An Interview with Friedrich Hayek: Part I

0:00so that we younger men and also the people listening with the pamphlet will understand the character of the figures involved in the Austrian School. And my first question that I had was on Menger. What was his... As you say, he did not want to publish and yet he had enormous impact of the ideas. What was the character of Menger as a teacher or a personality, which may be his carry forth even though he wrote so little? Well, that's a question I've often asked myself. See, I have a new man. I've seen him a single time.

0:47When he was about 80, long retired, marching in an academic profession, and the comic part of his story is When later I wrote a biographical essay on him, editing his works, there's one single sentence which is based on my own experience, and that is the only one which is wrong, Because he made a very impressive figure, so I described him as a tall man, and after whatever was told to me, you are alone, it's quite medium-sized. He was such an impressive figure, having seen him, I described him as a tall man.

1:34Now that his seminar, which ceased as early as 1903, when he retired the small group of very intelligent people and as was again a tradition associated with regular meetings with his former teacher, The former students, who were already occupying important positions in a coffee house, created a Menger circle that built in the century, which had largely vanished.

2:23that was dominated the first third of last century, and since Menger retired in 1903, very little was left beginning of this century. Then during World War I, the most powerful personal figure among his students, Boehm-Bawerk, also died. And so died the great textbook expositor, Filipowicz. And indeed, even the third man, who ultimately became my teacher, Friedrich von Mises, headed one of the last governments of the Austro-Hungarian Empire, being Minister of Trade, who had tempered the university.

3:21So when I came back from the war in 1918 was not a single one of the great features teaching. In fact, economics was in charge, temporarily and other comically, of an economic historian who was a socialist and became later the founder of the famous Marxist-Freudian Frank Institute of Social Research. But, Rieser came back. Who was that? I don't know. Grünberg is his name. Carl Grünberg.

4:06Later, the later people of the Frankfurt Institute were representative figures of Marx-Freud tradition in the 19th century. But he himself was an economic historian inclined in that direction. Scholarly Head was something which became a very political institution, but wholly uninteresting to us. And there was Mises who came back and became still my teacher. And Mises, who was what's called a present, an unfaithful man, Man who had the license to teach at the university, that to earn his living as a secretary of the Chamber of Commerce.

5:04Now, please be discreet about this point, because it raises very touchy problems. But it is commonly believed, and Mises himself asserted it, that he was never given a professorship because of anti-Semitism. It's not as simple as this, because half the law of faculty consisted of Jews. Well, the problem why Mises didn't get a professorship is a very peculiar one, and my answer to this, which I don't think has ever been stated, but which I will tell you is, all of our Jews who get a professorship, we had to have the support of these Jewish fellows.

5:57Any other Jews who were sufficiently eminent to be supported, because all the appointed Jews could get a professorship. But the Jews who were teaching were all socialists, and Mises was an anti-socialist, so he could not get the support of his own fellows. So the reason why I did not get a professorship was not really anti-Semitism, but he wasn't liked by his Jewish colleagues. It's a very comic story, and which I tell you is hesitation, because it's something you cannot prove. I'm quite certain it's correct, for my knowledge of the position, but the Vienna of the 1920s and 1930s is not intelligent without the Jewish problem, which was not a problem simply of Christians and Jews, but a very large middle group in between the two, Partly of baptized Jews, partly of Christians who have made friends with the Jews, and there was close contact with the purely Christian group, the mixed group, the game between the mixed group and the Jewish group, but not between the two things.

7:25I became very much aware of this quite a recent time ago, And I was asked whom of the great figures of Yemen I had known at the time. Have you known, for instance, Schrödinger? Yes, of course. Wittgenstein? Yes, of course. And so on. Then he came to Freud. No, no, I couldn't possibly have known Freud. Why? Because he belonged to the Holy Jewish School, and that was beyond my reach. Was not Freud a private docent for many years himself and was Freud also a private docent?

8:28When did he ever take a university position? Never, you know, both Mises and Fried. It's a title, Professor, but it was purely a title. The Werth Privatus Center had the license to teach what the Privatus Center means, and they finally decorated for being called professor, but never received a penny from the university. It's remarkable that two of the most important minds of Vienna were unable to do it. A very large number. And not only people, in the majority of instances, they were Jewish, but not only Jews. People who had highly unpopular views, but were recognized in a way, would get a license to teach, but not the regular professorship.

9:21Now, I have a question on this mixed group. Is this another religious group or what do you mean a mixed group? Mostly Christian Jews and Christians who were not anti-Semites. Oh, I see. who readily mixed with each other, and it was on the margin of the two pure groups, there was an intermediate group of people who very readily mixed and knew each other, which the extreme Jew and the extreme Christian would hardly communicate with the other side. You were a relative of Wittgenstein, are you not? The first time I heard of Wittgenstein was when I was a very small boy, and one of my aunts of my stern country answers once remarked, My grandfather has sold his daughter to a Jewish banker in Vienna, it was also a relation to the Wittgensteins ever came about.

10:35I see, all right. But they were completely established in Vienna society, as in general, the Jewish problem in Vienna became acute only as a result of the recent emigration from Poland. There was an old established Jewish population in Vienna, partly of local origin, partly of Hungarian or Bohemian origin, who were fully accepted to recognize the violent anti-Semitism occurred when very primitive, poor, Polish Jews immigrated already before the war and partly in flight from the Russians during the war.

11:27Then I became thrilled with the type of Jew which hadn't been known before in this caftan, a long beard, all that which we hadn't even seen before, and it was against them that the valiant anti-Semitism arose. And was that in the 20s, 1920s or 30s? What period? What period? During Do you think, was Menger equally respected by all scholars in the United States?

12:20In terms of the period, was he seen as a profound, a penetrating mind? Menger would be, and as I said, during the 1970s, the 1870s, the end of the century, the division was not yet so sharp. Menger himself made himself, before he became a professor, The reputation of the Germanist, which was in general a larger Jewish profession, so he was very much respected in the Jewish intellectual circle. Well, Menger's story, I ought not to anticipate too much, because I have now a great deal of information, what is still a confidential document.

13:12Menger's son, the mathematician, is producing a biography, which I have read in manuscript, which is not yet published, so I mustn't give away too much. Well can you tell us, can you show us on this map any highlights of Menger's life that we should note, like you were saying, now he was, wasn't he the finance minister? No, no. He was only for many years tutor of the Archduke Rudolf, the son of Francis Joseph who committed suicide in the end. and through that he had intimate contacts, but apart from this he refused every official position.

14:03In contrast to his successors, the Boehm-Bawerk was for many years Minister of Finance and Mises in the end had to come in more as a figurehead at the very end of the old empire. Mises believes that a suicide, he says in his notes and recollections, he believes it was the pessimism about the future, which had been imparted to him from Menger, which led to the suicide, that it wasn't the relationship with the girl, but he despaired about the liberal future. Do you think that Mises is exaggerating that? Yes, it certainly contributed greatly. I wouldn't dare to make a simple statement of any one cause.

14:53This was a very strong contributory factor. Rudolf, the Crown Prince, had been made by Menger at a 19th century level. Very much in conflict with the Austrian then ruling tradition, his attempts to reform them proved unsuccessful. The chance of his father living on forever, as it turned out to be true, that he had no prospects in the foreseeable future to do anything about it, was quite enough to put him in a state of very deep depression.

15:40I believe the immediate cause was something quite different, but that his basic depressive view of the world, which made him ready for a suicide, was due to his seeing the world in the light of an essential liberal, which Menger had made to him. Menger's influence on him was evidently, by cover now from the period of his son, very much greater than I had imagined. Mises, who couldn't have known this except by stories, is evidently right. The influence of the seminar was very great, Menger's, Boehm-Bawerk's and the meetings that Mises had in the 20s.

16:34Well, it's different. What were the differences? The Menger seminar did not produce many academics. From the Menger seminar emerged quite a number. Menger started too late to have his immediate successors, Boehm-Bawerk and Mises as his students. Mises and Boehm-Bawerk had just completed their studies and were already out of the university by the time he started teaching. Now stop, I'm confused on the chronology, I'm confused here. Which book are we speaking of?

17:19The Gunsensei. And that was published in the... 71. All right, now that was the beginning of his published, now I'm getting it, of the published career. Mises was, didn't he get his degree about 1906, or thereabouts, Mises was only post-Mengalian, Mises was never a direct pupil of Menger, and Weiser and von Boehm-Bawerk came on the faculty, or were they both students in that seminar with Menger, they were not? They had already graduated and gone as graduate students to Germany before Menger was appointed.

18:08Menger assisted them because he found in them the first people who believed in his book. But they were no longer students at that time. And from the mid-seventies, when Menger began to teach, to 1903, when he retired, his seminar produced a substantial number of distinguished high civil servants and statesmen. as a seminar and through this coffee house around, a considerable influence on the upper intellectual level of Vienna.

18:57And you say that coffee house is gone now? Do we know where it was? Do we have a look? No, I'm not sure. I believe I know. Do we all know Vienna at all? Not yet. Not really, I brought this map of the central part of Munich. Will that help? Well, the main... Because here's a university, I think. This is the university, which block of houses has at both ends coffee houses. This is a more popular one. This is the one especially favored by the economists. But it was quite regular that professors would meet their students after the lecture in the coffee house.

19:50I'm not sure which coffee house Menger frequented. In this century, it was this one which no longer exists. Which one is it? Try to get the two names. It's called Lundman, and it was called the Kuzler Cafe, the Athens Cafe. The Lund exists, and so all the history used to be the general sort. The Kuzler Cafe on the other side became specialized to the economists, In particular to some of them, what they have as a factor is spending their life as they're close to their house. Do we need to get the spelling of those? Yes, perhaps we should get the spelling so that we...

20:39Sure, write it down. Take that. Let's get the spelling of both of those. Did students meet with the senior professor over coffee? The professors would live, one typical instance I knew very well, in the early morning lecture, would take coffee there and the students would come, if they wanted to come sit with us. For the students, the coffee was very modern, to look sure it was the place to go to. While the Vienna Coffee House, of course, where in fact you could spend a day paying for a cup of coffee, was very attractive for intellectuals of a slightly higher level than the actual student.

21:35The student coffee thing even seemed cheaper in the university. But the professor who after his lecture retired to a couple of coffees would receive from us. I suspect, but I do not know, that like when he lay slightly older, a younger man, I knew, Menger also would have met his people at the Cafe Lundmann. But in Menger's case, the main important was that not students, but ex-students met regularly in a kind of circuit discussing current politics. While Menger never became active in current also-anthologies as an influence of the scheme and the intellectual heart of 19th century liberalism became very, very important.

22:42And even the highest civil servants, who would have been his students in the 1870s, would sit in 19th or the beginning of the century, to regularly come once a week for a conversation with men. That became the heart of what is so difficult today. You can't talk to Americans about liberalism without the understanding what it means. Well, we'll footnote your article to it where you explain it and that will be enough. We know what we mean, so you go ahead. In fact, if you have to explain it, you might almost say that in 19th century continental Europe, liberalism meant that American conservatism means today.

23:37That is roughly the right definition. In this sense, in opposition against the advanced interventionism and in socialism of the government, the Menger group remained a Gladstonean liberal group in Europe. and he remained the inspirer of all sorts of, there was no point that he couldn't from memory, to mention the people in high public positions to men of the theoretical, the wise men available.

24:28did those men at a later date achieve important positions or influence to either turn the thinking of the public or at least of the other ministers away from the interventionism or did they I mean if they did when did their influence end was it during the war? When they died. Well all right all right and when was What was that, in the 30s, the 20s? In the second and third century of the century. That's a decade of this century. I will say the first and the second, and then to the left, when all of that collapsed.

25:16People were silly about it, but they were very tired of the 12th century. What about von Boehm-Bawerk's seminars? Well, let's talk about those. Well, that is quite different here. This was the center of the academic development. That was the place where the great, the Boehm-Bawerk and Mises, as you will read, were wholly different characters. It's very curious. There were exact school fellows, university colleagues, fellows in law, Working on the same subject, going together to German University, but of the wholly different scientific attitude.

26:01I once read, written an essay on the title, Two Types of Mind, which is partly modeled on this, Boehm-Bawerk, the absolute master of his subject. He used the answer to everything at once. Anything which had been said before, he knew, a clear conception of it all. And Mises was the puzzler. Mises had a tendency to simplify, but to avoid the ill difficulties. Mises, a slow, thoughtful person, to whom nothing was simple, was all frightfully difficult, We hated discussing it, discussing anything, because you had to give a quick answer.

26:49You want to think about everything else. So Marshall took an episode, which is rather amusing. Sometime before World War I, for a while, the English economist Alfred Marshall and Wieser happened to go for summer holidays to the same place in the South German, the Wolomites, and nodded to each other, year after year, polite, but neither at any wish to discuss economics. Then Boehm-Bawerk came on a visit, brought them together, insisted that they discuss economics.

27:34They all reported that a very exciting day, but neither Wieser nor Marshall ever went to the same place again. Where was this? In St. Goldner Valley, in the Dolomites. Was Wieser more like Frank Knight in the way he went about things? Oh, yes. I have, in fact, in that essay which I mentioned about two types of life. In a footnote, give wine and saying, no, it's a similar pair. Yes, to me. His, these are, we hear very little of his students. We hear more of Boehm-Bawerk's students. Is there a reason for that?

28:21Oh yes. In the seminar, there are a whole lot of different pairs. Boehm-Bawerk's, you know, were highly exciting. He had, apart from the main original thinkers of his own school, a good many of the socialists of the time, people like Otto Bauer and, forget all the names, with violent discussions going on. What was discussed in Boehm-Bawerk's seminar was discussed all over the university. The Wiesel seminar would be quietly on one knee, carefully prepared paper, which then picked to pieces, was very far away from any topical issue when he cried.

29:12The Boehm-Bawerk seminar ended before World War I. It died in 1914 or 15. I have only known the Wiesel seminar. It was interesting for a theoretical point of view, but Ludwig would be really excited about it. Were you in both? Did you have... Of course. When Boehm-Bawerk died, I was 16. That's right. All right. I knew Boehm-Bawerk only by chance, because he happened to be a friend of my grandfather, my maternal grandfather, and he was at the same time professors at Innsbruck in the 1980s. And, actually, it may also amuse you, used to climb mountains together here in the Pyramids, And he did, which was still possible in the 1880s, do some first ascents together to some of the big summons with the big stars.

30:17And before my grandfather died, maternal grandfather, I repeat, in 1910, I used to meet Boehm-Bawerk in his house, Before I knew what the word economics meant, it was just a close friend of my parents and grandparents, but he died in 1915, so even when he died I was 16. I used later to meet his widow still, who had been a maternal friend of my mother. My mother called his widow aunt, because in the years she was together in Salzburg.

31:02Who do you regard as the most important of the graduates of Boehm-Bawerk's seminar? Mises, of course, would be one famous graduate. Schumpeter was one. I believe Karl Pribram was one. Yes. Were there any other? I think that Karl Pribram was not really a traditional person. I understand that, but he was an important... from Boehm-Bawerk, but I'm not sure whether Mises' main successor, Hans Mises, may or may not have been. And then there were a few other quite influential economists who were not strictly Austrians, particularly called Alfred Ammann, but then as I said these various later socialist leaders Otto Bauer, who became one of the leaders of the Austrian Marxists.

31:56Ilfer Bling, who later played a great role in Germany. Emil Lederer, who went to Germany since the 1920s, had to appoint a new professor in Berlin. The one who took a socialist, had to take it from the Austrian school and so took this rather insignificant leader, which was accrossed by Schumpr-Emerick. He had counted on the chair in Berlin and didn't get it. Many didn't get it. He went off to Harvard. And that is roughly the count.

32:41On this point, the exact content of Boehm-Bawerk's seminar, my former assistant, Neube, who is now in Stanford, seems to have got some information. It's the only point on which I have no problem. It's very curious, see, among the generation just above me, the experience of the Boehm-Bawerk seminar was the great experience of the youth, who all the time talked about, but there were no details, the atmosphere, as if it were familiar to me, but as you now ask me, give me some information, I know no facts, I know what names were occasionally mentioned And, it certainly, in the Vienna of the 1920s, the reference, oh we discussed this in the Boehm-Bawerk seminar before the war, was a constant event.

33:49This was a great experience of the generation just before me, who constantly remember, oh how interesting when we are all discussing this together. Now, were these seminars always held at the university? These were all held at the university and bring back to this. In the first floor of the west wing, the left wing, let's call it. If you look at it from the English outside, the first floor of this was the center of law and economics. And is that still where? That's still where it is, yes. The only other center which for the later period is the offices of Mises and accidentally myself and Albert, which is in the Chamber of Commerce of Vienna.

34:46Still, he left in 1934 to all his living from being one of the secretaries of the Chamber of Comics. He became there the source of two appointments in the same building, not in the same office. Well, in the same office in a certain case, yes, we got Harbour Libbers as Librarian of the Chamber of Commerce. Although Harbour Libbers remained in Vienna, he worked in the same building. My story is a little more complicated.

35:34When I graduated in 1921, I wrote in Vienna a new temporary office to carry out certain Conditions of the Peace Treaty of 1918, The Settlement of pre-war private debts between the nations. Mises, on behalf of the Chamber of Commons, was one of the directors of this new office.

36:23It was very attractive to new people, because if a young man who had studied law and spoke two foreign languages could get a much better position in the other circumstances. I was one of the fortunate men and came, not at the game pieces, off the record, but for I came to Mises with a letter of introduction from Mises, recommending me for this position. And Mises, I still can't see him before me, reading Mises' lecture, letter of introduction. Look at me. Mises says, you are promising me, young economist, I've never seen you at my lectures.

37:10He gave me the job, and so for the next five years, interrupted by a visit to America, was working under him, and then when I brought back from America the new idea of great predictions, and the short thing which the Harvard Economic Barrow made when it developed in the early 20s. Mises helped me to create, in the same building, an institute for business cycle research. About what year? That was the second part of the 20s.

37:56The first part of the 20s I worked with him in the office. And from 27 to 31 exactly, till I went to London, I was actually an organizer of this institute, beginning as myself and the secretary, and gradually expanding it, getting in Morgenstern as my collaborator, who afterwards took over from me. Now, can you locate the Chamber of Commerce? The Chamber of Commerce building then became so important, because during the 1920s until he left in January 1940, when I had already been gone, Mises office was a place of a sort of private seminar that took place at the Chamber of Commerce during the academic year twice a month.

38:58Now, Indiana which answers, while the coffee houses, both of them, may use a one which has survived as a representative for the other which has not. Now what, this is significant though, now you are saying that Mises' teaching outside of the university for advanced teaching, students did not get credit for this. Nothing at all, it was purely discussion club. What are some of the people who came that you remember or ever heard of that would be important for you?

39:50Well, first of an intermediate generation between Mises and Mayer, people who were still in the Boehm-Bawerk seminar, A man called Striegel, whom we all expected to succeed to the professorship, but who died young. And another man, whose essays will appear shortly, called Schams, S-E-H-A-M-S. When comes my nation, in which I am slightly the oldest, although I have one contemporary and one who might be able to interview a lady called Steffi Brown, who lives in New York.

40:50How would that be spelled? She now speaks in English, P-R-O-W-N. She used to be P-R-A-U-N when I knew her in Austria. I have got an address book upstairs. I might give you one of those addresses later. She, I believe, is the only surviving member of my own age. There used to be another woman of the same age. was secretary of the Bank Association, the name of Lieser, L-I-E-S-E-R, the name of Lieser, who had been dead for many years.

41:46Then comes Haberloh, only a year my junior. Then, to take first the better known figures, Bachluck, who was now two years younger, Bornstern, who was at Princeton.

42:11Well, you might say it was a group of some, a total of up to 20 people from about 12, Chapter 12 would regularly meet twice a month in the Mises Actual Chamber of Commerce office without any formal connection with the university, all ex-university students. Discussing, I believe predominantly, questions of scientific methodology rather than particular problems.

42:58Even if we start out with a very practical, concrete problem of the time, would very soon be off with the conflict between the different schools of economics. Later, in the early 1930s, in the last four years, when it still met, it became a considerable point of attraction for foreign students. That was the last I had left. I don't remember. I know that during the later years French, English, American students used to come in for a term, take part in these discussions.

43:47and during the final years of the Austrian School in Austria, it was the center, not only for the Austrian School itself, which attracted students from all over the world to join into the discussion. That I knew mainly by hearsay, because I was at first to leave Vienna before ambition in any sense had yet started, because I never imagined that I was emigrating, but if at the age of 32 you're offered a professorship at the University of London, you take it.

44:33Now let me ask you a question that may embarrass you, but it must be asked. If Mises was attracting English-speaking students in the early 30s, or perhaps even some in the late 20s. Yet, Mises is known in the English-speaking world in the 30s only because of you, really. This isn't production. Not as simple as this.

45:19Well, for those of us who remember it, that's how, so maybe you can clarify. The decisive person was Lionel Robbins, later Lord Robbins, who said, I'm the School of Economics, who just... The question is simply, we know of Robbins' early work today, in retrospect, because of the Nature and Significance, which I think was 32. No, I believe it was 30 already. Perhaps you're right, but that is, we don't think of that as being a book promoting Mises or the Austrians. So there must be some other influence you have in mind there that was more important than your, because prices and production... You know, by that time, 1931, Mises was still a relatively minor figure, confined to a particular field.

46:16But the man had done two things, a theory of money and the racism of socialism. His great book, his philosophical essay, came out even in German only in 38 and the American version only in the 40s. That established him as a great social philosopher. But by the early 30s, Mises was internationally sufficed, he was known at all, which is limited. But known to people like Robbins as a man by time of distinctive competition, the fear of money developing men and developing most effectively its criticism of socialism.

47:08But for those of us who are young or starting out and we look at a man's career, who in his thirties, I gather, wrote The Theory of Money and Credit, which in retrospect seems to be a masterpiece and a path breaking book and then the theory of socialism which influenced you and Robbins and Ropke and I don't know how many others but a lot of very bright young men of his era and turned them from socialism. How is it in 1931, which is 19 years after Money and Credit and 9 years after socialism, why

47:50Why is it that he was still unknown in the profession? None of his books was set up. That's a good reason. See, it was Robbins and I who arranged it, and none of his books was set up. What I want to know is, wait, now you were invited to be a professor at the London School, or was it the London School of Economics? But why wasn't Mises invited? Well you see, I had done a thing which none of us had done. I had before the beginning of Rockefeller fellowships, in 1923, on my own risk, gone to America, spent 15 months in America, was in consequence speaking fluent English.

48:41That's number one. It's not the whole story. That was a precondition. Mises could hardly have done this at the time. But two, I had, while in America, there was a lot of time to the criticism of a peculiar kind of American underconsumption analysis which was very similar to what Keynes later produced as a foster and catching, so I don't know if you still remember these names. I explained it correctly and was absolutely ready to criticize any other consumption theory which then Keynes produced.

49:30And I found superman completely equipped to deal with this. This would have been about what year? What year that you began to interact with Cain? Well, I'd begun still in the States in 1924, but I was working all the time on this sort of problems. I was preparing, and that's a search of four elements, which I have to mention. I had started writing a great treatise on money, which I never completed, but for which I had proposed to start is ten chapters on the history of monetary theory and policy, of which, by the end of the 20s, had opened the first four chapters healing with the development in England between 1690 and 1900.

50:32So when I came to London, and I will explain this in a moment, I proved to know much more about the history of English monetary theory than any of the English professors, which caused a great impression. And the fourth and the luckiest subject is that when I gave in Vienna my initial lecture as a Privatutsend, I chose for my subject this kind of consumption theory which had just come acute in England and Robbins could read German. It's a very almost unique factor, an English professor who could read German literature, and I had the good luck that he pounced on my subject.

51:22This is the thing we need at the moment, to fight Keynes, so I was brought in for the purpose, produced a course of lectures which was original, which suggested more knowledge of the history of English theory than anybody else. was sympathetic by Robbins, who had been influenced by the Austrian School. We at once understood each other. It was a combination of accidents to my appointment in London. I mean, it was luck from beginning to end. But it was prices and production which brought the Austrian trade cycle theory to the attention of our world. I want to say a fifth point, equally accidental, the invitation reached me when I had for the first time a clear picture of this theory but had not yet gone into all the complicated details.

52:27Since I have started working it out in an elaborate treatise, I would have encountered any number of complications. I would have produced a very difficult treatise. The invitation met me at the moment, and I could just quickly tell the story as a general survey, as I then saw it, without yet being up here. Then I give you the main illustration, which later held up the development. For my simple exposition, I could operate with a grave simplification in Boehm-Bawerk, operating with an average period of production. Now the average period of production is a beautiful simplification, but doesn't help you at all.

53:15A gentle exposition I could give as soon as I became aware, it's not a question of a single average period of production, for the needy complex structure. I would have got all... If I had been aware of this in 1931, I could not have given a beautiful, simple exposition. But it would have confused everybody. But I was myself yet aware of the difficulty. So I gave these incredibly successful lectures. But it was not really the marriage. It was a situation in which this particular set of lectures It's in London, and I expected nothing less than that four lectures I give in London would reach an invitation.

54:04And of course, in the first instance, it would do so much on the invitation for a visiting professorship for one year. But I fitted in so well, and now Robin and I became very close friends. Well, that happened to a number of your contemporaries, but let me ask you this. The London School was originally a Fabian institution. How was it that by 1931, you and Robbins were both on the faculty?

54:53As a person, I hold it due to the person of Eddie and Canon. The webs, in a sense, were very decent. They wanted a good politician who was an independent mind, and we are so convinced that unprejudiced study of economics must lead to socialism. That's a mistake of someone who wouldn't at all. And he who was the main professor and Foxwell who was a professor of money banking were completely separated from the Fabian part. All through my years, although in a way Lasky and I had something in common. We were both great book collectors, but apart from this, we had nothing in common at all.

55:52We hardly spoke the same language. Don't ask me to begin to tell you stories about LSE, because of its comic place, and the extraordinary person of Harold Varsky was the most peculiar place. Give us a couple of stories. We need at least one or two. Harold Varsky was a pathological problem. means even one of his friends today recognized that he was a pathological liar who just couldn't. If you have time, we'll tell you one or two stories, which everybody will first from our book collecting experience.

56:41You know, book collectors are like fishermen. They always have found something unique. But Harold Lasky took the following course, would come one midday when we always met up for lunch in the senior common room. Enthusiastic, just been to a chair in Carthage and in one of those boxes there were some beautiful French duodecimal volumes of the 18th century I turned him over, all the religious stuff, suddenly found that the back of one was thicker than the other. So I asked the man, how much is it? Six pence each.

57:26He put down the shilling, took the two-volume, slid it open, and out fell four letters exchanged, which it also on white paper. They were never published, but it did exist. It was typical for the man. He just made the story up? Completely. Amazing. All this, later, but there are two memorable locations in the same room. Even before we moved to Cambridge in 1939, in preparation of a total outbreak of war, So, as in 1940, before we had all moved by bombing in London and started, Ruth Lasky and I were spending evenings of the days we were teaching, we were still coming up from London for two days a week, in the house of one colleague, Lancelot Billings.

58:28On the first occasion, it was very remarkable because Harold Lasky was entertaining us about the beauties of the Russian system and was interrupted by the announcement of the news. We were all listening to the BBC, I believe, at half past seven. The news came through of the Stalin-Ribbenthal Pact, and after what's hard, Lasky behaved as he had never in his life said a good word. Waschewitz, the most abominable creature of all, and a change in the man, he didn't seem to ever remember what he had been doing for the preceding 20 years of his life.

59:23But a year later, in exactly the same position, again sitting together after dinner, listening to the news, Harold had just been to his home Manchester, and had his bombing attack. And on that occasion, it had been very shaking, because one bomb that had fallen close to his hotel had badly shaken him. Within three weeks, I've heard every stage of this story, it had become a story that his hotel had been hit, and he had suspended four floors into the center. The London School, was it mostly people, students, in terms of students, were they Fabians? Were they just students trying to get a degree? What was the motivation to come to the London School?

1:00:20Well, you have to distinguish between faculty and students. Faculty was this enormous difference in economics on the one hand and political scientists and sociologists on the other. In between, there were the lawyers, the geographers, the economic historians, who were either neutral, or the usual type would be a very mild Fabian, people of the Bloomsbury group, people like Eileen Power, who stuck in the Bloomsbury group, very nice and decent people, and there were no pox in there. I had no idea she was in any way connected with Bloomsbury. Eileen Power was connected with Bloomsbury?

1:01:08Oh yes. I didn't know that. She happened to live there. The Bloomsbury people were her neighbors. She knew them all. Alright, okay. In this sense, I don't think she was any active, but they were all very familiar to her. Alright, go ahead. Paul May was, of course, also a Fabian. But the man with whom you could talk, Murky Doctrine, A very interesting man. Personally, I like Torme. Harold Barsky was always a jerk, and I could never take Harold Barsky. But at that time, people took him seriously. Now, even his party fellows, even before his death, take him seriously as a thinker. He must have been a very young man, very brilliant. But by the time I knew him, he was not.

1:01:57I want to bring up something you have mentioned in a couple of places in your writing. It is significant, but I want to ask a further question. You write of the time that you spent preparing a review of Keynes's treatise on money. And then once it was published, Keynes had said to you, oh well, I've changed my view. So then when the general theory came out, you decided at that time that it would be unwise to spend the same amount of time to critique the book only to have him do the same thing over. Now, those of us who live on the far side of general theory suspect that had you published, it might have been different.

1:02:55I am of the opinion that it would not have been different, that the times were just moving in the direction of King. In retrospect, what do you think? You know, it's a much more complicated story. I've myself put it in a way in which you were now approached. But by being disillusioned by Keynes so easily to take, oh no, it doesn't matter. I've had a later experience with him of the same sort, which we'll tell you later. But a much more complicated procession. I by then had become very much aware that in that simplified form, based on the Boehm-Bawerk's, as I mentioned before, average field of production, my theory could not really be carried through.

1:03:45So I had come to the conclusion that I must first build up an adequate theory of capital for a return to industrial fluctuations. That took me seven years to do so, but even then I only published the first static volume, assuming I would go over to the dynamic part. But then the very curious position arose. But then war had broken out, and Keynes was almost the only sensible man who was willing and able to protect us against inflation. So during the war years, I was supporting Keynes against his supporters as the one man who actually did succeed in getting through the war without inflation.

1:04:37So during the war on practical politics, I was on Keynes' side and didn't want to discredit him. An attack on Keynes during the war years would have been negligible if I was right. I was grateful for his existence, and said I was in a great measure right, and it proves my last experience which came, a story I have talked many times, but I do not mind repeating, a few weeks before his death. That means it must have been in the, about January 1946, I was still treated as an honorary fellow of King's College.

1:05:28She had lived through the war in Cambridge. King's had given me rooms in his college and after I had returned to Cambridge, which I see came occasionally to Keynes, to Keynes the Dime there, you know, the very large occasion when two things occurred which I usually tell as illustration of the respect to which Keynes was a genius, But in the end, we tend to sit together in the smoking room of the college, reading the daily newspapers. At a stage, I ask him, tell me, aren't you getting alarmed by what Joan Robinson and Richard Kramer are making of your theories?

1:06:21Danger to our clearly inflation. And he bursts out, oh, they are just fools! That's a significant story. But in retrospect, after the Pure Theory of Capital, you never I never went back. I mean, the Road to Serfdom came out. It was an extraordinary success. Political, philosophical book. And it seemed that that turned your interest to a wholly new field.

1:07:07Perfectly true. I became much more interested. In fact, in a way, as Mises had been, but not following Mises, The differences of the philosophical approach of the social sciences, which led to different conclusions. It became particularly acute because Keynes, against his intentions, had stimulated the development of Magnomics. Mayer was convinced that not only his particular conclusions, but the whole foundation of microeconomics was wrong. So I wanted to demonstrate that we had to return to microeconomics, that this whole prejudice, The facilities, supported by the natural scientists, they could deduce anything from measurable magnitudes, the effects of aggregates and averages, became to fascinate me much more.

1:08:16I felt in a way that the thing which I am now prepared to do, I don't know of anybody else who can do this particular task. The other group that was at the capital of the area that was quickly continued by others. This was an opening, which was much more fascinating. The others have meant working for a result which I already knew, but I had to prove it, which was very dull. The other thing was an open problem. What does economics really look like when you recognize it as a prototype of a new kind of science of complex phenomena which could not employ a simple model of mechanics or physics?

1:09:18But that to deal with what then I described as mere pattern predictions, certain limited predictions. That was so much more fascinating as an intellectual problem. And yet capital theory in the Austrian sense ended with pure theory of capital, wouldn't you say, in retrospect? I read very largely, nobody has done what I hope to look to done by others. I mean, that's almost 50 years. It's 45 years ago. And there's been nothing, in fact, I'll be quite honest, that's the one book of yours that gives me the most trouble. How much this is true, I became very much aware about For only four years ago, I asked for permission to give a lecture on the same day, January 1981, exactly 50 years after my prices and production actions, under the chairmanship of Lyon Robbins, Under the title Team of Goods and Services, this whole question of the variation of the time stream leading up to a problem was published only in a German translation.

1:10:47It was supposed to be a chapter of the English I am working on, but I became very much aware of what you say. In effect, we are still well over 50 years ago. The crucial point has not yet come, well it would be unfair to say, sufficiently accepted. It has not yet been presented in a form that is fully satisfactory, even to me. I have a question. There is a Ph.D. thesis that was done at New York University looking at the series, the historical evidence, in the United States to support the Hayekian theory of the business cycle. Have you seen that?

1:11:36Which one, Mrs. I've seen it, but not most of the kind of thing. Well, I just, Robertson or something. Not this school. No, no, no. This is much more recent. This was, like, 1982, and I'm... Well, I probably know who you live with, the seniors from the outside. Well, it is now such a flood. A hook by Hayekians, a canola in the mouth. To what do you attribute the late reaction? Now, you're the dean of the school by dent of biology, you know, you've survived. There is this wave of interest now. Well, he got the Nobel Prize in 1974. The Nobel Prize had very little effect, from 1974 till about 1980.

1:12:21Oh yes, there are external effects and so on, but I could not yet feel that it stirred the interest of the younger generation. And for the past five years, in such a flood, I can no longer follow it. I don't think I'm exaggerating. I get every month a new book dealing with my problems and I'm concerned with my own tasks. I can't even read them. Do you have any explanation? Here is my guess, but it is only a guess. that at last the question of the Keynesian aggregates is now being taken seriously and you wound up as the man who 50 years ago first challenged it.

1:13:08Yes, in a way, even simple. It is a disappointment with Keynes, which has turned into respect to me. In the mere fact of unemployment combined with inflation at the same time, it's certainly disillusioning people. And that's 79 and 80, that late 70s period. Now let me ask a personal question. Ten years ago, and I'm going again by a ten year memory but I think I've got it close, ten years ago and I think it was in February, Reason Magazine published an interview with you and you made approximately the following statement. Fortunately, the worst prediction of your life. You talked about what you thought would come, which was unemployment, inflationary crisis, price controls, the command economy. And you said, we will see it within 10 years, but I will not see and I am thankful that I won't. Now, one, you're still here and second, at least with respect to price controls and the command economy, we did not see it.

1:14:35No, it's never become as fair as that. Why do you? Well, I believe the answer is in the United States, that there was then already underway a stream of the animatic nerve, which I began to discover very soon after that. The second thing is, I must also admit, that once in a dumb inner period, I was either still in or only recovering from a period which in a sense might be called depression, Although the medical diagnosis that I was suffering from depression was pure nonsense, it's now being cleared up that I had about 69, a little earlier, two heart attacks which knocked me out, one for one year and one for five years.

1:15:43I was unable to work from 69 to early 74 and not being able to work made me frightfully depressed and pessimistic. I have not been cured as some of my friends maliciously suggest by the Nobel Prize. I had already started publishing again early in the summer of 74 before I had any idea But that before 74, I was for almost five years out of action intellectually, at least unable to do any original work.

1:16:28I did such things as, for instance, that survey of the history of liberalism for an Italian encyclopedia, which has since been published in English translation, which not only just reproduces my old knowledge, but even makes some awful blunders of pure memory. If you know my writing, you will see how absurd it is to write an intellectual history of liberalism and to forget to even mention Lord Acton was one of my great figures, but that thing could happen to me at a time when I was merely reviving things I knew that the Act were thinking of.

1:17:20Sometimes I feel these five years have been a period of rest. You, I want to go back now to some questions about the students of Mises. You maintained your commitment to the Austrian perspective generally. However, you may have disagreed on some points with Mises, but you're still an Austrian economist. Schumpeter, no. Schoenpader, of course, was a friend of me, or if not a friend, at least a colleague, an intellectual peer. Haberler abandoned his open...

1:18:06Otherwise, never been greatly interested in the philosophical basis of it. What about Machlöff? We don't think of him as an Austrian today, though he was. How about Alvin Hayes? He was and he was not. He knew it all, but he was not basically a philosophical thinker. Was it Keynes's work or was it the reaction regarding the length of the Depression? Rubens is a case in point. You cannot get him to discuss the Great Depression. That book has fallen into Robin's memory hole. It's not there anymore.

1:18:55Was it a disillusionment about the theory as a result of either Keynes or the Depression that you think may have... Well, Alvin Hanson is another. Alvin Hanson? Alvin Hanson became the teacher of Samuelson of all things. And he was one of your students, right? No, he was back in contemporary in age. But he was influenced by your thinking. He was at one stage influenced me, but Hanson, I'm afraid I don't take him seriously. He was a man quick to learn it. He was not a real theoretical chemist. But let me get to the crucial point. Now, what I see only now, clearly, is a problem of my relation to Mises, which began with my 1937 article on economics and knowledge, It was an attempt to persuade Mises himself that when he asserted that the market theory was a priori, he was wrong.

1:20:15That what was a priori was only the logic of individual action. But the moment you passed from this to the interaction of many people, you entered into the empirical field. Curiously enough, while Mises was very resentful of any criticism by his pupils, and temporarily broke, Go ahead. Temporarily broke posts with Machlub and Haberler, because they criticized the thing. He took my critique silently, and even approved the article, as if he had not been aware that it was a criticism of his own news.

1:21:04I cannot explain this. But my view has come very much further. I believe I can now even explain why what I admit is a masterly Christianity has not been really effective because Mises remained in the end, himself a rationalist utilitarian. And with a rationalist utilitarianism, the rejection of socialism is irreconcilable. Socialist capitalism presumes that apart from our rational insight, we possess a traditional endowment of morals which has been tested by evolution, but not designed by our intelligence.

1:22:11We have never invented private property because we understood its consequences, nor have we ever invented the family. It so happened that those traditions, essentially religious traditions, and I am as much an argument as Mises was, But I must admit that the too decisive tradition which made it possible for us to build up an order which extends our vision cannot be the result of our intellectual insight, but must be the result of a moral tradition which, as I now put it, is the result of group selection and not of individual selection.

1:22:59Something which we can express, interpret, but Mises postulates, if we are strictly rational, we decide also, we can see that socialism is wrong, if we remain strict rationalists, eucliditarians, that implies we can arrange everything according to our pleasure. So Mises never could free himself from that fundamental philosophy in which we have all grown up, all of our mission, that reason can do everything better than we have it. From this he could never lose himself.

1:23:44And this respect, although I accept nearly everything of his criticism of socialism, I now understand why it has not been fully effective. Because in this case it's still based on the fundamental mistake of rationalism and socialism, that we have the intellectual power to arrange everything rationally, This is not a conflict, this is a search, in one place he says we can't do it, in another place he argues, being rational people, we must try to do it. That's a significant difference. Let me ask you, what was the basis? I mean, at seminars, was there a discussion of moral philosophy, of religion? What was the basis for the agnosticism in, I think, among...

1:24:38In a way, Yemen is the origin of so many schools of its own, which were dominant in the 1920s, and one of them was the influential, which we all were partly caught with logical positivism. In fact, Mises drove, of course, Richard von Mises, one of the leading figures, but he and I all grew up in this Ernst-Marc philosophy that ultimately everything must be rationally justified.

1:25:25Till we both discovered that apart from our capacity of rationally organizing things, we rely also on something which we have never rationally invented, certain moral traditions. Let me tell you an amusing episode. takes a little introduction, even the catholic church has become very sensible with some members in it and a very great man, the present Cardinal of Vienna, acts for the Vatican as a liaison between church and islands and in this effort, And yet about two years ago, organized a very remarkable event, reorganized by Cardinal of the Roman Catholic Church, a meeting on evolution on the 100th anniversary of the death of Charles Darwin, imagine, organized by the Cardinal of the Catholic Church.

1:26:38On this occasion, I was out to give the lecture on cultural evolution, existing from biological evolution. Mr. Cardinal, the chair before me, I made the rather rude remark as conclusion. I'm afraid even we agnostics must admit that we owe our civilization to superstitions of the gardener. made first a bitter face, and I apologize, I know it's too hard a word, let's call it un-symbolic truth, which has suddenly embraced me, and on the term symbolic truth, which are not rationally justifiable, which have prevailed, proved themselves in tradition, we are suddenly in complete agreement.

1:27:32Here, of course, the truths of the religions are different from the truths of science. If you admit that civilization depends on symbolic truths, as you might call it, which are essential for the preservation of human civilization, there's no conflict between us. Now, in the 20s, that was not perceived. This is a later Hayek speaking than the Hayek of the 1920s. This is the fatal conceit on which I am working. The whole idea, which is basic, that part of our order of cooperation is based not on deliberate designs which we understand, But on traditions which have prevailed, because they have enabled more people to live than other traditions, a sort of quasi-Darwinian solution, which however differs from biological Darwinism and not being based on selection of individuals, because individuals can never perceive these effects.

1:28:52They are beyond their range of vision when they show themselves in the actual success of the group. Choosing for this purpose now the conception of an extended order of operation. By extended I mean an order which transcends our vision. Just a simple fact that we are all working for people whom we do not know and being supplied by people whom we do not know. We live in an order which is, in this sense, not perceivable to us. We produce through habits whose significance we do not understand. An order which has become essential for our survival in present numbers.

1:29:42This is the main theme of the book I'm preparing and which because it leads in so many philosophical problems is taking me much longer than a problem. The book has been in draft for these four years, but the first, we call it the Fatal Conceit. The Fatal Conceit meaning that the whole civilization is a creation of the human race, that we have created knowing what we are doing, that I am denying. And the crucial part is the three volumes of the Federal Compete of Morals, Economics and Politics. And the moral part, which has led me into the problems I've just been explaining, which have delayed the book so much.

1:30:34I'm still ad-hoc to send the first volume to the printers before this summer. I am still hanging with a very amusing chapter. The one chapter I have to rewrite now begins with a problem. Why has it been true for the last hundred years? The intelligent a person was, the more likely it was that he would be a socialist. Which is roughly true. I don't think you can deny it. among the natural. But not now. It's improved. Among the physicists, it's almost been through. The biologists saw, Einstein was an out-and-out. Einstein was one of my principal novelists.

1:31:21I understand, but I believe in the last years it has begun to shift, and you're partially responsible. But I still start with a paradigm, which is a Nobel Prize lecture by Jacques Monod, the French biologist, which explicitly said, Science has now definitely proved to us that it's nonsense to believe anything except what is empirically demonstrable. Going out of the balance, said all traditional morals have done something. We must build society on the morals which we invent. This I take to my head. That's destructive.

1:32:06But that's bad biology. It's not even good epistemology anymore. In biology it's already bad, but there are very few physicists even at present.