Transitions into—and out of—Liberal Democracy
I feel extremely honored to have the opportunity to deliver a talk named for Friedrich Hayek. His rival Keynes famously said:
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe them-selves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen New in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.
Although Hayek is certainly not the likely font for the frenzies of “madmen in authority” (how would a Hayekian acquire authority?), and whether you see him as right or wrong, he is plainly one of the handful whose ideas lay claim to rule the modern world.
Once you have read his 1945 article on “The Use of Knowledge in Society” you cannot get it out of your mind. It will forever affect what you think of free market pricing as an information-generating system. Indeed, when you grasp Hayek’s argument on free market pricing, you wonder that we can casually speak of the Fed as “setting interest rates.” Of course that phrase grossly oversimplifies the process. But you still are left puzzling at why we treat it so casually.
