Fritz Machlup, Würdigung der Werke von Friedrich A. von Hayek (1977)

This 1977 German Walter Eucken Institut booklet is a scholarly appreciation, critical survey, and bibliography of Friedrich A. von Hayek’s writings. Translated from Machlup’s 1974 essay and expanded with a brief biography, Nobel materials, Hayek’s banquet speech, and an updated bibliography, it surveys more than fifty years of work across economics, law, political philosophy, intellectual history, psychology, and methodology. Its governing claim is that Hayek’s varied oeuvre forms one inquiry into coordination under limited knowledge.

Machlup’s analytical core begins by joining money, credit, capital, and the business cycle. Hayek’s early writings are read as an Austrian-Wicksellian account of how credit expansion changes relative prices, lengthens production beyond voluntary saving, produces malinvestment, and makes readjustment unavoidable. Money matters not as an aggregate price-level variable alone, but because it redirects plans and capital over time.

Meine Entscheidung, vier Fachbereiche, die von so manchem ihrer Vertreter separat behandelt wurden, hier als Einheit, als ein integriertes Mega-Thema zu präsentieren, steht mit Hayeks eigenem Standpunkt gegenüber diesen Gebieten in vollem Einklang.

English translation: My decision to present here as a unity, as one integrated mega-topic, four fields that have been treated separately by many of their representatives is fully in accord with Hayek's own stance toward these areas.

The 1931–36 “drama” with Keynes is handled without sectarianism. Machlup values Hayek’s critique of Keynes’s Treatise, yet explains why the General Theory won in a world of depression: Hayek’s counsel to let adjustment run its course was politically intolerable. Still, Machlup sees in Hayek an early demand for microeconomic foundations—cycles must be explained through individual decisions, relative prices, expectations, and capital structure.

The center of Machlup’s admiration is The Pure Theory of Capital, presented as a neglected but exceptionally penetrating work published when economists were absorbed by unemployment, war finance, rationing, and regulation. Its importance lies in intertemporal equilibrium, investment periods, durable goods, interest as a relation between present input prices and expected future output prices, and the heterogeneity of capital. Hayek’s economics becomes a theory of temporal order.

The next major movement turns to socialism, planning, and competition. Machlup follows Hayek from the Misesian calculation debate to the deeper problem of dispersed knowledge. The obstacle to central planning is not merely computational: relevant knowledge of capacities, opportunities, local conditions, and changing preferences is divided among persons and cannot simply be centralized. Prices coordinate because they economize on knowledge.

Das Preissystem ist ein „solcher Mechanismus zur Vermittlung von Informationen“, und „das bedeutungsvollste an diesem System ist die Wirtschaftlichkeit, mit der es das Wissen ausnützt“ (S. 115).

English translation: The price system is "such a mechanism for communicating information," and "the most significant fact about this system is the economy with which it uses knowledge" (p. 115).

This also shapes Machlup’s account of competition. Hayek does not defend the static model of perfect competition, but competition as a discovery procedure that reveals costs, opportunities, and errors. Hence Hayek’s liberalism has an institutional edge: property, contract, corporations, patents, and unions remain open to criticism when they suppress competitive order.

The chapters on law and political philosophy show why Hayek’s economics led beyond technical economics. General rules, spontaneous order, and freedom belong together because no authority can know in advance which uses of liberty will prove fruitful. The sections on intellectual history present Hayek as a theorist who thinks through Gossen, Menger, Wieser, Cantillon, Thornton, Mill, Hume, Mandeville, Comte, Hegel, and the Austrian School. The note on psychology registers The Sensory Order; the methodological chapters give fuller weight to Hayek’s critique of scientism and exact prediction in social inquiry.

Wenn die sozialen Erscheinungen nur insofern eine Ordnung zeigen würden, als sie bewußt entworfen wurden, wäre allerdings kein Raum für theoretische Wissenschaften der Gesellschaft und es gäbe, wie oft behauptet wird, nur Probleme der Psychologie. Nur insoweit als Resultat der individuellen Handlungen eine Art Ordnung entsteht, doch ohne daß sie von irgend einem Individuum geplant ist, erhebt sich ein Problem, das theoretische Erklärung fordert.

English translation: If social phenomena exhibited order only insofar as they had been consciously designed, there would indeed be no room for theoretical sciences of society, and, as is often claimed, there would only be problems of psychology. Only insofar as a kind of order arises as a result of individual actions without being planned by any individual does a problem arise that demands theoretical explanation.

Machlup’s final judgment is explicit. Among several Hayeks—cycle theorist, capital theorist, theorist of socialist planning, philosopher of law, and methodologist—he gives first place to capital theory and second to planning and knowledge. The booklet’s continuing relevance lies in showing Hayek’s work as one program: intertemporal coordination, decentralized knowledge, rules of liberty, and epistemic modesty belong together.

Wenn ich das Fachgebiet auszuwählen hätte, auf dem Hayeks Beiträge am fundamentalsten und bahnbrechendsten waren, dann fiele meine Wahl auf die Kapitaltheorie.

English translation: If I had to select the field in which Hayek's contributions have been most fundamental and pathbreaking, my choice would fall on capital theory.