There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.[100]

“The Denationalization of Money” is one of his literary works, in which he advocated the establishment of competitions in issuing moneys.

Investment and choice

Perhaps more fully than any other economist, Hayek investigated the choice theory of investment. He examined the inter-relations between non-permanent production goods and “latent” or potentially economic permanent resources, building on the choice theoretical insight that “processes that take more time will evidently not be adopted unless they yield a greater return than those that take less time”.[101]

Hayek’s work on the microeconomics of the choice theoretics of investment, non-permanent goods, potential permanent resources and economically-adapted permanent resources mark a central dividing point between his work in areas of macroeconomics and that of almost all other economists. Hayek’s work on the macroeconomic subjects of central planning, trade cycle theory, the division of knowledge and entrepreneurial adaptation especially, differ greatly from the opinions of macroeconomic “Marshallian” economists who follow the tradition of John Maynard Keynes and the microeconomic “Walrasian” economists who follow the tradition of Abba Lerner.

Philosophy of science

See also: The Counter-Revolution of Science

During World War II, Hayek began the Abuse of Reason project. His goal was to show how a number of then-popular doctrines and beliefs had a common origin in some fundamental misconceptions about the social science.[102] In his philosophy of science, which has much in common with that of his good friend Karl Popper, Hayek was highly critical of what he termed “scientism“, a false understanding of the methods of science that has been mistakenly forced upon the social sciences, but that is contrary to the practices of genuine science. Usually, scientism involves combining the philosophers’ ancient demand for demonstrative justification with the associationists’ false view that all scientific explanations are simple two-variable linear relationships.

Hayek points out that much of science involves the explanation of complex multivariable and nonlinear phenomena[citation needed] and the social science of economics and undesigned order compares favourably with such complex sciences as Darwinian biology. These ideas were developed in The Counter-Revolution of Science in 1952 and in some of Hayek’s later essays in the philosophy of science such as “Degrees of Explanation” (1955) and “The Theory of Complex Phenomena” (1964).

In Counter-Revolution, for example, Hayek observed that the hard sciences attempt to remove the “human factor” to obtain objective and strictly controlled results:

[T]he persistent effort of modern Science has been to get down to “objective facts,” to cease studying what men thought about nature or regarding the given concepts as true images of the real world, and, above all, to discard all theories which pretended to explain phenomena by imputing to them a directing mind like our own. Instead, its main task became to revise and reconstruct the concepts formed from ordinary experience on the basis of a systematic testing of the phenomena, so as to be better able to recognize the particular as an instance of a general rule. — Friedrich Hayek, The Counter-Revolution of Science (Chapter II, “The Problem and the Method of the Natural Sciences”)

Meanwhile, the soft sciences are attempting to measure human action itself:[103]

The social sciences in the narrower sense, i.e., those which used to be described as the moral sciences, are concerned with man’s conscious or reflected action, actions where a person can be said to choose between various courses open to him, and here the situation is essentially different. The external stimulus which may be said to cause or occasion such actions can of course also be defined in purely physical terms. But if we tried to do so for the purposes of explaining human action, we would confine ourselves to less than we know about the situation. — Friedrich Hayek, The Counter-Revolution of Science (Chapter III, “The Subjective Character of the Data of the Social Sciences”)

He notes that these are mutually exclusive and that social sciences should not attempt to impose positivist methodology, nor to claim objective or definite results:[104]


In The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology (1952), Hayek independently developed a “Hebbian learning” model of learning and memory—an idea he first conceived in 1920 prior to his study of economics. Hayek’s expansion of the “Hebbian synapse” construction into a global brain theory has received attention in neuroscience, cognitive science, computer science, behavioural science and evolutionary psychology by scientists such as Gerald Edelman and Joaquin Fuster.[105][106][107]

The Sensory Order can be viewed as a development of his attack on scientism. Hayek posited two orders, namely the sensory order that we experience and the natural order that natural science has revealed. Hayek thought that the sensory order actually is a product of the brain. He described the brain as a very complex yet self-ordering hierarchical classification system, a huge network of connections. Because of these nature of the classifier system, richness of our sensory experience can exist. Hayek’s description posed problems to behaviorism, whose proponents took the sensory order as fundamental.[102]

Social and political philosophy

In the latter half of his career, Hayek made a number of contributions to social and political philosophy which he based on his views on the limits of human knowledge[108] and the idea of spontaneous order in social institutions. He argues in favour of a society organised around a market order in which the apparatus of state is employed almost (though not entirely) exclusively to enforce the legal order (consisting of abstract rules and not particular commands) necessary for a market of free individuals to function. These ideas were informed by a moral philosophy derived from epistemological concerns regarding the inherent limits of human knowledge. Hayek argued that his ideal individualistic and free-market polity would be self-regulating to such a degree that it would be “a society which does not depend for its functioning on our finding good men for running it”.[109]

Although Hayek believed in a society governed by laws, he disapproved of the notion of “social justice“. He compared the market to a game in which “there is no point in calling the outcome just or unjust”[110] and argued that “social justice is an empty phrase with no determinable content”.[111] Likewise, “the results of the individual’s efforts are necessarily unpredictable, and the question as to whether the resulting distribution of incomes is just has no meaning”.[112] He generally regarded government redistribution of income or capital as an unacceptable intrusion upon individual freedom, saying that “the principle of distributive justice, once introduced, would not be fulfilled until the whole of society was organized in accordance with it. This would produce a kind of society which in all essential respects would be the opposite of a free society”.[111]

Spontaneous order

Main article: Spontaneous order

Hayek viewed the free price system not as a conscious invention (that which is intentionally designed by man), but as spontaneous order or what Scottish philosopher Adam Ferguson referred to as “the result of human action but not of human design”.[113] For instance, Hayek put the price mechanism on the same level as language.

Hayek attributed the birth of civilisation to private property in his book The Fatal Conceit (1988). He explained that price signals are the only means of enabling each economic decision maker to communicate tacit knowledge or dispersed knowledge to each other to solve the economic calculation problem. Alain de Benoist of the Nouvelle Droite (New Right) produced a highly critical essay on Hayek’s work in an issue of Telos, citing the flawed assumptions behind Hayek’s idea of “spontaneous order” and the authoritarian and totalising implications of his free-market ideology.[114]

Hayek’s concept of the market as a spontaneous order has been recently applied to ecosystems to defend a broadly non-interventionist policy.[115] Like the market, ecosystems contain complex networks of information, involve an ongoing dynamic process, contain orders within orders and the entire system operates without being directed by a conscious mind.[116] On this analysis, species takes the place of price as a visible element of the system formed by a complex set of largely unknowable elements. Human ignorance about the countless interactions between the organisms of an ecosystem limits our ability to manipulate nature.[117] Since humans rely on the ecosystem to sustain themselves, we have a prima facie obligation to not disrupt such systems. This analysis of ecosystems as spontaneous orders does not rely on markets qualifying as spontaneous orders. As such, one need not endorse Hayek’s analysis of markets to endorse ecosystems as spontaneous orders.

Hayek’s views on social safety nets

With regard to a social safety net, Hayek advocated “some provision for those threatened by the extremes of indigence or starvation due to circumstances beyond their control” and argued that the “necessity of some such arrangement in an industrial society is unquestioned—be it only in the interest of those who require protection against acts of desperation on the part of the needy”.[118] Summarizing Hayek’s views on the topic, journalist Nicholas Wapshott has argued that “[Hayek] advocated mandatory universal health care and unemployment insurance, enforced, if not directly provided, by the state”.[119] Critical theorist Bernard Harcourt has argued further that “Hayek was adamant about this”.[120] In 1944, Hayek wrote in The Road to Serfdom:

There is no reason why in a society which has reached the general level of wealth which ours has attained [that security against severe physical privation, the certainty of a given minimum of sustenance for all; or more briefly, the security of a minimum income] should not be guaranteed to all without endangering general freedom. There are difficult questions about the precise standard which should thus be assured… but there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. Indeed, for a considerable part of the population of England this sort of security has long been achieved.

Nor is there any reason why the state should not assist… individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong…. [And] there is no incompatibility in principle between the state’s providing greater security in this way and the preservation of individual freedom. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken.[121]

In 1973, Hayek reiterated in Law, Legislation and Liberty:

There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need to descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organised community, those who cannot help themselves. So long as such a uniform minimum income is provided outside the market to all those who, for any reason, are unable to earn in the market an adequate maintenance, this need not lead to a restriction of freedom, or conflict with the Rule of Law.[122]

Hayek’s liberalism and skepticism

Arthur M. Diamond argues Hayek’s problems arise when he goes beyond claims that can be evaluated within economic science. Diamond argued:

The human mind, Hayek says, is not just limited in its ability to synthesize a vast array of concrete facts, it is also limited in its ability to give a deductively sound ground to ethics. Here is where the tension develops, for he also wants to give a reasoned moral defense of the free market. He is an intellectual skeptic who wants to give political philosophy a secure intellectual foundation. It is thus not too surprising that what results is confused and contradictory.[123]

Chandran Kukathas argues that Hayek’s defence of liberalism is unsuccessful because it rests on presuppositions that are incompatible. The unresolved dilemma of his political philosophy is how to mount a systematic defence of liberalism if one emphasizes the limited capacity of reason.[124] Norman P. Barry similarly notes that the “critical rationalism” in Hayek’s writings appears incompatible with “a certain kind of fatalism, that we must wait for evolution to pronounce its verdict”.[125] Milton Friedman and Anna Schwartz argue that the element of paradox exists in the views of Hayek. Noting Hayek’s vigorous defense of “invisible hand” evolution that Hayek claimed has created better economic institutions than could be created by rational design, Friedman pointed out the irony that Hayek was then proposing to replace the monetary system thus created with a deliberate construct of his own design.[126] John N. Gray summarized this view as “his scheme for an ultra-liberal constitution was a prototypical version of the philosophy he had attacked”.[127] Bruce Caldwell wrote that “[i]f one is judging his work against the standard of whether he provided a finished political philosophy, Hayek clearly did not succeed”, although he thinks that “economists may find Hayek’s political writings useful”.[128]

Hayek’s views on dictatorship

Wikiquote has quotations related to: Friedrich Hayek and dictatorship

Hayek sent António de Oliveira Salazar a copy of The Constitution of Liberty (1960) in 1962. Hayek hoped that his book—this “preliminary sketch of new constitutional principles”—”may assist” Salazar “in his endeavour to design a constitution which is proof against the abuses of democracy”.[129]

Hayek visited Chile in the 1970s and 1980s during the Government Junta of general Augusto Pinochet and accepted being appointed Honorary Chairman of the Centro de Estudios Públicos, the think tank formed by the economists who transformed Chile into a free market economy.[129]

Asked about the liberal non-democratic rule by a Chilean interviewer, Hayek is translated from German to Spanish to English as having said the following:

As long term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. […] Personally I prefer a liberal dictatorship to democratic government devoid of liberalism. My personal impression – and this is valid for South America – is that in Chile, for example, we will witness a transition from a dictatorial government to a liberal government.[130]

In a letter to the London Times, he defended the Pinochet regime and said that he had “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“.[131][132] Hayek admitted that “it is not very likely that this will succeed, even if, at a particular point in time, it may be the only hope there is”, but he explained that “[i]t is not certain hope, because it will always depend on the goodwill of an individual, and there are very few individuals one can trust. But if it is the sole opportunity which exists at a particular moment it may be the best solution despite this. And only if and when the dictatorial government is visibly directing its steps towards limited democracy”.

For Hayek, the distinction between authoritarianism and totalitarianism has much importance and he was at pains to emphasise his opposition to totalitarianism, noting that the concept of transitional dictatorship which he defended was characterised by authoritarianism, not totalitarianism. For example, when Hayek visited Venezuela in May 1981, he was asked to comment on the prevalence of totalitarian regimes in Latin America. In reply, Hayek warned against confusing “totalitarianism with authoritarianism” and said that he was unaware of “any totalitarian governments in Latin America. The only one was Chile under Allende”. For Hayek, the word “totalitarian” signifies something very specific, namely the intention to “organize the whole of society” to attain a “definite social goal” which is stark in contrast to “liberalism and individualism”.[133]

Influence and recognition

Hayek’s influence on the development of economics is widely acknowledged. With regard to the popularity of his Nobel acceptance lecture, Hayek is the second-most frequently cited economist (after Kenneth Arrow) in the Nobel lectures of the prize winners in economics. Hayek wrote critically there of the field of orthodox economics and neo-classical modelisation.[134] A number of Nobel Laureates in economics, such as Vernon Smith and Herbert A. Simon, recognise Hayek as the greatest modern economist.[135] Another Nobel winner, Paul Samuelson, believed that Hayek was worthy of his award, but nevertheless claimed that “there were good historical reasons for fading memories of Hayek within the mainstream last half of the twentieth century economist fraternity. In 1931, Hayek’s Prices and Production had enjoyed an ultra-short Byronic success. In retrospect hindsight tells us that its mumbo-jumbo about the period of production grossly misdiagnosed the macroeconomics of the 1927–1931 (and the 1931–2007) historical scene”.[136] Despite this comment, Samuelson spent the last 50 years of his life obsessed with the problems of capital theory identified by Hayek and Böhm-Bawerk, and Samuelson flatly judged Hayek to have been right and his own teacher Joseph Schumpeter to have been wrong on the central economic question of the 20th century, the feasibility of socialist economic planning in a production goods dominated economy.[137]

Hayek is widely recognised for having introduced the time dimension to the equilibrium construction and for his key role in helping inspire the fields of growth theory, information economics and the theory of spontaneous order. The “informal” economics presented in Milton Friedman‘s massively influential popular work Free to Choose (1980) is explicitly Hayekian in its account of the price system as a system for transmitting and co-ordinating knowledge. This can be explained by the fact that Friedman taught Hayek’s famous paper “The Use of Knowledge in Society” (1945) in his graduate seminars.

In 1944, he was elected as a Fellow of the British Academy[138] after he was nominated for membership by Keynes.[139]

Harvard economist and former Harvard University President Lawrence Summers explains Hayek’s place in modern economics: “What’s the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That’s the consensus among economists. That’s the Hayek legacy”.[140]

By 1947, Hayek was an organiser of the Mont Pelerin Society, a group of classical liberals who sought to oppose socialism. Hayek was also instrumental in the founding of the Institute of Economic Affairs, the right-wing libertarian and free-market think tank that inspired Thatcherism. He was in addition a member of the conservative and libertarian Philadelphia Society.[141]

Hayek had a long-standing and close friendship with philosopher of science Karl Popper, who was also from Vienna. In a letter to Hayek in 1944, Popper stated: “I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski“.[142] Popper dedicated his Conjectures and Refutations to Hayek. For his part, Hayek dedicated a collection of papers, Studies in Philosophy, Politics, and Economics, to Popper and in 1982 said that “ever since his Logik der Forschung first came out in 1934, I have been a complete adherent to his general theory of methodology”.[143] Popper also participated in the inaugural meeting of the Mont Pelerin Society. Their friendship and mutual admiration do not change the fact that there are important differences between their ideas.[144]

Hayek also played a central role in Milton Friedman’s intellectual development. Friedman wrote:

My interest in public policy and political philosophy was rather casual before I joined the faculty of the University of Chicago. Informal discussions with colleagues and friends stimulated a greater interest, which was reinforced by Friedrich Hayek’s powerful book The Road to Serfdom, by my attendance at the first meeting of the Mont Pelerin Society in 1947, and by discussions with Hayek after he joined the university faculty in 1950. In addition, Hayek attracted an exceptionally able group of students who were dedicated to a libertarian ideology. They started a student publication, The New Individualist Review, which was the outstanding libertarian journal of opinion for some years. I served as an adviser to the journal and published a number of articles in it….[145]

Hayek’s greatest intellectual debt was to Carl Menger, who pioneered an approach to social explanation similar to that developed in Britain by Bernard Mandeville and the Scottish moral philosophers in the Scottish Enlightenment. He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology and anthropology. For example, Hayek’s discussion in The Road to Serfdom (1944) about truth, falsehood and the use of language influenced some later opponents of postmodernism.[146]

Hayek and conservatism

Hayek received new attention in the 1980s and 1990s with the rise of conservative governments in the United States, United Kingdom and Canada. After winning the 1979 United Kingdom general election, Margaret Thatcher appointed Keith Joseph, the director of the Hayekian Centre for Policy Studies, as her secretary of state for industry in an effort to redirect parliament’s economic strategies. Likewise, David Stockman, Ronald Reagan‘s most influential financial official in 1981, was an acknowledged follower of Hayek.[147]

Hayek wrote an essay, “Why I Am Not a Conservative” (included as an appendix to The Constitution of Liberty)[148] In it he disparaged conservatism for its inability to adapt to changing human realities or to offer a positive political program, remarking: “Conservatism is only as good as what it conserves”. Although he noted that modern day conservatism shares many opinions on economics with classical liberals, particularly a belief in the free market, he believed it is because conservatism wants to “stand still” whereas liberalism embraces the free market because it “wants to go somewhere”. Hayek identified himself as a classical liberal, but noted that in the United States it had become almost impossible to use “liberal” in its original definition and the term “libertarian” has been used instead. In this text, Hayek also opposed conservatism for “its hostility to internationalism and its proneness to a strident nationalism“, with its frequent association with imperialism.[149]

Hayek also found libertarianism a term “singularly unattractive” and offered the term “Old Whig” (a phrase borrowed from Edmund Burke) instead. In his later life, he said: “I am becoming a Burkean Whig”. However, Whiggery as a political doctrine had little affinity for classical political economy, the tabernacle of the Manchester School and William Gladstone.[150] His essay has served as an inspiration to other liberal-minded economists wishing to distinguish themselves from conservative thinkers, for example James M. Buchanan‘s essay “Why I, Too, Am Not a Conservative: The Normative Vision of Classical Liberalism”.

His opponents have attacked Hayek as a leading promoter of neoliberalism. A British journalist, Samuel Brittan, concluded in 2010 that “Hayek’s book [The Constitution of Liberty] is still probably the most comprehensive statement of the underlying ideas of the moderate free market philosophy espoused by neoliberals”.[151] Brittan adds that although Raymond Plant (2009) comes out in the end against Hayek’s doctrines, Plant gives The Constitution of Liberty a “more thorough and fair-minded analysis than it has received even from its professed adherents”.[151]

In Why F A Hayek is a Conservative,[152] British policy analyst Madsen Pirie claims Hayek mistakes the nature of the conservative outlook. Conservatives, he says, are not averse to change, but like Hayek they are highly averse to change being imposed on the social order by people in authority who think they know how to run things better. They wish to allow the market to function smoothly and give it the freedom to change and develop. It is an outlook, says Pirie, that Hayek and conservatives both share.

Hayek and policy discussions

Hayek’s ideas on spontaneous order and the importance of prices in dealing with the knowledge problem has inspired a debate on economic development and transition economies after the fall of the Berlin wall. For instance, economist Peter Boettke elaborated in detail on why reforming socialism failed and the Soviet Union broke down.[153] Economist Ronald McKinnon uses Hayekian ideas to describe the challenges of transition from a centralized state and planned economy to a market economy.[154] Former World Bank Chief Economist William Easterly emphasizes why foreign aid tends to have no effect at best in books such as The White Man’s Burden.[155]

Since the 2007–2008 financial crisis, there is a renewed interest in Hayek’s core explanation of boom-and-bust cycles, which serves as an alternative explanation to that of the savings glut as launched by economist and former Federal Reserve Chair Ben Bernanke. Economists at the Bank for International Settlements, e.g. William R. White, emphasize the importance of Hayekian insights and the impact of monetary policies and credit growth as root causes of financial cycles.[156] Andreas Hoffmann and Gunther Schnabl provide an international perspective and explain recurring financial cycles in the world economy as consequence of gradual interest rate cuts led by the central banks in the large advanced economies since the 1980s.[157][158] Nicolas Cachanosky outlines the impact of American monetary policy on the production structure in Latin America.[159]

In line with Hayek, an increasing number of contemporary researchers sees expansionary monetary policies and too low interest rates as mal-incentives and main drivers of financial crises in general and the subprime market crisis in particular.[160][161] To prevent problems caused by monetary policy, Hayekian and Austrian economists discuss alternatives to current policies and organizations. For instance, Lawrence H. White has argued in favor of free banking in the spirit of Hayek’s “Denationalization of Money”.[162] Along with market monetarist economist Scott Sumner,[163] White has also noted that the monetary policy norm that Hayek prescribed, first in Prices and Production (1931) and as late as the 1970s,[164][165] was the stabilization of nominal income.[166]

Hayek’s ideas find their way into the discussion of the post-Great Recession issues of secular stagnation. Monetary policy and mounting regulation are argued to have undermined the innovative forces of the market economies. Quantitative easing following the financial crises is argued to have not only conserved structural distortions in the economy, leading to a fall in trend-growth. It also created new distortions and contributes to distributional conflicts.[167]

Personal life

In August 1926, Hayek married Helen Berta Maria von Fritsch (1901–1960), a secretary at the civil service office where Hayek worked, on the rebound upon hearing of his cousin’s marriage. They had two children together.[168] Upon the close of World War II, Hayek restarted a relationship with his cousin, who had married since they first met, but kept it secret until 1948. Hayek and Fritsch divorced in July 1950 and he married his cousin[169] Helene Bitterlich (1900–1996)[170] just a few weeks later after moving to Arkansas to take advantage of permissive divorce laws.[171] His wife and children were offered settlement and compensation for accepting a divorce. The divorce caused some scandal at LSE where certain academics refused to have anything to do with Hayek.[171] In a 1978 interview to explain his actions, Hayek stated that he was unhappy in his first marriage and as his wife would not grant him a divorce he had to enforce it.[172] He rarely visited his children after the divorce.[173]

Hayek’s son, Laurence Hayek (1934 – 2004) was a distinguished microbiologist.[174]

Hayek was brought up in non-religious setting and decided that he was an agnostic from age 15.[175] He died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961.[176]

Legacy and honours

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Hayek’s grave in Neustifter Friedhof, Vienna

Even after his death, Hayek’s intellectual presence is noticeable, especially in the universities where he had taught, namely the London School of Economics, the University of Chicago and the University of Freiburg. A number of tributes have resulted, many established posthumously:

Notable works

Main article: Friedrich Hayek bibliography

See also


Bank of Sweden (1974). “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1974”. Skarbek, David (March 2009). “F.A. Hayek’s Influence on Nobel Prize Winners” (PDF). Review of Austrian Economics. 22 (1): 109–112. CiteSeerX10. doi:10.1007/s11138-008-0069-x. Archived from the original (PDF) on 27 July 2011. “Friedrich August von Hayek – Facts”. Retrieved 30 June 2017. kanopiadmin (28 January 2010). “Hayek and the Nobel Prize”. Mises Institute. Retrieved 30 June 2017. “Friedrich A. Hayek”. Mises Institute. 20 June 2014. Retrieved 3 September 2019. “Keynes v Hayek: Giants of economics”. 3 August 2011. Retrieved 4 September 2019. “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1974”. Retrieved 4 September 2019. aeasterling (16 May 2014). “What is Austrian Economics?”. Mises Institute. Retrieved 3 September 2019. “Aaron Director, Founder of the field of Law and Economics”. Retrieved 3 September 2019. “Commanding Heights : The Chicago School | on PBS”. Retrieved 3 September 2019. Edward Feser (2006). “The Cambridge Companion to Hayek (Introduction)”. Cambridge University Press. among the most important economists and political philosophers of the twentieth century. […] [He was] almost certainly the most consequential thinker of the mainstream political right in the twentieth century. It is just possible that he was the most consequential twentieth century political thinker, right or left, period.[permanent dead link] Schrepel, Thibault (January 2015). “Friedrich Hayek’s Contribution to Antitrust Law and Its Modern Application”. ICC Global Antitrust Review: 199–216. SSRN2548420. Ormerod, Paul. “The fading of Friedman”. Retrieved 31 August 2019. Catlin, George (1944). “The Road to Serfdom”. Nature. 154 (3911): 473–474. Bibcode:1944Natur.154..473C. doi:10.1038/154473a0. “No. 49768”. The London Gazette (Supplement). 16 June 1984. p. 4. Alan O. Ebenstein. (2003) Friedrich Hayek: A biography. p. 305. University of Chicago Press, 2003 “Archived copy”. Archived from the original on 25 February 2014. Retrieved 30 April 2013. George H.W. Bush (18 November 1991). “Remarks on Presenting the Presidential Medal of Freedom Awards”. Arrow, Kenneth J.; Bernheim, B. Douglas; Feldstein, Martin S.; McFadden, Daniel L.; Poterba, James M.; Solow, Robert M. (2011). “100 Years of the American Economic Review: The Top 20 Articles”. American Economic Review. 101 (1): 1–8. doi:10.1257/aer.101.1.1. Butler, Eamonn (2012). Friedrich Hayek: The Ideas and Influence of the Libertarian Economist, Introduction Ebenstein 2001, p. 7. Ebenstein 2001, pp. 7–8. Note: Von Juraschek was a statistician and was later employed by the Austrian government. Ebenstein 2001, p. 8. Ebenstein, p. 245 Hayek on Hayek: an autobiographical dialogue, By Friedrich August Hayek, Routledge, 1994, p. 51 Young Ludwig: Wittgenstein’s life, 1889–1921, Brian McGuinness, Oxford University Press, 2005 p. xii Hayek on Hayek: an autobiographical dialogue, By Friedrich August Hayek, Routledge, 1994, p. 53 Ebenstein 2001, p. 9. “UCLA Oral History 1978 Interviews with Friedrich Hayek, pp. 32–38”. 10 March 2001. Retrieved 14 September 2011. Kresge, Stephen; Wenar, Leif (22 July 2005). Hayek on Hayek: An Autobiographical Dialogue. Routledge. ISBN978-0226320625.:39 David Gordon (8 May 2009). “Friedrich Hayek as a Teacher”. Adam James Tebble, F.A. Hayek (Continuum, 2010), p. 2, ISBN978-0826435996 Deirdre N. McCloskey (2000). How to Be Human: Though an Economist. U of Michigan Press. p. 33. ISBN978-0472067442. The Sensory Order (1952) on learning

  • Backhaus, Jurgen G. (1 January 2005). Entrepreneurship, Money and Coordination: Hayek’s Theory of Cultural Evolution. Edward Elgar Publishing. ISBN 978-1845427955.:48
  • Handbook of Knowledge and Economics. Richard Arena, Agnès Festré, Nathalie Lazaric (eds.). Edward Elgar Publishing. 1 January 2012. ISBN 978-1781001028.:133

kanopiadmin (30 July 2014). “The Viennese Connection: Alfred Schutz and the Austrian School”. Mises Institute. Retrieved 2 January 2019. A. J.Tebble, F.A. Hayek, Continuum International Publishing Group, 2010, pp. 4–5 Federici, Michael. Eric Voegelin: The Restoration of Order, ISI Books, 2002, p. 1 Baxendale, Toby (25 October 2010). “The Battle of the Letters: Keynes v Hayek 1932, Skidelsky v Besley 2010”. The Cobden Centre. Retrieved 14 September 2011. “Info” (PDF). 2010. Malcolm Perrine McNair, Richard Stockton Meriam, Problems in business economics, McGraw-Hill, 1941, p. 504 Keynes v Hayek: Two economic giants go head to head Business–BBC News, 2 August 2011. Commanding Heights–John Kenneth Galbraith–Interview Conducted 09/29/2000, & accessed 21 March 2017. Paul Krugman. “The Conscience of A Liberal“. “The Opinion”, New York Times, 5 December 2011. Galbraith, J.K. (1991). “Nicholas Kaldor Remembered”. Nicholas Kaldor and Mainstream Economics: Confrontation or Convergence?. New York: St. Martin’s Press. ISBN978-0312053567. “Sir Arthur Lewis Autobiography”. Retrieved 14 September 2011. Ebenstein, Alan (2001). Friedrich Hayek: a biography (1st ed.). Palgrave, New York: University of Chicago Press. pp. 62, 248, 284. ISBN978-0312233440. “Interview with David Rockefeller”. Archived from the original on 6 July 2009. “No. 34541”. The London Gazette. 12 August 1938. p. 5182. Brittan, Samuel (2004). “Hayek, Friedrich August (1899–1992)”. Oxford Dictionary of National Biography (online ed.). Oxford University Press. doi:10.1093/ref:odnb/51095. (Subscription or UK public library membership required.) “Election of Fellows, 1947”. Econometrica. 16 (1): 117–122. January 1948. JSTOR1914293. Ebenstein, p. 116. Ebenstein, p. 128. A.J. Tebble, F.A. Hayek, Continuum International Publishing Group, 2010, p. 8 Beam, Christopher (3 January 2011). “The Trouble With Liberty”. New York Magazine. New York Media, LLC. Retrieved 7 November 2015. Milton and Rose Friedman, Two Lucky People: Memoirs (Chicago: U. of Chicago Press, 1998) Ross B. Emmett (2010). The Elgar Companion to the Chicago School of Economics. Edward Elgar Publishing. pp. 164, 200, 266–67. ISBN978-1849806664. Friedman, Milton (1951). “Neo-Liberalism and its Prospects”. Farmand: 89–93. Johan Van Overtveldt, The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business(2006) pp. 7, 341–46 Biography at Ebenstein, p. 195. F.A. Hayek, The Constitution of Liberty (London: Routledge & Kegan Paul, 1960), p. 11. Ebenstein, p. 203. Ebenstein, p. 218. Ebenstein, p. 254. “The Prize in Economics 1974 – Press Release”. 9 October 1974. Retrieved 14 September 2011. Ebenstein, p. 263. “Friedrich August von Hayek – Banquet Speech”. 10 December 1974. Retrieved 14 September 2011. Ebenstein, p. 261. Richard Cockett, Thinking the Unthinkable. Think-Tanks and the Economic Counter-Revolution, 1931–1983 (Fontana, 1995), pp. 174–76. John Ranelagh, Thatcher’s People: An Insider’s Account of the Politics, the Power, and the Personalities (Fontana, 1992), p. ix. “Letters to the Editor: Liberal pact with Labour”, The Times (31 March 1977), p. 15. “Letters to the Editor: Liberal pact with Labour”, The Times (2 April 1977), p. 15. “Letters to the Editor: German socialist aims”, The Times (13 April 1977), p. 13. “Letters to the Editor: The dangers to personal liberty”, The Times (11 July 1978), p. 15. Martin Anderson, “Revolution” (Harcourt Brace Jovanovich, 1988), p. 164 “Transcript for: Friedrich Hayek”. Retrieved 14 February 2015. Andrzy Walicki, “Liberalism in Poland”, Critical Review, Winter, 1988, p. 9. Dick Armey, “Address at the Dedication of the Hayek Auditorium”, Cato Institute, Washington, DC, 9 May 1995. Vaclav Klaus, “No Third Way Out: Creating a Capitalist Czechoslovakia”, Reason, 1990, (June): 28–31. “Cato Institute Book Forum – Friedrich Hayek: a Biography” (PDF). 8 May 2001. Archived from the original (PDF) on 3 June 2011. Retrieved 14 September 2011. Ebenstein, p. 301. Ebenstein, p. 305. Ebenstein 2001, p. 317. “About”. NYU Journal of Law & Liberty. See the chapter “The collaboration with Keynes and the controversy with Hayek,”, Heinz D. Kurz and Neri Salvadori, “Piero Sraffa’s contributions to economics,” in Critical Essays on Piero Sraffa’s Legacy in Economics, ed. H.D. Kurz, (Cambridge: Cambridge University Press, 2000), pp. 3–24. ISBN978-0521580892 Hayek, Friedrich (1989). The Collected Works of F.A. Hayek. University of Chicago Press. p. 202. ISBN978-0226320977. Nicholas Kaldor (1942). “Professor Hayek and the Concertina-Effect”. Economica. 9 (36): 359–82. doi:10.2307/2550326. JSTOR2550326. F.A. Hayek, “Reflection on the pure theory of money of Mr. J.M. Keynes,”Economica, 11, S. 270–95 (1931). F.A. Hayek, Prices and Production, (London: Routledge, 1931). P. Sraffa, “Dr. Hayek on Money and Capital,”Economic Journal, 42, S. 42–53 (1932). Bruce Caldwell, Hayek’s Challenge: An Intellectual Biography of F.A. Hayek (Chicago: University of Chicago Press, 2004), p. 179. ISBN0226091937 Nicholas Kaldor (1939). “Capital Intensity and the Trade Cycle”. Economica. 6 (21): 40–66. doi:10.2307/2549077. JSTOR2549077. R. W. Garrison, “F.A. Hayek as ‘Mr. Fluctooations:’ In Defense of Hayek’s ‘Technical Economics'”, Hayek Society Journal (LSE), 5(2), 1 (2003). Hein Schreuder, “Coase, Hayek and Hierarchy”, In: S. Lindenberg et Hein Schreuder, dir., Interdisciplinary Perspectives on Organization Studies, Pergamon Press Douma, Sytse and Hein Schreuder, 2013. “Economic Approaches to Organizations”. 5th edition. London: Pearson ISBN0273735292, ISBN978-0273735298 Chang, Ha-Joon (2014). “4”. Economics: The User’s Guide. London: Penguin Books Limited. ISBN978-0718197032. Hayek, F.A. The Road to Serfdom, Ch. 9 Stringham, Edward; Zywicki, Todd (20 January 2011). “Hayekian Anarchism”. George Mason University Law and Economics Research Paper Series. 11 (6). SSRN1744364. “Hayek on Social Insurance”. The Washington Post. The Pure Theory of Capital (pdf), Chicago: University of Chicago Press, 1941/2007 (Vol. 12 of the Collected Works): p. 90. Caldwell, Bruce. “Hayek, Friedrich August von (1899–1992).” The New Palgrave Dictionary of Economics. Third Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2018. Bettina Bien Greaves (1 April 1981). “Book Review: The Counter-revolution of Science: Studies on the Abuse of Reason by F.A. Hayek”. Röpke, Wilhelm. The Moral Foundations of Civil Society. Transaction Publishers. ISBN978-1412837859 – via Google Books. Gerald Edelman, Neural Darwinism, 1987, p. 25 Joaquin Fuster, Memory in the Cerebral Cortex: An Empirical Approach to Neural Networks in the Human and Nonhuman Primate. Cambridge: MIT Press, 1995, pp. 87–88 Joaquin Fuster, “Network Memory”, Trends in Neurosciences, 1997. Vol. 20, No. 10. (Oct.): 451–59. Hayek. The Use of Knowledge in Society – A selected essay reprint. Individualism and Economic Order, p. 11 The Mirage of Social Justice, chap. 10 The Mirage of Social Justice, chap. 12 The Constitution of Liberty, chap. 6 Ferguson, Adam (1767). An Essay on the History of Civil Society. Project Gutenberg: T. Cadell, London. p. 205. de Benoist, Alain (1998). “Hayek: A Critique”. Telos. 1998 (110): 71–104. doi:10.3817/1298110071. Lamey, Andy (24 September 2014). “Ecosystems as Spontaneous Orders”. Rochester, NY. SSRN2501745. Lamey, Andy (24 September 2014). “Ecosystems as Spontaneous Orders”. Rochester, NY: 2–11. SSRN2501745. Lamey, Andy (24 September 2014). “Ecosystems as Spontaneous Orders”. Rochester, NY: 12–13. SSRN2501745. Hayek, Friedrich (2011) [1960], Hamowy, Ronald (ed.), The Constitution of Liberty (Definitive ed.), Chicago: University of Chicago Press, p. 405, ISBN978-0-226-31539-3Wapshott, Nicholas (2011), Keynes Hayek: The Clash That Defined Modern Economics, New York: W.W. Norton & Company, p. 291 Harcourt, Bernard (12 September 2012). “How Paul Ryan enslaves Friedrich Hayek’s The Road to Serfdom”. The Guardian. Guardian Media Group. Retrieved 27 December 2014. Hayek, Friedrich (2007) [1944], Caldwell, Bruce (ed.), The Road to Serfdom (Definitive ed.), Chicago: University of Chicago Press, pp. 147–48, ISBN978-0-226-32055-7 Hayek, Friedrich (1976), Law, Legislation and Liberty, 2, Chicago: University of Chicago Press, p. 87, ISBN978-0-226-32083-0 Diamond, Arthur M. (Fall 1980). “F.A. Hayek on Constructivism and Ethics”. The Journal of Libertarian Studies. IV/4: 353–65. Kukathas, Chandran (1990). Hayek and Modern Liberalism. Oxford University Press. p. 215. N.P. Barry(1994), “The road to freedom—Hayek’s social and economic philosophy,” in Birner, J., and van Zijp, R. (eds) Hayek, Co-ordination and Evolution – His Legacy in Philosophy, Politics, Economics and the History of Ideas, pp. 141–63. London: Routledge. Milton Friedman and Anna J. Schwartz, “Has Government Any Role in Money?” (1986) John Gray, “The Friedrich Hayek I knew, and what he got right – and wrong” (30 July 2015) Bruce Caldwell, Hayek’s Challenge: An Intellectual Biography of F.A. Hayek (Chicago: University of Chicago Press, 2004), pp. 347–48 Farrant, Andrew, Edward McPhail, and Sebastian Berger. “Preventing the “Abuses” of Democracy: Hayek, the “Military Usurper” and Transitional Dictatorship in Chile?.” American Journal of Economics and Sociology 71.3 (2012): 513–38. Caldwell, Bruce; Montes, Leonidas (26 September 2014). “Friedrich Hayek and his visits to Chile” (PDF). The Review of Austrian Economics. 28 (3): 261–309. doi:10.1007/s11138-014-0290-8. Greg Grandin, professor of history, New York University, Empire’s Workshop: Latin America, the United States, and the Rise of the New Imperialism, pp. 172–73, Metropolitan, 2006, ISBN0805077383. Dan Avnôn, Liberalism and its Practice, p. 56, Routledge, 1999, ISBN0415193540. “Preventing the “Abuses” of Democracy: Hayek, the “Military Usurper” and Transitional Dictatorship in Chile?” (PDF). The American Journal of Economics and Sociology. Skarbek, David (2009). “F.A. Hayek’s Influence on Nobel Prize Winners”. Review of Austrian Economics. 22 (1). Smith

Simon Samuelson, Paul A (2009). “A few remembrances of Friedrich von Hayek (1899–1992)”. Journal of Economic Behavior & Organization. 69: 1–4. doi:10.1016/j.jebo.2008.07.001. The collected scientific papers of Paul A. Samuelson, Volume 5, p. 315. Fritz Machlup, Essays on Hayek, Routledge, 2003. p. 14. Sylvia Nasar, Grand Pursuit: The Story of Economic Genius, Simon and Schuster, 2011, p. 402 Lawrence Summers, quoted in The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World, by Daniel Yergin and Joseph Stanislaw. New York: Simon & Schuster. 1998, pp. 150–51. “Archived copy” (PDF). Archived from the original (PDF) on 18 January 2012. Retrieved 5 May 2012. See Hacohen, 2000. See Weimer and Palermo, 1982 See Birner, 2001, and for the mutual influence they had on each other’s ideas on evolution, Birner 2009 Milton & Rose Friedman, Two Lucky People: Memoirs (U. of Chicago Press), 1998. p. 333 e.g., Wolin 2004 Kenneth R. Hoover, Economics as Ideology: Keynes, Laski, Hayek, and the Creation of Contemporary Politics (2003), p. 213 Hayek, “Why I am Not a Conservative” online“Why I Am Not a Conservative”. Retrieved 12 October 2011. E.H.H. Green, Ideologies of Conservatism. Conservative Political Ideas in the Twentieth Century (Oxford: Oxford University Press, 2004), p. 259. Samuel Brittan, “The many faces of liberalism,”, 22 January 2010 “Why F A Hayek is a Conservative” Eamonn Butler and Madsen Pirie (eds) Hayek on the Fabric of Human Society (Adam Smith Institute, 1987) Boettke, Peter J. (2002). Why Perestroika Failed: The Politics and Economics of Socialist Transformation. Routledge. ISBN978-1134886319. Retrieved 2 January 2019. McKinnon, Ronald (1992). “Spontaneous Order on the Road Back from Socialism: An Asian Perspective”. American Economic Review. American Economic Association. 82 (2): 31–36. JSTOR2117371. Easterly, William (2006). The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Penguin Books. ISBN978-1101218129. White, William R. (2009). “Modern Macroeconomics is on the Wrong Track” (PDF). Finance & Development. International Monetary Fund. Hoffmann, Andreas; Schnabl, Gunther (2011). “A Vicious Cycle of Manias, Crises and Asymmetric Policy Responses – An Overinvestment View”. The World Economy. Wiley. 34 (3): 382–403. doi:10.1111/j.1467-9701.2011.01334.x. SSRN1513171. Schnabl, Gunther; Hoffmann, Andreas (2008). “Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets – An Overinvestment View”. The World Economy. Wiley. 31 (9): 1226–52. doi:10.1111/j.1467-9701.2008.01126.x. SSRN1018342. Cachanosky, Nicolas (2014). “The Effects of U.S. Monetary Policy in Colombia and Panama (2002–2007)”. The Quarterly Review of Economics and Finance. 54 (3). Elsevier. pp. 428–36. SSRN2170566. Brunnermeier, Markus K.; Schnabel, Isabel (9 June 2016). “12. Bubbles and Central Banks: Historical Perspectives”. In Bordo, Michael D.; Eitrheim, Øyvind; Flandreau, Marc; Qvigstad, Jan F. (eds.). Central Banks at a Crossroads: What Can We Learn from History?. New York: Cambridge University Press. ISBN978-1107149663. Taylor, John B. (2007). Housing and Monetary Policy (PDF) (Report). NBER Working Papers. 13682. National Bureau of Economic Research. “Lawrence H. White on Monetary Policy, Free Banking and the Financial Crisis | Mercatus”. Retrieved 19 September 2016. Sumner, Scott B. (2014). “Nominal GDP Targeting: A Simple Rule to Improve Fed Performance” (PDF). Cato Journal. 34 (2). Cato Institute. pp. 315–337. Retrieved 24 July 2019. Hayek, Friedrich (2008). Salerno, Joseph T. (ed.). Prices and Production and Other Works On Money, the Business Cycle, and the Gold Standard (PDF). Auburn, AL: Ludwig von Mises Institute. p. 297. ISBN978-1933550220. 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  1. Ian Jarvie (Editor), Karl Milford (Editor), David Miller (Editor) (2006), Karl Popper: a Centenary Assessment Vol. 1: Life and Times, and Values in a World of Facts, pp. 120, 295, ISBN 978-0754653752


  • Birner, Jack (2001). “The mind-body problem and social evolution,” CEEL Working Paper 1-02.
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  • Birner, Jack (2009). “From group selection to ecological niches. Popper’s rethinking of evolutionary theory in the light of Hayek’s theory of culture”, in S. Parusnikova & R.S. Cohen eds. (Spring 2009). “Rethinking Popper”, Boston Studies in the Philosophy of Science. Vol. 272
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Primary sources

External links

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Equality is Partnership Economics

In the public interest. This book is the future of economics. This is a balanced economics as caring and life support is integrated.

The Real Wealth of Nations: Creating a Caring Economics

  • Posted on October 6, 2015



In this powerful book, eminent social scientist, Riane Eisler shows that the great problems of our time — such as poverty, inequality, war, terrorism, and environmental degradation — are due largely to flawed economic systems that set the wrong priorities and misallocate resources. Additional Versions Available The Real Wealth of Nations: Creating a Caring Economics quantity Category: Book


America is teetering on the precipice of economic disaster. Commentators blame deregulated markets and a few bad apples at the top. But these are symptoms of deeper problems. Eminent social scientist and bestselling author Riane Eisler points the way to a sustainable and equitable economy that gives value to caring for our greatest economic assets: people and our natural environment.

Eisler offers a bold reformation: a caring economics that transcends traditional categories like capitalist and socialist and offers enormous economic and social benefits.
She describes business policies and practices, innovative economic indicators that incorporate caregiving activities, and new social structures. And she lays out practical steps we can take to move towards a society based on this more humane and effective economic model.

Like her classic, The Chalice and the Blade, The Real Wealth of Nations is a bold and insightful look at how to create a world in which everyone can achieve the full measure of their humanity.

What is the Partnership System?

The Partnership System provides solutions for our personal, social, economic, and ecological challenges. It is a  framework for organizing every aspect of society around life-supporting values of mutual respect and mutual responsibility, non-violence, equality, empowerment, and caring.

Riane Eisler’s research shows that partnership systems and domination systems are opposite ends of a spectrum of cultural possibilities for shaping our relations with ourselves, one another, and nature.

How do partnership systems and domination systems differ?

The degree to which a society or group adheres more to a partnership system or a domination system goes beyond Right-Left, Eastern-Western, capitalist-socialist, religious-secular, developed-developing, and other familiar categories. These contrasting social systems are different in many ways, but they have four key, interactive components:

  • Family and Social Structure
  • Gender Roles and Relations
  • Fear, Abuse and Violence
  • Narratives

Domination System Partnership System

1. Family & Social Structure

Authoritarian structure and hierarchies of domination in family and society. Top-down control of economic resources. Children observe and experience inequality and inequity as the norm.

Democratic structure and hierarchies of actualization. Caring is economically valued. Egalitarian and equitable adult relations are the norm. Parenting is not authoritarian but authoritative.

2. Gender Roles & Relations

Ranking of male half of humanity over female half. Rigid gender stereotypes, with “masculine” traits and activities such as toughness and conquest ranked over “feminine” ones such as care giving and nonviolence.

Equal valuing of the male and female halves of humanity, fluid gender roles with a high valuing of empathy, caring, caregiving, and nonviolence in women and men, as well as in social and economic policy.

3. Fear, Abuse & Violence

High degree of fear and violence, from child- and wife-beating to abuse by “superiors” in families, workplaces, and society.

Low degree of fear, abuse, and violence, as they are not needed to maintain top-down rankings. Respect for diversity and human rights.

4. Narratives

Beliefs and stories justify and idealize domination and violence, which are deemed inevitable, moral, and desirable.

Beliefs and stories present empathic, mutually beneficial, nonviolent relations as normal, moral, and desirable.

Five Key Guidelines

  1. The partnership/domination lens helps us see where to focus our energies to build better lives and a for a better world.
  2. No society is a pure partnership system or domination system.
    The core configuration of the domination system is starkly visible cross-culturally and historically in brutally repressive and violent societies – whether secular, like rightist Nazi Germany in the West or Kim Jong Un’s leftist North Korea in the East, religious, like ISIS in the Middle East or Boko Haram in Africa. More equitable and peaceful societies – whether ancient such as much of our deep nomadic forager past and Çatalhöyük and other prehistoric cultures, or modern such as Sweden, Norway, and Finland – adhere more  to the partnership system’s core configuration.
  3. Our brains are shaped by partnership- or domination-oriented environments.
    Findings from psychology and neuroscience show that the degree of partnership or domination in our foundational human relations — between women and men, and between parents and children — directly affects how our brains develop.
  4. Partnership- or domination-oriented families are a template for politics, economics, and other social institutions.
    Our experiences as children with either partnership or domination relations impact our whole society. They shape what we believe is “natural” in all spheres, from family and education to politics and economics. These connections explain why a top priority of regressive leaders (whether secular or religious, Eastern or Western) is pushing women into subservient roles in rigidly male-dominated, highly punitive “traditional” families. In these families, children learn it is painful to question orders, no matter how unjust, and that abuse and violence by those in power are normal and moral.
  5. Domination systems are not inevitable.
    For millennia in our prehistory partnership systems were primary, and for much of modern history social movements have challenged traditions of domination, — from the rule of kings over “subjects,” to men over women, to a “superior” race or religion over “inferior” ones, to the once hallowed “conquest of nature.” However, the movement toward partnership has been countered by fierce resistance, and we are today in a time of regression to the domination end of the social scale. The chart that follows shows four cornerstones of social systems we must change to four core components of partnership and domination systems highlight the actions needed to change our direction and continue the movement from domination to The Partnership System in all aspects of our lives.

The Politics of Partnership:


Domination System

Partnership System

1. Childhood

Promote fear-based parenting to teach unquestioning obedience. Present “spare the rod and spoil the child” as necessary and moral. Condition people to emotionally depend on those on top, rather than develop their own powers of thinking and creating.

Oppose funding for good nutrition, universal healthcare, and other measures that protect children and help them develop their potentials.

Dismantle public education and re-impose rote teaching-to-the-test to rank and humiliate children, teachers, and schools. Squeeze out education that teaches gender-balance, multiculturalism, peace, and environmental sensitivity.

Give little or no economic value to the “women’s work” of care giving in families. Oppose support for childcare, paid parental leave, and other caring policies.

Delegitimize violence against children as dysfunctional and immoral. Campaign to end violence and abuse of children. Promote partnership (non-violent, authoritative rather than authoritarian) parenting that empowers rather than disempowers children.

Ensure good nutrition and healthcare for all children. Show the personal, economic, environmental, and social benefits of this.

Support and improve public education. Promote multicultural, gender-balanced, and environmental education to help young people learn to respect themselves, others, and the environment and co-create a healthy future.

Demand high quality childcare and caregiver training. Award high status and economic benefits to the essential work of care giving, whether done by women or men, in families or the marketplace.

2. Gender

Reinforce cultural beliefs that women must be controlled by male heads of families and policy makers. Reinforce the masculinity -domination link and the femininity-subservience link. Oppose funding for programs that offer protection from violence to girls and women and the LGBTQ community.

Reinforce social priorities that value activities stereotypically associated with men over those associated with women. Denigrate men who are nonviolent and caring as “sissies” or “wimps.”

Reinstate curricula that focus on the male half of humanity, reinforcing mindsets that one kind of person or group is more valuable than another.

Fill policy-making positions with men (and token women) who support those who have economic control and want to take away rights to family planning and reproductive choice.

Change cultural beliefs that men are entitled to control women in families and societies. Unlink masculinity from domination and violence, and femininity from subordination and obedience. Unite to stop violence against girls and women and to protect the LGBTQ community.

Change social priorities so activities stereotypically associated with women are valued highly. Teach that caring and nonviolence are essential in men, women, and social policy for a more peaceful and just world.

Enact gender-balanced education. Support partnership education as foundational to end sexism, racism, anti-Semitism and other dominator “isms.”

Elect women leaders and bring partnership-oriented women and men from diverse racial and ethnic groups into decision-making to support caring and empathic policies, including family planning and reproductive choice.

3. Economics

Pass on costs of environmental and health damage to consumers, taxpayers, and future generations. Oppose socially and ecologically responsible business standards under the guise of “free markets” and “globalization.” Develop organizations, rules, and policies that lack empathy, such as agencies that cut back social services and maintain top-down economic control.

Oppose meaningful political campaign financing reform to maintain control of laws and social and economic policies by powerful economic interests.

Maintain the devaluation of the “women’s work” of care giving, and oppose caring policies.

Oppose changes in measures of economic productivity that protect socially and environmentally irresponsible practices.

Perpetuate old economic theories such as capitalism and socialism that came out of early industrial times. Ignore the realities of our post-industrial age when jobs are increasingly replaced by automation, robotics, and artificial intelligence.

Enact environmentally and socially responsible business standards and rules. Work for Partnership Charters for domestic and international corporations as well as in economic and environmental treaties. Reward pro-social policies and practices with tax breaks and other benefits and penalize irresponsible ones.

Enact public campaign financing and other means of ending economic control of politics, freeing policy makers to work for an equitable, environmentally sustainable, and caring economic system.

Show the economic value of caring for people and nature, and ensure it is adequately rewarded.

Use new measures of economic productivity (Social Wealth Economic Indicators) that focus on quality-of-life, human development, and environmental sustainability.

Form coalitions to support a caring economics or partnerism to meet the unprecedented technological, economic, and environmental challenges of our time of technological, social, economic, and environmental challenges.

4. Narratives/Language

Reinforce fragmented thinking through old categories such as religious vs. secular, Eastern vs. Western, and so forth.

Preserve cultural beliefs that human nature is selfish and violent, and hence that people must be rigidly controlled through fear and force. Discredit partnership -oriented beliefs, attitudes, and narratives as “fantasy,” and present self-interest and concern for others as opposites rather than as interconnected.

Use media monopolies and social media to negate partnership possibilities.

Use schools and media to make rankings of domination seem normal, natural, and divinely ordained.

Reinforce the belief that ranking male over female is divinely or naturally ordained, as well as gender stereotypes requiring men not to be like “inferior” women and never to embrace “soft” or “feminine” traits and activities like caring, care giving, and nonviolence.

Promote, often under the guise of religion, a “morality” of fear, scarcity, intolerance of the “other,” violence, punishment, and the necessity for strongman saviors.

Use and spread the social categories of partnership systems and domination systems, plus narratives that promote partnership.

Discredit narratives that promote domination. Strengthen the understanding that human nature is flexible and includes a powerful capacity for empathy, caring, and creativity. Show that self-interest and concern for others are not opposites but mutually supporting.

Ensure that the voice of partnership is heard, and counter false stories in social media.

Offer schools and media tools to recognize beliefs, myths, and stories that promote domination or partnership. Help them understand the consequences of each.

Create and disseminate narratives that support men and women worldwide in regaining their full spectrum of positive human capacities and possibilities. Recognize the value of caring, care giving, and nonviolence in both women and men.

Promote partnership morals and principles. Nurture the spiritual courage required to make partnership a way of life.