How Did Hayek Influence The Economy

Friedrich August Von Hayek

Many famous philosophers throughout history have helped shape the politics, social norms, and economic practices of today’s modern world. One of the greatest of these philosophers is perhaps the Austrian economic theorist, Friedrich August Von Hayek. Hayek is most famously known for his book, The Road to Serfdom, in which he outlines the consequences of government control over the economy, and liberty in the form of market competition.

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Friedrich Hayek was born in Austria-Hungary, on May 8th, 1899, to a wealthy Aristocratic family. His father, who came from a line of scholars, was a medical doctor and a lecturer. Hayek himself is known for his advocation of Classical Liberalism, and his work in the

He also spent time in the London School of Economics, where he took to the many debatable topics of his time period. Much of his debates revolved around “the business cycle”. Traditionally, it was believed that economies exist in an equilibrium, meaning they will eventually balance themselves out, due to the optimal distribution of goods. The problem was however, the rise and drops of the economy kept occurring, with each one being more dramatic than the last. Hayek mainly focused on the issues of supply, and argued that the printing of money and low interest rates by banks to promote investment during the recession, was a mistake. When money was too readily available, entrepreneurs would invest in products that have no demand amongst the population, which means products would not be sold, and companies would go bankrupt. In short, he believed that the only way to solve the economic crisis of the time would be for the government and large banks not to interfere with economic policies. He then spent the next few years in both the US and Europe lecturing on the subjects of politics, economics, psychology, and

In his book, he put several arguments surround the authoritarian politics of Europe at the time of World War Two. His first argument was that there is nothing special about the German race, and that they have no racial aspects to make them authoritarian in their politics and form of government. He also argued that the German Reich and the Soviet Union had gone wrong by taking to long term state planning of the government, and interfering with the natural cycle of the market. Hayek heavily criticised dictatorships and stated that no one person can be responsible for the planning of entire economies for every individual in a country, due to them not having enough information to base their decisions on. Despite his criticism of dictatorships, Hayek was comfortable with dictators who adopted free market policies. For Hayek, the free market acted as an agreement between the people, regarding the value of certain goods and services, and therefore the idea that a single person should plan for the millions of people within this agreement was a policy with a path towards failure. His book also explained the basis of how scarcity and excess affects prices; if something becomes scarce, it will be expensive, if it becomes plentiful, it becomes cheap. This is called Supply & Demand. In an economy with billions of transactions happening every moment, an increase of purchases