The archive.

For the Walter Eucken Institut's twenty-fifth anniversary, Hayek defends political economy as a science of institutional consequences: socialism may be morally motivated, yet whether its means can reach its professed ends is an empirical and theoretical question. Civilization, he argues, depends not on the small-group instincts of solidarity and altruism but on learned abstract rules, property, contract, competition, and price-guided exchange, that once violated tribal morality yet made the extended order possible. Prices are prospective signals in a catallactic order, not the retrospective rewards that labor theories from Mill to Marx suppose, and no authority can consciously reproduce their knowledge-coordinating work. He reads socialism, finally, as an atavistic revival of primitive solidarity, and indicts the word 'sozial' as a weasel word that hollows out market economy, rule of law, justice, and democracy.

Ich glaube, das Wiesel-Wort par excellence ist das Wort »sozial«.

English translation: “I believe the weasel-word par excellence is the word "social".”

Britain's economic decline, in Hayek's diagnosis, begins with a price structure rendered impotent, above all in the labour market, where trade union privileges block the adjustment of relative wages that would send workers to where they are most valued. Across five parts of this IEA Hobart Paper, he treats the market as a telecommunications system whose competitive prices carry dispersed knowledge no planner could hold, and he charges Keynesian demand management with shifting the blame for unemployment from rigid wages onto government money. The closed shop, demarcation rules, and intimidatory picketing raise insiders' wages only by excluding outsiders; monetary expansion merely postpones a worse reckoning. Charles Hanson's postscript traces the union immunities back to the 1906 Trade Disputes Act and forward through the Thatcher-era reforms that began, incompletely, to revoke them.

The market is thereby deprived of the function of guiding labour to where it can be sold.

The vitality of Mises's private seminar, set against Wieser's dull lectures, opens this interview's return to interwar Vienna, where Machlup wrote his dissertation and argued monetary theory, business cycles, and method with Kaufmann, Schutz, and Feigl. Looking back from 1980, he redescribes Mises's a priori economics as a domain of construction—powerful for the pure logic of choice, useless for predicting a concrete steel price—and holds that economics is most fertile in negative predictions and least trustworthy in regression and macro-forecasting. He names methodological individualism and subjectivism as the enduring core of Austrian economics once marginalism became universal, concedes that liquidationist advice failed politically in 1933, and turns Hayek's account of the stable 1920s price level and unsustainable investment against Friedman's neglect of relative prices and costs.

I would say methodological individualism and subjectivism are the most important of the whole lot. Marginalism is internationally accepted. No one is an Austrian just because he is a marginalist.

Before the knowledge economy could be measured, someone had to decide what counts as knowledge-producing activity—otherwise the category would swell to include everything or shrink to nothing. Machlup's foundational answer distinguishes the stock of knowledge held at a moment from the flow disseminated over time, and locates economic significance not in private discovery but in costly circulation: teaching, publication, research, professional service. He separates knowledge industries, defined by their output, from knowledge occupations, defined by the work performed in any industry whatsoever, and ranges across the types and qualities of knowing—practical, intellectual, pastime, spiritual, even unwanted. Opening an eight-volume expansion of his 1962 study, this first volume assembles the conceptual architecture—stock versus flow, generation versus dissemination, industry versus occupation—on which later analyses of human capital and information services would rest.

Generation of knowledge without dissemination is socially worthless as well as unascertainable.

Pigou, Keynes, and Jöhr had built the business cycle partly on waves of optimism and pessimism, and Haberler begins there to stage a wider reckoning with rational expectations at the moment it was reshaping macroeconomics. He grants the new school its central insight, that anticipated inflation erodes any stimulus and no permanent Phillips-curve trade-off exists, but rejects its strong claim that systematic monetary and fiscal policy touches only nominal variables. That neutrality, he argues, assumes homogeneous, model-consistent agents and instantly clearing markets, and so neglects downward money-wage rigidity, unions, and contracts. Invoking Arrow against shared-model assumptions and Barro on the 1973-74 oil shock, he defends limited monetary accommodation when nominal wages cannot fall. His preferred synthesis is Fellner's credibility hypothesis: disinflation works only when wage- and price-setters believe the authorities will persist.

But money illusion is a fairly hardy plant.

'Every man is free to do that which he wills, provided he infringes not the equal freedom of any other man' — Spencer made this formula the axis of his politics, and Hazlitt's chapter treats it as a powerful anti-coercive instinct yet a rule too vague for the weight it must carry. Equal freedom, he objects, defines liberty better than justice unless aggression, fraud, and legitimate competition are carefully distinguished; all practicable liberty is liberty under law. What Hazlitt prizes are Spencer's strikingly modern warnings: that democratic majorities use public agencies to shift costs onto minorities, that hidden taxation corrodes political responsibility, and that legislators mistake society for a manufactured object rather than an evolved order of voluntary cooperation — with only Auberon Herbert beside him against the collectivist tide.

The average legislator, equally with the average citizen, has no faith whatever in the beneficent working of social forces, notwithstanding the almost infinite illustrations of this beneficent working.

Hazlitt continues his inquiry into the proper limits of government by turning from Nozick to John Stuart Mill, a thinker raised in the laissez-faire tradition whose exceptions, he contends, quietly dismantle any stable boundary around the state. Mill sorts government's work into 'necessary' functions — courts, inheritance rules, coinage, weights and measures, contract enforcement — and 'optional' ones whose expediency stays open; but the optional list swells with compulsory education, protection of children and the insane, limits on working hours, poor relief, and ceilings on monopoly transport. Each concession looks humane, yet together they normalize discretion. The fatal move, for Hazlitt, is Mill's warrant for any task private persons could perform but will not — a formula loose enough to sanction nearly any coercion, and, he argues, a seed of the modern welfare state.

After having warned us that the state may carry out its delegated powers very badly, he assumes in particular instances that they will carry out these powers very well.

Every postwar slump revived the same dread, and by 1980, amid inflation, recession, a weak dollar, and a soaring gold price, it returned with fresh urgency. Whether another Great Depression could strike, Haberler answers by separating trigger from amplifier. The catastrophe of the 1930s, he argues, was largely homemade, a cumulative monetary contraction the Federal Reserve could have arrested, worsened by a fragile unit-banking system, rigid gold-standard parities, and beggar-thy-neighbor protection. Drawing on Friedman and Schwartz, he rejects the Marxist collapse theory, Keynesian secular stagnation, and the Austrian overinvestment account associated with Hayek and Robbins, noting that Robbins himself recanted. A deflationary depression on that model he judges almost inconceivable now, given deposit insurance and flexible exchange rates; the real modern danger is inflationary recession, policy panic, and the protectionism that once turned national rescues into collective ruin.

Money GNP fell by 16 percent, real GNP by 13 percent, industrial production by 32 percent and unemployment shot up from 11 percent in March 1937 to 20 percent in June 1938—all in the short span of 13 months.

Why should sound economic arguments prevail when political privileges reward those best organized to defend them? In this review of Ludwig von Mises’ Economic Policy, Murray N. Rothbard praises his teacher’s accessible defense of capitalism but challenges the adequacy of his political analysis. Rothbard endorses Mises’ account of markets as systems of mass provision rather than fixed privilege, then asks why politicians should be expected to rise above ordinary self-interest. Sugar protection supplies the concrete test: producers have a concentrated stake in lobbying, while consumers bear costs too dispersed to command sustained attention. The review’s interest lies in this turn from intellectual allegiance to criticism. For Rothbard, economic education needs both an account of institutions that favor intervention and a moral argument against special privilege.

Fusionism, the conservative synthesis that promised to reconcile traditionalist moral order with libertarian freedom, is dismantled here as a myth that cannot stand as a philosophy in its own right. Reading Frank S. Meyer's arguments closely, Rothbard finds that on every decisive issue the mediation dissolves into libertarianism. Virtue cannot be coerced, since a compelled act is mere motion, not moral choice; community holds no rights above the persons who compose it; order arises from voluntary interaction, not state command. Meyer's real quarrel, Rothbard argues, is with utilitarian liberalism and the Chicago law-and-economics that swaps justice for efficiency — not with a rights-based libertarianism grounded in natural law. Only his appeal to tradition, which cannot judge itself without some standard beyond it, marks a true inconsistency. Fusionism emerges as a Sorelian coalition myth, not a coherent third way.

Unless he can choose his worst, he cannot choose his best.

Knowing how to produce something does not establish whether producing it is worth the resources consumed. In this introduction to the 1981 special issue An Economic Critique of Socialism, Don Lavoie makes that distinction the starting point for a question about how economic knowledge is generated. His reading of Mises and Hayek shifts attention from prices as numbers available to planners to competition as the process that makes prices informative. On this account, instructing socialist managers to imitate competitive outcomes leaves the central problem unresolved. The short essay offers a pointed orientation to the calculation debate and explains why Lavoie regards it as a challenge not only to comprehensive planning but also to economists who claim to know how market prices should be corrected.

Forty years after Schumpeter predicted that capitalism would perish of its own success, Haberler measures the prophecy against the postwar record. Schumpeter, he stresses, was no socialist: his forecast was diagnostic, resting on the claim that capitalism's economic triumphs corrode the cultural and political institutions that shelter it, from aristocratic leadership and the family firm to a bourgeois order steadily undermined by a rising class of resentful intellectuals. Haberler preserves that insight while pressing three corrections. Schumpeter oversold monopoly, much of which lives on state protection rather than creative destruction; his case for socialism's efficiency belonged to the 'logic of blueprints,' which paired comparisons of West and East Germany or Taiwan and China have since demolished; and his gloom about capitalist resilience underrated the growth the postwar decades delivered. The question, Haberler concludes, is how far public planning can go within democratic limits.

“Can capitalism survive? No. I do not think so.”