ARCHIVAL INSIGHTS INTO THE

EVOLUTION OF ECONOMICS

HAYEK: A
COLLABORATIVE
BIOGRAPHY
Part VII:
‘Market Free Play with an
Audience’: Hayek’s Encounters with
Fifty Knowledge Communities

Robert Leeson
Archival Insights into the Evolution of Economics

Series editor
Robert Leeson
Department of Economics
Stanford University
Stanford, California, USA
This series provides unique insights into economics by providing archival
evidence into the evolution of the subject. Each volume provides bio-
graphical information about key economists associated with the develop-
ment of a key school, an overview of key controversies and gives unique
insights provided by archival sources.

More information about this series at

http://www.springer.com/series/14777
 Robert Leeson

Hayek: A
Collaborative
Biography
Part VII, 'Market Free Play with an
Audience': Hayek's Encounters with
Fifty Knowledge Communities
Robert Leeson
Department of Economics
Stanford University
Stanford, CA, USA

Archival Insights into the Evolution of Economics

ISBN 978-3-319-52053-7    ISBN 978-3-319-52054-4 (eBook)
DOI 10.1007/978-3-319-52054-4

Library of Congress Control Number: 2017954926

© The Editor(s) (if applicable) and The Author(s) 2017

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 Contents

1 Introduction   1

Part I Hayek’s Austrian Background   31

2 The Hayekian Religion  33

3 Hayek’s ‘Framework of Traditional and Moral Rules’  69

4 Corruption, Honour, Triangles 111

Part II Austria, 1–16 141

5 1–2: Austria, 1899–1931, Religion and Empire 143

6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring

the ‘World Restored’ of the 1820s 171

v
vi Contents

7 4–13: Austrians and the Holocaust (1) 201

8 14–16: Austrians and the Holocaust (2) 235

Part III America and Europe, 17–49 275

9 17–35: America, 1923–1924; London, Cambridge,

and Gibraltar, 1931–1949 277

10 36–43: Chicago, 1950–1962 305

11 44: Europe, 1962–1992 (1) 327

12 44: Europe, 1962–1992 (2) 349

13 45–49: Europe, 1962–1992 (3) 389

Part IV The 1974 Nobel Prize for Economic Sciences, 50 413

14 50: The Nobel Prize Community, 1901– 415

References 451

Index 501
 About the Authors

Robert Leeson is Visiting Professor of Economics, Stanford University,

and Adjunct Professor of Economics, Notre Dame Australia University.

vii
 1
Introduction

 he Austrian School ‘United Front’: From

T
Neo-­Nazis to Historians of Economic Thought
According to Friedrich Hayek (1980), there could be ‘no salvation for
Britain unless the special privileges granted to [labour] trade unions in
1906 are revoked.’ Labour unions can cause inconvenience (through
strikes) and increase unemployment (by raising their members’ wages);
but the financial-supply union can turn their own crises into depres-
sions and bailouts. A ‘stop in the mind’ prevented John Maynard Keynes
(1936) from identifying the source of the business cycle—the special
privileges (discretion) granted to the financial sector to sever the expendi-
ture flow (a capital-lending strike). Given that constraint, Arthur Pigou’s
proposal to provide incentives to bring forward business expenditure is
second-best; and Keynes’ government spending third-best.
Unless Keynes (1920), Robert Skidelsky (1983, xxii, 387) and Donald
Moggridge (1992, Chaps. 12, 13) were pulling a ‘stunt,’ The Economic
Consequences of the Peace was a distress-driven attempt to address the
adverse consequences for Austria and Germany (and thus the rest of the
world) of the ‘Carthaginian peace.’ But Hayek (1978a)—who saw only

© The Author(s) 2017 1

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_1
2 1 Introduction

opportunities to ‘play with an audience’—recalled that in 1920, when

‘von’ Wieser lectured, ‘he would pause with a certain trick. He had a
golden hunting watch in a leather thing, and if he was in doubt about
words he would pull that out, spring it open, look at it, close it, put it back,
and continue his lecture [laughter].’1 Likewise, Keynes had a ‘supreme
conceit of his power of playing with public opinion. You know, he had
done the trick about the peace treaty [1920]. And ever since, he believed
he could play with public opinion as though it were an instrument.’2
After the Wall Street Crash, Hayek ‘had done the trick’ by promoting
deflation (White 2008)—which assisted Hitler’s rise to power. He then
pulled a similar ‘stunt’ with The Road to Serfdom—by kicking-over the
traces of Austrian School culpability for the Third Reich. It worked: in
The Path to Power, Margaret Thatcher (1995, 50) described her intellec-
tual development in the late 1940s: ‘the most powerful critique of social-
ist planning and the socialist state which I read at this time, and to which
I have returned so often since’ was Hayek’s (1944) The Road to Serfdom.
And from George Mason University (GMU), Karen Vaughn (1999)
dutifully reported that context—‘that background and that time’—was
essential: what is ‘sometimes overlooked’ is that in The Road to Serfdom
Hayek was ‘trying to gently introduce the idea to the intellectual com-
munity that there was an equivalence between Hitler and Stalin that most
of them were unwilling to recognize … that was the message that he was
trying most to communicate.’
Apart from behavioural economics, contemporary policy choices are
still loosely associated with the competing frameworks of six econo-
mists: Keynes and Pigou; or Hayek and those he influenced—George
Stigler and Ronald Coase—and partly influenced, Milton Friedman. The
current combination is the worse: Keynesian-augmented Austrianism
(financial sector tightrope-walking above a Welfare State safety net: tax-
payer bailouts).
Science aspires to be democratic: when the quality of knowledge out-­
trumps the status of the knower, a hierarchy that resembles achieved sta-
tus can result. But the tendency will always exist for those with achieved
status (sometimes corruptly derived) to ossify the status hierarchy: ‘Know
Thy Place’ can have dysfunctional consequences in a competitive market.
From a Kuhnian perspective, at a time of paradigmatic crisis, ‘nor-
mal’ science competes for resources against a challenger. In the Hayek
 The Austrian School ‘United Front’: From Neo-Nazis to Historians... 3

a Collaborative Biography component of the Archival Insights into the

Evolution of Economics (AIEE) series, two paradigms compete: fund-­
raising fantasy—the ‘liberty’ universe which revolves around Hayek and
Mises—against the evidence:

i. Nazism originated in Vienna;

ii. Hitler acquired anti-Semitism in the Habsburg Viennese culture co-­
created by prominent proto-Nazi families like the von Hayeks;
iii. Hitler embraced Mises’ Austrian business cycle theory (ABCT) for
the same reason that it was constructed—to destroy democracy;
iv. Mises promoted Lebensraum;
v. Mises embraced political Fascism to defend his ‘property’;
vi. Hayek accepted that this was ‘economic liberalism’ pursued with
‘ruthless consistency’;
vii. Hayek and Mises promoted the policy-induced deflation that
allowed Hitler to gain power;
viii. Hayek’s defence of Pinochet’s ‘Clerical Fascism’ and his contempt
for the American ‘fashion’ of ‘human rights’ is consistent with Mises’
enlistment of political Fascism to defend ‘economic liberalism.’

Initially, two volumes in this AIEE series were planned to cover

Austrian School—but the number has multiplied along with the discov-
ery of suppressed material relating to Fraud, Fascism and Free Market
Religion. Rockwell (2010 [1999], 292, 291) and Rothbard (2009a), the
co-founders of the Mises Institute, openly embrace Lenin’s strategy of
revolution and so, presumably, regard historians of economic thought as
‘useful idiots.’ Boettke regards them as ‘gullible’ (see below).
The Jewish-born Mises (1985 [1927]) aspired to be the intellectual
Führer of a Nazi-Classical Liberal pact; while the Jewish-born Rothbard
embraced anti-Semitic white supremacists. From the Mises Institute,
Block (2000, 40) reported:

I once ran into some Neo-Nazis at a libertarian conference. Don’t ask, they
must have sneaked in under our supposedly united front umbrella. I was in
a grandiose mood, thinking that I could convert anyone to libertarianism,
and said to them, ‘Look, we libertarians will give you a better deal than the
liberals. We’ll let you goosestep. You can exhibit the swastika on your own
4 1 Introduction

property. We’ll let you march any way you wish on your own property.
We’ll let you sing Nazi songs. Any Jews that you get on a voluntary basis to
go to a concentration camp, fine.’

Block (2000, 40), the Harold E. Wirth Eminent Scholar Endowed

Chair in Economics at the J. A. Butt School of Business at Loyola
University New Orleans, had a minor quibble: ‘The problem with
Nazism is not its ends, from the libertarian point of view, rather it is with
their means. Namely, they engaged in coercion. But, the ends are as just
as any others; namely, they do not involve invasions.’ Mises promoted
Lebensraum (Leeson 2017a); while Block described the ‘united front’:

If you like saluting and swastikas, and racist theories, that too is part and
parcel of liberty. Freedom includes the right to salute the Nazi flag, and to
embrace doctrines that are personally obnoxious to me. Under the libertar-
ian code, you should not be put in jail for doing that no matter how hor-
rendous this may appear to some. I happen to be Jewish, and my
grandmother is probably spinning in her grave as I write this because we
lost many relatives in the Nazi concentration camps.

This AIEE series is designed to provide a systematic archival examina-

tion of the process by which economics is constructed and disseminated.
All the major schools will be subject to critical scrutiny; a concluding vol-
ume will attempt to synthesize the insights into a unifying general theory
of knowledge construction and influence. What should a biographer do
when the evidence contradicts the existing (fund-raising) impression? It
rapidly became clear that Hayek’s ‘biography’ could only be interpreted
in the context of his proto-Nazi background and the promotion of politi-
cal Fascist by his ‘master,’ Mises.

Volume Overview
Chapters 2, 3 and 4 examine the Austrian School religion and Hayek’s
attempt to put Mises’ conclusions into ‘a more effective form’ plus some of
the interactions between Hayek, Hitler, Mises, Hans Mayer and Othmar
Spann (Chap. 2); Hayek’s ‘framework of traditional and moral rules’—
 Volume Overview 5

academic fraud (Chap. 3); corruption, deflation and opportunity in

universities and pseudo-academic Institutes; the Second Estate sense of
‘honour’ that underpinned Hayek’s fund-raising; and the epistemological
foundations of the ‘lower’ to ‘higher order’ flow-of-funds triangle (Chap. 4).
Apart from Fayetteville, Arkansas (a city of convenience to facili-
tate his 1950 divorce), the chronology of Hayek’s (8 May 1899–23
March 1992) life is conveniently delineated by his seven cities of resi-
dence: Vienna (1899–1923 and 1924–1931, including a brief stay in
Zurich, 1919–1920), New York (1923–1924), London (1931–1940,
1945–1949), Cambridge (1940–1945), Chicago (1950–1962), Freiburg
(1962–1969, 1977–1992) and Salzburg (1969–1977). At least fifty
knowledge communities are associated with these seven locations.
Chapters 5 and 6 examine three Viennese (1899–1931) influences:

1. Religion
2. The Empires of the ‘old’ aristocracy
3. ‘Reaction’—restoring the ‘World Restored’ of the 1820s

Chapters 7 and 8 explore ‘Austrians and the Holocaust.’ At the

University of Vienna, Hayek joined four Führerkults:

4. Spann’s Spannkreis
5. Mises’ Miseskreis
6. Friedrich von Wieser’s ‘slightly tainted’ ‘Fabian socialism’ (progressive
taxation)
7. Mayer’s Künstlercafe

He also formed his own ‘spirit circle’ with J. Herbert Fürth:

8. Geistkreis

Hayek’s brother, Heinrich, spent the Third Reich injecting chemicals

into freshly executed victims of the Nazis. According to one of his col-
leagues, his victims may not have been dead when his ‘experiments’ began.
He was a Scharführer (non-commissioned officer) in the Sturmabteilung
(SA, Storm Detachment, Assault Division, or Brownshirts), and from
6 1 Introduction

1934 to 1935, Führer in the Kampfring der Deutsch-Österreicher im

Reich (Hilfsbund), an organization of German-Austrians living in
Germany that displayed a Swastika in its regalia (Hildebrandt 2013, 2016).
He presumably used his influence to ensure that a German-Austrian living
in England—his brother—would be given privileged treatment in Nazi-
occupied Britain: unlike over 2300 intellectuals and politicians, ‘Friedrich
von Hayek’ is not on the list of those whose arrest would be ‘automatic’
following an Austro-German invasion.3
After Hitler’s defeat, Hayek (1992a [1945], 223) pretended to insist
that captured or surrendering Nazis should be shot ‘in cold blood’; two
years later, when Heinrich was barred from academic employment under
German de-Nazification laws, Hayek compared the Holocaust to play-
ing the fiddle in the Viennese Symphony Orchestra: ‘It is scarcely eas-
ier to justify the prevention of a person from fiddling because he was a
Nazi than the prevention because he is a Jew’ (Spectator 1947; cited by
Ebenstein 2003, 390, n21).
In Vienna (and Zurich), Hayek encountered, or influenced, eight
knowledge communities:

9. Brain anatomists with a research interest in schizophrenia

10. The ‘Aryan lineage’ (Ahnenpaß, or ancestor passport) obsession
11. Socialism
12. Jewish anti-Semitism
13. Eugenics, social hygiene and the Nazi euthanasia programme
14. British-Austrians
15. Heinrich Brüning’s deflation-pursuing Weimar government

Hayek was also intimated connected to those who were preparing for the

16. Holocaust

Chapter 9 examines Hayek’s interactions with eight knowledge com-

munities in America (1923–1924):

17. Sigmund Freud

18. Left-Freudians (Wilhelm Reich and Herbert Marcuse)
19. The right-Freudian Mises
 Volume Overview 7

20. The American neoclassical approach (associated with John Bates

Clark)
21. The American-Austrian School (Frank A. Fetter)
22. Institutionalism (Thorstein Veblen)
23. The empirical research methods of Wesley Claire Mitchell and the
National Bureau of Economic Research (which tended to follow the
German Historical School)
24. The search for producer sovereignty (Edward Bernays)

Chapter 9 also examines Hayek’s interactions with ten knowledge

communities in London and Cambridge (1931–1949):

25. Market Failure

26. Keynesian
27. Neoclassical Synthesis
28. Post-Keynesian
29. Galbraithian
30. The Beveridge-inspired Welfare State
31. Stockholm or Myrdalian
32. Market Socialism
33. Stabilization rules
34. Marxism

Austrians describe Mises as ‘a non-compromiser, the Rock of Gibraltar’

(Peterson 2009 [2005], 16); in the same year as the publication of The
Road to Serfdom, Hayek illustrated what Austrian ‘liberty’ means in
practice in

35. Gibraltar

Chapter 10 explores Hayek’s encounters with eight knowledge com-

munities whilst at the University of Chicago (1950–1962):

36. McCarthyism and the Austrian campaign against academics at that

university and the University of Michigan (Lawrence Klein)
37. The tax-exempt donor class
38. The Cowles Commission
8 1 Introduction

39. Behavioural economics (which he co-fathered)

40. The ‘other half ’ of the Mont Pelerin Society: the Chicago School
41. The law and economics movement
42. Leonid Hurwicz
43. Ayn Rand and the Objectivist movement

Chapters 11, 12 and 13 examine Hayek’s European (1962–1992)

encounters (or re-encounters):

44. The social market middle way

45. John Rawls’ (1971) Theory of Justice
46. Karl Popper
47. The British Conservative Party
48. Reagan and the Republican Party
49. Pinochet

Chapter 14 examines Hayek’s inclusion in

50. The Nobel Prize community, 1901–

‘A Criminal Band’?

The Helen A. Regenstein Professor of English and American Literature
at the University of Chicago, Richard Stern, observed that Hayek struck
a ‘haughty’ pose ‘rather as if he were sniffing something disagreeable in
his moustache’ (cited by Ebenstein 2003, 182). Hayek’s contemptuous
reference to his disciples as ‘secondhand dealers in opinion’4 conjures up
the image of wartime spivs and petty peacetime crooks: by neoclassical
assumption, do those he described as his ‘worst … inferior … mediocri-
ties’ derive more status and income from doing Hayek’s ‘bidding’ than
dealing in other ‘products’?
Austrian Truth—praxeology—is ‘not derived from experience’
(Sennholz 2002); neither was the AIEE’s editors’ (pre-experience) under-
standing of Austrian economists and their economics. Eight years of
 ‘A Criminal Band’? 9

research into Hayekians has revealed that many are ‘observant’ Christians
who, convinced of American exceptionalism, fall into three categories:
frauds, theocrats and the devotionally incapacitated. The reader must
decide which category (or categories) the individuals discussed below
most appropriately fit. They wine-and-dine at the taxpayers’ expense
in what Thomas Kuhn (1962) called an invisible college: but since no
evidence is offered about the visible colleges or institutions that employ
them, no judgment about those institutions is warranted.
According to Austrians: ‘That we are part of some organic body and
that we are interconnected so that we “belong” to and are responsible
for each other is basically antithetical to our notion of the sovereignty
of the individual’ (Hamowy 2012, 535). Robert Putnam’s (1995, 2000)
‘Bowling Alone: America’s Declining Social Capital’ and Bowling Alone:
The Collapse and Revival of American Community suggests that utility
derived from group membership—including churches, especially in time
of bereavement—has tended to be replaced by the consumption of goods
and services. But what if the promoters of monotheism offer a binary
choice: bowling alone or suicide bombing for ‘God’? The production,
supply and consumption of religious ‘knowledge’ cannot remain under
Hayek’s ‘Shroud of Vienna.’
Nor did Hayek (1978a) wish it to be—he left an unambiguous instruc-
tion: sensitive information should be ‘under lock and key for the next
twenty-five years … There’s no reason for [hesitation] when it’s after your
lifetime.’5 ‘Free’ market religion blinds believers: it presumably never
occurred to the delusional Hayek that the apparently unconstrained
devotion of his disciples to his ‘Cause’ and his superiority was, in real-
ity, a constrained-optimization exercise: posthumously revealing Hayek’s
­‘thoroughly Hitlerian contempt for the democratic man’—as he had
expected them to do—would not assist their fund-raising, but would,
instead, be a form of Mutually Assured Destruction.
According to Caldwell (2001):

Apparently, materials still in the possession of Hayek’s secretary Charlotte

Cubitt or perhaps of family members might well be of great use to Hayek
scholars. There is, particularly soon after a great person dies, a natural incli-
nation for those who knew him best to want to keep back some mementos
10 1 Introduction

of the relationship. Although such sentiments are wholly understandable,

it must also be understood that they inevitably hinder scholarship. To
reconstruct a person’s life and ideas is extremely difficult, and those who try
to do so should be given access to all existing information.

Caldwell (2001) had a solution: ‘At a minimum, a photocopy of any

remaining materials should be deposited with the Hayek archives at
the Hoover Institution. Making such a deposit is the best way to pay
homage to a great man and a great mind, and to help those who dare
[emphasis added] to try to tell his story.’ The Hoover Institution chan-
nelled hundreds of thousands of tax-exempt dollars to buy-out Bartley’s
teaching time (from California State University Hayward/East Bay) so
that he could concentrate on interviewing Hayek for a biography that
was never finished. Breaking-point almost came when an antique clock
was reportedly stolen from the Deputy Director’s office. According to
Caldwell, Bartley’s partner, Stephen Kresge, gave him the Hoover-funded
transcripts on condition that they not be deposited in the Hayek Archives
at the Hoover Institution. While scholars write a biography, Austrians
write the Gospel—when asked if these transcripts would be available for
scholarly inspection, Caldwell insisted that they were suitable only for the
biography (his own).
According to Caldwell (2005a), Hayek ‘said that in the real world,
we have millions of individuals who have little bits of knowledge. No
one has full knowledge, and yet we see a great deal of social coordi-
nation.’ Through social coordination, Caldwell became President of
the History of Economics Society (HES, 1999–2000): does he share
Boettke’s ­contempt for the pattern-recognition capacities of historians
of economic thought?
After a visit to Nazi Germany in spring 1933, Hugh Dalton noted that
‘Geistige Gleichschaltung [intellectual coordination] is the Nazi ideal in
education. There is something of this to in the economics department
of the [London] school of economics’ (cited by Durbin 1985, 103).
Caldwell told the Wall Street Journal that Boettke ‘has done more for
Austrian economics, I’d say, than any individual in the last decade’ (cited
by Evans 2010). Referring to Hayek a Collaborative Biography and the
Austrian-suppressed evidence about Mises’ card-carrying Fascism and
 ‘A Criminal Band’? 11

Hayek’s anti-Semitism, Boettke (on his ‘coordination problem’ blog)

asserted that

the gullible folks on the SHOE [Society for the History of Economics] list
[are] not necessarily high opportunity cost scholars so perhaps one shouldn’t
worry. Yes, I know that sounds elitist, but scholarship requires certain abili-
ties and temperament, and is measured by very conventional standards of
publication, citation measures, etc. and these are highly correlated with
academic position. In addition, as the sociologists Peter Berger used to
emphasize, you cannot expect those only capable of playing checkers to be
able to play chess. Leeson’s form of intellectual ‘history’ appeals to those
playing ideological checkers, not those capable of engaging in scholarly
chess.6

Scholarship is a co-operative venture: the history of economics can

illuminate knowledge dynamics. But those Austrian who believe that the
road to heaven has opened-up for those who inhabit Hayek’s cognitive
sinkhole may be beyond rational discourse: they regard the evidence that
Mises and Hayek were frauds and plagiarists as sacrilege. ‘God’ tran-
scends time and space: for the faithful, therefore, there can be no analysis
or history of (their ‘market free play’) ‘God.’
However, scholars seek to persuade: one purpose of these chapters is
to persuade Caldwell that he has made some serious errors of judgment.
It would be helpful to the economics and public policy community if
he could provide a chapter to this AIEE series explaining the process by
which he stumbled into Hayek’s ‘fog of class war’—misled into promot-
ing an equality: neo-Feudalism=‘liberty.’ Boettke has already contributed
to this AIEE series (Boettke et al. 2013): it would be helpful to have
a ­further chapter explaining why divine Presuppositionist revelation
derived from Hayek—an atheist and a fraud—should provide the foun-
dations of public policy. They are invited to correct any errors of fact or
of interpretation (for which an apology will be issued).
For many, trust is a social glue; for others it is a weakness to be
exploited. For example, manufactured distrust of ‘the government’ and
its fiat money can lead to unwarranted trust in ‘God’-and-gold ‘beat the
market’ salesmen. Rothbard was honest about the first part of this strat-
egy: ‘If you wish to know how libertarians regard the state and any of its
12 1 Introduction

acts, simply think of the state as a criminal band and all of the libertarian
attitudes will logically fall into place’ (cited by Sobran 1995, 39). The
kleptocratic Hayek was a magnet for those who ‘Austrian-borrowed’ from
him, each other, their employers, and the taxpayer. But economics is con-
cerned with incentives and social outcomes not holier-than-thou postur-
ing. Most, if not all, of the contributors to I Chose Liberty (Block 2010)
wear their age of conversion on their sleeves: adolescents for ‘liberty.’
What incentives could alter behaviour? Rockwell (1994a, 14), who
praised ‘public floggings … I’d bring back the stocks and the rotten toma-
toes too,’ rejoiced in

six of the best. These are to be administered on his bare buttocks with a
half-inch wide, disinfectant-soaked rattan cane … Here, a jail term can
make you a big man. But not a tough spanking on your bare rear end. The
punishment enlists the emotion of shame, particularly powerful among
adolescents, in the cause of law and order … For more serious crimes, we
could administer more strokes, and in all cases, force prisoners to work to
repay their victims.

Taxpayer secession is a more charitable solution: ‘starve the beast’ and

the Austrian bubble would deflate.
In his Nobel Lecture, Friedman (1976) cited Pierre S. du Pont’s state-
ment to the French National Assembly just before ‘The Reign of Terror’:
‘Gentlemen, it is a disagreeable custom to which one is too easily led by
the harshness of the discussions, to assume evil intentions. It is necessary
to be gracious as to intentions; one should believe them good, and appar-
ently they are; but we do not have to be gracious at all to i­ nconsistent logic
or to absurd reasoning. Bad logicians have committed more involuntary
crimes than bad men have done intentionally.’ Sheridan Circle is as vis-
ibly connected to Dupont Circle as the Austrian School of Economics
is to Pinochet’s 1976 White Terror attack on Washington that killed
Orlando Letelier and Ronni Moffitt: at what stage does graciousness give
way to criminal indictments?
Hayek received a jubilant letter (18 June 1965) from a fund-raiser:
‘Occasionally, it is possible to bolster one’s faith in the triumph of that
which is right and to reaffirm one’s faith in truth, hard work, sacrifice,
 ‘A Criminal Band’? 13

perseverance, prayer and patience. On June 16th we received a letter from

the US Treasury Department (Internal Revenue Service [IRS]) granting
tax exempt status to the Institute!’7 Chapter 1 of Part III of this Hayek a
Collaborative Biography series concluded:

Since Austrians are people—to borrow Hayek’s (1944, viii) phrase—‘with

whom I wish to live on friendly terms,’ it is important to emphasise that
the purpose of this volume is to persuade, not to whip-up witch-hunts …
Scholarship is frequently rules-constrained combat; but when the rules are
broken, scientific communities can descend into the uncritical embrace of
ideology. In the aftermath of [academic] civil wars, wounds can be healed,
‘with Malice toward none, with charity for all’: Truth, however, must pre-
cede Truth and Reconciliation. It is in this spirit that these chapters are
offered.

Chapter 1 of Part VII concludes with a question: do IRS officials approve

of hundreds of thousands of tax-exempt dollars being offered to the AIEE
editor in an attempt to prevent publication of Hayek a Collaborative
Biography? Or the offer of an equivalent amount to someone else to work
on a hagiographic volume and then—causally or coincidentally—not to
submit the AIEE chapters that he had been commissioned to write? Or
a lesser amount to a failed mathematician with a long history of behav-
ioural issues to travel across America to petition university administrators
to sack any economist who may threaten Austrian fund-raising.
A university is entitled to hire a teacher who is devoted to deifying a
card-carrying Fascist—but must the taxpayer subsidize those who seek to
deify someone who sought to overthrow the Constitution of the United
States and replace it with a single sentence written by a dictatorship-­
supporting European aristocrat:

After all, the one phrase in the American Constitution, or rather in the
First Amendment, which I think most highly of is the phrase, ‘Congress
shall make no law….’ Now, that’s unique, but unfortunately [it goes] only
to a particular point. I think the phrase ought to read, ‘Congress should
make no law authorizing government to take any discriminatory measures
of coercion.’ I think this would make all the other rights unnecessary and
create the sort of conditions which I want to see.8
14 1 Introduction

David Gordon (2009) recalled that in 1969 at the University of

California Los Angeles (UCLA), Hayek stated that he found it ‘an inter-
esting historical coincidence that he was deaf in the left ear, and Karl
Marx had been deaf in the right ear.’ The Austrian archival silence is
deafening. Hayek was revealed to be a fraud in 1934, amoral in 1950,
and mentally ill in 1961, 1969–1974, and 1985–: impressions that are
reinforced by his 1978 UCLA oral history interviews and Cubitt’s (2006)
biography.
Like prices for monopolists and unregulated polluters, Austria ‘knowl-
edge’ is informationally efficient—for Austrians. When Arthur Seldon,
the ‘founder-president’ of the Institute of Economic Affairs complained
to Hayek that he had denigrated the quality of his think tank, Hayek
(28 August 1975) was obliged to assure him that the IEA was superior
to the ‘propaganda’ emanating from FEE, the Foundation for Economic
Education (the Irvington ‘setup.’).9 Seldon (1994) then described Hayek
on Hayek (1994) as portraying ‘the perfectly fulfilled life of this man for
all seasons and centuries.’
In the 1920s, British broadcasting began as a moralistic enterprise:
to promote ‘All that is best in every department of human knowledge,
endeavor and achievement … The preservation of a high moral tone is
obviously of paramount importance’ as John Reich, its first Director-­
General put it (cited by Mowat 1955, 23). In the United States, the
Public Broadcasting Service began in 1970. Eighteen months after Ronald
Coase’s (1959) seminal ‘The Federal Communications Commission’ was
published in the University of Chicago’s Journal of Law and Economics,
Kennedy’s FCC commissioner, Newton Minow (9 May 1961), deliv-
ered a famous address on ‘Television and the Public Interest’ describ-
ing the milieu: ‘a procession of game shows, formula comedies about
totally unbelievable families, blood and thunder, mayhem, violence,
sadism, murder, western bad men, western good men, private eyes, gang-
sters, more violence, and cartoons. And endlessly, commercials—many
screaming, cajoling, and offending … a vast wasteland.’10
Minow was describing the daily diet of the President of Hayek’s Mont
Pelerin Society, Boettke:

Buffy the Vampire Slayer, Seinfeld, Sapranos [sic], and NYPD Blue (I believe
I have seen every episode of these shows). As for movies, I am partial to
 ‘A Criminal Band’? 15

Adam Sandler movies, in particular The Water Boy, but also The Wedding
Singer. Though I should note that I love the Lord of the Rings movies, The
Matrix, and The Godfather trilogy [sic]; Star Wars less so, but still a big
favorite. Other movies I have particularly liked over the year have been
Taxi Driver, Raging Bull, and Bang the Drum Slowly with Robert DeNiro,
and The Right Stuff and Apollo 13 about the space program. I enjoy watch-
ing Tom Hanks movies as well. Given my interest in basketball it should
not be a surprise that I loved Hoosiers, the story of Pistol Pete Maravich, The
Pistol: Birth of a Legend, and even Robbie Benson in One on One … I am
an avid fan, watching hundred [sic] of games a year at the high school, col-
lege and pro level.11

Hayek (1978a) was contemptuous of Americans: ‘it was conspicu-

ous that the Americans did no longer walk. My wife used to say that
they would soon lose the capacity to walk … I doubt whether the
Americans are book readers. You see, if you go to a French provincial
town, you’ll find the place full of bookstores; then you come to a big
American city and can’t find a single bookstore. That suggests a very
fundamental contrast.’ That left Americans vulnerable to fraudsters:
‘I began with a tone of profound conviction, not knowing how I would
end the sentence, and it turned out that the American public is an
exceedingly grateful and easy public … what I did in America was a
very corrupting experience. You become an actor, and I didn’t know
I had it in me. But given the opportunity to play with an audience,
I began enjoying it [laughter]’12 But although American-Austrians
devoured Ayn Rand’s contempt-filled novels, Hayek presumably
assumed that they wouldn’t cross check his inconsistent answers—in
1985, telling Skousen and the public stoning theocrat, North, that
in 1931 he had ‘expected nothing less’ than the invitation to become
a full LSE professor (cited by Ebenstein 2003, 54, n20). But Hayek
(1978a) had told the Swede, Axel Leijonhufvud: ‘You see, at the age
of thirty-two, when you’re offered a professorship in London you just
take it. [laughter] I mean, there’s no problem about who’s competing.
It was as unexpected as forty years later the Nobel Prize. It came like
something out of the clear sky when I never expected such a thing
to happen, and if it’s offered to you, you take it. It was in ‘31, when
Hitler hadn’t even risen to power in Germany; so it was in no way
affected by political considerations.’13
16 1 Introduction

Hayek’s mental illness appeared to render him incapable of distinguish-

ing between self-promotional stories and reality: and his sycophantic
disciples repeat whatever stories they were told—even when they know
them to be false. Hayek systematically ‘rectified’ historical ‘knowledge.’
For example, Hayek on Hayek (1978a, 1994) contains the assertion that
he had rejected an offer to become President of the Austrian National
Bank:

Well, at that time I really wanted a job in which I could do scientific work
on the side. That was the main problem. It was a little later that I formed
an idea. I made a joke to my first wife, I think just before we married, that
if I could plan my life I would like to begin as a professor of economics in
London, which was the center of economics. I would do this for ten or
fifteen years, and then return to Austria as president of the national bank,
and ultimately go back to London as the Austrian ambassador. A most
unlikely thing happened that I got the professorship in London, which I
thought was absolutely a wish-dream of an unlikely nature. Even the sec-
ond step—Not at the time but forty years later, I was once negotiating a
possible presidency of the Austrian National Bank [laughter].14

Gottfried Haberler (3 May 1984) told Leube that he was ‘baffled’

about his statement (in a draft of a biographical essay on Hayek) about
Hayek having received such an offer. Haberler had talked to Heinrich
Schneider, the Austrian Alternative Director at the IMF, who then called
the Bank President Hanns Koren. Haberler sent Leube the formal state-
ment that Schneider (27 April 1984) provided him with: Hayek’s name
had not even been mentioned in the context of the Presidency of the
Austrian National Bank.15 But in The Essence of Hayek published later
that year, Leube (1984, xxvi) repeated Hayek’s lie: ‘During his years in
Freiburg, he was invited by the Austrian government to discuss the pos-
sibility of taking over the Austrian National Bank, which he refused in
order to complete his monumental Law, Legislation and Liberty.’
Haberler (to Herbert Stein, 23 April 1984) declined to participate
in an American Economic Institute symposium on Hayek.16 Habeler
(7 March 1988) told Leube and others that he was ‘not’ an Austrian econ-
omist in the sense in which the term is used in America: that is, a follower
of Mises.17 As ‘Academic Director’ of the European Center of Austrian
 ‘A Criminal Band’? 17

Economics Foundation, Leube continues to organize the ‘Gottfried von

Haberler’ annual conference in the Liechtenstein tax haven.18
The Austrian School of Economics is unlike any other allegedly scien-
tific community that the AIEE editor has ever encountered. For example,
Richard Ebeling, who is proud of having named successive dogs after a
card-carrying Fascist (‘Ludwig von Mises IV’ etc.) appears to derive util-
ity by uncritically consuming and repeating transparent fraud as Gospel
Truth (Leeson 2015a). The gullible are magnets for story-tellers. The Times
(17 December 1931) reported that ‘von’ Hayek had been appointed to
the Tooke Professorship at the LSE. But according to Ebeling (2001), in
‘the mid-1970s’ Oskar Morgenstern told him that in spring 1931 he had
told Hayek (who had just returned from the LSE) that ‘We are going to
enter the office, you are going to look through your mail, and you will
find a letter inviting you to be a professor at the London School.’ They
‘both laughed’ before Hayek opened a letter offering him the

position as the Tooke Professor of Economic Science and Statistics. Not

saying a word, Hayek handed the letter to Morgenstern, and they looked
at each other in a chilling silence. I must have looked incredulous after
being told this story, because Morgenstern said to me with dead serious-
ness, ‘It happened just that way.’

Morgenstern, who believed that Hayek was only 1/2 or 2/3 ‘Aryan,’
recorded in his diary that a 1929 Miseskreis presentation by Hayek had
been followed by an ‘unpleasant discussion in this arrogant circle of Jews.’
His 1935 diary entries reveals that he thought that Hayek was ‘crazy’ and
‘never going to become anything’ (Leonard 2010, 162, 168, n55, 108,
n30; Klausinger 2013, 12, 2014, 198). Morgenstern became a clairvoy-
ant about Hayek’s job offer in the elevator in the Vienna Chamber of
Commerce building where Mises’ Austrian Institute of Business Cycle
Research was located. As Hayek’s successor as Director of the Institute,
Morgenstern must have known that Hayek had not predicted the Great
Depression (in the Institute’s publication, as he had claimed)—for which
in 1931 he had been recruited to the LSE and for which he was given the
1974 Nobel Prize. But ‘in the mid-1970s’ he began ‘dining-out’ on his
Hayek-connections.
18 1 Introduction

Fürth described Hayek’s philosophy as being based on ‘his concep-

tion of personal freedom.’19 Hayek’s mental illness manifested itself in
an obsession with fabricating stories about himself—had this elevator
tall-story actually happened, he would surely have repeated it. It seems
that those who derive revenue from selling ABCT may themselves be easy
victims for the proverbial sellers of ‘Arizona Coastal Real Estate’ (ACRE).
North (1995, 72) caricatured Rothbard as a saintly member of one of
the fantasy families of the Austrian wasteland:

He did not advocate libertinism in the name of libertarianism. He was the

husband of one wife. He understood that widespread antinomian self-­
indulgence will eventually produce a social catastrophe. He believed deeply
that a society without civil government must rest heavily on self-­
government, and that self-government is not a powerful personal motiva-
tion in a person who is debauched sexually, chemically, or both.

But Hans-Hermann Hoppe (1995, 36) recalled that Rothbard

liked good food and a vodka martini or two … Unlike his mentor Mises,
Murray did not like to walk, let alone hike. Nature for him was largely an
untamed and dangerous foe. He was a man of culture. ‘Where there is
nature there should be civilization’ was his motto.

In I Chose Liberty, Hamowy (2010, 144) recalled that as the men

talked till dawn (‘five or six in the morning’), Rothbard’s wife, Joey,
‘would bring out a tray laden with liquor and mixes.’ At the Brussels
Mont Pelerin Society meeting, ‘Joey opened the room’s minibar and we
all helped ourselves to whatever was available. Needless to say, by the time
we left the room the bar was completely empty.’
Block (1995, 21, 22) recalled that in the 1960s, Rothbard was a ‘little
fat man’: when eating with Rothbard began to adversely affect his own
weight, he was told that ‘every calorie says “yea” to life. What could I
say?’ According to North (1995, 72), throughout his career Rothbard
‘maintained one theme: men are responsible for their actions, and a state
that tries to remove this responsibility through coercive action should not
be trusted.’
 ‘A Criminal Band’? 19

Sennholz was ‘fond’ of telling his Grove City College students that
academics ‘don’t typically get rich but they can leave behind a better
world’: they would ‘have to choose between great wealth and immortal-
ity.’ As promoter of Austrian economics and landlord to his students,
Sennholz acquired a multi-million-dollar fortune plus ‘immortality …
by the boatload.’ Sennholz will be ‘remembered for a very long time as a
very great teacher of very essential economic and moral truths. We loved
him, and we will miss him’ (Reed 2007).20
Hayek became rich by promoting morality and evading taxes—while
Sennholz conspicuously consumed religion and morality:

Hans had integrity. He embraced lofty principles, and he lived by them …

A tireless preacher about the moral rot and economic destructiveness of
government redistribution of wealth, in his personal life he never registered
to receive Social Security benefits. He didn’t even want to recover the Social
Security ‘contributions’ that had been taken from him over the decades. He
understood that those dollars had not been set aside in some mythical
‘lockbox’ with his name on it, but had been spent on other government
programs; thus, any payments he received from Social Security would be
funds taken from his fellow taxpayers, and that he regarded as an unaccept-
able infringement on the rights of his fellow man. The American taxpayer
never had a better friend and a more consistent advocate than Hans
Sennholz. (Hendrickson 2007)

‘Western bad men, western good men’: the lonesome Marlboro cow-
boy on the mythical frontier captures the self-image of followers of both
Ayn Rand and Austrian economics. In Atlas Shrugged, Rand (1985
[1957], 65), who died of lung cancer, found ‘liberty’ in cigarettes: ‘When
a man thinks, there is a spot of fire alive in his mind—and it is proper
that he should have the burning point of a cigarette as his one expres-
sion.’ Rothbard found ‘liberty’ in obesity and died of heart disease at
age 68. Boettke (2010, 64), who sits atop the Austrian food-chain, has
pledged his life to the ‘imitation’ of Rothbard, whose ‘far too early death’
he bemoaned. This could be considered a relatively harmless, consenting
adults issue—were it not for Austrian ‘optimism’: ‘I am very optimistic
… From China to Latin America to Russia, the world is moving in our
20 1 Introduction

direction … our movement is growing, and freedom is on the march.

That is why I am basically optimistic about the progress of mankind’
(Sennholz 2002). Plus, of course, the role that Austrians played in the
plutocratic neo-Feudal revolution in Russia of the Oligarchs and else-
where (Haiduk 2015; Leeson 2015b, Chap. 1).
According to DiLorenzo (1995, 74), Rothbard’s America’s Great
Depression ‘is such a refreshing antidote to the propaganda that most
other economic historians have published about that era that it deserves
a Nobel Prize.’ ‘Deacon’ McCormick’s Austrian School fraud was based
on bogus diaries (Leeson 2015a); Rothbard’s (2000 [1963], 90) America’s
Great Depression appears to have been based on elementary statistical
fraud: data mining to yield the Austrian Truth (by redefining the money
supply so as to include the cash surrender value of insurance policies). At
Columbia, Arthur Burns had blocked Rothbard’s PhD, which left him
‘almost in tears … devastated at the prospect of having to rewrite major
sections of his work.’ He was awarded a doctorate only after Burns left
for Washington (Raimondo 2000, 43–44). Burn’s ‘adopted’ son-in-law,
Friedman (16 March 1987 to Haberler), described Rothbard’s ‘desper-
ate’ efforts to find a magnitude that would correspond to that which the
‘Hayek-Mises theory requires.’21
Austrians oppose ‘Nanny State’ ‘truth-in-advertising’ regulations.
Rothbard (1988, 115, 2002a [1973]) proclaimed the fund-raising Truth:
Mises was ‘Unfailingly gentle’; Austrians were ‘in love with the sweet-
ness of his soul.’ But Margit Mises (1976, 143) appeared to object to
Rothbard’s fund-raising lies: ‘When friends talked about my husband,
they spoke of him as being “gentle” … actually, he was not gentle.’
According to Joseph Salerno (1995, 75, 76–77), Rothbard was a

fearless seeker of truth … Murray went beyond asserting the unfashionable

proposition that truth, rather than merely ‘nonfalsified hypotheses’ or ‘sci-
entific consensus’ or ‘continuing conversation,’ was attainable in political
economy; he committed the unpardonable heresy of proclaiming that the
laws of economics are knowable with greater certitude than even the laws
of physics … Murray logically and fearlessly concluded that ‘all these elab-
orated laws [of economics] are absolutely true’ and that, therefore, ‘eco-
nomics … does furnish existential laws.’ Needless to say, the courageous
 The Lingering Dysfunction of Dynasties 21

expression of such heretical, ‘extreme apriorist’ methodological views, in

conjunction with his unabashed advocacy of a purely free market economy,
got Murray excommunicated from the respectable, i.e., positivist and
interventionist, economics profession and forever disqualified him from
consideration for the prestigious and remunerative job in academia his
scholarship so richly merited … Rising up in high dudgeon, Murray mag-
nificently denounced and demolished the crazed and impious maunder-
ings of this ‘post-modernist’ movement in economics [emphases in
original].

For fund-raising purposes, Rothbard (2002a [1973]) gushed about

Mises. And Austrians gush about Rothbard:

a person of the highest integrity, both in his personal life and conduct as
well as his intellectual pursuits (Denson 1995, 104); Perhaps the only sub-
ject Murray Rothbard didn’t write about at length was personal morality.
This would have been redundant, for he lived a life of exemplary moral
character in his dealings with others. He surely understood that in this area
it is far more important to live your principles than to merely espouse them
… But if we agree with his long-run optimism, truth will eventually tri-
umph, then future generations will do nothing less than exalt and revere
the work and life of Murray Rothbard (Herbener 1995, 87, 88); Rothbard
was empirical proof that the Austrian theory is correct. In his professional
and personal life, he always put classical virtues ahead of his private inter-
est. (Rockwell 1995, 119)

In Austrian circles, Rothbard is known as ‘Robhard’ (Skousen 2000);

an attendee of the 1974 Austrian revivalist meeting (18 June 1979) told
Friedman that Rothbard was dishonest but not ‘more dishonest than
Michael Jensen’ (Leeson 2017a).

The Lingering Dysfunction of Dynasties

Austrian intermediaries have dominated the ‘academic’ study of Hayek
and malevolently influenced post-1974 public policy—their lobbying is
directly responsible for two of the ‘Four Horsemen of the Apocalypse’:
22 1 Introduction

financial crises and the acceleration of climate change. Both ‘Horsemen’

could be forced to ‘dismount’ if two employer trade unions—carbon pol-
luters and the financial sector—were not protected by ‘crooks’ for ‘liberty.’
The other two ‘Horsemen’—nuclear weapons and religious wars—pres-
ent a more complicated problem.
A secular United States of Arabia could—like Turkey—have emerged
from the Ottoman Empire had the British and French not carved-out
spheres of influence and reneged on the promises made by Colonel
T.E. Lawrence (2013 [1922], 23–24): the British cabinet

raised the Arabs to fight for us by definite promises of self-government

afterwards. Arabs believe in persons not in institutions. They saw in me a
free agent of the British government, and demanded from me an endorse-
ment of its written promises. So I had to join the conspiracy, and, for what
my word was worth, assured the men of their reward … I risked the fraud
on my conviction that Arab help was necessary to our cheap and speedy
victory in the east and that better we win and break our word than lose.

The Jewish diaspora was enforced by the Roman Empire; the return
was prompted by Romanov pogroms and the Holocaust of the revived
First Reich (962–1806). The 1919 ‘Peace’ Treaties provided ammunition
for Ludendorff and Hitler; and the Islamic State of Iraq and the Levant
(ISIL) recruits jihadists by claiming to seek the end of the 1916 Sykes–
Picot ‘Peace’ Treaty. In a video called End of Sykes-Picot, an ISIL jihadist
proclaimed: ‘This is not the first border we will break, we will break other
borders’ (cited by Tran and Weaver 2014). ISIL’s leader, Abu Bakr al-­
Baghdadi, vowed that ‘this blessed advance will not stop until we hit the
last nail in the coffin of the Sykes–Picot conspiracy.’22
During the Third Reich, the Swedish diplomat, Folke Bernadotte
(2009 [1945]), negotiated the release of about 31,000 prisoners from
German concentration camps including 450 Danish Jews from the
Theresienstadt camp. On 28 June 1948, as the UN Security Council
mediator in the Arab-Israeli conflict, Bernadotte (1895–1948) proposed
that Palestine and Transjordan be reformed as ‘a Union, comprising two
Members, one Arab and one Jewish,’ with ‘Full protection of religious
and minority rights,’ ‘Guarantees for Holy Places, religious buildings and
 The Lingering Dysfunction of Dynasties 23

sites’ and ‘Return of residents, displaced by the conflict.’ To sabotage

the proposal, Yitzhak Shamir (a future Israeli Prime Minister) and others
instructed the Stern gang to assassinate him (Hewins 1950).
The 1990–1991 Gulf War reversed Iraq’s annexation of Kuwait: the
following year, Yitzhak Rabin was elected as Israeli Prime Minister on
a platform embracing the Israel-Palestinian peace process. On 19 April
1995, a Gulf War veteran, Timothy McVeigh, detonated a truck bomb in
Oklahoma City; and on 4 November 1995, Rabin was assassinated by a
peace-process-sabotaging Holy Terrorist, Yigal Amir.
Palestinian refugees refer to their expulsion as ‘the catastrophe’ (Al
Nakba); Henry Kissinger (2013 [1957], 1) reflected: ‘It is not surprising
that an age faced with the threat of thermonuclear extinction should look
nostalgically to periods when diplomacy carried with it less drastic penal-
ties when wars were limited and catastrophe almost inconceivable.’ In
2001, President George W. Bush warned that this ‘Bring ’em on’ … cru-
sade, this war on terrorism, is going to take awhile.’ Religious wars usu-
ally end when the supply of heretics-to-be-slaughtered begins to run out.
The Crusades (1095–1291) ended in stalemate; and the 1517–1648 ‘War
of Confession’ depopulated Europe. Even thwarted gunpowder plots
leave an echo. Since 1605, the English have burnt effigies of Guy Fawkes;
and the failed 1683 Ottoman attempt to ‘sap’ (undermine) Vienna still
resonates with Austrian School economists who aspire to carry ‘aloft the
intellectual flag of Austria-Hungary’: ‘Lew Rockwell is not alone in judg-
ing the Habsburgs to have been guardians of European civilization (hint:
it has something to do with the Turks)’ (Raico 1997).
After numerous Klan bombing of Southern Baptist churches, shouldn’t
a Southern Baptist evangelical be reluctant to bless a bomber? But during
the Terror-bombing of Southeast Asia, Billy Graham telephone-blessed
Nixon: ‘Well, God bless. You’ve got a lot of people praying for you and
pulling for you.’ Nixon: ‘Well, believe me, Billy, it means an awful lot.
And you keep the faith, huh?’ Graham: ‘You betcha.’ Nixon: ‘Keep the
faith.’ Graham: ‘Yes, sir. Bye.’ Nixon: ‘Our folks, we’re gonna win.’23
When the Quaker Nixon asked the Methodist Governor of Alabama
to ‘intervene’ to stop his 1972 presidential national campaign chair,
Walter Flowers, from voting for impeachment, George Wallace replied:
‘I’m praying for you. I wish this didn’t have to be visited upon you, but
24 1 Introduction

I think that if I were to call, it might be misinterpreted.’ Nixon immedi-

ately reported to Haig (H.R. Haldeman’s successor as his Chief-of-Staff):
‘Well, Al, there goes the presidency’ (cited by Frost 1978, 96). As his
functionaries headed for prison, Nixon instructed them to ‘keep the faith’
(Haldeman 1994, 825; Kutler 1998, 474; Dean 2014).
Between 10 October 1973 and 9 August 1974, three religion-­
promoting ‘crooks’ for ‘liberty’ appeared to have been rendered ‘no longer
operative’: Mises (through death), Hayek (through suicidal depression)
and Nixon (through enforced resignation). Then on 4 September 1974,
the gullible Alan Greenspan (accompanied by his amphetamine-driven
cult-leader, Ayn Rand) was appointed Chair of President Gerald Ford’s
Council of Economic Advisers. It was only after he retired as Chair of the
Federal Reserve Board a third of a century later (31 January 2006) that he
discovered the ‘flaw’ in his promotion of ‘market free play’ financial sec-
tor ‘liberty’: ‘Those of us who have looked to the self-interest of lending
institutions to protect shareholders’ equity, myself included, are in a state
of shocked disbelief ’ (cited by Andrews 2008).24
The 1968 decision by the Swedish Central Bank to establish a Nobel
Prize for Economic Sciences has had a detrimental impact on knowledge
construction, as Hayek (1974a) predicted it would: ‘I must confess that
if I had been consulted whether to establish a Nobel Prize in economics,
I should have decidedly advised against it … the Nobel Prize confers on
an individual an authority which in economics no man ought to possess.’
Hayek (1974a) then outlined how he intended to use this influence—to
recruit ‘intermediaries’:

One reason was that I feared that such a prize, as I believe is true of the
activities of some of the great scientific foundations, would tend to accen-
tuate the swings of scientific fashion. This does not matter in the natural
sciences. Here the influence exercised by an individual is chiefly an influ-
ence on his fellow experts; and they will soon cut him down to size if he
exceeds his competence. But the influence of the economist that mainly
matters is an influence over laymen: politicians, journalists, civil servants
and the public generally.

Austrians regard intellectuals as corrupt sycophants. Rothbard, for

example, stated that since ‘the existence of any State regime rests on public
 The Lingering Dysfunction of Dynasties 25

opinion, it becomes important for the State to engineer that opinion

with the aid of the professional opinion-moulding group: the intellectu-
als. This cozy coalition benefits the State rulers—kings, nobles, political
parties, whatever—because the public is persuaded to obey the king or
State; the intellectuals benefit from a share in the tax revenue, plus their
‘market’ being guaranteed by the government’ (cited by Higgs 1995,
58–59). According to Salerno (1995, 79–80):

So Murray fought against the encroachments of State power against liberty

with all his might and to his dying day because, as a pious man, he so
highly valued the specific cultural, as well as the economic, products of
liberty-the John Wayne movies, the pop music and jazz of the Golden Age,
the New York City of his youth, and the intact, loving, church-going
nuclear families that constituted America. He could not bear to stand idly
by while his beloved culture was slowly, deliberately and gleefully poisoned
by the traitorous intellectuals who occupy Hollywood, ply the hallways of
the New York Times, and glut the halls of academia. These he warmly
detested, denouncing them as the well-compensated intellectual body-
guard for the ruling elite that controls both established political parties and
employs the staggering and historically unprecedented power of the
American mega-State to harass and plunder the American masses.

Thomas Hazlett asked ‘In 1947 you founded the Mont Pelerin Society,
an international group of free-market scholars. Has its progress pleased
you?’ Hayek (1992b [1977]) was pleased:

Oh yes. I mean its main purpose has been wholly achieved. I became very
much aware that each of us was discovering the functioning of real freedom
only in a very small field and accepting the conventional doctrines almost
everywhere else. So I brought people together from different interests. Any
time one of us said, ‘Oh yes—but in the field of cartels you need govern-
ment regulation,’ someone else would say, ‘Oh no! I’ve studied that.’ That
was how we developed a consistent doctrine and some international circles
of communication.

According to Hayek, Stigler had been awarded a Nobel Prize for work
crudely plagiarized from Fritz Machlup.25 In his 1982 Nobel Prize pre-
sentation speech, Lars Werin asserted that Stigler had ‘showed that the
26 1 Introduction

possibilities for a group of firms to form a cartel with monopoly power

are constrained by the member firms’ costs of monitoring each other and
enforcing sanctions on those who attempt to violate the agreement. These
costs are usually high. This inspired Stigler to undertake a series of studies
seeking to test a hypothesis, which, to paraphrase bluntly his own word-
ing, reads: what you cannot achieve yourself, let the state do for you.’
Stigler was the ‘foremost creator of the new and vital field of research
known as the “economics of regulation”.’26 But according to the College
of the Holy Cross Block (1995, 19), he was insufficiently Austrian:
‘Unlike the reformist Stigler, Rothbard called for the total elimination of
anti-­trust law.’ It was not Stigler but Rothbard who ‘showed that regula-
tory agencies were set up not to protect the consumer from rapacious
businessmen, but rather these selfsame businessmen from competition.’
Austrians promote small, limited government and large, unregulated
corporations. Hayek was awarded the 1974 Nobel Prize because of his
conclusion ‘that only by far-reaching decentralization in a market system
with competition and free price-fixing [emphasis added] is it possible to
make full use of knowledge and information.’27 In May 2015, ‘liberty’
traders—referring to themselves as members of ‘The Cartel’—manipu-
lated foreign exchange market and price-fixed a benchmark interest rate
that affects the cost of loans to those whom Austrians maintain are ‘sover-
eign consumers.’ Five of the world’s largest banks—Citicorp, JPMorgan
Chase, Barclays, and Royal Bank of Scotland, pleaded guilty and agreed
to pay chump-change (more than $5 billion) in fines.
On 27 July 2012, the Financial Times revealed that London Interbank
Offered Rate (Libor) had been manipulated since at least 1991. The pre-
vious month, Barclays Bank acknowledged significant fraud and collu-
sion. On 25 September 2012, the British Bankers’ Association agreed to
transfer oversight of Libor to UK regulators. The Economist Intelligence
Unit report on ‘A crisis of culture: Valuing ethics and knowledge in finan-
cial services’ discovered that 53 per cent of respondents stated that ‘strict
adherence’ to ethical ‘codes would make career progression difficult.’28
And in 2016, the New South Wales Electoral Commission determined
that the Australian Liberal Party had used the ‘charitable’ Free Enterprise
Foundation to disguise incoming donations: ‘In its ruling the commis-
sion concluded the Free Enterprise Foundation was used by senior Liberal
 Notes 27

officials as a means of offering anonymity to donors including property

developers, who are banned from making political donations to NSW
campaigns.’29
On 9 October 1974, it was announced that the Nobel Prize for
Economic Sciences would be awarded to the premier promoter of ‘mar-
ket free play’ ‘liberty’—Hayek. Friedman was the first (largely innocent)
victim of the new Nobel incentive structure (Leeson 2003a, b); while
Hayek, having been rewarded for fraud, used his newly conferred author-
ity to promote further fraud.
During a sabbatical at a North American think-tank, a member of the
Nobel Prize selection committee reportedly told anyone who would lis-
ten that there had been pressure to reward the Swede, Gunnar Myrdal—
but that he was intensely disliked by members of the selection committee
(in addition to being a prominent opponent of war-crimes in Vietnam).
In this highly charged political environment, a compromise was reached:
Myrdal was both elevated and incensed by pairing him with Hayek,
someone he detested. Gustav Jörberg (1927–1997), an associate member
of the 1993 Nobel selection committee, told a Lund University seminar
that it had been decided that Myrdal’s discomfort would be maximized
by the pairing because Hayek had ‘paired’ with his wife, Alva, in an extra-­
marital affair.
These chapters explore the communities that Hayek encountered
before and after his 1974 encounter with the Royal Swedish Academy of
Sciences. For ‘von’ Hayek, ‘bowing,’ which had gone out of ‘fashion’ after
the ‘Great’ War, would return.

Notes
1. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
2. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
3. ‘Nazi Black List’ file. Hoover Institution Archives.
28 1 Introduction

4. Friedrich Hayek, interviewed by James Buchanan 28 October 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
5. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
6. http://www.coordinationproblem.org/2014/06/robert-leeson-hayek-
and-the-­underpants-gnomes.html
7. Hayek Papers Box 26.21.
8. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
9. http://www.margaretthatcher.org/document/114609. Hayek Papers
Box 27.6.
10. http://www.americanrhetoric.com/speeches/newtonminow.htm
11. http://econfaculty.gmu.edu/pboettke/sports.html. Accessed 21 September
2016.
12. Friedrich Hayek, interviewed by Robert Chitester date unspecified
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
13. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
14. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/)
15. Haberler Archives Box 3.2.
16. Haberler Archives Box 3.2
17. Haberler Archives Box 2.2.
18. http://ecaef.org/haberler-conference/gottfried-von-haberler-
conference-2016/
19. ‘Gottfried Haberler a Sketch.’ 3 February 1990. Haberler Archives Box
12. Fürth file.
20. ‘We don’t know about his wealth, though we strongly suspect he and his
beloved wife Mary did just fine in that department’ (Reed 2007).
21. Haberler Archives Box 12, Friedman folder.
22. http://www.liveleak.com/view?i=8da_1404587611
23. http://www.politico.com/pdf/PPM43_exc_nixon_graham.pdf
 Notes 29

24. Like many others, Herbert Stein, Greenspan’s predecessor as CEA Chair,
was shocked by the Nixon that emerged from the tapes: Nixon was ‘very
good’ to him: ‘I have nothing but pleasant memories of him. I wept
when he left. I regarded him as a friend’ (cited by Frost 1978, 63).
25. Conversation with Leube, 27 June 2009.
26. http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/
1982/presentation-speech.html
27. http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/
1974/press.html
28. http://www.economistinsights.com/analysis/crisis-culture
29. ­http://www.abc.net.au/news/2016-03-24/nsw-liberal-party-disguised-
political-donations-free-enterprise/7272446
 Part I
Hayek’s Austrian Background
 2
The Hayekian Religion

Hayek’s ‘More Effective Form’

In the 1870s, the Neoclassical School diverged from the Classical School
into three ‘father’-led branches: Austrian (Carl Menger, 1840–1921),
British (William Stanley Jevons, 1835–1882) and Swiss-Lausanne
(Leon Walras, 1834–1910). Walras was followed by Vilfredo Pareto
(1848–1923); and Jevons by Alfred Marshall (1842–1924), Pigou
(1877–1959) and Keynes (1883–1946). Menger had two major second-­
generation disciples: Eugen Ritter von Böhm Bawerk (1851–1914)
and Wieser. Mises was heir to the Böhm Bawerk tradition; Mayer was
Wieser’s ‘favorite disciple’ and, along with Spann, a chosen successor
(Hayek 1978a; Schulak and Unterköfler 2011, 128).1 In the fourth gen-
eration, Hayek was more in the Wieser/Mayer-Spann tradition, while
Rothbard, the co-founder of the Ludwig von Mises Institute, was in the
other. As the Jewish-born Mises (1985 [1927]) aspired to be the intellec-
tual Führer of a Nazi/Classical Liberal Pact, so the Jewish-born Rothbard
(1992a; 1994a) sought to be the intellectual Führer of a Neo-Nazi-­
Militia/Classical Liberal Pact.
Most epigone-generation Austrians (many of whom have been ‘enno-
bled’ through patronage) appear to defer (for institutional and funding

© The Author(s) 2017 33

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_2
34 2 The Hayekian Religion

reasons?) to ‘Dr’ Leube, Caldwell, Rockwell, Boettke, and, to a lesser

extent, Shenoy (who, like Leube, had numerous personal contacts with
Hayek, and was his first official biographer). Habsburg Österreich (the
Eastern Reich) thus spawned two ‘umbrella’ strands: Menger/Böhm-­
Bawerk/Mises/Rothbard/Rockwell-Redneck-Boettke-Shenoy and Menger/
Wieser/Mayer-Spann/Hayek/Leube-Caldwell-Shenoy. Hayek (1978a)
told James Buchanan that ‘the decisive influence’ was reading Menger’s
Principles of Economics (Grundsetze 2007 [1871]). Menger’s Methodenbuch
(1985 [1883]) was also influential ‘not for what it says on methodology
but for what it says on general sociology. This conception of the sponta-
neous generation of institutions is worked out more beautifully [emphasis
added] there than in any other book I know.’2
In his first UCLA oral history interview, Hayek (1978a) told an
intellectual historian, Earlene Craver, that when he first arrived at the
University of Vienna, ‘it was dreadful, but only for a year. There was nobody
there…Böhm-Bawerk had died shortly before.’ Eugen von Philippovich,
‘another great figure, had died shortly before; and when I arrived there
was nobody [emphases added] but a socialist economic historian,’ Carl
Grünberg. Then ‘Wieser came back, and he became my teacher.’3 Hayek
(1978a) told the same story to Robert Bork—‘von Wieser…was my real
teacher’4—and Buchanan: ‘I was a direct student of Wieser, and he origi-
nally had the greatest influence on me. I only met Mises really after I had
taken my degree.’5 But the evidence reveals that before meeting Mises in
autumn 1921, Mayer and Spann played important roles in Hayek’s intel-
lectual development: Hayek’s ‘nobody’ is false.
Since Austrians are suppressing the oral history interviews that Hayek
wished to be made available posthumously, we can only speculate about
the contents. Since both Spann and Mises sought to be the sole intel-
lectual Führer of Fascism, what determined Hayek’s choice? Like Hayek’s
family, Spann was a proto-Nazi; while Mises had reservation about some
aspects of Nazi policies. After the fall of the Habsburgs, Spann promoted
the idea that the individual finds meaning by surrendering to the deified
and mysterious State: but on 13 March 1920, an attempt to overthrow
the ‘republic of peasants and workers’ in Germany and replace it by an
autocratic right-wing government (the Kapp Putsch) failed. For Hayek,
it was only a short sideways step to promote the idea that the individual
finds meaning by surrendering to Mises’ (1922) consumer sovereignty.
 Hayek’s ‘More Effective Form’ 35

Referring to Mises’ (1951 [1922]) Socialism, Hayek (1976b, 189–190)

recalled

there can be no doubt whatever about the effect on us who have been in
our most impressible age. To none of us young men who read the book
when it appeared was the world ever the same again…Not that we at once
swallowed it all. For that it was much too strong a medicine and too bitter
a pill. But to arouse contradiction, to force others to think out for them-
selves the ideas which have led him, is the main function of the innovator.
And though we might try to resist, even strive hard to get the disquieting
considerations out of our system, we did not succeed. The logic of the argu-
ment was inexorable. It was not easy. Professor Mises’ teaching seemed
directed against all we had been brought up to believe.6

In ‘The Socialist Roots of Naziism’ and elsewhere, Hayek (2007 [1944],

189, n27; 1978a) distanced himself from Spann who, along with Carl
Schmidt, he described as one of the ‘intellectual leaders of the generation
which has produced naziism.’ Wieser had made ‘rather poor appoint-
ments. The first one was Othmar Spann, a very curious mind, an origi-
nal mind, himself originally still a pupil of Menger’s. But he was a very
emotional person who moved from an extreme socialist position to an
extreme nationalist position and ended up as a devout Roman Catholic,
always with rather fantastic philosophical ideas.’7
Frauds like ‘Lieutenant’ ‘von’ Hayek, the high-caste Shenoy and Naval
Lieutenant Donald McCormick (aka Richard Deacon) invite scholarly
curiosity: with Hayek, the use of ‘special’ or ‘curious’ was a dissembling
device usually followed by lies. Hayek (1978a) was concerned to preserve
what remained of the neo-Feudal ‘market society’: ‘the curious thing is
that in the countryside of southwest England, the class distinctions are
very sharp, but they’re not resented. [laughter] They’re still accepted as
part of the natural order.’8 Hayek (1978a) also sought to preserve the
influence of the First Estate:

I still don’t know what people mean by God. I am in a curious conflict

because I have very strong positive feelings on the need of an ‘un-­understood’
moral tradition, but all the factual assertions of religion, which are crude
because they all believe in ghosts of some kind, have become completely
unintelligible to me. I can never sympathize with it, still less explain it.9
36 2 The Hayekian Religion

Although Hayek (1978a) ‘didn’t believe a word’ of Christianity,10

he appealed to the deeply religious, such as Mrs. Thatcher (1978): ‘The
Devil is still with us, recording his successes in the crime figures and in all
the other maladies of this society, in spite of its relative material comfort.’
According to Harry Johnson (1975, 83–84), ‘Keynes was—with-
out any intention of slurring him—an opportunist and an operator.’
Hayek (1978a) favourably compared his own manipulative ability to
Keynes’—who ‘had been so much an intuitive genius, not really a strict
logical reasoned…I regard him as a real genius11; Curiously enough,
I will say, Keynes was rather my type of mind…He was an intuitive
thinker12; [who] had a supreme conceit of his power of playing with
public opinion.’13
In his second UCLA interview, when Leijonhufvud asked about ‘intel-
lectual influences…from your student days,’ Hayek (1978a) replied:
‘Well, I think the main point is the accident [emphasis added] of, curi-
ously enough, Othmar Spann at that time telling me that the book on
economics still to read was Menger’s Grundsetze [2007 (1871)]. That was
the first book which gave me an idea of the possibility of theoretically
approaching economic problems. That was probably the most important
event.’ Using ‘curious,’ Hayek continued: ‘It’s a curious factor that Spann,
who became such a heterodox person, was among my immediate teachers
the only one who had been a personal student under Menger.’ The book
which made Spann famous was ‘Haupttheorien der Volkwirtschaftslehre
[Main Theories of Economics (1922)] which in its first edition was a very
good popular handbook. It’s supposed to really have been a cribbed ver-
sion of Menger’s lectures on the history of England. [laughter]’14
When Armen Alchian asked about the influence of Menger’s (2007
[1871]) Principles of Economics, Hayek (1978a) replied: ‘Yes. This was
before I went to Wieser’s lectures.’ Again using ‘curious,’ Hayek con-
tinued: ‘It’s very curious; the man who drew my attention to Menger’s
book was Othmar Spann. I don’t know if the name means anything to
you. He was semicrazy and changed violently from different political
persuasions—from socialism to extreme nationalism to Catholicism,
always a step ahead of current fashions. By the time the Nazis came into
power, he was suspect as a Catholic, although five years before he was
a leading extreme nationalist. But he drew my attention to Menger’s
 Hayek’s ‘More Effective Form’ 37

book at a very early stage, and Menger’s Grundsetze, probably more

than any other book, influenced me.’15
At the end of the ‘Great’ War, ‘Lieutenant’ Hayek (1994, 46; 1978a),
‘then and for some years to come still a child,’ ‘fell for’ Wieser when
he ‘came back’ to the University of Vienna.16 Hayek’s (1978a) implicitly
explained how Mises attracted recruits: ‘If I had come to him as a young
student, I would probably have just swallowed his views completely. As it
was, I came to him already with a degree. I had finished my elementary
course; so I pushed him in a slightly more critical fashion.’17
Referring to Wieser’s influence in the ‘last year’ of his degree
(1920–1921), Hayek (1994, 54) described Spann’s ‘stronger though
short-lived influence’: he was ‘at first most successful in attracting the
students by his enthusiasm, unconventionality, and interest in their indi-
vidual activities.’ Hayek sought to establish a philosophical distance:
‘I don’t think I learnt much from Spann, certainly not in that seminar
on methodology.’ Plus a temporal distance: ‘We did not get on together
long, and after a short period in which I had been regarded as one of his
favourites, he in effect turned me out of his seminar by telling me that by
my constant carping criticism I confused the younger members.’
But at the University of Vienna, the backward-looking Spann appears
to have been the major influence on the undergraduate Hayek. Indeed,
Fürth (11 May 1984) told Haberler that it was the winter of 1921–1922
that he and Hayek had ‘our “famous” encounter’ with Spann—they were
his two favourite students—which led to the foundation of the Geistkreis
in spring 1922.18 According to Hayek (1978a), ‘We formed it immediately
after we left the university.’19 Thus Hayek, presumably, attended Spann’s
seminar throughout his time at the University of Vienna (1918–1921).
Restoration-obsessed Austrians (and their school of economists) were
traumatized by their exclusion from the Second Reich and then by the
collapse of over half-a-millennium of one-family rule. Hitler (1939
[1925], 17) insisted that ‘German Austria must be restored to the Great
German Motherland’; and in 1942, Mises promoted Anschluss while
advising the Habsburg Pretender, ‘Otto on how monarchy might be
restored in Austria’ (Raico 1997). In a confidential report requested by
Otto, Mises described ‘the conditions under which a restoration could
be achieved…only an elected monarch enjoyed a secure basis for his
38 2 The Hayekian Religion

reign. Enthronement on the basis of legitimist claims against the will

of the people could not last. It was likely to be resisted and eventually
overthrown’ (Hülsmann 2007, 804, 818–819).20 Hayek (1975a [1974];
1978a), who claimed that he wanted to ‘restore the price mechanism,’
offered a catchword: ‘Why shouldn’t—as a proper heading—the need
for restoring the rule of law become an equally effective catchword, once
people become aware of the essential arbitrariness of the present govern-
ment.’21 Endgame for the Austrian nobility appeared to come with the
1918/1919 trauma of being exposed to equality before the law.
Is the Gospel Truth true? At least a dozen disciples—including the
devout Mormon Skousen and the public stoning theocrat, North—made
the pilgrimage to ring the doorbell labelled ‘Prof. Dr Friedrich A. von
Hayek’ (Ebenstein 2003, 316) to be told by ‘von’ Hayek (1994, 107, 37)
that he was ‘a law abiding citizen and completely stopped using the title
von.’
In Germany in November 1918, the Hohenzollerns were dispatched
into exile following a naval revolt at Kiel. ‘Von’ Mises (1998a [1949],
297) explained that sailors need not revolt because they were already in
control:

The consumers patronize those shops in which they can buy what they
want at the cheapest price. Their buying and their abstention from buying
decides who should own and run the plants and the land. They make poor
people rich and rich people poor. They determine precisely what should be
produced, in what quality, and in what quantities. They are merciless ego-
istic bosses, full-of whims and fancies, changeable and unpredictable. For
them nothing counts other than their own satisfaction. They do not care a
whit for past merit and vested interests. If something is offered to them
that they like better or that is cheaper, they desert their old purveyors. In
their capacity as buyers and consumers they are hard-hearted and callous,
without consideration for other people.

According to Mises, suppliers must obediently adjust: the entrepreneur

who adjusts most effectively would get the largest profits. The sovereignty-­
seeking suppliers (who were funding Mises) were ‘bound to obey uncon-
ditionally the captain’s orders. The captain is the consumer.’ According
to Mises (1998a [1949], 690), the choice lay between this order-obeying
 Hayek’s ‘More Effective Form’ 39

captain and a variety of candidates who seek ‘to be entrusted with the
captaincy of the socialist ship of state.’ The British Labour Government’s
Austrian-style austerity provoked the Invergordon Mutiny (15–16
September 1931); in the Preface to Socialism, dated January 1932, Mises
(1951 [1932], 21) insisted: ‘Every child who prefers one toy to another
puts its voting paper in the ballot box, which eventually decides who shall
be elected captain of industry.’
Mises (1922, 435; 1951, 443) first described this clever rhetori-
cal trick—the origin of Austrian School one-dollar-one-vote ‘democ-
racy’—in the first edition of Die Gemeinwirtschaft: Untersuchungen über
den Sozialismus (Socialism: An Economic and Sociological Analysis), four
years after the demise of the Habsburg Empire and their intergenera-
tional entitlement programme: ‘the Lord of Production is the Consumer’
(‘Der Herr der Produktion ist der Konsument’). Mises (1998a [1949], 271)
insisted that ‘on the market no vote is cast in vain’—unlike in a political
democracy, where only the majority or plurality gets what it voted for, a
market delivers election-day victory to every ‘voter.’
According to the Austrian School philosopher, Kuehnelt-Leddihn
(n.d.), during the Great War, Hayek and Mises fought ‘to prevent the
“world from being made safe for democracy”’22; and in a taped interview,
Hayek told Leube (2003a, 12) that he was ‘consciously devoted to the
vision and splendour of the Habsburg Empire.’ Like Hayek, Mises (1985
[1927], 50) worried about the ‘socialist program’ exercising ‘its power of
attraction on the masses.’ Mises (2007a[1958], 11) told Ayn Rand: ‘You
have the courage to tell the masses what no politician told them: you are
inferior and all the improvements in your conditions which you simply
take for granted you owe to the effort of men who are better than you.’
Mises (1944, 88, 20) also informed these inferior masses that they were
supreme: ‘Profit is the reward for the best fulfillment of some voluntarily
assumed duties. It is the instrument that makes the masses supreme. The
common man is the customer for whom the captains of industry and all
their aides are working.’ He then described the system that they must
defer to:

Free enterprise is the characteristic feature of capitalism. The objective of

every enterpriser—whether businessman or farmer—is to make profit. The
40 2 The Hayekian Religion

capitalists, the enterprisers, and the farmers are instrumental in the con-
duct of economic affairs. They are at the helm and steer the ship. But they
are not free to shape its course. They are not supreme, they are steersmen
only, bound to obey unconditionally the captain’s orders. The captain is the
consumer.

The ‘Pareto principle’ was a generalization from an observation that in

Italy in 1896 approximately 80 per cent of the land was owned by 20 per
cent of the population. According to Pareto’s ‘80-20 rule,’ 80 per cent of
consumer expenditure would be undertaken by the top 20 per cent—but
Mises (2007a [1958], 11; 1998a [1949], 286) sought to persuade the
‘inferior’ ‘lower orders’ that a rational calculation would lead them to
conclude that this 20 per cent provided them with ‘sovereign’ status: ‘The
consumer is not at the mercy of the shopkeeper. He is free to patronize
another shop if he likes. Nobody must kiss other people’s hands or fear
their disfavor.’23
According to Mises (1956, 2; 1951 [1922], 443–444; 1998b [1944],
16), ‘In a daily repeated plebiscite in which every penny gives a right to
vote the consumers determine who should own and run the plants, shops
and farms; From this point of view the capitalist society is a democ-
racy in which every penny represents a ballot paper. It is a democracy
with an imperative and immediately revocable mandate to its deputies.’
Therefore, the people who were funding him must have liberty: ‘Special
means of controlling [the entrepreneur’s] behaviour are unnecessary. The
market controls him more strictly and exactingly than could any govern-
ment or other organ of society; meddling with the conditions of competi-
tion is an authoritarian policy aimed at counteracting the democracy of
the market, the vote of the consumer.’
Mises’ propaganda stunt could have backfired—by assisting the ongo-
ing subversion of Habsburg-style deference. In contrast, Hayek (1978a)
hoped ‘that if we can refute the intellectual influence, people may again
be prepared to recognize that the traditional rules after all, had some
value.’24
In The Constitution of Liberty, Hayek (2011 [1960], 190–193) sought
to persuade ‘secondhand dealers in opinion’ that the ‘masses,’ equipped
with their ‘consumer sovereignty,’ had to be persuaded of the importance
 Hayek’s ‘More Effective Form’ 41

of aristocratic entitlements: ‘it is only natural that the development of

the art of living [emphases added] and of the non-materialistic values
should have profited most from the activities of those who had no mate-
rial worries.’
Hayek (1978a), the co-father of behavioural economics (Franz and
Leeson 2013), had an insight: ‘we largely had learned certain practices
which were efficient without really understanding why we did it; so that
it was wrong to interpret the economic system on the basis of rational
action. It was probably much truer that we had learned certain rules of
conduct which were traditional in our society. As for why we did, there
was a problem of selective evolution rather than rational construction.’25
According to Hayek (1976a, 189, n25), one of these ‘Old World’ tra-
ditional rules of conduct was the existence of ‘sharp social distinctions.’
These ‘intellectual influence’ reveals that the ‘spontaneous’ order is
a tangled web. The ‘consumers’ of labour supply (employers) are not
‘sovereign’—they compete with each other and labour unions; likewise,
consumers of final goods and services are, to a greater or lesser extent,
manipulated by suppliers’ advertising.
Article 110 of John Locke’s Fundamental Constitutions of Carolina
(adopted in 1669) established a hereditary aristocracy (‘cazique’ and ‘land-
grave’), hereditary serfdom (‘leetmen’ and ‘leetwomen’), and slaveholder
life-and-death power over their ‘property’: ‘Every freeman of Carolina
shall have absolute power and authority over his negro slaves, of what
opinion or religion soever.’ Charleston, South Carolina, was the nation’s
slave capital. Rice planters purchased slaves from the rice-growing areas
of Africa (Angola, Senegambia, the Windward Coast, the Gold Coast,
Sierra Leone, and Madagascar, Mozambique, and the two Bights): and
‘Gullah’ emerged as a slave creole language. From his vantage point in
North Carolina, Caldwell (2005) asserted that ‘language’ reflects ‘a spon-
taneous order’; and according to the author of The Scottish Enlightenment
and the Theory of Spontaneous Order:

Hayek became one of the twentieth centuries’ most important social and
political philosophers, well known for his elaboration and application of
the notion of spontaneous order and his study of institutional solutions to
the problem of knowledge; In sum, one does not need an orderer to have
42 2 The Hayekian Religion

order. Thus, language, law, morals, social conventions, and the exchange of
goods and services are all instances of spontaneous orders. (Hamowy 1987;
2008, xxxvl; 1999a, 279)

Language, law, morals, social conventions and so on are formed

through continuity, gradual evolution, and structural breaks—often asso-
ciated with warfare, as the English (1642–1649), French (1789–1799),
American (1765–1783) and Russian (1917–1922) revolutions illustrate.
Hamowy and another of Hayek’s University of Chicago Committee on
Social Thought PhD students, Raico, devoted their careers to changing
the ‘spontaneous’ order—law, morals and social conventions—associated
with the impediments imposed on their ‘gay liberationist’ community (as
expressed in discriminatory language and market exchanges).
One-dollar-one-vote had a major impact on the choice of language.
English, which originated with West Germanic and then Norman invad-
ers, became the official language of the United Nations, the European
Union and almost 60 sovereign states (including most of the former
British Empire). The widening international cash nexus created by the
industrial revolution obliged ‘suppliers’ to learn the language of those
who were ‘consuming’ their labour, resources and commodities: the rep-
resentatives of the British Sovereign.
According to Hamowy (1999b), if ‘there’s one underlying principle’
of most of Hayek’s work, ‘it is that the diffusion of knowledge in society
is such that no one mind or group of minds can possibly plan either
an economy or any other social institution which is viable. It will fall
of its own weight. These institutions have to develop by evolution.’ Yet
Hamowy was employed by a viable social institution that shows no signs
of falling under its own weight: the Cato Institute—planned in 1974 as
‘The Charles Koch Foundation’ by Charles Koch, Rothbard and Edward
Crane III. In 1980, Crane became the Communications Director for the
Edward Clark/David Koch Libertarian Party presidential election cam-
paign; which led to him and Koch physically removing Rothbard from
Cato and thus—according to Rothbard—revealing the libertarian ‘cloven
hoof ’ (Bessner 2014, 441). From Rothbard’s (1992a, 12) perspective—
‘the “preppies” (or wannabee preppies) were the Koch-Crane machine’—
Boettke, his self-appointed successor, ‘sups with the devil’ as the 2005
 Hayek’s ‘More Effective Form’ 43

recipient of the ‘Charles Koch Distinguished Alumnus, The Institute for

Humane Studies.’26
Hayek (1976a, 189, n25; 1978a) was apparently initially alarmed by
the possible unintended consequences of Mises’ mock-democratic rheto-
ric: the Habsburg ‘spontaneous’ order was already threatened by ‘peasants
and workers’ who were being taught in Freud’s Vienna that you could
‘make yourself your own boss.’27 Hayek (1994, 39, 78), whose maternal
grandparents ‘kept at least three servants,’ was born atop this social order
and was overwhelmingly concerned with preserving what remained of it.
Joseph Schumpeter insisted that ‘a good servant was worth a thousand
devices and that until he had come to America, he hadn’t known what
a mailbox was; until then, he claimed, he had always placed his outgo-
ing letters on a silver tray in the hallway and found them gone the next
morning’ (Parker 2005, 46). Between 1910 and 1923, the proportion of
the Viennese workforce employed as domestic servants fell from 9.3 to
6.3 per cent (Kirk 1996, 14, Table 0.2): ‘By the early twentieth century,
the rich were getting the uncomfortable sense that the foundations of the
social order were shifting’ (Economist 17 December 2011). The ‘natural’
order required that ‘you just had to raise your finger’ (Hayek 1978a28;
Leeson 2015b, Chap. 2). In Freiburg, Hayek had a ‘Bedienerin’ (servant),
a cleaning woman, plus his secretary/soiled-bed nurse, Cubitt.
In 1975, Mrs. Thatcher famously interrupted a Conservative Party
middle-roader:

‘This,’ she said sternly, ‘is what we believe,’ and banged Hayek [The
Constitution of Liberty] down on the table. (Ranelagh 1991, xi)

In ‘I BELIEVE—A speech on Christianity and Politics,’ Mrs. Thatcher

(1978) declared: ‘As a Christian, I am bound to shun Utopias on this earth
and to recognise that there is no change in Man’s social arrangements
which will make him perfectly good and perfectly happy. Therefore, I do
not claim that the free-enterprise system of itself is automatically going
to have these effects. I believe that economic freedom is a necessary but
not a sufficient condition of our own national recovery and prosperity.’
In contrast, in ‘The Intellectuals and Socialism,’ Hayek (1949, 432–433)
outlined the socialist-imitating strategy of ‘liberty’: ‘we must be able to
44 2 The Hayekian Religion

offer a new liberal programme which appeals to the imagination. We

must make the building of a free society once more an intellectual adven-
ture, a deed of courage. What we lack is a liberal Utopia…a truly liberal
radicalism…the main lesson which the true liberal must learn from the
success of the socialists is that it was their courage to be Utopian which
gained them the support of the intellectuals.’
But there were also similarities. According to Mrs. Thatcher (1978),

Freedom will destroy itself if it is not exercised within some sort of moral
framework, some body of shared beliefs, some spiritual heritage transmit-
ted through the Church, the family and the school. It will also destroy itself
if it has no purpose. There is a well-known prayer which refers to God’s
service as ‘perfect freedom.’ My wish for the people of this country is that
we shall be ‘free to serve.’

According to Hayek (2007 [1944], 78), there can be ‘no doubt that
the promise of greater freedom has become one of the most effective
weapons of socialist propaganda and that the belief that socialism would
bring freedom is genuine and sincere. But this would only heighten the
tragedy if it should prove that what was promised to us as the Road
to Freedom was in fact the High Road to Servitude.’ Hayek (1978a)
required—for the ‘inferior’ orders—‘The Road (Back) to Servitude’: he
was ‘never quite happy’ with the title of The Road to Serfdom, which he
‘really adopted for sound. The idea came from Tocqueville, who speaks
about the road to servitude; I would like to have chosen that title, but it
doesn’t sound good. So I changed “servitude” into “serfdom,” for merely
phonetic reasons.’29
Freudian psychiatry flourished in Mises’ and Hayek’s Vienna. Mises
was intensely right-Freudian; while the anti-Semitic Hayek (1978a)
avoided ‘the purely Jewish [groups]—Freud and his circle I never had any
contact with. They were a different world’30; ‘I grew up in the non-Jewish
society, which was wholly opposed to Freudianism.’31 Hayek (1978a)

even thought of becoming a psychiatrist32; In a way, you see, I am arguing

against Freud, but the problem is the same as in Freud’s [1930] Civilization
and Its Discontents [Das Unbehagen in der Kultur]. I only don’t believe that
you can remove these discontents…You can only become civilized by these
 Hayek’s ‘More Effective Form’ 45

repressions which Freud so much dislikes33; I think [Freud] is ultimately

responsible for the modern trend in education, which amounts to an
attempt to completely free people from habitual restraints.34

‘Free’ market fundamentalists battle for market share against other reli-
gions. In 1947, Hayek proposed that what became known as the Mont
Pelerin Society be named after two Catholics, Lord Acton and Alexis
de Tocqueville. Mrs Thatcher (1978) cited de Tocqueville: ‘Religion…
is more needed in democratic countries than in any others. How is it
possible that society should escape destruction if the moral tie is not
strengthened in proportion as the political tie is relaxed. And what can be
done with a people who are their own masters if they are not submissive
to the Deity?’ According to Hayek (1978a), who had received years, if
not decades, of psychiatric ‘treatment’:

The change in morals due to permissiveness is in a sense anti-liberal,

because we owe our freedom to certain restraints on freedom. The belief
that you can make yourself your own boss—and that’s what it comes to—is
probably destroying some of the foundations of a free society, because a
free society rests on people voluntarily accepting certain restraints, and
these restraints are very largely being destroyed. I blame, in that respect, the
psychologists, the psychoanalysts, as much as anybody else.35

Hayek (1978a; 1994, 61–62), who spent his summers in the Alpine
home of Eugenie Schwarzwald, who ran a progressive school which the
second Mrs. Hayek attended, continued: the psychologists and psycho-
analysts ‘are really the source of this conception of a permissive e­ ducation,
of a contempt for traditional rules, and it is traditional rules which secure
our freedom.’36
In the same year as The Road to Serfdom, Hayek (2010 [1944], 154)—in
line with his promotion of the organic State, or ‘market society’—insisted:

It is essential for the growth of reason that as individuals we should bow to

forces and obey principles which we cannot hope fully to understand [emphasis
added], yet on which the advance and even the preservation of civilization
depends. Historically this has been achieved by the influence of the various
religious creeds…The most dangerous stage in the growth of civilisation
46 2 The Hayekian Religion

may well be that in which man has come to regard all these beliefs as super-
stitions and refuses to accept or to submit to anything which he does not
rationally understand.

In contrast, Mises (1985 [1927], 47–48) insisted that in the long run,
‘a minority—even if it is composed of the most capable and energetic—
cannot succeed in resisting the majority. The decisive question, therefore,
always remains: How does one obtain a majority for one’s own party?
This, however, is a purely intellectual matter. It is a victory that can be
won only with the weapons of the intellect, never by force.’ With the
exception of Alchian (who did not ask about Mises), Hayek emphasized
to all his UCLA interviewers the reason why it had been a ‘very long
struggle’ to accept the arguments in Mises’ (1922) Socialism. Hayek
(1978a) told Jack High:

Being for ten years in close contact with a man with whose conclusions on
the whole you agree but whose arguments were not always perfectly con-
vincing to you, was a great stimulus…while I owe him a great deal, it was
perhaps most important that even though he was very persuasive, I was
never quite convinced by his arguments. Frequently, I find in my own
explanations that he was right in the conclusions without his arguments
completely satisfying me. In my interests, I’ve been very much guided by
him: both the interest in money and industrial fluctuations and the interest
in socialism comes very directly from his influence…in most instances
I found he was simply right; but in some instances, particularly the philo-
sophical background—I think I should put it that way—Mises remained
to the end a utilitarian rationalist. I came to the conclusion that both
­utilitarianism as a philosophy and the idea of it—that we were guided
mostly by rational calculations—just would not be true.37

Hayek (1978a) told Leijonhufvud: ‘You see, I am neither a utilitarian

nor a rationalist in the sense in which Mises was. And his introspection
is, of course, essentially a rationalist introspection.’38 Hayek (1978a) told
Bork that the ‘engineer is the typical rationalist, and he dislikes anything
which he cannot explain and which he can’t see how it works. What I now
call constructivism I used to call the engineering attitude of mind, because
the word is very frequently used. They want to direct the ­economy as an
engineer directs an enterprise. The whole idea of planning is essentially an
 Hayek’s ‘More Effective Form’ 47

engineering approach to the economic world.’ Bork asked: ‘You have iden-
tified the constructivist-rationalist fallacy, i.e., that a single mind can know
enough to direct a society rationally. Is there a connection between that
and what appears to be a growing egalitarianism in this society? The mod-
ern passion is for increasing equality.’ As Hayekian-Presuppositionalists
maintain that faith and divine revelation are the only basis for rational
thought, so Hayek (1978a) emphasized the importance—not of evidence
and logic—but of emotions: ‘Yes. I’m sure there is, although so far as I can
see—Oh, in fact, that agrees with what you just suggested. Egalitarianism
is very definitely not a feeling but an intellectual construction. I don’t
think the people at large really believe in egalitarianism; egalitarianism
seems to be entirely a product of the intellectuals.’39
Bork followed-up by referring to Irving Kristol, the father of neo-­
conservatism: ‘Well, that’s what I wondered: if you agree with the argu-
ment of Schumpeter, carried on by Kristol and others, that in fact a
large part of our social movement is due to the class struggles between
intellectuals and the business classes, and that intellectuals tend to be
constructivist-­rationalists.’ Hayek (1978a) replied: ‘Very much so. I don’t
think I am as skeptical about the possibilities as either Schumpeter or
Kristol is. In fact, this is my present attempt to make the intellectuals feel
intellectually superior if they see through socialism. [laughter]’40
Hazlett asked: ‘As an advocate of a really revolutionary reform, in terms
of our governmental structure, don’t you run the risk of being accused of
being a constructionist or a rationalist?’ Hayek (1978a) issued a denial:

No. First, I’m quite sure this has to be gradually achieved, once the ideal is
recognized, and institutions have of course to be designed, even if they
develop. I only object against the whole thing made to singly designed
institutions. Our spontaneous order of society is made up of a great many
organizations, in a technical sense, and within an organization design is
needed. And that some degree of design is even needed in the framework
within which this spontaneous order operates, I would always concede;
I have no doubt about this.41

In outlining his Freudian strategy to Robert Chitester, Hayek (1978a)

discussed the ‘question whether the too-rapid growth of civilization can
be sustained—whether it will mean the revolt of our instincts against too
48 2 The Hayekian Religion

much imposed restraints. This may destroy civilization and may be very
counterproductive. But that man is capable of destroying the civiliza-
tion which he has built up, by instincts and by rules which he feels to
be restraints, is entirely a possibility…there is no way out so long as….’
Hayek (1978a) did not finish the sentence:

It’s not only instincts but there’s a very strong intellectual movement which
supports this release of instincts, and I think if we can refute this intellec-
tual movement—To put it in the most general form, I have to revert to [the
idea that] two things happened in the last hundred years: on the one hand,
an always steadily increasing part of the population did no longer learn in
daily life the rules of the market on which our civilization is based. Because
they grew up in organizations rather than participating in the market, they
no longer were taught these rules. At the same time, the intellectuals began
to tell them these rules are nonsense anyhow; they are irrational. Don’t
believe in that nonsense. What was the combination of these two effects?
On the one hand, people no longer learned the old rules; on the other
hand, this sort of Cartesian rationalism, which told them don’t accept any-
thing which you do not understand. [These two effects] collaborated and
this produced the present situation where there is already a lack of the sup-
porting moral beliefs that are required to maintain our civilization. I have
some—I must admit—slight hope that if we can refute the intellectual
influence, people may again be prepared to recognize that the traditional
rules, after all, had some value. Whereas at present the official belief is, ‘Oh,
it’s merely cultural,’ which means really an absurdity. That view comes
from the intellectuals; it doesn’t come from the other development.

Chitester’s question about this sinister ‘other development’ led to an

exchange: ‘And it comes also from some elements of the science com-
munity.’ Hayek (1978a): ‘Oh, yes.’ Chitester: ‘The scientist-technologist
point of view.’ Hayek (1978a): ‘Very much so. To the extent to which
science is rationalistic in that specific sense of the Cartesian tradition,
which again comes in the form of, “Don’t believe in anything which you
cannot prove.” And our ethics don’t belong to the category of that which
you can prove.’42
Buchanan asked: ‘Why did we get involved in this sort of delusion—
and I think it is a delusion—to the effect that somehow we didn’t need to
 Hayek’s ‘More Effective Form’ 49

worry about limiting government if in fact we could make the politicians

responsible?’ Hayek (1978a) replied:

Well, I’ve been very much puzzled by this, but I think I have discovered the
origin of this. It begins with the utilitarians, with [Jeremy] Bentham and
particularly James Mill, who had this conception that once it was a major-
ity who controlled government, no other restriction on government was
any longer possible. It comes out quite clearly in James Mill, and later in
John Stuart Mill, who once said, ‘The will of the people needs no control
if it’s the people who decide.’ Now there, of course, is a complete confu-
sion. The whole history of constitutionalism till then was a restraint on
government, not by confining it to particular issues but by limiting the
form in which government could interfere.

Hayek (1978a) described the difference: Mises ‘had great influence on

me, but I always differed, first not consciously and now quite consciously.
Mises was a rationalist utilitarian, and I am not. He trusted the intelligent
insight of people pursuing their known goals, rather disregarding the tra-
ditional element, the element of surrounding rules. He wouldn’t accept
legal positivism completely, but he was much nearer it than I would be.
He would believe that the legal system—No, he wouldn’t believe that it
was invented; he was too much a pupil of Menger for that. But he still
was inclined to see [the legal system] as a sort of rational construction.
I don’t think the evolutionary aspect, which is very strongly in Menger,
was preserved in the later members of the Austrian school. I must say till
I came, really, in between there was very little of it.’43
Leo Rosten detected Freud’s influence. Hayek (1978a) told him:

Mises remained to the end a strict rationalist and utilitarian. He would put
his argument in the form that man had deliberately chosen intelligent
institutions. I am convinced that man has never been intelligent enough
for that, but that these institutions have evolved by a process of selection,
rather similar to biological selection, and that it was not our reason which
helped us to build up a very effective system, but merely trial and error. So
I never could accept the, I would say, almost eighteenth-century rational-
ism in his argument, nor his utilitarianism. Because in the original form, if
you say [David] Hume and [Adam] Smith were utilitarians, they argued
50 2 The Hayekian Religion

that the useful would be successful, not that people designed things because
they knew they were useful. It was only Bentham who really turned it into
a rationalist argument, and Mises was in that sense a successor of Bentham:
he was a Benthamite utilitarian, and that utilitarianism I could never quite
swallow. I’m now more or less coming to the same conclusions by recogniz-
ing that spontaneous growth, which led to the selection of the successful,
leads to formations which look as if they had been intelligently designed,
but of course they never have been intelligently designed nor been under-
stood by the people who really practice the things.44

Rosten asked: ‘So Freud did influence you, in the sense that he exposed
the enormous power of the not-rational, or of the rationalizing mecha-
nisms, for the expression of self-interest in the psychological sense.’
Hayek (1978a) replied

It may be; I’m certainly not aware of it. My reaction to Freud was always a
negative one from the very beginning. I grew up in an atmosphere which
was governed by a very great psychiatrist who was absolutely anti-Freudian:
[Julius] Wagner-Jauregg, the man who invented the treatment of syphilis
by malaria and so on, a Nobel Prize man. In Vienna, Freud was never—
But, of course, that leads to a very complicated issue: the division of
Viennese society [into] the Jewish society, the non-Jewish society. I grew up
in the non-Jewish society, which was wholly opposed to Freudianism; so I
was prejudiced to begin with and then was so irritated by the manner in
which the psychoanalysts argued—their insistence that they have a theory
which could not be refuted—that my attitude was really anti-Freudian
from the beginning. But to the extent that he drew my attention to certain
problems, I have no doubt that you are right.45

Hayek and all the major figures of the first three generations of the
Austrian School of economics were (with the exception of Machlup)
‘members of the nobility’ (Kuehnelt-Leddihn 1992) and, therefore,
beneficiaries of the ‘surrounding rules’ in which the illiterate ‘inferior’
orders had ‘learned certain rules of conduct which were traditional in our
society.’
Having told (Cubitt 2006, 80) that Mises’ Socialism ‘was not worth
reading.’ Hayek (1978a) told Craver:
 Post-Habsburg Führercults: Hayek, Hitler, Mises, Mayer and Spann 51

At first we all felt he was frightfully exaggerating and even offensive in tone.
You see, he hurt all our deepest feelings, but gradually he won us around,
although for a long time I had to—I just learned he was usually right in his
conclusions, but I was not completely satisfied with his argument. That, I
think, followed me right through my life. I was always influenced by
Mises’s answers, but not fully satisfied by his arguments. It became very
largely an attempt to improve the argument, which I realized led to correct
conclusions. But the question of why it hadn’t persuaded most other peo-
ple became important to me; so I became anxious to put it in a more effec-
tive form.46

 ost-Habsburg Führercults: Hayek, Hitler,

P
Mises, Mayer and Spann
According to Hayek (1978a), at the University of Vienna, Count
Ferdinand Degenfeld-Schonburg ‘played a certain role when I finally got
my Privatdozenteur.’47 Hayek neglected to mention that Degenfeld was
‘one of the staunch supporters of a monarchical restoration on legitimist
grounds’ (Hülsmann 2007, 818), and that Mayer—who he described
as ‘a ferocious Nazi’—had steered ‘his protégés through the habilitation
procedures: Haberler (1927), Morgenstern (1929) and Hayek (1929)’
(Klausinger 2015; 2014, 198). Although as a student, Hayek (1978a)
presumably attended Mayer’s seminar, he sought to distance himself:
‘Mayer’s seminar was almost completely confined to marginal utility
analysis. It took place at a time that was inconvenient to most of us who
were already in a job. I’m not certain at all that I ever attended a seminar
of Mayer’s. [laughter]’48
According to Machlup, Mayer was an ‘absolute scoundrel, an intriguer,
a liar; the worst epithets would fit him’ (cited by Craver 1986, 12, n48).
The evidence suggests that Hayek also fits that description—as do many
of his epigone generation beneficiaries. With respect to the Menger/
Böhm-Bawerk/Mises/Rothbard and Menger/Wieser/Mayer/Hayek
branches of the Austrian School: the third generation co-leaders became,
respectively, a card-carrying Austro-Fascist (Mises) and a Nazi (Mayer);
while the fourth generation co-leaders promoted a ‘united front’ with
52 2 The Hayekian Religion

Neo-Nazis (Rothbard) and military dictators (Hayek); and their epigone

generation disdain democracy.
Haberler (27 July 1984) asked Hayek about his attitude towards defi-
cit spending during the deep deflationary depression of the 1930s. Hayek
(5 August 1984) replied that it was fear of the political danger of revolu-
tion that underpinned opposition to the (Austrian-promoted) deflation
(that had facilitated Hitler’s rise to power)—but this, he thought, had
just been a political excuse for inflation.49 The ‘Great’ War between the
dynasties led to ‘squeeze till the pips squeak’ reparations: the resulting
inflation ruined many in Austria and Germany. It even affected Hayek
(1978a): ‘The short but acute inflation period upset social life and a great
many things.’50 While Vienna suffered ‘semi-starvation,’ the major dam-
age inflicted on Hayek (1994, 64) had apparently been that his father
had been obliged to renege on a ‘half-promise’ to fund a post-graduation
year-long stay in Munich.
According to Fürth, Hayek’s philosophy was based on ‘personal free-
dom’51; and Mayer was considered a ‘good “Austrian” liberal’ until he
began cooperating with the Nazis in 1938.52 Had Hayek stayed in Austria
would he—like Mises—have become a card-carrying Austro-Fascist and
a member (not of the Reform Club in London) but—like Mises—of the
official Fascist social club? Hayek, Mises and Rothbard are still presented
as ‘good Austrian’ liberals—but Hayek appeared to refer to political fas-
cism as economic liberalism applied with ‘ruthless consistency’ (Leeson
2015c). Hayek’s family were proto-Nazis and later card-carrying-Nazis: he
told Cubitt (2006, 10, 122, 47) that ‘all of his professional decisions had
been based on financial considerations’ and ‘if he had stayed in England,
or for that matter Austria, he would probably have taken up some govern-
ment post.’ Had Hayek not shared the Nazi’s dislike of democracy, Jews
and non-whites (especially the ‘negro’) he may have opposed his fam-
ily’s Nazism. The evidence, combined with Austrian perceptions about
Human Action, suggests that he would have cooperated with the Nazis
had he not been recruited in 1931 (by Beveridge) to the LSE.
Was Hayek honest about his associations with Mayer and Spann?
David Frost (1978, 223) noticed that Nixon was unconcerned even
about ‘inconsistencies in the same or consecutive sentences.’ Hayek
(1978a) immediately qualified himself: ‘I did see Mayer. Mayer was a
 Post-Habsburg Führercults: Hayek, Hitler, Mises, Mayer and Spann 53

coffeehouse man, mainly. If there was any place he was to be found,

it was at the coffeehouse at Künstlercafe, opposite the university; and I
did sit there with him and a group of his students many times in quite
informal talk [emphasis added], which I’m afraid was much more univer-
sity scandal than anything serious. [laughter]’ He then immediately con-
tradicted himself: ‘Occasionally there were interesting discussions. You
could get very excited, particularly if you strongly disagreed with some-
body.’ Before finally returning to the impression that he wished to create:
‘And there were all these stories about his constant quarrels with Othmar
Spann, which unfortunately dominated the university situation. But, on
our generation his influence was very limited.’ Paul Rosenstein-Rodan
was ‘the main contact…Rosenstein-Rodan and Morgenstern were…the
main contacts to the Meyer circle.’53
Spann—‘one of the leading social theorist of his time’ (Ehs 2013,
52–53)—used his influence to oppose the Habilitation process for two of
his former disciples—Hayek and Morgenstern: ‘Morgenstern had come
for some time under the spell of Spann’s influence, but turned away from
him and towards Mayer’ in 1925, although Morgenstern had ‘entertained
political positions that were not very far from Spann’s’ (Klausinger 2014,
198). From Spann—‘one of Austria’s most prominent fascist theoreti-
cians’ (Rothbard 1988, 69)—Hayek (1994, 54) ‘got a few helpful ideas
about the significance of the logic of the means-ends structure in eco-
nomic theory.’ How far apart were their means-ends political positions?
According to John Haag (1969, Abstract), Spann

was the most important corporative theorist in Central Europe during the
years between 1918 and 1938. After delivering an extremely popular series
of lectures at the University of Vienna in 1920, later published under the
title Per wahre Staat ([1921] ‘The True State’), he became a major spokes-
man for the anti-Marxist, anti-democratic ‘conservative revolution’ which
fired the imagination of German-speaking intellectuals. By the mid-1920’s,
he had gathered an ardent following among young nationalist (volkisch)
and conservative Catholic thinkers who regarded Spann as an intellectual
standard-bearer of the Right.

After The Road to Serfdom (1944), Hayek succeeded Spann in this

regard. According to Rothbard’s (2009b [1958], 70) review of an early
54 2 The Hayekian Religion

version of The Constitution of Liberty, Hayek ‘is universally regarded, by

Right and Left alike, as the leading right-wing intellectual’ with ‘great
prominence in the intellectual world.’ In his Nobel Lecture, Hayek
(1974b) provided a Catholic antidote to Pigouvian market failure: ‘those
remarkable anticipators of modern economics, the Spanish schoolmen
of the sixteenth century, who emphasized that what they called pretium
mathematicum, the mathematical price, depended on so many particular
circumstances that it could never be known to man but was known only
to God.’54
Hayek received an anonymous letter (23 July 1975) from ardent
pseudo-nationalists at the second Austrian revivalist conference:

spiritually and intellectually Vienna will always be our home: and we will
always return to the charge against the forces of macro-darkness now
threatening to overwhelm the world, carrying aloft the intellectual flag of
Austria-Hungary…we still love you: and we feel that by continued associa-
tion with us, we may yet show you the light and truth of anarcho-­
Hayekianism…And so, ladies and gentlemen, I give you two toasts to
victory in the future, and to the best legacy of Vienna to the world, Professor
Hayek [emphases in original].55

The British branch of the Neoclassical School promoted market-based

remedies (taxes and subsidies) to mitigate market failure. After almost
two-thirds of a millennium of ‘spontaneous’ order (1276–1918), the
Habsburgs and their Roman Catholic Church left a legacy of ­dysfunction:
together with Hitler, Freud and Popper, the Austrian branch of the
Neoclassical School sought to mitigate—or, in Schumpeter’s (1942) case,
at least address—this social and political failure.
In Vienna in March 1938 the Nazi swastika was draped across the
lintel of Freud’s house (Steiner 1980, 116). Hayek (1978a) implicitly
evaluated the juxtaposition: ‘I admit that while apart from many good
things, some not so good came from Austria; much the worst of it was
psychoanalysis.’56 The first sentence of Chap. 1 of Hitler’s Mein Kamf
(1939 [1925] 17, Chap. 6) relates to the ‘destiny’ associated with his bor-
der birthplace: ‘German Austria must be restored to the Great German
Motherland.’ Hitler explained how he was going to acquire power:
 Post-Habsburg Führercults: Hayek, Hitler, Mises, Mayer and Spann 55

The great majority of a nation is so feminine in its character and outlook

that its thought and conduct are ruled by sentiment rather than by sober
reasoning. This sentiment, however, is not complex, but simple and consis-
tent. It is not highly differentiated, but has only the negative and positive
notions of love and hatred, right and wrong, truth and falsehood [emphasis
added]…Every change that is made in the subject of a propagandist mes-
sage must always emphasize the same conclusion. The leading slogan must
of course be illustrated in many ways and from several angles, but in the
end one must always return to the assertion of the same formula.

Hayek promoted negative and positive notions about morality: ‘right

and wrong, truth and falsehood.’ Through the slogan or ‘catchword’ of
‘spontaneous’ order, Hayek (1978a) always returned to the same formula:

So, again, what I always come back to is that the whole thing turns on the
activities of those intellectuals whom I call the ‘secondhand dealers in opin-
ion,’ who determine what people think in the long run. If you can persuade
them, you ultimately reach the masses of the people.57

In ‘I BELIEVE—A speech on Christianity and Politics,’ Mrs. Thatcher

(1978) stated:

There is another dimension—a moral one…It is a long time since it was

said that the Church of England was the Tory Party at prayer. That famous
dictum was never wholly true. Historically, it would be nearer the mark to
say that the Tory Party in its origin was the Church of England in politics,
for the old concept of a partnership between Church and State lies very
near the heart of traditional Tory thinking, and in that partnership Tories
always believed that the Church had primacy because it was concerned
with those things which matter fundamentally to the destiny of mankind.

Buchanan asked Hayek: ‘And you don’t see a necessity for something
like a religion, or a return to religion, to instill these moral principles?’
Hayek (1978a) replied, ‘Well, it depends so much on what one means
by religion. You might call every belief in moral principles, which are
not rationally justified, a religious belief. In the wide sense, yes, one has
to be religious. Whether it really needs to be associated with a belief in
56 2 The Hayekian Religion

supernatural spiritual forces, I am not sure. It may be. It’s by no means

impossible that to the great majority of people nothing short of such a
belief will do.’58
Hayek’s (2011 [1960], 41–42) Constitution of Liberty was an overtly
propagandist tract: ‘If old truths are to retain their hold on men’s minds,
they must be restated in the language and concepts of successive genera-
tions…no statement of an ideal that is likely to sway men’s minds can be
complete: it must be adapted to a given climate of opinion.’ The Road to
Serfdom is dedicated to ‘THE SOCIALISTS OF ALL PARTIES’: and
Hayek told an IEA audience that with respect to the origins of the book,
‘basically there was no difference between socialism and fascism’ (cited by
Ebenstein 2003, 367, n4). Hayek told Cubitt (2006, 48) that although
there was ‘no difference between Communist and Fascist states he would
prefer to live under Fascism if he were forced to decide.’
In the reprint of The Road to Serfdom, Hayek (1976c, ix) asserted
that he had ‘rather underestimated the significance of the experience
of communism in Russia—a fault which is perhaps pardonable when
it is remembered that when I wrote Russia was our war-time ally—and
that I had not myself wholly freed myself from all the current interven-
tionist superstitions, and in consequence still made various concession
which I now think unwarranted.’ However, both sides of Hayek’s fam-
ily had been allies of the Soviet Communist Party. After May 1934, his
Austrian family lived under Fascism and were, presumably, supporters
of the Nazi-Soviet Pact (1939–1941) and the Anti-Comintern Pact with
Japan (1936–1945). In Operation Barbarossa—named after the crusad-
ing Holy Roman Emperor, Frederick Barbarossa (1155–1190)—Hitler
sought to defeat Russia and thus force Britain to negotiate peace (Stahel
2009, 104). Hayek’s English family were part of the Democracy-Soviet
Pact (1941–1945) which defeated Japan and the two Germanic powers.
Hayek was contemptuous of what he dismissed as Amnesty
International’s ‘bunch of leftists’ who provided evidence about Pinochet’s
human rights abuses (Farrant and McPhail 2017). Caldwell and Leonidas
Montes (2014a, 50; 2014b; 2015, 304) address—or rather fail to ade-
quately address—‘the uncomfortable question of why Hayek chose to
remain silent about the human rights abuses that took place under the
[Pinochet] junta, a question about which we can only offer conjectures.’
 Post-Habsburg Führercults: Hayek, Hitler, Mises, Mayer and Spann 57

Had Hayek and Mises been genuine Classical Liberals they would have
defended the rights of the individual against an oppressive State. If, on the
other hand, they were neo-Feudal White Terror promoters masquerading
as scholars, they would expect that Red Terror would be as brutal as the
Terror that they sought to encourage. Mises (1985 [1927], 158, 19, 44,
42–51), for example, was entirely comfortable about human rights abuses:
‘Whether or not the Russian people are to discard the Soviet system is for
them to settle among themselves. The land of the knout and the prison-
camp no longer poses a threat to the world today [emphasis added].’
For those like Hitler and Mises who openly embraced ‘Germanity’
and eugenics, the ‘unterlegen’ (inferior) label was usually the prelude to
euthanasia and genocide. The ‘inferior’ domestic lower orders that Mises
(2007a [1958], 11) was pleased Ayn Rand was putting in their ascribed
place had an external counterpart. Seventeen years before The Road to
Serfdom, Mises (1985 [1927], 154, 48), who encouraged his Fascist allies
to ‘exterminate its adversaries and their ideas in the same way that the
hygienist strives to exterminate a pestilential bacillus,’ explained that—as
long as his ‘world’ was not disturbed—Red Terrorists could ‘do what they
want’ in the ‘land of the knout and the prison-camp’:

One cannot, therefore, classify nations according to their worth and speak
of them as worthy or less worthy. Consequently, the question whether or
not the Russians are inferior [emphasis added] lies completely outside the
scope of our consideration. We do not at all contend that they are so. What
we maintain is only that they do not wish [emphasis in original] to enter
into the scheme of human social cooperation. In relation to human society
and the community of nations their position is that of a people intent on
nothing but the consumption of what others have accumulated.

Mises’ (1985 [1927], 158) evidence related to the assertion that

‘healthy’ people ‘eschew’ Russian literature: ‘People among whom the
ideas of Dostoyevsky, Tolstoy, and Lenin are a living force cannot pro-
duce a lasting social organization. They must revert to a condition of
complete barbarism.’
To put this in a ‘more effective form,’ Hayek (2007 [1944], 162; 2011
[1960], 79) asserted in The Road to Serfdom: ‘Collectivism has no room
58 2 The Hayekian Religion

for the wide humanitarianism of [classical] liberalism but only for the nar-
row particularism of the totalitarian.’ And in The Constitution of Liberty:
‘A society that does not recognize that each individual has values of his
own which he is entitled to follow can have no respect for the dignity of
the individual and cannot really know freedom.’
The ‘Americanist road’ of the John Birch Society involved expressions
of contempt for Americans: the 42 million who voted for Johnson in
1964 were ‘voting for the repeal of the Declaration of Independence…for
scrapping the United States Constitution entirely, as an absurd and useless
antique…for paying more and more billions of dollars out of their own
pockets, into the pockets of Communists tyrants or Communists sym-
pathizers all over the world’ (White Book of the John Birch Society 1964).
Referring to one of the Society’s founders, Jane Mayer (2016, Chap. 1)
concluded that ‘Fred Koch’s willingness to work with the Soviets and
the Nazis was a major factor in creating the Koch family’s early fortune.’
According to Fred C. Koch: ‘It is not the Communists who are destroy-
ing America…America is being destroyed by citizens who will not listen,
are not informed, and who will not think.’ The John Birch Society had

pointed out years ago that the ‘Civil Rights’ slogan and movement, in this
country, were being used by the Communists and their allies and gullible
dupes in exactly the same way that the ‘agrarian reform’ slogan and move-
ment were used in China by Mao Tse-tung and all of the agents and dupes
and misguided idealists who rallied to his support…the red hands are run-
ning the show…The ‘Civil Rights Act of 1963,’ if enacted, will be the first
major step in establishing a brutal totalitarian police state over the American
people…Washington has been taken over…Communist influences are
now in full working control of our Federal Government…How Much
Time Do We Have? It is late!…The danger is fantastic. So must the resis-
tance be [emphasis in original]. (White Book of the John Birch Society 1964)

In 1979, the Guardian serialized Austrian School lies about Pigou

being a gun-runner for Stalin (Leeson 2015a). Two Murdoch newspa-
pers, the News of the World and the Sunday Times, then published articles
with titles such as ‘KGB: Michael Foot was our agent’ which suggested
that the Soviet intelligence service made cash payments to him while he
was editor of the left-wing journal Tribune. The News of the World settled
 Post-Habsburg Führercults: Hayek, Hitler, Mises, Mayer and Spann 59

immediately (paying £35,000 in damages); while the Sunday Times paid

£100,000 in damages after a trial—but Murdoch refused to appear in
court (Williams 1995).
In the Daily Telegraph, Charles Moore (2010) repeated these claims:
‘Why did the former Labour leader take money from Moscow for years?’
From the late 1940s until 1974, Foot ‘readily agreed to see’ the KGB in
Tribune’s offices and ‘freely disclosed information about the Labour move-
ment to them. He told them which politicians and trade union leaders
were pro-Soviet, even suggesting which union bosses should be given the
present of Soviet-funded holidays on the Black Sea.’ In return, the KGB
‘left a £10 note (about £250 in today’s values)…slipped into his pocket
in a way which allowed him to ignore it, each time the KGB came.’ In
1979, Pigou had been dead for two decades; conveniently, Moore (2010)
repeated the defamation just after Foot (1913–2010)—the leader of the
Labour Party (1980–1983)—had died.
Brian Crozier told Mrs. Thatcher that there had been a secret meeting
between Foot and the General Secretary of the Communist Party of Great
Britain (Leeson 2017a). Four years before Martin Luther King’s assassi-
nation, the John Birch Society asserted that there was a ‘bona fide pic-
ture extant, well known to our members, showing the Rev. King actually
being trained by Communists, at a Communist School, in Communist
methods.’ The White Book of the John Birch Society (1964) also asserted
that the

propaganda concept is that Negroes living in the South, wherever they

outnumber whites, are members of a ‘Negro nation,’ of an oppressed colo-
nial area, which must be given its ‘independence’—and hence in reality
made a colony of Moscow.

The 1954 Brown versus Board of Education decision undermined

states’ rights: in 1957, President Dwight Eisenhower federalized the
Arkansas National Guard to enforce desegregation at Little Rock High
School to remove ‘a blot upon the fair name and high honor of our nation
in the world’ and restore the image of American democracy. According
to Robert Welch (1963), Eisenhower was a communist. The John Birch
Society, which Welch had founded, also denigrated the ‘pro-Communist
60 2 The Hayekian Religion

decisions of the Warren Supreme Court.’ But they distanced themselves

from reports that a ‘secret terrorist society’ had targeted King and Chief
Justice Earl Warren for assassination: ‘We would be terribly disappointed
to see anything happen to Earl Warren before we can build enough pub-
lic understanding of his judicial misdeeds to get him impeached’ (White
Book of the John Birch Society 1964).
Welch told the press that ‘American Negroes are “astonishingly” well
off, and if Communists would stop muddying the waters with “agita-
tion,” their lot would improve.’ Besides, the ‘Negro’—as exemplified by
‘Zeak Crumpton, of Hampton, Virginia’—celebrated slavery: ‘I am glad
that my ancestors were Negro slaves…I get on my knees each night and
thank God for permitting my ancestors to come to America as a slave.
That was the greatest blessing to our race…’ According to the White Book
of the John Birch Society (1964), the ultimate authority on such matters
was J. Edgar Hoover who declared: ‘The Negro situation is also being
exploited fully and continuously by Communists on a national scale.’
At the LSE, watching a ‘negro’ Nobel Laureate dancing—almost cer-
tainly Sir Arthur Lewis—had made Hayek see the ‘the animal beneath
the facade of apparent civilisation’ (cited by Cubitt 2006, 23); and for
Mises (1951 [1922], 234–235), a John Birch Society supporter: ‘It was
not cant for English free traders to speak of England’s vocation to elevate
backward people to a state of civilization. England has shown by acts that
she has regarded her possessions in India, in the Crown colonies, and in
the Protectorates as a general mandatory of European civilization.’
Members of the Austrian School of Economics assisted the process by
which the ‘vision’ of Classical Liberal ‘Utopia’ turned to post-Communist
reality: asymmetric privatization and the rise of Russia of the Oligarchs.
The qualifications of one these post-Communist reconstructionist
appears to include no more than a seven-year California State College
undergraduate degree, a Rutgers University M.A., Mont Perelin Society
membership, plus the Hillsdale College Ludwig von Mises Professorship
of Economics (Haiduk 2015; Leeson 2015b, Chap. 1). Mises (1985
[1927], 158) laid down the ‘guiding principle of the policy of the civi-
lized nations toward Russia. Let the Russians be Russians. Let them do
what they want in their own country. But do not let them pass beyond
the boundaries of their own land to destroy European civilization.’ But
 Post-Habsburg Führercults: Hayek, Hitler, Mises, Mayer and Spann 61

Mises was tolerant: Russians ought not to be ‘prohibited from spreading

their propaganda and distributing bribes the way the Czars did throughout
the world. If modern civilization were unable to defend itself against the
attacks of hirelings, then it could not, in any case, remain in existence
much longer [emphases added].’
Austrians believe that ‘of course socialism and unlimited democracy
come very much to the same thing’ (Hayek 1978a)59; and ‘What sepa-
rates the Communists from the advocates of the Welfare State is not the
ultimate goal of their endeavours, but the method by means of which
they want to attain a goal that is common to both of them’ (Mises
1961). For Austrians, therefore, Fascism is preferable to (and should
be imposed upon?) any country with a Welfare State. Hayek (1978a)
fraudulently created a Welfare State for his academically unqualified
propagandists because he ‘need[ed]’ these ‘intermediaries’ to reach the
‘masses.’60
The hagiographic Hayek Centre promotes ‘The Hayek Prophesies’
because ‘Liberty will have a tough time enduring without sound eco-
nomic policies.’61 At the peak of the Cold War, the words of Prophet
Mises (1985 [1927], 158, 19, 44, 42–51)—a business sector hireling
who declared that Fascism ‘has, for the moment, saved European civi-
lization’—were translated: ‘With all their will to war and destruction,
the Russians are no longer capable seriously of imperiling the peace of
Europe. One may therefore safely let them alone [emphasis added].’
Fourteen years before the publication of The Road to Serfdom, there
were ‘a hundred accounts’ of the Soviet gulags: the Labour and Socialist
International produced a Report to the Commission of Inquiry into the
Situation of Political Prisoners; Boris Souvarine published an account of
the ‘hundreds of thousands of political prisoners in the prisons, isola-
tors and concentration camps’; and Ivan Solonevich’s (1938) London-­
published Russia in Chains: A Record of Unspeakable Suffering ‘achieved
great popularity’ (Kaplan 2003, 226–227).
In a Public Broadcasting Service discussion about The Road to Serfdom,
Ben Wattenberg (1999) stated that Hayek has ‘seen Hitler rampage
through Europe. He had seen Stalin take over the Soviet Union and
transform it into a gulag. Is that what drove him, those experiences?’
Hamowy (1999b) replied: ‘Well, that was part of it.’62 Caldwell (2005)
62 2 The Hayekian Religion

was more specific: ‘By the late ‘30s, once the purges and other things
came to light, many people realized the Soviet Union was a monstrosity.’
If Hayek’s (1992a [1945], 223) mental illness prevented him from
realizing that others may object to ‘shooting in cold blood,’ his intel-
ligence allowed him to cover his tracks. When Rosten suggested that
The Road to Serfdom (1944)—published 17 years after Liberalism in
the Classical Tradition—had been ‘surprisingly lenient’ on the Russians,
Hayek (1978a) protested: ‘Well, you forget that it was our ally in war at
the time I wrote and published it.’ Rosten pushed: ‘This was just shortly
after the execution of [Henrik] Ehrlich and [Viktor] Alter and the Katyn
Forest and all of that. No, I’m not criticizing you.’ Hayek replied: ‘We
didn’t know about these things yet [emphasis added]. You see, in fact, I say
it came out in ‘44, but it was mostly written in ‘41 and ‘42…I just had to
restrain myself to get any hearing. Everybody was enthusiastic about the
Russians at that time, and to get a hearing, I just had to tune down what
I had said about Russia.’63
According to Hayek (2009a [1979], 6), Keynes had a ‘rather lim-
ited knowledge of economic theory’: he told Cubitt (2006, 5) that he
and his fellow European émigrés sat in the ‘sardonic corner’ of the LSE
Common Room making ‘malicious’ comments about the competence
of their English colleagues. The classically educated Hayek (1994, 84)
concluded departmental meetings with a call-to-arms against the LSE
Director who had just recruited him: ‘Beveridge delundus est’ (‘We must
destroy Beveridge’). But ‘it turned out that the LSE economists, and even
Lionel Robbins, had not had a classical education…I found out that not
one of them understood what I was saying. It’s a famous phrase, a story
from, I believe, Cicero…I assumed this to be popular knowledge.’
In Greek mythology, Sisyphus was punished for Hayek’s ‘curious’
sin of chronic deceitfulness—condemned to spend eternity pushing an
immense boulder up a hill, only to watch it roll back down. For Mises
(1985 [1927], 19, 44, 42–51), Fascist ‘merit…will live on eternally in
history’; and with what appears to be a sardonic mock, Hayek (2010
[1952] 154) applied the Sisyphus analogy to the ‘rationalist whose rea-
son is not sufficient to teach him those limitations of the powers of con-
scious reason, and who despises all the institutions and customs which
have not been consciously designed, would become the destroyer of the
 Notes 63

c­ ivilization built upon them. This may well prove a hurdle which man
will repeatedly reach, only to be thrown back into barbarism.’
Spann promoted an organic view of the State: a reconstruction of a
mythical version of the Feudal Corporate State in which everyone had
an allocated role—the State must promote the ‘new more just and
moral society’ (Ehs 2013, 53). According to Hayek’s (2010 [1945], 66)
‘Individualism: True and False’:

While the theory of individualism has thus a definite contribution to make

to the technique of constructing a suitable legal framework and of improv-
ing the institutions which have grown up spontaneously, its emphasis is, of
course, on the fact that the part of our social order which can or ought to
be made a conscious product of human reason is only a small part of all the
forces of society. In other words, that the state, the embodiment of deliber-
ately organised power and consciously directly power, ought to be only a
small part of the much richer organism [emphasis added] which we call
‘society,’ and that the former ought merely to provide a framework within
which free (and therefore not ‘consciously directed’) collaboration of men
has the maximum of scope.

In Law, Legislation, and Liberty, Hayek (1973, 19) elaborated:

Every man growing up in a given culture will find in himself rules, or may
discover that he acts in accordance with rules—and will similarly recognize
the actions of others as conforming or not conforming to various rules.
This is, of course, not proof that they are a permanent or unalterable part
of ‘human nature’ or that they are innate, but proof only that they are a
part of a cultural heritage which is likely to be fairly constant, especially so
long as they are not articulated in words and therefore also are not discussed or
consciously examined [emphases added].

Notes
1. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
64 2 The Hayekian Religion

2. Friedrich Hayek, interviewed by James Buchanan 28 October 1978

(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
3. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
4. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
5. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
6. Coming from a proto-Nazi family, Hayek (1976b, 189–190) had not
been taught to believe in socialism, which renders the second part of his
argument ‘curious’: ‘It was a time when all the fashionable intellectual
arguments seemed to point to socialism and when nearly all ‘good men’
among the intellectuals were socialists. Though the immediate influence
of the book may not have been as great as one might have wished, it is in
some ways surprising that it had as great an influence as it did [emphasis
in original].’
7. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
8. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
9. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
10. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
11. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
12. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
 Notes 65

13. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre

for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
14. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, https://oralhistory.library.ucla.edu/).
15. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
16. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
17. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
18. Haberler Archives Box 3.2.
19. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, https://oralhistory.library.ucla.edu/).
20. ‘Mises wrote that there was no contradiction between national self-­
determination and a monarchical regime, provided that the monarchy
was established by a free referendum.’
21. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
22. https://mises.org/pdf/asc/essays/kuehneltLeddihn.pdf
23. The data does not necessarily support Pareto’s ‘principle.’
24. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
25. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
26. https://www.peter-boettke.com/curriculum-vita/
27. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 and
Robert Chitester date unspecified 1978 (Centre for Oral History
Research, University of California, Los Angeles, https://oralhistory.
library.ucla.edu/).
66 2 The Hayekian Religion

28. Friedrich Hayek, interviewed by James Buchanan 28 October 1978

(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
29. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
30. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
31. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
32. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
33. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, https://oralhistory.library.ucla.edu/).
34. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
35. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
36. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
37. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
38. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, https://oralhistory.library.ucla.edu/).
39. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
40. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
 Notes 67

41. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978

(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
42. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
43. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
44. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
45. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/).
46. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
47. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
48. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, https://oralhistory.library.ucla.edu/).
49. Haberler Archives Box 12, Hayek folder.
50. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, https://oralhistory.library.ucla.edu/).
51. Haberler Archives Box 12, Fürth folder.
52. ‘Songs by Felix Kaufmann.’ Haberler Archives Box 1.
53. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, https://oralhistory.library.ucla.edu/).
54. https://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/hayek-lecture.html
55. Hayek Papers Box 26.28.
56. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
68 2 The Hayekian Religion

57. Friedrich Hayek, interviewed by James Buchanan 28 October 1978

(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
58. ‘But, after all, we had a great classical civilization in which religion in
that sense was really very unimportant. In Greece, at the height of its
period, they had some traditional beliefs, but they didn’t take them very
seriously. I don’t think their morals were determined by religion.’
Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
59. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
60. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
https://oralhistory.library.ucla.edu/).
61. https://hayekcenter.org/?p=4278
62. Hamowy (1999b) continued: ‘what he feared were the policies that were
adopted by the allies, the control and depredations on personal liberty
which had been introduced to some extent by the fact that these allied
powers were at war, which really limited the area of private free action.
And he saw this as continuing. If you extrapolated what was going on,
say, from 1930 to 1944, when The Road to Serfdom was originally pub-
lished, if you go up to 1999, you see a huge behemoth state and, in fact,
he was probably right in believing that that would come about.’
63. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, https://
oralhistory.library.ucla.edu/). On 13 April 1943, Radio Berlin announced
the discovery of the graves and laid the blame on the Soviets; the London
Times (28 April 1943) and the Manchester Guardian (May 1943)
reported the story (Engel 1993, 233, n140).
 3
Hayek’s ‘Framework of Traditional
and Moral Rules’

The age of dynasties—weakened in the eighteenth century by the estab-

lishment of the American Republic—appeared doomed in the aftermath
of their ‘Great’ War. Hayek (1978a) explained why Wieser was absent
when he first arrived: he ‘had left the university to become a minister
in the last Austrian government.’1 By ‘the last Austrian government,’
Hayek was referring to the Habsburg Empire, whose successor—the First
Austrian Republic (1919–1934)—he denigrated as a ‘republic of peasants
and workers.’2 This and the Hohenzollern successor State—the German
Weimar Republic (1919–1933)—collapsed under the pressure of the
policy-induced deflation promoted by the Austrian School of Economics.
There is, apparently, no evidence that Hitler actually stated: ‘We need
law and order. Yes, without law and order our nation cannot survive.
Elect us and we shall restore law and order’ (Boller and George 1989,
45–46). However, after their failed 1923 Putsch, Ludendorff and Hitler
embraced democracy as a prelude to destroying it:

to avoid facing the gun barrels of state power until such time as he had
those same gun barrels at his command. The contemporary catchphrase
‘Adolphe Légalité’ revealed an instinct that this much vaunted legality
amounted to no more than ‘a moratorium on illegality.’ (Fest 1970, 26)

© The Author(s) 2017 69

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_3
70 3 Hayek’s ‘Framework of Traditional and Moral Rules’

Hayek (1978a) Légalité was equally deceptive: ‘And, after all, in a sense,
the conception of democracy was an artifact which captured public opin-
ion after it had been a speculation of the philosophers. Why shouldn’t—
as a proper heading—the need for restoring the rule of law become an
equally effective catchword, once people become aware of the essential
arbitrariness of the present government.’3
Hayek (1978a) believed in

democracy as a system of peaceful change of government; but that’s all its

whole advantage is, no other … I think I was just taken in by the theoreti-
cal picture of what democracy was—that ultimately we had to put up with
many miscarriages, so long as we were governed by the dominant opinion
of the majority. It was only when I became clear that there is no predomi-
nant opinion of the majority, but that it’s an artifact achieved by paying off
the interests of particular groups, and that this was inevitable with an
omnipotent legislature, that I dared to turn against the existing conception
of democracy. That took me a very long time.4

Hayek embraced the ‘liberty and property’ logic used by John Caldwell
Calhoun (1782–1850) in the antebellum South:

what is called public opinion, instead of being the united opinion of the
whole community, is usually nothing more than the opinion or voice of the
strongest interests or combination of interests, and not infrequently of a
small but energetic and active portion of the whole. Public opinion, in rela-
tion to government and policy, is as much divided and diversified as are the
interests of the community; and the press, instead of being the organ of the
whole, is usually but the organ of these various and diversified interests
respectively, or rather of the parties growing out of them. It is used by them
as the means of controlling public opinion and of so modelling it as to pro-
mote their peculiar interests and to aid in carrying on the warfare of party.
But as the organ and instrument of parties, in governments of the numerical
majority, it is as incompetent as suffrage itself to counteract the tendency to
oppression and abuse of power. (Calhoun cited by Beahm 2002, 48)

The upper Habsburg Estates were primarily focused on maintaining

the ‘privileges of their aristocratic members … the nobles regarded the
 Hayek’s ‘Framework of Traditional and Moral Rules’ 71

Austrian people as an extension of their own peasantry, their only func-

tion to keep the nobility in luxury’ (Taylor 1964, 14, 188–189). The
mill owner, Josef von Hayek (1750–1837), accumulated a ‘substantial
fortune’ (Hayek 1994, 37)—which presumably became inherited family
property. Hayek (1978a) dated the ‘revolt against the market society’ to
1828:

At the same time that we no longer learned the traditional ethics of the
market, the philosophers were certainly telling them, ‘Oh, you must not
accept any ethical laws which are not rationally justifiable.’ These two
different effects—no longer learning the traditional ethics, and actually
being told by the philosophers that it’s all nonsense and that we ought
not to accept any rules which we do not see have a visible purpose—led
to the present situation, which is only a 150-year event. The beginning of
it was 150 years ago. Before that, there was never any serious revolt
against the market society, because every farmer knew he had to sell his
grain.5

To sell their rice, tobacco and cotton, plantation farmers in the antebel-
lum South required slavery: one aspect of the ‘revolt against the market
society’—the 1833 Slavery Abolition Act—fitted almost exactly Hayek’s
chronology. The 1807 Slave Trade Act had made the slave trade illegal
throughout the British Empire; and in 1808 the importation of slaves
into the United States was also prohibited (although the internal slave
trade continued as did the illegal importation of slaves).
The Texas Capitol’s monument to the Confederate war dead (installed
in 1903) celebrates those who fell for ‘liberty’ and slavery:

Died for state rights guaranteed under the Constitution. The people of the
South, animated by the spirit of 1776, to preserve their rights, withdrew
from the federal compact in 1861. The North resorted to coercion. The
South, against overwhelming numbers and resources, fought until
exhausted.

In 1838, Calhoun reflected about the abolitionist revolt against the

Southern market society:
72 3 Hayek’s ‘Framework of Traditional and Moral Rules’

This agitation has produced one happy effect at least; it has compelled us
to the South to look into the nature and character of this great institution,
and to correct many false impressions that even we had entertained in rela-
tion to it. Many in the South once believed that it was a moral and political
evil; that folly and delusion are gone; we see it now in its true light, and
regard it as the most safe and stable basis for free institutions in the world.
It is impossible with us that the conflict can take place between labor and
capital, which make[s] it so difficult to establish and maintain free institu-
tions in all wealthy and highly civilized nations where such institutions as
ours do not exist. The Southern States are an aggregate, in fact, of com-
munities, not of individuals. Every plantation is a little community, with
the master at its head, who concentrates in himself the united interests of
capital and labor, of which he is the common representative. These small
communities aggregated make the State in all, whose action, labor, and
capital is equally represented and perfectly harmonized. Hence the har-
mony, the union, and stability of that section, which is rarely disturbed
except through the action of this Government.

Calhoun also described the blessings of ‘our free institutions’ and

slavery:

The blessing of this state of things extends beyond the limits of the South.
It makes that section the balance of the system; the great conservative
power, which prevents other portions, less fortunately constituted, from
rushing into conflict. In this tendency to conflict in the North between
labor and capital, which is constantly on the increase, the weight of the
South has and will ever be found on the Conservative side; against the
aggression of one or the other side, which ever may tend to disturb the
equilibrium of our political system. This is our natural position, the salu-
tary influence of which has thus far preserved, and will long continue to
preserve, our free institutions, if we should be left undisturbed. Such are
the institutions which these madmen are stirring heaven and earth to
destroy, and which we are called on to defend by the highest and most
solemn obligations that can be imposed on us as men and patriots.6

According to Hayek’s (2011 [1960], 70) Constitution of Liberty, five

distinctions separate freedom from slavery: ‘legal status as a protected
member of a community’; ‘immunity from arbitrary arrest’; the right to
 Hayek’s ‘Framework of Traditional and Moral Rules’ 73

work at ‘whatever he desires to do’; the right to ‘movement according to

his own choice’; plus the right to own property. According to these defi-
nitions, Pass Law apartheid was a slave society.
The ‘revolt against the market society’ led to British interference
with the policy of other countries: between 1808 and 1860, the British
West African Squadron seized approximately 1600 slave ships and freed
150,000 Africans who were aboard.7 After his third trip to South Africa,
Hayek (1978a) defended the ‘civilisation’ of apartheid from the American
‘fashion’ of ‘human rights’:

You see, my problem with all this is the whole role of what I commonly call
the intellectuals, which I have long ago defined as the secondhand dealers
in ideas. For some reason or other, they are probably more subject to waves
of fashion in ideas and more influential in the American sense than they are
elsewhere. Certain main concerns can spread here with an incredible speed.
Take the conception of human rights. I’m not sure whether it’s an inven-
tion of the present [Carter] administration or whether it’s of an older date,
but I suppose if you told an eighteen year old that human rights is a new
discovery he wouldn’t believe it. He would have thought the United States
for 200 years has been committed to human rights, which of course would
be absurd. The United States discovered human rights two years ago or five
years ago. Suddenly it’s the main object and leads to a degree of interference
[emphasis added] with the policy of other countries which, even if I sym-
pathized with the general aim, I don’t think it’s in the least justified. People
in South Africa have to deal with their own problems, and the idea that you
can use external pressure to change people, who after all have built up a
civilization of a kind, seems to me morally a very doubtful belief. But it’s a
dominating belief in the United States now.8

Hayek (1978a) denigrated decolonization:

It’s so clear that in some respects America is bringing pressure on the other
countries in respects that are by no means obvious that they are morally
right … An early instance was the extreme American anti-colonialism: the
way in which the Dutch, for instance, were forced overnight to abandon
Indonesia, which certainly hasn’t done good to anybody in that form. This,
I gather, was entirely due to American pressure, with America being
74 3 Hayek’s ‘Framework of Traditional and Moral Rules’

c­ompletely unaware that the opposition to colonialism by Americans is

rather a peculiar phenomenon.9

In Habsburg Austria, social superiors were acknowledged through

bowing: before absorbing the anti-Semitism of leading Viennese families
like the von Hayeks, the fourteen-year-old Hitler always ‘made a bow’
when greeting his Jewish family doctor (Hamann 2010, 20). In The Fatal
Conceit: The Errors of Socialism, which Bartley partly wrote, Hayek (1988,
10) identified an ‘opinion’-based modification of the Habsburg ‘moral
tradition’ that in 1918–1919 had proven so unreliable a prop for his
ascribed status:

Ethics is the last fortress in which human pride must now bow [emphasis
added] in recognition of its origins. Such an evolutionary theory of moral-
ity is indeed emerging, and its essential insight is that our morals are nei-
ther instinctual nor a creation of reason, but constitute a separate
tradition—between [Hayek’s or Bartley’s emphasis] instinct and reason …
a tradition of staggering importance in enabling us to adapt to problems
and circumstances far exceeding our rational capacities. Our moral tradi-
tions, like so many other aspects of our culture, developed concurrently
with our reason, not as its product. Surprisingly and paradoxically as it may
seem to say this, these moral traditions outstrip the capacities of our reason
[emphasis added].

In the supposedly post-superstition ‘Age of Reason,’ Mises (1985

[1927], 154, 48) insisted that Classical Liberalism ‘is based completely
on science and whose policies represent nothing but the application of
the results of science.’ For Spann, the ‘truth’ of holistic laws, ‘the essence
of science, is intuitively envisioned by the scientific elite … Analogous
to the limbs and organs of the human body, Spann’s individuals have no
freedom at all: they perform whatever serves the collective branching’
(Schweinzer 2000, 54).
According to Hayek (1949, 427, 437, 2011 [1960], 186), ‘To do the
bidding of others is for the employed the condition of achieving his pur-
pose’—he was contemptuous of the ‘inferior mediocrities’ that he was
recruiting. Referring to ‘the nature of intellectual work,’ Hayek (1978a)
 Hayek’s ‘Framework of Traditional and Moral Rules’ 75

calculated: ‘Of course, scientists are pretty bad, but they’re not as bad as
what I call the intellectual [emphasis added], a certain dealer in ideas, you
know. They are really the worst part. But I think the man who’s learned
a little science, the little general problems, lacks the humility the real
scientist gradually acquires.’10 Hayek (1944, Chap. 10, 1949) needed to
recruit ‘the worst part’ and assist them to ‘Get on Top’:

What we lack is a liberal Utopia, a program which seems neither a mere

defense of things as they are nor a diluted kind of socialism, but a truly
liberal radicalism which does not spare the susceptibilities of the mighty
(including the trade unions), which is not too severely practical, and which
does not confine itself to what appears today as politically possible. We
need intellectual [emphasis added] leaders who are willing to work for an
ideal, however small may be the prospects of its early realization.

In Mein Kampf, Hitler (1939 [1925], Chap. VI) explained that from
his Austrian perspective: ‘The receptive powers of the masses are very
restricted, and their understanding is feeble. On the other hand, they
quickly forget. Such being the case, all effective propaganda must be
confined to a few bare essentials and those must be expressed as far as
possible in stereotyped formulas. These slogans should be persistently
repeated until the very last individual has come to grasp the idea that
has been put forward.’ Hitler (who would shout: ‘Propaganda, propa-
ganda, all that matters is propaganda’) referred to the ‘intellectual classes’:
‘Unfortunately we need them; otherwise we might one day, I don’t know,
exterminate them or something like that. But unfortunately we need
them’ (cited by Fest 1970, 63, 259).
Like Spann, Hayek (1978a) was ‘always a step ahead of current fash-
ions’11: the reconstruction of his ‘spontaneous’ order would come through
the contrived construction of fashionable opinion by his low-­quality dis-
ciples: ‘You have to persuade the intellectuals, because they are the makers
of public opinion. It’s not the people who really understand things [emphasis
added]; it’s the people who pick up what is fashionable opinion. You have
to make the fashionable opinion among the intellectuals before journal-
ism and the schools and so on will spread it among the people at large.’12
76 3 Hayek’s ‘Framework of Traditional and Moral Rules’

This required that some fashionable opinion—or ‘old truths’—had to be

abandoned:

Americans are more liable to this sort of quick change. There is a much
more deeply ingrained tradition on the Continent than there is in American
urban life … All I see is the urban America, and urban America certainly
[represents] often an instability and changeability which I have not come
across anywhere else … The very balance consists in the fact that they are
passing fashions. They have great influence for the moment, but I should
not be surprised if—In this case, I might be surprised, but let me just give
an example: if I come back again, say, in two years, which is my usual inter-
val, I shall find people are no longer jogging.13

American intellectuals—‘secondhand dealers in opinions’—were

driven by fashion: ‘For some reason or other, they are probably more
subject to waves of fashion in ideas and more influential in the American
sense than they are elsewhere. Certain main concerns can spread here
with an incredible speed.’14
Hayek (1994, 54) had learnt from Spann not to allow the ‘younger
members’ to feel ‘confused.’ The Jewish-born Hamowy (2012, 535) was
unaware of the confused ideology that he had devoted his career to pro-
moting: ‘That we are part of some organic body and that we are inter-
connected so that we ‘belong’ to and are responsible for each other is
basically antithetical to our notion of the sovereignty of the individual.’
On the 14th anniversary of the collapse of the Austrian-led Third Reich
(his 60th birthday), Hayek (2011 [1960 (8 May 1959)], 40) explained
in The Constitution of Liberty that his ‘mind has been shaped by a youth
spent in my native Austria and by two decades of middle life spent in
Great Britain, of which country I have become and remain a citizen. To
know this fact about myself may be of some help to the reader, for the
book is to a great extent the product of this background.’
What is the American ‘background’ of Austrian economics? The Koch
brothers are selective about who they fund: for example, they denied the
2016 Republican Party Presidential candidate access to their state-of-the-­
art political data and refused to let him fund-raise through their gather-
ings.15 But the idea that Charles Koch would support Trump’s opponent,
 Hayek’s ‘Framework of Traditional and Moral Rules’ 77

Hillary Clinton, was ‘blood libel’—analogous to the false accusations

that Christian children had been killed by Jews for ritualistic purposes
(Gold 2016). In response, Donald Trump tweeted ‘Much better for them
to meet with the puppets of politics, they will do much better!’16
While devout Hayekian-Presuppositionist ‘scholars’ write autobio-
graphical essays on ‘Becoming an Austrian Economists and Libertarian, and
Staying One’ (Boettke 2010b), Joan Robinson recalled that when some-
one ‘remonstrated’ with Keynes for being ‘inconsistent,’ he responded:
‘When someone persuades me that I am wrong, I change my mind. What
do you do?’ (cited by Harcourt 1986, 99, n3). Hayek (1978a) saw this
as weakness: ‘Keynes was very capable of rapidly changing his opinion’17;
‘If Keynes had lived, he would greatly have modified his own ideas, as he
always was changing opinion.’18
According to Hayek (1978a), while Keynes was ‘disputed as long as
he was alive—very much so—after his death he was raised to sainthood.
Partly because Keynes himself was very willing to change his opinions,
his pupils developed an orthodoxy: you were either allowed to belong to
the orthodoxy or not.’19 His pupils were ‘really all socialists, more or less,
and Keynes was not.’20 Hayek (1949, 432–433) outlined a propaganda
operation: ‘we must learn from the success of the socialists.’
Ronald Coase (1994, 19) referred to the ‘difficulties of understand-
ing Hayek’—who apparently used Nicholas Kaldor as an interpreter in
his LSE seminars.21 Hayek’s first appointed biographer, Shenoy (2003),
recalled that her father, B.R. Shenoy, one of Hayek’s 1930s LSE students,
found him incomprehensible: he ‘still had a thick Viennese accent at the
time. He was uncertain about his English: “Money he does this, money
he does that.” My father couldn’t really follow because of the accent.’
After arriving at the LSE, Hayek attended an English language immer-
sion course at the Berlitz School (Cubitt 2006, 4).22
In some upper-class English circles, cricketing analogies, such as ‘Adolf
stopped play,’ were used to describe World War II. Hamowy (1999a,
286–287) noted that Hayek had an ‘ongoing love affair with Great
Britain. One of his proudest achievements [emphasis added] was his hav-
ing become a British subject during his tenure at the LSE, and he was
disappointed that he did not have the opportunity to return to Britain.’
Although Queen Elisabeth II made Hayek, an academic fraud, one of her
78 3 Hayek’s ‘Framework of Traditional and Moral Rules’

Companions of Honour, Hamowy complained that ‘All his writings in

political and social philosophy attest to his admiration for things British.
It was therefore somewhat of a surprise that he should have been recog-
nized by the Nobel Committee for his brilliant contributions to econom-
ics but never to have been knighted by the Queen.’
According to Hamowy (1999a, 286), Hayek

regarded the British as the most civilized people on earth. The British more
than any other nation, Hayek contended, understood that true liberty
rested on an appreciation for the rule of law and on the institutions that
evolved to protect the subject’s freedom from arbitrary power. They had a
keen (but not a blind) respect for the unwritten rules governing how we
should deal with each other, which allowed them to function as a cohesive
entity even in a crisis, without relying on the explicit commands of some
arbitrary authority.

Hayek described to Hamowy (1999a, 287) how lunch at a gentleman’s

club illustrated the ‘spontaneous’ order: Hayek

was struck by the quiet courage and dignity that the British displayed dur-
ing the Second World War and particularly during the bombing of London.
One day over lunch at the Reform Club he recounted to me how, at that
very same table some years earlier, he had been having lunch with a col-
league when the screech of a buzz bomb was heard getting louder and
louder, a sure sign that it would land, if not directly on the Club, then close
by. When conversation no longer became possible over the mounting noise
the dining room fell silent and remained so until the bomb landed. At that
point, Hayek recalled, each person picked up his comments at the exact
point where he had earlier stopped speaking. There were no cries of alarm,
no confused rush for the doors, no panic, and, equally important, no one
barking out orders to the waiters and guests. In the event, the club that
stood immediately to the west of the Reform was totally destroyed.

Less civilized people may have rendered assistance to Hitler’s vic-

tims rather than finish lunch; but instead ‘we have all been enriched by
Hayek’s contributions to our understanding of what makes a free society
free’ (Hamowy 1999a, 287).
 Hayek’s ‘Framework of Traditional and Moral Rules’ 79

Hayek (1978a) loved the ‘strength’ of certain English

social conventions which make people understand what your needs are at
the moment without mentioning them … The way you break off a conver-
sation. You don’t say, ‘Oh, I’m sorry; I’m in a hurry.’ You become slightly
inattentive and evidently concerned with something else; you don’t need a
word. Your partner will break off the conversation because he realizes with-
out you saying so that you really want to do something else. No word need
to be said about it. That’s in respect for the indirect indication that I don’t
want to continue at the moment.

In contrast, in Austria there would be ‘an effusion of polite expressions

explaining that you are frightfully [emphasis added] sorry, but in the pres-
ent moment you can’t do it. You would talk at great length about it, while
no word would be said about it in England at all.’23
The accent in which those words were spoken (or not spoken) was
‘frightfully’ important to Hayek (1978a), who was ashamed of the Italian
accent which he had picked up from ‘peasants’: ‘I picked up Italian dur-
ing the war in Italy—well, sort of Italian. I don’t dare to speak it in polite
society24; I didn’t have the kind of feelings which could make me an
Italian; while at once I became in a sense British, because that was a natu-
ral attitude for me, which I discovered later. It was like stepping into a
warm bath where the atmosphere is the same as your body.’25
Between 1931 and 1949, Hayek, who disliked ‘very unpleasant’ Jewish
accents (Leeson 2015c, 46), was exposed to British accents by living adja-
cent to ‘the most Jewish constituency in the United Kingdom’ (Hoare
2015). But Hayek (1978a) did not acquire the middle-class language of
his North-West London neighbours (as his children did) nor of his LSE
colleagues, but instead the accent and affectations of the English upper-­
class. For example, schemes to limit tax revenue were promoted by people
who were ‘frightfully confused.’26 Frank Knight was ‘frightfully dogmatic’
about capital theory.27 Mises could be ‘frightfully exaggerating.’28 Harold
Laski was ‘frightfully offended by my The Road to Serfdom.’29 Thomas
Nixon Carver took ‘me to his country club and gave me a big luncheon,
which I almost abused. [laughter] All I remember is that he was fright-
fully offended.’30 Hayek encountered Viennese socialism in its ‘Marxist,
80 3 Hayek’s ‘Framework of Traditional and Moral Rules’

frightfully doctrinaire form.’31 And monotheistic religions are so ‘fright-

fully intolerant.’32
Hayek had ‘early been charmed’ by Keynes’ company, a ‘charm that
continued’ when the LSE was moved to Cambridge early in the war as
a consequence of the Austro-German ‘bombing of the British capital’
(Hamowy 1999a, 283). Hayek (1994, 92) observed that people got
‘enchanted by merely listening’ to Keynes’ ‘words’: his Old Etonian ‘voice
was so bewitching.’ Hayek (1978a) explained that ‘Well, you see, I think
the intellectual history of all this is frightfully complex.’33 Keynes told
him

‘Oh, never mind, my ideas were frightfully important in the Depression of

the 1930s, but you can trust me: if they ever become a danger, I’m going to
turn public opinion around like this’;34 He was much too self-assured, con-
vinced that what other people could have said about the subject was not
frightfully important;35 it would sound so frightfully egotistic in speaking
about myself—why I feel I think in a different manner. But then, of course,
I found a good many instances of this in real life.36

Hayek told Cubitt (2006, 51, 17) that it caused ‘hilarity’ when female
students using expressions such as ‘awful’ and ‘horrible.’ Hayek, one of
Schumpeter’s (1939, 75) entrepreneurs, who devoted his career to the
‘creative destruction’ of the reputations of his competitors, was followed
by a ‘swarm of imitators.’ Leube—the son of a cement merchant—claims
to be the descendant of a fourteenth-century Habsburg Count; in person
and on video, Shenoy appeared to have been imitating Joan Robinson’s
upper-class mannerisms.
Austrian ‘Professors of Economics’ do not appear to have split-­
loyalties between professing their faith in Truth and evaluating evidence:
‘Economist is my occupation, but I am first and foremost a student of
Murray Rothbard’s’ (Thornton 1995, 27). At GMU, Boettke (2010b, 64)
‘would listen to tapes of Rothbard lectures and try to imitate his ability to
combine theory, history and jokes, to convey the principles of economics
to those who are innocent of its teachings.’
Boettke (2010b, 62), who embraced a tripartite division (‘those who
were evil, those who were stupid, and those who agreed with me’), claims
 Hayek’s ‘Framework of Traditional and Moral Rules’ 81

that Presuppositionism had changed him—but does his position as full

‘Professor of Economics’ (paid by the taxpayer to train students to criti-
cally evaluate evidence and arguments) conflict with his stated ‘obligation’
to ‘build a community of libertarian scholars’? His ‘obligation’ derives
from the ‘economic truth’ supplied to him by Sennholz (1922–2007), a
‘Misean for Life’ Luftwaffe bomber-pilot for whom ‘A logically compe-
tent defense of a free society requires divinely revealed information; all
other defenses fail. Sennholz, almost alone among eminent free enter-
prise economists, rests his defense of a free society on revelation [emphasis
added]’ (John Robbins 1992).
According to Skousen (2007a), Sennholz rehearsed his lectures on
students before flying his plane ‘all over the country, giving speeches on
the evils of inflation, deficit spending and the falling dollar before bank-
ers, stockbrokers, businessmen and religious leaders.’ They first met at a
Howard Ruff personal ‘investment’ conference in the late 1970s: ‘After
hearing him for only a few minutes, one was smitten by this true-­believing
gold bug.’ Sennholz was ‘best as a powerful, electric speaker with that
unforgettable German accent’ who ‘regularly received a standing ovation.’
In ‘the Douglas McArthur of Free-Market Economics,’ Skousen
(2011a) explained that Sennholz was an ‘inspirational speaker at invest-
ment conferences in the 1970s and 1980s’ who made a fortune in real
estate before becoming FEE President (1992–1997): ‘He frequently
invited me to speak at FEE’s monthly lecture series. I invite all my sub-
scribers to come and we had big crowds at the FEE mansion. At the
beginning of my talk, I’d turn to Hans and ask him to tell my subscribers
all about FEE. In that unmistakable German accent, he spoke eloquently
for 10–15 minutes and convinced people to donate to a good cause.’
Citing (favourably) the public stoning theocrat, North, John
W. Robbins (1992), in his Festschrift essay on Sennholz, continued: ‘As for
the form of government, God established a republic in Israel. The nation
was divided into twelve tribes, much as the United States is divided into
fifty states.’ Therefore, modern governments should not

3. Establish government production facilities.

4. Redistribute property.
5. Impose taxes of 10 per cent or more.
82 3 Hayek’s ‘Framework of Traditional and Moral Rules’

For almost three decades, Rockwell was successively Paul’s Chief-of-­

Staff (1978–1982) and President of the Mises Institute (1982–2009).
In a ‘Godshammer’ ‘Open Letter to Lew Rockwell,’ Robbins (2008)—
Paul’s Chief-of-Staff (1981–1985)—complained that his predecessor was
putting his own self-interest before the ‘Cause’:

You have now had three opportunities—1996, 2001, and 2008—to prove
that you are a friend of Ron Paul and freedom, and you have failed to do
so each time. This week, for the third time, the puerile, racist, and com-
pletely un-Pauline comments that all informed people say you have caused
to appear in Ron’s newsletters over the course of several years have become
an issue in his campaign. This time the stakes are even higher than before.
He is seeking nationwide office, the Republican nomination for President,
and his campaign is attracting millions of supporters, not tens of thousands
… Your callous disregard for both Ron and his millions of supporters is
unconscionable … You know as well as I do that Ron does not have a racist
bone in his body, yet those racist remarks went out under his name, not
yours. Pretty clever. But now it’s time to man up, Lew. Admit your role,
and exonerate Ron. You should have done it years ago.

North (2010, 246), who ‘wrote a weekly newsletter for Paul. I wrote it
as every journalist writes, on the day it is due,’ went looking for ‘another
job,’ and became a ‘Washington Reject.’ According to Rockwell—who
must have appointed North as the Mises Institute ‘Rothbard Medal’
holder—the ghost-writer ‘left in unfortunate circumstances’ (cited by
Kirchick 2008).
‘The Rockwell Files’—in the Economist ‘Democracy in America’ col-
umn (11 January 2008)—cast doubt on Paul’s integrity: ‘if the person
responsible for spreading venom under his name for many years remains
a close associate [Rockwell], it suggests that Mr. Paul is at least pre-
pared to countenance pandering to racists, however respectable his own
views.’ On 17 January 2008, Lizardo (another of Paul’s former Chief-of
Staff) told David Weigel (2008): ‘Last week, a statement was prepared
by Ron Paul’s press secretary Jesse Benton, and approved by Ron Paul,
­acknowledging Lew Rockwell as having a role in the newsletters. The
statement was squashed by campaign chairman Kent Snyder.’ Benton
 Hayek’s ‘Framework of Traditional and Moral Rules’ 83

responded: ‘I respect Tom Lizardo, but he does not work for the cam-
paign and has no authority to comment on campaign business.’
Benton, who was also involved in Paul’s 501 (c)(4) non-profit
Campaign for Liberty (C4L), told David Donadio (2008) ‘I was an econ
major, and we actually had a real Chicagoan in our econ department. I
guess I’ve become more of an Austrian now. The market can always do
better. Ultimately the market is the best way to provide things to society.’
When asked if this included national security, Benton replied:

Sure. Absolutely. That’s the ideal. You have to combine your idealism with
pragmatism of the time, and what’s available, and what you have … I think
if someone attacked our domestic borders, we’d use nuclear weapons …
Oh, now I’m getting in talking about nuclear weapons, it’s gonna be Barry
Goldwater all over … I evolved from not knowing anything at all to think-
ing I wanted social justice to thinking that social justice is a myth really,
and the way to make sure most people have the most is to unleash the
creativity of the human spirit, in free markets and minimal government.

On 5 August 2015, Benton plus two other Paul staffers, John Tate (who
runs America’s LibertyPAC, another official pro-Paul superPAC) and
Dimitri Kesari, were indicted by a Federal grand jury for felony charges
arising from an alleged attempt to conceal expenditure of campaign
money to buy the endorsement of an Iowa politician (Jacobs 2015).
In Paul’s (2008a) Pillars of Prosperity, Free Markets, Honest Money,
Private Property, Rockwell (2008a, xviii) (in a Foreword written before
the newsletter authorship began to sink the campaign) stated: ‘One is
struck by his consistency and willingness to state the truth, even when
it is unpopular to do so. He is right to believe that the most important
step in this struggle [for liberty] is to state the truth, openly and with-
out fear.’ Rockwell and Rothbard ‘envisioned a libertarian alliance with
‘cultural and moral traditionalists’ who shared a dislike for everything
from environmentalism to postmodern art’ (Tanenhaus and Rutenberg
2014). Sennholz’s gravestone has engravings of a bomber plane plus
a piano37; did he—reflecting his (Nazi?) past—also warn his students
about ­‘degenerate art’? Why does Boettke attach the ‘degenerate’ label
to those who provide evidence about the Austrian agenda?38 In I Chose
84 3 Hayek’s ‘Framework of Traditional and Moral Rules’

Liberty, Boettke (2010b, 62) explained: ‘Everyone’ at Grove City College

was ‘exposed’ to Sennholz’s ‘wonderful’ lectures in classes and a few times
every year in our ‘morning church obligation. His lectures sang to me the
first time I heard them, and unlike many of my classmates, I loved the
tune; his lectures still ring loudly in my ears and continue to make me
think everyday.’39
A stolen antique clock almost severed the flow of tax-exempt funds
from the Hoover Institution to the suppliers of The Collected Works of
F. A. Hayek. Hayek (1978a) loved Wieser ‘trick’ with ‘a golden hunting
watch in a leather thing,’40 and the Washington Post reported that he ‘is
everything you want an 83-year-old Viennese conservative economists to
be. Tall and rumpled. A pearl stickpin in his tie. A watch chain across his
vest, even though he wears a digital on his wrist. An accent which melds
German Z’s with British O’s.’ With ‘lovely aristocratic ease,’ he became
a ‘favorite of conservative economists from Irving Kristol to William
Buckley.’ While Hayek described the ‘spontaneous formation of an order’
as ‘extremely complex structures’ and the market as ‘an exo-somatic sense
organ,’ the staff of the Heritage Foundation ‘hover around him with a
combination of delight and awe that makes them seem like small boys
around a football hero’ (Allen 1982).
In Buckley ‘Jr’s’ National Review, the Australian-Austrian Crozier
(1986) described himself as a ‘Britisher.’ Bartley ‘III’ was the grandson
of a self-made businessman, the son of a drunkard, and the imitator of
‘the manners, speech and dress of an English gentleman, complete with
pocket watch, chain and vest’ (Adolf Grünbaum cited by Theroux 2015,
240, n26). The essence of the epigone-generation of the Menger/Böhm-­
Bawerk/Mises/Rothbard/Rockwell-Redneck-Boettke-Shenoy stream is:
‘You can’t fight the massive and organized powers of statist, centralist,
and generally destructionist social forces armed only with a watch chain
and an antique vocabulary’ (Rockwell 2010 [1999], 291).
What type of ‘market free play’ allows Austrian economists to obtain
gasoline and evade market forces (through tenure-protected academic
employment)? Sennholz explained

why government policies resulted in gas shortages, forcing Mr. Boettke to

siphon gas. ‘I was hooked.’ (Evans 2010)
 Hayek’s ‘Framework of Traditional and Moral Rules’ 85

Do Austrians seek market power (theocracy, archival monopoly,

producer sovereignty, etc.) because they are market failures? The high-
status image that Boettke projects to his students is belied by the fact
that after seven years of academic scrutiny, he was deemed unworthy
of tenure. The market for academic economists is intensely competi-
tive: if someone fails in a ‘top ten’ department, they are usually hired
by a ‘second ten’ department. A ‘friend’ arranged for Boettke to be
hired at GMU (Evans 2010).41 According to Vaughn (2015), before
Buchanan’s ‘serendipitous’ arrival, George Mason was an ‘undistin-
guished’ University whose ‘faculty was not exactly at the forefront of
academic research.’ The economics department was ‘bottom heavy in
newly minted Ph.D.’s’ and ‘only a handful of faculty were actively pub-
lishing in academic journals.’
The economics department at the University of Chicago could have
staffed either a Democrat or a Republican administration—at least in
1964 (Friedman and Friedman 1998, 192). Should universities allow
hiring practices which produce ideological homogeneity? According to
Vaughn (2015), at GMU there was ideological unanimity: ‘those of us
who did strive to be research economists were all sympathetic to either
the public choice agenda or to Jim [Buchanan]’s subjectivist side.’ This
bubble allows Boettke (2015) to project himself as part of the ‘1%’ intel-
lectual, athletic and financial elite: ‘I live in a different world than the
99%.’ Boettke believes that he is ‘engaging in scholarly chess’ while histo-
rians of economic thought are ‘playing ideological checkers.’42
After decades of devotion to Hayek, Caldwell has reportedly aban-
doned his efforts to learn German and has hired a co-author for his
‘Definitive’ ‘Philosopher of Liberty’ biography. Boettke (2015) spent the
‘first 10–15 years’ of his career ‘as a Russia watcher—studied the language
(though I never mastered it).’ Shenoy—who could ‘speak’ Austrian, but
not understand German (Hayek’s precondition for his approval of her
biography)—obtained, at her second attempt, a lower-second-class degree
in economic history—which is below the conventional cut-off for entry
into graduate school. Her life-time academic tenure, which insulated
her from market forces, was obtained through lobbying by the National
Tertiary Education Union (of which she was a voluntary member) and
Hayek43; she was an honoured GMU Visiting Professor.
86 3 Hayek’s ‘Framework of Traditional and Moral Rules’

Hayek (24 January 1978) informed Machlup that he had allowed

Shenoy to take an ‘incomplete’ autobiographical sketch plus a packet
of handwritten notes.44 Despite numerous requests, Shenoy refused to
return this archival material or the Hayek family heirlooms that she
had ‘Austrian-borrowed’ for her non-existent ‘Order of Liberty’ biog-
raphy. A year after she was revealed to be an academic fraud (Leeson
2013a, 202), Samuel Bostaph (15 May 2014), a Texas Christian
University graduate, Mises Institute Fellow, and ‘Ph.D. Professor
Emeritus of Economics University of Dallas,’ described Austrian
faith-logic to the SHOE email list: ‘Sudha Shenoy was the daughter of
prominent Indian economist Bellikot [sic] Shenoy, and an economic
historian on the faculty of the University of Newcastle in Australia for
many years. I knew her personally and what I have read of her works
shows careful scholarship.’
Reason asked Caldwell if he agreed that Hayek ‘taught us that the start-
ing point of our plans has to be a recognition of the necessary limits
of our understanding, that the grand old Enlightenment dream of total
knowledge has to be replaced with one that is limited and provisional.’
Referring to Hayek’s Challenge (2004), Caldwell (2005b) replied:

That is a Hayekian theme. One of the things that I take away from Hayek
is you can’t really prove any of this stuff in a traditional way. What you can do
is develop a way of thinking and all sorts of different evidence that ulti-
mately convinces you that this is an appropriate way of looking at this par-
ticular type of social phenomenon. I think this is part and parcel of Hayek’s
method [emphases added]. It’s certainly what I took from him in my book.
Understanding the limits of what we can do is an important legacy. And so
is understanding that in trying to do too much, we often end up making
situations much worse.

Much Austrian ‘knowledge’ appears to consist of unknowingly con-

sumed fraud. Having examined and passed Shenoy’s PhD, Caldwell
(2004, 317, n34, 2005b, 65, 56) twice uncritically repeated her fraud—
and when challenged by the community which had elected him their
President, responded: ‘Oh my God, do I really have to be dragged into
this discussion!’ (SHOE 15 May 2014).
 Hayek’s ‘Framework of Traditional and Moral Rules’ 87

Skousen (1997) may have only one academically refereed publica-

tion, but Buckley told him: ‘I keep your economics book at my bedside
and tell all my friends to read it!’ Over lunch, Skousen (2008), as FEE
President, gave Buckley a copy of his textbook and shortly afterwards,
John Whitney, Chairman of the ‘W. Edwards Deming Center for Quality
Management and Professor of Professional Practice [emphases added] at
the Columbia Business School,’ telephoned and, a few months later,
arranged for Skousen to take over his courses: ‘I immediately accepted. I
will be eternally grateful to William F. Buckley, Jr., for opening this door
to my career.’45
According to Sennholz (2002): ‘The private property order rests
squarely on truthfulness, reliability, and voluntary cooperation. In a
free market, a businessman who deceives his customers will lose them.’
Under a section entitled ‘The Moral Hazard of Being Honest,’ Leube
(2003b [2001], 15–16, 10) reflected about ‘considerations of reputation
and especially peer pressure’: there were times when it ‘becomes senseless
and even stupid to remain honest … situations are often faked to capi-
talise on any legal or semi-legal opportunity to exploit the collective sys-
tem.’ The fake PhD that Hayek ennobled Leube with—plus his dubious
ancestry—presumably assisted his acquisition of a full professorship at
California State University, Hayward/East Bay (CSUH/EB); Grünbaum
observed that the same bogusness assisted Bartley to obtain employment
at the University of Pittsburgh (Theroux 2015, 240, n26). Leube (2003b)
reflected ‘On Some Unintended Consequences of the Welfare State’; the
previous year, his appointment had been abruptly changed to Professor
Emeritus (Coleman 2002). Bartley told his friends and colleagues that
the University of Pittsburg has sacked him because he was a homosexual
(Leeson 2013a, Chap. 9); but according to his senior colleagues, he was
obliged to resign after it became apparent that he was simultaneously
employed full-time by California State University, Hayward (Theroux
2015). That university thus employed two fake European aristocrats,
both writing Hayek biographies.
As Bartley approached death, his partner,

saw in his face and heard in his voice a quality that had never been there,
as long as I had known him (which was 26 years). In some way that I
88 3 Hayek’s ‘Framework of Traditional and Moral Rules’

cannot articulate he was becoming transparent to himself, that the care-

fully forged persona that he had worked so hard to maintain all these
years had simply dissolved, and in its place was the simplicity of accep-
tance of what he had done and what he had not done, how he had lived
and not lived and without regret, bitterness, anguish or apology … he
seemed to be released from all the feelings of guilt and compulsion which
had plagued so much of his life. (Cited by Leeson 2013a, 150–151)

Boettke’s (2010b)

most important contribution is as a teacher of economics. I consider teach-

ing a ‘calling’ and consider my role as an economic educator both at the
undergraduate and graduate level very seriously and enjoy my role as a
teacher tremendously … I am myopically focused on the advance of
Austrian economics within the economics profession and the academic
community … we Austrians have this amazing endowment of scientific
ideas from Mises and Hayek. We cannot squander this endowment of
unbelievably powerful ideas. We must win the day in the scientific debates
… Our students study Austrian economics, write dissertations in Austrian
economics and get jobs where they in turn teach Austrian economics.

Hayek’s (1949, 432–433) disciples were typically ‘inferior … medioc-

rities’; Rockwell (2010 [1999], 298)—who also sought to recruit from
this cohort (Chap. 12, below)—asserted:

Our Mises and Rothbard Fellows are in demand, and not only because
more and more departments seek genuine diversity at a time of Austrian
renaissance. They are among the best young economists working today.
Not only can they run rings around the mainstream with the mainstream’s
own tools, but their praxeological grounding gives them a real leg-up in
understanding actual economic events. They are also blessed with the voca-
tion to teach, to be scholars in the classical tradition. This is no way to get
rich, and it’s not for everyone, but in the secular world, there is no higher
calling [emphasis added]

In reality, Bartley was arguably the only epigone-Austrian for whom

Hayek’s contempt was unwarranted. In over half-a-century as a taxpayer-­
funded ‘scholar,’ Hamowy’s work has primarily been promoted by
 Hayek’s ‘Framework of Traditional and Moral Rules’ 89

fellow-travellers and for-profit publishers. His ‘Note on Hayek and

Anti-Semitism’ in History of Political Economy (2002) may be the most
nonsense-ridden essay ever published in that journal. With respect to his
‘Adam Smith, Adam Ferguson, and the Division of Labor’ (published
1968 in Economica, the LSE journal Hayek had edited): according to
Struan Jacobs (1998, 2015a), Hamowy and George Roche III falsely
attributed to Hayek originality with respect to the term and notion of
‘spontaneous’ order.
The ‘two things that struck’ Hamowy (1999a, 285, 2010, 147) about
Hayek were his ‘intellectual honesty and the modesty [emphasis added]
with which he wore his immense erudition.’ Hayek was a ‘somewhat for-
mal man, invariably considerate and good-natured.’ Hamowy regarded
himself as ‘terribly lucky’ to have had the ‘opportunity to get to know
both’ Rothbard and Hayek: ‘They were both truly brilliant men from
whom I have profited immensely.’ Together with Mises, Hans Kohn and
Sir Isaiah Berlin, they were ‘responsible for how I understand the world.’
But was ‘especially true’ of Rothbard and ‘Frederick [sic] Hayek, whom I
knew best and whom I loved most.’
Referring to the response of American ‘intellectuals’ to The Road to
Serfdom, Hayek (1978a) described the ‘unmeasured praise from people
who probably never read it.’46 Hamowy complained that Hayek’s PhD
supervision was virtually worthless: ‘Hayek contributed little to Ronald’s
studies. Hayek was above it all. Ronald was on his own, as students of
Great Academics always are’ (Cox 2012). For over three decades, Hayek
wrapped-up Hamowy (1999b) in his tangled ‘spontaneous’ web without
mentioning the Securities and Exchange Commission: ‘I frankly could
not speak to what Hayek thought of the SEC … the SEC never came up
for some reason.’
Vaughn (1999) summarized Hayek’s opposition to planning: ‘And
they will have to, just by necessity, just bowl those over the wants and
desires and preferences of the people who they’re planning for. They must
presume they know better, or they’re not going to be successful planners.’
Hamowy (1996, 419–420) directed his animosity towards those who
might make ‘intrusions’ into ‘one’s private life.’ Thus Charles Merriam,
Professor of Political Science at the University of Chicago and one of
Hayek’s (1994, 103–123) critics, ‘particularly exemplifies the insolence,
90 3 Hayek’s ‘Framework of Traditional and Moral Rules’

incivility, and self-importance that so often accompanies high ranking

bureaucrats’ who display ‘contempt for personal freedom of choice and
individual autonomy.’
Douglas Simpson’s (2011, Chap. 5, 290) Looking for America:
Rediscovering the Meaning of Freedom contains a chapter on ‘The Road
to Serfdom’ plus a standard Austrian cliché: ‘I have found one thing true
about bureaucracy, which is that once bureaucracy solves a problem, it
will usually either deny the problem, or create another, in order to remain
attached to the tax nipple.’ In Liberalism in the Classical Tradition, Mises
(1985 [1927], 43–44) explained that it was important for those of his
class to display ‘a certain aristocratic dignity, at least in their outward
demeanour.’ Hamowy (1999a, 285) described Hayek as ‘an extremely
distinguished-looking man with impeccable manners and a gentle schol-
arly way about him.’ Hayek is remembered for making smutty remarks
about other peoples’ wives (Leeson 2015c, 112); and according to the
Rothbard-Rockwell-Report, ‘There is no point telling men to refrain from
premarital sex when the opportunity is offered; they won’t listen. Sexual
morality rests with women’ (Levin 1996, 5).
In Socialism, Mises (1951 [1922], 87, 104, n1, 85, 87, 90) explained:
‘Waking and dreaming man’s wishes turn upon sex’: for women, ‘the
sexual function,’ the urge to ‘surrender to a man,’ and ‘her love for her
husband and children consumes her best energies’; anything more was
‘a spiritual child of Socialism.’ His fiancé recalled: ‘Sometimes I did
not see him for weeks. But I knew very well that he was in town. At
least twice daily the telephone rang, and when I answered there was
silence at the other end of the line—not a word was spoken. I knew it
was Lu … I was so tormented, so torn to pieces that the children must
have felt it.’47 Mises also gratified himself by feeling Margit Mises’
(1976, 28, 23) six-year-old daughter: ‘I wanted to touch Gitta’s hair
and think of you.’ Mises tried to edit this (and much else) out of his
life:

But there was one thing about him that I never understood and still don’t
understand. From the day of our marriage he never talked about our past.
If I reminded him now and then of something, he cut me short. It was as
if he had put the past in a trunk, stored it in the attic, and thrown away the
 Hayek’s ‘Framework of Traditional and Moral Rules’ 91

key. In thirty-five years of marriage he never, never-not with a single word-­

referred to our life together during the thirteen years before our marriage.
As the past was part of my life, part of the person I became, I could not
forget. His silence about the past remains in my mind like a crossword
puzzle that one cannot solve because one needed letter is missing. (Margit
Mises 1976, 43–44)

In ‘Understanding Libertarian Morality: The Psychological

Dispositions of Self-Identified Libertarians,’ Ravi Iyer et al. (2012)
report that libertarians display ‘lower interdependence and social relat-
edness’ and score ‘moderately lower than conservatives and substantially
lower than liberals on empathic concern for others.’ Austrian ‘liberty’
is person-­specific: ‘I want to receive subsidies but evade taxes’; ‘tax-
evaders are my heroes.’48 While others have sought to extend rights
to the disenfranchised—slaves, serfs, Jews, non-whites, children and
women—Rothbard (2002b [1971], 52) explained why Austrians oppose
externality analysis: ‘whether Women’s Libbers like it or not, many men
obtain a great deal of enjoyment from watching girls in mini-skirts; yet,
these men are not paying for this enjoyment. Here is another neighbor-
hood effect remaining uncorrected! Shouldn’t the men of this country
be taxed in order to subsidize girls to wear mini-skirts?’ Thus, ‘Professor
Rothbard demonstrates logically the absence of externalities subject to
remedy by government intervention’ (Herbener 1995, 87). Inspired by
Rothbard, Austrian School academics chant: ‘We want externalities’
(Blundell 2014, 100, n7).
According to Mises (1951 [1922], 87, 104, n1), ‘The sickness of a man
whose sexual life is in the greatest disorder is evident in every line of his
writings.’ Rothbard (2007a [1957], 12) told Ayn Rand that he had previ-
ously thought of the novel, ‘at best, as a useful sugar-coated pill to carry
on agit-prop work amongst the masses who can’t take ideas straight.’
Rand had obliged him to ‘no longer pooh-pooh the novel.’ Using the
Marxist phrase, ‘the unity of theory and practice,’ Rothbard gushed, tell-
ing Rand that she had ‘achieved not only the unity of principle and per-
son, and of reason and passion, but also the unity of mind and body,
matter and spirit, sex and politics.’ Only ‘twice’ in Rothbard’s life have he
felt ‘honored and happy’ that he had been ‘young and alive at the specific
92 3 Hayek’s ‘Framework of Traditional and Moral Rules’

date of the publication of a book: first, of Human Action in 1949, and

now with Atlas Shrugged.’
Several Austrian School economists appear to suffer from severe psy-
chiatric illnesses; and many more display characteristics usually associ-
ated with autism. Rothbard (2007a [1957], 13) told Rand about her
credentials as his faith-healer: ‘I now come to the painful part of this let-
ter. For standing as I do in awe and wonder at the glory and magnitude
of your achievement, knowing from early in the novel that I would have
to write you and express in full how much I and the world owe to you.’
Rothbard (2007a [1957], 13–14) disburdened himself:

I also know that I owe you an explanation: an explanation of why I have

avoided seeing you in person for the many years of our acquaintance.
I want you to know that the fault is mine, that the reason is a defect in my
own psyche and not a defect that I attribute to you. The fact is that most
times when I saw you in person, particularly when we engaged in lengthy
discussion or argument, that I found afterwards that I was greatly depressed
for days thereafter. Why I should be so depressed I do not know. All my
adult life I have been plagued with a ‘phobic state’ (of which my travel
phobia is only the most overt manifestation), i.e. with frightening emotions
which I could neither control nor rationally explain. I have found that
unfortunately the only way I could successfully combat this painful emo-
tion is by sidestepping the situations which seemed to evoke it—knowing
that this is an evasion, but also knowing no better way. So in this situation.
I have never felt depressed in such a way after seeing anyone else, so I con-
cluded that the best I could do is avoid the reaction by not going to see you.
I had naturally been too ashamed to say anything about this to you.

But Rand had cured him: ‘Strangely, I don’t feel ashamed now; it is as
if when writing to the author of Atlas Shrugged, that book which conveys
with such immediate impact the pride and joy in being a man, that it is
impossible to feel shame for telling the truth.’ Rothbard then uttered a
standard Austrian cliché: ‘Indeed, it is one of the greatest achievements
the human mind has ever produced. And I mean it.’
When offered ‘therapy’ for his phobias by Rand’s lover, Nathaniel
Branden, Rothbard exposed himself—and was accused of plagiarism and
(by two suddenly former friends, George Reisman and Robert Hessen)
 Hayek’s ‘Framework of Traditional and Moral Rules’ 93

‘immorality and intellectual dishonesty,’ refused to take part in a Moscow-­

style show-trial, and wrote to his parents that he was ‘certainly glad’ to be
‘free’ of Branden, ‘that psycho’ (cited by Burns 2009, 182–184).49
Rothbard (1971a) then denounced and ‘sidestepped’ the ‘Rand Cult.’
He also complained:

People have bitterly accused me of resisting all change in Austrian econom-

ics and of denouncing any differing opinions. Not true: I welcome change
and advances in Austrian theory provided they are true, i.e., that they work
from within the basic Misesian paradigm. So just as I think I have advanced
beyond Mises in developing the Misesian paradigm, people like Hans
Hoppe and yourself have advanced the paradigm still further, and great! Or,
to put it another way, any change that makes the doctrine even harder core
is super. What of course I bitterly oppose is degeneration away from truth
and the Misesian paradigm [emphases added]. (Cited by Salerno 1995, 84)

Students can obtain from the Mises Institute a non-examined

‘Certificate of Participation’ in DiLorenzo’s ‘The Political Economy of
War’ course by watching tapes of lectures on ‘von Mises’ and others
explaining about ‘The evils of military conscription.’50 After a career of
devotion, Raico provided the Austrian Truth about Mises: ‘Decade after
decade he fought militarism’ (cited by Rothbard 1988, 116). So too did
Ebeling (SHOE 22 May 2014): ‘anyone familiar with Mises’ writings
knows that he opposed war.’ The Misean paradigm purports to pursue
‘liberty’ by destroying the ‘Welfare-Warfare State’; but in the second and
third editions of Human Action, Mises (1963, 282, 1966, 282) lobbied
for the ‘Warfare State’: ‘He who in our age opposes armaments and con-
scription is, perhaps unbeknown to himself, an abettor of those aim-
ing at the enslavement of all.’ Rockwell (2010 [1999], 297–298), who
explained that Mises had ‘strayed,’ was ‘thrilled’ to have silently edited-­
out Mises’ deviation from the Misean paradigm in Human Action The
Scholars Edition:

In particular, making the unchanged first edition available again retrieves

important passages that were later eliminated, and clarifies questions raised
by unnecessary, and, in some cases, unfortunate additions and revisions
94 3 Hayek’s ‘Framework of Traditional and Moral Rules’

made to later editions. That the original edition represents the fullest synthe-
sis of Mises’s thought [emphases added] on method, theory, and policy, and
is the book that sustained the Austrian tradition and the integrity of eco-
nomic science after the socialist, Keynesian, Walrasian, Marshallian, and
positivist conquests of economic thought, is reason enough to reissue the
original on its fiftieth anniversary, making it widely available for the first
time in nearly four decades. A high place must be reserved in the history of
economic thought, indeed, in the history of ideas, for Mises’s masterwork.
Even today, Human Action points the way to a brighter future for the sci-
ence of economics and the practice of human liberty. (Herbener et al.
1998, xxiv)

Like ‘God,’ Austrian economics ‘is what it is’—all things to all Holy
Men. Salerno (1995, 75) contrasted Rothbard’s ‘piety and humility’ with
‘the great system-builders’ most of whom ‘thoroughly impious.’ Keynes,
Knight, Marshall and John Stuart Mill, ‘not to mention Karl Marx—all
were atheistic millennialists who saw economics as a grand pathway to
implementing a heaven on earth.’ But according to North (2013), the
reverse was the Truth—Mises (like Rothbard) was hard-core because he
was a ‘system-builder’:

But Hayek never had that ability or inclination. He would take a small
topic and investigate it. He would generally keep in the back of his mind
this principle: voluntary decisions in the marketplace are more efficient
than decisions by central planning boards. He understood enough of Mises
to be opposed to central planning. But he was never committed in the way
that Mises was to the fundamental principle that the state should be
restricted from entry into affairs that are governed by price competition,
open entry, and voluntary contracts. In this sense, Hayek was always
soft-core.

Christianity Today reported that Lt. Gen Michael Flynn, the former
head of the US Defense Intelligence Agency, had stated that computers
captured from ISIS activists contain 80 per cent pornography (Torres
2016).51 Pornography—which ‘objectifies’ the ‘other’ for arousal pur-
poses—sheds light on religiosity. Friedman (17 April 1990) told Boettke’s
predecessor as President of the Mont Pelerin Society (Antonio Martino)
 Hayek’s ‘Framework of Traditional and Moral Rules’ 95

that ‘a disturbingly large fraction of members are present at the meetings

essentially as voyeurs and not as real participants.’52
The Wall Street Journal reported that

Mr. Boettke isn’t too concerned with matters of style. More folksy than
formal, his commitment to economics, as his wife Rosemary says, is ‘always
on.’ He has a tendency to ramble, interrupt and use salty language. In
between the dozen books and over 100 articles he has written, he spends
hours debating with students around his backyard barbecue grill. Often,
when Mrs. Boettke needs him to run errands, he makes students pile in the
car with him to finish the debate. He also has trouble closing down his inner
economist. ‘He refuses to recycle,’ Mrs. Boettke says. ‘Something about
how it actually uses more resources.’ He’s not exactly a handyman either.
‘If his “opportunity cost” is too great, he’ll hire someone.’ (Evans 2010)

Boettke (2005, 14–15) claims to have learnt three things:

1. Spiritually—that Jesus Christ is Lord and Savoir and that one must
commit to a personal relationship with God and to strive to live a
Christcentered life.
2. Historically—the role of the Christian Church in the development of
Western Civilization.
3. Intellectually—the philosophical and epistemological importance of
Christian presuppositionalism.

Since Sennholz was a ‘GREAT teacher … a man of deep moral convic-

tion,’53 Boettke presumably aspires to imitate him: “If you want to dedi-
cate your life to imparting knowledge, take on a college of your choice
and give your life to it. If you stick with it, you can change the flavor and
color of an institution of learning … If you want to have an impact, you
must dedicate yourself to one place” (Sennholz 2002). Boettke, who cir-
culates a video to students and others about ‘underpants’ together with a
discussion of ‘masturbation,’ told the Wall Street Journal that he had been
‘denied tenure in 1997, a blow to his personal ambitions’ (Evans 2010).54
In ‘Red Light States: Who Buys Online Adult Entertainment?’
Benjamin Edelman (2009, Table 2, 217, 219) found that there is a posi-
tive relationship between pornography consumption and the proportion
of the population of a State that agrees with statements such as
96 3 Hayek’s ‘Framework of Traditional and Moral Rules’

Even today miracles are performed by the power of God.

I never doubt the existence of God.
Prayer is an important part of my daily life.
I have old-fashioned values about family and marriage.
AIDS might be God’s punishment for immoral sexual behavior.

In his discussion of AIDS in Debts and Deficits, Sennholz (1987, 170)

explained: ‘In ages gone, when moral obligations meant conformity to
the will of God, carriers of contagious diseases who knowingly and will-
ingly infected other individuals, and thereby inflicted great suffering and
early death on others, would have been treated as criminals, yea, even as
murderers, and been promptly quarantined from the healthy commu-
nity.’ From a behavioural economics perspective, the long-run reported
outcome of expected eternal utility (‘Heaven’) is an insufficient incen-
tive to ‘nudge’ the religious away from short-run impulsive buying: the
Mormon-founded State of Utah had the highest per capita consump-
tion of pornography. The ‘observant’ also have a weekly ‘come to Jesus’
moment: the consumption of pornography falls on ‘the Sabbath’ and
peaks on the other days of the week.
North became slightly famous for predicting the end of both homo-
sexuality (via AIDS) and civilization (via Y2K). With respect to AIDS,
North (1987a) explained: ‘I’m getting out of my closet with this issue.
We are under siege. The homosexuals didn’t create this plague; God did.
But they are the primary distributors.’ The day AIDS becomes front-page
news,

the West is going to have a revolution. It will mark the end of the present
statist, humanist, fist-in-God’s-face road … THERE IS GOING TO BE A
WILD EXODUS FROM THE PUBLIC SCHOOLS. You KNOW I’m
right. All talk about ‘white flight’ will end; regardless of race, color, or national
origin, THE PUBLIC SCHOOLS ARE GOING TO BE ABANDONED
… I think it will happen before the mid-1990’s [North’s capitals].

North (1987a) also predicted that within a decade, homosexuals will

‘all be dead. There will be no gay lobby because there will be no male
gays. (The irony of all this is that the one group that is probably safest is
 Hayek’s ‘Framework of Traditional and Moral Rules’ 97

the lesbian community.)’ North, who became wealthy by selling survival-

ist material, insisted: ‘But we must recognize what we face. The disease
will be here in a decade because judgment has come. How can you quar-
antine a hundred million people? You can’t execute them, yet this is the
only means of removing the first cousin of the AIDS lentivirus which
attacks sheep. You simply wait. And pray.’ One of North’s sources was
the Austrian School fraud, ‘Deacon’ McCormick, who derived much of
his ‘knowledge’ from the soft-core-porn newspaper, the News of the World
(Leeson 2015a).55
Hayek’s first suicidal breakdown coincided exactly with the prema-
ture death of his first wife (Leeson 2015d, Chap. 6). Hayek (1978a) told
Rosten that his essential argument is

that our instincts were all formed in the small face-to-face society where we
are taught to serve the visible needs of other people. Now, the big society
was built up by our obeying signals which enabled us to serve unknown
persons, and to use unknown resources for that purpose. It became a purely
abstract thing. Now our instinct still is that we want to see to whom we do
good, and we want to join with our immediate fellows in serving common
purposes. Now, both of these things are incompatible with the great soci-
ety. The great society became possible when, instead of aiming at known
needs of known people, one is guided by the abstract signals of prices; and
when one no longer works for the same purposes with friends, but follows
one’s own purposes. Both things are according to our instincts, still very
bad, and it is these ‘bad’ things which have built up the modern society …
There is still the strong innate need to know that one serves common, con-
crete purposes with one’s fellows. Now, this clearly is the thing which in a
really great society is unachievable. You cannot really know. Whether peo-
ple can learn this is still part of the emancipation from the feelings of the
small face-to-face group, which we have not yet achieved. But we must
achieve this if we are to maintain a large, great society of free men. It may
be that our first attempt will break down.56

Hayek (1978a) told Bork that

innate instincts are really based on a face-to-face society where you knew
every other member and every outsider was an enemy. That’s where our
98 3 Hayek’s ‘Framework of Traditional and Moral Rules’

instincts come from. The tribe was the first attempt, of a sort of large order,
where some rules as distinct from common purpose already began. That’s
why I don’t like the expression ‘tribal element’ in this sense. It’s really—we
have no word for this—morals which existed in the small face-to-face band
that determined our biologically inherited instincts, which are still very
strong in us. And I think all civilization has grown up by these natural
instincts being restrained. We can use even the phrase that man was civi-
lized very much against his wishes. He hated it. The individual profited
from it, but the general abandoning of these natural instincts, and adapting
himself to obeying formal rules which he did not understand, was an
extremely painful process. And man still doesn’t like them.57

In 1986, Hayek alerted a ‘startled’ Cubitt (2006, 226) to the ‘60th

anniversary of his first marriage.’ Using his deceptive word ‘curious,’
Hayek (1978a) reflected about his behaviour towards his ‘very good’ first
wife:

There’s no reason for [hesitation] when it’s after your lifetime. I know I’ve
done wrong in enforcing divorce. Well, it’s a curious story, I married on the
rebound when the girl I had loved, a cousin, married somebody else. She is
now my present wife. But for twenty-five years I was married to the girl
whom I married on the rebound, who was a very good wife to me, but I
wasn’t happy in that marriage. She refused to give me a divorce, and finally
I enforced it. I’m sure that was wrong, and yet I have done it. It was just an
inner need to do it.58

Hayek’s wife died as The Constitution of Liberty (2011 [1960]) was

being published. Hazlett asked:

You have written almost alone on the subject, in The Constitution of Liberty,
of the separation of the concept of value and the concept of merit—that
good people don’t deserve more money but that, in the economic system,
people get money for a lot of reasons that we can’t even describe. And this
is a subtle point. I don’t know if libertarians, even people that agree with
your political conclusions, have caught on to this. Do you find that this
point is being missed?
 Hayek’s ‘Framework of Traditional and Moral Rules’ 99

Hayek (1978a) replied:

I think it has been missed, and when I put it in The Constitution of Liberty,
I even followed it up to its ultimate conclusion. I think it’s all a matter of
the basic difference between the attitudes we developed in the closed, face-­
to-­face society and the modern, abstract society. The idea of merit is an idea
of our appreciation of known other persons in the small group—what is
commonly called the face-to-face society; while in the greater open society,
in apparent terms, we must be guided purely by abstract considerations,
and merit cannot come in.59

The phrase re-appeared in the Bartley-edited Fatal Conceit (1988, 17):

We have not shed our heritage from the face-to-face troop, nor have these
instincts either ‘adjusted’ fully to our relatively new extended order or been
rendered harmless by it.

The ‘closet’-obsessed Bartley interviewed Hayek about his sexuality

and concluded that his sexual practices (with his cousin, but not, pre-
sumably, with his first wife) resembled his own.60 The second Mrs Hayek
described Bartley as ‘widerlicher’ (repulsive) adding that ‘there was some-
thing about Bartley that she would rather not mention.’ She later added
that she ‘believed’ Bartley to be a ‘homosexual, and had therefore refused
to allow him into her home’ (Cubitt 2006, 192, 205, 170).
In 1934, Hayek began a sixteen-year campaign to pressure his first
wife to take herself and their two children to live in Vienna. Ludwig
Lachmann told Ebeling (2001) that dinner at Hayek’s home in London
in the late 1930s was an ‘awkward and embarrassing affair’ because Hayek
and his first wife were ‘not speaking to each other.’ At the dinner table,
Lachmann ‘carried on conversations with the two of them, but they said
not a word to each other.’ Hayek (1978a), who provided justifications for
Mises’ conclusion, insisted that ‘restoring the rule of law’ could become a
‘catchword’ or propaganda device.61 When the rule of law got in his way,
he reverted to rules of engagement: migration to find ‘liberty’ in Arkansas
by ‘enforcing’ a jurisdiction-shopped ‘bootleg’ divorce.
100 3 Hayek’s ‘Framework of Traditional and Moral Rules’

Vaughn (1998, 1999), the author of Austrian Economics in America:

The Migration of a Tradition, uncritically repeated Hayek’s propaganda:

Hayek did believe in the rule of law … What he had a problem against was
something he called constructivism, which is your notion of let’s sit around
and figure out what makes sense here, because he said, nobody, no group
of people have enough wisdom or knowledge to overturn these rules of law.
What you can do is tinker around the edges, and that’s—and which kinds
of things that you apply the rule of law to becomes very important.

Hayek (1978a), who ‘need[ed] these intermediaries,’ found that

the English understood ‘what your needs are at the moment without
mentioning them.’62 Bartley’s conclusion about Hayek’s sexual prefer-
ences may have reached the buggery-obsessed North (2014)63: ‘Anyone
attempting to build a philosophy of liberty in terms of the writings of
Hayek has, in the words of the prophet Isaiah, rested on a bruised reed
(Isa 42:3).’ After North (1986a) ‘asked’ -about homosexuality, the sec-
ond Mrs Hayek stopped the interview and threw him and the Mormon
Skousen (2011a) out:

‘He won’t be able to do any work for weeks! Get out!’ she shouted as she
shooed us out the door.64

North (2013) -reflected: ‘It is fascinating that Hamowy was chosen to

be the editor of the corrected, posthumous edition of The Constitution of
Liberty in Hayek’s collected works.’ Keynes allegedly told Hayek (1994,
92) that two members of his ‘circus,’ Richard Kahn and Joan Robinson,
were ‘just fools’; Hayek appeared to feel the same way about his own.
Hamowy was one of the ‘gay libertarians’ (Cox 2012) who are attracted
to a school of economics that embraces theocrats, like North, who seek
to publically stone them to death (Leeson 2015a, 275).
When Peter Bauer was ‘elevated’ to the House of Lords, Hayek
reminded Cubitt (2006, 51) of his ascribed status: a ‘small … Jewish boy
from Hungary’ and indicated that he was ‘the size of a dwarf.’ Hamowy
(2010, 145), described by Bartley as a ‘gay dwarf ’ (Cubitt 2006, 265),
was the last to arrive for a University of Chicago tutorial, which resulted
in Hayek ‘guffawing to the point where his eyes were tearing’:
 Hayek’s ‘Framework of Traditional and Moral Rules’ 101

I was compelled to use the table as a seat, which I tried to mount by turning
Hayek’s wastepaper basket upside down to use as a step, all this while Hayek
continued to complete the point he was making when I entered his office.
It probably comes as no surprise that my attempt proved disastrous. The
wastepaper basket overturned and rolled away, I fell to the ground, and the
table, unable to sustain the pressure I was placing on it as I grabbed for it,
tipped over, knocking one of the other student’s chairs into Hayek’s desk.65

According to Hayek (1978a), Mises had

always had been rather bitter. He had been treated very badly all through
his life, really, and that hard period when he arrived in New York and was
unable to get an appropriate position made him very much more bitter.
On the other hand, there was a counter-effect. He became more human
when he married. You see, he was a bachelor as long as I knew him in
Vienna, and he was in a way harder and even more intolerant of fools than he
was later. [laughter] If you look at his autobiography, the contempt of his
for most of the German economists was very justified. But I think twenty
years later he would have put it in a more conciliatory form. His opinion
hadn’t really changed [emphases added], but he wouldn’t have spoken up as
openly as in that particular very bitter moment when he just arrived in
America and didn’t know what his future would be.66

According to Hayek (2011 [1960], 190–193), ‘it is only natural

[emphasis added] that the development of the art of living and of the
non-materialistic values should have profited most from the activities
of those who had no material worries.’ ‘Dr’ Leube, ‘D.L.E,’ a library
assistant assigned to catalogue the books that Hayek had sold to the
University of Salzburg, had both academic aspirations and financial
worries. He describes himself as

Bachelor, Gymnasium [high school], Salzburg, 1963; AJD, University

Salzburg, 1971 … Senior researcher, university associate to Field Artillery
von Hayek IFN at University of Salzburg, 1968–1977. Senior economist,
resident scholar Austrian Enterprize Institute, Vienna, 1977–1983.
Professor economics California State University, Hayward, since 1984.
Research fellow Hoover Institution Stanford University, since 1983.
102 3 Hayek’s ‘Framework of Traditional and Moral Rules’

Director International Institute for Austrian Economics, Stanford, since

1988. Visiting professor Université d’Aix en Provence, Institut Für
Liberalismus, Vienna, 1992. Recipient numerous awards including
F. Leroy Hill award Institute for Humane Studies, George Mason
University, 1984. Member Libertas International (founding member
1983), Institute Europeum, Ludwig Erhard Stiftung, Wirtschaftsforum
der Führungskrâfte, Mont Pelerin Society (awards).67

According to Hamowy (1999b), ‘What Hayek objected to was admin-

istrative regulatory agencies, which made ad hoc decisions, which were
not predictable in advance.’ Wattenberg (1999) agreed: in the United
States and elsewhere, ‘we have had these metastasizing government agen-
cies that have self-perpetuated themselves, I think, in a counterproduc-
tive way.’ Wattenberg asserted that ‘you had a growth of welfare even
when unemployment was going down in the ’80s, welfare was going up.
You had this sort of—and that was, I thought, it was hurting the people
it was supposed to help. So it was mindless, and that’s in the modern era,
that’s what the Hayek answer is saying.’
In the first draft of a letter to an administrator of tax-exempt property,
Hayek stated that Leube was ‘almost’ suitable for a Mises postdoctoral
research grant; the second draft stated that the thirty-eight-year-old Leube
was an almost ‘perfect’ case for the grant—adding that at the University
of Salzburg, economics is taught only as a subsidiary of law, and although
Leube completed the Law course, he ‘never took’ a degree. Hayek then
simply added ‘Dr’ to Leube’s name to obtain the funds, and from there
to ‘take’ a full professorship.68
Hayek ‘giggled’ when recalling Leube’s ‘Kubelfall’ over—and almost
into—a ‘cleaning woman’s bucket,’ destroying the only copy of the hand-
written German translation of Law, Legislation and Liberty (Cubitt 2006,
10). Such delight in the misfortune of his deferential disciples could be
interpreted charitably—were it not for Hayek’s (1978a) manipulative
contempt: ‘That I cannot reach the public I am fully aware. I need these
intermediaries, but their support has been denied to me for the greater
part of my life.’69
After a career of devotion to the concept of ‘spontaneous’ order,
Hamowy (1999a, 280) summarized Hayek’s social philosophy: ‘one does
 Hayek’s ‘Framework of Traditional and Moral Rules’ 103

not need an orderer to have order.’ In contrast, Hayek (1978a) conceded

‘that some degree of design is even needed in the framework within which
this spontaneous order operates, I would always concede; I have no doubt
about this.’70
Like other aristocrats, the Habsburgs employed retainers to beautify
their gardens and design their palaces. In 1573, Emperor Maximilian
II established an ‘imperial medical garden,’ which his successor, Rudolf,
destroyed four years later. In 1855, Archduke Karl Ludwig remodelled
the renaissance Ambras Castle and redesigned its park as an English gar-
den (Ogilvie 2006, 65; Taylor 2008, 10). In his Nobel Lecture, Hayek
(1974b) insisted that non-propertied intellectuals should not get ideas
above their station:

If man is not to do more harm than good in his efforts to improve the
social order, he will have to learn that in this, as in all other fields where
essential complexity of an organized kind prevails, he cannot acquire the
full knowledge which would make mastery of the events possible. He will
therefore have to use what knowledge he can achieve, not to shape the
results as the craftsman shapes his handiwork, but rather to cultivate a
growth by providing the appropriate environment, in the manner in which
the gardener does this for his plants.

An hereditary aristocracy is a form of intergenerational social engi-

neering; according to Hayek (1978a), the tax-exempt donor class were
primarily business constructivists: ‘an engineer directs an enterprise.’71
The section of the Third Estate for which Hayek was contemptuous—
consumers—or was actively hostile towards—labour unionists—had to
be persuaded that they were engineering capitalism through ‘consumer
sovereignty.’ Therefore, the engineering approach to economic policy had
to be rejected in favour of the ‘spontaneous’ order associated with these
three other engineering projects.
According to Mises (1951 [1922], 234–235), the ‘civilized’ ‘white races’
elevate ‘backward people’ through ‘Protectorates.’ Between ownership
by the Ottomans and becoming annexed ‘property’ of the Habsburgs,
the Protectorate of Bosnia (1878–1908) was re-engineered to be a mod-
ernized ‘model colony’: in 1889, a Roman Catholic Cathedral was built
104 3 Hayek’s ‘Framework of Traditional and Moral Rules’

in Sarajevo (Shatzmiller 2002, 103). Bosnia may have inspired Hayek’s

(1978a) proposal to prevent the Habsburg Empire disintegrating:

I played with constitutional reform at the beginning and the end of my

career … I think the first paper I ever wrote—never published, and I
haven’t even got a copy—was on a thing which had already occurred to me
in the last few days in the army, suggesting that you might have a double
government, a cultural and an economic government. I played [emphases
added] for a time with this idea in the hope of resolving the conflict
between nationalities in the Austro-Hungarian Empire. I did see the ben-
efits of common economic government. On the other hand, I was very
much aware of all the conflicts about education and similar problems. And
I thought it might be possible in governmental functions to separate the
two things—let the nationalities have their own cultural arrangements and
yet let the central government provide the framework of a common eco-
nomic system. That was, I think, the first thing I put on paper.72

The Constitution of Liberty (2011 [1960]) and Law, Legislation and

Liberty (1973–1979) were elaborations on this Imperial theme. Hayek
(1960) proposed that a body be established ‘charged with creating that
framework of traditional and moral rules which any Western democracy
with a long history possesses as a result of its history.’ Hayek devoted the
major part of his career to promoting his own version of this ‘framework
of traditional and moral rules’—academic fraud. Recognition of this fact
may assist nuanced hagiographers, like Caldwell (2004, 1), to resolve
their career-long ‘puzzle’ about Hayek. After twelve years of residence,
and over four decades of regular visiting, Hayek (1978a) did not ‘know
American rural life at all’73; the ‘secondhand’ promoters of Austrian
‘opinion’ appear equally non-plussed about its originator.

Notes
1. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 105

2. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
3. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. Friedrich Hayek interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
5. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
6. http://www.wwnorton.com/college/history/foner2/contents/ch11/doc-
uments02.asp
7. http://www.bbc.co.uk/devon/content/articles/2007/03/20/abolition_
navy_feature.shtml
8. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
9. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
10. Friedrich Hayek interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
11. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
12. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
13. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
14. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
106 3 Hayek’s ‘Framework of Traditional and Moral Rules’

15. http://www.politico.com/story/2015/07/kochs-freeze-out-trump-
120752#ixzz4GWziAH4M
16. http://www.newsmax.com/Politics/Trump-Koch-Network-­Focus/
2016/08/01/id/741469/
17. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
18. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
19. Friedrich Hayek interviewed by Jack High date unspecified 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
20. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
21. Allan G.B. Fisher (9 August 1975) to Roger Randerson. Hayek Papers
Box 45.5.
22. Arnold Plant’s widow, Edith (1 May 1978), reminded Hayek of the
‘halting beginnings of your knowledge of the English language when we
first met you here.’ Hayek Papers Box 43.31.
23. Friedrich Hayek interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
24. Hayek to Angelo Petroni (13 January 1984). Hayek Papers Box 29.12.
UCLA oral history interview with Leo Rosten.
25. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
26. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
27. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
28. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 107

29. Friedrich Hayek interviewed by Leo Rosten 15 November 1978 (Centre

for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
30. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
31. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
32. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
33. ‘Well, you see, I think the intellectual history of all this is frightfully
complex, because this idea of necessary laws of historical development
appears at the same time in [Georg Wilhelm Friedrich] Hegel and
[Auguste] Comte. So you had two philosophical traditions—Hegelian
idealism and French positivism—really aiming at a science which was
supposed to discover necessary laws of historical development. But it
caught the imagination—[It] not only [caught] the imagination but it
appeared certain traditional feelings and emotions. As I said before, once
you put it out that the market society does not satisfy our instincts, and
once people become aware of this and are not from childhood taught
that these rules of the market are essential, of course we revolt against it.’
Friedrich Hayek, interviewed by Leo Rosten on 15 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
34. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
35. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
36. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
37. http://www.findagrave.com/cgi-bin/fg.cgi?page=gr&GRid=55113757
38. ‘Too often’ history of economics dispute ‘degenerate into ideological cor-
ners … But Robert Leeson is a specialist at degenerating—not sure I
know what his ideology really is, but he seems to take great joy in being
108 3 Hayek’s ‘Framework of Traditional and Moral Rules’

a degenerator … During the 24 hours he was on [the GMU] campus lets

just say he exercised his expertise as a degenerator of conversation and
leave it at that.’ http://www.coordinationproblem.org/2014/06/robert-­
leeson-­hayek-and-the-underpants-gnomes.html
39. http://www.visionandvalues.org/2007/07/on-hans-a-compendium-
of-tributes-to-dr-hans-f-sennholz/
40. Friedrich Hayek, interviewed by Armen Alchian on 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
41. A ‘friend lured [Boettke] back to George Mason a year after he was
denied tenure.’
42. http://www.coordinationproblem.org/2014/06/robert-leeson-hayek-­
and-the-underpants-gnomes.html
43. Shenoy picked up the ‘recommendation she had asked Hayek to write
for a permanent position at Newcastle University in Australia’ (Cubitt
2006, 340). This letter for (‘Dr’?) Shenoy is not in the Hayek Archives;
nor can it be found in the University of Newcastle Archives. Possibly
coincidentally, Shenoy’s husband was the University Archivist.
44. Hayek Papers Box 36.18.
45. http://www.humanevents.com/2008/02/28/bill-buckley-and-me-a-
true-story/
http://www.legacy.com/obituaries/houstonchronicle/obituary.
aspx?pid=168459476#sthash.fBuTwjbh.dpuf
46. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
47. Margit Mises (1984, 20–21) attributed Mises’ behaviour to shyness: ‘He
wanted to hear my voice.’
48. The first quote is an impression; the second is from a leading Hayekian
fund-raiser.
49. Such episodes should be of interest to psychologists as well as econo-
mists. Given that real estate is to New York as oil is to Texas, Rothbard’s
sycophancy may have been compounded by his immobility (he spent
most of his life unable to leave New York because of his irrational fears)
and what may be a lebensraum-inferiority: he had a ‘tiny’ apartment
(Bessner 2014), while Mises had two spare bedrooms. While Rand’s
apartment was also ‘small,’ she at least had a view of the Empire State
Building (Burns 2009, 147). Economists, of course, are not qualified to
do more than speculate about such matters.
 Notes 109

50. http://academy.mises.org/courses/the-economics-of-war/
51. This is a standard type of black propaganda—and so must be treated
with caution.
52. Friedman Papers Box 200.6.
53. http://www.visionandvalues.org/2007/07/on-hans-a-compendium-
of-tributes-to-dr-hans-f-sennholz/
54. http://www.coordinationproblem.org/2014/06/robert-leeson-hayek-­
and-the-underpants-gnomes.html
55. Rupert Murdoch owned the scandal-promoting News of the World from
1969 until its scandal-enforced close (2011).
56. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
57. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
58. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
59. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
60. All Austrian ‘knowledge’ is, by definition, self-serving. However, the
source of this ‘knowledge’ was close to Bartley for many years; but on the
other hand, he refuses to allow his name to be used. Bartley reportedly
also told Cubitt of his ‘discovery.’
61. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
62. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
63. Presumably referring to buggery, North (1986a) concluded: ‘Keynes had
long since decided to do a lot worse than just beggar his neighbor.’
64. Alternatively, Bartley may have exaggerated what he had discovered; and
Mrs Hayek’s behaviour may have been unrelated to questions about
sexuality.
110 3 Hayek’s ‘Framework of Traditional and Moral Rules’

65. Hamowy (2010, 145) continued: ‘It took several minutes before deco-
rum was reestablished but my dreadful embarrassment was substantially
eased by the humor Hayek seems to have found in the incident.’
66. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
67. http://prabook.org/web/person-view.html?profileId=587996
68. Hayek Papers Box 15.5. Leube sensationally alleged that he had uncov-
ered the Böhm-Bawerk diaries. When asked about the diary-based essay
that Leube was supposed to produce, Leonard Liggio (email to Leeson,
19 July 2011) refused to answer the question and instead simply repeated
what was already apparent: no essay on Böhm-Bawerk resulted from the
tax-exempt funding. A follow-up email to Liggio (from Leeson, 20 July
2011)—‘You gave funds to Kurt Leube for such an essay: it never got
written?’—went unanswered. In a follow-up telephone call, Liggio,
somewhat evasively explained that tax-exempt funds—when spent to
promote ‘liberty’—remain unaccounted for.
69. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
70. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
71. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
72. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
73. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 4
Corruption, Honour, Triangles

 niversities and Pseudo-academic Institutes:

U
Corruption, Deflation and Opportunity
The religious revival of the late 1970s increased the influence of Islamic
fundamentalists and the American religious right—both helped elect
Reagan as president. On 8 September 1978 (‘Black Friday’), the Shah
of Iran’s Peacock Throne passed the point of no-return when the mili-
tary opened fire on thousands of religious demonstrators in Tehran’s
Jaleh Square. The Shah’s ‘White Revolution’ (1963–1978) had been
accompanied by White Terror plus Hayekian paid propaganda provided
by Crozier (1993, 161–165). But on 16 January 1979, the Shah aban-
doned ‘his’ country to theocrats and went into exile. Three months ear-
lier—and ten months before the taking of hostages at the US embassy
in Tehran—Chitester asked Hayek if he got ‘questions about religion?
I would assume a lot of people confuse your interest in a moral structure
with religion.’ Hayek (1978a) replied: ‘Very rarely.’ Referring to Shenoy
(who had known him, or known about him, since childhood), and was
an academic who with his assistance obtained lifetime tenure, continued:

© The Author(s) 2017 111

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_4
112 4 Corruption, Honour, Triangles

It so happens that an Indian girl, who is trying to write a biography of

myself, finally and very hesitantly came up with the question which was
put to Faust: ‘How do you hold it with religion?’ [laughter] But that was
rather an exceptional occasion. Generally people do not ask. I suppose you
understand I practically never talk about it. I hate offending people on
things which are very dear to them and which doesn’t do any harm.1

The ‘only thing’ that Hayek (1978a) was ‘sure’ was that Keynes
‘would have disapproved of what his pupils made of his doctrines.’2 The
response to Shenoy’s question—like numerous other taped interviews
that Hayek naively expected would be available after his death—is being
suppressed by his disciples (Leeson 2015c, Chap. 2). Frost (1978, 234,
93, 272) asked Nixon ‘Why didn’t you burn the tapes?’ before quoting
him: ‘When I’m speaking about Watergate, though, that’s the whole
point of the election. This tremendous investigation rests, unless one of
the seven begins to talk. That’s the problem.’ Nixon confessed that he
had ‘let the American people down’; Hayek’s disciples must have con-
cluded that because of his self-promotion-for-posterity tapes, he had
let his Austrian ‘people’ down: ‘The [Fund-raising] Use of Knowledge
in Society’ explains why his (delusional) wishes are being thwarted by
‘market free play’ Hayekians.
As a child, Hayek (1978a) had been enthralled by Johann Wolfgang
von Goethe (1749–1832), the author of the play in which Doctor Faustus
sells his soul to the ‘Devil’ in return for academic influence:

In a purely literary field, I was reading much more fine literature as a young
man and, as you have probably become aware, I was a great Goethe fan.
I am thoroughly familiar with the writings of Goethe and with German
literature, generally, which is incidentally partly because of the influence of
my father. My father used to read to us after dinner the great German
dramas and plays, and he had an extraordinary memory and could quote
things like the ‘Die Glocke,’ Schiller’s poem, from beginning to end by
heart, even in his—I can’t say his old age; he died at fifty-seven. He was, in
the field of German literature, an extraordinarily educated man. As a young
man before the war, and even immediately after, I spent many evenings
listening to him. In fact, I was a very young man. Of course, I started writing
plays myself [emphasis added], though I didn’t get very far with it. But I
 Universities and Pseudo-academic Institutes: Corruption... 113

think if you ask in this sense about general influence, Goethe is really prob-
ably the most important literary influence on my early thinking.3

As Hayek (1978a, 1994, 43) abandoned religion—at ‘thirteen or four-

teen’—his proto-Nazi father gave him ‘a treatise on what is now called
genetics’; his interests then

started wandering from biology to general questions of evolution, like pale-

ontology. I got more and more interested in man rather than, in general,
nature. At one stage I even thought of becoming a psychiatrist. Also public
life and certain aspects of social organisation—such as education, the press,
political parties—began to interest me, not so much as subjects for system-
atic study but from a desire to comprehend the world in which I was living;
watching the dissolution of the Austro-Hungarian Empire turned my
interest to politics and political problems.4

The Constitution of Liberty (2011 [1960], 429, 193) promoted ‘toler-

ance’ for a ‘group of the idle rich—idle not in the sense that they do
nothing useful but in the sense that their aims are not entirely governed
by considerations of material gain.’ Hayek told Cubitt (2006, 10, 122)
‘that all his professional considerations had been based on financial con-
siderations … Yet, he added, he had never done anything for money that
he did not actually want to do.’
Hayek (1978a) told Chitester that it had been for

essentially practical reasons that I decided on economics rather than psy-

chology. Psychology was very badly represented at the university. There was
no practical possibility of using it outside a university career at that time,
while economics offered a prospect … Finally I got definitely hooked by
economics by becoming acquainted with a particular tradition through the
textbook of Carl Menger [2007 (1871)] which was wholly satisfactory to
me. I could step into an existing tradition, while my psychological ideas
did not fit into any established tradition.5

The Royal Swedish Academy of Sciences announced that Hayek was

to be rewarded for his conclusion ‘that only by far-reaching decentraliza-
tion in a market system with competition and free price-fixing [emphasis
114 4 Corruption, Honour, Triangles

added] is it possible to make full use of knowledge and information.’6

Hayek’s (2009a [1979], 5) ‘whole concept of economics is based on the
idea that we have to explain how prices operate as signals, telling people
what they ought to do [emphasis added] in particular circumstances.’
Central bank inflation-targeting (1990–) has a predecessor in Irving
Fisher’s (1923) proposal to stabilize the ‘dance’ of the trade cycle by sta-
bilising the general price level (the ‘dance of the dollar’), thus preventing
both inflation and deflation. Hayek (1978a) told Alchian:

I hope that on Monday there will be a letter from me in the Wall Street
Journal, which just suggests that I hope they would put in every issue in
headline letters the simple truth: ‘Inflation is made by government and its
agents. Nobody else can do anything about it.’

This simple Austrian Truth is nonsense. The money supply is conven-

tionally defined as currency (in circulation) + deposits, while the monetary
liabilities of the central bank—the monetary base—is defined as currency +
reserves. A central bank controls one component of the monetary base
(reserves) and originates the other (currency).7 Because of a ‘stop in the
mind,’ combined with financial sector lobbing, one structural weakness
remains unaddressed: the ability of banks to sever the expenditure flow
by taking and hoarding deposits or using them to buy secondhand bonds
(Leeson 2008, 2009a, b, c, 2011a, b, 2012a, b).
The money supply is determined as a by-product of the proportion
of reserves that banks find it privately optimal to lend (newly created
­deposits).8 The standard expansionary procedure of a central bank is to
buy government bonds from primary dealers. From a stock perspective, if
the demand for bonds remains unchanged while the central bank reduces
the supply, the price will increase and the yield to maturity will fall.
Central banks hope that this fall in interest rates will stimulate spending.
From a flow perspective, central banks hope that new incoming ­deposits
from customers will flow into outgoing loans. But as was revealed
through the US monetary policy response to the Global Financial Crisis:
the reserves component of the monetary base increased over fourfold,
while the money supply increased by about 56 per cent, while the US
Consumer Price Index increased by less than 10 per cent.9
 Universities and Pseudo-academic Institutes: Corruption... 115

Mises may have told League of Nations officials how to stop inflation:

‘Meet me at 12 o’clock at this building.’ And it turned out at midnight

they met him at the printing office, where they were printing money. And
they said, ‘How can we stop this inflation?’ And he said, ‘Hear that noise?
Turn it off.’ (Hayek 1994, 70)

Whatever the strength of the relationship between the money supply

and the price level, policy analysis requires something more than heroic
fiction. Likewise, the deflation of the early 1930s was initially caused by
bank-failures (and thus the collapse of the money supply).
After the 1929 Wall Street Crash, Hayek promoted further deflation
and helped turn a financial crisis into the Great Depression. Alchian
asked: ‘In Prices and Production, on page 29 of the second edition, I ran
across a sentence I didn’t remember you having made at that time. You
made the prediction about the future, which turned out to be wrong,
unfortunately. You said something to the effect—I don’t have the exact
quotation—that in the future the theorists will abandon the concept of a
general price level and concentrate on relative price effects in the change
of the quantity of money.’ Hayek (1978a) replied: ‘It was a wish. [laugh-
ter]’ Alchian responded: ‘It was a wish, and I think it’s beginning to now
come about. The recent work on monetary economics is emphasizing
now more the relative price effect, but up to the very recent time it’s all
been on general price level.’
While trade cycle theory pursues stabilization, Hayek (1978a) pro-
moted destabilization:

I think it all began with my becoming aware that any assumption that
prices are determined by what happened before is wrong, and that the
function of prices is to tell people what they ought to do in the future …
It’s by discovering the function of prices as guiding what people ought to
do that I finally began to put it in that form. But so many things—The
whole trade-cycle theory rested on the idea that prices determined the
direction of production.10

When it suited his anti-labour union agenda, Mises promoted a

cost-push explanation of inflation (Leeson 2017a). Hayek (1978a) told
116 4 Corruption, Honour, Triangles

Alchian that he had just published an op-ed piece in the London Times
‘on the effect of trade unions generally. It contains a short paragraph just
pointing out that one of the effects of high wages leading to unemploy-
ment is that it forces capitalists to use their capital in a form where they
will employ little labor. I now see from the reaction that it’s still a com-
pletely new argument to most of the people [laughter].’11
In non-Austrian neoclassical analysis, if labour unions push real wages
above ‘equilibrium,’ the economy will still function—but with distribu-
tional consequences. The employed will gain (by the higher real wage);
and the increased capital per worker (which Hayek emphasized) will tend
to increase the marginal revenue product of labour and thus increase the
‘equilibrium’ wage. But the union-induced ‘excess supply’ of labour will
lose their jobs and (unless they are rapidly reemployed) their human capi-
tal and self-esteem will deteriorate: the ‘equilibrium’ wage of this cohort
will spiral down. If Hayek’s (1975b) ‘market free play’ advice were fol-
lowed so as to establish the ‘equilibrium structure of prices,’ such indi-
viduals may be obliged to take ‘The Road (Back) to Servitude’ and seek
employment as domestic servants or in the shadow economy (Leeson
2017a).
How ‘ought’ the unemployed to behave when policy-induced rises
in their pre-unemployment real wage produces the same result? Before
The Road to Serfdom (1944), Hayek’s major contribution to world his-
tory (1929–1933) had been—from a democratic perspective—the
dysfunctional promotion of the deflationary manipulation of the price
mechanism: falling general prices, rising real wages and thus increased
unemployment. As Hitler was gaining electoral momentum, Hayek
regarded deflation-induced ‘allocative corrections’ and the removal of
‘distorted relative prices’—that is, eliminating rigidities in wages—as
‘desirable’: ‘at the beginning of the Great Depression … I believed that
a process of deflation of some short duration might break the rigidity of
wages which I thought was incompatible with a functioning [emphasis
added] economy’ ([1974] cited by Haberler 1986, 426).
Hayek and Mises were paid Second Estate lobbyists for one of the
two competing interest groups that emerged from the Third Estate—
employer trade unions and corporations. With respect to the ‘monopoly
power’ of the other—labour unions—Hayek (1978a) suspected that they
 Universities and Pseudo-academic Institutes: Corruption... 117

were a ‘capitalist racket.’12 If labour unions remained as powerful with

Great Depression levels of unemployment as they had been with single
digit levels, then the post-deflation wage structure would tend to resem-
ble that which had previously prevailed. If, as is more likely, sovereignty-­
seeking employers emerged with enhanced bargaining power, then the
‘distortions’ associated with their employees’ (now-diminished) bargain-
ing power would be reduced or eliminated.
Mises was a poor verbal communicator; but like Hitler and Sennholz,
Hayek enjoyed manipulating an audience. Referring to the manufactured
‘profound conviction’ that he displayed on his 1945 Road to Serfdom pro-
motional tour, Hayek (1978a) added: ‘what I did in America was a very
corrupting experience. You become an actor, and I didn’t know I had it in
me. But given the opportunity to play with an audience, I began enjoying
it [laughter].’13
But Hayek (1978a) claimed that he sought to avoid other types of
corruption:

journalists, in their environment, under the conditions in which they

work, they probably can’t be blamed for what they do, and still more so for
the politicians. It’s one of my present arguments that we have created insti-
tutions in which the politicians are forced to be partial, to be corrupt in the
strict sense, which means their business is to satisfy particular interests to
stay in power. It’s impossible in that situation to be strictly honest, but it’s
not their fault. It’s the fault of the institutions which we have created …
And I must say dishonesty is a thing I intensely dislike.14

Hayek (1978a) ‘grew up with the idea that there was nothing higher
in life than becoming a university professor, without any clear concep-
tion of which subject I wanted to do. It just seemed to me that this
was the worthwhile occupation for your life, and I went through a very
long change of interests.’15 Hayek also went through a series of shifting
affiliations within the broad umbrella of the Austrian School. His own
status and wealth-building out-trumped any other supposed attachment:
a position consistent with Austrian perceptions about Human Action
(Mises 1963, 1966, 1998a [1949]). Hayek (1978a) appeared to regard
himself—like Keynes—as an ‘intuitive genius … a real genius’16; and in
118 4 Corruption, Honour, Triangles

Socialism, Mises (1951 [1922], 85, 87, 90) appeared to describe himself:
‘In the life of a genius, however loving, the woman and whatever goes
with her occupy only a small place … Genius does not allow itself to be
hindered by any consideration for the comfort of its fellows even of those
closest to it.’
Peter Drucker (1978, 50) observed that at NYU, Mises ‘did not suffer
from undue modesty.’ With respect to the reconstruction of his ‘sponta-
neous’ order, Hayek (1978a) described the problem:

The good scientist is essentially a humble person. But you already have the
great difference in that respect between, say, the scientist and the engineer.
The engineer is the typical rationalist, and he dislikes anything which he
cannot explain and which he can’t see how it works. What I now call con-
structivism I used to call the engineering attitude of mind, because the
word is very frequently used. They want to direct the economy as an engi-
neer directs an enterprise. The whole idea of planning is essentially an engi-
neering approach to the economic world.17

Three decades before, in Individualism and Economic Order ‘Socialist

Calculation I. The Nature and History of the Problem,’ Hayek (2009b
[1948], 121) reflected: ‘The increasing preoccupation of the modern
world with problems of an engineering character tends to blind people to
the totally different character of the economic problem and is probably
the main cause why the nature of the latter was less and less understood.’
In 1948, while again marketing The Road to Serfdom in America, Hayek
delivered a Mises-organized lecture on ‘Why I am not a Keynesian.’18 Two
years later, Hayek became the American sales agent for the engineering-­
derived Keynesian Phillips Machine19; and recruited Machlup as his
subagent.20
According to Hayek, corrupt patronage dominated the University
of Vienna. Craver asked if there could be ‘roadblocks even in getting
accepted as a Privatdozent?’ Hayek (1978a) explained that this ‘license to
lecture’ came with almost ‘no money … what I got from student fees just
served to pay my taxi’ to the University.21 Hayek (1978a) described other
types of corruption: ‘You were very much dependent on the sympathy, or
 Universities and Pseudo-academic Institutes: Corruption... 119

otherwise, of the professor in charge. You had to find what was called a
Habilitations-Vater, a man who would sponsor you’ for an examination of
a non-supervised postdoctoral research project. But if you didn’t happen
to ‘agree with the professor in charge, and there were usually only two or
three—in fact, even in a big subject like economics, there were only two
or three professors—unless one of them liked you [emphases added], well
there was just no possibility.’22
Neoclassical economics suggests that Hayek (1978a) would respond in
a privately optimal fashion to these corrupt incentives: Wieser’s

were a special kind of lectures, and particularly if the lecturer was His
Excellency, the ex-minister, nobody would dare to ask a question or inter-
rupt. We were just sitting, 200 or 300 of us, at the foot of this elevated
platform, where this very impressive figure, a very handsome man in his
late sixties, with a beautiful beard, spoke these absolutely perfect orations.
And he had very little personal contact with his students, except when, as I
did, one came up afterwards with an intelligent question. He at once took
a personal interest in that individual. So he would have personal contacts
with 5 or 6 of the 300 that were sitting in his lectures. In addition, you
attended his seminar one year—that, again, was a very formal affair—for
which somebody produced a long paper which was then commented upon
by Wieser.

Hayek (1978a) decided against psychology because it ‘would not have

given me an easy access to an academic career.’23 But ‘personally,’ Hayek
‘ultimately became very friendly with’ Wieser; ‘he asked me many times
to his house. How far that was because he was a contemporary and friend
of my grandfather’s, I don’t know.’24
Hayek (1978a) recalled that at the University of Vienna, Wieser
‘floated high above the students as a sort of God.’25 Ben Higgins (1977,
74) recalled that at the LSE, ‘we were very much under the influence
of Hayek. He was our God.’ Through fraudulent job recommenda-
tion, Hayek built a Welfare State for his academically unqualified dis-
ciples: ‘That I cannot reach the public I am fully aware. I need these
­intermediaries … the secondhand dealers in ideas—have to play a very
important role and are very effective.’26
120 4 Corruption, Honour, Triangles

‘Honour’
The (membership ‘by invitation only’) ‘Honor Society’ review of The Road
to Serfdom explains why ‘von’ Hayek (1992a [1945], 223) —who pro-
moted ‘shooting in cold blood’—appeals to a certain type of American.
Complaining about ‘the muddleheaded liberty lovers Hayek woefully
mentions,’ and, referring to shooting ‘in cold blood,’ the Honor Society
proclaimed: ‘we too are susceptible to the authoritarian, even murderous
impulses that Hayek described, and all the more reason for us to remain
vigilant and resist them.’27
In The Road to Serfdom, Hayek (2007 [1944], 77) approvingly cited
de Tocqueville: ‘while democracy seeks equality in liberty, socialism seeks
equality in restraint and servitude.’ And in The Constitution of Liberty,
the high-born Hayek explained that the ‘liberty’ or freedom of the high-­
born is worth more than the liberty or freedom of the low-born (Robin
2015). The less-free assist ‘liberty’ by embracing servitude: ‘It may indeed
be the most difficult task of all to persuade the employed masses that
in the general interests of society, and therefore in their own long term
interest, they should preserve such conditions as to enable the few to reach
[emphasis added] conditions which to them seem unattainable or not
worth the effort and risk’ (Hayek (2011 [1960], 186).
Those influenced by tradition-bound societies embrace honour and,
sometimes, honour killings (Ignatieff 1997). In the ascribed-status social
order that Hayek promoted, ‘honour’ was an attribute of the Second
Estate. As Hayek explained to Mises’ stepdaughter, Gitta Sereny (1995,
552, 553–554, n), the captured high-ascribed-status Nazi war criminal,
Albert Speer, was a man ‘born to honour, who chose to live in dishonour.’
Rothbard, a personal pronoun Austrian who must have been aware of
the circumstantial evidence that suggested that ‘von’ Mises was a sexual
predator and possibly a child molester, stated ‘As for me, I for one do not
consider becoming a Catholic on a par with becoming a child molester;
on the contrary, I consider it an honourable course’ (cited by Salerno
1995, 80–81).
A legitimate noble title (such as the ‘von’ which was legal ‘property’
until 1919) requires a legitimate royal source: a fons honorum, ‘fountain-
head’ or ‘source of honour.’ According to A Dictionary of Medieval Terms
 ‘Honour’ 121

and Phrases, the word ‘honour’ was first used to indicate ‘an estate which
gave its holder dignity and status’ (Corédon 2004). The First Estate
asserted that their elevated position had been ordained by ‘God’: in Cur
Deus Homo, ‘honour’ was extended upwards from other Feudal sectors
to ‘God.’ Saint Anselm of Canterbury’s ‘understanding of sin posits that
sin is an objective deprivation of the honour that belongs to God. The
decisive concept of the honour of God reflects Anselm’s feudal social
world. To deprive a person of his or her honour was a fundamental crime
against the social order. Furthermore, such an offence is proportionately
magnified according to the status of the person in the hierarchical order’
(Lindberg 2009, 232).
After the Romanov-Ottoman War (1877–1878), the Congress of Berlin
delivered Bosnia and Herzegovina to the Habsburgs. On his return from
the Congress, Benjamin Disraeli announced that ‘Lord Salisbury and
myself have brought you back peace—but a peace I hope with honour,
which may satisfy our sovereign and tend to the welfare of our country’
(cited by Evans 2013, 366). As Britain prepared to face the Third Reich,
Neville Chamberlain (1939, 456) broadcast from 10 Downing Street:
‘Up to the very last it would have been quite possible to have arranged a
peaceful and honourable settlement between Germany and Poland, but
Hitler would not have it … Now may God bless you all. May He defend
the right. It is the evil things that we shall be fighting against—brute
force, bad faith, injustice, oppression and persecution—and against them
I am certain that the right will prevail.’
‘Munich’ is synonymous with Appeasement: an attempt—by both
sides—to revise or repeal the 1919 ‘Peace’ treaties. In 1922, a German-­
language newspaper reported that Hitler had stated that his ‘first and
foremost task will be the annihilation of the Jews. As soon as I have the
power to do so, I will have gallows built in rows—at the Marienplatz in
Munich, for example … until the last Jew in Munich has been exter-
minated. Other cities will follow suit, precisely in this fashion, until all
Germany has been completely cleansed of Jews’ (cited by Fleming 1987,
17). Ludendorff and Hitler made their First Grab for Power in Munich in
1923 (Dornberg 1982); and in 1934, Munich was the site of the Night
of the Long Knives (Evans 2004). Four years later, returned from meet-
ing Hitler in Munich, Chamberlain declared: ‘My good friends, for the
122 4 Corruption, Honour, Triangles

second time in our history, a British Prime Minister has returned from
Germany bringing peace with honour. I believe it is ‘peace for our time.’
Go home and get a nice quiet sleep’ (cited by Wasserstein 2007, 277).
Rupert Brook’s (1883–1915) idealist war sonnets reveal that the Great
War was initially perceived to be about the pursuit of ‘honour’ and
Empire-glory:

If I should die, think only this of me:

That there’s some corner of a foreign field
That is for ever England. There shall be
In that rich earth a richer dust concealed;
A dust whom England bore, shaped, made aware,
Gave, once, her flowers to love, her ways to roam,
A body of England’s, breathing English air,
Washed by the rivers, blest by suns of home.

And think, this heart, all evil shed away,

A pulse in the eternal mind, no less
Gives somewhere back the thoughts by England given;
Her sights and sounds; dreams happy as her day;
And laughter, learnt of friends; and gentleness,
In hearts at peace, under an English heaven.

After over sixteen years as Prime Minister (1949–1966), the Anglophile

Robert Menzies was succeeded by Harold Holt, who in a 1966 speech
in Washington, echoed Brook and repeated the 1964 Democratic Party
election slogan to its beneficiary:

You have in us not merely an understanding friend but one staunch in the
belief of the need for our presence in Vietnam. We are not there because of
our friendship, we are there because, like you, we believe it is right to be
there and, like you, we shall stay there as long as it seems necessary to
achieve the purposes of the South Vietnamese Government and the pur-
poses that we join in formulating and progressing together. And so, sir, in
the lonelier and perhaps even more disheartening moments which come to
any national leader, I hope there will be a corner of your mind and heart
which takes cheer from the fact that you have an admiring friend, a staunch
friend that will be all the way with LBJ. (Cited by Warhafts 2014, 124)
 ‘Honour’ 123

President Lyndon Johnson responded to Holt with a political cliché:

America and her allies were in Vietnam to serve the cause of ‘liberty,
freedom and hope.’28
On 14 January 1963, George Wallace took the oath-of-office as
Governor of Alabama and declared: ‘In the name of the greatest people
that have ever trod this earth, I draw the line in the dust and toss the
gauntlet before the feet of tyranny, and I say segregation now, segregation
tomorrow, segregation forever’ (cited by Raffel 1998, 270). At Bob Jones
University, GRACE (an acronym for ‘Godly Response to Abuse’) reported
that 48 per cent of respondents stated that BJU personnel directed them
not to report sexual abuse or discouraged them from reporting it. The
BJU President Steve Pettit was obliged to confess: ‘We failed to uphold
and honor our own core values.’29 In 1964, Wallace received an ‘hon-
orary doctorate’ from BJU accompanied by a tribute: ‘Men who have
fought for truth and righteousness have always been slandered, maligned,
and misrepresented. The American press in its attacks upon Governor
Wallace has demonstrated that it is no longer free, American, or honest’
(Christian Crusades 1963–1964).
In taking his oath-of-office, Wallace stood on the spot where Jefferson
Davies had been sworn in as provisional President of the Confederate
States of America. Four months later, much of the world was horrified
when the police in Birmingham, Alabama, brutalized civil rights dem-
onstrators. President John F. Kennedy justified federal intervention (and
violated states’ rights) on the grounds that ‘we preach freedom around the
world.’ Civil rights were ‘a moral issue’ that was ‘as old as the Scriptures
and is as clear as the American Constitution … Are we to say to the
world, and much more importantly, to each other that this is the land
of the free except for the Negroes?’30 The 1964 BJU tribute to Wallace
continued:

But you, Mr. Governor, have demonstrated not only by the overwhelming
victories in the recent elections in your own state of Alabama but also in
the showing which you have made in states long dominated by cheap dem-
agogues and selfish radicals that there is still in America love for freedom,
hard common sense, and at least some hope for the preservation of our
constitutional liberties. (Christian Crusades 1963–1964)
124 4 Corruption, Honour, Triangles

In the 1968 presidential campaign, ‘Liberty Lobby’ distributed a

pro-Wallace pamphlet entitled ‘Stand up for America’ (Carter 1995,
296–297). While Martin Luther King (15 January 1929 to 4 April 1968)
had a ‘dream,’ Nixon (8 August 1968) had a campaign: ‘Eight years ago
I had the highest honor of accepting your nomination for President of
the United States. Tonight I again accept that nomination … I see a day
when the President of the United States is respected and his office is hon-
ored because it is worthy of respect and worthy of honor’ (cited by Harris
and Tichenor 2010, 315, 318).
The night before his assassination, King declared

Well, I don’t know what will happen now. We’ve got some difficult days
ahead. But it really doesn’t matter with me now, because I’ve been to the
mountaintop. And I don’t mind. Like anybody, I would like to live—a long
life; longevity has its place. But I’m not concerned about that now. I just
want to do God’s will. And He’s allowed me to go up to the mountain. And
I’ve looked over. And I’ve seen the Promised Land. I may not get there with
you. But I want you to know tonight, that we, as a people, will get to the
Promised Land. So I’m happy, tonight. I’m not worried about anything.
I’m not fearing any man. Mine eyes have seen the glory of the coming of
the Lord.

The night before his resignation, Nixon tried to persuade Kissinger

to cover-up his ‘mountaintop moment’: sobbing about being forced to
resign (Frost 1978, 98).
The month before he was assassinated, Robert Kennedy (1925 to 6
June 1968) promised ‘No more Vietnams’ (Palermo 2001, 199–200;
Schlesinger 2002, 889–890); to win the 1968 election, Nixon pledged
‘to you that we shall have an honorable end to the war in Vietnam. We
shall not stop there. We need a policy to prevent more Vietnams’ (cited
by Ingalls and Johnson 2009, 169). From the White House, Nixon
immediately initiated two more Vietnams (or rather Pearl Harbors): the
covert carpet-bombing of Cambodia and Laos (18 March 1969 to 15
August 1973) which destroyed the social fabric of those societies and
paved the way for the dictatorships of Pol Pot (1975–1979) and the
Marxist Lao People’s Democratic Republic (1975–). In disgrace, Nixon
 ‘Honour’ 125

(1990, Introduction) wrote No More Vietnams—a title he admitted was

‘too clever by half, as if I were trying to outsmart people by co-opting
the anti-war critics’ favorite bumper sticker. Titles, like texts, should be
simple and direct. If I were making a decision today, I would choose a
different title: A Noble Cause.’
Like post-1974 Hayek, pre-1974 Nixon was a survivor: 1952 (the
‘Nixon Fund’ revelations and his Checkers speech), 1960 (the Kennedy
defeat), and 1962 (his ‘last’ press conferences after being defeated for the
Californian Governorship by Pat Brown). Nixon claimed that he had
‘leveled with the American people, and told the truth’ (cited by Frost
1978, 268): but like Hayek, he only provided reliable information as a
by-product of self-promotion.
Nixon and his predecessors created a chain of command in which war-­
crimes were committed by the equivalent of Einsatzgruppen death squads.
On 31 March 1971, a low-level functionary, William Laws Calley, Jr.,
was found guilty of murdering 22 unarmed South Vietnamese civilians
in My Lai; but the following day, Nixon ordered him transferred from
Leavenworth prison to house arrest, pending appeal. On 1 May 1971,
Nixon instructed his White House staff to say nothing, on or off the
record, about war-crimes (Oliver 2006, 232). Had Calley (and his com-
manding officers) been in the crosshairs of Robert Jackson, the chief
US prosecutor at the Nuremburg Trials, the death penalty would surely
have been demanded; in 1974, he received a limited presidential pardon
(Savelsberg and King 2011, 52).
On 23 January 1973, Nixon announced from the Oval Office ‘that
we today have concluded an agreement to end the war and bring peace
with honor in Vietnam and in Southeast Asia.’31 On 30 April 1973,
Nixon declared ‘There can be no whitewash at the White House’ and
referred not to the civilian casualties that he had caused but to his ‘ter-
rible’ Christmas Eve ‘personal ordeal of the renewed bombing of North
Vietnam, which after twelve years of war finally helped to bring America
peace with honor.’
Whether or not Nixon (with his enemies list) had initiated the
Watergate break-in, he certainly created the culture in which such acts
could be seen as ‘honorable’: ‘I knew that in order to get the enemy to
take us seriously abroad, I had to have enough support at home.’ That
126 4 Corruption, Honour, Triangles

was what the 1972 ‘election was about. It was a clear issue. McGovern
was for buggin’ out and I was for seeing it through to an honorable end’
(cited by Frost 1978, 190).
On 2 February 1973, Nixon sacked CIA director Richard Helms
because he had refused to block the FBI investigation into Watergate.
On 30 April 1973, Nixon described his own altruism and impartiality
over the Watergate investigation:

I sat down just before midnight. I wrote out some of my goals for my sec-
ond term as President. Let me read them to you.
‘To make it possible for our children, and for our children’s children, to
live in a world of peace.
To make this country be more than ever a land of opportunity, of equal
opportunity, full opportunity for every American.
To provide jobs for all who can work, and generous help for those who
cannot work.
To establish a climate of decency and civility, in which each person
respects the feelings and the dignity and the God-given rights of his
neighbor.
To make this a land in which each person can dare to dream, can live his
dreams, not in fear but in hope, proud of his community, proud of his
country, proud of what America has meant to himself and to the world.’
These are great goals. I believe we can, we must work for them. We can
achieve them. But we cannot achieve these goals unless we dedicate our-
selves to another goal. We must maintain the integrity of the White House,
and that integrity must be real, not transparent … As the new Attorney
General, I have today named Elliot Richardson, a man of unimpeachable
integrity and rigorously high principle. I have directed him to do every-
thing necessary to ensure that the Department of Justice has the confidence
and the trust of every law-abiding person in this country. I have given him
absolute authority to make all decisions bearing upon the prosecution of
the Watergate case and related matters. I have instructed him that if he
should consider it appropriate, he has the authority to name a special
supervising prosecutor for matters arising out of the case.32

In the Saturday Night Massacre (20 October 1973), Richardson

and his Deputy William Ruckelshaus resigned under duress; and the
 ‘Honour’ 127

Hayekian Bork (2013, Chap. 5) sacked the Watergate Special Prosecutor,

Archibald Cox (who had subpoenaed the White House tapes), in return
for a promise from Nixon: ‘You’re next when a vacancy occurs on the
Supreme Court.’
On 8 August 1974, Nixon, in his resignation announcement, pro-
claimed his commitment to ‘the blessings of liberty’ and

those shared ideals that lie at the heart of our strength and unity as a great
and as a free people … When I first took the oath of office as President 5½
years ago, I made this sacred commitment: to ‘consecrate [emphases added]
my office, my energies, and all the wisdom I can summon to the cause of
peace among nations.’ I have done my very best in all the days since to be
true to that pledge. As a result of these efforts, I am confident that the
world is a safer place today, not only for the people of America but for the
people of all nations, and that all of our children have a better chance than
before of living in peace rather than dying in war … In leaving it, I do so
with this prayer: May God’s grace be with you in all the days ahead.33

On 8 September 1974, President Ford took a decision which enraged

many and weakened his appeal relative to Reagan and Carter: after
attending early morning communion at St. John’s Episcopal Church,
Ford returned to the White House to announce that Nixon would
receive a ‘full, free and absolute pardon.’ The press reported that Ford
had chosen ‘the Sabbath’ to ‘emphasize that the pardon was an act of
mercy, not justice’ (Herbers 1974). A month later, it was announced
that the King of Sweden would ennoble a prominent member of the
Second Estate—‘von’ Hayek—who was ‘consciously devoted to the
vision and splendour of the Habsburg Empire’ and their one-family
rule (Leube 2003a, 12).
The ‘Great’ War had been sparked by Habsburg determination to
prevent the Southern Slavs uniting under Serbia, which would, in the
words of the Chief of the General Staff, Franz Graf von Hötzendorf,
‘relegate the Monarchy to the status of a small power’ (Mason 1985, 67).
Hötzendorf later came to be regarded as the Architect of the Apocalypse
(Sondhaus 2000); and his burial status was relegated from Ehrengrab
(grave of honor) to ‘historical grave.’
128 4 Corruption, Honour, Triangles

On 24 October 1984, over lunch at the Reform Club, Hayek embraced

the transparent fraud of Naval Lieutenant ‘Deacon’ McCormick: the fol-
lowing day, Queen Elisabeth II made Hayek her ‘Companion of Honour.’
Referring to ‘Deacon’ McCormick, Hayek informed Bartley, his third
appointed biographer and the first general editor of The Collected Works
of F. A. Hayek: ‘He may be sometime [sic] making things up. I suppose
his exactitude is not that of a scholar, but of a journalist. But entirely
honourable’ (cited by Leeson 2013a, 195).
Hayek described the kleptocratic Pinochet as an ‘honourable general’
and his government officials as ‘educated, reasonable, and insightful men’
(cited by Caldwell and Montes 2014a, 38, n121, b, 2015, 282). Hayek
(1978a) explained that the ‘robber baron was a very honored and honor-
able person, but he was certainly not an honest person in the ordinary
sense. The whole traditional concept of aristocracy, of which I have a
certain conception—I have moved, to some extent, in aristocratic circles,
and I like their style of life. But I know that in the strict commercial
sense, they are not necessarily honest. They, like the officers, will make
debts they know they cannot pay.’34
Hayek (1949, 420–421, 428) insisted that the ‘administration of
property’ was the foundation of genuine intellectual status. His 1984
sermon to the Mont Pelerin Society emphasized ‘moral inheritance which
is an explanation of the dominance of the western world, a moral inheri-
tance which consists essentially in the belief in property, honesty and the
family [emphasis added], all things which we could not and never have
been able adequately to justify intellectually’ (cited by Leeson 2013a,
197).35 For Hayek (1994, 39), a family becomes an ‘honourable’ ‘family’
when it was ennobled: the ‘age’ of the ‘family’ is measured by the date
of entry into the Second Estate. Thus his mother’s parents came from a
‘younger’ family because they were ‘ennobled over a generation later’ than
his father’s ‘older’ family, while the ‘von’ Mises ‘family’ (April 1881) were
younger still (Hülsmann 2007, 15). In 1950, the Mont Pelerin Society
almost imploded when Hayek revealed himself (to Robbins, Friedman
and, presumably, others) to be amoral: a conspiratorial liar who tried to
minimize the financial cost to himself of abandoning his first wife and
family. He is ‘believed in’ by his disciples even when his lies stare them in
the face (Chap. 13, below).
 ‘Honour’ 129

Hayek admitted to Cubitt (2006, 176, 38, 59, 381–382) that he had
‘criminally neglected’ his first family (his ‘private affairs’) and believed
that he was responsible for his daughter’s distrust of men and marriage.
Christine Hayek (1929–) ‘hardly knew’ her father: during her childhood,
he was the absent ‘professor in his study’; and when the 1974 Nobel Prize
was announced, his son, Lorenz (1934–2004), apparently exclaimed ‘so
that’s who he is!’ (Leeson 2015b, Chap. 5). Hayek’s (1976c, ix) The Road
to Serfdom, which was written in his ‘spare time from 1940 to 1943,’
justified intellectually a socialist-stab-in-the-back explanation for Hitler’s
rise.
Radnitzky (2000, 19) used an engineering analogy to deify Hayekian
ethics:

The economic effects of robbery and taxation in the same amount are, of
course, identical. It is remarkable that states can collect, in taxes, a large
part of their subjects’—or rather victims’—resources without exercising
noticeable violence, although this does not make them less coercive …
what matters are not the intentions but the consequences of welfare poli-
cies, such as the impact on morals and attitudes, i.e. the software infra-
structure of capitalism.

Hayek was a serial income tax-evader: in Germany, he failed to declare

both his US social security payments and his ‘Moonie Nobel Prize’; and
when he was caught, he feared that ‘his’ property would be impounded.
Cubitt (2006, 122, 10, 177, 288, 264, 35–36) also reported that Hayek
had been caught in the ‘cheating matter’—stealing, or double-dipping,
from tax-exempt educational charities—to maintain his aristocratic life-
style. Hayek had ‘not thought fit to tell’ his donor, Walter Morris, and
appeared to instruct his secretary to do likewise. When the ‘angry’ Morris
complained to Cubitt about being ‘deceived [,] Hayek laughed, and told
me that he had wanted to have nothing to do with this but did not mind
being told about it as an anecdote.’
What did Hayek (1975a [1974]) mean by ‘restor[ing] the price mech-
anism’? For the last fifteen years of his life, Hayek refused to pay Cubitt
(2006, 10), his secretary/soiled-bed nurse: ‘because of the many gaps
between one donor and another, and because cheques were lost, or not
130 4 Corruption, Honour, Triangles

sent, or forwarded to the wrong bank, I was almost permanently in debt

until about three years before Hayek’s death. I once asked Hayek whether
he did not mind having to beg for money so often. He just laughed, and
said he did not mind it in the least, that all his professional considerations
had been based on financial considerations.’
Hayek’s Mont Pelerin Society was funded by neo-Feudal organiza-
tions such as the United Fruit Company (Leeson 2017a); its Austrian
component catered to the beneficiaries of neo-Feudalism. According to
the editor of The Constitution of Liberty: The Definitive Edition, ‘meet-
ings were held in one of the most expensive hotels in the city as befit-
ted the fact that almost all attendees were either think-tank executives
traveling on expense accounts, South American latifundia owners, for
whom hundred-­dollar bills were small change, or the officers of the
Society itself, a self-perpetuating oligarchy who, thanks to its mem-
bers’ dues, travelled around the world in first-class accommodations’
(Hamowy 2003).
The appeal to ‘honour’ is a potent fund-raising device. In a newspa-
per founded by a self-proclaimed Messiah and founder of the ‘Moonies,’
David Hein (2008), professor and chairman of the Religion and
Philosophy Department at Hood College, declared that his institution
pursued ‘excellence … the regular practice of disciplined integrity, a sense
of honor, a nobility of character: there is this other excellence that I hope
you will also remember us for, and I hope look out for in the future when
you stop to think about Hood.’ Although as students, they may be insig-
nificant, as alumni they would be honoured and pursued for donations:
‘Your instructors may not always remember your name, but our develop-
ment office, I promise you, will never forget you.’
According to Haag (1969, 54), Spann ‘consciously attempted to
impress his students with the possibilities of turning ideas into deeds,
for he believed that dedicated intellectuals could lead a nation to great-
ness.’ After Jerry Falwell Jr. approved of his 2016 campaign to ‘Make
America Great Again’ (because he ‘is a successful executive and entrepre-
neur, a wonderful father and a man who I believe can lead our country
to ­greatness again’), Trump tweeted his appreciation: ‘Great honor—Rev.
Jerry Falwell Jr. of Liberty University, one of the most respected religious
leaders in our nation, has just endorsed me!’36
 Austrian Business Cycle Theory and Hayek Triangles 131

Hayek promoted his Great Society of Free Men to donors (Leeson

2015b). Hazlett asked him: ‘So if a businessman says to you, ‘What
can I do?’ from the state down, your suggestion is to send a check to
the IEA or a reasonable facsimile.’ Hayek (1978a) replied: ‘Oh, yes. Of
course, do the same thing here.’ Anthony Fisher who ‘has founded, on
my advice’ the London-based Institute of Economic Affairs, is ‘now cre-
ating similar institutes in this country, in Los Angeles and San Francisco
and New York, and he has already done one in Vancouver,’ the Fraser
Institute, which is ‘nearly as good as the London one.’37

 ustrian Business Cycle Theory and Hayek

A
Triangles
As Mises plagiarized ‘consumer sovereignty’ from Frank A. Fetter (Leeson
2015d, Chap. 7), so Hayek plagiarized the distinction between totalitar-
ian and authoritarian from his Geistkreis co-member and Hoover Fellow,
Eric Voegelin (1999 [1936]). Hayek told a Venezuelan interviewer that
he didn’t

‘know of any totalitarian governments in Latin America. The only one was
Chile under [Salvador] Allende.’ It was important, he insisted, not to con-
fuse ‘totalitarianism with authoritarianism.’ (Ebenstein 2003, 300)

The origin of the Roman Catholic Church was an ‘individual selection’

by Emperor Constantine (‘the Great,’ or ‘Saint Constantine the Great,
Equal-to-the-Apostles’). The 325 First Council of Nicaea was a ‘group
selection’: combining the military requirements of the Roman Empire
with an opportunity to impose uniformity on the ‘spontaneous’ order
that had been established by the scattered Christian communities (the
Nicene Creed).
Rothbard (2007a [1957], 15) told Ayn Rand that he had ‘learned’
from her ‘about the existence of Aristotelian epistemology, and then I
studied that, and came to adopt it wholeheartedly’; he then ‘grounded
his economics and politics solidly on the Aristotelian Thomist tra-
dition’ (Stromberg 1995, 45). Rothbard’s co-founder of the Mises
132 4 Corruption, Honour, Triangles

Institute confirms that Austrian economics is ‘rooted in Aristotelianism’

(Rockwell 2010 [1999], 299).
The weakening totalitarianism of the Holy Roman Empire and Habsburg
Austria (1276–1918) had been undermined by the Enlightenment and
the Scientific Revolution. The ‘spontaneous’ Aristotelean order was
defended by burning the astronomer, Giordano Bruno (1548–1600),
at the stake for promoting, among other heresies, Nicolaus Copernicus’
(1473–1543) suggestion that the Sun, rather than Jerusalem, was at the
centre of the known universe. Galileo Galilei (1564–1642), the ‘Father of
modern observational astronomy,’ was tried by the ‘Holy Office,’ found
‘vehemently suspect of heresy,’ forced to recant and spend the last nine
years of his life under house arrest (Kuhn 1959, 1962).
Alois Hudal (1885–1963), the author of The Foundations of National
Socialism, was a Rome-based Austrian titular bishop who helped establish
the ‘monastery route’ (‘ratlines’) which offered Nazis, such as Heinrich
von Hayek, the opportunity to escape justice (Steinacher 2011, 118–127).
According to his witch-hunting brother (Hayek 1978a), religion

doesn’t do any harm;38 After all, our whole moral world consists of restraints
of this sort, and [Freud], in that way, represents what I like to call the sci-
entific destruction of values, which are indispensable for civilization but
the function of which we do not understand. We have observed them
merely because they were tradition. And that creates a new task, which
should be unnecessary, to explain why these values are good.39

The Habsburgs left a legacy of 85 per cent illiteracy (Taylor 1964, 166,
41, 35): its ‘moral tradition’ was promoted through Latin ceremonies,
terror-inducing visions of ‘Hell’ (on church walls and windows), plus
persecution of those who tried to evade compulsory church attendance.
The Hayekian optimising-agent differs from its British neoclassical
counter-part. Hayek (1978a) told Bork:

My whole interpretation of the market prices as the signals telling people

what they ought to do [emphasis added] all sprang from this one thing
which I first outlined in a lecture to the London Economics Club in 1937.
I think, while up to this point my work was conventional in the sense of
 Austrian Business Cycle Theory and Hayek Triangles 133

just carrying on what existed, this was a new outlook I brought into eco-
nomics. I now like to put it into the form of interpreting prices as signals
leading us, on the one hand, to serve needs of which we have no direct
knowledge, and on the other hand, to utilize means of which we have no
direct knowledge. But it’s all through the price signals, which enable us to
fit ourselves in an order which we do not, on the whole, comprehend.40

Bork had just been employed by a ‘crook’ for ‘liberty’ who used price
signals to tell people what they ought to do—by illegally insisting on
campaign contributions in return for price support for farmers (Lardner
and Pincus 1997). After a fraction of the facts had reached a critical
threshold, Nixon—to tell the Watergate burglars what they ought to do
(remain silent)—instructed his Chief-of-Staff: ‘Well … they have to be
paid. That’s all there is to that. They have to be paid’ (cited by Kutler
1998, 111).41 Like Hayek, Nixon was a morality-promoter, telling Frost
(1978, 238, 241): ‘It would have been wrong in this case to give the
money to [Howard] Hunt when he was … when it was given for the pur-
pose of blackmail. In other words, hush money. That would have been
wrong.’ In response, Frost confronted Nixon with the reality of what he
had stated on tape: ‘You could get a million dollars and you could get it
in cash. I know where it could be gotten … Your major guy to keep under
control is Hunt … Hunt has got to know this before he’s sentenced …
Christ, turn over any money we got.’
Bork asked another ‘crook’ for ‘liberty’: ‘The idea that information and
facts are spread widely throughout the society, and that no one person
has even an appreciable fraction of the facts, also forms a large part of
the basis of your philosophy of law.’ Hayek (1978a) replied: ‘Oh, yes; oh,
yes.’42 The co-editor of Hayek on Hayek clarified:

To Hayek, the human is a rule-following animal. Her knowledge is mostly

limited to the particulars of her surroundings and is largely inarticulabel.
She follows rules which she cannot state fully, and she does not usually
know how these rules serve to coordinate human action. The immensely
complex set of rules and institutions that has evolved over the centuries to
coordinate human action define what Hayek calls ‘spontaneous order.’
(Wenar 1992, 663)
134 4 Corruption, Honour, Triangles

The third general editor of The Collected Works of F. A. Hayek clarified

still further: ‘a spontaneous order’ can ‘occur among animals that are non-
communicating, and it can occur among humans and various social insti-
tutions. Language, the market, money, and more reflect this’ (Caldwell
2005a). These Skinner-box ‘rats in a trap’ could be manipulated through
Hayek-style operant conditioning to have faith in the ‘spontaneous’ order
and to accept that if a ‘von’ Nobel Laureate ennobles someone without an
undergraduate degree as ‘Dr,’ a ‘spontaneous’ order has been issued which
‘the market’ must obey. As Hayek (2009a [1979], 4–5) explained: we are
‘constantly adapting ourselves to factors that are unknown to us and for
this purpose we can only use limited and fragmented information … the
spontaneous evolution of a system of communication, which, by means
of signals, tells economic agents what to do in order to adapt to events
we know very little about. The system is the market and the signals are
prices.’43
In pursuit of power, Austrian School economists have adopted a revo-
lutionary strategy derived from Lenin (Rothbard 2009a [1961]; Rockwell
2010 [1999], 291); and Hayek discovered a use for what Marx regarded
as the ‘opium of the people.’ Fear of The Road to Serfdom was designed
to replace the diminishing potency of the marketed fear of ‘Hell.’ To do
‘his bidding’ in defence of the neo-Feudal social order, Hayek’s (1994,
72–73) used words such as ‘capitalism’ and ‘the market society.’ However,
his social Darwinist order was based not on the ‘creative destruction’
of dynamic Schumpeterian entrepreneurship, but on the superstitious
acceptance of ‘mere habit’:

Capitalism presumes that apart from our rational insight we possess a tra-
ditional endowment of morals, which has been tested by evolution but not
designed by our intelligence. We have never invented private property
because we understood the consequences, nor have we ever invented the
family. It so happens that these traditions, essentially a religious tradition,
and I am as much an agnostic as Mises was, but I must admit that the two
decisive traditions [emphasis added] which make it possible for us to build
up an order which extends our vision cannot be the result of our intellec-
tual 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 something
which we can ex post interpret.
 Austrian Business Cycle Theory and Hayek Triangles 135

The triangles of Austrian business cycle theory connect the ‘lower

orders’ to the ‘higher orders’ via ‘time stages of production.’ The social
order and ‘moral traditions’ of Habsburg Austria channelled resources
from the lower orders (the Third Estate, or commoners) to the Holy
Roman Emperor (HRE) and the Pope (P) via the higher orders—the
First (the priesthood) and Second (the nobility) Estates. To worship
‘God’ and to pay an insurance premium to avoid the torments of ‘Hell,’
Third Estate deference and resources (tithes and taxes) flowed up this
Feudal/neo-Feudal triangle to benefit the Upper Estates (I + II) plus P +
HRE, and, after Napoleon, P + the Habsburg Emperor (HE).

P + HRE/HE (‘GOD’)

I + II

III

Shortly before this edifice collapsed, Hayek (1978a) detected a weak

link in the First Estate: ‘I was very young—I must have been thirteen or
fourteen—when I began pestering all the priests I knew to explain to me
what they meant by the word God. None of them could. [laughter] That
was the end of it for me.’44
Hayek (1978a) complained to Buchanan: ‘with our present method of
democracy, you don’t have to agree, but you have to—You are pressed, on
the pretext of social justice, to hand out privileges right and left.’45 Hayek
(1978a)—who wanted privileges handed out to the right only—sought to
re-engineer this neo-Feudal triangle by replacing the perceived weak link
with an ‘honourable’ ‘“un-understood” moral tradition’ (HUUMT)46: an
organic entity to which the individual must bow and which he decep-
tively labelled ‘the market society’ or ‘capitalism.’
Financial resources and deference flow-up the Hayek triangle—from
tax-exempt plutocrats (TEP) (the ‘donor class’), sovereignty-seeking
­suppliers (SSS), plus AMLL, the anti-‘mongrelisation’ of the ‘white race’
‘Liberty Lobby’ (Mintz 1985, 66, 75, 81)—to benefit ‘von’ Hayek (1949,
136 4 Corruption, Honour, Triangles

427, 437, 1978a) and those he described as the ‘worst’ ‘inferior … medi-
ocrities’ (H + WIM), whom he needed to recruit and retain for propa-
ganda purposes47:

HUUMT

H + WIM

TEP + SSS + AMLL

Under P + HRE/HE (‘GOD’), the illiterate pay a tithe to ‘Beat Satan’;

under HUUMT, the financially illiterate pay a tithe to ‘Beat the Market’
by applying the same Austrian business cycle theory which enabled Hayek
to (fraudulently) allege that he had predicted the Great Depression (and
for which he was awarded the Nobel Prize).
Rothbard (1993) welcomed the first bombing of the World Trade
Center and appeared to encourage further terrorist attacks; like al Qaeda,
the Austrian School of Economics resembles a franchise operation.
Without Nobel prestige, it would be just another far-right hate-group.
But it has become a ‘knowledge’-based flow-of-funds: a double-Hayek-­
triangle resting on FAITH (a Franchise for Austrian Intermediaries sell-
ing Tithes and Homophobia).

Hayek (‘I don’t believe a word of it’) ‘God’

(‘I need these intermediaries’)

(‘I believe in Him’) (‘I believe in Him’)

The FAITH-full

(Unsupervised $) (‘Man of God’ deference + tithes)

The Tax-Payer The Financially Illiterate

 Notes 137

Notes
1. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
2. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
3. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
4. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
5. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
6. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/press.html
7. The exact proportion of US currency that circulates outside the country
is disputed—but appears to be significant.
8. Banks can also access the non-deposit wholesale market in order to make
loans.
9. Between August 2008 and August 2015, the US monetary base increased
from $0.847626 to $3.3919 trillion, while the US money supply (M2)
increased from $7.7 to $12.1 trillion. https://research.stlouisfed.org/
fred2/series/M2.
Over roughly the same period (August 2008–July 2015), the US
Consumer Price Index increased by less than 10 per cent (218–238;
100 = 1982–1984). https://research.stlouisfed.org/fred2/series/
CPIAUCS.
10. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
11. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
138 4 Corruption, Honour, Triangles

12. Friedrich Hayek, interviewed by James Buchanan 28 October 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
13. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
14. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
15. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
16. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
18. Hayek Papers Box 38.24.
19. The Phillips Machine (MONIAC) is on display in a variety of places,
including the Science Museum, London, and the University of Leeds.
20. Machlup suggested that the Harvard Keynesian, Seymour Harris, might
be interested in purchasing one of the Machines. Hayek Papers Box
36.17.
21. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
22. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
23. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
24. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
25. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 139

26. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
27. https://www.honorsociety.org/
28. Australian Broadcasting Corporation ‘All The Way’ documentary, broad-
cast on Australian television on 21 April 2015.
29. http://www.bju.edu/grace/
30. http://www.pbs.org/wgbh/americanexperience/features/primary-­
resources/jfk-civilrights/
31. http://watergate.info/1973/01/23/nixon-peace-with-honor-broadcast.
html
32. http://www.emersonkent.com/speeches/no_whitewash_at_the_white_
house.htm
33. http://www.pbs.org/wgbh/americanexperience/features/primary-­
resources/nixon-resignation/
34. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
35. http://www.margaretthatcher.org/document/117193
36. http://www.cnn.com/2016/01/26/politics/donald-trump-jerry-­falwell-
jr-endorsement/index.html
37. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
38. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
39. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
40. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
41. Transcribed conversation between Nixon and H. R. Haldeman.
42. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
43. By coincidence, the origins of B. F. Skinner’s (1967, 389–391) atheism
(and thus, in part, his scientific curiosity) was the assistance provided to
140 4 Corruption, Honour, Triangles

him by his teacher, Miss Graves, to overcome the fear of ‘Hell’ that his
grandmother had tried to indoctrinate him with.
44. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
45. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
46. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
47. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
Part II
Austria, 1–16
 5
1–2: Austria, 1899–1931, Religion
and Empire

Religion
The first ‘tradition’ or knowledge community that Hayek (1978a) was
exposed to was Catholicism: ‘I have had little religious background,
although I might add to it that having grown up in a Roman Catholic
family, I have never formally left the creed. In theory I am a Roman
Catholic. When I fill out the form I say ‘Roman Catholic,’ merely because
this is the tradition in which I have grown up. I don’t believe a word of
it [laughter]’.1
For rhetorical purposes, both Keynesians and the Chicago side of the
Mont Pelerin Society have employed religious metaphors.2 In contrast,
Austrians use both the language and the intent of religion—whilst some-
times engaging in a cover-up.
After almost half a century of close-quarter observations, Arnold
Harberger (1999), the original ‘Chicago boy’ and the 1998 Distinguished
Fellow of the American Economic Association, detected—not a school
of economics—but a religion: there was ‘a great difference in focus
between Hayek (the Austrians) and Chicago as a whole. I really respect
and revere those guys. I am not one of them, but I think I once said that

© The Author(s) 2017 143

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_5
144 5 1–2: Austria, 1899–1931, Religion and Empire

if somebody wants to approach economics as a religion, the Austrian

approach is about as good as you can get.’ Within this religious edifice,
Hayek (1978a)

just learned [Mises] was usually right in his conclusions, but I was not
completely satisfied with his argument. That, I think, followed me right
through my life. I was always influenced by Mises’s answers, but not fully
satisfied by his arguments. It became very largely an attempt to improve the
argument, which I realized led to correct conclusions. But the question of
why it hadn’t persuaded most other people became important to me; so I
became anxious to put it in a more effective form.3

When Chitester asked ‘I would assume a lot of people confuse your

interest in a moral structure with religion,’ Hayek (1978a) replied ‘Very
rarely.’ In his taped University of California at Los Angeles (UCLA) oral
history interviews, Hayek (1978a) spoke in messianic terms: his mission
was ‘to persuade the intellectuals in the hopes that ultimately they could
be converted and transmit my ideas to the public at large.’ According to
the UCLA transcripts, Hayek (1978a) told Craver:

Well, what converted me is that the social scientists, the science specialists
in the tradition of Otto Neurath, just were so extreme and so naive on
economics that it was through [Neurath] that I became aware that positiv-
ism was just as [emphases added] misleading as the social sciences. I owe it
to his extreme position that I soon recognized it wouldn’t do.

Apparently anxious to put this into a more effective form, the editors
of Hayek on Hayek (1994, 50) silently corrected this to

Well, what dissuaded [emphasis added] me is that the social scientists, the
science specialists in the tradition of Otto Neurath, just were so extreme
and so naive on economics; it was actually through them that I became
aware that positivism was just [sic] misleading in the social sciences. I owe
it to Neurath’s extreme position that I soon recognized it wouldn’t do.

For Austrian School economists, Vienna appears to be the Disneyland

of ‘liberty.’ Through talking to Machlup, Ebeling (1983) was ‘allowed to
 Religion 145

eavesdrop at the tables of late-night Vienna cafes where Mises, Hayek,

Haberler, Strigl and Morgenstern discussed matters of theory and policy
in an atmosphere of lighthearted seriousness.’ Rothbard (2002a [1973])
gushed:

For those of us who have loved as well as revered Ludwig von Mises, words
cannot express our great sense of loss: of this gracious, brilliant and won-
derful man; this man of unblemished integrity; this courageous and life-
long fighter for human freedom; this all-encompassing scholar; this noble
inspiration to us all. And above all this gentle and charming friend, this
man who brought to the rest of us the living embodiment of the culture
and the charm of pre-World War I Vienna. For Mises’ death takes away
from us not only a deeply revered friend and mentor, but it tolls the bell for
the end of an era: the last living mark of that nobler, freer and far more civi-
lized era of pre-1914 Europe … Mises himself, spinning in his inimitable
way anecdotes of Old Vienna.

Mises was ‘personally obnoxious’ (Craver 1986, 5)—but according to

Rothbard (2002a [1973]) he had:

a mind of genius blended harmoniously with a personality of great sweet-

ness and benevolence. Not once has any of us heard a harsh or bitter word
escape from Mises’ lips. Unfailingly gentle and courteous … an inspiration
and as a constant star … Ludwig Mises never once complained or wavered
… stand[ing] foursquare for the individualism and the freedom that he
realized was required if the human race was to survive and prosper.

It was in ‘Old Vienna’ that Hitler acquired anti-Semitism from a cul-

ture co-created by the proto-Nazi von Hayek family. Rothbard (2002a
[1973]) continued:

We could not, alas, recapture the spirit and the breadth and the erudition;
the ineffable grace of Old Vienna. But I feverently [sic] hope that we were
able to sweeten his days by at least a little … But oh, Mises, now you are
gone, and we have lost our guide, our Nestor, our friend. How will we
carry on without you? But we have to carry on, because anything less would
be a shameful betrayal of all that you have taught us, by the example of
146 5 1–2: Austria, 1899–1931, Religion and Empire

your noble life as much as by your immortal works. Bless you, Ludwig von
Mises, and our deepest love goes with you.4

Like Haberler, Hicks and Robbins, Machlup (1980) implicitly rec-

ognized the role that his school of economics had played in facilitating
Hitler’s rise to power:

The problems of the 1930s were the spectacular deflations of price levels,
of national income, and of foreign trade … There was the phenomenon of
widespread unemployment—which most of us Austrians explained by dis-
parity between labor cost and commodity prices—but this was not enough,
especially not at a time when the quantity of money had fallen so badly. So
this was why all the Austrian attempts, even Hayek’s Austrian business-­
cycle theory, did not satisfy people. In the midst of the greatest contraction
of money circulation, of incomes, of employment and so on, our recom-
mendations were to let the economy be shaken down and have everything
that’s wrong liquidated, and let all the structural distortions be repaired.
Well, at that moment, in 1933, this was not the right recipe.

In ‘Boom and Bust Follows an Old Austrian Script,’ Roger Garrison

(2002), the Misean Visiting Fellow, NYU, and Professor of Economics,
Auburn University, asserted that ‘The key to avoiding booms and busts,
then, is letting the interest rate tell the truth about time. But with a cen-
tral bank dominating the economic landscape, truth can get distorted.’
Austrians appear incapable of reporting evidence accurately. As ‘Visiting
Hayek Fellow’ at the LSE, Garrison (2003) claimed to quote Ben Higgins:
the significance of Hayek’s LSE lectures in the 1930s was ‘buried in the
cumbersome three-dimensional diagrams with which Hayek presented
his ideas and which made them seem like something in the field of engi-
neering.’ But Higgins (1977, 74) was actually reflecting about the delu-
sions fostered by Austrian School religion:

We were very much under the influence of Hayek. He was our God. There
were actually points of contact [between London and Cambridge] but we
couldn’t see them. The period of investment, for example, in Hayek’s mind
was an ex ante concept, not very different from the concept of liquidity
preference. But all that was buried in the cumbersome three-dimensional
 Religion 147

diagrams with which Hayek presented his ideas which made them seem
like something, not psychological, but something in the field of engineer-
ing—the Structure of Capital.

In a supposedly academically respectable LSE ‘Hayek Memorial

Lecture,’ Boettke (2004) gushed: ‘It is a great honor for me to have this
opportunity to speak at this great institution of economic education and
research, and on this occasion to honor F. A. Hayek—a scholar who
I admire greatly as a man of keen intellect and courage.’ In the 2003
‘Hayek Moment Delivered at the Mises Institute’s Rothbard Graduate
Seminar’ to inaugurate the LSE ‘Hayek Lecture Series,’ Rockwell (2003,
435–436) explained: ‘In a series of lectures named in honor of Hayek
and sponsored by the Mises Institute and businessman Toby Baxendale,
the spirit of those years at the London School of Economics is back.’
Baxendale and his Cobden Centre promote Hayekian ‘free money’ and
bit coins.5 In 1931, Hayek was appointed to the LSE by the Director,
William Beveridge, after his job-interview fraud about having predicted
the Great Depression. Almost eight decades later, the shadow of Hayek
remains: in 2011, Sir Howard Davies resigned as LSE Director after it
was revealed that the PhD student alleged mass murderer and Austrian-­
School-­MBA-credentialed son of Muammar Gaddafi, Saif al-Islam, had
donated money in suspicious circumstances.
According to Boettke (2004), the ‘final significant influence on Hayek,
and the most significant I would argue, was Ludwig von Mises … they had
intertwined research programs.’ Boettke (2015) believes that Mises is ‘the
greatest economist who ever lived,’ Hayek was Mises’ ‘greatest follower’
and ‘was different from Mises for a variety of subtle reasons.’ As Mises
plagiarized ‘consumer sovereignty’ from Frank A. Fetter (Leeson 2015d,
Chap. 7), so Hayek plagiarized his route to knowledge-­sovereignty from
a fellow-Austrian:

Propaganda must always address itself to the broad masses of the people …
All propaganda must be presented in a popular form and must fix its intel-
lectual level so as not to be above the heads of the least intellectual of those
to whom it is directed …Propaganda must not investigate the truth objec-
tively and, in so far as it is favourable to the other side, present it according
148 5 1–2: Austria, 1899–1931, Religion and Empire

to the theoretical rules of justice; yet it must present only that aspect of the
truth which is favourable to its own side. (Hitler 1939 [1925], Chap. VI)

Hayek (1978a) observed that in Roman Catholic Austria and else-

where, resilient social orders were underpinned by unintelligible ‘knowl-
edge’ and superstition; he devoted his career to persuading social scientists
to serve this ‘spontaneous’ order: ‘I am in a curious conflict because I
have very strong positive feelings on the need of an “un-understood”
moral tradition, but all the factual assertions of religion, which are crude
because they all believe in ghosts of some kind, have become completely
unintelligible to me. I can never sympathize with it, still less explain it.’6
Yet in his Nobel Lecture, Hayek (1974b) praised ‘those remarkable antic-
ipators of modern economics, the Spanish schoolmen of the sixteenth
century, who emphasized that what they called pretium mathematicum,
the mathematical price, depended on so many particular circumstances
that it could never be known to man but was known only to God.’
Five religious images were conjured-up in two further Nobel Lecture
sentences: the Tree of Knowledge in the Garden of Eden, Truth, The
Road to Salvation or Damnation (grave, confess), and ‘Satan,’ that Great
Deceiver (The Pretence of Knowledge): ‘I confess that I prefer true [?] but
imperfect knowledge, even if it leaves much indetermined and unpredict-
able, to a pretence of exact knowledge that is likely to be false. The credit
which the apparent conformity with recognized scientific standards can
gain for seemingly simple but false theories may, as the present instance
shows, have grave consequences.’
The following year, Hayek (1975b) denounced ‘Satan’ and his snake:
‘the silver voice of that genius in persuasion, Lord Keynes … [who] was
exceedingly difficult to resist in conversation or discussion. Even if you
knew that he was wrong, you sometimes found it extraordinarily hard
to maintain your position while you talked to him—although once you
turned away, you realised that you had been misled.’ Hayek had a rem-
edy: ‘Before we can return to reasonable stability and perhaps lasting
prosperity, I am convinced that we must exorcise this Keynesian devil …
[whose followers had] forfeited their right to be heard.’ Hayek completed
his ‘free market’ knowledge construction model: ‘You might object that I
have left out some facts, and that the result would have been different if
 Religion 149

I had not neglected those other facts. Well, my answer to this objection
would be: quote the facts, please, and I shall be willing to consider them.’
As he emerged from a six-year-long suicidal depression, Hayek became
transformed from Prophet to Messiah: ‘For forty years I have preached
that the time to prevent a depression is during the preceding boom.’ After
his ‘prediction had come true,’ he was tempted to tell the public: ‘Well, if
you had listened to me before you wouldn’t be in this mess.’
The Mont Pelerin-fuelled stagflationary crisis of the 1970s should not
be attributed to either Keynes or A.W.H. ‘Bill’ Phillips (Leeson 1994a,
1997a, 1998a, b, 1999). But according to a ‘crook’ for ‘liberty,’ non-­
Austrian ‘secondhand dealers in opinion,’7 who had indulged in topics
which he had not approved of, had thought it ‘desirable to replace spon-
taneous processes by deliberate human control. This erroneous view has
lead [sic] to a drastic decline in the importance and relevance of economic
theory and explains the crisis … Many economists are now beginning to
realise that their approach was mistaken and they are coming back to me
[emphasis added]’ (Hayek 1978a, 2009a [1979], 4–5).
Between naval defeats at Lepanto and Navarino (1571–1827), the
Mediterranean gradually ceased to be the Muslim or ‘Ottoman Lake’8;
while from the Carthaginian ‘peace’ to the Germanic sack of Rome
(146 BC–410 AD), it had largely been the ‘Roman Lake.’ Pax Romana
(27 BC–180 AD) was imposed by conquest and fear. From ‘visions’ at the
Battle of the Milvian Bridge to the fall of the Habsburg-dominated Holy
Roman Empire (312–1806) and beyond, the cross was embraced for
military purposes: the promise of eternal paradise is a useful motivational
device for those confronting the choice between running away or the
prospect of imminent death.9 Before the conversion of Constantine (and
before Christians burnt heretics at the stake), crucifixion was designed
to provide a ‘hellish’ end for those who rebelled against the Empire: pour
encourager les autres. When Saul became Paul, he transformed this humil-
iation into the selfless sacrifice of a martyr to—allegedly—open-up the
road to ‘Heaven.’
When confronted by rumours about a ‘surreptitious (past or immi-
nently impending) conversion to Catholicism,’ Rothbard replied that it
shows that for his critics
150 5 1–2: Austria, 1899–1931, Religion and Empire

joining the Catholic Church is just about the worst thing you can say
about your enemy. Why is that? Why, for them, should becoming a
Catholic be the ultimate in disgrace? … As for me, I for one do not con-
sider becoming a Catholic on a par with becoming a child molester; on the
contrary, I consider it an honorable course … Apparently [they] are inca-
pable of understanding how anyone could be appreciative of the Catholic
Church without having actually been converted—or, in their eyes, snatched
up, something like the invasion of the body snatchers.

Rothbard concluded that, though not a believer, he had become ‘an

ardent fan of Christianity,’ because, unlike his Randian critics, ‘I’ve
learned something over the years’ (cited by Salerno 1995, 80–81).
Ebeling was led to believe by William Peterson (10 December 1985)
that he could do for Mises what Harrod had done for Keynes and what
Boswell had done for Johnson—and in the process, his ‘star’ would rise
faster and further.10 Peterson (2009, 42) also transformed the atheist
Mises into a ‘modern-day Moses pleading with Egypt’s Pharaoh, mean-
ing today’s myopic statists: Let my people [the consumers] go!’ But
according to Mises, ‘Man has only one tool to fight error—reason.’ Such
Austrians combine faith-consistency—democracy must be ‘really limited’
or replaced entirely by one-dollar-one-vote consumer sovereignty—with
evidence-inconsistency: alternating between glorifying the ‘elite’ influ-
ence exerted by their Gods on ‘top-tier’ economists (Skarbeck 2009), and
bemoaning the neglect and persecution they endured—sometimes, even
in the same book.
For example, Peterson (1987) falsely asserted that Mises had been vic-
timized because of his ‘staunch adherence to liberty … Today we glory in
the truth of Misesian economics, and marvel at his lonely and courageous
struggle against heavy odds.’ Peterson then correctly stated the academic
world did not ‘take kindly’ to Mises who ‘never’ held a regular professor-
ship in the United States or at the University of Vienna. Peterson (2009,
6, 19) then correctly stated that Mises was a Distinguished Fellow of the
American Economic Association, before falsely stated that Mises was a
‘professor of political economy at New York University for a quarter-­
century, retiring in 1969.’ Peterson correctly stated that between 1934 and
1940 Mises had a professorship at the Graduate Institute of International
 Religion 151

Studies in Geneva (his only full-time academic position), before mislead-

ingly stating that ‘before Geneva he had long been a professor at the
University of Vienna.’ Peterson simultaneously asked: ‘Why would no Ivy
League university here nor prestigious university in Europe find a chair
for him … what of academic freedom? Even NYU, in offering Mises a
‘visiting professorship’—he so visited for twenty-four years—offered no
pay. It had to be raised outside. For shame, you lords of Academe here
and abroad.’
Those within faith-based communities have a different perspective
than outsiders: faith-in-Truth provides the centripedal counterpoint to
evidence-influenced centrifugal tendencies. Austrian economists, who
inhabit an evidence-free or evidence-inconsistent universe, appear to
have constructed the only ‘school’ of economics in which argumentum
ad hominem accompanied by the imitation of scholarship is the accepted
mode of discourse. Invoking a phrase usually reserved for prostitutes,
Mises (1960 [1948], 55) referred to the ‘camp-followers of Lord Keynes.’
According to the Oxford Dictionary, ‘scabrous’ means ‘covered with
scabs’: ‘scabrous details included being regularly seen with a mistress.’ In
The Road to Serfdom Texts and Documents The Definitive Edition, Caldwell
(2007a, 21) described Hayek’s martyrdom:

The worst of the lot, Herman Finer’s scabrous Road to Reaction [1945], was
also picked out for mentioning by Hayek in the 1956 foreword. The over-
arching message of the book was evident in its very first sentence: ‘Friedrich
A. Hayek’s The Road to Serfdom constitutes the most sinister offensive
against democracy to emerge from a democratic country for many decades.’
According to Finer, Hayek’s call for constitutionalism and advocacy of the
rule of law was indicative of his antidemocratic biases, the ‘very essence’ of
Hayek’s argument being ‘the idea that democracy is dangerous and ought to
be limited [unattributed emphasis].’ Toward the end of the book (pub-
lished, we remember, in 1945) we find Finer remarking on ‘the thoroughly
Hitlerian contempt for the democratic man so perfectly expressed by
Hayek.’

With grammatical clumsiness, Boettke told his NYU students that

‘Austrian economics, by most observers of economic science, is viewed
152 5 1–2: Austria, 1899–1931, Religion and Empire

as closely associated with classical liberalism politics.’11 In contrast, for

the Harvard Crimson, Finer correctly identified the distinction between
Austrian economic liberalism—property—and political liberalism—
democracy (which, in Hayek’s judgment, threatens the first): Hayek ‘dis-
trusts the people politically, but he has confidence in any one of those
same people who can be successful in economics; he believes in economic
freedom, but not in political freedom … The implications of his thesis
are hideous, but most people don’t realize them.’12
The rise of democracy fatally weakened governments of, by, and for
Hayek’s (1978a) ‘aristocratic circles’13: democracy, Hayek insisted, is
dangerous and ought to be limited (Leeson 2015b, 37–42). Austrian-­
promoted policy-induced deflation helped end democracy in Germany
and Austria (1933–1934) and facilitated the Fascist rise to power
(Hutchison 1992, 110–112; Galbraith 1975, 173; Haberler 1986,
425). Almost immediately, Hayek began to kick-over the traces of
Austrian School culpability: The Road to Serfdom (2007 [1944]) was
dedicated to ‘THE SOCIALISTS OF ALL PARTIES’—a variety of
Holocaust revisionism that has a parallel in the ‘Liberty Lobby’ (Mintz
1985, Chap. 5).
According to Mises (1985 [1927], 19, 51): ‘The program of [classical]
liberalism, therefore, if condensed into a single word, would have to read:
property … All the other demands of liberalism result from this funda-
mental demand [Mises’ emphasis].’14 The word ‘Republic’ is derived from
the Latin res publica, loosely meaning social or public affair. Social and
private property (res privata) inhabit cooperating spheres: to strengthen
itself, the second releases resources to the first so that the law can enforce
contracts and property rights and try to prevent ‘fraud and deception
(including exploitation of ignorance)’ (Hayek 2007 [1944], 88). Social
property can also be used to create human capital and thus more private
and social property; alternatively—as the 1935 Nuremburg Laws dem-
onstrated—it can be used as a conveyor belt along which ‘the other’—
in this case Jews—have their property stolen and their human capital
degraded. This was one of the consequences of the deflation that Hayek
and Mises promoted.
In ‘Researchers or Corporate Allies? Think Tanks Blur the Line,’ the
New York Times reported that ‘think tanks have frequently become
 Religion 153

vehicles for corporate influence and branding campaigns’ (Lipton and

Williams 2016). The Austrian School of Economics is almost entirely
dependent on tax-exempt funding through ‘educational charities.’ Hayek
was a serial tax-evader who stole, or double-dipped, from the think tanks
who funded him, while in 1951 Mises asked

What is a loophole? If the law does not punish a definite action or does not
tax a definite thing, this is not a loophole. It is simply the law … The
income-tax exemptions in our income tax are not loopholes. The gentle-
man who complained about loopholes in our income tax … implicitly
starts from the assumption that all income over fifteen or twenty thousand
dollars ought to be confiscated and calls therefore a loophole the fact that
his ideal is not yet attained. Let us be grateful for the fact that there are still
such things as those the honorable gentleman calls loopholes. Thanks to
these loopholes this country is still a free country.15

In 1927, referring to ‘Ludendorff and Hitler’ and others, Mises (1985

[1927], 51) insisted that the ‘victory of Fascism in a number of countries
is only an episode in the long series of struggles over the problem of prop-
erty.’ As the German Reichstag voted on Hitler’s Enabling Act (23 March
1933), Mises told Tracey Kittredge, of the Rockefeller Foundation, that
he feared that income tax commissioners in both Austria and Germany
had the power to confiscate ‘Jewish property’ (Craver 1986, 25).
Like ‘divine right’ monarchs, dictators tend to regard the State as their
personal property—and enforce ‘taxation’ or expropriation for entirely
self-interested purposes. Rome, a Monarchy before it was a Republic
(circa 509–27 BC), was dominated by a patrician nobility who—by
emphasizing ‘tradition’ and ‘morality’—sought to dominate the far more
numerous citizen-commoners: the plebeians. The non-citizen ‘masses’—
including slaves and women—were excluded.
Hayek (1978a, 2011 [1960], 41–42), who denigrated the post-­
Habsburg Constitution as ‘a republic of peasants and workers,’16 dedi-
cated The Constitution of Liberty to ‘the members of the Mont Pelerin
Society and in particular to their two intellectual leaders, Ludwig von
Mises and Frank Knight.’ There were no ‘peasants and workers’ in the
‘self-perpetuating oligarchy’ of the Mont Pelerin Society (Hamowy 2003).
154 5 1–2: Austria, 1899–1931, Religion and Empire

According to Austrians, Mises ‘glorifies in the potential and reason of

man. In sum, he stands for principal in the finest tradition of Western
Civilisation. And from that rock of principal, during a long and fruitful
life, this titan of our time has never budged … He has long sought the
eternal verities. He believes in the dignity of the individual’ (Petersen
2009 [1971], 13–14). In a letter to Ayn Rand, Mises (2007a [1958], 11)
expressed one of these eternal Austrian verities—‘Hitlerian contempt for
the democratic man’:

‘Atlas Shrugged’ is not merely a novel. It is also—or may I say: first of

all—a cogent analysis of the evils that plague our society, a substantiated
rejection of the ideology of our self-styled ‘intellectuals’ and a pitiless
unmasking of the insincerity of the policies adopted by governments and
political parties. It is a devastating exposure of the ‘moral cannibals,’ the
‘gigolos of science’ and of the ‘academic prattle’ of the makers of the ‘anti-­
industrial revolution.’ You have the courage to tell the masses what no poli-
tician told them: you are inferior and all the improvements in your
conditions which you simply take for granted you owe to the effort of men
who are better than you. If this be arrogance, as some of your critics
observed, it still is the truth that had to be said in this age of the Welfare
State.

In Liberalism in the Classical Tradition, Mises (1985 [1927], 43–44) also

expressed ‘Hitlerian contempt’ for the elected representatives of ‘the dem-
ocratic man’: those of the ‘old regime’ had displayed a ‘certain aristocratic
dignity, at least in their outward demeanor.’ The democratically elected
representatives who replaced them had ‘made themselves contemptible
by their behavior.’ Nothing did more harm to democracy in Germany
and Austria than the deflation that Hayek and Mises promoted—but
Mises asserted that the damage was done by the ‘hollow arrogance and
impudent vanity with which the Social-Democratic leaders who rose to
power after the collapse of the empire conducted themselves.’
Through societal legitimization, democracy restricts the recruiting
capacity of terrorists; and unlike other forms of government, democra-
cies are hesitant to engage in armed conflict with each other: the ‘inter-­
democracy nonaggression pact.’ For dictators, in contrast, ­non-­aggression
 Religion 155

pacts are often a prelude to war. Having praised ‘German and Italian’
Fascists and labelled the arguments for and against the 1923 Ludendorff-
Hitler Putsch as ‘not conclusive,’ Mises (1985 [1927], 44) deviously
asserted that the ‘only consideration that can be decisive is one that
bases itself on the fundamental argument in favor of democracy.’ Hayek
(1978a) elaborated: democracy had one advantage and ‘no other’:

my concern has increasingly become that in democracy as a system it isn’t

really the opinion of the majority which governs but the necessity of paying
off any number of special interests. Unless we change the organization of
our democratic system, democracy will—I believe in democracy as a sys-
tem of peaceful change of government; but that’s all its whole advantage is,
no other.17

As ‘crooks’ for ‘freedom’ and ‘liberty,’ Ludendorff and Hitler pursued

this legitimising strategy in the decade after their failed Putsch. Ludendorff
and Ernst Röhm, the head of the SA (Sturmabteilung, Storm Detachment,
Assault Division or Brownshirts), were elected to the Reichstag as repre-
sentatives of the National Socialist Freedom Movement (a front for the
banned Nazi Party); and in 1925, Ludendorff ran as the presidential can-
didate for another Nazi front, the German Völkisch Freedom Party. In
the 1932 presidential election, Hitler stood in his place.
Hayek (1978a) was an operator: ‘I’m operating on public opinion. I
don’t even believe that before public opinion has changed, a change in
the law will do any good. I think the primary thing is to change opinion
on these matters.’18 Hayek outlined his strategy to Hazlett, who asked
‘You mention the Institute for Economic Affairs as having tremendous
influence in Britain. Is this really the solution, to stimulate intellectual
discourse from a free-market standpoint?’ Hayek (1978a) replied: ‘Oh,
I’m sure you can’t operate any other way. You have to persuade the intel-
lectuals, because they are the makers of public opinion. It’s not the people
who really understand things; it’s the people who pick up what is fash-
ionable opinion. You have to make the fashionable opinion among the
intellectuals before journalism and the schools and so on will spread it
among the people at large.19
156 5 1–2: Austria, 1899–1931, Religion and Empire

According to Hayek (1948 [1947], 113–114), ‘freedom’ and ‘liberty’

required that ‘the people’ acquiesce: ‘We can either have a free Parliament
or a free people. Personal freedom requires that all authority is restrained
by long-run principles which the opinion of the people approves.’ If
Austrian School opinion was resisted by ‘the people,’ this would lead to
dictatorship: ‘In a nation where there is not yet a tradition of compromise
… almost any attempt to put upon the government a great many tasks
is bound to lead to dictatorial regimes’ (Hayek 1960). Referring to the
policies associated with Galbraith and Myrdal, Hayek (1979, 93) insisted
that what ‘makes most Western economies still viable is that the organisa-
tion of interests is yet only partial and incomplete. If it were complete,
we would have a deadlock between these organised interests, producing a
wholly rigid economic structure which no agreement between the estab-
lished interests and only the force of some dictatorial power could break.’
The ‘liberty’ and ‘equality’ fraternities that emerged from the French
Revolution employed Terror (White and Red, respectively) to construct
their ‘courageous’ Utopias.20 Meanwhile, ‘government of the people, by
the people, for the people’ evolved into universal adult suffrage and uni-
versal and subsidised education for their children. After overcoming aris-
tocratic resistance, democracy was threatened both by ‘liberty’—Hayek’s
(1978a) ‘system of really limited democracy’21—and ‘equality’— ‘the
peoples’ democracies’ of the Soviet and Chinese Empires. While the
‘equality’ Red Terror fraternity is now discredited—Communism: The
God that Failed (Crossman 1950)—the Austrian ‘liberty’ fraternity con-
tinue to denigrate Democracy: The God that Failed (Hoppe 2001).
The Statue of Liberty famously proclaims:

Keep, ancient lands, your storied pomp!’ cries she

With silent lips. ‘Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!

After the collapse of the Austrian-led Third Reich, the Austrian

School banker, Felix Somary, informed Otto, the Habsburg Pretender,
 The Empires of the ‘Old’ Aristocracy 157

that ‘Aristocracy has to begin somewhere,’ and—pointing to westbound

‘unkempt’ train passengers (some presumably refugees)—­contemptuously
added: ‘These are going to be our overlords in the future’ (cited by Watters
2005).
The Austrian School philosopher, Kuehnelt-Leddihn, ‘was a hereditary
knight of the Holy Roman Empire and an adjunct scholar of the Mises
Institute (great combination!)’ (Rockwell 2008c). All the major figures
of the first three generations of the Austrian School of Economics were
(except Machlup) ‘members of the nobility’ (Kuehnelt-Leddihn 1992).
According to Kuehnelt-Leddihn (no date), during the ‘Great’ War, Hayek
and Mises fought ‘to prevent the “world from being made safe for democ-
racy”.’22 As Hayek (1944) was writing The Road to Serfdom, Kuehnelt-­
Leddihn (aka F. S. Campbell 1978 [1943]) published The Menace of the
Herd.
Hayek (1978a) explained that ‘once you put it out that the market
society does not satisfy our instincts, and once people become aware of
this and are not from childhood [emphases added] taught that these rules
of the market are essential, of course we revolt against it.’23 Mrs Cecil
Frances Alexander’s (1848) Hymns for Little Children contains ‘All Things
Bright and Beautiful’ which describes the rules of this neo-Feudal ‘market
society’:

The rich man in his castle,

The poor man at his gate,
God made them high and lowly,
And ordered their estate.

The Empires of the ‘Old’ Aristocracy

In 1783—six years before Josef Hayek (1750–1837) was ennobled
by Kaiser Josef II (Hayek 1994, 37)—the British lost thirteen North
American colonies and thus a major part of their first Empire. In the thir-
teen years preceding the publication of The Constitution of Liberty (2011
[1960]) the British began—voluntarily—to surrender their second.
158 5 1–2: Austria, 1899–1931, Religion and Empire

Of the four Empires that collapsed during or immediately after their

‘Great’ War, two (the Habsburg and the Ottoman) had been designated
the ‘sick’ men ‘of Europe’ or ‘decaying states’ (Ludendorff 1919, 138);
Great Britain subsequently began to fall into the same category. There
are similarities between the Habsburg fin de siècle and the British ‘win-
ter of discontent’: the first became a failed state (1918–1919); the sec-
ond appeared to be failing (1978–1979). Hayek told Cubitt (2006, 15)
that of the two Empires he had watched decline, ‘England’s downfall
had been the more painful to him.’ Hayek appeared to direct his racist
anti-Semitism specifically towards those who were responsible for under-
mining the European Empires: American ‘interference’ with apartheid
and the Dutch Empire, the ‘workers and peasants’ who succeeded the
Habsburgs, and those who left the British Empire—Egyptians, Indians,
West Indians and Jews.
In the two years prior to Hayek’s 1949 departure from Britain, India
became independent; the Dutch reluctantly recognized Indonesian inde-
pendence; and in the Eastern Mediterranean, the British Mandate for
Palestine ended and the Jewish State of Israel was created. A generation
earlier (1922), the British protectorate of Egypt gave way to nominal inde-
pendence24; the 1956 Suez debacle further weakened the imperial spirit.
Harold Macmillan’s ‘wind of change’ speech in South Africa spurred the
creation of the anti-immigration, anti-decolonization Conservative Party
Monday Club to protect the white governments in Rhodesia and South
Africa (which hung-on until 1979 and 1994, respectively): the fifth
Marquess of Salisbury became its first President. These assorted Empire-­
loyalists were the second knowledge community that Hayek associated
with.
Dynasties were subjected to internal decolonization—forced to grad-
ually give way to democracy—and the democracies that succeed them
facilitated (often reluctantly) external decolonization: in the 1960s, most
of Africa and the West Indies became independent. For contemporary
public consumption, Hayek stated that apartheid laws

appears to be a clear and even extreme instance of that discrimination

between different individuals which seems to me to be incompatible with
the reign of liberty … the fact that the laws under which government can
 The Empires of the ‘Old’ Aristocracy 159

use coercion are equal for all responsible adult members of that society.
Any kind of discrimination—be it on grounds of religion, political opin-
ion, race, or whatever it is—seems to be incompatible with the idea of
freedom under the law. Experience has shown that separate never is equal
and cannot be equal. (Cited by Diener 2013, 32)

For posthumous consumption, Hayek left in his archives a copy of a

letter to Neil McLeod of the Liberty Fund explaining that he wished to
change his Chicago bank because his current branch had ‘gone negro’:
dealing with non-whites made him feel ‘uncomfortable.’25
In his history of the LSE, Ralf Dahrendorf (1995, plate 17, between
268 and 269) reproduced a photograph of academics dancing (a regu-
lar lunchtime activity). Hayek described Sir Arthur Lewis, his LSE col-
leagues and the recipient of the 1979 Nobel Prize for Economic Sciences,
as an ‘unusually able West Indian negro’; and when asked what his

attitude to black people was … he said that he did not like ‘dancing
Negroes’! He had watched a Nobel laureate doing so, which had made him
see the ‘the animal beneath the facade of apparent civilization.’

Four years later, Cubitt (2006, 23–24) reminded Hayek of their con-
versation to ‘make sure he had meant what he had said. He stood by it but
looked uncomfortable and obviously did not care to discuss it further.’
In ‘Monday Club still on Reich Track,’ the Times, in a report of the
Monday Club Annual General Meeting, quoted Merlin Charles Sainthill
Hanbury-Tracy, seventh Baron Sudeley: ‘True though the fact may be
that some races are superior to other … Hitler did well to get everyone
back to work’ (Rifkind 2006). Referring to a paper that he was about to
deliver to the Monday Club, Hayek (1978a) stated:

I’m just drafting an article which is going to be called ‘Mill’s Muddle and
the Muddle of the Middle.’ [laughter] I’m afraid John Stuart Mill—you
know, I have devoted a great deal of time studying his intellectual devel-
opment—really has done a very great deal of harm, and the origin of it is
still impossible for me to explain. That in any man the mere fact that he
was taught something as a small boy [emphasis added] should make him
160 5 1–2: Austria, 1899–1931, Religion and Empire

incapable of seeing that it is wrong, I still find very difficult to under-

stand. That applies especially to the labor theory of value.26

The Republic of India is the largest democracy in the world. But four
years after Indian independence, Mises (1951 [1932], 234–235) asserted:
‘Were England to lose India today, and were that great land, so richly
endowed by nature, to sink into anarchy, so that it no longer offered a
market for international trade—or no longer offered so large a market—
it would be an economic catastrophy of the first order.’ Hayek (1978a),
who combined a high moral tone with hypocrisy, reflected:

I don’t have many strong dislikes. I admit that as a teacher—I have no

racial prejudices in general—but there were certain types, and conspicu-
ous among them the Near Eastern populations, which I still dislike
because they are fundamentally dishonest. And I must say dishonesty is a
thing I intensely dislike. It was a type which, in my childhood in Austria
[emphasis added], was described as Levantine, typical of the people of
the eastern Mediterranean. But I encountered it later, and I have a pro-
found dislike for the typical Indian students at the London School of
Economics, which I admit are all one type—Bengali moneylender sons.
They are to me a detestable type, I admit, but not with any racial feeling.
I have found a little of the same amongst the Egyptians—basically a lack
of honesty in them.27

Dutch control over the Indonesian archipelago—which had always

been tenuous—was restored in 181628; the 1884 Berlin Conference
provided some semblance of order for the ‘New Imperialism’ and the
‘Scramble for Africa.’
In his Nobel Lecture, Hayek (1974b) insisted

The recognition of the insuperable limits to his knowledge ought indeed to

teach the student of society a lesson of humility which should guard him
against becoming an accomplice in men’s fatal striving to control society—
a striving which makes him not only a tyrant over his fellows, but which
may well make him the destroyer of a civilization which no brain has
designed but which has grown from the free efforts of millions of individuals
[emphasis added].29
 The Empires of the ‘Old’ Aristocracy 161

Apartheid had been designed by ‘the brain’ of Hendrik Verwoerd

(1901–1966), a Professor of Applied Psychology and Sociology (Hepple
1967). According to Hayek’s (2011 [1960], 70) The Constitution of
Liberty, five distinctions separate freedom from slavery: ‘legal status as
a protected member of a community’; ‘immunity from arbitrary arrest’;
the right to work at ‘whatever he desires to do’; the right to ‘movement
according to his own choice’; plus the right to own property. According
to these definitions, Pass Law apartheid was a slave society. But Hayek
(1978a) defended the ‘civilisation’ of socially engineered apartheid from
the American ‘fashion’ of human rights:

Take the conception of human rights. I’m not sure whether it’s an inven-
tion of the present [Carter] administration or whether it’s of an older date,
but I suppose if you told an eighteen year old that human rights is a new
discovery he wouldn’t believe it. He would have thought the United States
for 200 years has been committed to human rights, which of course would
be absurd. The United States discovered human rights two years ago or five
years ago. Suddenly it’s the main object and leads to a degree of interfer-
ence with the policy of other countries which, even if I sympathized with
the general aim, I don’t think it’s in the least justified. People in South
Africa have to deal with their own problems, and the idea that you can use
external pressure to change people, who after all have built up a civilization
of a kind, seems to me morally a very doubtful belief. But it’s a dominating
belief in the United States now … An early instance was the extreme
American anti-colonialism: the way in which the Dutch, for instance, were
forced overnight to abandon Indonesia, which certainly hasn’t done good
to anybody in that form. This, I gather, was entirely due to American pres-
sure, with America being completely unaware that the opposition to colo-
nialism by Americans is rather a peculiar phenomenon.30

Eight years before Pinochet’s coup, General Suharto seized power:

in the ‘cleansing’ process that followed, more than 500,000 Indonesian
‘impurities’ were liquidated. According to Mark Aarons (2008, 81), a
CIA report described the massacre as ‘one of the worst mass murders of
the 20th century, along with the Soviet purges of the 1930s, the Nazi
mass murders during the Second World War, and the Maoist bloodbath
of the early 1950s.’ In 1967, Hayek praised ‘el-Haj Mohammed’ Suharto
162 5 1–2: Austria, 1899–1931, Religion and Empire

and his Generals who were ‘mostly not what we would regard as military
men. They are in many instances men coming from other professions
who in the fight for independence have risen in rank and remained in the
army to ward off communism’ (cited by Farrant and McPhail 2014).31
European Empires were strengthened—and then fatally weakened—
by war. The Napoleonic Wars were partially financed by the 1803 sale
of Louisiana; in 1819, exhausted by the Peninsular War (1807–1814),
the Spanish ceded Florida; in 1867, fear of British seizure persuaded
Alexander II, the Emperor of Russia, King of Poland and Grand Prince
of Finland, to sell Alaska; and after the ‘Great’ War, Woodrow Wilson’s
14 Points doomed the Habsburg Empire. The expanding American
Republic acquired 828,000 (Louisianan) plus 65,755 (Floridian) and
586,412 (Alaskan) square miles, while the Habsburg Empire left a legacy
of almost geopolitical insignificance.
After the Bourbons were removed by the French Revolution
(1789–1799), Metternich tried to restore ‘order’ in post-Napoleonic
Europe (1815–1848); and after the 1848 Liberal Revolution, Bismarck
performed a roughly similar role. In 1900 in China, the Eight-Nation
Alliance (Austro-Hungary, France, Germany, Italy, Japan, Russia, the
United Kingdom and the United States) intervened to defeat the anti-­
imperialist Boxer rebellion. After the Romanovs were removed by rev-
olution, France, Italy, Japan, Romania, Greece, Poland, China, Serbia,
and the British Empire (including Canadians, Indians and Australians)
unsuccessfully intervened. Japan occupied parts of Siberia until 1922 and
the northern half of Sakhalin until 1925.
The following year, ‘von’ Wieser (1983 [1926], 226) reflected on the
consequences of the ‘Great’ War:

When the dynastic keystone dropped out of the monarchical edifice, things
were not over and done with. The moral effect spread out across the entire
society witnessing this unheard-of event. Shaken was the structure not only
of the political but also of the entire social edifice, which fundamentally was
held together not by the external resources of power but by forces of the
soul. By far the most important disintegrating effect occurred in Russia
[emphases added].
 The Empires of the ‘Old’ Aristocracy 163

The separation of Church from State (and thus the increasing retreat
of religion from theocracy into the private sphere) was matched by the
separation of Dynasty from State. Between 1917 and 1922/1924, the
edifice imposed by four dynasties over almost two-and-a-half millennium
disintegrated: Romanovs (1613–1917), Hohenzollerns (1061–1918),
Habsburgs (1276–1918) and Ottomans (1299–1922/1924). Referring
to the neo-Feudal era, Hayek (1978a) described his mission: to ‘reim-
pose [emphasis added] limitations on governmental power.’32 These four
dynasties, however, left a hideous moral tradition: liquidating the ‘other.’
By attaching ‘genus’ to ‘cide,’ Raphael Lemkin described the 1915
Ottoman massacre of about a million Armenians and other Christian
minorities (Kévorkian 2011; Schabas 2009, 295; Cooper 2009, 155).
The Romanovs had long tolerated pogroms: in 1914 and 1915, as the
Russians retreated on the Eastern Front, ‘Jewish villages were torched
and looted and their inhabitants raped and killed’ (Winter 2006, 97).
The first anti-Semitic legislation of the twentieth century was enacted
in 1920 in Admiral Miklós Horthy’s post-Habsburg Hungary (Leonard
2010, 34); and the Hitler and Franco Holocaust also took place in ‘prop-
erty’ once owned by the Habsburgs and Hohenzollerns.
World Wars I and II started on ‘property’ owned or once owned by the
Habsburgs and Hohenzollerns; the proxy World War III was initiated
from ‘property’ once owned by the Romanovs; and World War IV looks
most likely to begin in ‘property’ once owned by the Ottomans: conflict
over a ‘sanctuary’ State for those who had almost been liquidated on
‘property’ once owned by the Habsburgs and the Hohenzollerns.
Austrians seek to carry ‘aloft the intellectual flag’ of the House of
Habsburg because ‘After all, by a very conservative estimate, a hundred
million people have died at the hands of their own governments in this
century. Given that record, how bad could anarchy be?’ (Sobran 1995,
39). According to Mises (2003 [1969], 17), Wieser, like Menger and
Böhm-Bawerk, ‘looked with the utmost pessimism upon the political
future of the Austrian Empire.’ Almost six decades after Wieser’s (1983
[1926]) The Law of Power, Hayek instructed his ‘secondhand dealers in
opinion’ (Mont Pelerin Society members) that they should be concerned
with ‘changing opinion … Its intellectuals who have really created social-
ism … who have spread socialism out of the best intentions.’
164 5 1–2: Austria, 1899–1931, Religion and Empire

Democracy—universal adult suffrage—is bolstered by conventions

about what constitutes acceptable discourse: rational, evidence-based
debate as opposed to appeals to superstitions. Hayek—who did not
‘believe a word of ’ Christianity33—emphasized that

We have to recognize that we owe our civilization to beliefs which I have

sometimes have offended some people by calling ‘superstitions’ and which
I now prefer to call ‘symbolic truths’ … We must return to a world [empha-
sis added] in which not only reason, but reason and morals, as equal part-
ners, must govern our lives, where the truth of morals is simply one [Hayek’s
emphasis] moral tradition, that of the Christian west, which has created
morals in modern civilization. ([1984] cited by Leeson 2013a, 197)34

Generations of children were filled with stories about the Dark

Continent and the ‘White Man’s burden’ (Rudyard Kipling’s poem, writ-
ten to celebrate Queen Victoria’s Diamond Jubilee and first published in
the year of Hayek’s birth):

Take up the White Man’s burden, Send forth the best ye breed
Go bind your sons to exile, to serve your captives’ need;
To wait in heavy harness, On fluttered folk and wild—
Your new-caught, sullen peoples, Half-devil and half-child.

As Bork (1978) noted: ‘This concept of the protection of property, of

course, is now in tension, or in opposition to, demands made in the name
of social justice.’ Mises (1985 [1927], 19) equated Classical Liberalism
with private ‘property’: do ‘new caught, sullen’ inputs in the productive
process—slave labour concentration camps, slave plantations and so
on—constitute property or a violation of human rights and social justice?
Some predators were, of course, ‘privateers’ of the English Crown before
becoming ‘free market’ pirates and slave traders.
For Americans, the 1773 Boston Tea Party and the 1814 British burn-
ing of Washington are potent anti-colonial images.35 According to Mises
(1951 [1922], 234–235), ‘The wars waged by England during the era
of Liberalism to extend her colonial empire and to open up territories
which refused to admit foreign trade, laid the foundations of the modern
economy … England, which had become the greatest colonial power,
 The Empires of the ‘Old’ Aristocracy 165

proceeded to manage her possessions according to the principles of free

trade theory.’ Mises continued: ‘in judging the English policy for ­opening
up China, people constantly put in the foreground the fact that it was the
opium trade which gave the direct, immediate occasion for the outbreak
of war complications. But in the wars which the English and French
waged against China between 1839 and 1860 the stake was the gen-
eral freedom of trade and not only the freedom of the opium trade.’
According to Mises, under English and French control, Chinese opium
addicts were displaying their consumer sovereignty. The anti-imperialist
Boxer Rebellion (1899–1901) was a prelude to the 1911 overthrow of
the Qing monarchy, the 1949 Red Terror seizure of power and the ‘Great
Leap Forward’ (in which millions died of famine). Mises and Hayek pro-
moted White Terror to facilitate a ‘Great Leap Backwards’ so as to ‘return
to a world’ in which they were not subject to equality before the law.
As Hayek (1944) published The Road to Serfdom, Erwin Rommel
became world-famous as the Desert Fox and for writing about Infantry
Attacks (2012 [1944]). In 1917, the 26-year-old Rommel was awarded
Prussia’s highest order of merit—Pour le Mérite—after the Battle of
Caporetto (Becket 2013, 3; Wilkes and Wilkes 2001, 187). The teenage
Hayek (1978a) claimed to have been promoted to Lieutenant in 1917:

On the retreat from the Piave [River], we were first pursued by the Italians.
Since I was telephone officer of my regiment (which meant that I knew all
the very few German-speaking men, who were the only reliable men in
these conditions), I was asked to take a little detachment for the artillery
regiment … I had to attack a firing machine gun. In the night, by the time
I had got to the machine gun, they had gone. But it was an unpleasant
experience [emphases added]. [laughter]36

According to Leube (1994, 163), Hayek’s ‘Theory of the Spontaneous

Order’ emerged from observing the retreat from the Piave River of ‘These
multinational, multiracial troops, speaking at least seventeen different
languages, [who] left without any legally binding command or even com-
mon moral obligation.’ In a taped interview, Hayek told Leube (2003a,
12) that he ‘never doubted that there are things in life worth fighting
for and risking one’s own life for.’ Leube added that Hayek had been
166 5 1–2: Austria, 1899–1931, Religion and Empire

‘born into an aristocratic family that could not only lay claim to a long
academic tradition but also to a long and dutiful service to the Empire
… he joined up in March 1917 … he was anxious to be sent as an artil-
lery sergeant cadet to the intensely embattled Italian front … much to
his dislike he missed by a few days the Battle of Caporetto in October/
November 1917 that left many dead and wounded.’
George Macaulay Trevelyan (1919, 54, 81, 157, 235, 9), later Regius
Professor of Modern History at Cambridge (1927–1943), described the
volunteer-drivers of the Friends Ambulance Unit (FAU) at the Battle of
Caporetto (and elsewhere on the Italian front): ‘In daylight our ambu-
lances … often had to run the gauntlet. The [Austrian] enemy could see
the red cross clearly enough, but cared no more about it on cars than on
dressing-stations and field hospitals, which they systematically destroyed
along the same road.’ Austrian gas attacks produced ‘poisoned wretches
… tortured men, falling down under our own eyes and dying in agony by
hundreds together.’ The British Red Cross in Italy carried 400,000 sick
and wounded at the front; Trevelyan’s unit carried 177,522; their unit
cars travelled 1,319,316 km (see also Young 1953, 282).
‘The War to End All Wars’ undermined faith in the ‘old truths.’ The
earliest surviving manuscript of Wilfred Owen’s ‘gas poem’ is dated 8
October 1917:

My friend, you would not tell with such high zest

To Children ardent for some desperate glory
The old lie; Dulce et Decorum est
Pro patria mori.

The ‘Great’ War and its aftermath undermined intergenerational

entitlements. The Budapest-born and Austrian-educated Arthur
Koestler (1950, 19) described some of the affected: ‘Those who refused
to admit that they had become déclassé, who clung to the empty shell
of gentility, joined the Nazis and found comfort in blaming their fate
on Versailles and the Jews. Many did not even have that consolation;
they lived on pointlessly, like a great black swarm of tired winter flies
crawling over the dim windows of Europe, members of a class displaced
by history.’ In 1919, two years after the demise of the Romanovs, the
déluge washed-­away the legal basis of Habsburg inherited titles and
 Notes 167

privileges. Hayek (1978a) sought to reconstruct a (Dickensian?) spon-

taneous order in those who would ‘ask for more’ would give in: ‘you
just had to raise your finger’ (Leeson 2015b, Chap. 2).37 Dennis Bark’s
(2007, 1, 13–14, 18, 21) Americans and Europeans Dancing in the Dark
was inspired by a ‘series’ of conversations with Leube, a ‘longtime
friend from Salzburg.’ Over eighteen months they ‘continued to talk
about America and Europe.’ Although the conversations were ‘never’
recorded, Bark ‘always took notes and later on we often referred to
them.’ In Bark’s mind, these notes had almost Platonic status: by 2004,
he had a ‘complete manuscript in the form of eleven conversations.’
Bark provided a sympathetic account of ‘the role of aristocratic rule in
Europe’ and the associated ‘practice of patronage—that is to say, the finan-
cial and political support given to all manner of cultural, educational,
and social undertakings by the ruling and noble classes … patronage
accounted for much of the history of Western civilization.’ Bark lamented
that the power of ‘the Austro-Hungarian, German, and Russian monar-
chies had disappeared’ and been replaced by

the new aristocrats. They are the current government elite, in the form of
large cadres of civil servants, functionaries, government officials, and mem-
bers of parliaments and national assemblies. Their influence is well illus-
trated by their numbers; for example, in Sweden one in three is employed by
government, and in France it is one in four. Common to both the old and
the new aristocrats is their impact on economic, political, and social life.
Whether it is called big government or the welfare state the guiding princi-
ple of politics in contemporary Europe is rule by an elite [Bark’s emphases].

Hayek’s (1944) Road to Serfdom was interpreted as an assault on these

new aristocrats: ‘He did not refer to the new aristocrats, but that is whom
he was writing about.’

Notes
1. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
168 5 1–2: Austria, 1899–1931, Religion and Empire

2. At the University of Chicago, for example, Coase (1983, 192) regarded

himself as ‘Saint Paul to Aaron Director’s Christ. He got the doctrine
going, and what I had to do was bring in the gentiles.’
3. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. http://mises.org/rothbard/misesobit.asp
5. http://www.cobdencentre.org/2010/03/why-i-founded-the-cobden-
centre/
6. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
7. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
8. After 1571, 7 October became a day of Catholic celebration: the Feast of
Our Lady of Victory or The Feast of Our Lady of the Rosary.
9. Roman power had, of course, declined before the sack of Rome.
10. Haberler Archives Box 26.
11. Boettke’s assessment question continued: ‘Austrian economists, however,
are insistent that their approach to economics is “value free” and not
ideological. What are the Austrian arguments for value-freedom and
why—even with strict adherence to value-freedom—do Austrian’s argue
that they can critically assess arguments to politically plan or intervene
in the economic system?’ http://web.ceu.hu/crc/Syllabi/west-syllabi/
documents/Economics/boettke.html
12. http://www.thecrimson.com/article/1945/6/5/finer-attacks-hayek-
logic-sees-hideous/
13. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
14. Mises (1985 [1927], 19) defined property as the ‘private ownership of
the means of production (for in regard to commodities ready for con-
sumption, private ownership is a matter of course and is not disputed
even by the socialists and communists).’
15. https://mises.org/blog/what-ludwig-von-mises-taught-gottfried-
haberler-and-paul-samuelson-about-­tax-loopholes
 Notes 169

16. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
18. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
19. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
20. ‘The main lesson which the true liberal must learn from the success of
the socialists is that it was their courage to be Utopian which gained
them the support of the intellectuals and therefore an influence on pub-
lic opinion which is daily making possible what only recently seemed
utterly remote’ (Hayek 1949, 432–433).
21. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
22. http://mises.org/pdf/asc/essays/kuehneltLeddihn.pdf
23. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
24. With the exception of four ‘reserved’ areas: foreign relations, communi-
cations, the military and the Anglo-Egyptian Sudan.
25. Hayek Papers Box 34.17.
26. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
27. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
28. In 1806, Napoleon ended the Holy Roman Empire and appointed his
brother to the Dutch throne; in 1811, British forces occupied several
Dutch East Indies ports.
29. ­http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/
1974/hayek-lecture.html
170 5 1–2: Austria, 1899–1931, Religion and Empire

30. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
31. Suharto was born with only one name; ‘el-Haj Mohammed’ was added
later.
32. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
33. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
34. http://www.margaretthatcher.org/document/117193
35. The British embraced free trade in the 1840s.
36. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
37. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 6
3: Austria, 1899–1931: Hayek’s
‘Reaction’—Restoring the ‘World
Restored’ of the 1820s

In classical mechanics, ‘reaction’ is a description—but when attached to

Austrian Classical Liberalism it may conjure-up pejorative implications.
For an historian, however, the term ‘reaction’ invites investigation, rather
than dismissive criticism: it means someone who seeks to restore the sta-
tus quo ante, or the status quo ante bellum (the state existing before a war).
‘Reactionaries’ were Hayek’s third knowledge community.
Hayek, who told the Washington Post that he was a ‘Gladstonian lib-
eral’ (Allen 1982) also told North and Skousen that American conser-
vatives were the equivalent of nineteenth-century Classical Liberals.1
In public, Hayek (2011 [1957/1960], 518) insisted that conservatives
had ‘authoritarian or paternalistic leanings.’ Faith in the market society
distinguished Classical Liberals from Conservatives, who in ‘looking
forward,’

lack the faith in the spontaneous forces of adjustment which makes the
[classical] liberal accept without apprehension, even though he does not
know how the necessary adaptations will be brought about … This fear of
trusting uncontrolled social forces is closely related to two other characteris-
tics of conservatism: its fondness for authority and its lack of understanding
of economic forces. Since it distrusts both abstract theories and general

© The Author(s) 2017 171

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_6
172 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

­ rinciples, it neither understands the spontaneous forces on which a policy

p
of freedom relies nor possesses a basis for formulating principles for policy.2

Hayek (1978a) distanced himself from the ‘muddle of the middle’

democratic centre (from Labour/Democratic/Social-Democrat to
Conservative/Christian Democrat/Republican Parties). He believed that
there was ‘a chance of making the intellectuals proud of seeing through
the delusions of the past. That is my present ambition, you know. It’s
largely concerned with socialism, but of course socialism and unlimited
democracy come very much to the same thing. And I believe—at least I
have the illusion—that you can put things in a way in which the intel-
lectuals will be ashamed to believe in what their fathers believed.’3
According to Mises (1985 [1927], 152): ‘More dangerous than bayonets
and cannon are the weapons of the mind.’ Hayek (1978a) explained to Bork:

You know, I’m frankly trying to destroy the superstitious belief [emphasis
added] in our particular conception of democracy which we have now,
which is certainly ultimately ideologically determined, but which has created
without our knowing it an omnipotent government with really completely
unlimited powers, and to recover the old tradition, which was only defeated
by the modern superstitious democracy, that government needs limitations.
For 200 years the building of constitutions aimed at limiting government.
Now suddenly we have arrived at the idea where government, because it is
supposedly democratic, needs no other limitations. What I want to make
clear is that we must reimpose limitations on governmental power.4

Other types of superstition were required:

I wrote 40 years ago that I have strong objections against the quantity
theory because it is a very crude approach that leaves out a great many
things, but I pray to God that the general public will never cease to believe
in it. Because it is a simple formula which it understands … The gold stan-
dard was based on what was essentially an irrational superstition. As long
as people believed there was no salvation but the gold standard, the thing
could work. That illusion or superstition has been lost. We now can never
successfully run a gold standard. I wish we could. It’s largely as a result of
this that I have been thinking of alternatives. (Hayek 1992b [1977])
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 173

The Constitution of Liberty required that the ‘employed masses’ must

be made subservient to the ‘general interests of society.’ This was being
undermined by ‘The belief that you can make yourself your own boss’
(Hayek (2011 [1960], 186; 1978a).5
At the University of Vienna, Hayek was a disciple of the romantic
reactionary, Spann, who insisted that the clock must be turned back to
a period when ‘ills’ supposedly did not exist (Carty 1995, 93). Chapter
4 of Spann’s (2012 [1929]) Types of Economic Theory is devoted to ‘An
Introduction to the Basic Problem of Sociology: Individualism versus
Universalism.’ In 1931, he used the derogatory term ‘neoliberal’ (neulib-
eral) to describe individualists (Schulak and Unterköfler 2011, 112). In
Spann’s judgement, ‘Individualism leads to liberalism; liberalism leads to
capitalism, capitalism leads to Marxism; Marxism leads to Bolshevism’
(cited by Klausinger 2013, 8, n26; 2014).
Spann promoted an organic view of the State—a reconstruction of
a mythical version of the Feudal Corporate State in which everyone
had an allocated role: the State must promote the ‘new more just and
moral society’ (Ehs 2013, 53). His causal sequence differed slightly from
Schumpeter’s (1942) Capitalism, Socialism and Democracy, which pre-
dicted that the economic success of capitalism would produce social forces
which would eventually lead to its destruction (the Welfare State would
lead to a form of Corporatism which would foster anti-­entrepreneurial
values hostile to capitalism, especially among intellectuals). Spann’s causal
sequence was also a little different from Mises’ (1961): ‘What separates
the Communists from the advocates of the Welfare State is not the ulti-
mate goal of their endeavours, but the method by means of which they
want to attain a goal that is common to both of them.’
Hayek, who told Cubitt (2006, 10) that ‘all his professional consid-
erations had been based on financial considerations,’ was eclectic—he
embraced whatever arguments would lead to his pre-conceived conclu-
sions—and then he competed for funding and influence. Not surprisingly,
Hayek’s (2011 [1960], 40; 1978a) Austrian ‘background’—combined
with the restraints of living in England—influenced his framework, but
elements of Spann can be detected, although expressed in ‘a more effec-
tive form.’
174 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

Although Hayek (2007 [1944], 194) embraced a Nazi-style organic

view of the ‘competitive market society,’ his propaganda utilized a causal
sequence which differs from Spann’s—democracy thwarts ‘organic
growth’ and leads to ‘social welfare’ and economic planning in which
‘the will of a small minority be imposed upon the people,’ and thus leads
to a Nazi State: ‘The increasing veneration for the state, the admiration
of power, and of bigness for bigness’ sake, the enthusiasm for ‘organiza-
tion’ of everything (we now call it ‘planning’) and that ‘inability to leave
anything to the simple power of organic growth’ … are all scarcely less
marked in England now than they were in Germany.’
Hayek (1978a) was a neo-Feudal ‘spontaneous’ order reactionary:

our whole thinking in the past 150 years or 200 years has been dominated
by a sort of rationalism. I avoid the word rationalism because it has so
many meanings. I now prefer to call it constructivism, this idea that noth-
ing is good except what has been deliberately designed, which is nonsense.
Our whole civilization has not been deliberately designed6; At the same
time that we no longer learned the traditional ethics of the market, the
philosophers were certainly telling them, ‘Oh, you must not accept any
ethical laws which are not rationally justifiable.’ These two different
effects—no longer learning the traditional ethics, and actually being told
by the philosophers that it’s all nonsense and that we ought not to accept
any rules which we do not see have a visible purpose—led to the present
situation, which is only a 150-year event. The beginning of it was 150 years
ago. Before that, there was never any serious revolt against the market soci-
ety, because every farmer knew he had to sell his grain.7

The neo-Feudal ‘market society’ that existed 150 years before Hayek’s
(1978a) UCLA oral history interviews included not only slavery but also
serfdom. In 1838, John C. Calhoun objected to the abolitionist ‘madmen’
who were disturbing the ‘equilibrium’ of slavery-based ‘free institutions’:

In this tendency to conflict in the North between labor and capital, which
is constantly on the increase, the weight of the South has and will ever be
found on the Conservative side; against the aggression of one or the other
side, which ever may tend to disturb the equilibrium of our political sys-
tem. This is our natural position, the salutary influence of which has thus
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 175

far preserved, and will long continue to preserve, our free institutions, if we
should be left undisturbed. Such are the institutions which these madmen
are stirring heaven and earth to destroy, and which we are called on to
defend by the highest and most solemn obligations that can be imposed on
us as men and patriots.8

Metternich’s ‘Concert of Europe’ order had been self-consciously

constructed to contain the (spontaneous?) ‘Age of Reason’ revolution-
ary forces associated with the industrial revolution, the breakdown of
Feudalism and what was perceived—by the aristocratic order—as the
catastrophe of the French Revolution. The title of Kissinger’s (1954)
doctoral dissertation referred to the equilibrium (‘Peace, Legitimacy, and
the Equilibrium’); in its published version (A World Restored: Metternich,
Castlereagh and the Problems of Peace, 1812–22), Kissinger (2013 [1957], 1)
explained the appeal of the era: ‘It is not surprising that an age faced
with the threat of thermonuclear extinction should look nostalgically to
periods when diplomacy carried with it less drastic penalties when wars
were limited and catastrophe almost inconceivable.’
At the time of Hayek’s 1974 Nobel Prize, Kissinger was Ford’s Secretary
of State. Kissinger (2013 [1957], 1) found the elixir of stability in anti-­
revolutionary ‘legitimacy’—which, he emphasized, was a different con-
cept than ‘justice’: ‘Those ages that in retrospect seem most peaceful were
least in search of peace. Those whose quest for it seems most unending
appear least able to achieve tranquillity.’ One implication of Kissinger’s
analysis is that the pursuit of ‘peace’ and ‘justice’—at any time—would
undermine the stability of the international order.
Deficit-spending on the Vietnam War pushed inflation higher (Leeson
2003c). Austrian lobbying for the military-industrial-complex fuelled
these three interconnected catastrophes: ‘He who in our age opposes
armaments and conscription is, perhaps unbeknown to himself, an abet-
tor of those aiming at the enslavement of all’ (Mises 1963, 282; 1966,
282).
Austrian business cycle theory blames irresponsible increases in
the monetary base (currency + reserves) as ‘the ultimate source of all
­inflationary adventures’ (Sennholz 1958, 708). Yet Hayek’s (1972) Tiger
by the Tail (edited by the fraud, Shenoy) attributed inflation to Keynesian
176 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

academics—rather than to the increases in the money supply initiated by

Arthur Burns, Nixon’s Chair of the Federal Reserve Board (1970–1978),
who had been recruited to Hayek’s (2009a [1979], 6) Mont Pelerin
Society in 1948: ‘This Keynesian doctrine has caused great harm and is
responsible, to a great extent, for the problems the international economy
has experienced in the seventies.’

i. The relative economic success of the United States can be attributed

to natural advantages plus private and public sector factors of which
four seem particularly powerful.
ii. Americans repudiated one of the tenets of Classical Liberalism: indus-
try was initially developed behind a tariff wall.
iii. The natural advantage of the Mississippi River and its tributaries was
augmented by the government-built Eerie Canal (1817–1825, con-
necting the Great Lakes to the Atlantic, via the port of New York),
and the government-built interstate highway system (1956–).
iv. ‘Westward Expansion’ through the government-promoted transcon-
tinental railroad (1807–1912) and the Homestead Acts (1850–1930),
which intensified conflict with the original inhabitants.
v. The non-Austrian Classical Liberal, John Bright, found in America ‘a
free church, a free school, free land, a free vote, and a free career for the
child of the humblest born in the land’ (cited by Bradley 1980, 61).

Listening to Mises’ ‘anecdotes of Old Vienna’ left Rothbard (2002a

[1973]) nostalgic for ‘the nobler, freer and far more civilized era of pre-­
1914 Europe … the ineffable grace of Old Vienna.’ Not only was the
‘grace of Old Vienna’ beyond the spoken word it was also largely beyond
the written word: in 1918, 85 per cent of the Habsburg population were
illiterate (Taylor 1964, 166, 41, 35). Some German-speaking Jews—like
the von Mises—had penetrated the ‘higher levels of Viennese society …
Education had been one of the chief avenues of entry’ (Craver 1986,
22). Mises (1985 [1927], 114–115) sought to kick-over the ladder of
achieved status from which his family had derived their acquired status:

continued adherence to a policy of compulsory education is utterly incom-

patible with efforts to establish lasting peace … It is better that a number
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 177

of boys grow up without formal education than that they enjoy the benefit
of schooling only to run the risk, once they have grown up, of being killed
or maimed. A healthy illiterate is always better than a literate cripple.

America had been relatively successful in promoting human capital-­

fuelled social mobility: this repudiation of the European ‘social order’—the
aristocratic entitlements that Mises and Hayek sought to promote—
facilitated the development of a society more ‘open to the talents.’ But
starting in the 1970s, real wages have remained almost flat; and the major
beneficiaries of economic growth have been the tax-exempt donor class.
The Mises Institute displays a ‘DONATE TODAY’ sign alongside an
‘Open Letter to Donald Trump,’ insisting that when he enters the White
House he reduces the US corporate tax rate: ‘ideally, it should be repealed
entirely because it constitutes double taxation on shareholders of cor-
porations who also pay income tax on their dividends.’9 Yet, Corporate
Profits in the United States reached an all-time high of $1.642 trillion in
the third quarter of 2014 (having averaged $402.53 billion from 1950
to 2016).10
In neoclassical theory, profits are maximized where the marginal rev-
enue product of a worker is equal to the wage paid. In the consumer
discretionary sector, the average revenue generated by each employee is
$245,000 and in companies in the S&P 500 index, the average revenue
generated by each employee is $432,000 (Whipp and Fleming 2016).
With the federal minimum wage stuck at $7.25 an hour since 2009,
the Mises Institute ‘Open Letter’ to Trump insisted that the ‘federal
minimum wage should either be permanently fixed at its current rate
or reduced; legally minimum wages should be left entirely to the states.
(Ideally, all minimum wage laws should be repealed since they cause
job destruction.)’11 Because, in large part, of Hayek-influenced policy
changes, the American dream is in danger of becoming an Austrian-­
influenced nightmare.
Three years before the Smoot–Hawley tariff (in response to the Great
Depression, which he and Hayek had sought to deepen), Mises (1985
[1927], 143), in opposing a European free-trade zone, recommended
instead the American model: ‘If the conditions under which American
industry operates, with a potential market of more than a hundred
178 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

twenty million rich consumers, unhampered by tariffs or similar obsta-

cles, are compared with those against which German, Czechoslovakian,
or Hungarian industry must contend, the utter absurdity of endeavors to
create little autarkic economic territories becomes immediately obvious.’
Sixty-two years after the end of the American Civil War, and six years
before Hitler began the pursuit of Lebensraum and the extermination of
those who stood in the way of German racial purity and might, Mises
(1985 [1927], 48, 142)—who had encouraged his Fascist allies to ‘exter-
minate its adversaries and their ideas in the same way that the hygien-
ist strives to exterminate a pestilential bacillus’—asserted for ‘more than
sixty years,’ the United States was ‘not involved in any war. If they had
not waged a war of extermination against the original inhabitants of the
land, if they had not needlessly waged war against Spain in 1898, and
if they had not participated in the World War, only a few graybeards
among them would today be able to give a first-hand account of what
war means.’
By ‘war of extermination against the original inhabitants of the
land,’ Mises was presumably referring to the Cherokee–American Wars
(1776–1795), the Northwest Indian War (1785–1795), Tecumseh’s
War (1811), the Creek War (1813–1814), the First Seminole War
(1817–1818), the Texas–Indian Wars (1820–1875), the Arikara War
(1823), the Winnebago War (1827), the Black Hawk War (1832), the
Second Seminole War (1835–1842), the Cayuse War (1847–1855), the
Apache Wars (1849–1924), the Puget Sound War (1855–1856), the
Rogue River Wars (1855–1856), the Third Seminole Wars (1855–1858),
the Yakima War (1855–1858), the Navajo Wars (1858–1856), the Paiute
War (1860), the Yavapai Wars (1861–75), the Dakota War (1862), the
Colorado War (1863–1865), the Snake War (1864–1868), the Powder
River War (1865), Red Cloud’s War (1866–1868), the Comanche
War (1867 and 1875), the Modoc War (1872–1873), the Red River
War (1874), the Great Sioux War (1876), the Nez Perce War (1877),
the Bannock War (1878), Cheyenne War (1878–1879), the Sheepeater
Indian War (1879), the White River War (1879), the Battle of Wounded
Knee (1890) and the Yaqui Wars (1896–1918).
Mises neglected to mention the Whiskey Insurrection (1791–1794),
the Quasi-War against the French Republic (1798–1800), the First
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 179

Barbary War (1801–1805), the War of 1812, the Second Barbary War
(1815), the Aegean Sea Anti-Piracy Operations (1825–1828), the
Battle of Quallah Battoo and the First Sumatran expedition (1832),
the Patriot War (1838), the Pacific Ocean Exploring Expedition
(1838–1842), the Second Sumatran Expedition (1838), the Mexican–
American War (1846–1848), Cochinchina Campaign (1858–1862), the
First Cortina War (1859–1860), the Reform War (1860), the Second
Cortina War (1861), and the Shimonoseki War (1863–1864). And
when Mises (1985 [1927], 142, 48–49) stated that ‘For more than
sixty years their country was not involved in any war,’ he was exclud-
ing wars against ‘barbarians’: the Korean Expedition (1871), the Las
Cuevas War (1885), Garza War (1891–1893), the Second Samoan Civil
War (1898–1899), the Philippine–American War (1899–1902), the
Moro Rebellion (1899–1913), the Boxer Rebellion (1899–1901), the
Border War (1910–1919), the Occupation of Nicaragua (1912–1933),
the Occupation of Haiti (1915–1934) and the first Occupation of the
Dominican Republic (1916–1924).
Mises (1985 [1927], 449–450, 151–154) also excluded American
intervention on behalf of his White Terror allies in Russia (1918–1920).
According to Mises, Fascism was the product of civilization:

Fascists carry on their work among nations in which the intellectual and
moral heritage of some thousands of years of civilization cannot be
destroyed at one blow, and not among the barbarian peoples on both sides of
the Urals [emphasis added], whose relationship to civilization has never
been any other than that of marauding denizens of forest and desert accus-
tomed to engage, from time to time, in predatory raids on civilized lands
in the hunt for booty. Because of this difference, Fascism will never succeed
as completely as Russian Bolshevism in freeing itself from the power of
liberal ideas.

The Washington Post drove one ‘crook for liberty’ from the White
House whilst promoting Hayek’s transparent lies: he was ‘the son of a
botanist and the grandson of a zoologist, both of them von Hayeks, a
hereditary title he has dropped’ (Allen 1982). The Post also provided a
platform for Caldwell’s (2010a, b) transparent nonsense: ‘Hayek himself
disdained having his ideas attached to either party.’
180 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

‘Von’ Hayek (1994, 107, 37) falsely claimed to be ‘a law abiding

citizen and completely stopped using the title von.’ ‘Von’ Mises (1985
[1927], 449–450, 151–154, 51) explained: ‘The law-abiding, citizen by
his labor serves both himself and his fellow man and thereby integrates
himself peacefully into the social order. The robber, on the other hand,
is intent, not on honest toil, but on the forcible appropriation of the
fruits of others’ labor.’ Referring to Russians, Mises asserted: ‘There are
nations in which transient atavistic impulses toward plunder and vio-
lence, which one would have presumed to have long since been mastered,
still break out and once more gain ascendancy.’ Mises, who promoted
Austro-German Lebensraum (Leeson 2017a), continued:

But, by and large, one can say of the nations of the white race that today
inhabit central and western Europe and America that the mentality that
Herbert Spencer called ‘militaristic’ has been displaced by that to which he
gave the name ‘industrial.’ Today there is only one great nation that stead-
fastly adheres to the militaristic ideal, viz., the Russians.

Despite this military advantage, the ‘fortunate’ circumstance that had

‘saved civilization from being destroyed by the Russians’ was the ‘fact’
that the European nations were ‘strong enough to be able successfully
to stand off the onslaught of the hordes of Russian barbarians [emphases
added].’ Mises was specific about the source of this strength: ‘It cannot be
denied that Fascism and similar movements aiming at the establishment
of dictatorships are full of the best intentions and that their intervention
has, for the moment, saved European civilization.’
Hitler became a devotee of Austrian business cycle theory either in
Vienna or in Munich (Leeson 2017a): he absorbed Viennese anti-­
Semitism from proto-Nazi families like the von Hayeks; and the miscalcu-
lation that ended his Third Reich was derived from delusional prejudices
promoted by Mises et al. Eighteen years before Austria was occupied by
the Russians, Mises (1985 [1927], 154), predicted: ‘The experiences of
the Russians in the Napoleonic Wars, the Crimean War, and the Turkish
campaign of 1877–78 showed them that, in spite of the great number of
their soldiers, their army is unable to seize the offensive against Europe.
The World War merely confirmed this.’
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 181

The ‘Great’ War had been sparked by Habsburg determination to pre-

vent the Southern Slavs uniting under Serbia, which, in the words of the
Chief of the General Staff, Franz Graf von Hötzendorf, would ‘relegate
the Monarchy to the status of a small power’ (Mason 1985, 67). The 1908
annexation of Bosnia-Herzegovina orchestrated by the Austrian Foreign
Minister, Baron von Aehrenthal, inflamed Slavic nationalism—during
his trial for the assassination of Habsburg Archduke Franz Ferdinand,
Gavrilo Princip proclaimed: ‘I am a Yugoslav nationalist, aiming for the
unification of all Yugoslavs, and I do not care what form of state, but it
must be free from Austria’ (cited by Andjelic 2003, 11).
Trevelyan (1915, 862) noted that Habsburg military weakness was
caused by ‘the hatred of her subject populations, and the secret disloy-
alty of her soldier slaves’; and Mises complained that the defence of the
Empire provided by Slavs and Romanians was ‘half-hearted at best; many
of them actually fought on the other side’ (Hülsmann 2007, 265, n25).
Trevelyan (1915, 862) saw Serbia’s war against Austria-Hungary as a ‘war
of liberation’ that would ‘free South Slavs from tyranny’:

If ever there was a pure victory of freemen over slaves who had been sent by
the tyrant to destroy them, it was the Serbian victory last December … If
ever there was a battle for freedom, there is such a battle now going on in
Southeastern Europe against Austrian and Magyar. If this war ends in the
overthrow of the Magyar tyranny, an immense step forward will have been
taken toward racial liberty and European peace.

The Empire of Vienna and Buda-Pest is an anachronism dependent on

Prussian arms. It is the domination of two races, the Austrian-Germans
and the Magyar over half a dozen other races. Indeed the present war arises
quite as much out of the question of Austro-Hungary and its subject
nationalities as it does over the German ambition to dominate Europe.
Even German love of domination would not alone have sufficed to set the
whole world on fire had not German Culture been in alliance with a force
equally regardless of the rights of others [emphasis added], the determination
of the Magyars to ‘Magyarize’ the Romanians, Slavs and Croats who dwelt
within the borders of their State … It is because she is not a nation that
Austria-Hungary is so weak in war. Already, she has failed to defend herself,
182 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

and since the opening of the 1915 she has been practically occupied by
Kaiser Wilhelm’s troops.

According to Kuehnelt-Leddihn (2000, 15–16):

In the East, until 1917, it was still a fight among three emperors, which was
the reason why the old style there somehow survived and continued on a
higher level. It was still a war between gentlemen, a fact evident not only at
the front, but also evident in the homelands. In Russia, craftsmen and
tradesmen among the prisoners were often released and, until the Bolsheviks
took over, they earned money very nicely. ‘Enemy Aliens’ were jailed in
Britain, France, Italy, and Germany, but not in Austria.

Kuehnelt-Leddihn (2000, 16) had Hayekian ‘man on the ground’

knowledge:

My family lived for half a year in an Austrian prison camp where my father
installed and ran an x-ray station. We children loved the (mostly Russian)
prisoners with whom we played. Then we lived nearly two years in Baden,
near Vienna, the Headquarters of the Austro-Hungarian Army, where I
sported a British sailor’s suit with a ribbon on my cap inscribed
‘H.M.S. Renown.’ We also had a French governess and spoke French with
her in the streets. Something of the sort would have been unthinkable in
the more ‘progressive’ West. After the fall of our great fortress Przemyst (it
was starved into surrender), the Russian officers invited their Austro-­
Hungarian colleagues to a banquet where they toasted each other.

But according to Trevelyan (1919, 229–230), the Habsburg non-­

officer-­class typically ‘behaved tolerably. The worst tyranny had come
from the officers … everything moveable of any value had been packed
up and sent off into Austria-Hungary.’ Austro-Hungarian prisoners-of-­
war told Trevelyan (1915, 861) that they had

rejoiced to be out of the fighting and [were] absolutely uninterested in the

issues of the war … The punitive expedition had begun in August with the
‘chivalrous’ Hungarians murdering two or three thousand men, women
and children of the ‘barbarous’ Slavs near Shabatz and Losnitza. They burnt
a large number of the ‘barbarian’ women and children alive and gouged out
the eyes of others.12
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 183

Hayek (1978a) denigrated Austrian democracy as a ‘republic of peas-

ants and workers’,13 while according to Trevelyan (1915, 864–865) the
Serbians had built a ‘peasant democracy … There is no class of land-
lords taking rent. There is no feudalism, no squirearchy.’ In contrast,
in neighbouring Hungary, ‘the Magyars, one of the most feudal of all
the European races, sacrifice the wealth and happiness of the cultivating
peasant to the landlord patrician, who carries off everything, politically,
socially, and economically. Serbia on the other hand is democratic and
egalitarian, far more so than either America or England.’
During the ‘Great’ War, Pigou and his fellow FAU drivers—includ-
ing Trevelyan—were targeted by Austrians: ‘the enemy gunners on the
mountains beyond us found our enormous white disks with their red
crosses, as they raced along the hillside, most eligible running targets for
practice. They fired not only shrapnel but large missile at them point
blank … we had four cars hit in the first few weeks; and sixteen were at
different times put out of action. Finally, as we were not there to pro-
vide a free shooting gallery, I had all the Red Cross discs painted out.’
The 1917 collapse of Romanov Russia intensified the ‘Austrian barrage’
(Young 1953, 277, 287).
An Austrian School fraud used Trevelyan to convict Pigou of treason—
conjured up (without reference or supporting evidence) to question his
heroism:

George Trevelyan, when questioned once about Pigou’s ability as a driver,

replied that the professor was ‘apt to pretend to be a rather worse driver
than he really was. Never understood the reason why. But he never had as
many accidents as was suggested. After all, he kept his own personal Ford
going on service with both the FAU and the Red Cross. I sometimes think
his stories about accidents and delays were intended to cover up his forays
into Switzerland during service on the Italian front.’

With added emphasis, ‘Deacon’ McCormick (1979, 10) implied that

Pigou’s ambulance driving on the Western Front was a front for treason:
‘Forays into Switzerland? If Trevelyan knew the purpose of these, he was
certainly not admitting anything [emphasis in original].’
The sense of being ‘chained to a corpse’ was widely held in German mili-
tary circles (Everett 1985, 145). Ludendorff (1919, 138) reflected: ‘it was
184 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

fatal for us that we were allied with decaying states like Austro-­Hungary
and Turkey. A Jew in Radom once said to one of my officers that he could
not understand why so strong and vital a body as Germany should ally
itself with a corpse. He was right … I got to know the conditions of affairs
in Austria-Hungary only in the course of the war. I had never had any
opportunity previously.’
Mercantilism assisted the emergence of liberal democracies (by
strengthening the States that emerged from the declining Holy Roman
Empire); by challenging and limiting absolutism, the Second Estate
also played a role. In a world of warring chiefdoms, for leading the
‘nation’ at war, a ‘natural’ officer class (the equivalent of modern bikie-
gang enforcers) was rewarded with government-provided intergenera-
tional entitlements. To preserve the genetic stock, aristocratic ‘breeding’
through marriage was essential; and to rescue the family from bank-
ruptcy, ‘vulgar new money’ from America was also tolerated (MacColl
and Wallace 1989).
The ‘old lie’ was promoted by old liars. Hayek told Leube (2003a,
12) that he was ‘consciously devoted to the vision and splendour of the
Habsburg Empire’; he also wanted to display his version of ‘honour’ and
‘clear out’ to avoid any risk to himself:

it was almost two years I spent in the army making plans for the future, but
even these were upset. It’s a very complicated story. I had decided to enter
the diplomatic academy, but for a very peculiar reason. We all felt the war
would go on indefinitely, and I wanted to get out of the army, but I didn’t
want to be a coward. So I decided, in the end, to volunteer for the air force
in order to prove that I wasn’t a coward. But it gave me the opportunity to
study for what I expected to be the entrance examination for the ­diplomatic
academy, and if I had lived through six months as an air fighter, I thought
I would be entitled to clear out. Now, all that collapsed because of the end
of the war. [tape recorder turned off] In fact, I got as far as having my orders
to join the flying school, which I never did in the end [emphases added].
And of course Hungary collapsed, the diplomatic academy disappeared,
and the motivation, which had been really to get honorably out of the
fighting, lapsed. [laughter] (Hayek (1978a).14
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 185

If Hayek did not join the flying school this raises questions about not
only about his flying stories but also the other stories he told to a ‘fasci-
nated’ Radnitzky about his ‘war experiences, especially that of parachut-
ing’ (Cubitt 2006, 91, n91). Radnitzky (1995, 189), an ideologue with
Hayekian professional standards, criticized Miseans: ‘An admirable polit-
ical philosophy is combined with an untenable position in epistemology.’
On Hayek’s 75th birthday, Shenoy (8 May 1974) expressed standard
epigone-generation sentiments: ‘As one Whig to another may I also say
Long Live Whiggery? It isn’t given to all of us to do for The Cause what
you have done, many of us—all of us—must feel very much that we are
simply filling in one or two small chinks in that noble edifice of thoughts
which you have reconstructed; but I can say that for one such person, it
is a task to which her working life will be dedicated [Shenoy’s emphases]’
(cited by Leeson 2015d, 24).15 What to non-believers seems like fraud
seems to Austrians to be Truth in service of ‘The Cause.’
Radnitzky (2000, 16, 20), who describes himself as ‘a personal friend,’
described Hayek’s ‘more effective form’ fraud: during Hayek’s ‘productive
life, the signet of the era was creeping socialism. He contributed much
to a tidal change in the intellectual climate. Libertarians have criticised
Hayek for the “softness” of his liberalism. Be that as it may, nobody has
done more for the revival of respect for freedom in our century than
Hayek has. He influenced the course of history not only by his great
theoretical work, but also in many practical ways.’ These practical ways
included being ‘an inspiration for conviction politicians [emphasis added]
such as Margaret Thatcher (through Keith Joseph) and President Reagan.
Hayek’s publication strategy [Radnitzky’s emphasis] was probably the only
practical thing at the time. Had he been as uncompromising as Mises and
the libertarians, he could never have made such a worldwide impact.’
Non-sycophantic reflection reveals that Hayek’s publication strategy
about Pigou being a communist spy was fraud (Leeson 2015a); and
Radnitzky could have discovered that Hayek’s assertion about being a
‘Great’ War parachutist had similar, if not identical, epistemological
foundations. According to Geoffrey Barker (1990, 402), at the end of
the ‘Great’ War, ‘airborne forces were still a paper concept … the first
country to develop military parachuting techniques was [Fascist] Italy …
in 1927.’
186 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

Between Hayek’s first trip to America and his 1949 migration,

‘Murder, Inc.’ ‘enforcers’ were responsible for innumerable contract kill-
ings; the subsequent trials inspired the 1951 Humphrey Bogart film, ‘The
Enforcer.’ Hayek’s (1978a) wife ‘refused to give me a divorce, and finally
I enforced it. I’m sure that was wrong, and yet I have done it.’16 The Road
to Serfdom (1944) followed Hollywood fiction: ‘The Road to Singapore’
(1940), ‘The Road to Zanzibar’ (1941) and ‘The Road to Morocco’
(1942); his Tiger by the Tail (1972) followed a 1955 British crime film
of the same name. Hayek’s (1978a) ‘inner need’ to have unrestrained
access to his cousin—whose conversation and cooking he could barely
tolerate—was described by disciples such as Radnitzky (1921–2006) as
‘a wonderful love story’ which should be made into a film (Cubitt 2006,
106).17 Mises appeared to imitate Senator McCarthy (Leeson 2015b,
18–22); ‘Tail Gunner Joe’ may have prompted Hayek to fabricate his
own aerial war-stories.
Radnitzky (2000, 20), Professor Emeritus in Philosophy of Science at
the University of Trier, Germany, suffered devotional-incapacity:

With respect to theory, we have to continue to work on these topics as

Hayek would have expected us to do. Hayek did not give us a theory of
‘public’ goods. He leaves us without defence against the popular myth of
public goods. This is especially virulent in view of the ecosocialists’ misuse
of the quest for clean air, forests, etc., as they place this quest in the service
of creeping socialism (‘Externalities are the last refuge of the dirigistes’). He
did not produce a theory of taxation, nor did he develop a fully fledged
theory of the dynamics of democracy. He has not provided us with effective
defences against the popular myth of democratisation, and the concomi-
tant danger that creeping socialism enters through the backdoor of
­democracy. In summary, Hayek’s theoretical position—was he really a
‘minimal’ state theorist?—could generate policy outcomes of which he
would not approve [emphases in original].

Hayek (1978a) distinguished between his thinking, his talking and

‘real life’: ‘Oh, it’s a very old idea of mine which … I never wrote up
because it would sound so frightfully egotistic in speaking about myself—
why I feel I think in a different manner. But then, of course, I found a
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 187

good many instances of this in real life [emphases added].’18 Hitler com-
mitted suicide to evade responsibility; possibly to inoculate himself from
suicidal depression, Hayek inhabited a fantasy world: the ‘worst inferior
mediocrities’ who ‘sat at his feet,’ ‘fascinated’ by his lies, played a thera-
peutic role in his own personal drama.
Before the ‘Great’ War, Hayek’s (1994, 47, 39, 62) life appears to have
been free of trauma: ‘My parents were exceedingly well suited to each
other, and their married life seemed (not only to me) one of unclouded
happiness.’ Cubitt (2006, 50, 119, 211) reported that Hayek and his sec-
ond wife were only ‘at peace’ with each other when they reminisced about
the ‘shared time of their early’ lives. It is not surprising that he devoted
his life to reconstructing that neo-Feudal social order: ‘liberty’ from a dis-
turbing—possibly schizophrenic—reality, in which he faced prosecution
for attaching ‘von’ to his name.
For Hayek (1978a), becoming English ‘was like stepping into a warm
bath where the atmosphere is the same as your body.’19 He must have
noted at the Reform Club and elsewhere that the ‘old boys’ network’ was
as venal and incompetent as its Habsburg equivalent. Old Etonians, such
as Guy Francis de Moncy Burgess (1911–1963) could have as undetected
a loyalty to an alien social order (Communist Moscow) as ‘von’ Hayek
(Habsburg Vienna). By coincidence, the Habsburg ‘splendour’ that
Hayek was ‘devoted to’ manifested itself in Otto, the Pretender; while
in May 1934 (as Austrian became a one-party Fascist State), Burgess’ fel-
low spy, Kim Philby, was recruited by ‘Otto’ (aka Arnold Deutsch, PhD,
University of Vienna) via Edith Tudor-Hart (née Suschitzky, and, like
Deutsch, of Viennese descent). Like many other Austrians, Deutsch was
a ‘sex-pol’ Freudian—of the left variety (West 2005, 202).
Exploitable superstition, contagious diseases and military alliances
facilitated the colonization of the Americas by the Habsburg-led First
Reich. Hayek must have noted that after escaping from the European
Empires, a certain type of American became susceptible to bogus
Romanov Princesses, Bilgewater Dukes and Habsburg vons. Some create
their own lower-to-higher-order-dynasties: Jerry Falwell Sr., Llewellyn
Rockwell Jr., Earl Holt III, George Roche IV, Ludwig von Mises V
(Ebeling’s dog) and so on.20 A Romanov Fantasy: Life at the Court of Anna
Anderson describes how, between suicide attempts and incarcerations in
188 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

mental hospitals, Franziska Schanzkowska (1896–1984, aka Fräulein

Unbekannt, ‘Miss Unknown’), showed initiative by impersonating the
murdered Grand Duchess Anastasia (Welch 2007). Their neighbours in
University Circle, Charlottesville, Virginia, regarded her and her history
professor husband, ‘Jack’ Manahan (the ‘Grand Duke-in-Waiting’ and
‘son-in-law to the Tsar’) as harmless eccentrics.
During the ‘Great’ War, Hayek (1994, 44–45) ‘developed a great inter-
est in the drama, and this must have been the first interest which I pur-
sued systematically for some time and where I showed real initiative.’ In
addition to the reading and watching the ‘ancient Greek dramas,’ Hayek
‘even started to write tragedies myself. On rather violent and more or
less erotic historical themes (Andromache, Rosamund, etc.), but I never
finished a play, though I was working up towards some rather effective
scenes I had thought out.’ One theme occupied him ‘most for quite a
long time. It was a play about Andromache. With all the implications;
very obscure and only half understood. But ending in a magnificent scene
which indeed would be theatrically very effective—Andromache is the
slave of Achilles’s son, wandering from the castle out onto the sea, onto
a rock extending out into the sea, and the sun rises and she runs up to
the sun: “It’s you, it’s you, my Hector.” And she falls into the sea.’ Hayek
(1978a) combined academic study with theatre: ‘I sometimes marvel
how much I could do in the three years when you think, as I mentioned
before, my official study was law. I did all my exams with distinction in
law, and yet I divided my time about equally between economics and
psychology. I had been to all these other lectures and to the theater every
evening almost.’21
Rockwell (2010 [1999], 287) is a devotee of McCarthy: ‘I told them
that Tailgunner Joe should have been attacking the U.S. government all
along, because it was the real threat to our liberties.’ In the 1977 film,
‘Tail Gunner Joe,’ the alcoholic McCarthy was revealed to have fabricated
heroic war-stories involving airplane crashes and anti-aircraft fire. The
following year, Hayek (1978a) recounted similar theatrical experiences:
‘Bill Hutt had been a fighter pilot in World War I. And on that particular
day he had bought his first car, and he had never driven a car before. He
took Lionel [Robbins] and me up to Lionel’s home in that car ­driving
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 189

fighter-pilot style [laughter].’ Alchian added: ‘Without parachutes.’

Hayek (1978a) responded: ‘It was a somewhat exciting experience.’22
In 1955, Philby (who arrived in Austria two years after Hayek left
Vienna for London) became world-famous after a press conference in
which he denied being ‘The Third Man’ (the title of a 1949 British film
set in Allied-occupied Vienna); during the 1980 election campaign,
Hayek scripted a press conference for himself (and candidate-Reagan,
Chap. 13, below). Both had more important concerns than their respec-
tive wives and children. From Moscow, Philby (1980 [1968], 180, 17)
glorified his career-long deception in The Autobiography of Kim Philby
My Silent War: ‘The first duty of an underground worker is to perfect not
only his cover story but also his cover personality … One does not look
twice at an offer of enrolment in an elite force … as I look over Moscow
from my study window, I can see the solid foundations of the future I
glimpsed at Cambridge.’
Hayek (1994, 153), who attempted to dictate his ‘Against the Stream’
biography to Bartley, reflected: ‘You have made me think about the past.
I hesitate because it sounds a little like self-praise, but it isn’t, its self-­
discovery. In a sense I am fearless, physically, I mean. It’s not courage. It is
just that I have never really been afraid. I noticed it in the war [emphases
added].’ Bartley asked: ‘You must have been fearless to go on those air-
plane expeditions in the Great War where you were acting as an artillery
spotter.’ Hayek replied: ‘Excitement, in a sense; but not a matter of fear.
Once the Italians practically caught us. One in front, firing through the
propeller. When they started firing, my pilot, a Czech, spiralled down. I
unbelted myself, climbed on the rail. My pilot succeeded in correcting
the spin just above the ground. It was exciting … I lack nerves. I believe
this is a thing I inherited from my mother [emphases added].’23
The same sense of Second Estate ‘honour’ was possessed by The Last
Knight of Liberalism and led to the same result:

If Mises could have gotten away earlier, in any honourable manner, he

would have welcomed the opportunity. He tried, in the fall of 1914, to use
his Kammer [Lower Austrian Chamber of Commerce and Industry] affilia-
tion to be transferred to some other duty … After the Northern Front had
calmed down, Mises was finally considered suitable for bureaucratic
190 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

employment, and the Kammer connections now proved to be effective.

During his Christmas holidays in Vienna, on December 22, 1915 he
received orders from the War Ministry to join its department no. 13 in
Vienna … During this period, he officially resided at a Villa Keller in
Baden, but probably spent most nights at the family apartment in down-
town Vienna. (Hülsmann 2007, 269–270)

Having declared that Fascist merit would ‘live on eternally in history,’

‘von’ Mises was lucky to escape with his life. Riding his ‘horse’ (bus)
on the road to neutral Manhattan was more than he could endure: he
‘was in a terrible state of mind. As calm and composed as he seemed, he
was not made for adventures and uncertainties of this kind. I needed all
my courage to help him overcome his desolation’ (Margit Mises 1976,
58). On arrival in America, Mises presumably perjured himself by falsely
declaring ‘No’ to immigration questions, such as ‘Have you committed,
ordered, incited, assisted, or otherwise participated in extrajudicial kill-
ings, political killings, or other acts of violence?’
Social capital (reciprocal trust) is the glue that turns Mises’ (1998a
[1949]; 1963; 1966) Human Action into heroism. It was ‘mateship’ not
professions of loyalty to the Empire that persuaded Hayek’s successor as
Tooke Professor of Economic Science and Statistics to risk being beaten
to death in return for (communal) cups of tea and (communal) news
from a secret radio (Leeson 1994b, 2000a, Chap. 1).
Austrians imitate: students of the ‘Misean for Life’ Luftwaffe bomber
pilot ‘all seem to have stories about him and relish telling them in their
best Sennholz imitation. It was not his storytelling or German accent
and mannerisms that made him a legend, however, it was his passion
for converting others to economic truth’ (Herbener 2007). Sennholz is
‘the Douglas McArthur of Free-Market Economics’ (Skousen 2011b).
General McArthur was famous for self-promotion: ‘I came through and
I shall return.’ In 1992, Rothbard ranted to the John Randolph Club (of
which he was co-founder and co-president):

It is a lie, he proclaimed, that the clock cannot be turned back. ‘We shall
break the clock of social democracy,’ he thundered. ‘We shall break the
clock of the Great Society. We shall break the clock of the welfare state.
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 191

We shall break the clock of the New Deal. We shall break the clock of
Woodrow Wilson’s New Freedom and perpetual war. We shall [emphasis in
original] repeal the 20th century.’ (Cited by Francis 1995, 66)

Francis continued: ‘We haven’t done it yet, but Murray was right that
we can and we will. And when we do, this brave and brilliant man of iron
will be with us.’
In September 1995, Francis was dismissed by the Washington Times
after Dinesh D’Souza (1995) reported in the Washington Post on a talk
given to the 1994 American Renaissance conference:

A lively controversialist, Francis began with some largely valid complaints

about how the Southern heritage is demonized in mainstream culture. He
went on, however, to attack the liberal principles of humanism and univer-
salism for facilitating ‘the war against the white race.’ At one point he
described country music megastar Garth Brooks as ‘repulsive’ because ‘he
has that stupid universalist song, in which we all intermarry.’ His fellow
whites, he insisted, must ‘reassert our identity and our solidarity, and we
must do so in explicitly racial terms through the articulation of a racial
consciousness as whites … The civilization that we as whites created in
Europe and America could not have developed apart from the genetic
endowments of the creating people, nor is there any reason to believe that
the civilization can be successfully transmitted to a different people.

One of Rothbard’s (2007a [1957], 14) ‘phobias’ was fear of the dark
(or at least an inability to sleep outside daylight hours): he told Ayn Rand
that he regarded her ‘as like the sun, a being of enormous power giving
off great light, but that someone coming too close would be likely to get
burned.’ Rothbard wished to return to a mythical version of the America
of his childhood:

for Murray liberty was not an arid abstraction to be discoursed on and

debated at interminable length on the Internet, nor was it an ultimate cul-
tural value to be ‘lived’ by ingesting recreational drugs, indulging in sexual
promiscuity, and shedding the bonds of family, church, and community.
Rather, Murray loved liberty as a necessary (but by no means sufficient)
cause of the American culture and society that he cherished, celebrated,
192 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

and called his own. Thus he was an unapologetic admirer of American

culture as it existed, raw and unadulterated, from the 1930s through the
1950s, because he viewed it as the specific historical product of the prepon-
derantly libertarian and individualist American politico-economic system
whose decline had begun with the coming of the New Deal in the 1930s.
(Salerno 1995, 79)

Although Rothbard wanted to repeal the ‘twentieth century,’ and

Mises was a lobbyist for the warfare state, Salerno (1995, 79) asserted:

The progressive transmogrification of this system by the ideology of mod-

ern liberalism into the monstrous American welfarewarfare state, which has
grown enormously more rapacious and destructive since its birth in the
1960s, served not only to precipitate increased instability and secular
decline in the American economy, but also produced a concurrent and
previously unimaginable degeneration of all institutions of American soci-
ety and culture.

Marx and Engels asserted that ‘primitive communism’—the sup-

posedly egalitarian social relations and common ownership of hunter-­
gatherer societies—preceded capitalism (Shaw 1979, 115–155). In the
Austrian 1944 version of 1066 And All That (Sellar and Yeatman 1930),
Shenoy (2003, 4) found the nineteenth century to be a ‘good thing’:
‘Forty million people moved peacefully because they wanted a better life.
There were no expulsions, no wars, no genocides nothing. They were just
looking for a better life … The world’s armies and navies did not know
what to do.’24
According to his second wife, Hayek stated that Shenoy ‘could not
be trusted since she was only an Indian’ (Cubitt 2006, 344). During the
unstable equilibrium of this neo-Feudal century, 100,000 were killed in
the 1857 First Indian War of Independence: The War of No Pity (Herbert
2008); at its end, 37 million were either killed or wounded in the ‘Great’
War. According to Hayek (1995 [1966], 245; 1994, 97), Keynes ‘much
disliked the nineteenth century; for the economic history of the nine-
teenth century, he was close to being ignorant, because he disliked it on
aesthetic grounds. The nineteenth century is ugly.’
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 193

Hayek (1978a) told Craver (1986, 8) that Wieser was an ‘aloof aristo-
crat’ and for ‘a long time’ his ‘ideal in the field.’25 Hayek (1978a) had a
‘certain conception’ of intergenerational entitlement programmes: ‘I have
moved, to some extent, in aristocratic circles, and I like their style of life.’26
The ‘civilisation’ that he sought to defend was intimately connected to this
last century of declining aristocratic rule and its colonial outposts. Prince
Klemens Wenzel von Metternich (1773–1859) served as the Austrian
Foreign Minister (from 1809) and Chancellor (from 1821) until the 1848
Liberal Revolution forced his resignation. The ‘Age of Metternich’ sought
to preserve peace in the post-Napoleonic world—internationally, through
alliances; and domestically, through repression. Prince Otto von Eduard
Leopold, Prince of Bismarck, Duke of Lauenburg (1815–1898) domi-
nated German and European affairs from the 1860s until 1890: through
warfare, he united Germany. ‘The Age of Bismarck’ sought to preserve
post-unification peace—internationally, through alliances; and domesti-
cally, through repression plus the Welfare State. Austrian economics was
constructed as Bismarck excluded Austria from the Second Reich: this
sense of grievance had consequences both for the School and the Pan-
German Hitler (Leeson 2015e, Chaps. 1, 2 and 3). In 1938, almost all
Austrians were deliriously happy to unite with the Third Reich.
According to Peterson (1987), ‘Mises set an example for us. He held
that it is the duty of everyone to read, think, and speak about the impor-
tance of freedom. The preservation of civilization depends upon it. Lu
Mises would be happy to know that the torch he lit is burning brighter
than ever.’ At the 1949 (Seelisberg) Mont Pelerin Society meeting, when
asked how policy should respond to ‘widespread unemployment and
hence famine and revolutionary discontent,’ Mises replied: ‘If the policies
of non-intervention prevailed—free trade, freely fluctuating wage rates,
and no form of social insurance, etc.—there would be no acute unem-
ployment. Private charity would suffice to prevent the absolute destitu-
tion of the very restricted hard core of unemployables’ (cited by Peterson
2009 [1971], 9). Such sentiments would not have endeared Hayek to
the founders of the LSE, Sidney and Beatrice Webb. Whilst all historical
analogies have the potential to mislead as well as to enlighten, Miseans, in
a sense, tend to follow Metternich, while Hayek (1978a), anxious to put
Mises’ conclusion into a ‘more effective form,’ was—or at least pretended
to be—more in the Bismarck tradition:
194 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

once you have reached a certain level of wealth, I think it’s in the common
interest of all citizens to be assured that if their widows or their children by
some circumstances become unable to support themselves, they would be
assured of a certain very low minimum, which on current standards would
be miserable but still would secure them against extreme deprivations. But
beyond that I don’t think we can do anything … Most of the people I have
in mind would really not be able to make much of an extra income.

Characteristically, Hayek expected—and was tolerant of—fraud: ‘But

if some widow who had to live on that small minimum income did take
in some washing in her kitchen, I just would not notice it. [laughter]’27
In ‘Liberty and its Antithesis,’ a review of Hayek’s (2011 [1960]) The
Constitution of Liberty, Mises (1961) criticized Hayek for believing that
the ‘Welfare State is under certain conditions compatible with liberty.
In fact the Welfare State is merely a method for transforming the mar-
ket economy step by step into socialism,’ as had been demonstrated by
Bismarck, the ‘American New Deal and British Fabian Socialism.’
The Enlightenment sought and seeks to establish equality before the
law: in 1919, the abolition of the privileges of the Habsburg nobles;
and in the twenty-first century, extending marriage rights to homosexu-
als. In his Memoirs, ‘von’ Mises (2009 [1978 (1940)], 17–19) explained
how such charities could discriminate against ‘the other.’ With respect
to the ‘unsatisfactory housing conditions throughout Austria,’ his ‘activ-
ity’ with the Central Association for Housing Reform (Zentralstelle)
brought him ‘great satisfaction’: it had ‘connections with the Kaiser Franz
Joseph Anniversary Foundation for Public Housing’ (Kaiser Franz Joseph
Jubiläum-Stiftung-für Volkswohnungen), which was endowed with ‘large
funds to finance housing in general. The same funds also financed the
construction of two housing projects for single men. I found the lat-
ter to be superfluous … an experienced adviser to the police considered
houses for single men breeding grounds for homosexuality. It was on
these grounds that I could not support their funding … Adolf Hitler was
living in one at the time.’
The Austrian School of Economics is a magnet for homosexuals—
seeking to escape from legal and social persecution—and homophobes—
who wish to publically stone them to death. All of Hayek’s University of
 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring... 195

Chicago Committee on Social Thought PhD students appeared to have

faced personal challenges: one apparently committed suicide; another,
the Jewish-born Hamowy, was a child-victim of medical malpractice
and became what Bartley described as a ‘gay dwarf ’ (Cubitt 2006, 265);
another is the author of Gay Rights: A Libertarian Approach (Raico 1975).
Hitler left an eternal instruction: ‘And let it be known for all time to
come that if anyone raises his hand to strike the State, then certain death
is his lot’ (cited by Kershaw 1999, 519). So did Mises (1985 [1927], 19,
44, 42–51): ‘It cannot be denied that Fascism and similar movements
[emphasis added] aiming at the establishment of dictatorships are full
of the best intentions and that their intervention has, for the moment,
saved European civilization. The merit that Fascism has thereby won for
itself will live on eternally in history.’ The ‘similar movements’ of ‘bloody
counteraction’ that Mises referred to include the anti-Semitic ‘l’Action
Française’ plus ‘Germans and Italians.’ ‘Italians’ obviously refers to Benito
Mussolini’s 1922 March on Rome; ‘Germans’ and ‘Ludendorff and
Hitler’ obviously refers to the 1923 Ludendorff-Hitler Putsch; while by
1926, ‘l’Action Française’ and their youth wing, Camelots du Roi, had earned
a violent reputation. Recruits to Camelots du Roi were obliged to pledge:

to fight against every republican regime. The republican spirit disorganises

national defense and favours religious influences directly hostile to tradi-
tional Catholicism. A regime that is French must be restored to France.
Our only future lies, therefore, in the Monarch, as it is personified in the
heir of the forty kings who, for a thousand years, made France. Only the
Monarchy ensures public safety and, in its responsibility for order, prevents
the public evils that antisemitism and nationalism denounce. The neces-
sary instrument of all general interests, the Monarchy, revives authority,
liberty, prosperity and honour. I associate myself with the work for the
restoration of the monarchy. I pledge myself to serve it by the means in my
power. (Cited by Davis 2002, 83)

Mises presumably approved of the February 1934 French Fascist (Ligues

d’extrême droite) overthrow of the centre-left coalition government and
the attempt by Camelots du Roi to assassinate the Jewish socialist, Léon
Blum (just before he took office as Prime Minister, 1936) plus the 1936
Anti-Comintern Pact between Fascist Germany and the Empire of Japan.
196 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

Why did Mises (1985 [1962], xviii) insist: ‘I have not changed any-
thing in the original text of the book and did not influence in any way
[emphasis added] the translation made by Dr. Ralph Raico and the edit-
ing done by Mr. Arthur Goddard’? When Raico (2012, 258, n7) was
translating Liberalism in the Classical Tradition (1985 [1927]), ‘Mises at
one point suggested that I include a translator’s note explaining the his-
torical context of these and similar remarks on Italian [sic] Fascism. My
reply, in retrospect mistaken, was that such a note was superfluous, since
the grounds for the views he expressed in 1927 were obvious. The English
translation appeared, unfortunately, without any such explanation. I had
vastly underestimated the prevelance of historical cluelessness among
Mises’s socialist critics.’
Is Raico clueless about Mises and the Catholic Church and their atti-
tudes towards homosexuals (at least prior to Pope Francis)? Raico (1997)
celebrated the attendance of ‘Karl von Habsburg, son of the Archduke
Otto,’ at the fifteenth anniversary of the Ludwig von Mises Institute:

For many people, myself included, the Habsburgs are the best symbol
available of Old Austria and of the world of central Europe before the
arrival of the Nazis and the Reds … In a letter promoting the affair, Lew
Rockwell said some nice things about the Habsburgs … Lew Rockwell is
not alone in judging the Habsburgs to have been guardians of European
civilization (hint: it has something to do with the Turks) … After all, the
Archduke Otto, head of the family, has for many years now been a respected
member of the Mont Pelerin Society, and Mises himself in 1942 advised
Otto on how monarchy might be restored in Austria.

The Habsburg Pretender was delighted that ‘There is an extraordinary

revival of religion in France … I never would have thought one could dare
to say in France what Sarkozy is saying—that the separation of church
and state in France is wrong’ (cited by Watters 2005). Raico (2014), who
runs the ‘Jewish Libertarian blog,’ reported that Leonard Liggio

was a Catholic, a scholar, and a libertarian. His Catholic faith was his lode-
star. Leonard was a ‘birthright Catholic,’ and from his childhood through
to university and graduate work at Georgetown and Fordham and for the
 Notes 197

rest of his life, Leonard enriched his understanding of his religion and par-
ticipated in the sacraments of his Church. Ultimately, he was admitted into
the Order of the Knights of Malta … On his deathbed, he received the Last
Rites of the Catholic Church. I trust that my friend Leonard is spending
eternity with the Master he worshiped.

Notes
1. http://contemporarythinkers.org/friedrich-hayek/multimedia/interview-
hayek-gary-north-part-1/
2. In the published version, Hayek’s original 1957 Mont Pelerin address was
changed from ‘authoritarian or paternalistic leanings’ to ‘fondness for
authority’: ‘This timidity and fear to trust to the uncontrolled working of
social forces is closely connected with two other characteristic attributes of
conservatism: Its authoritarian or paternalistic leanings and its dislike and
consequent lack of understanding of the operation of economic forces. As
it distrusts both abstract theories and general principles it neither under-
stands the spontaneous forces on which a policy of freedom relies, nor has
it a basis for formulating principles for policy’ (Colander and Freedman
2011, 13, n34).
3. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
5. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
6. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
7. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
8. http://www.wwnorton.com/college/history/foner2/contents/ch11/docu-
ments02.asp
198 6 3: Austria, 1899–1931: Hayek’s ‘Reaction’—Restoring...

9. https://mises.org/blog/7-things-trump-must-do
10. http://www.tradingeconomics.com/united-states/corporate-profits
11. https://mises.org/blog/7-things-trump-must-do
12. Wartime ‘academic’ writing is often indistinguishable from propaganda
(Leeson 2015a, Chap. 1). The journalist, John Reed (1915, 80), docu-
mented the ‘Austrian atrocities’ at Shabatz and Losnitza and elsewhere.
13. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
14. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
15. Hayek Papers Box 50.2.
16. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
18. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
19. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
20. Others lampoon this imitative dynastic project with a triple-­hyphenated
surname: ‘von S**t-Don’t-Stink.’
21. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
22. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
23. Some of the Bartley-labelled interviews were undertaken by others—this
appears to be a Bartley biographical interview.
24. ‘In the nineteenth century, you had for the first time a worldwide eco-
nomic order. You had free trade, free movement of people, free movement
of capital, a gold standard, falling prices in the latter part of the century,
 Notes 199

peaceful development, and no major wars between 1815 and 1914. The
world’s armies and navies did not know what to do. Yes, there were aberra-
tions like the American Civil War and the Franco-Prussian War, but mostly
it was a period of peace. Forty million people moved peacefully because
they wanted a better life. There were no expulsions, no wars, no genocides
nothing. They were just looking for a better life.’
25. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
26. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
27. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
 7
4–13: Austrians and the Holocaust (1)

4–8: Four Führerkults plus the Geistkreis

Hayek (1978a) and his fellow students were ‘very much aware’ that there
were two Austrian School traditions, following respectively, Böhm-­Bawerk
and Wieser. Mises represented the Böhm-Bawerk tradition, and Mayer the
Wieser tradition: ‘Böhm-Bawerk had already been an outright liberal, and
Mises even more, while Wieser was slightly tainted with Fabian socialist
sympathies,’1 and ‘prided himself that his theory of marginal utility had
provided the basis of progressive taxation, which then seemed to me one
of the ideals of social justice.’2 As Habsburg Finance Minister, Böhm-
Bawerk introduced a progressive income tax (Hülsmann 2007, 143, n74).
Hayek’s (1944) The Road to Serfdom extended Ludendorff’s ‘November
Criminals’ ‘stab-in-the-back’ myth (Wheeler-Bennett 1938): democratic
socialists were culprits for both propagandists. By 1917, Ludendorff had
become the military dictator, or at least ‘unquestionably the most power-
ful man in Germany’ (Tipton 2003, 313). Hayek (1978a) located the
‘beginning’ of his ‘interest in economics’ to his discovery of the ‘definitely
mildly socialist’ writings of Ludendorff’s wartime raw materials dictator
(Rohstoffdiktator), Walther Rathenau, who had become

© The Author(s) 2017 201

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_7
202 7 4–13: Austrians and the Holocaust (1)

an enthusiastic planner. And I think his ideas about how to reorganize the
economy were probably the beginning of my interest in economics. And
they were very definitely mildly socialist. Perhaps I should say I found a neu-
tral judge. That’s what made me interested in economics. I mean, how realis-
tic were these socialist plans which were found very attractive? So there was a
great deal of socialist inclination which led me to—I never was captured by
Marxist socialism. On the contrary, when I encountered socialism in its
Marxist, frightfully doctrinaire form, and the Vienna socialists, Marxists,
were more doctrinaire than most other places, it only repelled me. But of the
mild kind, I think German Sozialpolitik, state socialism of the Rathenau
type, was one of the inducements which led me to the study of economics.3

Hayek (1978a) emphasized that Rathenau’s books were ‘of course,

socialist of a sort—central planning, at least, but not a proletarian social-
ism.’4 In the forward to the American edition, John Chamberlain (2007
[1944], 253) almost defined Rathenau as the Austrian enemy: ‘Hayek
is horrified to see the English succumbing by degrees to the controlled-­
economy ideas of the German Walter Rathenau, the Italian syndicalists—
yes, and Adolf Hitler, who had the courage to draw conclusions from the
less forthright statism of his predecessors.’ The Road to Serfdom was a

warning, a cry in a time of hesitation. It says to the British and by implica-

tion to Americans: Stop, look and listen … when ‘society’ and the ‘good of
the whole’ are made the overmastering touchstones of state action, no indi-
vidual can plan his own existence.

Hayek (2007 [1944], 186) fuelled this perception: ‘Rathenau, who,

although he would have shuddered had he realised the consequences of
his totalitarian economics, yet deserves a considerable place in any fuller
history of the growth of Nazi ideas.’
Hayek (20 June 1967) told Haag that Spann’s ‘enthusiasm,’ his Old
Testament Prophet style of declamation, plus his appearance—the ‘burn-
ing’ eye of the fanatic—were striking.5 During Spann’s

Sunday morning sessions … the master transmitted his universalistic concepts

to his disciples. Since his ideas were simply ‘the truth,’ they were not discussed;
furthermore, the master did not like to be contradicted. (Haag 1969, 55)
 4–8: Four Führerkults plus the Geistkreis 203

Describing his own Führercult, Hayek (1975a) put this into a ‘more
effective form’: ‘You might object that I have left out some facts, and that
the result would have been different if I had not neglected those other
facts. Well, my answer to this objection would be: quote the facts, please,
and I shall be willing to consider them.’
As a self-described ‘intuitive genius,’ Hayek (1978a, 1949, 427, 437)
sought to recruit those he described as the ‘worst’ ‘inferior … medioc-
rities’—‘secondhand dealers in opinions’—plus ‘masters.’6 Like Wieser,
Hayek was ‘what one commonly would call an intuitive thinker;’ while
Robbins and Machlup (like Böhm-Bawerk) were ‘masters’ who ‘to an
extent, have command of the present state of economics which I could
never claim to. But it’s just because I don’t remember what is the standard
answer to a problem and have to think it out anew that occasionally I get
an original idea.’7
Although Spann had done the rejecting, Hayek (1994, 54; 1978a)
claimed that he had distanced himself from Spann because (amongst
other things) ‘he was a very emotional person.’8 But so too was Mises9;
who, appearing to have a Messiah complex, aspired to lead the ‘Tribe of
Mises’: if deviationists (real or imagined) didn’t exit, then he would per-
form his own melodramatic ‘stomp’-out (Friedman and Friedman 1998,
161). In 1947, at the first Mont Pelerin Society meeting, Mises made ‘a
dreadful exhibition of himself—attacking us all calling us Socialists and
Interventionists and indulging in a degree of irrelevance quite unbeliev-
able to those who didn’t know his prickly temperament’ (Robbins cited
by Howson 2011, 662–663).
This applied not only to the Chicago branch of the Mont Pelerin
Society but also to fourth-generation Austrians. Haberler was a wit-
ness at Mises’ wedding; Machlup’s doctoral dissertation ‘The Gold
Exchange Standard’ (Die Goldernwährung) was dedicated to Mises, his
supervisor and ‘spiritual father’; and subsequently, Machlup (1981)
went to extraordinary lengths to find employment for Mises. But when
he and Haberler began to favour the price mechanism (with respect
to the price of foreign exchanges), Mises refused to speak to them for
‘several years.’10 When Machlup tried to speak to Margit Mises (1984,
34, 202, 146) at the 1965 Mont Pelerin Society meeting in Stresa,
Mises pulled his wife
204 7 4–13: Austrians and the Holocaust (1)

away from Machlup. ‘I don’t want you to talk to him,’ he said. ‘I don’t want
you ever to talk to him again … He was in my seminar in Vienna … he
understands everything.’

Frost (1978, 223) noticed that Nixon was unconcerned even about
‘inconsistencies in the same or consecutive sentences’—the same applies
to both Hayek and Rothbard. Rothbard (1988, 75, 98, 105)—after
reporting that Mises recalled the past ‘bitterly,’ and referring to ‘apos-
tasy’ and Machlup’s and Haberler’s dissent as ‘a particularly bitter blow to
Mises’—simply lied: ‘Mises never expressed any bitterness at his fate or
of the apostasy of his former followers.’ Hayek (1978a) put the evidence
into a ‘more effective form’: ‘Mises was, contrary to his reputation, an
extremely tolerant person. He would have anyone in his seminar who was
intellectually interested. Mayer would insist that you swore by the master,
and anybody who disagreed was unwelcome.’11
Although—unlike all the other major figures of the first three gen-
erations of the Austrian School of Economics—Machlup was not one
of the ‘members of the nobility’ (Kuehnelt-Leddihn 1992), in 1966,
he was President of the American Economic Association (AEA) and
elected Distinguished Fellow of the AEA in 1967. Vernon Smith
(2007, 17) recalled his Habsburg-style deference: when Machlup vis-
ited Cambridge, Massachusetts, ‘you wondered how the two polite
Austrians—he and Haberler—would resolve the issue of which one
was to go through a door first.’ In 1969, Mahlup used his influence to
obtain for Mises the AEA Distinguished Fellow award (Peterson 2009,
44)12; and in 1971, wrote the recommendation that led to Hayek being
awarded the 1974 Nobel Prize (Leeson 2013a, 29). Machlup (1980)
and Haberler (1986) politely pointed out the association between
Hayek’s advocacy and the deflation that facilitated Hitler’s rise to power
whilst falsely insisting that Hayek had been forced out of Austria by
the Nazis.
Hayek is, presumably, the only Nobel Laureate to be rewarded for
what appears to be fraud—a fraud that Machlup (1974, 500) uncriti-
cally repeated in his recommendation report: ‘in February 1929, he
boldly predicted that crisis and downturn in the United States might
 4–8: Four Führerkults plus the Geistkreis 205

be imminent. With these warnings, which came true with a vengeance,

Hayek had introduced one of the main themes of his monetary theory of
the investment cycle.’ Moreover, the list of AEA Distinguished Fellows
is—with one exception—distinguished. Mises was neither a genuine
academic nor a scholar—he was a paid lobbyist, who frequently signed
his anonymous articles ‘a leading monetary politician’ (Hülsmann 2007,
347, n32). Only one Distinguished Fellow has an illegal prefix attached
to his name: ‘Ludwig E. von Mises.’13
Machlup (1981) reflected that there were ‘many libertarians—classical
liberals’ who share Mises’ views

and yet dislike him, or dislike his way of expressing the shared views. A few
‘neo-liberals’ in Europe consider the Mises style as abrasive and his formu-
lations as evidence of a ‘paleo-liberalism,’ a petrified position not appropri-
ate for the twentieth century … Mises is disliked by a good many people,
including many good people.

During a visit to Vienna, Hugh Gaitskell observed that in the Miseskreis:

‘There is no discussion. He is just incapable of it. There’s one exception—
the English are allowed to speak … but if any Austrian or German student
raises his voice Mises shuts him up at once’ (cited by Williams 1979, 53).
Hayek (1978a) appeared to be the only person from whom Mises would
tolerate dissent: ‘I believe I’m the only one of his disciples who has never
quarrelled with him.’14
According to Hayek (1994, 54), Spann was ‘at first most successful
in attracting the students by his enthusiasm, unconventionality, and
interest in their individual interests.’ Referring to his entire time at the
University of Vienna (1918–1921), Hayek (1978a) asserted that Spann’s
influence on himself ‘didn’t last long, because we soon discovered that he
really didn’t have anything to tell us about economics.’15 But for these
three years Hayek apparently attended the Spannkreis Sunday morning
sessions: but after a period in which Hayek (1994, 54) was regarded as
one of Spann’s ‘favourites, he in effect turned me out of his seminar by
telling me that by my constant carping criticism I confused the younger
members.’
206 7 4–13: Austrians and the Holocaust (1)

In Spann’s organic view of the State,

All spiritual reality present in the individual is only there and only comes
into being as something that has been awakened … the spirituality that
comes into being in an individual (whether directly or mediated) is always
in some sense a reverberation of that which another spirit has called out to
the individual. This means that human spirituality exists only in commu-
nity, never in spiritual isolation … We can say that individual spirituality
only exists in community or better, in ‘spiritual community’ [Gezweiung].
All spiritual essence and reality exists as ‘spiritual community’ and only in
‘communal spirituality’ [Gezweitheit]. (Cited by Tudor 2013)

Hayek (1978a) appeared to resent a funding body: he was ‘the first

Central European student’ who came to the United States ‘on his own’
without Rockefeller funding16:

I was the only one who did not come away in the comfort of the Rockefeller
Foundation. All the later visitors visited America very comfortably and
could travel and see everything. My case was unique. I was the only one
who came on his own, at his own risk, and with practically no money to
spare, and who lived for the whole of a fifteen-month period on sixty dol-
lars a month. It would have been miserable if I hadn’t known that if I was
in a real difficulty I would just cable my parents, ‘Please send me the money
for the return.’ But apart from this confidence that nothing could really
happen to me, I lived as poorly and miserably as you can possibly live.17

At the Rockefeller Foundation, the leaders of the Spann, Mises and

Mayer circles were regarded as the ‘Prima Donnas’ of the Austrian School
of Economics (Leonard 2010, 79). In autumn 1921, Hayek (1978a) and
Fürth set up their own Geistkreis (‘spirit community’ or ‘thought circle’):
‘I think at the beginning, Herbert Fürth and I would just talk. This was
a discussion group, selecting from the people we knew; then some other
members might make suggestions, and if the rest of us knew about a man
and agreed that he was- [unfinished sentence].’18
According to Fürth, this began shortly before they left the university,19
while according to Hayek (1978a), ‘We formed it immediately after we
left the university.’ There was some overlap between the Miseskreis and
 4–8: Four Führerkults plus the Geistkreis 207

the Geistkreis ‘but not exactly … the women, who were excluded from
the Geistkreis—Stephanie Browne, Helene Lieser, and Ilse Minz—were
all members of the Mises seminar but not of the Geistkreis.’20 Hayek told
Leube that ‘girls’ were excluded because he found them ‘sexually distract-
ing.’21 But when Leijonhufvud asked ‘Was it an exclusively male group?
Were you antifeminist?’ Hayek (1978a) replied: ‘No, it was impractical,
under the then-existing social traditions, which created so many compli-
cations, to have a girl among us; so we just decided-.’ Perhaps reflecting
that ‘social traditions’ had not prevented women from attending Mises’
seminar, Hayek did not finish the sentence but instead made light of the
exclusion: ‘Our name was even given [to us] by a lady [Browne] whom
you probably have met, who resented being excluded, and so gave us the
name Geistkreis in order to ridicule the whole affair [laughter]’.22
Hayek (1994, 68) recalled that while he had been a ‘regular student
I only once [emphasis added] went to a lecture of [Mises], but rather
disliked him.’ In 1921, Hayek (1978a) became a civil servant in a ‘tem-
porary’ governmental department that had been established to carry out
the provisions of the 1919 peace treaty. His ‘official chief ’ was ‘von Mises,
whom I had not known at the university, and I had never [emphasis
added] attended his lectures at the university.’ For the first decade of
his working life (1921–1931), Hayek was ‘very closely connected with
him.’23 Hayek (1978a) was not a ‘regular civil servant but a temporary
civil servant, with a much higher salary than I would have had. So it
was quite an attractive position.’24 After working for Mises for eighteen
months, Hayek (1994, 69) left for America: Mises ‘smoothed my way
not only by getting for me the necessary leave of absence but on financial
conditions so favourable as to make my plans practicable.’
In ‘The Socialist Roots of Naziism,’ Hayek (2007 [1944], 189, n27)
further distanced himself from Spann who, along with Carl Schmidt, he
described as one of the ‘intellectual leaders of the generation which has
produced naziism.’ With respect to the Menger/Wieser/Mayer-Spann/
Hayek/Leube-Caldwell-Shenoy branch of the Austrian School, Hayek
(1978a) recalled that it was Spann who drew his ‘attention to Menger’s
book at a very early stage, and Menger’s Grundsetze (2007 [1871]),
probably more than any other book, influenced me.’25 Hayek ‘probably
derived more from not only the Grundsetze but also the Methodenbuch
208 7 4–13: Austrians and the Holocaust (1)

[1985 (1883)] not for what it says on methodology but for what it says
on general sociology. This conception of the spontaneous generation of
institutions is worked out more beautifully [emphasis added] there than in
any other book I know.’26
Spann’s model was the German idealist philosopher, Johann Gottlieb
Fichte (1762–1814). Whilst Hayek (1978a) presented himself as having
devoted his career to turning Mises’—rather than Spann’s—message into
‘a more effective form,’ he appeared to model himself on Wieser, who he
described as a ‘most impressive teacher, a very distinguished man whom I
came to admire very much, I think it’s the only instance where, as very young
men do, I fell for a particular teacher … he was for a long time my ideal in
the field, from whom I got my main general introduction to economics.’27
Norman Borlaug (1970) shared his Nobel Peace Prize with those
who organized a co-operative effort by the private and public sectors:
he described himself as ‘one member of a vast team made up of many
organizations, officials, thousands of scientists, and millions of farm-
ers—mostly small and humble—who for many years have been fighting
a quiet, oftentimes losing war on the food production front.’ In the early
1970s, Borlaug and his fellow green revolutionaries were credited with
saving the lives of almost a quarter of the world’s population. Hayek
(1978a) sought to out-trump him: until

150 years ago … there was never any serious revolt against the market
society, because every farmer knew he had to sell his grain … once you put
it out that the market society does not satisfy our instincts, and once people
become aware of this and are not from childhood taught [emphasis added]
that these rules of the market are essential, of course we revolt against it …
If you want to live in small tribal groups, some other [culture might] be
good; but if you want not only to have a world society but to maintain the
present population of the world, you have no choice. If that is your ulti-
mate aim—just to assure to the people who live a future existence and
continuance—I think you must create and maintain essentially a market
society. If we now destroy the market society, then two-thirds of the present
population of the world will be destined to die.28

Through clean air, safe drinking water, vaccinations and improved

diet, post-Feudalism delivered ever-increasing life expectancies—until
 4–8: Four Führerkults plus the Geistkreis 209

the ‘market free play’ obesity epidemic. Neoclassical optimality is typi-

cally taught by those who derive more utility from the (axiomatically
derived) ‘disutility of labour’ than from consumption: what does the neo-
classical food model deliver? Ceteris paribus, if all the ‘food’ suppliers of
a market lose half their crop, this will increase the price of ‘food’ as well
as their income (assuming that the demand for ‘food’ is price inelastic).
But the divergence between local and international prices will provide an
incentive for exporters to supply this market, thus tending to bring the
price of ‘food’ back down to international levels. But if the half-crop-loss
is unevenly distributed, some suppliers will lose most, if not all, of their
income: the demand for ‘food’ will fall as the increasingly famished ‘fall
off’ the demand curve. Within the afflicted area, the ‘equilibrium’ price
of food may fall, providing an incentive for local (non-lost) producers to
export their crop.
Likewise, in Great Depression Germany, as policy-induced deflation
reduced income and aggregate demand, so the ‘demand’ for Hitler rose.
Buchanan stated: ‘The market, as you and I know, will always emerge if
you leave it alone’; to which Hayek (1978a) replied: ‘I think people are
quite likely to agree on general rules which restrict government, without
quite knowing what it implies in practice. And then I think if that is made a
constitutional rule, they will probably observe it. You can never expect the
majority of the people to regain their belief in the market as such [emphases
added]. But I think you can expect that they will come to dislike govern-
ment interference.’29
Hayek (1978a) aimed at ‘completely eliminating all direct interference
with the market’ and ‘eliminating completely the social justice aspect’
of redistribution.30 Opposition to ‘interference’ led Hayek (1978a)
to defend the ‘civilisation’ of apartheid from the American ‘fashion’ of
‘human rights’ (Chap. 3, above). Hayek (1978a) informed Bork—who
had recently been employed by a justice-obstructing President with an
‘enemies list’—that American ‘interference’ resembled Hitler’s:

Well, I think America is in a very early stage of the process. You see, it
comes with a restriction of economic freedom, which only then has effects
on the mental or intellectual freedom. In a way, American development is
probably a generation behind the one which gave me the illustrations—the
210 7 4–13: Austrians and the Holocaust (1)

German development. The American degree of restrictions of freedom is

perhaps comparable to what it was in Germany in the 1880s or 1890s
under Bismarck, when he began to interfere with the economic affairs.
Only ultimately, under Hitler, did the government have the power which
American government very nearly has. It doesn’t use it yet to interfere with
intellectual freedom. In fact, perhaps the danger to intellectual freedom in
the United States comes not from government so much as from the trade
unions.31

In Socialism, one ‘crook’ for ‘liberty’ declared: ‘In the life of a genius,
however loving, the woman and whatever goes with her occupy only a
small place … Genius does not allow itself to be hindered by any con-
sideration for the comfort of its fellows even of those closest to it’ (Mises
1951 [1922], 85, 87, 90). The following year, Nixon (2014 [1952], 97)
used his wife, children, and their dog, ‘Checkers,’ for electoral purposes
(so as to ‘tell the truth’ in response to having his ‘honesty and integrity’
questioned): the Vice Presidency of the United States is a ‘great office,
and I feel that the people have got to have confidence in the integrity
of the men who run for that office and who might attain them … I am
going to campaign up and down America until we drive the crooks and
the Communists and those that defend them out of Washington, and
remember folks, Eisenhower is a great man. Folks, he is a great man, and
a vote for Eisenhower is a vote for what is good for America.’32
One of Rothbard’s (1994b)

happiest political moments came when the Republicans swept both houses
of Congress in the November 1946 election on the slogan, ‘controls, cor-
ruption, and communism.’

From the onset of the Cold War through the Mont Pelerin-inspired
Stagflation and Global Financial Crisis and beyond, two ‘crooks’ for ‘lib-
erty’ exerted a major influence on public policy: Nixon (1946–1974) and
Hayek (1974-). In 2016, in support of Donald Trump, the Republican
Party platform described climate change as ‘the triumph of extremism
over common sense’; yet in 1964, Barry Goldwater proclaimed that
‘extremism in the defense of liberty is no vice.’ On every other occasion
 4–8: Four Führerkults plus the Geistkreis 211

between 1948 and 1976, American voters had to choose for or against
Nixon. The prospect of Vice President Nixon succeeding President
Dwight Eisenhower (1953–1961) may have stimulated an enhanced
toleration of inflation (Leeson 1997b, c; 1998a, b). Eisenhower (2006
[1961]) left office warning about the ‘military industrial complex’; four
decades later, President George Bush (2010, 262) began preparations to
invade Iraq based ‘in large part on intelligence that proved false.’ What
role did the military industrial complex and the tax-exempt educational
charities that they fund play in providing that ‘intelligence’?
The Crusades (1095–1291) were a Christian-Muslim battle over ‘own-
ership’ of the Jewish ‘Old Testament,’ undertaken by those who had been
promised by Infallible Popes that they were on a penitential pilgrimage
to ‘Heaven’: the associated anti-Semitic ‘persecution of 1096’ was, in a
sense, a prelude to the Holocaust (Nirenberg 2002). In 1947, the anti-­
Semitic Hayek chose Pilgrim Mountain (Mont Pèlerin) to launch his
own Holy War.
Bush (2010, 224) reflected: ‘after the nightmare of 9–11, I had vowed
to do what was necessary to protect the country. Letting a sworn enemy
of America refuse to account for his weapons of mass destruction was a
risk I could not afford to take … I prayed for our troops, for the safety
of the country, and for strength in the days ahead.’ In predicting a ‘Third
Awakening’ of religious devotion, Bush observed that ‘A lot of people in
America see this as a confrontation between good and evil, including me’
(cited by Baker 2006)—yet he apparently offered no ‘prayer’ for the hun-
dreds of thousands of Iraqi civilians that he was condemning to death.
Bush warned that ‘this crusade, this war on terrorism, is going to
take awhile’ (for which he afterwards apologized). Before Operation
Barbarossa—named after a crusading Holy Roman Emperor—Hitler
instructed his general to ‘close your heart to pity’ (cited by Nicholls 2000,
317)—probably a necessary ingredient of warfare. But from a knowledge
construction-perspective: how did this born-again Christian (and other
US Presidents) come to be regarded by critics as the moral equivalent of
Adolf Eichmann?
Eight decades earlier, in The Political Economy of War, Pigou (1921,
111–112) described ‘the private interests of makers of armaments’ who
212 7 4–13: Austrians and the Holocaust (1)

‘promote war scares’ and who were ‘not without influence in the press
and through the press on public opinion.’ He could have been describing
Mises’ (1963, 282; 1966, 282) lobbying for the ‘Warfare State.’ Many
more tons of bombs were dropped during the Vietnam War than were
dropped during World War II (Harrison 1993, 133); but in 1974, Nixon
resigned in disgrace while proclaiming his commitment to ‘peace’ and
‘the blessings of liberty.’33 As with the Iraq War, buyers’ remorse does not
lead to a refund: bygones are forever bygones and (from a behavioural
economics perspective) short-run (manipulated) impulsive behaviour led
to the massive transfer of resources from taxpayers (present and future) to
the armaments industry.
The taxpayer bears a double burden—the cost of ‘unjust’ (and lost) wars
plus the lost revenue associated with the tax-exempt ‘educational’ charities
who promoted the falsehoods. Supplier trade unions—like labour unions
and the government—can also ‘interfere with the economic affairs’: but
according to Hayek, it was Pigou who was interfering with the ‘market
society’ by buying guns and shipping them to Stalin (Leeson 2015a).
By definition, trade unions (for labour and for employers) promote the
private benefit of their members—and many impose social costs. Should
their dues be tax-deductible or tax-increasable? If negative externalities
are caused, some of the social damage can be recouped through tax-based
full-cost pricing.
Some Austrians have become tenured academics through Hayek’s
fraudulent job recommendations: they must be the only ‘school’ of
‘economists’ who have found a tax-exempt ecological niche from where
to undermine the Constitution of the United States and replace it with a
single sentence written by a dictatorship-supporting European aristocrat.
As Hayek (1978a) explained to Buchanan:

After all, the one phrase in the American Constitution, or rather in the
First Amendment, which I think most highly of is the phrase, ‘Congress
shall make no law….’ Now, that’s unique, but unfortunately [it goes] only
to a particular point. I think the phrase ought to read, ‘Congress should
make no law authorizing government to take any discriminatory measures
of coercion.’ I think this would make all the other rights unnecessary and
create the sort of conditions which I want to see.34
 4–8: Four Führerkults plus the Geistkreis 213

Buchanan and Richard Wagner (1977) expressed concern for

the ‘unrepresented’ being those yet-unfranchised future taxpayers who

must bear the liabilities chosen by their ancestors.

The following year, Buchanan (1978) worried about democracy and

the ‘franchise’: ‘it seems to me that we’ve got ourselves in—again, it goes
back to the delusion of democracy, in a way—but we’ve got ourselves into
a situation where people who are direct recipients of government largesse,
government transfers, are given the franchise; people who work directly
for government are given the franchise; and we wouldn’t question them
not having it. Yet, to me, there’s no more overt conflict of interest than the
franchise [given] to those groups.35 According to Rockwell (1995, 115),

‘Voting rights’ are also a fiction, which—depending on how they are

used—can also diminish freedom.

Austrians offer one-dollar-one-vote ‘consumer sovereignty’ as a

replacement for the franchise. Buchanan (1987, 1954) ‘didn’t become
acquainted with Mises until I wrote an article on individual choice and
voting in the market in 1954. After I had finished the first draft I went
back to see what Mises had said in Human Action (1998a [1949]). I
found out, amazingly, that he had come closer to saying what I was trying
to say than anybody else.’
After the 1848 Liberal Revolutions, Prussia embraced a three-class, tax-­
based franchise for elections to the Lower House of the State Parliament.
In this public, oral (i.e. not secret) males-only ballot, a first (highest tax)
class vote was worth 17.5 times the value of a third (lowest tax) class vote
(Dwyer 2001, 132; Ponting 1998). Expansion of the franchise and equal-­
weighted votes came during the Weimar Republic (1919–1933). Until
1907, the Austrian electoral system was also ‘glaringly unequal’: of 253
seats in the Lower House of Parliament, 85 were elected by 5000 nobles,
and 21 by the 500 members of the Chambers of Commerce (Ponting
1998; Hülsmann 2007, 187–188, 851, n26).
Red Terrorists legitimized their rule with ‘peoples’ democracy’ Parliaments.
Hayek (1978a) had been led to study economics through ‘Rathenau’s
214 7 4–13: Austrians and the Holocaust (1)

c­ onception of a grand economy. He had himself been the raw materials dic-
tator in Germany, and he wrote some very persuasive books about the recon-
struction after the war.’36 Six decades later, Hayek (1978a)—as sophisticated
an Austrian propagandist as Hitler—described to Buchanan the ‘catchword’
strategy by which the spontaneous order could be reconstructed:

No, I think in general the question of the franchise is what powers they can
confer to the people they elect. As long as you elect a single, omnipotent
legislature, of course there is no way of preventing the people from abusing
that power without the legislature’s being forced to make so many conces-
sions to particular groups. I see no other solution than my scheme of divid-
ing proper legislation from a governmental assembly, which is under the
laws laid down by the first. After all, such a newfangled conception gradu-
ally spreads and begins to be understood. And, after all, in a sense, the
conception of democracy was an artifact which captured public opinion after it
had been a speculation of the philosophers. Why shouldn’t—as a proper
heading—the need for restoring the rule of law [emphases added] become
an equally effective catchword, once people become aware of the essential
arbitrariness of the present government.

Buchanan asked for more details: ‘Well, how would you see this com-
ing about, though? Would you see us somehow getting in a position
where we call a new constitutional convention and then set up this sec-
ond body with separate powers? Or how would you see this happening?’
Hayek (1978a) replied: ‘I think by several experiments in new amend-
ments in the right direction, which gradually prove to be beneficial,
but not enough, until people feel constrained to reconstruct the whole
thing.’37 Hayek planned to reconstruct the ‘spontaneous’ order by mak-
ing the franchise a once-in-a-lifetime voting experience—a proposal he
tried to persuade Pinochet to adopt (Leeson 2017a).
As The Road to Serfdom (1944) began to have its desired effect, Hayek
was commissioned by the British Colonial Office to investigate the econ-
omy of Gibraltar—which was roughly divided along class and ideological
lines: a slum-dwelling working-class (including some left-wing refugees
who had fled the Spanish Civil War) plus an upper-class—including some
vintage or ‘honourable’ ‘families’—who typically had supported Franco.
According to Hayek’s Report, Gibraltar formed ‘the commercial centre of
 4–8: Four Führerkults plus the Geistkreis 215

an urban conglomeration of nearly 100,000 inhabitants whose working

class suburbs are located in Spain’ (some Spaniards commuted daily to
work on the Rock). Hayek’s solution was to eliminate rent control and
thus force many working-class people to relocate to Spain, where Franco’s
Fascist regime was undertaking its own Holocaust (Preston 2012).
Austrians like Rothbard see the world as a battle between Red and
White Terrorists (with democracies as an irrelevant sideshow):

All socialism seemed to me monstrously coercive and abhorrent. In one

family gathering featuring endless pledges of devotion to ‘Loyalist’
Spain during the Civil War, I piped up, at the age of eleven or twelve,
‘What’s wrong with Franco, anyway?’ It didn’t seem to me that Franco’s
sins, however statist, were any worse, to put it mildly, than those of the
Republicans.38

In 1975, Franco’s funeral was attended by only four Heads of State,

all non-elected—Pinochet, the Bolivian dictator General Hugo Banzer,
Jordan’s King Hussein and Prince Rainier III of Monaco—plus US
Vice President Nelson Rockefeller (Official Journal of the European
Communities 1976, 99). As in Pinochet’s Chile, Hayek was prepared
to ‘sacrifice the liberty of individual for the liberty of markets’ (Grocott
2015, 17, 18; Grocott 2017).
Austrian analysis is conventionally interpreted as beginning with the
individual—the assumption of ‘consumer sovereignty’—in which ben-
efits flow down from the totality of the ‘market society.’ Spann’s analysis
also began with the individual—whose rights were also derived from the
‘totality’: ‘It is the fundamental truth of all social science … that not
individuals are the truly real, but the whole, and that the individuals have
reality and existence only so far as they are members of the whole’ (cited
by Mort 1959, 249).
Spann promoted an organic view of the State—a reconstruction of a
mythical version of the Feudal Corporate State in which everyone had
an allocated role: the State must promote the ‘new more just and moral
society’ (Ehs 2013, 53). This type of Clerical Fascism thrived in Marshal
Pétain’s Vichy France, General Franco’s Spain, and in two Nazi protector-
ates or puppet states: Jozef Tiso’s First Slovak Republic and in Croatia
216 7 4–13: Austrians and the Holocaust (1)

under the Ustaše. The Hayekian Jaime Guzmán promoted a similar

objective in General Pinochet’s Chile (Cristi 2017; Leeson 2017a).
Hayek told a Venezuelan interviewer that he did not

‘know of any totalitarian governments in Latin America. The only one was
Chile under [Salvador] Allende.’ It was important, he insisted, not to con-
fuse ‘totalitarianism with authoritarianism.’ (Ebenstein 2003, 300)

Yet just before he heard about his Nobel Prize, Hayek (1975a [1974])
stated: ‘Once you have abandoned democracy, any authoritarian gov-
ernment in power will be driven, just to maintain itself, to take all
kinds of repressive measures, even if it doesn’t intend to do so from the
beginning.’39
In the Times, the Hayekian Brian Crozier (1982) asked ‘Is democracy
such a good thing?’ He sought to challenge the ‘prevailing assumption’
that ‘party democracy is necessarily good and dictatorship necessarily
bad.’ In his nuanced-hagiographic biography of Franco, Crozier (1967,
xix–xx) noted that he and his subject ‘both hate communism.’ The ser-
vile qualities of the Spanish people rendered them ‘singularly unqualified
for democracy’; and Franco was for ‘order’ and against ‘disorder.’ His
conclusions were on the whole ‘very favorable to Franco.’ According to
Crozier (1993, 157), ‘In Chile, I spent several days closeted with the
dictator, General Augusto Pinochet, for whom I had drafted (in Spanish)
fifteen clauses for a new Constitution [of Liberty]. Fourteen of them were
in the final document.’ In addition to Pinochet, Hayek cultivated other
dictators: in 1962, sending António de Oliveira Salazar, the dictator of
Catholic Portugal, a copy of The Constitution of Liberty (2011 [1960])
together with a note: he hoped that his book—this ‘preliminary sketch
of new constitutional principles’—‘may assist’ Salazar ‘in his endeavour
to design a constitution which is proof against the abuses of democracy’
(cited by Farrant, McPhail and Berger 2012, 521).
Spann combined Roman Catholicism with German nationalism (or
Pan-Germanism) in opposition to the

cosmopolitan perspective of liberals and socialists (where ‘cosmopolitan’

was often nothing more than a code for ‘Jewish’). Spann’s political position
was mirrored in his multiple affiliations: In Vienna he was e.g. a member
 4–8: Four Führerkults plus the Geistkreis 217

of the Deutsche Gemeinschaft, the Deutscher Klub, and the Institut zur Pflege
deutschen Wissens; in the scientific field he was closely associated with the
Deutsche Gesellschaft für Philosophie, all of which entertained notoriously
close relations with the Nazi party in the 1930s. (Klausinger 2013, 8)

Haag described Spann and his academic community as a ‘veritable

breeding ground of Fascist and Nazi ideas’ (cited by Ehs 2013, 52–53).
According to Paul Schweinzer (2000, 52), Spann’s ‘school can be viewed
as one of the decisive pillars of Austro-fascism.’ Edmund Palla, secre-
tary of the Austrian Chamber of Labour, Engelbert Dollfuss and Mises
(2009 [1978], 62) ‘belonged to a three-member publication committee
of the Economic Commission … which published a report on Austria’s
economic difficulties.’ Dollfuss, who had also been one of Spann’s stu-
dents, modelled his one-party ‘Fatherland Front’ State on Spann’s works.
But in May 1934, Spann objected that Dollfuss had failed to build the
corporations that were a necessary precondition for his ‘Universalism’
(Schweinzer 2000, 52).
The first sentence of Chap. 1 of Hitler’s Mein Kampf (1939 [1925],
17) relates to the ‘destiny’ associated with his border birthplace: ‘German
Austria must be restored to the Great German Motherland.’ In 1919,
Mises declared that ‘a unitary German state is a political and moral neces-
sity’ and would become the ‘starting point of a new calm and peaceful
development in German affairs’ (cited by Silverman 1984, 69, 941). John
Van Sickle (18 September 1930) recorded in his diary that Mises still
believed that some form of Anschluss was inevitable (Leonard 2011, 93,
n22). In September 1932, Mises stated that ‘after twelve months Hitler
would be in power’ (Hayek 2013a [1976], 145–146). On 1 March
1934, Mises joined the Austro-Fascist ‘Fatherland Front’ and its official
social club; and from exile in America continued to promote Anschluss
(Hülsmann 2007, 677, n149, 804). According to Leube (2003a, 13),
Hayek also favoured Anschluss (without specifying whether he later
changed his mind).
Mises’ (1985 [1927], 48) proposed Fascist-Classical Liberal Pact was
based on anti-Communism:

The fundamental idea of these movements—which, from the name of the

most grandiose and tightly disciplined among them, the Italian, may, in
218 7 4–13: Austrians and the Holocaust (1)

general, be designated as Fascist—consists in the proposal to make use of

the same unscrupulous methods in the struggle against the Third
International as the latter employs against its opponents. The Third
International seeks to exterminate its adversaries and their ideas in the
same way that the hygienist strives to exterminate a pestilential bacillus; it
considers itself in no way bound by the terms of any compact that it may
conclude with opponents, and it deems any crime, any lie, and any cal-
umny permissible in carrying on its struggle. The Fascists, at least in prin-
ciple, profess the same intentions.

The onset of the deflation-induced Great Depression further stimu-

lated anti-Semitism: in 1932, a Nazi poster campaign in Vienna read
‘When Jewish Blood will Squirt from the Knife’ (Leonard 2010, 128).
Mises may have harboured doubts the security of his ‘property’ before
his apartment was looted by the Nazis in March 1938—but must have
approved of the 1936 Anti-Comintern Pact between German Fascists
and the Empire of Japan.
Morgenstern—like Spann, Hayek, Hitler and Mises—was ‘an out-
spoken Pangerman … and like Spann a member of the Deutscher
Klub’ (Klausinger 2013, 12; 2014, 198). The support provided by
Morgenstern for a ‘strong state’ would, according to Stephanie Braun,
lead to him being ‘much misunderstood; for he will be reproached for
favoring political fascism for the sake of sound economic policies’ (cited
by Klausinger 2006, 31, n26). Hayek (1978a) favoured (allegedly) tem-
porary dictatorship for the sake of (what Austrians regard as) ‘sound’
economic policies:

There’s always so many different things converging which drive one to a

particular outcome. I did see that our present political order made it almost
inevitable that governments were driven into senseless policies. Already the
analysis of the The Road to Serfdom [1944] showed me that, in a sense,
Schumpeter [Capitalism, Socialism and Democracy 1942] was right—that
while socialism could never do what it promised, it was inevitable that it
should come, because the existing political institutions drove us into it.
This didn’t really explain it, but once you realize that a government which
has power to discriminate in order to satisfy particular interests, if it’s
 4–8: Four Führerkults plus the Geistkreis 219

­ emocratically organized, is forced to do this without limit—Because it’s

d
not really government but the opinion in a democracy that builds up a
democracy by satisfying a sufficient number of special interests to offer
majority support. This gave me a key to the reason why, even if people
understood economics correctly, in the present system of government it
would be led into a very stupid economics policy.40

The age of dynasties left a dysfunctional legacy. In 1918, Pétain sought

to impose a ‘humiliating disaster’ on the Germans rather than a negoti-
ated peace (Griffiths 2011, Chap. 4); but whilst he did not succeed in pre-
venting the Armistice, the end result was the same—the Great Inflation
plus a sense of national humiliation and resentment that Ludendorff and
Hitler et al. manipulated.
As the 1910–1911 retreat of the hereditary British House of Lords in
the face of taxation pressure from the Commons revealed, nobles often
prefer financial penalties rather than have Gresham’s Law diminish the
value of their currency—their intergenerational entitlements. Austrian
democracy had done to the Habsburg Second Estate (and more) what
King George V had threatened to do to the Lords.
Citing a public stoning theocrat, John Robbins (1992) stated

In his book Honest Money, The Biblical Blueprint for Money and Banking,
Gary North makes an excellent point: ‘There is nothing in the Bible that
indicates that gold and silver became money metals because Abraham,
Moses, David, or any other political leader announced one afternoon:
“From now on, gold is money!”…the State didn’t create money.’ This is
quite true. The Bible is the oldest and most reliable history book we have,
and there is nothing in it to indicate that the State originally created money.
Rather, the evidence is that money originated in the market, when mer-
chants offered their own coins and weights of metal in trade.

Hayek (1978a) had ‘two inventions in the economics field. On the one
hand, my proposal for a system of really limited democracy; and on the
other—also a field where present government cannot pursue a sensible
policy—the denationalization of money, taking the control of money out
of the hands of government.’41
220 7 4–13: Austrians and the Holocaust (1)

9: Brain Anatomists

The ninth knowledge community that Hayek associated with were
brain anatomists with research interests in schizophrenia. In Zurich in
1919–1920, Hayek (1994, 64) worked in the laboratory of the brain
anatomist, Constantin von Monakow, ‘tracing fibre bundles through the
different parts of the human brain.’ von Monakow and S. Kitabayashi
(1919) had just published ‘Schizophrenie und Plexus chorioidei’ in
Schweizer Archiv für Neurologie und Psychiatrie (Swiss Archives of
Neurology and Psychiatry—a journal von Monakow had founded in
1917).
The for-posthumous-consumption biographical interviews that Hayek
gave to his disciples will, presumably, never be released to avoid damage
to what appears to be their major preoccupation: tax-exempt fund-raising
(Leeson 2015c, Chap. 2). Hayek attempted to dictate his ‘Against the
Stream’ biography to Bartley (Leeson 2013a, Chap. 9); the four pages of
transcripts (one heavily redacted) that the AIEE editor has been allowed
to inspect reveal Hayek to be somewhat paranoid: obsessing about being
watched by sinister forces—including the Nazis—on the basis of receiv-
ing an uncensored book from Germany via Franco’s Spain.
Hayek’s mental illness manifested itself in obsessive self-interest and
extreme mood swings—from suicidal depression to what he called
‘frightfully egotistic’ feelings.42 Cubitt did not specify which type of psy-
chiatrist her employer was supervised by; but Hayek (1978a) explained:
‘it seems that it was through psychiatry that I somehow got to the prob-
lems of political order.’43 After his second prolonged bout of depression
(1969–1974), Hayek always carried a razor blade with which to slash
his wrist; he wanted to know ‘where “the poison”, that is arsenic, could
be obtained.’ During his third bout (1985–), the second Mrs Hayek
instructed Cubitt (2006, 168, 188, 168, 89, 111, 174, 188, 284, 328,
317) not to let her husband near the parapet of their balcony. When
asked ‘What did Hayek think about subject x?’ his fellow Austrian-LSE
economist (1933–1948), Ludwig Lachmann (1906–1990), would rou-
tinely reply: ‘Which Hayek?’ (cited by Caldwell 2006, 112). Cubitt
noted that Hayek became ‘upset’ after reading an article on schizophre-
nia and ‘wondered whether he thought it was referring to himself or
 10: Aryans 221

Mrs Hayek.’ The 1974 Nobel Prize for Economic Sciences exacerbated
this personality split: Walter Grinder detected ‘almost two different peo-
ple’ (Ebenstein 2003, 264).
In May 1975, Reagan described communism as ‘a form of insanity …
a temporary aberration that will one day disappear from the earth because
it is contrary to human nature’ (cited by Kengor 2001). As President,
Reagan (27 March 1984) informed Eamonn Butler of the Adam Smith
Institute that Hayek had played ‘an absolutely essential role in preparing
the ground for the resurgent conservative movement in America.’44
In 1991, Hayek told his second wife to put him—not in a nursing
home—but into

a lunatic asylum, yet their doctor said he was in perfect physical shape. His
hallucinatory experiences exhausted him … Sometimes he would see
things in vivid shapes, green meadows, writing on the wall, and even per-
ceived sounds. No matter how strongly Mrs Hayek would deny the reality
of these apparitions he would insist that he had seen and heard them. On
one such occasion he was so distressed because she would not believe him
that he clutched my hand and said that the presence of persons and their
singing had lasted for nine hours. (Cubitt 2006, 355–356)

10: Aryans
Hayek contributed to what later became known as the Ahnenpaß,
or ancestor passport: the Nazi certification of ‘Aryan lineage’—his
tenth knowledge community. Vienna was—and remains—one of
the most anti-Semitic cities in the world (Leeson 2015c, Chap. 3).
In mid-­nineteenth-­century Britain, a Jew, Disraeli, could be elected
Tory Prime Minister (1868, 1874–1880), while in 1907, Hitler
arrived in Vienna with a possible Jewish ancestry and found—and
admired and later emulated—an openly anti-Semitic Mayor (Karl
Lueger 1897–1910).45 The 1933 Law for the Restoration of the
Professional Civil Service, signed by Hitler and Count Schwerin von
Krosigk, excluded those with one non-‘Aryan’ parent or grandparent
(Stackelberg and Winkle 2002, 150–152).
222 7 4–13: Austrians and the Holocaust (1)

Genealogical ‘research’ flourished during the Third Reich; a third-­

of-­a-century later, Hayek (1978a) stated: ‘Now, see, the Wittgensteins
themselves were three-quarters Jewish, but Ludwig Wittgenstein’s grand-
mother was the sister of my great grandfather; so we were again related.’46
Between 1903 and 1904, Wittgenstein (26 April 1889–1951) and Hitler
(20 April 1889–1945) attended the same state school; Wittgenstein may
have been the only Jew that Hitler knew before arriving in Hayek’s Vienna
(McGinness 1988, 51; Monk 2001, 15; see also, with caution, Cornish
1999). Morgenstern complained in his diary that in the Geistkreis he was
the ‘only pure Aryan (out of 8!). Hayek is probably only 1/2 or 2/3. This
is uncomfortable’ (cited by Leonard 2010, 108, n30).
Hayek’s (1994, 61–62) obsession with establishing his own ‘Aryan’
ancestry pre-dates Hitler’s and evolved out of an overheard conversation
about his family being Jewish, whilst staying in the Alpine summer home
of Eugenie Schwarzwald, who ran a progressive school which his cousin,
the second Mrs Hayek, attended:

In Vienna there was a certain amount of speculation in the Jewish com-

munity [about whether my family was Jewish]. One of the things that
amused me: My younger brother Heinz, who in every other respect had a
face that could be much less Jewish than mine, actually had dark hair, black
hair; and it just so happened that in one of the summers I spent in the
Schwarzwalds’ summer home, I happened to overhear a conversation
among the Jewish circle, when my brother arrived, to the effect that he
looked Jewish. My own curiosity about this led me to spend a great deal of
time researching my ancestors. I have full information for five generations
in all possible directions … so far back as I can possibly trace it, I evidently
had no Jewish ancestry whatsoever.

Hayek was ‘at pains to point out and was to repeat this many times,
that his family could not have Jewish roots’ (Cubitt 2006, 51).
In the 1970s, the ‘Jewish conspiracy’-obsessed ‘Liberty Lobby’ sought to
function as ‘a bridge between the more isolated paramilitary constituencies
and the broader right wing movement’ (Mintz 1985, 104). In the 1990s
‘united front’ with Neo-Nazis, Hayek’s Jewish-born co-leader of the fourth-
generation Austrian School of Economics formed a Classical Liberal Pact
with ‘Rednecks’: did he exclude the Aryan Brotherhood (Rothbard 1992a)?47
 11–12: Socialism and Jewish Anti-Semitism 223

11–12: Socialism and Jewish Anti-Semitism

Hayek’s encounters with the Schwarzwald family exposed him to two
other knowledge communities that may have influenced his future devel-
opment. During the ‘Great’ War, Eugenie Schwarzwald (1872–1940)

began a second career as a social worker, while continuing with her school.
She succeeded in recruiting aristocrats, businessmen and politicians in
order to realize her large-scale social projects. She organized aid programs
for refugees, opened public kitchens offering cheap meals in almost every
district in Vienna, and established recreation homes for children, mainly in
the Semmering area in Lower Austria, allowing children to enjoy fresh air
and regular meals outside the city …
In 1920, she purchased the summer villa ‘Seeblick’ in Grundlsee in
Styria as a recreation resort, mainly hosting her growing circle of friends, a
fascinating mixture of authors, musicians, actresses, monarchists, socialists
and Marxists … In 1934, following the establishment of the Austro-Fascist
government in Austria, Schwarzwald organized support for persecuted
socialists. (Shapira n.d.)

Popper worked in one of Schwarzwald’s recreational homes for chil-

dren (Hacohen 2000, 91). This knowledge community may have pre-
pared Hayek for Wieser’s Fabian Socialism.
According to Peter Drucker (1978, 32), Eugenie’s husband, Hermann
(‘Hemme’) Schwarzwald (1871–1939), had a ‘hero in economics’—
Eugen Dühring (1833–1921): ‘What attracted him was that Dühring
alone among all known nineteenth century economists had been ardently,
indeed violently, anti-Semitic … Hemme was by no means the only
European Jew who turned anti-Jewish to resolve his own inner conflicts.’
Was The Road to Serfdom (1944) an extrapolation from Schumpeter’s
(1942) Capitalism, Socialism and Democracy (and the early influence
of Wieser’s and Eugenie Schwarzwald’s ‘socialism’) to the Nazis and
Hermann Schwarzwald’s anti-Semitism? Was Mises, Drucker’s (1978,
50) New York University colleague—who ‘did not suffer from undue
modesty’—included in this Jewish anti-Jewish community?
Hayek (1978c) pretended to be ‘shocked’ to find that in Vienna, anti-­
Semitism remarks were being made by ‘a good many people of Jewish
224 7 4–13: Austrians and the Holocaust (1)

descent.’ Mises reportedly taunted Ayn Rand as a ‘silly little Jew girl’
(cited by Burns 2009, 141); Hayek also told Cubitt (2006, 17) about
‘a famous scientist without, however, revealing his name, who despite
being opposed to Hitler had gone to one of his rallies just to see what it
was like, only to find himself applauding and clapping his hands, about
which afterwards had been very ashamed [sic].’

 3: Hayek’s Philosophy as ‘the Product of This

1
Background’: Eugenics, Social Hygiene
and the Nazi Euthanasia Programme
The ‘old truths,’ ‘background’ and ‘climate of opinion’ associated with
the first three decades of Hayek’s (pre-English) life influenced, in one way
or another, his advocacy. Fürth (23 March 1992) told Paul Samuelson
that Hayek’s father was the president of a ‘highly nationalistic society of
“German” physicians’ who competed with the politically neutral General
Medical Association.48
Hayek (1978a) ‘grew up in an atmosphere which was governed by a
very great psychiatrist who was absolutely anti-Freudian: [Julius] Wagner-­
Jauregg.’49 According to Hayek (1978a), the composition of Viennese
intellectual groups was ‘connected with what you might call the race
problem, the anti-Semitism. There was a purely non-Jewish group; there
was an almost purely Jewish group; and there was a small intermediate
group where the two groups mixed.’50 Hayek’s (1994, 61) own family was
in ‘the purely Christian group; but in the university context I entered into
the mixed group.’ The phrase ‘purely Christian’ appears to mean proto-­
Nazi or anti-Semitic. Within the ‘very small group’ of ‘famous people of
Vienna,’ Hayek (1978a) ‘knew almost every one of them personally. And
with most of them I was somehow connected by friendship or family
relations and so on.’51 When asked ‘[Did you know Konrad] Lorenz?’
Hayek (1978a) replied: ‘Oh, yes, I know the whole family.’52
Two of the five University of Vienna recipients of the Nobel Prize
for Medicine had Nazi connections: Wagner-Jauregg (1857–1940) and
Lorenz (1903–1989) (Burkhardt 2005, Chap. 5). The university website
 13: Hayek’s Philosophy as ‘the Product of This Background’... 225

has three links to ‘Konrad Lorenz and National Socialism’; plus a link
to a ‘controversial discussion’ about Wagner-Jauregg’s involvement with
the Nazis. This ‘Exculpatory report’ states: ‘The conviction of the need
for population policies was present in all political and social groups.’ A
list of ‘social hygiene’ and ‘eugenics’ related organizations and associated
individuals was provided, including ‘Ludwig von Mises, economist and
founder of the Institute for Business Cycle Research (now the Austrian
Institute for Economic Research), Othmar Spann, philosopher of history
and a staunch opponent of Marxism.’53
Raico (2012, 275, 274), the translator of Liberalism in the Classical
Tradition, justified Mises’ support of Fascism by invoking Pareto—who
suggested ‘that the author of an article in the socialist paper Avanti!
endorsing the strikers’ violence should be taken care of by General Bava
Beccaris, who had just supervised a massacre of violently protesting
socialists in Milan.’ Raico quoted Pareto:

To lack the courage needed to defend oneself, to abandon any resistance, to

submit to the generosity of the victor, even more, to carry cowardice to the
point of assisting him and facilitating his victory, is the characteristic of the
feeble and degenerate man. Such an individual merits nothing but scorn,
and for the good of society it is useful that he should disappear as quickly as
possible [emphasis added].

The social hygiene and eugenics movement was the thirteenth knowl-
edge community that Hayek encountered. In ‘Security and Freedom,’
Hayek (2007 [1944], 151–152) stated: ‘It has been well said that while
the last resort of a competitive economy is the bailiff, the ultimate sanc-
tion of a planned economy is the hangman.’ Friedman used a hangman
analogy to describe Hayek’s contribution to the deflation that assisted
Hitler’s rise to power:

I think the Austrian business-cycle theory has done the world a great deal
of harm. If you go back to the 1930s which is a key point, here you had the
Austrians sitting in London, Hayek and Lionel Robbins, and saying you
just had to let the bottom drop out of the world [emphasis added]. You’ve just
got to let it cure itself. You can’t do anything about it. You will only make
226 7 4–13: Austrians and the Holocaust (1)

it worse … I think by encouraging that kind of do-nothing policy, both in

Britain and in the United States, they did harm. (Cited by Epstein 1999)

In his diary (29 August 1937), the anatomist Hermann Voss referred to
Heinrich von Hayek as ‘the little Viennese Jew’ (cited by Aly et al. 1994,
112). Before Heinrich von Hayek could have joined the Sturmabteilung
(SA, Storm Detachment, Assault Division or Brownshirts) he would have
had to use the family tree (such as the one constructed by his brother) to
demonstrate that his family did not have Jewish roots. He was accepted
in November 1933 and promoted to the rank of Scharführer (non-­
commissioned officer) in 1943. In March 1938, he joined the Nazi Party
(member number 5518677) and served as Führer (1934–1935) in the
Kampfring der Deutsch-Österreicher im Reich (Hilfsbund), an organization
of German-Austrians living in Germany that displayed a Swastika in its
regalia (Hildebrandt 2013; 2016).
Was Hitler the first person to have Nazi Party members shot in cold
blood? After the 1934 Night of the Long Knives, he explained

In this hour I was responsible for the fate of the German people, and
thereby I became the supreme judge of the German people. I gave the order
to shoot the ringleaders in this treason, and I further gave the order to
cauterise down to the raw flesh the ulcers of this poisoning of the wells in
our domestic life. Let the nation know that its existence—which depends
on its internal order and security—cannot be threatened with impunity by
anyone! And let it be known for all time to come that if anyone raises his
hand to strike the State, then certain death is his lot.

The premier German legal scholar, Carl Schmidt, defended Hitler in

‘The Führer Upholds the Law’ (Kershaw 1999, 519). Hayek (1978a)
described Schmidt as

one of the most intelligent of the German lawyers, who saw all the prob-
lems, then always came down on what to me was intellectually and morally
the wrong side. But he did really see these problems almost more clearly
than anybody else at the time—that an omnipotent democracy, just
because it is omnipotent, must buy its support by granting privileges to a
number of different groups. Even, in a sense, the rise of Hitler was due to
 13: Hayek’s Philosophy as ‘the Product of This Background’... 227

an appeal to the great numbers. You can have a situation where the sup-
port, the searching for support, from a majority may lead to the ultimate
destruction of a democracy.54

Buchanan (2015 [1979], 259) sneered at non-Hayekians:

My purpose here is not, however, to criticize in retrospect those who were

swayed by intellectual-academic fashion, and who joined in the neglect of
Hayek’s contribution as a scholar. My purpose here is quite different. I
want to focus attention on Hayek’s position in those lean years, and I want
to note his courage and integrity in sticking to his guns when, quite liter-
ally, he must have felt that almost everyone else among his peers was out of
step. Hayek’s record of intellectual consistency throughout his career is one
of the most enduring features of his work.

Like Hitler, Hayek (1992a [1945], 223), who despised ‘social justice,’
explained that ‘full justice’ involved shooting in cold blood:

Neither legal scruples nor false humanitarianism should prevent the meet-
ing out of full justice to the guilty individuals in Germany. There are thou-
sand, probably tens of thousands, who fully deserve death; and never in
history was it easier to find the guilty men. Rank in the Nazi party is almost
certain indication of the degree of guilt. All the Allies need to do is to
decide how many they are prepared to put to death. If they begin at the top
of the Nazi hierarchy, it is certain that the number they will be shooting in
cold blood will be smaller than the number who deserve it.

Yet two years later, when his brother was barred from academic
employment under German de-Nazification laws, Hayek compared the
Holocaust to playing the fiddle in the Viennese Symphony Orchestra:
‘It is scarcely easier to justify the prevention of a person from fiddling
because he was a Nazi than the prevention because he is a Jew’ (Spectator
1947; cited by Ebenstein 2003, 390, n21).
For Hayek (1978a), to avoid ‘serious revolt against the market society,’
the individual must ‘bow’ and ‘obey.’55 The Road to Serfdom Texts and
Documents The Definitive Edition includes a reprint of the Foreword to
the American edition, in which Chamberlain (2007 [1944], 253–256),
228 7 4–13: Austrians and the Holocaust (1)

somewhat confused and ill-informed, complained that ‘six hundred

thousand Jews are now deprived of their property, scattered to the ends
of the earth, or lying in mass graves in the Polish forests.’ But as editor,
Caldwell neglected to report that Heinrich von Hayek spent the Third
Reich injecting chemicals into freshly executed victims of the regime.
The von Hayek family’s Nazi Party affiliation would not have assisted
the cause of restating Mises’ pro-Fascist conclusions in ‘a more effective
form.’56

Notes
1. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
2. Wieser was ‘proud, as he believed, to have provided a scientific justifica-
tion for progressive income taxation with his development of the theory
of marginal utility’ (Hayek 1992a [1977], 156).
3. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
5. Hayek Papers Box 23.1.
6. Hayek (1978a) saw similarities between himself and Keynes who ‘had
been so much an intuitive genius, not really a strict logical reasoner, that
both the atmosphere of the time, the needs of the moment, and his per-
sonal feelings might have swayed his opinions very much. I regard him as
a real genius, but not as a great economist, you know. He’s not a very
consistent or logical thinker, and he might have developed in almost any
direction. The only thing I am sure is that he would have disapproved of
what his pupils made of his doctrines.’ Friedrich Hayek, interviewed by
Thomas Hazlett 12 November 1978 (Centre for Oral History Research,
University of California, Los Angeles, http://oralhistory.library.ucla.edu/).
7. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 229

8. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
9. ‘The one thing about Lu that was as astonishing as it was frightening was
his temper. Occasionally he showed terrible outbursts of tantrums. I do
not really know what else to call them. I had experienced them in Vienna
on various occasions. Suddenly his temper would flare up, mostly about
a small, unimportant happening. He would lose control of himself, start
to shout and say things, which coming from him, were so unexpected, so
unbelievable, that when it happened the first few times I was frightened
to death. Whatever I said would enrage him even more. It was impossi-
ble to reason with him. So I kept silent or went out of the room. I gradu-
ally realized that these outbursts had nothing to do with me. I was just
there, I was the outlet which gave him the opportunity to relieve himself.
And I learned to understand that these terrible attacks were really a sign
of depression, a hidden dissatisfaction and the sign of a great, great need
for love’ (Margit Mises 1976, 44).
10. http://www.mises.org/daily/1700
11. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
12. ‘Fritz was helpful in getting the American Economic Association to
name Lu as Distinguished Fellow.’
13. https://www.aeaweb.org/honors_awards/disting_fellows.php
14. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
15. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
16. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
18. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
230 7 4–13: Austrians and the Holocaust (1)

19. Fürth Papers Hoover Institution Box 4.

20. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
21. Conversation with Leube, 27 June 2009.
22. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
23. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
24. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
25. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
26. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
27. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
28. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
29. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
30. ‘Well, I would still aim at completely eliminating all direct interference
with the market—that all governmental services be clearly done outside
the market, including all provision of a minimum floor for people who
cannot make an adequate income in the market. [It would then not be]
some attempt to control the market process but would be just providing
outside the market a flat minimum for everybody. This, of course, means
in effect eliminating completely the social justice aspect of it, i.e., the
deliberate redistribution beyond securing a constant minimum for
everybody who cannot earn more than that minimum in the market. All
 Notes 231

the other services of a welfare state are more a matter of degree—how

they are organized. I don’t object to government rendering quite a num-
ber of services; I do object to government having any monopoly in any
case. As long as only the government can provide them, all right, but
there should be a possibility for others trying to do so.’ Friedrich Hayek,
interviewed by Axel Leijonhufvud date unspecified 1978 (Centre for
Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
31. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
32. ‘One other thing I should probably tell you, because if I don’t they will
probably be saying this about me, too. We did get something, a gift, after
the election. A man down in Texas heard Pat on the radio mention that
our two youngsters would like to have a dog, and, believe it or not, the
day we left before this campaign trip, we got a message from Union
Station in Baltimore, saying they had a package for us. We went down to
get it. You know what it was. It was a little cocker spaniel dog, in a crate
that he had sent all the way from Texas, black and white, spotted, and
our little girl Tricia, the six year old, named it Checkers. And you know,
the kids, like all kids, loved the dog, and I just want to say this, right
now, that regardless of what they say about it, we are going to keep it.’
33. http://www.pbs.org/wgbh/americanexperience/features/primary-­
resources/nixon-resignation/
34. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
35. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
36. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
37. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
38. https://www.lewrockwell.com/1970/01/murray-n-rothbard/
life-in-the-old-right/
232 7 4–13: Austrians and the Holocaust (1)

39. Hayek (1975a [1974]) prefaced this comment with: ‘I’m sure a totalitar-
ian socialism is incompatible with a really democratic system.’
40. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
41. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
42. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
43. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
44. Hayek Papers Box 24.72.
45. Hitler’s possible Jewish ancestry only became widely known later.
46. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
47. Rothbard did not provide a list of his ‘masses in motion.’
48. Fürth Papers. Hoover Institution. Box 5.
49. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
50. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
51. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
52. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
53. http://www.univie.ac.at/archiv/tour/21.htm
54. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
 Notes 233

55. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre

for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
56. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 8
14–16: Austrians and the Holocaust (2)

 4: British-Austrians: Make
1
the Economy Scream
Kissinger (2013 [1957], 1; 1954) described the antithesis of a revolution-
ary foreign policy as that based on ‘legitimacy’ rather than ‘justice.’ In
1970, Nixon ordered the CIA to ‘make the [Chilean] economy scream’
to ‘prevent Allende from coming to power or to unseat him’ (cited by
Kornbluh 2013, 17). Kissinger (27 June 1970) updated King George III:
‘I don’t see why we need to stand by and watch a country go commu-
nist because of the irresponsibility of its own people’ (cited by Johansen
1980, 260). From the Great Depression to the democratically elected
Allende government and beyond, most if not all Austrians and their
fellow-­travellers seek to ‘make the economy scream’ through deflation—
but only some consciously take the next step of openly advocating dic-
tatorships to eliminate that section of the political market that advocates
policies they disapprove of.
President Wilson’s 14 Points doomed the Habsburgs and their Empire.
Less than seven years after the attack on Pearl Harbor, the Cold War
obliged the American Republic to begin to embrace the remnants of

© The Author(s) 2017 235

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_8
236 8 14–16: Austrians and the Holocaust (2)

the Japanese Empire and those who had provided the deflationary fuel
that had facilitated Hitler’s rise to power. As Hitler was gaining electoral
momentum, Hayek promoted deflation-induced ‘allocative corrections’
and the removal of ‘distorted relative prices’—that is, eliminating rigidi-
ties in wages—as a ‘desirable’ policy:

at the beginning of the Great Depression … I believed that a process of

deflation of some short duration might break the rigidity of wages which I
thought was incompatible with a functioning economy. Perhaps I should
have even then understood that this possibility no longer existed … I
would no longer maintain, as I did in the early ‘30s, that for this reason, and
for this reason only [emphasis added], a short period of deflation might be
desirable. Today I believe that deflation has no recognizable function what-
ever, and that there is no justification for supporting or permitting a pro-
cess of deflation. ([1974] cited by Haberler 1986, 426)

A specific denial by a conspiratorial liar invites investigation. Hayek

(2011 [1960], 186) referred to ‘the most difficult task’ of persuading ‘the
employed masses’; in contrast, the unemployed masses often seek sal-
vation through the persuasive oratory of Red and White Terrorists: the
Austrian-promoted policy-induced deflation that preceded Hitler’s rise
to power increased the real wage and thus created a pool of unemployed
‘masses.’ In line with his promotion of the organic State or ‘market soci-
ety,’ Hayek (2010 [1944], 154), referring to The Road to Serfdom, insisted
‘It is essential for the growth of reason that as individuals we should bow
to forces and obey principles [emphasis added] which we cannot hope fully
to understand, yet on which the advance and even the preservation of
civilization depend.’
The Austrian explanation for America’s Great Depression is that the
‘adjustment process’ was ‘hobbled’ by policy:

Keep[ing] wage rates up. Artificial maintenance of wage rates in a depression

insures permanent mass unemployment. Furthermore, in a deflation, when
prices are falling, keeping the same rate of money wages means that real
wage rates have been pushed higher. In the face of falling business demand,
this greatly aggravates the unemployment problem …
 14: British-Austrians: Make the Economy Scream 237

Subsidiz[ing] unemployment. Any subsidization of unemployment (via

unemployment ‘insurance,’ relief, etc.) will prolong unemployment
­indefinitely, and delay the shift of workers to the fields where jobs are avail-
able. (Rothbard 2000 [1963], 19–20)

Hayek (1978a) had been ‘very much influenced by Mises.’1 The devout
Presuppositionist, Boettke (2004, 6, n4, 7), agrees: ‘Mises and Hayek, as
we have seen, are both advocates of the private property market order and
attempts to dehomogenize Mises and Hayek on the issue of private prop-
erty and knowledge is mistaken … Summing up, the argument made by
Mises and Hayek can be said to progress from property right to prices to
profit and loss and finally to politics.’
On 1 May 1970, the Quaker President Nixon referred to anti-war
demonstrators as ‘bums’2; four days later, four unarmed student demon-
strators were shot dead by the Ohio National Guard. On 8 May 1970,
Nixon (who had 58 journalists on his enemies list) told a White House
press conference:

I would certainly regret that my use of the word ‘bums’ was interpreted to
apply to those who dissent. All the members of this press corps know that
I have for years defended the right of dissent.3

Rothbard was ‘an ardent fan of Christianity’: ‘In particular Murray rec-
ognized the positive role in bolstering liberty in the U.S. played by litur-
gical Christianity’ (Salerno 1995, 80–81). To defend the ‘private property
market order,’ Rothbard (1992a, 8–9) proposed to establish an Austrian
Police State with no separation of powers:

2. Slash welfare. Get rid of underclass rule by abolishing the welfare system,
or, short of abolition, severely cutting and restrict it.
3. Abolish racial or group privileges. Abolish affirmative action, set aside
racial quotas, etc., and point out that the root of such quotas is the entire
‘civil rights’ structure, which tramples on the property rights of every
American.
4. Take Back the Streets: Crush Criminals. And by this I mean, of course,
not ‘white collar criminals’ or ‘inside traders’ but violent street criminals-­
238 8 14–16: Austrians and the Holocaust (2)

robbers, muggers, rapists, murderers. Cops must be unleashed, and allowed

to administer instant punishment, subject of course to liability when they
are in error.
5. Take Back the Streets: Get Rid of the Bums. Again: unleash the
cops to clear the streets of bums and vagrants. Where will they go? Who
cares? Hopefully, they will disappear, that is, move from the ranks of
the petted and cosseted bum class to the ranks of the productive mem-
bers of society.

Christianity is usually associated with the sentiments of ‘Abide with

Me’: in the British neoclassical tradition, Alfred Marshall kept a paint-
ing of a ‘down and out’ on his wall to guide him back to ‘the right path’
when beguiled by distracting, but shallow academic controversies (Pigou
1953, 65). In contrast, American-Austrians seek to carry ‘aloft the intel-
lectual flag’ of the House of Habsburg—while their conspicuous ‘moral-
ity’ allows them to extract a tithe from the financially illiterate. White
collar criminals and price-fixing ‘market free play’ insider-traders typi-
cally ‘sleep in their own beds’ (they do not get jailed, and their banks pay
the fines); while appeals to ‘God’ and ‘bring-the-house-down’ patriotism
(plus a desire for subsidized human capital formation) leads many young
Americans to enlist in the military, suffer Post-Traumatic Stress Disorder,
and then become homeless (what Austrians call ‘Bums’). The suicide rate
for American veterans is much larger than the comparable rate for non-­
veterans (Kesling 2016).
Mises (1963, 282; 1966, 282; 1985 [1927], 44, 51, 19) promoted the
‘Warfare State,’ ‘Ludendorff and Hitler’ and other ‘Fascists’ as defenders
of ‘civilisation,’ ‘liberty’ and ‘property’: ‘full of the best intentions.’ After
Anschluss, Austrian School economists have used the terms ‘Fascist’ and
‘Nazi’ to denigrate their opponents—such as the Jewish-born Friedman
(Leeson 2015a, Chap. 7). Referring to the Nixon Administration,
Rothbard (1971b) declared:

The fascization of America proceeds apace. To top it off, the Administration

is readying two socialistic ‘welfare’ measures of great importance: one fur-
ther socializes medicine through nationwide major medical ‘insurance’ to
be paid by the long-suffering poor and lower-middle class Social Security
taxpayer.
 14: British-Austrians: Make the Economy Scream 239

Hayek (1949, 420–421, 428) encouraged his disciples to have the

‘courage to indulge in Utopian thought’; but while Austrians indulge in
inflammatory rhetoric, economists must tackle the market failure that
lies at the heart of capitalism: the market for knowledge and its products.
Influenza vaccinations, for example, generate net social benefits—but
where in the supply chain do the social benefits of medical entrepre-
neurship exceed the costs? The 1918–1919 influenza epidemic spurred
vaccination research: how are costs to be recouped—through the private
market, patents, and a socially suboptimal price floor? Or through tax-­
funded public health research? Or are there a better ways of rewarding
invention and innovation without patents? This is a market design—not
an ideological—question.
Presumably, John Rawls will be the last North American philosopher
to lose a brother to diphtheria (Pogge 2007, 5–6)4; presumably, Franklin
D. Roosevelt will be the last polio victim to serve as US President; and
presumably, Nixon will be the last US President to suffer the depression-­
inducing trauma of losing a brother to tuberculosis5: tax-funded public
health campaigns have reduced the impact of such infectious diseases.
Sometimes, however, the lobby-funded linking of vaccinations to unin-
tended consequences produces articles with titles like ‘Great Science
Frauds’ (Time 2012).
Austrians and their fellow-travellers tend to regard vaccinators and
those who promote ‘sin’ taxes (e.g. on tobacco) as ‘Public Health Nazis.’
According to the South African-Austrian, Leon Louw, anti-smoking
bylaws are ‘a kind of hysteria, a peculiar semi-religious fundamentalist
Puritanism … a vicious assault’ on choice: ‘The anti-tobacco fanatics …
the nicotine Nazis will not stop until there is full prohibition.’6 (See also
Jon Anderson’s (2010) ‘Public Health Nazi tail wags dog of individual
free choice and liberty.’7).
Had President Wilson not been incapacitated by the Great Influenza
Pandemic of 1918–1919, the Peace Treaties may have been more about
a lasting peace and less dominated by a Pétain-style, vengeance-driven,
interwar interval or truce. Four major Republics were undermined by
the consequences: the First German (1919–1933), the First Austrian
(1919–1934), the Third French (1870–1940) and the American (1789–
). Point 5 of Wilson’s 14 Points called for ‘A free, open-minded, and
240 8 14–16: Austrians and the Holocaust (2)

absolutely impartial adjustment of all colonial claims, based upon a strict

observance of the principle that in determining all such questions of
sovereignty the interests of the populations concerned must have equal
weight with the equitable claims of the government whose title is to be
determined.’
The 1776 Declaration of Independence, referring to the ‘patient suf-
ferance of these Colonies,’ noted: ‘In every stage of these Oppressions
We have Petitioned for Redress in the most humble terms: Our repeated
Petitions have been answered only by repeated injury. A Prince whose
character is thus marked by every act which may define a Tyrant, is unfit
to be the ruler of a free people.’ Republicanism was at that time an equiv-
alent threat to the ‘social order’ as Protestantism had previously been and
Anarchism and Communism later came to be.
In October 1918, Tomáš Masaryk, the first President of (post-­
Habsburg) Czechoslovakia, proclaimed the ‘Declaration of Common
Aims of the Independent Mid-European Nations’ in Independence
Hall, Philadelphia.8 The 1836 Texas Declaration of Independence was
signed in Washington-on-the-Brazos9; in 1945, when declaring the
independence of the Democratic Republic of Vietnam, Ho Chi Minh’s
(1890–1969) appeal to the universal applicability of the principles of the
1776 Declaration of Independence should perhaps have taken place in a
newly named ‘Washington-on-the-Mekong.’ His failure to gain a hear-
ing at the 1919 Versailles ‘Peace’ conference led him to abandon faith in
Wilsonian idealism in favour of ‘the formula of Karl Marx: we say to you
that your liberation can only come by your own efforts’ (cited by Huynh
1982, 60).
His country’s struggle to escape from the status of colonial ‘prop-
erty’ took longer and was more costly than that endured by the thirteen
American colonies. The Empire of Japan could have had a ‘Vietnam’:
instead Pétain’s Vichy France surrendered to the Japanese after only a
few days resistance. The ‘Protocol Concerning Joint Defense and Joint
Military Cooperation’ gave the Japanese control of eight airfields. In
November 1941, the United States instructed the Japanese to give up
all occupied territories in Indochina and China, and withdraw from
the Austro-German, Japanese and Italian Tripartite Pact (which had
been established on 27 September 1940). But Vietnam became a transit
 14: British-Austrians: Make the Economy Scream 241

s­ tation for Japanese troops in the build-up to the attack on Pearl Harbor
(Gilbert 1989, 273). In 1945, a Japanese puppet-State was established:
the Empire of Vietnam (11 March–23 August). How many lives—
including Americans—did that 1919 decision cost?
On 14 February 1973, Nixon told Colson: ‘My losses are to be cut.
The President’s losses gotta be cut on the cover-up deal’ (cited by Frost
1978, 58). To cover-up his obstruction of justice, on 17 November 1973,
Nixon (1913–1994) declared: ‘in all of my years of public life I have
never obstructed justice. People have got to know whether or not their
President is a crook. Well, I’m not a crook. I’ve earned everything I’ve
got’ (cited by Kilpatrick 1973). ‘Be you ever so high, the law is above
you’? Nine months later, Nixon became the only President to resign the
office, whilst maintaining: ‘When the president does it, that means it is
not illegal’ (cited by Frost 1978, 183).
In 1927, Allyn Abbott Young (1876–1929) had been recruited by
Beveridge, the LSE Director, to fill chair vacated by the 1926 retirement
of the British-Austrian, Edwin Cannan (Blitch 1995; Mehrling and
Sandilands 1999).10 At the LSE in 1928, Coase (1983, 211) heard Young
talk about ‘the Austrians and the importance of their work. The reason
he did this was that he was introducing von Mises who then gave a lec-
ture.’ Had Young (1876–1929) not died prematurely during an influenza
epidemic, Hayek would presumably have remained in Austria and, in all
likelihood, joined the Nazi Party like the rest of his family. Hayek told
his second appointed biographer that he had been present when Hitler
addressed hundreds of thousands of deliriously enthusiastic Austrians
on the Heldenplatz three days after Anschluss (Cubitt 2006, 16; Sime
1996, 184; Art 2006). Robbins referred to Hayek taking advantage of his
‘Nazi relatives’ for this visit to Austria, supposedly to ‘find out’ what had
happened to Austrian School economists (Howson 2011, 319). Hayek
(1994, 121) told his third appointed biographer a different story: ‘In fact
I was visiting my present wife.’
Robbins proposed to Beveridge that Jacob Viner be offered Young’s
chair—but Viner declined. Haberler may have been Beveridge’s pre-
ferred second choice (but the ‘sample’ lectures provided too difficult to
organize). As third choice, Hayek was invited by Beveridge to give the
University of London Advanced Lectures in Economics (27–30 January
242 8 14–16: Austrians and the Holocaust (2)

1931): ‘undoubtedly the most successful set of public lectures given at

LSE during my time there’ (Coase 1994 [1991], 19). Beveridge then
proposed that Hayek be offered the vacant chair; Robbins consulted with
T.E. Gregory before a decision was made (Howson 2011, 7).
Cannan (1927, xiii, 253, 305, 330, 417; 1930, 1932) was a strict
adherent of the quantity theory of money and apparently unconcerned
about the consequences of deflation. He devoted his professional life to
the cause of removing the ‘scales … from the eyes of the people of Europe’
until they forced disinflation upon their reluctant governments by cry-
ing: ‘Burn your paper money, and go on burning it till it will buy as much
gold as it used to do.’ According to Cannan, the ‘thorough deflationist’
cure for the ‘diarrhoea of paper’ would be disagreeable, ‘but so is giving
up the practice of over-indulgence in intoxicating liquor.’ With respect
to the unemployed ‘byproduct’ of this deflation, Cannan opposed unem-
ployment insurance on the grounds that ‘expectation of Government
assistance only hinders the mobility of existing workers.’
Cannan’s (1927 [1922], 311; [1924], 371–372) objection to
Keynes’ (1923) Tract on Monetary Reform had been preceded by an ear-
lier London-Cambridge ‘institutional’ dispute between Cannan and
Marshall (Dahrendorf 1995, 211–213; Coats 1967). Robbins (1971,
105, 85, 83) recalled that the ‘slogan’ at Cambridge in the 1920s was that
it was ‘all in Marshall,’ whereas Cannan emphasized ‘this or that weak-
ness of “old Marshall”.’ At the LSE, Cannan’s (1861–1935) ‘ascendency
was paramount. We revered him. We hung on his words. We conned
over his every piece of writing. He represented for us archetypal mature
wisdom in his subject’ (Robbins 1971, 83). In ‘Professor Cannan and
Contemporary Monetary Theory,’ Gregory (1927, 47–48) argued that
Cannan had

never shared the view made popular particularly by Professor Cassel and
shared by many English economists, that there is something peculiarly
disastrous or unfair in reversing the tendency of prices, so that after a
period of inflation, no attempt should be made to get prices any lower than
they were at the time that the cessation of further inflation took place. In
the first place, it is very doubtful whether it is possible to stabilize prices at
the point they have reached when inflation is stopped.
 14: British-Austrians: Make the Economy Scream 243

Gregory (1927, 48) referred to Cannan’s two arguments in favour of

deflation: first, merely stopping inflation (without lowering the price level)
would cause a ‘slump and depression’ regardless; and second, ‘the social
difficulties accompanying a period of deflation are usually exaggerated.’
Gregory (1927, 48) cited Cannan: any difficulties caused by deflation

must be regarded in the same light as those which a spendthrift or a drunk-

ard is rightly exhorted by his friends to face like a man … though we have
many unemployed, we have the satisfaction of knowing that the unem-
ployed in this and other deflated countries are better off than the employed
in countries where the inflation boom is still in full swing, and that what
they produce is sufficient not only for that but at the same time to provide
for the unemployed and incapable, better at any rate than they have ever
been provide for at any earlier periods—so well, in fact, that the goodness
of the provision is supposed to obstruct to an appreciable extent their
return to work by preventing necessary reductions of money wages in cer-
tain directions.

Gregory was the University of London Cassel Professor of Banking

and Currency: two years later, the collapse of an asset price bubble led to
the collapse of the American banking system and the Great Depression.
According to Herbert Hoover (1952, 30), his ‘Austerian’ Treasury
Secretary, Andrew Mellon, insisted on deflation: ‘liquidate labor, liqui-
date stocks, liquidate farmers, liquidate real estate… it will purge the
rottenness out of the system. High costs of living and high living will
come down. People will work harder, live a more moral life. Values will
be adjusted, and enterprising people will pick up from less competent
people.’11
Spann and Mises both aspired to become the sole intellectual Führer of
Fascism: Spann’s claim rested on what he believed to be his own ‘unique
possession of the key to true “Germanness,” [which] put him in the posi-
tion to aspire to the intellectual leadership of the Pan-German, and in
particular of the German Nazi movement—an attempt that was doomed
to fail from the outset’ (Klausinger 2014, 196).
Mussolini’s successful 1922 ‘March on Rome’ was accompanied by
laissez-faire sentiments: ‘In economic matters, we are liberals in the more
classical sense of the word’ (cited by Raico 2012, 278, 280, n38; see also
244 8 14–16: Austrians and the Holocaust (2)

Carsten 1982, 76). Elsewhere, other White Terrorists had not prevailed:
largely defeated in Russia by 1922, while the 1923 Ludendorff and Hitler
imitative ‘March on Berlin’ had failed to leave Munich.
In Liberalism in the Classical Tradition, Mises (1985 [1927], 48,
49) referred to the Austrian School Pact with those he aspired to lead:
Fascists, at least in ‘principle,’ profess the same ‘intentions’ as the Third
International: ‘That they have not yet succeeded as fully as the Russian
Bolsheviks in freeing themselves from a certain regard for liberal notions
and ideas and traditional ethical precepts is to be attributed solely to the
fact that the Fascists carry on their work among nations in which the
intellectual and moral heritage of some thousands of years of civilization
cannot be destroyed at one blow.’ Yet when the Eastern Reich joined the
Third Reich in 1938 (Anschluss), Austrians—who comprised only 8 per
cent of the total population—rapidly became disproportionately repre-
sented as SS members (13 per cent), concentration camp staff (40 per
cent), and concentration camp commanders (70 per cent). Austrian terri-
tory was the road to serfdom for the 800,000 victims who were compelled
to work as war-time slave labourers—many of whom were murdered as
the Allies advanced (Berger 2012, 84). Mises (1985 [1927], 48, 49) was
equally delusional about the future of Fascism whose ‘deeds … were emo-
tional reflex actions evoked by indignation at the deeds of the Bolsheviks
and Communists. As soon as the first flush of anger had passed, their
policy took a more moderate course and will probably become even more
so with the passage of time.’
The passage of time changed Mises’ (May 1943) mind about ‘Germans
and Italians’ and those who lived under Habsburg rule: ‘I do not believe
that a member of the Hitler youth or of the equivalent groups in Italy,
Hungary or so on can ever turn toward honest work and non-predatory
jobs. Beasts cannot be domesticated within one or two generations’ (cited
by Hülsmann 2007, 817). For neo-Feudalists, an individual is defined by
ascribed status, while democracy values achieved status. The open society
allows for personal redemption, while the Austrian closed society imposes
intergenerational ‘blood guilt.’
Mises (1985 [1927], 48–49, 50) had cautioned against ‘complete
faith’ in Fascist tactics: ‘Now it cannot be denied that the only way one
can offer effective resistance to violent assaults is by violence. Against
 14: British-Austrians: Make the Economy Scream 245

the weapons of the Bolsheviks, weapons must be used in reprisal, and

it would be a mistake to display weakness before murderers. No lib-
eral has ever called this into question.’ The distinguishing difference
between ‘liberal from Fascist political tactics’ related to the ‘fundamen-
tal estimation of the role of violence in a struggle for power.’ Fascists
had ‘complete faith in the decisive power of violence,’ while Mises only
partly agreed: ‘In order to assure success, one must be imbued with the
will to victory and always proceed violently. This is its highest principle’
He also noted that a civil war was bound to result. Fascism needed to
be augmented by Classical Liberal ideas: ‘The decisive question, there-
fore, always remains: How does one obtain a majority for one’s own
party? This, however, is a purely intellectual matter.’ Mises then out-
lined his role as the sole intellectual Führer of a Nazi-Classical Liberal
Pact: ‘Fascism does nothing to combat it except to suppress socialist
ideas and to persecute the people who spread them. If it wanted really
to combat socialism, it would have to oppose it with ideas. There is,
however, only one idea that can be effectively opposed to socialism, viz.,
that of [classical] liberalism.’
The Last Knight of Liberalism was deluded on this and on the power of
‘naked force’:

Mises was completely taken by surprise. He had not realized that condi-
tions had once again changed profoundly. Tank divisions had become suf-
ficiently fast to attack the flanks of even very large armies, especially when
the divisions operated under air support … Mises could hardly believe
what he read in the newspapers. ‘Belgium! Holland!’ he exclaimed in his
notebook on May 10 … On June 14, Mises exclaimed again: ‘Paris!’ and
three days later ‘Armistice!’ It was an ordeal. May 1940 was, as he later
recalled, ‘the most disastrous month of Europe’s history.’ It was the only
time he was ever wrong in forecasting an important political or economic
event. (Hülsmann 2007, 751)

When Britain left the gold standard in 1931, Mises falsely predicted:
‘In one week England will be in hyperinflation’ (cited by Hülsmann
2007, 633, 636, 641, n68); predictive failure also strengthened Hayek’s
faith. Three decades after The Road to Serfdom (1944), Hayek was asked
by Tibor Machan: ‘The Road to Serfdom predicted serious problems for
246 8 14–16: Austrians and the Holocaust (2)

England and America should these follow the policies of welfare statism–
how do you see it now?’ Hayek (1975a [1974]) replied by predicting ‘the
end of the free political order’:

Well, now, I don’t think I have anything to retract. Perhaps I did see the
danger nearer, but it is a common experience that these tendencies take a
long time to work themselves out; on the whole, though, the world is fol-
lowing the path I was afraid it would. In a way the thing has become more
serious just now because we are now being driven into a planned society by
inflation … What I expect is that inflation will drive all the Western coun-
tries into a planned economy via price controls. Nobody will dare to stop
inflation in an ordinary manner because as things are at present, to discon-
tinue inflation will inevitably cause extensive unemployment. So assuming
inflation stops it will quickly be resumed. People will find they can’t live
with constantly rising prices and will try to control it by price controls and
that of course is the end of the market system and the end of the free politi-
cal order.

It was ‘increasing disappointment with governments’ which facilitated

Hitler’s rise to power. Hayek (1975a [1974]) continued:

So I think it will be via the attempt to regress the effects of a continued

inflation that the free market and free institutions will disappear. It
may still take ten years, but it doesn’t matter much for me because in
ten years I hope I shall be dead … what will happen I cannot really
imagine because it will be constant pulling one way and pulling the
other for the reason that inflation will be regarded as intolerable. The
only way really to stop it will produce unemployment which would be
regarded as equally intolerable and people will resort to price controls
without knowing that this leads into worse matters. When they recog-
nize it they will scrap the price controls and we’ll again be at the begin-
ning of the same affair. I don’t know how many times we can go through
the same cycle and certainly it will mean an increasing disappointment
with governments.

According to Hayek (1978a), it does not matter whether policy-­

induced malfunctions lasted a few years or a few decades so long as the
‘end result was the same.’12 The deflation that Hayek and Mises promoted
during the Great Depression delivered power to Hitler; unemployment
 14: British-Austrians: Make the Economy Scream 247

levels only returned to pre-deflation levels only after the outbreak of

World War II.
Hayek (1975a [1974]) explained:

The governments will be unable to give the people what they clamor for
and it will certainly be a time of constant political disruptions [emphasis
added]. My wish is that people would have courage to face a period of
substantial though not necessarily very prolonged unemployment, with all
provisions for the unemployed, and restore the price mechanism. But I
think the chance that this will happen which to me seems to be the only
way out for free system, is very small indeed.

High asked: ‘Have the economic events since you wrote on trade-cycle
theory tended to strengthen or weaken your ideas on the Austrian theory
of the trade cycle?’ Hayek (1978a) replied:

On the whole, strengthen, although I see more clearly that there’s a very
general schema which has to be filled-in in detail. The particular form I
gave it was connected with the mechanism of the gold standard, which
allowed a credit expansion up to a point and then made a certain reversal
possible. I always knew that in principle there was no definite time limit for
the period for which you could stimulate expansion by rapidly accelerating
inflation. But I just took it for granted that there was a built-in stop in the
form of the gold standard, and in that I was a little mistaken in my diagno-
sis of the postwar development. I knew the boom would break down, but
I didn’t give it as long as it actually lasted. That you could maintain an infla-
tionary boom for something like twenty years I did not anticipate [emphases
added].

It did not matter so long as the ‘end result was the same’:

While on the one hand, immediately after the war I never believed, as most
of my friends did, in an impending depression, because I anticipated an
inflationary boom. My expectation would be that the inflationary boom
would last five or six years, as the historical ones had done, forgetting that
then the termination was due to the gold standard. If you had no gold
standard—if you could continue inflating for much longer—it was very
difficult to predict how long it would last. Of course, it has lasted very
much longer than I expected. The end result was the same.13
248 8 14–16: Austrians and the Holocaust (2)

Friedman was distressed by the inflation fuelled by his ‘surrogate

father’ and Chair of the Federal Reserve, Arthur Burns (Leeson 2003c).
Hayek (1978a) hoped that the inflation produced by Burns—his sec-
ond year Mont Pelerin Society recruit—would be the prelude to Austrian
‘salvation.’ Rosten asked about a revival of the recession-driven ‘feeling
that the system has let them [the masses] down, the system has failed,
that again we are having unemployment, again we are having inequity?’
Hayek (1978a) replied:

There will certainly be a reaction of this sort, but I rather hope that for the
idea of the system, government will be substituted. I think people are
beginning to see that the government is doing a great deal of harm, and this
myth of ‘the system’ which is responsible for everything can be exposed,
and I think is gradually being weakened. I may be overoptimistic on this,
but I believe government is now destroying its reputation by inflation.14

Hayek (1978a) explained that he had had ‘intellectually to justify’

positions that he did not believe in: he contrasted the

difference between nearly all my friends, who were in favor of flexible

exchanges, and my support of fixed exchange rates, which I had intellectu-
ally to justify. I was driven to the conclusion that I wanted fixed exchange
rates, not because I was convinced that it was necessarily a better system
but it was the only discipline on governments which existed. If you released
the governments from that discipline, the democratic process, which I have
been analyzing in different conditions, was bound to drive it into inflation.
Even my defense of fixed exchange rates was, in a way, limited. I was against
abandoning them only where people wanted flexible exchanges in order to
make inflation easier.15

Four years before the start of the low-inflation Great Moderation

(1982–2007) and nine months before its initiator, Paul Volcker, became
Chair of the Federal Reserve, Hayek (1978a) still expected some ‘throw
the whole thing over again’ transformation, or revolution. Buchanan
asked ‘let me follow up a little bit in the political problems of getting out
of inflation. It does seem to me that we face the major political problem
of the short term, not only in this country but also in Britain and other
 14: British-Austrians: Make the Economy Scream 249

countries, of how can we politically get the government to do something

about the inflation.’ After discussing the removal of ‘all limitations on
people using money, other than the government’s money,’ Hayek (1978a)
responded:

That’s a field where I am most pessimistic. I don’t think there’s the slightest
hope of ever again making governments pursue a sensible monetary policy.
That is a thing which you cannot do under political pressure, because it is
undeniable that in the short run you can use inflation to increase employ-
ment. People will never really understand that in the long run you make
things worse that way. This thing is driving us into a controlled economy
because people will not stop inflation inflating but try to combat inflation
by price controls. I’m afraid that’s the way in which the United States is
likely in the near future to slide into a controlled economy. Again, my hope
is that you are so quick to change that you might find it so disgusting that
[even though] you may erect an extremely complex system of price con-
trols, after two years you’re so fed up with it that you throw the whole thing
over again!16

Hayek’s (1978a) ‘general view of life [is] that we are playing a game of
luck, and on the whole I have been lucky in this game.’17 Hayek (2007
[1944], 156) insisted that

It is essential that we should relearn frankly to face the fact that freedom
can be had only at a price and that as individuals we must be prepared to
make severe material sacrifices to preserve our liberty. If we want to retain
this, we must regain the conviction on which the rule of liberty in the
Anglo-Saxon countries has been based and which Benjamin Franklin
expressed in a phrase applicable to us in our lives as individuals no less than
as nations: ‘Those who would give up essential liberty to purchase of little
temporary safety deserve neither liberty nor safety.’

In ‘A Judicial Odyssey towards Freedom,’ the Fox News contributor,

Judge Andrew Napolitano (2010, 232), emphasized the American embrace
of Franklin in this context. In contrast, for oral history purposes, Hayek
(1978a) appeared to expect that ‘we will get something like what [J. L.]
Talmon [1960] has called ‘totalitarian democracy’—an elective dictatorship
250 8 14–16: Austrians and the Holocaust (2)

with practically unlimited powers. Then it will depend, from country to

country, whether they are lucky or unlucky in the kind of person who
gets in power. After all, there have been good dictators in the past; it’s
very unlikely that it will ever arise. But there may be one or two experi-
ments where a dictator restores freedom, individual freedom.’ Rosten—
an ‘inveterate Anglophile’ (Bermant 1997)—was horrified: ‘I can hardly
think of a program that will be harder to sell to the American people.
I’m using “sell” in the sense of persuade. How can a dictatorship be
good?’ Hayek (1978a) reassured him: ‘Oh, it will never be called a dicta-
torship; it may be a one-party system.’ Rosten asked ‘It may be a kindly
system.’ Hayek replied: ‘A kindly system and a one-party system.’18
In ‘The Cultural Background of Ludwig von Mises,’ the Austrian
School philosopher, Kuehnelt-Leddihn dated the Austrian Déluge: ‘1908,
when the disastrous “one man-one vote” principle was introduced.’19
Hitler (1941 [1925], 96–97) agreed: ‘The fate of the German nationality
in the Austrian State was dependent on its position in the Reichstag. Up
to the introduction of general suffrage and the secret ballot, a German
majority existed in Parliament.’ Spann opposed democracy because it
excluded the right of superior individuals to determine the destiny of the
State: ‘setting the majority in the saddle means that the lower rule over
the higher’ (cited by Wasserman 2014, 83). His ‘universalistic’ philoso-
phy was both organic and reactionary:

As a panacea for the chaos racking the continent between the wars, he
urged the German people to reestablish the hierarchically organized society
medieval Europe had known. In his organic corporative state ‘the best’
rather than the vulgar multitude would rule [emphasis added]. All members
of this society would be represented in an occupational parliament which
would ensure maximum stability for the broad masses of producers and
political power for a handful of planners, thinkers, and philosophers who
would guide the ‘true state.’ (Haag 1969, Abstract)

In 1925, Mises (2011 [1925], 81, n17) stated that ‘The most emi-
nent literary spokesmen for national socialism are Oswald Spengler and
Othmar Spann.’ In 1920, Hayek must have attended Spann’s (1921) lec-
tures on ‘the true state’ and would surely have read the published version.
Austrian economists unite behind Spann: the vulgar multitude must
 14: British-Austrians: Make the Economy Scream 251

be told that ‘you are inferior’ (Mises 2007a [1958], 11), and political
power must reflect ‘America’s True Democracy’ (Peterson 2009, 19) and
permanently reside with ‘the best’: a ‘small, self-perpetuating oligarchy
of the ablest and most interested’ (Rothbard 1994c), monarchy and the
‘Natural Order’ (Hoppe 2001), ‘natural aristocracy’ (Rockwell 1994b,
19), or a non-‘democratically organized’20 ‘constitutional court’ defend-
ing rules written by a European aristocrat (Hayek 1978a).21 Austrians
also agree that the ‘inferior’ orders must vote, primarily, through one-­
dollar-­one-vote elections.22 Hayek would allow them a once-in-a-lifetime
vote through a social club (Leeson 2017a).
In the interwar period, the dynamics of post-dynastic Continental
Europe diverged still further from the trajectory of the British
Parliamentary democracy. On the Continent, the ‘Great’ War was fol-
lowed by Red and White Terror: in Russia in 1919, about 100,000 Jews
were liquidated mostly by White Terror armies (Kenez 1991, 347)—
while in England, Scotland and Wales between 1919 and 1972, no one
was killed in political demonstrations (Clutterbuck 1974, 21). The neo-
classical ‘Marshall of Italy,’ Maffeo Pantaleoni (1857–1924), was engaged
in ‘intense work in support of Fascism’ and ran a ‘vigorous anti-Semitic
campaign’ in the decade before his death (Michelini and Maccabelli
2015, 92, 93). The Austrian branch of the Neoclassical School also tended
towards Fascism, while the British branch did not. As Mises joined the
Austro-Fascist ‘Fatherland Front’ (Hülsmann 2007, 677, n149), Cannan
served as President of the Royal Economic Society (1932–1934). Most of
the LSE Austrians were members of the Reform Club, while Mises was a
member of the official Austro-Fascist social club.
Mises and Hayek interacted with the British-Austrians before 1931:
Hayek’s (1925) first letter in the Times was on the necessity of translating
Mises’ (1922) Die Gemeinwirtschaft: Untersuchungen über den Sozialismus
into English (Socialism 1932). Hayek co-created the British-Austrian
School—his fourteenth knowledge community.
There are similarities between Cannan and Hayek. For example,
Hayek (1978a) stated that Keynes’ ‘pupils developed an orthodoxy:
you were either allowed to belong to the orthodoxy or not’23; Cannan
(1927 [1922], 311; [1924], 371–372) asserted that to ‘outsiders,’ the
‘Cambridge School of Economics’ appeared ‘as somewhat of a “sect”.’
252 8 14–16: Austrians and the Holocaust (2)

Cannan also argued that it was important for the stability of the finan-
cial system that the quantity theory was seen to be part of the body of
economic theory which is perceived to be ‘generally true.’ Distracting
attention away from the money supply towards money demand would
‘constantly tend to make people disbelieve in the workings of the quan-
tity theory.’ Hayek (1992b [1977]) concurred:

I wrote 40 years ago that I have strong objections against the quantity
theory because it is a very crude approach that leaves out a great many
things, but I pray to God that the general public will never cease to
believe in it. Because it is a simple formula which it understands. The
gold standard was based on what was essentially an irrational supersti-
tion. As long as people believed there was no salvation but the gold stan-
dard, the thing could work. That illusion or superstition has been lost
[emphases added]. We now can never successfully run a gold standard. I
wish we could. It’s largely as a result of this that I have been thinking of
alternatives.

Did Cannan—like Hayek—use unscrupulous academic methods? In

his rejoinder to Cannan, Keynes (1983 [1924], 415, 419) argued that
there could be ‘both very large and very rapid’ changes in ‘the volume of
real balances.’ Keynes complained that Cannan was ‘unsympathetic with
nearly everything worth reading … which has been written on monetary
theory in the last ten years … [The] almost revolutionary improvement
in our understanding of the mechanism of money and credit and of the
analysis of the trade cycle … may prove to be one of the most important
advances in economic thought ever made.’ Cannan was guilty of writing
‘as though the last word had been said years ago in elementary textbooks.’
In contrast to Cannan’s work, Keynes commended the ‘impressive’ col-
lection of opinions on the topic provided by J.R. Bellerby (1923), ‘from
many sources.’
Cannan (1927 [1924], 384, 386–387) responded by purporting to
analyse ‘what these textbooks really did say.’ Referring to Keynes’ (1923)
‘restatement of the quantity theory’ and heightened perceptions about
the importance of hoarding and ‘the demand for currency,’ Cannan
asserted that ‘rummaging through old lecture notes, I find I was teaching
 14: British-Austrians: Make the Economy Scream 253

it orally ten years before I put it in a book in 1918.’ However, Cannan’s

attempt to establish an LSE oral tradition is not supported by an exami-
nation of the 1918 edition of Money. Cannan (1918, 63) explained that
economists had ‘long been familiar’ with the idea that the value of money
depended ‘upon the various influences which affect demand and supply’
and that to restrain prices rises the public should ‘insist on adequate limi-
tation of the supply of money.’
In the last edition of Money (after the publication of Keynes’ 1930
Treatise), Cannan (1935, 76, 92) explained that ‘the Quantity Theory
of the value of money singles out quantity as the thing on which the
value of money may be said to depend, other things (including Demand)
remaining the same. It would be very astonishing if this were not true.’
Cannan believed that the demand for money was fairly stable: ‘in the
absence of anticipation of future changes the elasticity of demand for
money is “equal to unity”.’ Prior to his death on 8 April 1935, Cannan’s
Money went through eight editions (the Preface to the last edition was
dated April 1935).
Hayek (1989) concluded that the policies pursued by his admirers,
Thatcher and Reagan, were ‘as reasonable as we can expect at this time.
They are modest in their ambitions.’ What Austrian goals had they failed
to achieve? Hayek (1992a [1963], 29–30) described Cannan and Gregory
as Mises’ ‘kindred spirits.’ Before Hayek (1978a) arrived in 1931, the
LSE ‘was half-Austrian already [laughter].’24 What was the missing half?
The crucial distinction between Edwin Cannan: Liberal Doyen
(Ebenstein 1997) and Mises: The Last Knight of Liberalism (Hülsmann
2007, 677, n149) is that only one was a card-carrying Fascist and only one
promoted Fascist violence to achieve Austrian School ends. According to
Mises (1985 [1927], 47–48), ‘The militaristic and nationalistic enemies
of the Third International felt themselves cheated by liberalism’ because
of the exclusion of ‘murder and assassination from the list of measures to
be resorted to in political struggles.’ Hayek (1995 [1929], 68)—while
praising Cannan’s ‘fanatical conceptual clarity’ and his ‘kinship’ with
Mises’ ‘crusade’—noted that he and the British-Austrians had failed to
realize the necessary next step: ‘Cannan by no means develops economic
liberalism to its ultimate consequences with the same ruthless consistency
254 8 14–16: Austrians and the Holocaust (2)

as Mises.’ According to Caldwell (1995, 70, n67), this was an apparent

reference to Liberalism in the Classical Tradition, in which Mises (1985
[1927], 19, 51) stated:

The program of [classical] liberalism, therefore, if condensed into a single

word, would have to read: property … All the other demands of liberalism
result from this fundamental demand … The victory of Fascism in a num-
ber of countries is only an episode in the long series of struggles over the
problem of property [Mises’ emphasis].25

According to Boettke (2004, 9), ‘by the 1990s the gap between’ non-­
Austrians and ‘Austrians has closed considerably and the closing of the
gap is in the direction of the sort of incentive alignment and information
processing arguments that Austrians have been urging economists to take
since the 1930s and 1940s.’ Hayek was ‘not challenging the intended
liberalism of his market socialist opponents, he was arguing that there
was an inconsistency between the goals they sought and the model they
proposed for achieving those goals. The result was a tragic tale of best
intentions paving the path to hell.’ In The Road to Serfdom, Hayek (1944,
137) asserted that ‘socialism can be put into practice only by methods
which most socialists disapprove.’ Both Hayek’s and Boettke’s remarks
apply equally to the Austrian version of Classical Liberalism.
Caldwell (2008) displayed Austrian scholarly standards in his review of
Guido Hülsmann’s (2007, 677, n149) Mises: The Last Knight of Liberalism:
the author was an ‘amateur’ because he had made a ‘serious’ error—by
not obtaining Caldwell’s permission to cite from the Hayek Archives.
Hülsmann also supplied Mises’ Austro-Fascist party membership number
(282632) and official Fascist social club membership number (406183).
In a footnote, Caldwell and Montes (2014a, 3, n8; 2014b, 2015, 263,
n8) objected that the connection to Fascism had been revealed:

The fascism charge regarding Mises is based on a couple of sentences taken

from his book Liberalism in the Classical Tradition … He was offering a
comment on a pressing issue of the day … We might simply point out the
other obvious fact that, as a Jew and a classical liberal, Mises was persona
non grata among both the Nazi and Stalinist regimes. He and his wife just
managed to escape the Nazis and their French collaborators when they fled
 15: ‘Make the Economy Scream’: The Rise of the Third Reich 255

Geneva, traveling across Vichy France to Barcelona and Lisbon in July

1940, and ultimately landing in New Jersey about a month later (Mises
1984, Chap. 4). His apartment in Vienna was ransacked by the Nazis, and
the materials they took were later seized by the Soviets and placed in a
secret archive in Moscow, where they sit today (Ebeling 2012, p. ix). He is
as unlikely a candidate for being considered a fascist as he is for being a
communist.

 5: ‘Make the Economy Scream’: The Rise

1
of the Third Reich
Hayek’s (1975a [1974]) ‘wish is that people would have courage to face
a period of substantial though not necessarily very prolonged unemploy-
ment, with all provisions for the unemployed, and restore the price mecha-
nism [emphases added]. But I think the chance that this will happen
which to me seems to be the only way out for free system, is very small
indeed.’ Hayek and three LSE colleagues published a pro-austerity let-
ter in the Times on ‘Spending and Saving’ in response to a letter from
Keynes et al. advocating spending to remedy the ‘mounting wave of
unemployment’ (Gregory, ‘von’ Hayek, Plant and Robbins 19 October
1932; Keynes, Pigou, Stamp, Macgregor, Layton and Salter 17 October
1932).26 At the time, British unemployment was 20 per cent (Hutchison
1981, 243).
Robbins (2007 [1934], 119, 77, 69) bemoaned the delay in ‘liquida-
tion and cost-cutting’—but saw promising signs in Britain: ‘In the sum-
mer of 1932 there began a small revival of business … In other parts
of the world, liquidation and cost-cutting had reached a stage at which
the restoration of profitability at some not too far distant date seemed a
legitimate expectation.’ Robbins complained that President Hoover had
earlier ‘pledged the leaders of big industry to make no reduction in wage
rates. Until the summer of 1930 no serious reductions in wage rates took
place … this policy was the reverse of what was needed.’
In December 1931, the German Chancellor, Brüning (30 March
1930–30 May 1932), reduced most wages by 10–15 per cent; unem-
ployment rose from one-sixth to one-fifth of the German labour force.
256 8 14–16: Austrians and the Holocaust (2)

He hoped that this austerity would assist the process of ending repara-
tions (Galbraith 1975, 173; Haberler 1986, 425; Mommsen 1996, 364).
Andreas Korsh detected the influence of Austrian business cycle theory:
‘The economic policies carried out by Brüning had powerful support in
neoclassical price theory, according to which a free market economy left
to itself, without state interference, regulates itself and finds its way back
to full employment’. Austrian ‘overinvestment theory was widely held in
Germany at the time of the economic crisis’ (cited by Hutchison 2000,
157). Brüning exhorted his cabinet to ‘hold out’ for another year without
any deviation from austerity, wage cutting and deflation; and on 24 May
1932, announced that he was a ‘hundred metres before the finish line’ in
his quest to abolish reparations (Mommsen 1996, 364). He resigned six
days later; and his successor, Franz von Papen, formed the ‘cabinet of bar-
ons’ or as the ‘cabinet of monocles’ (Time 1933)—including Konstantin
Freiherr (Baron) von Neurath (Foreign Minister), Wilhelm Moritz Egon
Freiherr von Gayl (Interior), Magnus Alexander Maximilian Freiherr von
Braun (Agriculture), Peter Paul Freiherr von Eltz-Rübenach (Posts and
Transport), Johann Ludwig Graf Schwerin von Krosigk (Finance) and
Kurt von Schleicher (Defence).
‘Von’ Hayek (2009a [1979], 7) thought it impertinent to inquire
about ‘market free play’ prices:

The fundamental cause of unemployment is the deviation of prices and

wages from what they would be if we had a free market and a stable cur-
rency … As I stated in my Nobel Prize lecture, most contemporary econo-
mists overlook the inherent limitations of our numerical knowledge. It is
interesting to note, however, that in the XVIth century, people like Luis
Molina anticipated in a remarkable way one of the most important prin-
ciples we must always take into account: particular prices depend on so
many circumstances that there value can never be known to man but only
to God.

Brüning also objected to impertinent questions about the role he

played in facilitating Hitler’s rise to power: ‘He asked me if I disputed
the word of the former Chancellor of German Reich’ (Galbraith 1975,
173, n17). According to Hans Mommsen’s (1996, 396) The Rise and
 15: ‘Make the Economy Scream’: The Rise of the Third Reich 257

Fall of Weimar Democracy, ‘Against the warnings of his closest advisors,

Brüning continued the fiscally convenient practice of progressive salary
reductions.’
Robbins (2007 [1934], 64) applied Austrian business cycle theory to
Germany:

Of the total amount invested in, it has been estimated that at least 40 per
cent was on account of governmental bodies. Much of this was spent on
the carrying out of works such as the construction of swimming-baths, the
financing of housing schemes and so on, which had little prospect of being
financially remunerative. This was at a time when German industry was
still suffering from the greatest capital shortage in modern economic his-
tory. Much of this money is irretrievably lost. But, because it was borrowed
by government bodies, recognition of this fact is slow to come and liquida-
tion has thus been delayed. Paradoxically enough, economists who have
urged that this sort of thing has not proved its worth in practice, are often
called by their opponents ‘deflationists.’

In Monetary Theory and the Trade Cycle (originally published in German

in 1928), Hayek (1933a) developed a stochastic equilibrium model: the
forecast errors of independent producers would simply cancel each other
out (Young, Leeson and Darity 2004). According to Boettke (2004), the
‘best’ way to understand Hayek ‘is to see him as following up on the
questions that Mises first posed about the economic system, clarifying
those questions and providing more subtle answers [emphasis added] to
those questions.’ But there was nothing subtle about Hayek’s (1978a)
Misean answers: ‘I am most concerned, because it’s the most dangerous
thing at the moment, with the power of the trade unions in Great Britain
… The British have created an automatic mechanism which drives them
into more and more use of power for directing the economy. Unless you
eliminate the source of that power, which is the monopoly power of the
trade unions, you can’t [correct this].’27 Hayek (1980) used religious
language: ‘There is no salvation [emphasis added] for Britain unless the
special privileges granted to trade unions in 1906 are revoked.’ His ‘salva-
tion’ subtlety came in the ‘more effective’ ‘spontaneous’ order ‘form’ in
which those answers were presented.
258 8 14–16: Austrians and the Holocaust (2)

Sennholz (2002) taught that ‘many economists are acclaiming the

praises of government. Since Keynes, they have unquestioningly accepted
that public works promote employment, impart stability, and raise
national income. According to this view, government takes on a magical
connotation and color. It is no longer legislators, regulators, and tax col-
lectors but a source of grace and goodness, virtue and welfare. In a sense,
it is regarded as God on earth.’ Sennholz worshipped another God: ‘A
logically competent defense of a free society requires divinely revealed
information; all other defenses fail. Sennholz, almost alone among emi-
nent free enterprise economists, rests his defense of a free society on rev-
elation’ (John Robbins 1992).
The ‘monastery route’ (‘ratline’) led Nazi war-criminals like Eichmann
to ‘liberty’ and ‘freedom’ in places like Argentina and Catholic Ireland
(Steinacher 2011, 118–127). Possibly coincidentally, Sennholz (2002)
had ‘a special interest in Argentina because some two dozen former stu-
dents of mine live there. Some are professors; one is a congressman. They
studied with me at Grove City College.’ Sennholz (2002) had a prefer-
ence for the very young:

Over a period of thirty-six years of teaching at Grove City, I would esti-

mate perhaps 10,000 students. I always had large classes of 100 to 150.
Most students came from an interventionistic environment. Very few
came to me because they knew what I would teach. So, you take them as
they are and slowly lead them to the light of freedom [emphasis added]. I
was always careful to illustrate economic theory with continuing exam-
ples from the real world. At Grove City, I always preferred teaching fresh-
men. Their minds are open and ready for new knowledge. They are eager
to learn.

Austrian economics provides justifications for pre-ordained conclu-

sions—irrefutable economics as the light of freedom: ‘Austrian econo-
mists view economics in an entirely different light—as a branch of
praxeology, which is purely theoretical and systematic. Its doctrines are
not derived from experience, but are a priori like those of logic and math-
ematics, and antecedent to any comprehension of economic facts and
events’ (Sennholz 2002).
 15: ‘Make the Economy Scream’: The Rise of the Third Reich 259

The asymmetries of economics are a mystery to ‘market free play’ pro-

moters. An unexpected increase in prices will reduce the real cost of a
loan—although some ‘equilibrating’ pressure may be exerted by central
banks (increasing repayments—interest rates—so as to exert downward
pressure on inflation). An unexpected fall in prices will increase the real
burden of debt which can lead to bankruptcies and mass unemploy-
ment—but there is no quasi-equilibrating mechanism of negative inter-
est rates. The paradox of democracy is also an asymmetry: tax-exempt
theocrats who seek to destroy democracy are tolerated.
After exposure to Sennholz’s ‘light of freedom,’ many undergradu-
ates presumably sought nourishment through education (rather than
indoctrination-­through-humiliation). This appeared to infuriate Sennholz
(2002): ‘The seniors would upset me, because I had taught them before
but it would frustrate me because they would forget so much.’ Boettke
(who, like the Bourbons, appears to have ‘learned nothing and forgotten
nothing’), explained to The Wall Street Journal (and presumably also to his
PhD students) the importance of sometimes ‘letting prices fall. There’s
little to fear in deflation, he adds, when it accompanies periods of strong
productivity growth … Roughly 75% of his students have gone on to
teach economics at the college or graduate level’ (Evans 2010).
Boettke’s (2010a, 62) career as a ‘Professor of Economics’ appears to
have been dominated by his passion: ‘I loved the tune’ of Sennholz’s ‘eco-
nomic truth’ and ‘I love Mises to pieces.’ Hitler and Mises were funded
by sovereignty-seeking employers; and after a second inconclusive par-
liamentary election (November 1932), von Papen, Alfred Hugenberg
(German National People’s Party) plus several leading industrialists and
businessmen urged President Paul von Hindenburg to appoint Hitler as
Chancellor (Leeson 2017a).
Market free play ‘game, set and match’ came when Hitler took office
(30 January 1933)—the beginning of an alternative strategy to repeal the
‘Peace’ treaty (Patch 1998, 256). In power, he received a 0.03 per cent
levy on wages and salaries of employees of the German Trade Association.
All labour unions were abolished and workers were obliged to join the
National Socialist Union (Bullock 1991, 133; Davidson 1966, 192–193,
230, 204). Deflation had been ‘one of the strongest agents working
towards the Republic’s downfall’ (Stolper 1967, 116–119).
260 8 14–16: Austrians and the Holocaust (2)

 6: Austrian Anti-Semitism: Prelude

1
to the Holocaust
Hayek (1978a) asserted:

the reason why I ever wrote The Road to Serfdom—In the late thirties, even
before war broke out, the general opinion in England was that the Nazis
were a reaction, a capitalist reaction, against socialism. This view was par-
ticularly strongly held by the then-director of the London School of
Economics, Lord Beveridge, Sir William Beveridge, as he was then. I was
so irritated by this—I’d seen the thing develop [emphasis added]—that I
started writing a memorandum for him, trying to explain that this was just
a peculiar form of socialism, a sort of middle-class socialism, not a proletar-
ian socialism.28

Five years before the publication of Liberalism in the Classical Tradition,

the journalist, Josef Hell, reported in a German-language newspaper that
Hitler had told him:

Once I really am in power, my first and foremost task will be the annihila-
tion of the Jews. As soon as I have the power to do so, I will have gallows
built in rows—at the Marienplatz in Munich, for example—as many as
traffic allows. Then the Jews will be hanged indiscriminately, and they will
remain hanging until they stink; they will hang there as long as the prin-
ciples of hygiene permit. As soon as they have been untied, the next batch
will be strung up, and so on down the line, until the last Jew in Munich has
been exterminated. Other cities will follow suit, precisely in this fashion,
until all Germany has been completely cleansed of Jews. (Cited by Fleming
1987, 17)

The following year, Ludendorff and Hitler staged a coup in Munich

as a prelude to a ‘March on Berlin’ and an Anschluss ‘March on Vienna.’
Newspapers reported that ‘Hitlerites stormed through the town and
invaded first class restaurants and hotels in search of Jews and profiteers’
(Walsh 1968, 289; Dornberg 1982). Two years later, Hitler (1939 [1925],
161, 165–166, 518) reported that an October 1918 British gas attack at
Ypres had ended his war: soldiers
 16: Austrian Anti-Semitism: Prelude to the Holocaust 261

lay gasping and choking during gas attacks, neither flinching nor faltering,
but remaining staunch to the thought of defending the Fatherland … Has
all this been done in order to enable a gang of despicable criminals to lay
hands on the fatherland? … I then decided that I would take up political
work … At the beginning of the war, or even during the war, if 12,000 or
15,000 of these Jews who were corrupting the nation had been forced to
submit to poison gas … then the millions of sacrifices made at the front
would not have been in vain.

Another two years later, Mises stated (1985 [1927], 44) with respect
to ‘Ludendorff and Hitler’ and others who used violence to achieve their
political goals: ‘Many arguments can be urged for and against these
doctrines, depending on one’s religious and philosophical convictions,
about which any agreement is scarcely to be expected. This is not the
place to present and discuss the arguments pro and con, for they are not
conclusive.’
With respect to ‘the Jew’ in ‘Germany and Austria,’ Hayek (2007
[1944], 161) asserted: ‘The fact German anti-Semitism and anti-­
capitalism spring from the same root is of great importance for the under-
standing of what has happened there, but this is rarely grasped by foreign
observers.’ Almost all pre-epigone-generation-Austrians were either
Jewish-born, anti-Semitic, or, in Mises’ case, possibly both. The Jewish-­
born Fürth (26 February 1992) reported to Haberler (his brother-in-law)
that Wieser was anti-Semitic.29 According to Eugen Maria Schulak and
Herbert Unterköfler (2011, 42), Wieser was labelled a ‘fascist’ because his
magnum opus Gesetz der Macht (The Law of Power 1983 [1926]) contains
‘anti-Semitic statements and an abstract Führerkult … as well as sources
indicating the contrary.’ Wieser’s diary entries reveal that he was ‘not free
from anti-Semitic sentiment’ (Klausinger 2013, 6, n16). Schumpeter
also made anti-Semitic remarks and diary notes and was ‘unsure whether
Hitler would be good or bad for Germany’ (cited by Swedberg 1992,
x–xii).
Hayek (1978a) had certainly ‘seen the thing develop.’ In Austria, one
of his family friends and a regular visitor, ‘D. [Othenio] Abel,’ was ‘a very
distinguished’ Professor of Paleontology at the University of Vienna’30;
and ‘well-known as a self-confessed anti-Semite’ (Klausinger (2013, 12, n44).
262 8 14–16: Austrians and the Holocaust (2)

Hayek’s childhood friend, Fürth (20 April 1984), informed Haberler

that Hayek’s family ‘adhered to Nazism long before there was an Adolf
Hitler.’31
According to Mises’ (1944, 94–96), most of those in the Wandervogel
circle ‘had one aim only: to get a job as soon as possible with the govern-
ment. Those who were not killed in the wars and revolutions are today
pedantic and timid bureaucrats in the innumerable offices of the German
Zwangswirtschaft. They are obedient and faithful slaves of Hitler.’ Rosten
asked: ‘You were talking about the forties, and I was reminded of, I think
it’s von Mises, who had this extraordinary description of Germany before
the First World War, with bands of young people with the equivalent
of guitars and mandolins roaming the countryside, and so on … The
Wandervogel. And all that they left, he said, was not a single work of art,
not a single poem, nothing but wrecked lives and dope! Were you famil-
iar with that at all?’ Hayek (1978a) replied: ‘Oh, I saw it happen; it was
still quite active immediately after the war. I think it reached the high-
est point in the early twenties, immediately after the war. In fact, I saw
it happen when my youngest brother [Erich] was full time drawn into
that circle; but they were still not barbarians yet. It was rather a return to
nature. Their main enjoyment was going out for walks into nature and
living a primitive life. But it was not yet an outright revolt against civiliza-
tion, as it later became.’32
Hayek (1978a) was recruited the Austrian School of Economics and
(what appears to be) the Wandervogel circle by Spann, who ‘soon ceased to
be interested in technical economics and was developing what he called a
universalist social philosophy. But he, being a young and enthusiastic man,
for a very short time had a constant influence on all these young people.
Well, he was resorting to taking us to a midsummer celebration up in the
woods, where we jumped over fires and—It’s so funny [laughter].’33 One
of Hayek’s Austrian Wandervogel comrades was Eichmann (Cesarini 2005,
21; Stachura 1981, 3)34; whose trial and execution was documented by
his Committee on Social Thought colleague, Hannah Arendt (1963) in
Eichmann in Jerusalem: A Report on the Banality of Evil. With respect to
the Menger/Wieser/Mayer-Spann/Hayek/Leube-Caldwell-Shenoy branch
of the Austrian School, immediately after Anschluss, Mayer–Wieser’s
‘favourite disciple’ (Hayek 1978a)35—instructed all non-‘Aryans’ to leave
 16: Austrian Anti-Semitism: Prelude to the Holocaust 263

the Austrian Economics Association (Nationalökonomische Gesellschaft),

‘in consideration of the changed circumstances in German Austria, and in
view of the respective laws now also applicable to this state’ (cited by Mises
2009 [1978], 83).
Immediately after Anschluss, Mises’ Viennese apartment was ransacked
by those he had aspired to lead (Hülsmann 2007, xi, 728, 677, n149);
and the Reich’s security service issued an order to kill Spann and his
son Raphael (Klausinger 2013, 16, n59). After a visit to post-Anschluss
Vienna, Hayek (17 April 1939) reported to the Jewish-born Machlup
that ‘Mayer is a ferocious Nazi. Possibly, the reason for his excitement is
that Spann and his son Raphael have been arrested by the Gestapo’ (cited
by Klausinger 2015).
After graduating from the University of Vienna, Hayek (1994, 59)
was ‘admitted’ to Mises’ Privatseminar, where they sang songs ‘about the
seminar’ written by the Jewish philosopher of science, Felix Kaufmann
(French 2013, 83–85).36 Twenty-three of the twenty-nine members of the
Miseskreis were Jewish; Hayek, Haberler and Morgenstern were the most
prominent non-Jews (Beller 1989, 20). All three had been supervised by
Mayer, who steered ‘his protégés through the habilitation procedures:
Haberler (1927), Morgenstern (1929) and Hayek (1929)’ (Klausinger
2014, 198).
In the Austrian Corporate State (Ständestaat, 1934–1938), Morgenstern
(Hayek’s successor as Director of the Austrian Institute of Business Cycle
Research) made anti-Semitic comments while presenting himself as
the leader of the Austrian School of Economics. His 1935 diary entries
reveal that he thought that Mises talked ‘pure nonsense’ and that Hayek
was ‘crazy’ and ‘never going to become anything.’ After a 1929 meet-
ing of the Miseskreis, Morgenstern recorded in his diary that a presenta-
tion by Hayek had been followed by an ‘unpleasant discussion in this
arrogant circle of Jews’ (Leonard 2010, 162, 168, n55, 108, n30; see
also Klausinger 2013, 12; 2014, 198). Eight years after leaving Vienna,
Hayek objected to the British Broadcasting Corporation employing for
wartime propaganda purposes someone with ‘a very unpleasant voice’
who sounded like a ‘Viennese Jew’ (Leeson 2015d, Chap. 2).37
Hayek (1994, 121) was in Vienna immediately after Anschluss and may
have been one of the 99.7 per cent of eligible plebiscite voters who on 10
264 8 14–16: Austrians and the Holocaust (2)

April 1938 approved the Austro-German union which ‘unleashed a tor-

rent of enthusiasm for Nazism in Vienna’ (Bukey 1989, 152). The Times
reported ‘no signs of a people bowing unwillingly to a foreign yoke.’
Vienna ‘resembled a town which had just received news of a great victory’
(cited by Burkhardt 2005, 257).
Herbert Simon (1991, 89), the father of bounded rationality, repeated
one standard post-Holocaust prejudice—Austria was a victim of Hitler:
‘The Spanish civil war, the rape of Austria and Czechoslovakia, the
Hitler-Stalin Pact, the invasion of Poland, the fall of France, the bomb-
ing of Britain—all evoke in me vivid memories of anger and frustra-
tion.’ Rothbard’s parents were Polish-Jewish immigrants (Bessner 2014).
Ludendorff (1919, 89)—a Jewish-conspiracy promoter (Winter 1963,
158)—stated that ‘the Polish Jew is very backward’; and Hayek (1978c)
stated that ‘Nobody who has lived through the rise of the violent anti-­
Semitism which led to Hitler can refuse Mrs Thatcher admiration for her
courageous and outspoken warning’ about non-white immigration into
the United Kingdom:

It was the sudden influx of large numbers of Galician and Polish Jews, flee-
ing the invading Russians, which in a short period changed the attitude
throughout a large part of society. They were too visibly different to be
readily absorbed in what was still a fairly homogenous population. I was
shocked on my visits to Vienna in the early 1930s to find people who had
not long before regarded as indecent any anti-Semitic remark (including a
good many people of Jewish descent) arguing that although, though they
detested Hitler, they had to agree with his anti-Semitic policies—which of
course had not yet revealed their most dreadful forms.

According to Hansjörg Klausinger (2014, 199), one standard pre-­

Holocaust stereotype was that Jews exhibited ‘precociousness’: Wieser
attributed the alleged Jewish advantage in comparison to ‘Aryans’ to their
‘more rapidly maturing oriental nature.’ Hayek (1994, 57, 59) shared
both this prejudice and the ‘precociousness’ label: his circle included ‘the
best type of the Jewish intelligentsia of Vienna who proved to be far
ahead of me in literary education and general precociousness … gen-
erally these men came from homes which were or had been wealthier
than mine.’ This allowed Hamowy (2002, 255; 2010, 147) to defend the
 16: Austrian Anti-Semitism: Prelude to the Holocaust 265

­ erson he ‘loved most’: ‘For those of us who knew Hayek, the charge that
p
he was anti-Semitic can only seem perverse. Not only was he not anti-­
Semitic but in most regards he was in fact pro-Semitic.’ Yet Spann—who
argued that Jews should be allowed to live within a corporate ghetto but
excluded from society (Wistrich 1989, 237)—also believed that ethnicity
need not determine Jewishness: ‘This permitted Spann, although gener-
ally hostile towards Jews (especially in academia), to be selective in mak-
ing exceptions, and occasionally to cooperate with researchers of Jewish
origin and even allow them into his own circle—as e.g. in the cases of
Lily Katser, Ivo Kornfeld and Helene Lieser’ (Klausinger 2013, 9; 2014,
196).
Pantaleoni ‘probably’ inspired the translation into Italian of the fraud-
ulent Protocols of the Elders of Zion: a standard anti-Semitic stereotype
involves the alleged existence of a complex Jewish structure control-
ling ‘international financial banditry’ (Michelini and Maccabelli 2015,
98–99)—a standard assertion of the ‘Liberty Lobby’ (Mintz 1985).
Machlup (27 June 1967) explained to Hayek that anti-Semitism under-
pinned his refusal to become President of the Austrian Central Bank: he
doubted that the job could be done by an Austrian Jew who had escaped
from Hitler.38 Hayek told Cubitt (2006, 146) that he hoped that his
‘Hayek’ or ‘Solids’ denationalized money would become the common
currency—but he expected to be outmanoeuvred by ‘a Jewish banker
who would go for it and make a pile of money.’
Hayek was a magnet for Jewish intellectuals like Shirley (1924–1993)
and William Letwin (1922–2013), ‘whose parents had fled [Romanov]
persecution’ and, presumably, pogroms (Daily Telegraph 2013). Their
son, Conservative M.P. Oliver Letwin, reflected on the Atlas Network
website: ‘Without [Anthony] Fisher, no IEA [Institute for Economic
Affairs]; without the IEA and its clones, no Thatcher and quite possibly
no Reagan; without Reagan, no Star Wars; without Star Wars, no eco-
nomic collapse of the Soviet Union. Quite a chain of consequences for a
chicken farmer!’.39
Hayek (1978a) told Buchanan that he and Popper ‘became very close
friends, and we see completely eye-to-eye on practically all issues.’40
Popper (24 October 1969) declined Hayek’s attempts to persuade him
to join him at the University of Salzburg in part because he did not
266 8 14–16: Austrians and the Holocaust (2)

want to be ‘exposed’ to Austrian anti-Semitism, which was still ‘strong’:

people of Jewish origins should ‘keep away’ so that anti-Semitism could
die down.41
Hamowy (1999a, 285; 2002, 258) used a Yiddish word to describe
an essay he had published on what he believed to be an error in Hayek’s
Constitution of Liberty discussion of the relationship between ‘freedom,
coercion, and the rule of law’: ‘I’m still breathless when I think of the
chutzpah that I must have had.’ Hamowy, who found that Hayek had
‘displayed truly breathtaking scholarship,’ asserted that it is ‘truly breath-
taking to find’ that Melvin Reder’s (2000) evidence-based (but less-than-­
comprehensive) account of Hayek’s anti-Semitism could be ‘offered as
evidence of anti-Semitism.’
As if to illustrate the ‘Law of Austrian Markets’ (a version of Say’s
Law), Reder’s (2000) History of Political Economy (HOPE) supply of
evidence necessarily created an equal quantity of vengeance: ‘A demand
that the editor of HOPE be fired came from a North Carolina legisla-
tor, prominent among letters sent to the president of Duke University
and the director of Duke University Press, while reports of disfavour
attributed to members of the Hayek family in England were conveyed
to HOPE by third parties’ (Weintraub 2012, 65). Yet Hayek wished it
to be posthumously known that he shared his family’s anti-Semitism.
When Cubitt (2006, 51) asked him if he ‘felt uncomfortable about
Jewish people he replied that he did not like them very much, any more
than he liked black people.’ Hamowy (2002, 259) unwittingly revealed
that devotees, like himself, had created an iconic image which had to
be taken on trust:

In sum, Reder’s reading of Hayek’s comments are, to put the most charita-
ble light on it, idiosyncratic. Not only did I not interpret Hayek’s references
to Jews as suggesting anti-Semitism when I reviewed the book [Hayek on
Hayek 1994] on which Reder relies (see Hamowy 1996), but, as far as I am
aware, no other reader has arrived at conclusions remotely similar to those
of Professor Reder. Nor does the level of scholarship exhibited by Professor
Reder’s article meet professional standards. Reder did not even bother to
consult any of Hayek’s other writings before making these charges …
Professor Reder’s comments on Hayek are an insult both to Hayek and to
 16: Austrian Anti-Semitism: Prelude to the Holocaust 267

those many Jews, like myself, who worked closely with and under him and
should be dismissed as the somewhat jaundiced views of a writer intent on
finding malevolence where none exists [emphases added].

What does abstract ‘liberty’ mean when applied to someone other than
the personal pronoun Austrian proclaiming it? Is military conscription a
violation of ‘liberty’? In line with the Austrian School organic view of the
State whereby the individual serves the ‘totality’ of the ‘market society,’
Mises’ (1963, 282; 1966, 282)—as the Vietnam War accelerated—pro-
claimed in the second and third edition of Human Action: ‘He who in
our age opposes armaments and conscription is, perhaps unbeknown to
himself, an abettor of those aiming at the enslavement of all.’
Friedman was proud of the role that he played in ending conscrip-
tion (Friedman and Friedman 1998, 377–381); and many Canadians
are proud of having provided refuge to Americans fleeing slavery (before
1865) and the Vietnam draft (after 1965). Hamowy—the University
of Alberta Professor Emeritus of Intellectual History—‘detested’ the
people and the country who provided him with academic employment
(1969–1998); and when he no longer needed their income and status,
he ‘immediately’ moved back to the United States because he ‘detested
conformist cultures, and he regarded both his department and, it is fair
to say, Canada itself as epitomes of conformism.’ Stephen Cox (2012)
once asked Hamowy ‘what was wrong with Canada,’ to which he replied:
‘I’ll tell you. If you walk into a store in Canada, and you find a cus-
tomer ­having a dispute with a sales clerk, 90% of the other customers will
immediately side with the clerk. That person is regarded as an official, and
therefore the one to obey.’ Hamowy attributed this ‘defect of Canadian
culture in large part to the migration to Canada of people opposed to the
American Revolution. They set the tone.’
Those with malice towards the ‘other’ may also have malice towards the
‘Jew.’ Hamowy (2005)—who was capable of taking issue with Hayek on
issues that related to his own ‘liberty’—fell thrice into Hayek’s (1978a)
‘fundamentally dishonest’ Eastern Mediterranean category: a Jew, with a
Syrian father and an Egyptian mother (Cox 2012).42 Hamowy’s (1996,
419; 2010, 147) devotionally incapacitated review of Hayek on Hayek
268 8 14–16: Austrians and the Holocaust (2)

(1994) reveals that the man he ‘loved most’ was riddled with malevo-
lence—a malevolence which Hamowy celebrated because the ‘most
interesting portion’ provided ammunition for Austrian argumentum ad
hominem:

Thus we learn that socialist political theorist Harold Laski, who held the
chairmanship of the Labour Party in 1945, was a pathological liar of such
proportions that even his friends were forced to concede as much, and that
William Beveridge, the LSE director and author of the 1942 Beveridge
Report (which became the blue print for the modern welfare state), was an
academic fraud. Although Beveridge was regarded as an economist, he in
fact knew no economics and apparently was prepared to adopt whatever
position would ensure him the greatest reward. He routinely misused the
school’s funds, spending monies earmarked for one project on another of
his own choosing and raising funds on the basis of promise he had no
intention of keeping. It is unfortunate that such personal reminiscences
occupy only a small portion of this brief book and are confined to Hayek’s
years in England. American audiences would I am certain have been fasci-
nated by similar assessments of his American colleagues … one cannot help
but wish that Hayek had written more extensively and more confidingly
about his private and public life.

Roy Harrod’s (1951) biography wilfully omitted references to Keynes’

homosexuality: ‘Harrod is a master of selective quotation from Keynes’s
letters’ (Skidelsky 1983, xviii).43 In the Foreword to Ian Hodge’s Baptized
Inflation: A Critique of ‘Christian’ Keynesianism, North (1986), the Mises
Institute ‘Rothbard Medal of Freedom’ holder, stated that prior to Michael
Holroyd’s (1967, 1968) revelations about Keynes’ homosexuality, ‘A few
economists knew, and his biographer, Sir Roy Harrod, certainly knew!
… I interviewed F. A. Hayek in July of 1985, and I asked him about
this … He assured me that Harrod had known.’44 Citing as an author-
ity the Austrian School fraud, ‘Deacon’ McCormick, North concluded
that Keynes was a ‘Godhating, principle-hating, State-loving homosexual
pervert,’ and Keynesians have ‘pushed the world into evil, and therefore
toward God’s righteous judgment.’
According to Zygmund Dobbs’ (2009 [1969]) Keynes at Harvard
Economic Deception as a Political Credo, ‘German socialists,’ including
 Notes 269

August Bebel and Eduard Bernstein, ‘for years censored and concealed
Marx’s anti-Jewish vituperations in order to make him more palatable
to Jewish converts.’ Have Hayekians, such as Hamowy received mil-
lions of tax-exempt dollars to ‘make friends with the archival record’
and perform a similar operation to protect the fund-raising potency of
their icons?

Notes
1. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
2. ‘You see these bums, you know, blowing up the campuses. Listen, the
boys that are on the college campuses today are the luckiest people in the
world, going to the greatest universities, and here they are burning up
the books, I mean storming around about this issue—I mean you name
it—get rid of the war; there will be another one.’ http://www.presidency.
ucsb.edu/ws/?pid=2496
3. ‘I have always opposed the use of violence. On university campuses the
rule of reason is supposed to prevail over the rule of force. And when
students on university campuses burn buildings, when they engage in
violence, when they break up furniture, when they terrorize their fellow
students and terrorize the faculty, then I think “bums” is perhaps too
kind a word to apply to that kind of person. Those are the kind I was
referring to.’ http://www.presidency.ucsb.edu/ws/?pid=2496
4. As a child, Rawls unintentionally infected and lost two brothers—the
second to pneumonia (Pogge 2007, 5–6).
5. According to George Colt (2012, 370), Nixon felt guilty after his
younger brother, Arthur, died in 1925, ‘believing that a rock thrown by
a neighbor had contributed to his brother’s death, a rock from which he
felt he should have been able to protect his younger brother.’ When eight
years later, his elder brother, Harold, died of tuberculosis, Nixon (accord-
ing to his mother) sank into a ‘deep impenetrable silence.’ Nixon’s White
House farewell speech referred to traumatic loss: ‘Nobody will ever write
a book, probably, about my mother. Well, I guess all of you would say
this about your mother—my mother was a saint. And I think of her, two
boys dying of tuberculosis, nursing four others in order that she could
270 8 14–16: Austrians and the Holocaust (2)

take care of my older brother for three years in Arizona, and seeing each
of them die, and when they died, it was like one of her own. Yes, she will
have no books written about her. But she was a saint. Now, however, we
look to the future. I had a little quote in the speech last night from T.R.
[Theodore Roosevelt]. As you know, I kind of like to read books. I am
not educated, but I do read books—and the T.R. quote was a pretty
good one. Here is another one I found as I was reading, my last night in
the White House, and this quote is about a young man. He was a young
lawyer in New York. He had married a beautiful girl, and they had a
lovely daughter, and then suddenly she died, and this is what he wrote.
This was in his diary. He said, “She was beautiful in face and form and
lovelier still in spirit. As a flower she grew and as a fair young flower she
died. Her life had been always in the sunshine. There had never come to
her a single great sorrow. None ever knew her who did not love and
revere her for her bright and sunny temper and her saintly unselfishness.
Fair, pure and joyous as a maiden, loving, tender and happy as a young
wife. When she had just become a mother, when her life seemed to be
just begun and when the years seemed so bright before her, then by a
strange and terrible fate death came to her. And when my heart’s dearest
died, the light went from my life forever.” That was T.R. in his twenties.
He thought the light had gone from his life forever—but he went on.
And he not only became President but, as an ex-President, he served his
country, always in the arena, tempestuous, strong, sometimes wrong,
sometimes right, but he was a man.’ http://www.historyplace.com/
speeches/nixon-farewell.htm
6. http://www.desmogblog.com/leon-louw
7. http://www.examiner.com/article/public-health-nazi-tail-wags-
dog-of-individual-free-choice-and-liberty
8. http://www.nps.gov/nr/twhp/wwwlps/lessons/132independence/132fac
ts4.htm
9. http://www.nps.gov/nr/twhp/wwwlps/lessons/132independence/132fac
ts4.htm
10. Cannan joined the LSE at its inception in 1895 and became a professor
there in 1906 (Milgate 1987).
11. By 1952, Mellon (1855–1937) was long-dead and so Hoover’s account
must, presumably, remain unverifiable.
12. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 271

13. Friedrich Hayek, interviewed by Jack High date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
14. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
15. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
16. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
18. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
19. http://www.mises.org/pdf/asc/essays/kuehneltLeddihn.pdf
20. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
21. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
22. As a climate-change-sceptic and Austrian fellow-traveller (who claims to
be an hereditary member of the British House of Lords) put it: those in
the House of Commons are ‘the choice of the people, like Barabbas.’ He
may have been joking.
23. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
24. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
25. Mises (1985 [1927], 19) defined property as the ‘private ownership of
the means of production (for in regard to commodities ready for con-
sumption, private ownership is a matter of course and is not disputed
even by the socialists and communists).’
272 8 14–16: Austrians and the Holocaust (2)

26. https://thinkmarkets.files.wordpress.com/2010/06/keynes-hayek-­1932-
cambridgelse.pdf
27. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
28. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
29. Fürth Papers Hoover Institution Box 6.
30. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
31. Fürth Papers. Hoover Institution. Box 5.
32. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
33. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
34. The Wandervogel was a large circle: they presumably attended different
gatherings.
35. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
36. Hayek (1978a) learnt a lot from Kaufmann who ‘was much more gener-
ally [concerned with] scientific method. I remember, for instance, we got
from him an extremely instructive lecture on entropy and its whole rela-
tion to probability problems, and another one on topology. This interest
in relevant borderline subjects—He was an excellent teacher, in the lit-
eral sense. After a paper by Kaufmann, you really knew what a subject
was about.’ Friedrich Hayek, interviewed by Axel Leijonhufvud date
unspecified 1978 (Centre for Oral History Research, University of
California, Los Angeles, http://oralhistory.library.ucla.edu/).
37. Hayek Papers Box 61.5.
38. Hayek Papers Box 36.18.
39. http://www.atlasnetwork.org/about/our-story
40. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 273

41. Hayek Papers Box 44.2.

42. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
43. Anand Chandavarkar (2000, 1619) concluded: ‘The devout Harrod was
as concerned to overlook Keynes’s anti-Semitism as he was to suppress
any reference to his androgynity [sic]. The icon just could not be
besmirched.’
44. North should explain why this statement from Hayek doesn’t appear to
be on the tape of the interview.
https://mises.org/library/interview-friedrich-hayek-part-i
https://mises.org/library/interview-friedrich-hayek-part-ii
 Part III
America and Europe, 17–49
 9
17–35: America, 1923–1924; London,
Cambridge, and Gibraltar, 1931–1949

17–19: Freud, and Left- and Right-Freudians

Hayek and Mises grew up in Vienna, where Freudian psychiatry flour-
ished. When Hayek (1978a) ‘was thirteen or fourteen my father gave me
a treatise on what is now called genetics—it was then called the theory of
evolution—which was still a bit too difficult for me. It was too early for
me to follow a sustained theoretical argument. I think if he had given me
the book later, I would have stuck to biology. In fact, my interests started
wandering from biology to general questions of evolution, like paleon-
tology. I got more and more interested in man rather than, in general,
nature. At one stage I even thought of becoming a psychiatrist. And then
there was the experience of the war. I was in active service in World War
I. I fought for a year in Italy, and watching the dissolution of the Austro-­
Hungarian Empire turned my interest to politics and political problems1;
it seems that it was through psychiatry that I somehow got to the prob-
lems of political order.’2
Like the Romanov Empire, the multinational Habsburg Empire
appeared to cultivate visions of the ‘evil’ ‘other’ to explain misfortune.
For Hitler (1939 [1925], 29), the ‘two perils were Marxism and Judaism’;

© The Author(s) 2017 277

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_9
278 9 17–35: America, 1923–1924; London, Cambridge...

for Hayek, the perils were Freudians, trade unions and the influence of
competing ‘fathers’; and for the Freudian Mises, they were trade unions,
Fabian Socialists and ‘Fascists’ (a post-Anschluss label he attached to any-
one who opposed him).
As the ‘Great’ War ended, Hayek (1978a) ‘decided—Well, I didn’t
even decide to do economics. I was hesitating between economics and
psychology. Although my study was confined to three years at veterans’
privileges, and I did a first-class law degree, I divided my time essentially
between economics and psychology.’ For ‘essentially practical’ career-­
based reasons Hayek ‘became an economist, although the psychological
ideas continued to occupy me. In fact, they still helped me in the meth-
odological approach to the social sciences. I finally wrote out the ideas I
had formed as a student thirty years later—or nearly thirty years later—in
that book The Sensory Order [1952]. And I still have a great interest in
certain aspects of psychology, although not what is predominantly taught
under that name, for which I have not the greatest respect.’3
Freud was embraced both by elements of the New Right—as rep-
resented by Mises—and the New Left—as represented by Herbert
Marcuse’s (1966 [1955]) Eros and Civilization: A Philosophical Inquiry
into Freud plus Wilhelm Reich’s (1972 [1929]) Dialectical Materialism
and Psychoanalysis and Mass Psychology of Fascism (1980).
In the 1973 Saturday Night Massacre, the Hayekian Acting Attorney
General Bork (2013, Chap. 5) sacked Watergate Special Prosecutor
Archibald Cox (who had subpoenaed the White House tapes) in return
for a promise from Nixon: ‘You’re next when a vacancy occurs on the
Supreme Court.’ Thatcher (1978) citation from de Tocqueville (‘de
Torsquoueville’)—‘Religion … is more needed in democratic countries
than in any others. How is it possible that society should escape destruc-
tion if the moral tie is not strengthened in proportion as the political tie is
relaxed? And what can be done with a people who are their own masters
if they are not submissive to the Deity?’—may reflect Austrian influence.
Hayek (1978a) told Bork:

The change in morals due to permissiveness is in a sense antiliberal, because

we owe our freedom to certain restraints on freedom. The belief that you
can make yourself your own boss—and that’s what it comes to—is probably
 17–19: Freud, and Left- and Right-Freudians 279

destroying some of the foundations of a free society, because a free society

rests on people voluntarily accepting certain restraints, and these restraints
are very largely being destroyed. I blame, in that respect, the psychologists,
the psychoanalysts, as much as anybody else. They are really the source of
this conception of a permissive education, of a contempt for traditional
rules, and it is traditional rules which secure our freedom [emphasis added].4

According to Hayek (1988, 57; 1978a), Keynes was ‘one of the most
representative leaders intellectual leaders of a generation emancipated
from traditional morals’—his lifestyle and advocacy had consequences
almost without comparison in world history:

The height of the influence of the modern psychoanalysis of ‘uneducation’

was in the forties and fifties. And it was in the sixties that we got the prod-
ucts of that education … They essentially told the young people: ‘Well, all
the traditional morals are bunk.’5

When asked ‘Was it anti-Semitism which kept Mises from a professor-

ship?’ Hayek (1994, 59; 1978a) replied with knowledge which ‘I don’t
think has ever been stated’ and ‘Now please be discrete 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.’ Hayek then contradicted Mises: ‘the reason why he did
not get a professorship was not really anti-Semitism, but [that] he wasn’t
liked by his Jewish colleagues. This is a very comic story, which I tell you
with hesitation, because it’s the sort of thing you cannot prove. I’m quite
certain it’s correct [emphasis added]; an antisocialist Jew who was not a
capitalist was absolutely a monstrosity in Vienna’ [laughter].6
The evidence contradicts Hayek. When Wieser’s chair became vacant
in 1922, the faculty put Mayer first on the short-list, followed by Alfred
Amonn and Mises ‘as distant second and third’: ‘Remarkably, in the fac-
ulty’s final vote to include Mises in the list at third place (with 11 pro
and 8 con) of the seven Jewish professors present at the meeting only
one Grünberg voted against Mises’ (Klausinger 2013, 7; 2014, 195; see
also Leonard 2010, 88). Carl Grünberg was the Dean of the Faculty
and an Austro-Marxist teaching economic history. According to Hayek
280 9 17–35: America, 1923–1924; London, Cambridge...

(1994, 55), Grünberg was ‘rather comically’ in charge of economics,

and then founded—and became the respectable front for—the Freudo-­
Marxist Frankfurt Institute for Social Sciences: ‘the sort of scholarly head
for something which became a very political institution.’ Grünberg was
‘wholly uninteresting to us.’
According to Hayek (1978a), there was a ‘very great’ Marxist influence of
‘that curious institution in Frankfurt, the Institut fur Sozialwissenschaften,
where now Marcuse is the main figure, who made his reputation by com-
bining Marxism and psychoanalysis.’7 Hayek (1994, 85) and Robbins
(1971, 139–141) successfully opposed Beveridge’s attempt to relocate the
Frankfurt Institute to the LSE as part of a rescue operation of eminent
scholars from Nazi persecution. Decades later, Hayek remained ‘full of
venom about the Frankfurt Institute and its possible move to the LSE’
(Dahrendorf 1995, 291). A favourable reference to the Frankfurt Institute
was ‘more’ than Hayek ‘could endure’ (Cubitt 2006, 31).
In the seventeenth century, Lockean social contract theory competed
for influence with the divine right of kings; and in post-dynastic Europe,
it competed with the divine right of the state—Spann and Hitler—and
the divine right of the market—Mises and Hayek (Leeson 2017b). The
Jewish-born Marcuse incensed Austrians. When Hitler came to power,
Marcuse escaped to the New York Institute of Social Research where he
published ‘The Struggle Against Liberalism in the Totalitarian View of
the State.’ Liberalism, Marcuse (1968 [1934], 3, 11–12) argued, was a
front for the ‘total-authoritarian state … In order to get behind the usual
camouflage and distortion and arrive at a true image of the liberalist eco-
nomic and social system, it suffices to turn to Von Mises’ portrayal of
liberalism.’ Raico (2012, 260), the translator of Mises’ (1985 [1927])
Liberalism in the Classical Tradition, accused Marcuse and other Marxists
of ‘outright dishonesty’ and of providing a ‘venomous’ critique of Mises.
After years and probably decades of psychiatric drugs and treat-
ment, Hayek (1978a), insisted that psychiatry ‘has no scientific stand-
ing, but I won’t enter into this.’8 The Misean branch of the Austrian
School of Economics is intensely Freudian. In Socialism: An Economic
and Sociological Analysis, Mises (1951 [1932], 87, 104, n1, 105, 89,
88)—a middle-aged bachelor living with his devotedly religious Jewish
mother—devoted an entire chapter to sex and relationships: ‘the new
 17–19: Freud, and Left- and Right-Freudians 281

science of psycho-analysis has laid the foundations for a scientific theory

of sexual life … Only recently Freud, with the insight of a genius, has
shown how deep are the impressions which the parental home leaves on
the child. From the parent the child learns to love, and so comes to pos-
sess the forces which enable it to grow up into a healthy human being.’
Spann accused ‘Mayer of supporting Jews, and he puzzled over whether
this might derive from some psychic or sexual defects on Mayer’s side’
(Klausinger 2013, 10; 2014, 197). Mises (1951 [1932]) instructed his
disciples to examine ‘life history through the psycho-analytical method …
The sickness of a man whose sexual life is in the greatest disorder is evi-
dent in every line of his writings.’ When Mises met Margit Sereny in
1925, she was a thirty-five-year-old widow with two young children,
Guido and Gitta. They were rapidly engaged, but Mises declined to
marry her until 1938—after his mother died. Freudian analysis suggests
the Oedipus complex: Mises’ mother was President of the Institute for
the Blind (Margit Mises 1984, 17).
To use a possibly inappropriate biological analogy: at the onset of
World War II, Reich and Mises arrived as somewhat exotic and inva-
sive species—Austrian exiles in New York; both acquired cult followings.
Reich’s lifestyle is described by Myron Sharaf (1983) as Fury on Earth;
Mises was famous for his hysterical outbursts (Margit Mises 1984, 18,
19, 44; Friedman and Friedman 1998, 161; Robbins cited by Howson
2011, 662–663; Hülsmann 2007, 518–522).
Left- and Right-Freudians sought ‘liberation’ from sexual repression.
Mises (2007b [1957], 152) promoted ‘liberty’ through Freud and the
mysterious, hysteria-derived ‘thymology’ prediction machine; and Reich
claimed to have extended Freudian libido into a grand unified theory of
physical and mental health—‘orgone energy,’ a life force or cosmic energy
which could cure common colds, cancer and impotence. Reich and his
‘orgone accumulator’ became part of the counter-culture: the Austrian-
American philosopher, Paul Edwards (1977) explained that ‘for some years
many of my friends and I regarded [Reich] as something akin to a messiah.’
In 1950, Reich set up the Orgonomic Infant Research Center—which
led to accusations of sexual abuse: children stood naked in front of a
group of 30 ‘therapists,’ while Reich described the children’s ‘blockages.’
Reich’s daughter, Lore Reich Rubin, believed that her father was a sexual
282 9 17–35: America, 1923–1924; London, Cambridge...

abuser (Turner 2011, 314–319, 323). The Wilhelm Reich Infant Trust
continues to promote his message.
According to Mises (1951 [1932], 87, 104, n1), ‘Waking and dream-
ing man’s wishes turn upon sex.’ His fiancé (1976, 28, 23) recalled:
‘Sometimes I did not see him for weeks. But I knew very well that he was
in town. At least twice daily the telephone rang, and when I answered
there was silence at the other end of the line—not a word was spoken.
I knew it was Lu … I was so tormented, so torn to pieces that the chil-
dren must have felt it.’9 Mises also gratified himself by feeling Margit’s
six-year-old daughter: ‘I wanted to touch Gitta’s hair and think of you.’
There is strong circumstantial evidence that Gitta was deeply traumatised
by Mises’ advances (Leeson 2017b).
In Socialism, Mises (1951 [1932], 85, 87, 90) justified his type of
behaviour: ‘In the life of a genius, however loving, the woman and what-
ever goes with her occupy only a small place … Genius does not allow
itself to be hindered by any consideration for the comfort of its fellows
even of those closest to it.’ According to Mises, for women, ‘the sexual
function,’ the urge to ‘surrender to a man,’ and ‘her love for her husband
and children consumes her best energies’; anything more was ‘a spiritual
child of Socialism.’

 0–24: Psychiatry, America, Bernays

2
and the Quest for Producer Sovereignty
One common theme in Hayek’s life—at least in Vienna, Chicago,
Freiburg and Salzburg—was an interest in, treatment by, and professed
opposition to, psychiatry. Hayek’s (1952) The Sensory Order an Inquiry
into the Foundations of Theoretical Psychology is both insightful and fruit-
ful—it contributed to the new science of behavioural economics (Franz
and Leeson 2013; Franz and Marsh 2015). Hayek’s concept of reality as
being personally constructed also invites an examination of the construc-
tion of a person’s reality by someone else.
Whilst based in New York (1923–1924), Hayek (1978a) encountered at
least four major American Schools of Economics: the neoclassical approach
 25–35: London, Cambridge and Gibraltar, 1931–1949 283

associated with John Bates Clark; the American-Austrian School,

as represented by Frank A. Fetter; the Institutionalist, Thorstein
Veblen; and the empirical research methods of Wesley Claire Mitchell
(1874–1948) and the National Bureau of Economic Research (NBER),
which tended to follow the German Historical School (Leeson 2015c,
Chaps. 6 and 7).
In New York, the Austrian-born Edward Bernays (1891–1995) helped
integrate Freud’s theories into the producer-sovereignty-seeking advertis-
ing and public relations industries.10 During Hayek’s time in America
(and as he was pondering the material that would become The Sensory
Order), Bernays (1923) published Crystalizing Public Opinion. Five years
before the publication of Hayek’s (1952) The Sensory Order: An Inquiry
into the Foundations of Theoretical Psychology, Bernays (1947, 1955) pub-
lished ‘The Engineering of Consent’ (and later a book with the same
title).
In Propaganda, Bernays (1928, 47) stated: ‘If we understand the mech-
anism and motives of the group mind, is it not possible to control and
regiment the masses according to our will without their knowing about
it? The recent practice of propaganda has proved that it is possible, at least
up to a certain point and within certain limits.’ Hayek’s (2007 [1944],
171–172) Road to Serfdom required a ‘skillful propagandist’; and whether
or not Hayek (1978a) was consciously influenced by Bernays, there are
clear parallels:

What I always come back to is that the whole thing turns on the activities
of those intellectuals whom I call the ‘secondhand dealers in opinion,’ who
determine what people think in the long run. If you can persuade them,
you ultimately reach the masses of the people.’11

 5–35: London, Cambridge and Gibraltar,

2
1931–1949
In addition to the British-Austrians (discussed in Chap. 8, above),
between Austria and Chicago, Hayek encountered at least eleven knowl-
edge communities including ten competing schools of economics: market
284 9 17–35: America, 1923–1924; London, Cambridge...

failure, Keynesian, Neoclassical Synthesis, post-Keynesian, Galbraithian,

Beveridge-inspired, Stockholm or Myrdalian, market socialism, stabiliza-
tion rules and Marxism. In Gibraltar in 1944, Hayek also illustrated what
The Road to Serfdom (1944) meant in practice.
In the British Neoclassical School, Jevons (1835–1882) spawned sec-
ond and third Cambridge-associated generations: Marshall, followed
by Pigou and Keynes. Pigou was the ‘father’ of the Neoclassical mar-
ket failure tradition; and Keynes’ (1936) General Theory of Employment,
Interest and Money was within this market failure tradition. At the LSE,
the British-Austrians—Cannan (1861–1935), Robbins (1898–1984)
and others—sought to replace the British neoclassical tradition with a
mixture of the Continental (Austrian and Swiss-Lausanne) versions.
At age 30, Pigou (1877–1959) succeeded Marshall (1842–1924)
as Cambridge Professor of Political Economy. In his 1908 Inaugural
Professorial Lecture, Pigou stated that he would be glad if a student would
come to study economics as a result of having ‘walked through the slums
of London and is stirred to make some effort to help his fellow men …
social enthusiasm, one might add, is the beginning of economic science’
(cited by Hutchison 1953, 284, 416). Forty-five years later, Pigou (1953,
65) reminded a Cambridge audience how Marshall kept a painting of a
‘down and out’ on his wall to guide him back to ‘the right path’ when
beguiled by distracting, but shallow academic controversies.
British neoclassicism favours a positive role for the State to supple-
ment and support market forces. Pigou’s (1912, vii) monumentally titled
Wealth and Welfare addressed ‘the misery and squalor that surrounds us,
the injurious luxury of some wealthy families, the terrible uncertainty
overshadowing many families of the poor—these are evils too plain to be
ignored. By the knowledge that our science seeks it is possible that they
may be restrained.’ Pigou used marginal analysis to provide remedies for
market failure, through taxes and subsidies.
Hugh Dalton, Labour Chancellor of the Exchequer (1945–1947), con-
tributed to this welfare tradition: the Pigou–Dalton principle. Inspired by
Pigou (1912, 24), Dalton (1920, 348, 351, 361) assumed (from a ‘posi-
tive’ scientific perspective) that utility was cardinal and that social welfare
would be maximized when all incomes were equal and (from a normative
perspective) that ‘It is generally agreed that, other things being equal, a
 25–35: London, Cambridge and Gibraltar, 1931–1949 285

considerable reduction in the inequality of incomes found in most mod-

ern communities would be desirable.’ This led Dalton to conclude that
redistribution would result in greater equity so long as the relative income
ranking was unchanged. Hayek transplanted the Austrian version of the
ordinal revolution into the British tradition to in an attempt to demolish
such analysis (Moscati 2015). Hayek also promoted the fraud that Pigou
was a Soviet spy (Leeson 2015a).
According to Mises (1985 [1927], 19), ‘The program of liberalism,
therefore, if condensed into a single word, would have to read: property
[Mises’ emphasis] that is, private ownership of the means of production
(for in regard to commodities ready for consumption, private ownership
is a matter of course and is not disputed even by the socialists and com-
munists). All the other demands of liberalism result from this fundamen-
tal demand.’ When Peterson (2009 [1971], 9) asked how policy should
respond to ‘widespread unemployment and hence famine and revolu-
tionary discontent,’ Mises replied: ‘If the policies of non-intervention
prevailed—free trade, freely fluctuating wage rates, and no form of social
insurance, etc.—there would be no acute unemployment. Private charity
would suffice to prevent the absolute destitution of the very restricted
hard core of unemployables.’
Libertarian score ‘moderately lower than conservatives and substan-
tially lower than liberals on empathic concern for others’ (Iyer et al.
2012). At the June 1974 revivalist meeting in South Royalston, Vermont
and Austrians competed with each other over what Friedman described
as ‘rotten bastard’ proposals: the speed with which non-Austrian (i.e.
aristocratic, tax-exempt and academic) ‘entitlements’ could be elimi-
nated—forcing wounded veterans, the famine-stricken, the old, the
sick, the young and the poor to seek private charity.12 In contrast, Hayek
(1978a) proposed what would later be called Universal Basic Income: ‘a
flat minimum for everybody. This, of course, means in effect eliminating
completely the social justice aspect of it, i.e., the deliberate redistribution
beyond securing a constant minimum for everybody who cannot earn
more than that minimum in the market.’13
Keynes (1936) spawned both the Keynesian Neoclassical Synthesis
and the post-Keynesian tradition—in Britain, primarily associated with
Richard Kahn (1905–1989), Roy Harrod (1900–1978), Joan Robinson
286 9 17–35: America, 1923–1924; London, Cambridge...

(1903–1983) and Nicholas Kaldor (1908–1986). In the postwar period,

these two Keynesian strands battled over policy and theory, especially
capital theory (Harcourt 1972). Robinson (1962) referred to her
Neoclassical Synthesis opponents as ‘bastard Keynesians.’
On his way to London in 1931 and again during the wartime
evacuation of the LSE, Hayek encountered the various streams of the
Cambridge School. Hayek was regarded as a ‘nut’ after providing uncon-
vincing arguments to a Cambridge audience including Joan Robinson
and Kahn (cited by Samuelson 2009).14 Robinson (1972, 2–3) recalled
that as the controversy about public works was ‘developing,’ Robbins
‘sent to Vienna for a member of the Austrian school to provide a counter-­
attraction to Keynes.’ On his way to the LSE, Hayek visited Cambridge
and ‘expounded his theory … The general tendency seemed to show that
the slump was caused by consumption.’ Kahn (1984, 181–182) asked:
‘Is it your view that if I went out tomorrow and bought a new overcoat
that would increase unemployment?’ Hayek turned to a backboard full of
triangles and replied ‘Yes … but it would take a very long mathematical
argument to explain why.’
As AEA President, the Institutionalist John Kenneth Galbraith
invited Joan Robinson (1972, 2–3) to deliver the December 1971
Richard T. Ely Lecture. Robinson extrapolated from Hayek’s perfor-
mance: ‘This pitiful state of confusion’ was a reflection of ‘the first
crisis of economic theory.’ Hayek (1994, 92) responded by reporting a
problematic, if not fictitious, conversation in which Keynes was quoted
as stating that Kahn and Robinson were ‘just fools.’ In September
1971, the Nobel Prize for Economic Sciences selection committee
received Machlup’s recommendation that Hayek be awarded the
Nobel Prize—in part because of his fraudulent claim to have predicted
the Great Depression (Robbins 2012 [1931]; Klausinger 2012, 172,
n10; 2010, 227). Simultaneously, Robinson, Kahn, Harrod, Kaldor
and Galbraith must surely have been nominated (without success) for
Nobel Prizes.
The Times (17 December 1931) reported that ‘von’ Hayek had been
appointed to the Tooke Professorship at the LSE. Shortly afterwards, his
theory of the business cycle appeared to suffer an irreversible defeat (Sraffa
1932a, b; ‘von’ Hayek 1932). Even before ‘von’ Hayek (1933b) delivered
 25–35: London, Cambridge and Gibraltar, 1931–1949 287

his Inaugural Professorial Lecture, he became marginalized within the

economics profession; and, according to Coase, subsequently ‘lost sup-
port’ at the LSE (cited by Ebenstein 2003, 73).
Keynes (1936, 3, n1, 175, 177–178) introduced the General Theory
with the admission that much of what followed was possibly a ‘solecism’
with respect to his characterization of the ‘classical’ economists in general
and the ‘Classical Theory of the Rate of Interest’ in particular. The year
before the General Theory was published, Knight (1935, 236) described
the economic doctrines of ‘the classical school’ as ‘a mixture of a more
or less scientific analysis of a price economy with what is really political
propaganda for laissez-faire.’ Hayek was the ‘natural’ candidate as Keynes’
(JMK XIII [1935], 546, 552; 1936, 351) ‘classical’ whipping boy—but
his freshly marginalized status would have reduced the potency of this
literary device (Leeson and Schiffman 2015).
Keynes appealed to a different ‘tradition’: neglected heretics ‘which the
classics have treated as imbecile for the last hundred years.’ With respect
to the Chicago tradition, Friedman was a reverse plagiarist (Leeson
2003a, b); a tactic he may have derived from Keynes (1936, 351): ‘I
am not really being so great an innovator, except as against the classical
school, but have important predecessors and am returning to an age-long
tradition of common sense … which deserves rehabilitation and honour.’
Defeat at Sraffa’s hand obliged ‘von’ Hayek (1937, 1978a) to reflect
about ‘Economics and Knowledge.’ He also rectified history: ‘In the
middle forties—I suppose I sound very conceited—I think I was known
as one of the two main disputing economists: there was Keynes and there
was I [emphasis added]. Now, Keynes died and became a saint; and I
discredited myself by publishing The Road to Serfdom, which completely
changed the situation [laughter].’15
Galbraith (1975, 175) associated the rise of the Third Reich with
Austrian-promoted deflation (see also Hutchison 1992, 110–112;
Haberler 1986, 425). In the United States, Republican House Majority
Leader, Richard Armey (1995), associated the market and its promoter—
the fraud and thief, Hayek—with virtue: the Estonian Prime Minister
Mart Laar visited to ‘recount’ his country’s ‘remarkable transformation.
He described a nation of people who are harder-working, more virtu-
ous—yes, more virtuous, because the market punishes immorality—and
288 9 17–35: America, 1923–1924; London, Cambridge...

more hopeful about the future than they’ve ever been in their history.’
Armey asked Laar

where his government got the idea for these reforms. Do you know what
he replied? He said, ‘We read Milton Friedman and F. A. Hayek.’

James Galbraith (2009), noting that Armey spoke ‘of his admiration
for Austrian economics,’ added what may be an apocryphal story:

I can’t resist telling you that when the Vienna Economics Institute cele-
brated its centennial, many years ago, they invited, as their keynote speaker,
my father. The leading economists of the Austrian school—including von
Hayek and von Haberler—returned for the occasion. And so my father
took a moment to reflect on the economic triumphs of the Austrian
Republic since the war, which, he said, ‘would not have been possible with-
out the contribution of these men.’ They nodded—briefly—until it
dawned on them what he meant. They’d all left the country in the 1930s.

Hayek’s (1978a) response to John Kenneth Galbraith was ‘libelous …

which I don’t want to be recorded.’16
During Hayek’s time at the LSE, Beveridge (1942, 1944) laid the
foundations of the modern British Welfare State which was designed to
attack the five ‘giant evils’: ‘want, disease, ignorance, squalor and idle-
ness.’ The Constitution of Liberty (2011 [1960], 429, 193) was written, in
part, in opposition to Beveridge:

Though we may have speeded up somewhat the conquest of want, disease,

ignorance, squalor and idleness, we may in the future even do worse in that
struggle when the chief dangers will come from inflation, paralyzing taxa-
tion, coercive labour unions, an ever increasing dominance of government
in education, and a social service bureaucracy with far-reaching arbitrary
powers—dangers from which the individual cannot escape by his own
efforts and which the momentum of the overextended machinery of gov-
ernment is likely to increase rather than to mitigate.

Few would disagree with the general cautionary thrust of Hayek’s

remarks—although fewer would accept his assertion that ‘There must be
 25–35: London, Cambridge and Gibraltar, 1931–1949 289

a tolerance’ for a ‘group of the idle rich—idle not in the sense that they
do nothing useful but in the sense that their aims are not entirely gov-
erned by considerations of material gain.’
Hayek (2011 [1960], 500) somewhat sarcastically saw education as
an imposition on the existing social order rather than as a vehicle for
the promotion of a society dominated by achieved, rather than ascribed
status: ‘rationalistic’ Classical Liberals had

often presented the case for general education as though the dispersion of
knowledge would solve all major problems and as though it were only nec-
essary to convey to the masses that little extra knowledge that the educated
already possessed in order that this ‘conquest of ignorance’ should initiate
a new era.

Beveridge did not form a distinct school of economics—but according

to Hayek (1978a), ‘Kaldor, through the Beveridge Report, has done more
to spread Keynesian thinking than almost anybody else.’ According to
Hayek (1978a), Beveridge ‘never wrote’ the Beveridge Report (1942): ‘he
was incapable of doing this. I have never known a man who was known as
an economist and who understood so little economics as he. He was very
good in picking his skillful assistants. The main part, the report on unem-
ployment, was really done by Nicholas Kaldor.’17 Kaldor told Nadim
Shehadi that this assertion was ‘not true … what I did write was Appendix
3 which appeared in my name’ (cited by Dahrendorf 1995, 156).
According to the 1974 Royal Swedish Academy of Sciences press
release, ‘As in all areas where von Hayek has carried out research, he gave
a profound historical exposé of the history of doctrines and opinions in
this field.’18 Galbraith (1981, 49) reported that Schumpeter, his Harvard
colleague, ‘intended as a young man to be the greatest scholar, the great-
est general and the greatest lover of his generation but sadly the circum-
stances of postwar Austria had denied him the possibility of a military
career.’ Hayek (1994, 83, 85) asserted that Beveridge failed on all three
counts. Beveridge was not a scholar: ‘He could write to any subject where
he was given instruction … he was completely ignorant of economics.’ As
a ‘general’ (i.e. LSE Director), his partner ‘really dominated affairs. She
was a crude, energetic woman who knew what she wanted; completely
290 9 17–35: America, 1923–1924; London, Cambridge...

dominated him.’ Hayek also spread the rumour that she had stated that
Beveridge suffered from erectile dysfunction: ‘He isn’t man enough; he
isn’t man enough. I know.’ Hayek told Shehadi: ‘I personally believe that
Beveridge was completely incapable of any sexuality’ (cited by Dahrendorf
1995, 156). Hayek (1994, 84) concluded LSE departmental meetings
with ‘Beveridge delendus est’ (‘We must destroy Beveridge’).
When Beveridge recruited Hayek to the LSE, the Economics
Department had already become a quasi-Austrian enclave. In Hayek’s
(1978a) judgment, had Jevons not died age 46, or had his ‘extraordi-
narily brilliant pupil,’ Philip Wicksteed, acquired more ‘influence, things
may have developed in a different direction.’ Hayek then described pro-
ducer sovereignty: Marshall established ‘almost a monopoly … England
was dominated by Marshallian thinking. And this idea that if you knew
Marshall there was nothing else worth reading was very widespread.’ But
Marshall did not ‘appeal very much’ to Hayek: ‘I never became as familiar
with Marshall as all my English colleagues were. That really meant that I
was moving, to some extent, in a different intellectual atmosphere than
nearly all my colleagues.’19 The exception was the LSE: Cannan had ‘cre-
ated a different position, and where Robbins was one of the few econo-
mists who knew the literature of the world—he drew on everything.’20
Hayek (1978a) told Alchian that he had spent all of his ‘early years
on utility analysis … I was very attracted, in a way, by the indifference-­
curve analysis. I thought it was really the most satisfactory form, particu-
larly when it became clear that it unified the theory of production and
the theory of utility with a similar apparatus.’ Presumably because Hicks
was still alive, Hayek covered himself: ‘I don’t know whether I ought to
mention it—I doubt whether John Hicks remembers it—but it’s almost
a joke of history that I had to draw Hicks’s attention, who came from
Marshall, to indifference curves. [laughter] … the blackboard was used
much by people like Hicks and Allen [laughter].’21
Hicks (1904–1989) had taught at the LSE between 1926 and 1935—
for five years before Hayek arrived.22 Yet Hayek (1978a) told Buchanan
that Hicks had been ‘a complete Marshallian when he came, and it was
really in discussion—I probably had more theoretical discussions with
John Hicks in the early years of the thirties than with any of the other peo-
ple.’ In 1972, Hicks was awarded the Nobel Prize for Economic Sciences
 25–35: London, Cambridge and Gibraltar, 1931–1949 291

for ‘fundamental contributions to the renewal of the general equilibrium

theory. Work with welfare theory. Introduced new welfare concepts in
microeconomics.’23 Hicks (1972) emphasized that he had abandoned
Austrian business cycle theory: ‘It is not the case (as used to be supposed)
that there is any single physical index by which we can distinguish those
techniques which lie ‘further down’ the spectrum from those which lie
‘higher up.’ There is no such index which can be employed without excep-
tion. I could already show (in 1939) that the ‘Period of Production’ that
was used for this purpose by Böhm-Bawerk and Hayek will not in general
serve.’ Hicks added: ‘How much I have learned from others—especially,
perhaps, from Roy Harrod, Joan Robinson and Nicholas Kaldor—will
nevertheless, I hope, be apparent.’
A Review of Austrian Economics essay on ‘F. A. Hayek’s Influence on
Nobel Prize Winners’ by one of Boettke’s students asserted that in terms
of ‘elite economists’ influencing other ‘elite economist,’ Hayek was ‘the
second most frequently mentioned laureate in the Prize Lectures, and he
has the second most publication citations of the laureates. Hayek’s influ-
ence on the top-tier of economists is substantial’ (Skarbeck 2009). The
hagiographic Café Hayek ‘Taking Hayek Seriously’ website is headed by
an un-sourced and ellipsis-added (and thus distorted) quote from Hicks:
‘I can date my own personal “revolution” rather exactly to May or June
1933. It was like this. It began … with Hayek.’24
In the second edition of Theory of Wages, Hicks (1963, 307) actually
stated: ‘I can date my own personal ‘revolution’ rather exactly to May or
June 1933. It was like this. It began (rather oddly, as it turned out) with
Hayek. His Prices and Production is one of the influences that can be
detected in The Theory of Wages.’ In his Nobel Lecture, Hicks (1972)
emphasized that he was ‘deeply ashamed’ of the Austrian influence
exerted over him in his 1932 Theory of Wages:

the tradition in which I was working in [chapters] IX-X—the tradition of

Böhm-Bawerk and Wicksell—was much less familiar to English readers
than that of Pigou, on whom I was drawing in VI; but mostly because of
a head-on collision between what I was saying and the ‘New Economics’
which even then, three years before the General Theory, was already begin-
ning to be the Economics of Keynes. When I wrote the Theory of Wages,
292 9 17–35: America, 1923–1924; London, Cambridge...

I was completely innocent of these ideas; I had scarcely a notion of what

was going on at Cambridge, or for that matter in Sweden. But hardly had
my book left my hands when I began to move in that direction myself. I
stumbled upon something which, if not quite the same as Keynes’s
Liquidity Preference, has a close relation to it. And even before the
General Theory appeared in 1936, I had begun to draw some of the con-
sequences … The first result of the new point of view, when I reached it
in 1933–35, was to make me deeply ashamed of what in those chapters I
had written. I realised (too late) how inappropriate it was. It had nothing
to do with the state of the world at the time when I was writing. I had
diagnosed a disease, but it was not the right disease. The unemployment
of 1932 was of quite a different character from what I had supposed.

Hicks and Kenneth Arrow were jointly awarded the 1972 Prize; when
Alchian asked ‘Perhaps it might have been more appropriate for the
Nobel Prize to have gone to you and Hicks together, and Arrow and
Myrdal together,’ Hayek (1978a) replied ‘Oh, surely [laughter].’25 High
quoted Hicks (1967, 203) to Hayek: ‘When the definitive history of eco-
nomic analysis during the 1930s comes to be written, a leading character
in the drama—it was quite a drama—will be Professor Hayek.’ Hicks was
referring to the ordinal and Keynesian revolutions (Moscati 2015; Leeson
2015b Chaps. 1–3).
In 1933, Hayek reluctantly published an essay by Gunnar Myrdal
which was critical of Hayek’s (and Keynes’) monetary economics (Barber
2008, 25). In 1935, Robbins—presumably with Hayek’s support—
refused Brinley Thomas’ (1991, 268) suggestion that Myrdal be invited
to deliver two or three lectures at the LSE on the Stockholm School.
The following year, Robbins informed Kaldor that he hoped that Myrdal
would give a couple of lectures at the LSE (Howson 2011, 290).
Hayek was informed that Myrdal, his Nobel co-recipient, complained
that he had ‘certainly never been much troubled by epistemological
worries.’ When Hazlett asked: ‘Is Myrdal’s misstatement prompted by
ignorance or malice? And is this a fair sampling of the general academic
environment throughout Europe?’ Hayek (1992b [1977]) replied:

No, it is certainly a rather extreme case combined with an intellectual arro-

gance that, even among economists, is rare. Myrdal has been in opposition
 25–35: London, Cambridge and Gibraltar, 1931–1949 293

on these issues even before Keynes came out. His book on monetary doc-
trines and values and so on dates from the late 1920s. He has his own
peculiar view on this subject which I think is wrong. His book couldn’t
even be reproduced now. I don’t think he has ever been a good economist.

Myrdal and his wife, Alva, designed the Swedish Welfare State. The
Hungarian part of the former Austro-Hungarian Empire had the highest
suicide rate in the world: almost twice that of Sweden and four times that
of the United States (Kamm 1987). Three years after emerging from his
second suicidal depression (1969–1974), Hayek (1992b [1977]) made a
remarkable assertion about a national psyche: ‘there is perhaps more social
discontent in Sweden than in almost any other country I have been.’
Hayek derived favourable conclusions about Pinochet by strolling around
his Police State; and was also caricatured other countries: ‘The standard
feeling that life is really not worth living is very strong in Sweden. Although
they can hardly conceive of things being different than what they’re used
to, I think the doubt about their past doctrines is quite strong.’
According to Shehadi (1991, 385–387), at Hayek’s LSE, Keynes was
‘prevented from giving a talk in the lecture room and had to give it in the
graduate student common room which was packed to the stairs.’ Tibor
Scitovsky described how he had to ‘strike a balance between his integ-
rity and his objective of passing his exams. He had fears that if he used
Keynesian terms, he would fail.’
Arrow et al. (2004) reported that ‘de Scitovsky’ was born into a ‘noble
family; his father held the post of Foreign Minister.’ Scitovsky told David
Colander and Harry Landreth (1986, 204–205) that his father was ‘from
high-school days … a close friend of the Hungarian Prime Minister.’
According to Hayek (1978a), Scitovsky’s

father brought him to me from Budapest … to London and wanted some-

body who was familiar with Central European conditions. So he came to
me and brought a young boy saying, ‘Will you look after him a little while
he is a student; this is his first time in a foreign country.’26

In 1935, when this ‘young boy’ arrived at the LSE—as a graduate

student, after studying law in Budapest—Scitovsky (1910–2002) was
294 9 17–35: America, 1923–1924; London, Cambridge...

about to turn twenty-five. In 1930–1931, Scitovsky studied economics

in Cambridge under Dennis Robertson and Maurice Dobb, and wrote an
essay every fortnight for Joan Robinson (Colander and Landreth 1986,
204–205).
Hayek (1978a) asserted that whilst they were both at the LSE
(1935–1938), he and Scitovsky ‘got on very well together. I believe he
did his thesis under Robbins.’27 In contrast, referring to the ‘bitterly
anti-Keynesian senior faculty, mainly Robbins, Hayek and Beveridge,’
Scitovsky recalled that he and many of his fellow students ‘sensed the
faculty’s inability to deal with economic reality’; there were ‘pretty violent
fights’ in LSE seminars between Kaldor et al. and Robbins and Hayek,
students ‘faced the difficult but challenging problem of how to pass our
examinations. For we knew that the senior faculty clung to its rights of
setting and grading examination papers … we did not want to be dis-
honest and write answers which we knew were wrong but would please
the examiners … you really had to do some pretty hard thinking how
to operate in that highly charged environment’ (cited by Colander and
Landreth 1986, 207–208).
According to Hayek (1978a), others had been corrupted by politics: he
was ‘a little doubtful’ whether the deceased market socialist, Oskar Lange
(1904–1965), was ‘really intellectually completely honest. When he had
this conversion to communism, as communism came to power, and was
willing to represent his communist government in the United Nations
and as ambassador, and when I met him later, he had at least been cor-
rupted by politics. I don’t know how far he had already been corrupted in
the thirties when he wrote these things, but he was capable of being cor-
rupted by politics.’28 Seven years later, Hayek was blunter—telling North
and Skousen: ‘Lange was a fraud.’29
At the LSE, Hayek also encountered Abba P. Lerner’s (1934, 1936,
1937, 1938, 1944) market socialism. The microeconomic component
of Lerner’s (1944) Economics of Control extended Pigou’s (1912) Wealth
and Welfare framework to include theory-based rules about policy inter-
ventions to correct for externalities; the macroeconomic component
advocated activist, ‘functional finance’ stabilization policy to achieve full
employment.
 25–35: London, Cambridge and Gibraltar, 1931–1949 295

Assistant Lecturer Lerner (1903–1982), co-founder of The Review of

Economic Studies, was four years younger than Hayek, but had an equally
strong publication record. He was born in the pogrom-prone Romanov
Empire; and grew up and continued to live in the East End of London.30
Alchian (1978) told Hayek that when Lerner ‘was a very young child,
they were so poor his mother used to put water in the milk, and he always
thereafter liked skim milk.’ In contrast, Hayek’s (1994, 39) maternal
grandparents were ‘housed in a magnificent, even grandiose top-floor flat
of ten rooms … undoubtedly one of the most beautiful flats in Vienna …
they kept at least three servants.’ His parents’ ‘fantastic flat’ was the ‘danc-
ing centre of Vienna’s upper academia’ (cited by Ebenstein 2003, 45). As
the University of London Tooke Professor, Hayek (1994, 78) couldn’t
afford a car until 1936: ‘We were of course still running the house with
the help of a regular maid. These were usually Austrian girls.’31
In addition to his low ascribed status, Lerner had—from Hayek’s per-
spective—an additional unattractive aspect: he was Jewish. Lerner also
trespassed on what Hayek may have regarded as his monopoly rights:
selling the Keynesian Phillips Machine in the United States (Dorrance
2000, 116).32 According to Hayek (1978a), Lerner ‘was a very recent
convert to civilization [laughter].’ He had been ‘a Trotskyist who had,
before he came to the university, I believe, failed in business and become
interested in economics because he had failed in business. But from the
beginning, he was extremely good.’33 Referring to an oral history tape
that was embargoed until 2003, Hayek (1978a) continued: ‘In the end—
Well, that, I think, ought to be under lock and key for the next twenty-­
five years.’ Alchian pushed Hayek: ‘he would probably tell it himself if he
were here, I don’t want to press on a matter which would be under lock
and key.’34
The ‘Near East’ was once synonymous with the Ottoman Empire
(which included Armenia): Hayek’s (1978a) skin-colour theory of hon-
esty related to ‘certain types, and conspicuous among them the Near
Eastern populations, which I still dislike because they are fundamentally
dishonest. And I must say dishonesty is a thing I intensely dislike.’35
Hayek may not have trusted Alchian because of his Armenian origins
and may have suspected that he would not keep quiet about his Lerner
stories until the victim was dead. For whatever reason, Hayek (1978a)
296 9 17–35: America, 1923–1924; London, Cambridge...

replied to Alchian: ‘No, I don’t think it would benefit to make it public

now. I was going to say simply this: in the end, we had the problem that
both Kaldor and Lerner were clearly such exotic figures that we couldn’t
keep them both in the department. And one of very few points on which
Robbins and I ever disagreed was which of the two to retain [laughter].’36
Alchian pressed again: ‘I’d heard that there was a dispute. My impression
or recollection—you needn’t correct it or say it’s right or wrong—was
that you favored Lerner and he favored Kaldor.’ Hayek (1978a) replied:
‘Yes, that’s perfectly correct … It would have done a great deal of good
to England if Lerner had stayed and Kaldor had gone to America [laugh-
ter].’ Presumably referring to a pre-interview conversation or informa-
tion, Alchian replied: ‘Oh, you’ve wished that all your life.’37
The fraud that Robbins’ (2012 [1931]) unwittingly promoted in his
Foreword to Hayek’s Prices and Production was apparently uncovered—
within three years—at the University of Chicago (Leeson 2017c). In
‘Professor Hayek and the Concertina-Effect,’ Kaldor (1942, 359–360)
explained that Hayek’s Prices and Production (2012 [1931]) had ‘fas-
cinated the academic world of economists’—its ‘first impact’ [Kaldor’s
emphasis]. Kaldor continued:

This was the first impact. On second thoughts the theory was by no means
so intellectually satisfying as it appeared at first. There were admitted gaps
in the first published account [Hayek 2012 (1931)] which was merely
intended as rudimentary, but when one attempts to fill in these gaps they
became larger, instead of smaller, and new unsuspected gaps appeared—
until ultimately one was driven to the conclusion that the basic hypothesis
of the theory, that scarcity of capital causes crises, must be wrong.

Hayek (1978a) initially failed to force Kaldor out of the LSE. According
to Shehadi (1991, 386), ‘Robbins asked Kaldor not to lecture his stu-
dents on Keynes because it would confuse them, and even attended his
class to make sure he did not.’ During World War II, Kaldor complained
that Hayek preventing him from grading LSE students: ‘probably the
only instance in recorded history of an academic demanding to be given
more examination scripts to mark.’ Kaldor suspected a Robbins-Hayek-­
coordinated, anti-Keynesian conspiracy; and after the war, he did not
 25–35: London, Cambridge and Gibraltar, 1931–1949 297

return with the LSE to London (King 2009, 56). Kaldor sent ‘a wicked
manuscript note’ to Hayek: ‘If you talk about the ‘lost generations of
Keynesians’ what about the (even older) ‘lost generations of Hayekians’
[*like myself ] who believed in Prices and Production?’ (cited by Ingrao
and Ranchetti 2005, 396).
During his last three years at the LSE, Hayek overlapped with the
war hero, ‘Bill’ Phillips, who in 1958, succeeded him as the University
of London Tooke Professor of Economic Science and Statistics. Phillips
worked with James Meade on stabilization policy rules (Leeson 1994a,
b, 1997a, b; 2000a). In his Nobel biography, Meade (1977a) reported
that at the LSE he had a ‘large and rich team of economic colleagues.
Of these, I will mention only Professor A.W.H. Phillips to whom I owe
an immense intellectual debt of gratitude for education in the treatment
of dynamic systems.’38 Meade’s (1977b) Nobel Lecture addressed ‘The
Meaning of “Internal Balance”;’ he and Phillips examined dynamic sys-
tems to stabilize the economy. In contrast, Hayek (1975a) promoted
‘major social instability’ to reduce wages. The ‘primary cause of the
appearance of extensive unemployment’ is disequilibrium prices and
wages: ‘wages are only rigid downwards … Remember, please: this is
the crucial concept.’ A ‘secondary’ contraction or depression could make
unemployment ‘general.’ Hayek, who couldn’t specify how much ‘social
unrest’ it would take in ‘restoring the market,’ stressed: ‘The point I want
to make is that this equilibrium structure of prices is something we can-
not know beforehand because the only way to discover it is to give the
market free play.’
In 1940, Mises and Meade fled from Geneva and the threat of Fascism:
Meade to war-service in London; The Last Knight of Liberalism to the
safety of neutral Manhattan (Leeson 2015b, 270). With respect to politi-
cal entrepreneurs (like Hitler?), Hayek (1975b) acknowledged that he
did not know if the pursuit of unobservable equilibrium would lead to
‘political revolution.’ Hayek apparently believed that someone called ‘Bill
Phillips’—codename ‘Jack’—was an underground communist who oper-
ated espionage ‘transmitting stations’ for the Soviets (Leeson 2015a).
Referring to ‘the Hayek-Robbins line,’ Thomas (1991, 390) recalled
that in the interwar LSE, the ‘ruling powers were passionate believers
in freedom, and this included freedom to adjust the constraints within
298 9 17–35: America, 1923–1924; London, Cambridge...

which freedom was exercised by nonfavourites. The main type of adjust-

ment was the postponement of tenure.’ Thomas did not receive tenure
until, on the advice of the LSE Director (1937–1957) Sir Alexander
Carr-Saunders, he moved away from (the Hayekian area of ) ‘monetary
theory to migration and economic growth.’
The eleventh school that Hayek encountered in London and Cambridge
was represented (primarily) by the Marxist, Maurice Dobb (1933), who
disputed the Austrian notion of consumer sovereignty. Dobb concluded
that the LSE Department of Economics was ‘firmly regimented under
the Robbins-Hayek banner’ where academics were ‘mouthing old plati-
tudes about the blessings of a price mechanism and the beneficence
of capitalist speculators’ (cited by Shenk 2013, 130–131). According
to Shehadi (1991, 385–387), Hayek and Robbins ‘tried to restrict the
divulgence’ of non-Austrian ideas. Under their patronage, the LSE was
‘described as a court where the favourites were the ones who adhered
to Neo-classical principles and the non-favourites were those who had
affinities to Keynesian ideas. The former got promotion, the latter were
weeded out gradually.’
During the McCarthy era, the Marxist Paul Sweezy was accused by the
Attorney General of New Hampshire of subversive activities. Sweezy, who
refused to hand-over his lecture notes, was exonerated by the Supreme
Court of the United States (Uchitelle 2004). Lauchlin Currie (5 August
1971) told Sweezy’s brother, Alan, that his own career had been blocked
at Harvard University by Harold Burbank, Haberler and Seymour Harris
who ‘didn’t get on the [Keynesian] bandwagon until it was perfectly safe
to do so and he had his position secured at Harvard.’39
In 1932, Alan Sweezy (1907–1994) and his brother Paul (1910–2004)
went to Europe for a year: to the University of Vienna to study Austrian
economics (on a Sheldon Fellowship) and the LSE, respectively. Paul
Sweezy had been ‘relatively conservative, or at least confused politi-
cally’—he had voted for Norman Thomas, the Socialist Party of America
candidate in the November 1932 Presidential election. When he went to
the LSE, he thought of himself as ‘not exactly a follower but somehow
very much influenced by Gottfried Haberler, of whom I was very fond. I
changed my view considerably at LSE. He got more and more crotchety
as he got older and became very intolerant, but when he was young he
 25–35: London, Cambridge and Gibraltar, 1931–1949 299

was a very exciting person. I thought of myself as within that Austrian

mode. So too did Abba Lerner and many of the LSE economists.’ Sweezy,
who left the LSE as ‘a Marxist and as a radical,’ noted that Joan Robinson
was ‘far to the left of many of the Marxists, in terms of her instincts and
sympathies’ (cited by Colander and Landreth 1996, 75).
The Sweezys’ father had been vice president of First National Bank of
New York, which was headed by George F. Baker, a partner of J.P. Morgan
and Company (Foster 2004). Paul Sweezy, who became the long-term
editor of the Marxist Monthly Review, found that the LSE graduate stu-
dents had formed an ‘extraordinarily lively intellectual environment’
(cited by Colander and Landreth 1996, 76).
According to Hayek (1978a), who ‘moved, to some extent, in aristo-
cratic circles, and I like their style of life … Socialism has never been an
affair of the proletarians. It has always been the affair of the intellectu-
als, who have provided the workers’ parties with the philosophy.40 This
aristocratic style of life was challenged by ‘the servant problem’ (Chap.
2, above). Other high ascribed-status economists—like Paul Sweezy and
Dobb—were motivated by what Hayek despised: ‘social justice.’ In 1920,
the upper-class-born Dobb (1900–1976), a writer for Plebs, the monthly
publication of the Plebs League, joined the Communist Party of Great
Britain. Robbins (1926) wrote an Economica review of Dobb’s (1925)
LSE dissertation, Capitalist Enterprise and Social Progress: ‘as savage a
review … as I am capable of,’ he informed his LSE colleague, Arnold
Plant (Howson 2011, 136). In the process of writing the review, Robbins
became familiar with Knight’s (1921) Risk Uncertainty and Profit—which
subsequently became required reading at the LSE (Coase 1983, 213).
Dobb’s private life hampered his academic career: in consequence of
his divorce, he was sacked as Director of Studies at Pembroke College,
Cambridge, and his dining rights were withdrawn (Shenk 2013, 45, 36,
67). In 1950, after abandoning his wife and two children Hayek became
almost persona non grata at the LSE. Six years earlier, he had become a
world-famous defender of ‘liberty’ (1944) whilst simultaneously illustrat-
ing what it meant in practice in a Report on Gibraltar commissioned by
the British Colonial Office.
In summer 1944, the Nazis ‘beautified’ the Theresienstadt concentra-
tion camp before inviting the Danish Red Cross to observe Jewish inmates
300 9 17–35: America, 1923–1924; London, Cambridge...

enjoying cultural activities. Also in 1944, the Jewish actor-director, Hans

Gerron, was coerced into directing a propaganda film about Theresienstadt
showing how ‘humane’ conditions were in Nazi concentration camps.
When shooting finished, Gerron and those he shot, including mem-
bers of Martin Roman’s Ghetto Swingers, were deported to Auschwitz
where most were immediately gassed (Prager 2008). Some were harvested
(teeth, hair, etc.) to serve the ‘good’ that Hitler began dreaming about
whilst absorbing the anti-Semitism of prominent Viennese proto-Nazi
families like the von Hayeks. Others were injected with chemicals by ‘sci-
entists’ like Heinrich von Hayek (Hildebrandt 2013; 2016). In summer
1944, Hayek visited Gibraltar: his Report insisted that eliminating rent
control would oblige many working-class people (many of whom were
State-less refugees from the Spanish Civil War) to relocate to Franco’s
Spain to enjoy an ‘improved lifestyle’ (Grocott 2015, 13; Grocott 2017).

Notes
1. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
2. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
3. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/). See also Hayek’s (13 July 1977) letter to
John Davenport of Fortune Magazine. Hayek Papers Box 16.56.
5. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
6. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 301

7. Friedrich Hayek, interviewed by James Buchanan 28 October 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
8. Hayek (1978a) continued: ‘It becomes a most destructive force in
destroying traditional morals, and that is the reason I think it is worth-
while to fight it. I’m not really competent to fight it on the purely scien-
tific count, although as you know I’ve also written a book on psychology
[1952], which perhaps partly explains my scientific objections. But it is
largely the actual effect of the Freudian teaching that you are to cure
people’s discontent by relieving them of what he calls inhibitions. These
inhibitions have created our civilization.’ Friedrich Hayek, interviewed
by Robert Chitester date unspecified 1978 (Centre for Oral History
Research, University of California, Los Angeles, http://oralhistory.
library.ucla.edu/).
9. Margit (1984, 20–21) attributed Mises’ behaviour to shyness: ‘He
wanted to hear my voice.’
10. Bernay’s mother, Anna, was Sigmund Freud’s sister, and his father, Ely,
was the brother of Freud’s wife, Martha Bernays.
11. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
12. Conversation with David Henderson (7 July 2011), who attended the
1974 revivalist conference and heard Friedman make the remark.
13. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
14. In ‘A Few Remembrances of Friedrich von Hayek (1899–1992)’ Paul
Samuelson (2009) recalled Kahn’s ‘simple oral 1932 statement’: ‘If
Hayek believes that the spending of newly printed currency on employ-
ment and consumption will worsen our current terrible depression, then
Hayek is a nut.’
15. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
16. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
302 9 17–35: America, 1923–1924; London, Cambridge...

17. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre

for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
18. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/press.html
19. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
20. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
21. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
22. http://www.lse.ac.uk/aboutLSE/keyFacts/nobelPrizeWinners/hicks.aspx
23. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1972/hicks-facts.html
24. http://hayekcenter.org/?page_id=31#sthash.orV2Ev8g.dpuf
25. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
26. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
27. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
28. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
29. http://contemporarythinkers.org/friedrich-hayek/multimedia/interview-
hayek-gary-north-part-2/
30. https://www.thegazette.co.uk/London/issue/34217/page/7043
31. Car ownership in the United Kingdom rose from 100,000 in 1918 to
just below 2 million in 1939. In 1936, the UK population was just below
50 million (O’Connell 1998, 19).
32. See the correspondence with Machlup. Hayek Papers Box 36.17.
 Notes 303

33. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
34. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
35. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
36. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
37. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
38. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1977/meade-bio.html
39. Lauchlin Currie Papers. Duke University. Correspondence. Alan Sweezy
file.
40. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 10
36–43: Chicago, 1950–1962

36: McCarthyism
According to William Buckley Jr. and Leo Brent Bozell (1954, 160, n,
50–51), in February 1950, Senator McCarthy’s ‘first important blow’
against supposed communists in the United States State Department was
reported the following day in only two newspapers—one of which was
the Chicago Tribune. The Tribune produced what Herbert Simon (1991,
121) regarded as a ‘thick stream of bile’ in its battle to save what it regarded
as the American way of life against the New Deal. According to Rexford
Tugwell (1972, 169), the Tribune continued to print stories that were
‘straight Hoover. It might have been culled from the Memoirs.’ The
Tribune fanned anti-communist flames and the Illinois State Senate
established a committee to investigate subversive influences in the educa-
tional system (Schlesinger 1960, 604, 607, 529, 88, 94; Stigler 1988,
157; Ickes 1953, 368, 376).
The Great Depression was caused by the combined influence of bubble-­
inducing fraud on unregulated Wall Street, the collapse of the American
banking system (mismanagement by the Federal Reserve and the absence
of deposit insurance), beggar-they-neighbour trade policies initiated by

© The Author(s) 2017 305

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_10
306 10 36–43: Chicago, 1950–1962

the Hoover administration plus the deflationary policy ­influence of the

Austrian School of Economics. It was interpreted as ‘the final failure of
capitalism’—and thus tended to push political sentiment to the extra-
parliamentary extremes. Friedman (1983, 178) calculated that by 1934
‘close to a majority’ of faculty and students within the social sciences at
the University of Chicago were ‘either members of the Communist party
or very close to it.’ But Friedman promoted academic freedom and sug-
gested that Paul Sweezy should establish a defence fund to fight the assault
waged against him during the McCarthy period (Leeson 2017a). In con-
trast, Rockwell (2010 [1999], 287) is a devotee of McCarthy: ‘I told them
that Tailgunner Joe should have been attacking the U.S. government all
along, because it was the real threat to our liberties.’
McCarthy received financial backing from the Tribune’s publisher,
Colonel Robert McCormick (Revere 1959, 115). According to Samuel
Francis (1995, 65), Rothbard was an adviser to McCormick, Charles
Lindbergh, who in 1941 sought a neutrality pact with Nazi Germany,
and ‘Senator Robert A. Taft … who best represented what Rothbard
believed was the real American tradition of small and limited government
at home and an America First foreign policy abroad.’
Rothbard (1994a, 5) sought to organize the Austrian School of
Economics around an ‘Outreach to the Redneck.’ During the
2015–2016 Republican Party primaries, Former Arkansas Governor
Mike Huckabee told Fox News that he did not want to get involved in
‘the war of words’ between Trump and the other Republican presiden-
tial candidates because ‘Any drunken redneck can walk in a bar and
start a fight. The question is: Can he finish the fight?’1 David Duke, a
white nationalist and former Ku Klux Klan grand wizard, reportedly
advised his radio show listeners that

voting against Donald Trump at this point is really treason to your heri-
tage. And I am telling you that it is your job now to get active. Get off your
duff. Get off your rear end that’s getting fatter and fatter for many of you
everyday on your chairs. When this show’s over, go out, call the Republican
Party, but call Donald Trump’s headquarters, volunteer. They’re screaming
for volunteers. Go in there, you’re gonna meet people who are going to
have the same kind of mindset that you have.2
 36: McCarthyism 307

When asked ‘Will you unequivocally condemn David Duke and say
that you don’t want his vote and that of other white supremacists in this
election?’ Trump replied ‘I don’t know anything about David Duke, OK?
I don’t know anything about what you’re even talking about with white
supremacy or white supremacists’ (Kessler 2016).
In his Presidential campaigns Duke obtained 4 per cent in 1988
(Louisiana Democratic primary), 1 per cent in 1988 (Populist Party), and
8.85 per cent in 1992 (Louisiana Republican primary). In 1989, he was
elected as Republican State Representative, 81st Representative District
(Suburban New Orleans). Rothbard (1992a, 6, 7, 13) celebrated Duke’s
election victory because he was ‘a right-wing populist … why isn’t it OK
to have been a Klansman?’3 Rothbard praised McCarthy for taking ‘the
alleged danger seriously; and insisted on naming names, in naming and
exposing these whom he considered the enemy.’ But he had been sabo-
taged by the media: ‘by getting the U.S. Senate—an institution which
McCarthy, not a libertarian, loved and revered—to censure him, they
broke Joe’s heart, and he was finished from then on.’
In April 1945, Hayek (1978a), on a Road to Serfdom promotional lec-
ture tour, ‘began with a tone of profound conviction, not knowing how I
would end the sentence, and it turned out that the American public is an
exceedingly grateful and easy public.’ He travelled across the United
States for ‘five weeks doing that stunt [laughter] everyday, more or less,
and I came back as what I thought was an experienced public lecturer,
only to be bitterly disappointed when I went back to England’ where his
American ‘stunt’ didn’t work: ‘Well, after all, you see, the New York audi-
ence apparently was a largely favorable one, which helped me. I didn’t
know in the end what I had said, but evidently it was a very successful
lecture.’ Hayek also reflected: ‘what I did in America was a very corrupt-
ing experience. You become an actor, and I didn’t know I had it in me.
But given the opportunity to play with an audience, I began enjoying it
[laughter].’4 Eight months later, the American Economic Review published
Hayek’s (1945) ‘Use of Knowledge in Society’—a prelude to his 1974
Nobel Lecture on ‘The Pretence of Knowledge.’
The soon-to-be Mont Pelerin Society member, Chamberlain (2007
[1944], 253–254), wrote the Foreword to the first American edition of
The Road to Serfdom. In God and Man at Yale, the soon-to-be Mont
308 10 36–43: Chicago, 1950–1962

Pelerin Society member, Buckley (1951), made what Chamberlain (1951,

ix) regarded (in his Foreword) as a ‘devastating’ case against the Yale
Economics Department. Students were exposed to textbooks which con-
tained material ‘brewed out of Keynes, the Fabians, and Karl Marx him-
self ’ without countervailing arguments from Mont Pelerin Society
members: Hayek, Knight, ‘Ludwig von Mises’ and Wilhelm Röpke.
Hayek (17 June 1979) told David Boaz of the Council for a Competitive
Economy that his ‘strict’ rule was not to take part in current political
activities of a country of which he was not a citizen.5 Shortly after taking
up his position as Professor of Social and Moral Sciences, Hayek (23
December 1950) informed Lawrence A. Kimpton, the Vice President of
the University of Chicago, that he had just had lunch with an exception-
ally intelligent and educated businessman who had startled him by ‘seri-
ously’ asserting that the first two of the sequential Social Science course
were organized by communist sympathizers. This ‘apparently’ honest and
intelligent man, whose son was studying at the University, had under-
taken ‘continuous’ observation before reaching this conclusion.6
The evidence suggest that Hayek was referring to Frederick Nymeyer
who, through the Libertarian Press, devoted a large part of his life and
presumably his finances to locating and publishing everything he could
find on the second-generation Austrian School economist, Böhm-­
Bawerk—a project that Hayek (4 September 1962) assisted him with.
Kimpton swallowed the bait. After an arranged lunch with Kimpton,
Nymeyer (22 January 1951) informed Hayek that the University author-
ities now knew that they could not ‘claim’ the reputation of being an
institution of learning; they could, instead, be perceived, instead, rather
as an institution of ‘propaganda’ with an anti-capitalist and ‘subversive’ to
freedom bias. Nymeyer suggested to Kimpton that someone who holds
to ‘Individualism’ should be designated to audit all courses.7
Nymeyer’s (2 April 1951) objectivity consisted of as much information
on Menger/Böhm-Bawerk/Mises/Hayek as on Marx/Veblen/Keynes,
with ‘naturally’ the material heavily weighted for the former. Hayek (30
March 1951) replied that his tactic had worked: Nymeyer’s lunch with
Kimpton had evidently made its desired impact. Somewhat conspiratori-
ally, Hayek (23 December 1950) forwarded to Kimpton a pamphlet—
apparently written by Representative William Horsley—which he
explained ‘incidentally,’ he had received in a plain envelope soon after he
 36: McCarthyism 309

arrived in Chicago.8 Hayek (7 November 1953) then invited Nymeyer to

join the Mont Pelerin Society.9
In 1954, the US House of Representatives investigated tax-exempt
foundations (H. Res 217). Carroll Reece of Tennessee investigated ‘Pro-­
communist and pro-socialist propaganda financed by tax-exempt foun-
dations.’ The University of Chicago was targeted: its ‘Roundtable is
propaganda not education.’ Moreover, the University under President
Robert Hutchins ‘has distinguished itself by being the only institution for
higher learning in America which has been investigated five times for
immoral or subversive activities.’ In the fifth hearing, Horsley sought to
deny the University of Chicago tax exemption.10 Hayek (30 March 1951)
speculated to Nymeyer that this ‘knowledge’ could prove to be of consid-
erable importance for the future. According to the University of Chicago
website, in 1949, ‘Hutchins steadfastly refused to capitulate to red-baiters
who attacked faculty members’; and in 1951, he was replaced by
Kimpton.11
Reece was ‘a fiscal conservative and defender of business interests in
eastern Tennessee’12; and for $100, Gary North will supply a copy of the
Government Printing Office’s ‘Hearings Before the Special Committee to
Investigate Tax-Exempt Foundations and Comparable Organizations’:
‘The Reece Committee Hearings Exposed America’s Major Tax-Exempt
Foundations as Moving Toward a One-World State … I have no illusions
that I will sell many copies. But for serious researchers into the secret
take-over of the United States, beginning in 1913, this document will
open a closed book in American history.’ North, the self-appointed ‘Tea
Party Economist,’ is a survivalist promoter and (like his co-religionist,
Boettke) a conspiracy theorist: ‘The hearings were held for two weeks.
Then, without warning, the committee stopped them … a Democrat on
the committee, Wayne Hays—whose career ended in a sexual scandal in
1976, while I was a Capitol Hill staffer—was able to persuade other com-
mittee members to pull the plug.’13
When in 1955, the University of Michigan considered promoting the
Keynesian econometrician and future recipient of the Nobel Prize for
Economic Sciences, Lawrence Klein, from part-time lecturer to full pro-
fessor, Paton, an accountant and soon-to-be Mont Pelerin Society
­member, informed Ackley, the chair of the Department of Economics,
that this was ‘all a plot’ to ‘solidify Jewish control of the department’
310 10 36–43: Chicago, 1950–1962

(Ackley cited by Hollinger 1998, 152, n76). Paton (11 February 1955)
insisted that Hayek be allowed to ‘respond candidly’ to the proposed
promotion. Just in case Hayek was unaware of the ideological dimension,
Paton reminded him that the Klein was ‘completely’ in the ‘wrong camp.’
The University of Michigan formally invited Hayek to pass judgment on
Klein. Hayek’s written reply (if he made one) is not in the Hayek
Archives.14
The anti-Semitic Hayek (1978a) ‘never sympathized with either mac-
roeconomics or econometrics’15: the Klein episode and Hayek’s role have
not been exhaustively examined (see, for example, Schrecker 1986,
253–255; Brazer 1982, 219–228). In a postscript to Science Jews and
Secular Culture Studies in Mid-Twentieth-Century American Intellectual
History (1998), David Hollinger (2013) reported that he had been unable
to use some evidence because of a restriction that had since expired
(Ackley describing Paton’s anti-Semitic statements in a 1979 interview
with Marjorie Brazer): Paton’s ‘successful opposition to Klein is central to
my discussion of the McCarthy Era at Michigan.’ William Haber, a
University of Michigan economist who aided Jewish refugees, believed
that Paton’s anti-Semitism underpinned his opposition to Klein—a
charge contested by Paton’s son, William A. Paton, Jr. (Hollinger 1998,
152, n76; Howe Verhovek 1989). The restricted 1979 Ackley interview
supports Haber’s judgment.16
When the evidence about Hayek’s anti-Semitism was presented on the
SHOE list, Caldwell (1 June 2014 SHOE) revealed how ‘secondhand
dealers in opinions’ elevate the emotional needs of their opinionated
superiors above the evidence: ‘As noted below, my colleague at Duke Roy
Weintraub asked me to post this for him to the list’:

Leeson is simply an irresponsible poseur and provocateur. Anything he

writes needs to be fact-checked. Yes, it really is that bad. (E. Roy Weintraub)

Weintraub (4 June 2014 SHOE) then described what passes for evi-
dence in Austrian circles:

The entire episode a tale with no Austrian/Hayekian/Mt. Pelerin-ian con-

nection whatsoever. Between Leo Scharfman and Gardner Ackley, the two
 36: McCarthyism 311

Michigan chairmen at that time, the department, with one exception

(accountant William Paton, 1889–1991—papers at the Univ of Florida
and certainly no Austrian), behaved fairly and honorably. There was, in fact
no successful ‘campaign’ against Klein.

According to Klein (1986, 28), the campaign against him succeeded:

A large scale digital computer was installed at Michigan, and we started a

project for automatic model solution—simulation, if you like—but it was
not quite brought to fruition before I was to leave Ann Arbor. In the
McCarthy era I left Michigan for the peace and academic freedom of
Oxford … In 1958 I returned to America and took up a professorship at
Pennsylvania, where I admired the position of the president, provost and
deans on the serious matter of academic freedom.

‘Certainly no Austrian’? Paton was one of FEE’s 16 foundation

trustees (Hazlitt 1984).17 Paton—‘a faithful attendant at our meet-
ings’—had been recommended as a trustee to FEE’s founder, Leonard
Read, by ‘W.C. Mullendore, then Executive Vice President of
Southern California Edison Company’ (Read cited by Lawrence et al.
2004, 19–20).
In FEE’s Freeman, Sennholz (1996a) described Paton’s Austrian
credentials:

In the academic world, a few eminent scholars such as B. M. Anderson,

H. J. Davenport, F. R. Fairchild, F. H. Knight, and W. A. Paton scorned
the New Deal which was holding sway in education and communication.
They disputed and refuted John Maynard Keynes’ doctrines and theories
which offered a new defense for old errors … The critics not only cried out
against the inhumanity of a political command system but also reminded
their readers of the great heritage of the West, the creed of individual lib-
erty and the private property order. The old order had not failed, they
contended, it had been smothered, expunged, and dismantled by political
authority. It was not the old order of classical liberalism that had foundered
but the new mode of political supremacy in social and economic life. It was
the surrender of freedom that provoked the return of autocracy and
tyranny.
312 10 36–43: Chicago, 1950–1962

Sennholz (1996a) was FEE’s fund-raising President (1992–1997)

which ‘set out to reaffirm, expound, and shed fresh light on the philoso-
phy and movement of classical liberalism which stresses not only the dig-
nity of every individual but also the importance of property rights, natural
rights, the need for constitutional limitations on government, and, espe-
cially, the freedom of every individual from any kind of political restraint.’
In 1947, ‘Professor Ludwig von Mises, a member of the staff of FEE,
published Planned Chaos which challenged the popular dogma that capi-
talism has lost its usefulness and that all-round regimentation of eco-
nomic life is both inescapable and highly desirable.’
In the 1946 election, the Republican Party National Chairman pro-
claimed: ‘The choice which confronts Americans is between Communism
and republicanism.’ Nixon (elected to the House of Representatives) and
McCarthy were beneficiaries. In 1957, McCarthy died in disgrace; and
on 9 August 1974—a month before the announcement that Hayek
would be awarded the Nobel Prize—Nixon, was forced to resign the pres-
idency. Weintraub (2003–2004) and Caldwell (1999–2000) were both
elected HES Presidents; and Hayek (1985)—who systematically fabri-
cated historical evidence—was elected HES Distinguished Fellow.18

 7–42: The Donor Class, the Cowles

3
Commission, the Chicago School
and Behavioural Economics
Hayek arrived in London in January 1931 to deliver four lectures; and
left immediately after Christmas 1949, to obtain what Robbins described
as a ‘bootleg divorce’ (Cubitt 2006, 67, 64). It was a double-divorce: he
resigned from the LSE in February 1950. For several years previously he
had been ‘fruitfully’ interacting with a very potent knowledge commu-
nity—the tax-exempt donor class.
After a brief sojourn in Arkansas (to qualify for a divorce), he spent a
dozen years at the University of Chicago at the Committee on Social
Thought where he interacted with—and influenced—the Cowles
Commission economists and influenced, if not co-founded, four schools
of economics: behavioural economics (Franz and Leeson 2013) plus the
 37–42: The Donor Class, the Cowles Commission, the Chicago... 313

subjects of a subsequent AIEE volume on the Chicago School of econom-

ics (monetarism and microeconomics), and the law and economics
movement.
Eleven economists won the Nobel Prize for Economic Sciences for
research done at Cowles: Arrow (1972), Tjalling Koopmans (1975),
Simon (1978), Klein (1980), James Tobin (1981), Gérard Debreu (1983),
Franco Modigliani (1985), Trygve Haavelmo (1989), Harry Markowitz
(1990), Joseph Stiglitz (2001) and Leonid Hurwicz (2007). The number
could have been twelve, had Gary Becker not been attracted away from
Cowles towards Friedman (Leeson 2003a, 243–244). Instead, the num-
ber of Mont Pelerin Society Nobel Laureates rose to eight: Hayek (1974),
Friedman (1976), Stigler (1982), Maurice Allais (1988), Buchanan
(1986), Coase (2001), Becker (1992) and Smith (2002). Simon and
Smith are Hayek’s (1952) co-founders of the school of behavioural eco-
nomics (Franz and Leeson 2013; Franz and Marsh 2015).
As Hayek sought employment in the Department of Economics,
Cowles Commission econometricians initiated a Methodenstreit against
‘Measurement Without Theory’: Arthur F. Burns and Wesley Claire
Mitchell’s (1946) induction (Koopmans 1947; see also Vining’s 1949
reply). In 1948, when Mitchell died, Burns recruited Friedman to become
Director of a three year (!) National Bureau of Economic Research proj-
ect on monetary factors in business cycles (Friedman and Schwartz 1963,
1970, 1982; Friedman and Friedman 1998, 228, xi; Burns 1969 [1950],
90; Hammond 1996, 48).19
Hayek (1978a) asserted that he was on ‘very good terms’ with part of
the Economics Department, but ‘numerically it was the econometricians
who dominated. The Cowles Commission was then situated in Chicago;
so the predominant group of Chicago economists had really very little in
common.’20 In the Department of Economics, Friedman and Knight
were intense critics of econometrics (Leeson 1998b). Hostile questioning
led to what became known as ‘the Friedman critique’; to which Koopmans
retorted: ‘But what if the investigator is honest?’ (cited by Epstein 1987,
107).21
In 1945, Harold Luhnow of the William Volker Charities Fund asked
Hayek (1994, 127): ‘Which university would you prefer?’ Hayek replied
‘Chicago … I mentioned Stanford as a possibility. Within three weeks I
314 10 36–43: Chicago, 1950–1962

had invitations from the chancellors of three universities. Arrangements

were made to divide a semester between Chicago and Stanford.’ Hayek
(1978a) reflected about ‘one instance about four or five years after I had
published The Road to Serfdom [1944], when a proposal of an American
faculty to offer me a professorship was turned down by the majority. It
was one of the big American universities.’22
According to Caldwell (2004, 297), the ‘deal’ to appoint Hayek to the
Chicago Economics Department’ ‘fell through in 1948.’ Hayek regarded
his position at the University of Chicago as ‘a scholar’s dream’: the one
prior attempt to informally consider Hayek by the Department of
Economics (in early 1946, before Friedman’s arrival) was ‘unknown to
Hayek and not taken even moderately seriously by most members of the
Chicago Department’ (Mitch 2015).23 On 14 November 1948, the
Department refused to provide Hayek with a ‘courtesy appointment’ to
accompany his forthcoming Committee on Social Thought position
(Mitch 2016).
According to Boettke (2004, 10, n7), ‘Hayek’s rather shoddy treat-
ment by his colleagues in the economics department at the University of
Chicago during the 1950s has only been told in partial tidbits to date.’
Hamowy (1996, 421) reinforced this image: ‘inasmuch as the university’
of Chicago had ‘never actually paid Hayek a salary, it refused [emphasis
added] to provide him with a pension.’ As did Rothbard (2009c [1988],
106, n54): ‘the University of Chicago refused [emphasis added] to pay
Hayek any pension.’
To promote deductive a priori ‘reasoning,’ Austrians embrace confir-
mation bias (a standard error of inductive reasoning). Rockwell (2011b)
repeated the Austrian Truth: it was ‘great’ to have ‘historian’ Hamowy as
a ‘distinguished visiting faculty member at Mises University.’ Presumably
referring to David Gordon, Rockwell stated that ‘David Gordan’ reported
that ‘Ronald confirmed that it was indeed Milton Friedman who blocked
Hayek from the Chicago economics faculty. As a result of the Miltonian
blackball, Hayek had to take an unpaid position at the university, and
eventually returned to Austria.’
According to Rockwell (2011b), Hayek’s ‘American salary was paid by
the heroic Volker Fund, but there was no pension and certainly no ten-
ure.’ However, like all other University of Chicago employees, the tenured
 37–42: The Donor Class, the Cowles Commission, the Chicago... 315

Hayek received a pension commensurate with his contributions (Mitch

2015). Two years previously, Hamowy (1999a, 286) had accurately
reported that it was the ‘inadequacy of the pension arrangements Hayek
had with the University of Chicago’ that had persuaded him to return to
Europe in such of funds.
According to Hayek (2009a [1979], 9), ‘Rational behaviour is not a
premise of economic theory, although it is usually presented as such. The
essential point to be made is that competition will make it necessary for
people to act rationally if they are willing to maintain their position or if
they wish to improve it.’ The tax-haven-based European Centre of
Austrian Economics Foundation ‘firmly stands for self-responsibility,
individual freedom, and limited government’24: Hayek’s inability to ade-
quately save for his retirement demonstrates the bankruptcy of notions of
‘self-responsibility’ and intertemporal rationality.
Hamowy (1996, 420) also correctly ascertained that ‘leading members
of the [Chicago] Economics Department were unalterably opposed to
Hayek’s joining the department in large part because of his connection to
the Austrian School, which they regarded as somewhat disreputable.’
Even a zero price (a 100 per cent subsidy from the Volker Fund) was not
sufficient to induce the Economics Department to even formally con-
sider Hayek. According to Hamowy (2010, 144), Hayek was rejected
because his ‘approach to capital theory was at odds to departmental
orthodoxy.’ Yet Hamowy failed to penetrate beneath mythological
Austrian martyrdom to discover the real reason: Hayek’s fraud about hav-
ing predicted the Great Depression had apparently been uncovered in the
department in 1934 (Leeson 2017c).
According to Friedman (1983, 187–188), at Chicago there was a ‘neg-
ative answer’: ‘the economists were not willing to have Hayek.’ Hayek
implied to Nadim Shehadi that the Cowles Commission vetoed his
appointment: ‘The econometricians didn’t want me’ (cited by Ebenstein
2003, 175). In 1955, the Cowles Commission relocated to Yale—the
veto, had it existed, would have been lifted. Indeed, by then Hayek
(1978a) had made a reputation for himself on the Committee on Social
Thought: ‘And if I may say so, the first seminar I held there was one of the
great experiences of my life. I announced in Chicago a seminar on scien-
tific method, particularly the differences between the natural and the
316 10 36–43: Chicago, 1950–1962

social sciences, and it attracted some of the most distinguished members

of the faculty of Chicago. We had Enrico Fermi and Sewall Wright and a
few people of that quality sitting in my seminar discussing the scientific
method. That was one of the most exciting experiences of my life.’25

43: Hurwicz
The 43rd knowledge community that Hayek encountered is associated
with Hurwicz (1917–2008) who was taught by Hayek and Kaldor at the
LSE (1938–1939) before attending Mises’ seminar in Geneva
(1939–1940).26 Hayek (1978a) told High that his ‘general view of life [is]
that we are playing a game of luck, and on the whole I have been lucky in
this game.’ But he was not impressed with Hurwicz-style contributions:
‘I don’t think that game theory has really made an important contribu-
tion to economics, but it’s a very interesting mathematical discipline.’27
Hurwicz (1984, 419, 423, 424) recalled that ‘Hayek played a major
role in influencing my thinking.’ From the 1950s, Hurwicz focused on
‘issues in welfare economics viewed from an informational perspective.’
He denied that welfare economics had not grasped the ‘Hayek lesson.’
Pollution was an important negative externality: Pigouvian taxes and sub-
sidies may be optimal. Hurwicz knew of ‘no basis’ for claiming in non-­
classical situations that ‘the free-market process (however defined) would
yield optimal resource allocation.’ Supplementary ‘institutional devices
involving public intervention’ were likely to be required.
In his Nobel Lecture on ‘The Pretence of Knowledge’—‘This way lies
charlatanism and worse’—Hayek (1974) warned of ‘specious claims of
what science can achieve’:

the desirability of replacing spontaneous processes by ‘conscious human

control’ … To act on the belief that we possess the knowledge and the
power which enable us to shape the processes of society entirely to our lik-
ing, knowledge which in fact we do not [Hayek’s emphasis] possess, is likely
to make us do much harm … in the social field the erroneous belief that
the exercise of some power would have beneficial consequences is likely to
lead to a new power to coerce other men being conferred on some author-
 43: Hurwicz 317

ity. Even if such power is not in itself bad, its exercise is likely to impede the
functioning of those spontaneous ordering forces by which, without under-
standing them [emphasis added], man is in fact so largely assisted in the
pursuit of his aims.

Hayek (1974) continued:

We are only beginning to understand on how subtle a communication

system the functioning of an advanced industrial society is based—a com-
munications system which we call the market and which turns out to be a
more efficient mechanism for digesting dispersed information than any
that man has deliberately designed. If man is not to do more harm than
good in his efforts to improve the social order, he will have to learn that in
this, as in all other fields where essential complexity of an organized kind
prevails, he cannot acquire the full knowledge which would make mastery
of the events possible. He will therefore have to use what knowledge he can
achieve, not to shape the results as the craftsman shapes his handiwork, but
rather to cultivate a growth by providing the appropriate environment, in
the manner in which the gardener does this for his plants. There is danger
in the exuberant feeling of ever growing power which the advance of the
physical sciences has engendered and which tempts man to try, ‘dizzy with
success,’ to use a characteristic phrase of early communism, to subject not
only our natural but also our human environment to the control of a
human will. The recognition of the insuperable limits to his knowledge
ought indeed to teach the student of society a lesson of humility [emphasis
added] which should guard him against becoming an accomplice in men’s
fatal striving to control society—a striving which makes him not only a
tyrant over his fellows, but which may well make him the destroyer of a
civilization which no brain has designed but which has grown from the free
efforts of millions of individuals.28

For ‘forty years,’ Hayek (1978a) worked to undermine attempts to

‘replace a spontaneous order.’29 The 2007 Nobel Prize for Economic
Sciences was awarded to Hurwicz, Eric Maskin and Roger Myerson for
their work which ‘allows us to distinguish situations in which markets
work well from those in which they do not. It has helped economists
identify efficient trading mechanisms, regulation schemes and voting
procedures. Today, mechanism design theory plays a central role in many
318 10 36–43: Chicago, 1950–1962

areas of economics and parts of political science.’30 Hurwicz (1984, 424)

argued that ‘Panaceas are not to be found at either end of the spectrum.’
The answers derived from ‘dispassionate’ comparisons of markets and
public intervention ‘will not please the ideologues of either persuasion’:
laissez-faire did not constitute a ‘universal panacea.’
According to Hayek (1978a), with

the present type of democracy, government is inevitably driven into inter-

vention, even against its professed principles. It’s always the sort of cyni-
cism of people who still believe it would be nice if we could stick to our
liberal principles, but it proves in practice to be impossible. So they resign
themselves reluctantly, and perhaps some more cynically. They believe
other people are getting out things from the process of corruption; so they
decide to participate in it. It’s quite cynical.31

Hayek (1978a) explained to Bork:

my whole theory leads me to deny that a constitution is a character of law.

A constitution is an instrument of organization; it is not an instrument of
rules. And perhaps the American Constitution tries too much to be law,
and ought to be understood merely as principles of organization rather
than principles of conduct … which, in limiting the powers of government
and legislation to coercion only according to formal rules, would delimit
power, not lay down any rules of law. We would just say that people [empha-
sis added] had no other power than that.32

For Hayek (1978a), ‘the people’—with their self-interest—was the

problem: ‘You can preserve the existing economic system only by mak-
ing concessions to the people, which will ultimately destroy the same
system [laughter].’ Referring to the author of the Pygmalion (in which
a cockney flower girl successfully masquerades as a duchess at an ambas-
sador’s garden party—a lampoon on the British social order), Rosten
replied:

Well, the numbers, too. There were a great many—Even [George Bernard]
Shaw, who was very silly about many things, got off a very acute line about
democracy when he said, ‘When you rob Peter to pay Paul, remember how
 44: Competing Salons: Ayn Rand and the Objectivist Movement 319

many Peters there are and how many Pauls.’ And he went on from that to
hint at the growing unwieldiness and difficulty of mass suffrage in a society
where there are a limited number of goods to be parceled out.

In response, Hayek (1978a) explained that democracy was meaning-

less: ‘You see, it’s all in the destruction of the meanings of words.
Everybody’s convinced it has a meaning. And when you begin to investi-
gate what it means, you find it means precisely nothing … They all believe
it will benefit the particular causes in which they are concerned.’33

 4: Competing Salons: Ayn Rand

4
and the Objectivist Movement
Rockwell (2003) dedicated Speaking of Liberty to Rothbard: ‘Scholar,
Teacher, Gentleman.’ According to Rothbard (1974), the Austrian School
journalist, Henry Hazlitt, was ‘A Genius and a Gentleman’ who ‘left not
a shred standing of Keynes’s [1936] famous work. It was a superb exercise
in economic demolition.’34 According to Hazlitt (1995 [1960], 10), the
Keynesian ‘heresy … became the intellectual fashion, which academic
economists could ignore only at the cost of being themselves ignored, or
challenge only at the cost of losing status. But whatever the full explana-
tion of the Keynesian cult, its existence is one of the great intellectual
scandals of our age.’
The internal dynamics of the scandal-ridden Austrian School of
Economics resemble what Rothbard (1971a) described as the ‘Ayn Rand
Cult.’ Rand’s Objectivist philosophy is captured in fiction, The
Fountainhead (1943) and Atlas Shrugged (1985 [1957]), and also in
essays, The Virtue of Selfishness: A New Concept of Egoism (1964). Rand
and the Austrians co-operated—whilst competing for devotees. In
Goddess of the Market Ayn Rand and the American Right, Jennifer Burns
(2009, 143–144) reports that ‘soon Rand had her own salon to match
Mises’s’; and she became ‘friendly’ with FEE’s Cornuelle brothers, Herbert
and Richard, and the Volker Fund. According to The Last Knight of
Liberalism, Mises was FEE’s ‘spiritus rector’—literally: ‘Führer’ or ‘ruler’
(Hülsmann 2007, 884).
320 10 36–43: Chicago, 1950–1962

Greenspan (2008, 52) recalled: ‘By the time I had joined Richard
Nixon’s campaign for the Presidency in 1968, I had long since decided to
engage in efforts to advance free-market capitalism as an insider, rather
than as a critical pamphleteer.’ He became chair of the Council of
Economic Advisers on 4 September 1974, the month before the
announcement of Hayek’s Nobel Prize: ‘It did not go without notice that
Ayn Rand stood beside me as I took the oath of office took the oath of
office in the presence of President Ford in the Oval Office.’ He and Rand
‘remained close until she died in 1982, and I’m grateful for the influence
she had on my life.’
In April 1969, the middle-aged Rothbard plus representatives from
Young Americans for Freedom—an organization founded by Buckley to
promote ‘fusion’—had met on the campus of California State College at
Long Beach in what became, for some, ‘a drug-fuelled anarchist frenzy’
(McVicar 2017). It is ‘widely whispered in the libertarian community’
that FEE’s founder, Read (1898–1983), ‘joined his friends,’ Mullendore
(1892–1983, President, Southern California Edison Company), James
Ingebretson (1906–1999, Spiritual Mobilization), and Thaddeus Ashby
(1924–2007, Assistant Editor of Faith and Freedom) in ‘acid explorations’
(Doherty 2007, 279–280; Rothbard 2007b, Chap. 11).
The unregulated ‘recreational’ drug market left casualties—including,
it seems, Hayek’s third appointed biographer (Chap. 13, below). For
populist electoral purposes, in 1971 Nixon launched a ‘war on drugs’;
and during the 1980 election, Crozier encouraged Reagan to exploit this
‘war’ also for populist purposes (Leeson 2017a). On 5 September 1975,
Lynette ‘Squeaky’ Fromme—having bonded with the Manson ‘family’
via LSD—tried to assassinate Ford (Bravin 2013). Greenspan (2008, 52)
was mesmerized by his all-night encounters with his amphetamine-driven
cult-leader:

One contradiction I found particularly enlightening. According to objec-

tivist precepts, taxation was immoral because it allowed for government
appropriation of private property by force. Yet if taxation was wrong, how
could you reliably finance the essential functions of government, including
the protection of individuals’ rights through police power? The Randian
answer, that those who rationally saw the need for government would con-
 44: Competing Salons: Ayn Rand and the Objectivist Movement 321

tribute voluntarily, was inadequate. People have free will; suppose they
refused? I still found the broader philosophy of unfettered market competi-
tion compelling, as I do to this day, but I reluctantly began to realize that
if there were qualifications to my intellectual edifice, I couldn’t argue that
others should readily accept it.

For most of his life, fear of travel (including bridges and lifts) left the
Jewish-born Rothbard marooned on Manhattan Island. Rothbard (2007a
[1958], 14) informed Rand about a ‘defect in my own psyche’:

most times when I saw you in person, particularly when we engaged in

lengthy discussion or argument, that I found afterwards that I was greatly
depressed for days thereafter. Why I should be so depressed I do not know.
All my adult life I have been plagued with a ‘phobic state’ (of which my
travel phobia is only the most overt manifestation), i.e. with frightening
emotions which I could neither control nor rationally explain.

The Jewish-born Greenspan (2008, 51) explained Rand’s appeal: she

became a stabilizing force in my life. It hadn’t taken long for us to have a

meeting of the minds—mostly my mind meeting hers—and in the fifties
and early sixties I became a regular at the weekly gatherings at her apart-
ment. She was a wholly original thinker, sharply analytical, strong-willed,
highly principled, and very insistent on rationality as the highest value. In
that regard, our values were congruent—we agreed on the importance of
mathematics and intellectual rigor … Rand’s Collective became my first
social circle outside the university and the economics profession. I engaged
in the all-night debates and wrote spirited commentary for her newsletter
with the fervor of a young acolyte drawn to a whole new set of ideas. Like
any new convert, I tended to frame the concepts in their starkest, simplest
terms. Most everyone sees the simple outline of an idea before complexity
and qualification set in. If we didn’t, there would be nothing to qualify,
nothing to learn. It was only as contradictions inherent in my new notions
began to emerge that the fervor receded.

In 1958, the Jewish-born Mises (2007a [1958], 11) informed Rand

that in the ‘age of the Welfare State’ she had ‘the courage to tell the masses
322 10 36–43: Chicago, 1950–1962

what no politician told them: you are inferior and all the improvements
in your conditions which you simply take for granted you owe to the
effort of men who are better than you.’ In 1958, Hayek tried unsuccess-
fully to obtain tax-exempt educational charity funds for ‘Miss Rand.’35

Notes
1. http://insider.foxnews.com/2015/07/21/mike-huckabee-reacts-
donald-trumps-comments-about-lindsey-graham
2. https://www.buzzfeed.com/andrewkaczynski/david-duke-urges-his-
supporters-to-volunteer-and-vote-for-tr?utm_term=.ihjprqe32#.
lsQR1k6VY
3. ‘So why wasn’t the establishment willing to forgive and forget when a
right-wing radical like David Duke stopped advocating violence, took
off the Klan robes, and started working within the system? If it was OK
to be a Commie, or a Weatherman, or whatever in your wild youth, why
isn’t it OK to have been a Klansman? Or to put it more precisely, if it was
OK for the revered Justice Hugo Black, or for the lion of the Senate,
Robert Byrd, to have been a Klansman, why not David Duke? The
answer is obvious: Black and Byrd became members of the liberal elite,
of the Establishment, whereas Duke continued to be a right-wing popu-
list, and therefore anti-Establishment, this time even more dangerous
because “within the system”.’
4. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
5. Hayek Papers Box 16.43.
6. Hayek Papers Box 55.1.
7. Hayek Papers Box 40.23.
8. Hayek Papers Box 55.1.
9. Hayek Papers Box 78.22.
10. http://archive.org/stream/TheWorldOrder_329/22-Reece-Committee-
Hearings-Tax-Exempt-Foundations-1953_djvu.txt
11. ­http://president.uchicago.edu/directory/robert-maynard-hutchins.
In 1960, Kimpton left the University of Chicago to work for Standard
Oil of Indiana.
http://president.uchicago.edu/directory/lawrence-kimpton
 Notes 323

12. http://history.house.gov/People/Detail/20216
13. http://www.garynorth.com/products/item9.cfm
14. Hayek Papers Box 67.6.
15. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
16. George Katona, in his 1979 interview with Brazer, insisted that the tape
recorder be turned off before he would answer questions about Paton
and Klein.
17. When his ‘legitimate’ knowledge was revealed to be illegitimate,
Weintraub (SHOE 6 June 2014) responded: ‘I am abashed to be so chas-
tised by the 17th most important economist in the world: “On a broad
measure of publications, Professor Leeson was ranked joint 17th (with
Nobel Laureate Paul Samuelson) in the list of the world’s top 500 econo-
mists on the basis of the number of journal articles included in the
ECONLIT database of the American Economic Association” (Leeson
homepage, http://www.nd.edu.au/fremantle/schools/business/staff/rlee-
son.shtml) Mea culpa, mea maxima culpa. Enough said.’ But Leeson
doesn’t have a homepage and ‘17th most important economist in the
world’ are Weintraub’s fabricated words. Tom Coupe’s European
Economic Association analysis—in which Leeson is ranked 17th—
relates to ‘1994–1998, number of journal articles included in the
ECONLIT database of the American Economic Association’: http://
web.archive.org/web/20070717070525/http://homepages.ulb.ac.
be/~tcoupe/ranklab11.html
18. http://historyofeconomics.org/Fellows.cfm
19. Mitchell induced in Friedman (1950, 465, 489, 478–479) a feeling of
‘exasperation, because numerous significant theoretical insights are so
carefully hidden.’ He attempted to rescue Mitchell’s work and to elevate
it as ‘a contribution to economic theory of the first magnitude.’ Friedman
believed that ‘the theoretical insights are there after one pierces their
protective coloring.’ He explained the process by which he intended to
enable ‘economists … to rediscover [the] essential elements’ of Mitchell’s
work. His Chicago colleague, Lloyd Metzler (25 September 1950), com-
plained in correspondence to Friedman that ‘I do not share your views
concerning the relative merits of Mitchell’s theory and later theories of
the business cycle. I doubt very much whether you would be able to
interpret Mitchell as you have done in the absence of later developments
by Keynes and others.’ Friedman Archives Box 30.23. Friedman later
324 10 36–43: Chicago, 1950–1962

admitted that ‘I tried … in the article I wrote on [Mitchell] to sort of

play fast and loose and try to construct an analytical theory.’ Interview
with Jeff Biddle (6 October 1993). I am grateful to Biddle for providing
me with a transcript of this interview.
20. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
21. Friedman’s correspondence with Patinkin (4 February 1950) reveals the
existence of another oral tradition: ‘the Friedman question’: ‘under what
circumstances would you abandon your pet theory?’ (Leeson 2003b, 243).
22. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
23. Stigler (1983, 174) denigrated Gardiner Means: he ‘never had an
appointment in the economics department’ at Columbia and ‘was hired
as an unsuccessful blanket manufacturer in some kind of research centre
at Columbia.’
24. http://ecaef.org/about-ecaef/
25. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
26. In 1938, Hurwicz studied for a PhD at LSE on ‘The Currency
Devaluation with Special Reference to the Experience of the Gold Bloc
Countries’ (Grimes 2008).
27. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
28. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/hayek-lecture.html
29. ‘No, you see The Road to Serfdom was really an advance sketch of a more
ambitious book I had been planning before, which I meant to call “The
Abuse and Decline of Reason.” The abuse being the idea that you can do
better if you determine everything by knowledge concentrated in a single
power, and the consequent effects of trying to replace a spontaneous order
by a centrally directed order. And the [results of the] decline of reason were
the phenomena which we observed in the totalitarian countries. I had that
in my mind, and that in fact became the program of work for the next
forty years.’ Friedrich Hayek, interviewed by James Buchanan 28 October
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
 Notes 325

30. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/2007/press.html
Hurwicz’s Nobel biography incorrectly states: ‘In Chicago, he lived with
his cousins deep in the Polish section of town—sleeping on their couch
and auditing courses at the University of Chicago with the famous econ-
omist Ludwig von Mises.’
http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/2007/hurwicz-bio.html
31. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
32. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
33. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
34. https://www.lewrockwell.com/1970/01/murray-n-rothbard/a-genius-
and-a-gentleman/
35. Hayek Papers Box 17.37.
 11
44: Europe, 1962–1992 (1)

44: The Social Market Middle Way (1)

Using his dissembling word, ‘curious,’ Hayek (1978a) described his influ-
ence on British economists: ‘You know, I had a curious influence on
Hicks. You won’t believe it, but I told him about indifference curves
[laughter].’ Previously, Hicks had been ‘a pure Marshallian.’ Hayek
recalled a conversation ‘the very beginning of the thirties … I remember
a conversation after a seminar, when he had been talking in Marshallian
terms, when I drew his attention to Pareto [laughter].’1
Apparently in justification of Mises’ promotion of fascists, Raico
(2012, 250, 275, 274) reported that in 1906, Pareto complained that the
right to strike had turned into ‘the freedom, for the strikers, to bash in the
brains of workers who wish to continue to work and to set fire to the
factories with impunity.’ In one of his last essays, Pareto (1948–1923)
again complained about the ‘transformations’ demanded by ‘modernity’
that facilitated ‘the ascent of the proletariat’: the right to strike included
‘the ability to constrain others to do so and to punish strikebreakers.’ The
only ones left to defend the freedom to work were, Pareto ironically
wrote, were the supporters of laissez-faire: ‘those abominable

© The Author(s) 2017 327

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_11
328 11 44: Europe, 1962–1992 (1)

Manchesterians’ Raico (2012, 275, 274) explained that Pareto ‘endorsed

the Fascist takeover, and, a year before his death, permitted Mussolini to
appoint him to the Senate.’ One of Pareto’s associates, Maffeo Pantaleoni
(1857–1924), the neoclassical ‘Marshall of Italy,’ was engaged in ‘intense
work in support of fascism’ and ran a ‘vigorous anti-Semitic campaign’ in
the decade before his death (Michelini and Maccabelli 2015, 92, 93).
Raico (2012, 273–274), who described Pantaleoni as among ‘Fascism’s
earliest and most fervent supporters,’ noted that Hayek had referred to
Pantaleoni as the author of ‘one of the most brilliant summaries of eco-
nomic theory that has ever appeared.’ Pantaleoni wrote: The ‘public pow-
ers, which historically have already been most effective instruments of
spoliation in the hands of the nobilty [sic], first, and then of the bour-
geoisie, will now become the means of procuring bread and circuses for
the people … If it had not been for the intervention of Fascism, Italy
would have suffered not merely an economic and political catastrophe,
but rather a catastrophe of its very civilization, equal in its kind to that of
Russia and Hungary.’ Italy was saved from the ‘destructive hurricane’ of
Bolshevism ‘only by fascism and by the heroism of the fascists who died
pro libertate Patriae in the struggle of civil war.’ This, Raico explained,
was a position ‘similar to that of Mises.’
According to Raico (2012, 188, n16, 278, n37), A. de Viti de Marco
wrote that Pantaleoni was ‘enraged by the collectivist and interventionist
features of post-War Italy,’ including ‘the demagoguery of taxation orga-
nized by the alliance of all the parasitic groups for the speedier spoliation of
the well-to-do and the savers and the free [i.e., non-unionized] workers—
that is of the producers [emphasis in original].’
Hayek (1978a) ‘believe[d] in democracy as a system of peaceful change
of government; but that’s all its whole advantage is, no other.’2 For
Rothbard (1992a, 8, 1994c), the purpose of Austrian economics is to
‘Get rid of underclass rule,’ and replace it by a ‘small, self-perpetuating
oligarchy of the ablest and most interested’; for Raico (2012, 278, 280,
n38)—like Mises—Fascism and Classical Liberalism had common
Continental (Italian-Austro-Lausanne) neoclassical objectives: Pantaleoni,
who was a ‘bitter opponent of universal suffrage precisely because of the
immense vista it opens up for lower-class plunder of the economically success-
ful [emphasis added]’ was also ‘happy’ to report that Mussolini
 44: The Social Market Middle Way (1) 329

(in a speech, 8 November 1921) stated: ‘In economic matters, we are

liberals in the more classical sense of the word.’
Bentham (1838 [1789], 1), who formalized welfare economics,
famously declared: ‘Nature has placed mankind under the governance of
two sovereign masters, pain and pleasure’: the Benthamite goal of ‘maxi-
mizing the greatest good of the greatest number’ as measured by the
number of cardinal ‘utils’ was part of the classical tradition. After 1892,
the Lausanne and Anglo-American Neoclassical Schools sought to dis-
credit the idea that utility was measurable: Austrian utility theory ‘caught
up’ in the interwar period (Moscati 2015). During Hayek’s time
(1931–1950), the LSE became the epicentre of Austrian economics: they
sought to integrate the Continental and American ordinal revolution
into the British neoclassical tradition and remove the cardinal notion of
the measurability of utility and thus the foundation of interpersonal
comparisons of utility—the basis of progressive taxation (Robbins 1932;
Robbins 1938; Hicks and Allen 1934; Hayek 1936).
Later, Hayek (1978a) sought to move economics further away from
utility-maximization:

our instincts, which of course determine the enjoyment, are not fully
adapted to our present civilization … Let me put it in a much more general
way. What has helped us to maintain civilization is no longer satisfied by
aiming at maximum pleasure. Our built-in instincts—that is, the pleasure
which guides us—are the instincts which are conducive to the maintenance
of the little roving band of thirty or fifty people. The ultimate aim of evolu-
tion is not pleasure, but pleasure is what tells us in a particular phase what
we ought to do. But that pleasure has been adapted to a quite different
society than which we now live in. So pleasure is no longer an adequate
guide to doing what life in our present society wants. That is the conflict
between the discipline of rules and the innate pleasures, which recently has
been occupying so much of my work.3

Like Hicks (1972), Robbins (1971, 234, 117) was ashamed that he
had been misled by Austrian ‘liberty’ into slavery: ‘I had become the
slave of theoretical constructions which, if not intrinsically invalid as
regards logical consistency were inappropriate to the total situation
which had then developed and which therefore misled my judgment.’
330 11 44: Europe, 1962–1992 (1)

Robbins (1971, 154) issued a post-Austrian mea culpa: ‘I shall always

regard this aspect of my dispute with Keynes as the greatest mistake of
my professional career, and the book, The Great Depression [1934], which
I subsequently wrote, partly in justification of this attitude, as something
which I would willingly see be forgotten.’ Robbins damned with faint
praise before re-emphasizing his point: ‘Now I still think that there is
much in this theory as an explanation of a possible generation of boom
and crisis. But, as an explanation of what was going on in the early ’30s,
I now think it was misleading. Whatever the genetic factors of the pre-
1929 boom, their sequelae, in the sense of inappropriate investments
fostered by wrong expectations, were completely swamped by vast defla-
tionary forces sweeping away all those elements of constancy in the situ-
ation which otherwise might have provided a framework for an
explanation in my terms.’
Cannan insisted that any difficulties caused by deflation ‘must be
regarded in the same light as those which a spendthrift or a drunkard is
rightly exhorted by his friends to face like a man’ (cited by Gregory 1927,
48). Robbins (1971, 154) recanted:

The theory was inadequate to the facts. Nor was this approach any more
adequate as a guide to policy. Confronted with the freezing deflation of
those days, the idea that the prime essential was the writing down of mis-
taken investments and the easing of capital markets by fostering the dispo-
sition to save and reducing the pressure on consumption was completely
inappropriate. To treat what developed subsequently in the way which I
then thought valid was as unsuitable as denying blankets and stimulants to
a drunk who has fallen into an icy pond, on the ground that his original
trouble was overheating.

In an interview for the Cato Policy Report, Hayek (1983a) reinforced

his ‘disdain’ for policy advisors: ‘You can either be an economist or a
policy advisor.’ Referring to Robbins, Hayek added: ‘I have seen in some
of my closest friends and sympathizers—I won’t mention any names—
who completely agreed with me, how a few years in government cor-
rupted them intellectually and made them unable to think straight.’ For
posthumous biographical purposes, Hayek (1994, 78) was specific: dur-
ing his first decade in England, he and Robbins ‘worked beautifully
 44: The Social Market Middle Way (1) 331

together,’ until ‘I’m afraid he fell under Keynes’ influence’ and acquired
‘corrupt’ attitudes through government service.
At a 1975 ‘Austrian economics’ conference, Ebeling (2008) asked
Hayek why he thought ‘Lord (Lionel) Robbins, who had been such a
staunch advocate of Austrian economics and the free market’ at the LSE
in the 1930s had ‘shifted to a much more compromising [emphasis added]
Keynesian position after World War II.’ Hayek told Cubitt (2006, 10,
122) that ‘all his professional considerations had been based on financial
considerations.’ Hayek assumed that others were equally corrupt—tell-
ing Ebeling (2008): ‘Robbins is one of my oldest friends, and I love him
dearly, but he preferred to be Lord than right.’
In 1950, Robbins severed all contact with Hayek over his treatment of
his first wife, Hella, and their two children; contact was resumed at the
marriage of Hayek’s son in July 1961, a year after Hella’s death (Leeson
2015d, Chap. 5). Between 1961 and 1963, Robbins supervised the
Report of the Committee on Higher Education (the ‘Robbins Report’)
which recommended a ‘big expansion’ of the British university sector.4
The Robbins Report embraced social inclusion: the ‘Robbins principle’
made university places ‘available to all who were qualified for them by
ability and attainment.’ It also repudiated the climate that Robbins and
Hayek had attempted to create at the LSE: ‘in the graduate school there
are no ultimate authorities, no orthodoxies to which the pupil must sub-
scribe’ (Thompson 2012).
The Robbins principle—designed to both increase the stock of human
capital and social mobility—undermined the Pareto principle, which was
an extrapolation from Pareto’s observation that in Italy in 1896 approxi-
mately 80 per cent of the land was owned by 20 per cent of the popula-
tion. This 80–20 ‘rule’ has been generalized for a variety of purposes
including the assertion that the distribution of wealth and income was an
intertemporal, pan-cultural constant—a ‘law’ that could not be repealed
by public policy. Thus taxing the top 20 per cent to provide subsidized
human capital for the bottom 80 per cent would not only violate Pareto
‘efficiency’ but would also fail to produce its desired result.
Hayek (1978a) had ‘no objection to progression to the extent that it is
needed to make the whole tax burden equal in compensation—the pro-
gression of the income tax compensating for the regressive effect of
332 11 44: Europe, 1962–1992 (1)

indirect taxes. But I think the aim of taxation, if it is based on general

rules, should be to make the net burden of taxation proportional and not
progressive, because once you have progressive, the thing becomes purely
arbitrary. It becomes ultimately an aiming at burdening particular people
along these lines.’5 Fear of ‘lower-class plunder of the economically suc-
cessful’ underpins Italian-Austro-Lausanne opposition to progressive
taxation (Raico 2012, 278, 280, n38). Neoclassical economics is not
required to predict that Generals Pinochet and Suharto would use their
monopoly of political and military power to plunder their countries
(Robison 1986; Rohter 2006). Pareto ‘efficiency’—which leads to policy
paralysis—strongly implies that it is not socially optimal to tax these
kleptocrats because there is no ‘scientific’ method of comparing their loss
of utility with gains accruing elsewhere in the community.
Likewise, it is not Pareto ‘efficient’ to remove tariffs on imports: local
producers would lose. But if tariff-reductions initiate a regional ‘vicious’
(rather than ‘virtuous’) spiral, should the market be given ‘free play’ to
establish the ‘equilibrium structure of prices’ as Hayek (1975b) recom-
mended? Or does a city in economic decline—like Detroit—require a
collaborative partnership between the public and private sectors?
Most economists oppose tariffs. But is it optimal to have ‘free’ trade in
products, such as sugar—‘whose sweetness has caused more human bit-
terness than any other’ (Hobsbawm 2010, 34)? Non-externality aug-
mented neoclassical theory asserts that the consumer’s surplus would
increase with increased supply and consumption: ‘a reduction [emphasis
in original]’ in the level of protection for sugar would bring ‘further
improvements to world economic efficiency and further benefits to the
low-cost producing most of which fall under the loose definition of
underdeveloped countries’ (Snape 1963, 72).
But as Hayek pointed out: ‘All economic activity is carried out through
time. Every individual economic process occupies a certain time, and all
linkages between economic processes necessarily involve longer or shorter
periods of time’ ([1928] cited by Skousen 2007b, 184). Austrians, who
want to receive subsidies but evade taxes, bond with each other by
­chanting ‘We want externalities’ (Blundell 2014, 100, n7). Austrian busi-
ness cycle theory is time- and externality based: the agent of the govern-
ment (the central bank) sets interest rates below the ‘natural’ rate and
 44: The Social Market Middle Way (1) 333

optimizing producers take advantage of this below-full-cost pricing to

invest in capital goods for more roundabout, ‘longer process of produc-
tion’ technologies. The resulting bubble must burst and mass unemploy-
ment must follow, and be intensified by policy-induced austerity to lower
the price level, raise real wages and generate more unemployment. In
2016, Donald Trump was the beneficiary both of the failure of indis-
criminate deregulation and of elements of Austrian business cycle theory:
‘Interest rates are artificially low. If interest rates ever seek a natural level,
which obviously they would be much higher than they are right now—
you have some very scary scenarios out there.’6
Hayek (2010 [1944], 154) expected economists to ‘bow to forces and
obey principles which we’—or rather they, ‘cannot hope fully to under-
stand.’ However, notwithstanding the capital controversies (Harcourt
1972), neoclassical economics postulates that, in general, a change in
relative prices will lead to a switch of quantity demanded: as capital
becomes cheaper, relative to labour, more capital will tend to be used.
This will tend to increase the marginal revenue product of labour and
thus increase the equilibrium wage (and disrupt the ‘spontaneous’ social
order). If aggregate savings are a function of national income and the
distribution of that income, the ‘natural’ rate of interest—if it ever
existed—will change.
In his Nobel Lecture, Hayek (1974b) highlighted a legitimate constraint:

As we advance we find more and more frequently that we can in fact ascer-
tain only some but not all the particular circumstances which determine
the outcome of a given process; and in consequence we are able to predict
only some but not all the properties of the result we have to expect. Often
all that we shall be able to predict will be some abstract characteristic of the
pattern that will appear—relations between kinds of elements about which
individually we know very little. Yet, as I am anxious to repeat, we will still
achieve predictions which can be falsified and which therefore are of
empirical significance.
Of course, compared with the precise predictions we have learnt to
expect in the physical sciences, this sort of mere pattern predictions is a
second best with which one does not like to have to be content. Yet the
danger of which I want to warn is precisely the belief that in order to have
a claim to be accepted as scientific it is necessary to achieve more. This way
334 11 44: Europe, 1962–1992 (1)

lies charlatanism and worse. To act on the belief that we possess the knowl-
edge and the power which enable us to shape the processes of society
entirely to our liking, knowledge which in fact we do not possess, is likely
to make us do much harm [Hayek’s emphasis].

But what about knowledge which is overwhelming accepted by the

relevant scientific community, such as climatologists, but rejected (or
pseudo-doubted) by lobbyists and a tiny proportion of that community?7
What is the optimal forecast? And what about the harm caused by not
acting to deal with externalities such as environmental damage?
Shortly before the announcement of his Nobel Prize, Hayek (1975a
[1974], 9) appeared to embrace externalities:

Oh, a very great many of them will require deliberate state action–you
know after all this is a problem which has concerned economists for a long
time. It has now been discovered by the public but this whole question
takes one back to the old Cambridge tradition of Pigou and his successors
who for fifty years have been dealing with exactly this problem. It’s a ques-
tion to what extent we can make the market system take account of these
effects and to what extent this is impossible and we therefore have to find
some substitute for it. It’s still very largely an open question which proba-
bly has to be decided case by case—for which there’s no general answer.

Making the market take account of externalities—full-cost pricing

through subsidies and taxes—defines Pigouvian economics. A few weeks
later, however, the Royal Swedish Academy of Sciences announced that
Hayek was to be rewarded for his conclusion ‘that only by far-reaching
decentralization in a market system with competition and free price-fixing
[emphasis added] is it possible to make full use of knowledge and infor-
mation.’8 A few weeks before, Hayek (1975a [1974], 9) had relegated
Austrian economics: ‘In the narrow sense, the specific Austrian tradition
has on the whole merged with the Lausanne and the Cambridge ­tradition
to become part of what is called neoclassical economics. What we can
hope for is just that this neoclassical tradition again becomes influential,
not its specific Austrian branch which constitutes a particular phase in
the neoclassical development.’
 44: The Social Market Middle Way (1) 335

Hayek (2009a [1979], 5) later sought to elevate microeconomics above

macroeconomics:

It seems to me more and more that the immense efforts which during the
great popularity of macroeconomics over the last thirty or forty years have
been devoted to it, were largely misspent, and that if we want to be useful
in the future we shall have to be content to improve and spread the admit-
tedly limited insights which microeconomics conveys. I believe it is only
microeconomics which enables us to understand the crucial functions of
the market process: that it enables us to make effective use of information
about thousands of facts of which nobody can have full knowledge; it is
intellectually not satisfactory to attempt to establish causal relations between
aggregates or averages in the manner in which the discipline of macroeco-
nomics has attempted to do. Individuals do not make decisions on the basis
of partial knowledge of magnitudes such as the total amount of production,
or the total quantity of money. Aggregative theorizing leads nowhere.

Microeconomic-based externality analysis seeks to use information

without any pretence of ‘full knowledge’: measurement issues were, in
Pigou’s (1937, 39–46) judgement, ‘extraordinarily great’: how ‘are we to
reckon up the indirect benefits that the planting of a forest may have on
climate?’ Taxes and subsidies were thus important, but imperfect, market-­
based remedies—a method of nudging outcomes in the desired direction.
Hayek’s (2009a [1979], 4, 7),

whole concept of economics is based on the idea that we have to explain

how prices operate as signals, telling people what they ought to do in par-
ticular circumstances. The approach to this problem has been blocked by a
cost or labor theory of value, which assumes that prices are determined by
the technical conditions of production only. The important question is to
explain how the interaction of a great number of people, each possessing
only limited knowledge, will bring about an order that could only be
achieved by deliberate direction taken by somebody who has the combined
knowledge of all these individuals. However, central planning cannot take
direct account of particular circumstances of time and place. Additionally,
every individual has important bits of information which cannot possibly
be conveyed to a central authority in statistical form. In a system in which
336 11 44: Europe, 1962–1992 (1)

the knowledge of relevant data is dispersed among millions of agents, prices

can act to coordinate the separate actions of different individuals … one of
the most important principles we must always take into account: particular
prices depend on so many circumstances that their value can never be
known to man but only to God.

Hayek (1978a) did not ‘believe a word of ’ Christianity,9 while Mises

and Rothbard were also atheists. In his Nobel Lecture, Hayek (1974b)
used ‘God’ to provide a Catholic antidote to Pigouvian market failure.
Rothbard, his co-leader of the fourth-generation Austrian School, was ‘an
ardent fan of Christianity’ and considered becoming a Catholic ‘an hon-
orable course’ (cited by Salerno 1995, 80–81). In Mises in America,
Peterson (2009, 42) explained that Austrians had to attach ‘the free mar-
ket idea’ to a ‘moral code based on virtue, honor, dignity, and wisdom, or
on the Ten Commandments, which, by the way, is depicted on the Mises
Institute seal. Yes, the free market is super, as real an ideal as we’ll ever
see.’ Peterson then invoked an atheist to justify religion:

in Lu’s words: ‘The issue is always the same: the government or the market.
There is no third solution.’

When in 1992, the United Nations Framework Convention on Climate

Change aimed to ‘stabilize greenhouse gas concentrations in the atmo-
sphere at a level that would prevent dangerous anthropogenic interference
with the climate system,’ Rothbard (1992b, 7) denounced the decision as
the work of ‘a few left-wing hysterics’: ‘most real scientists have a very dif-
ferent view of such environmental questions.’ Austrian School Roman
Catholics presumably regard Pope Francis as a blasphemer for suggesting
that the environment should not be left to ‘known only to God’ prices.
Hayek’s fraud about having predicted the Great Depression was appar-
ently uncovered at the University of Chicago in 1934: at a zero ‘price’ (his
salary was to be paid by the William Volcker charity), the Department of
Economics calculated that the ‘cost’ of employing him was too great
(Leeson 2017c). According to The Last Knight of Liberalism, Mises was
FEE’s ‘true spiritus rector’—literally: ‘Führer’ or ‘ruler’ (Hülsmann 2007,
884). Mises (1985 [1927], 19) also had a zero ‘price’ (he was funded by
those he was lobbying for)—but apart from the Graduate Institute of
 44: The Social Market Middle Way (1) 337

International and Development Studies in Geneva (1934–1940), no

University wished to employ someone who ‘seemed to demand syco-
phancy’ (Buchanan 1992, 130) and whose notion of supply and demand
consisted of condensing Classical Liberalism into a single word—
‘property’—and then insisting that ‘All the other demands of liberalism
result from this fundamental demand.’10 Moreover, as a NYU Professor
of Economics, Mises allocated grades randomly: ‘at first he gave all stu-
dents an A; then after intervention by the administration, he allocated As
and Bs according to alphabetical order; and after further intervention,
gave an A to anyone who wrote a paper (regardless of the quality) and a
B to those who did not’ (Rothbard 1988, 106, n56). This allowed Wall
Street brokers to obtain academic qualifications from NYU as they slept
throughout Mises’ class (Doherty 2007, 212).
Trying to ‘fix’ one issue can cause complications elsewhere. Rent con-
trol, for example, can reduce the mobility of labour and increase unem-
ployment. Even if Mises had been offered academic employment, his
Human Action calculation could have been complicated: he and his wife
may have had to leave their three-bedroom, rent-controlled Manhattan
West End apartment (Hülsmann 2007, 809). Mises was utterly opposed
to rent control: ‘Never would Ludwig von Mises bend to the winds of
change that he saw to be unfortunate and disastrous’ (Rothbard 1988,
27). And after Mises died, Block (2008), a Senior Fellow of the Ludwig
von Mises Institute, explained what should happened to all widows
(except, presumably, Mises’):

The husband dies. Now the lady is left with a gigantic apartment. She uses
only two or three of the rooms and, to save on heating and cleaning, closes
off the remainder. Without rent control she would move to a smaller
accommodation. But rent control makes that option unattractive. Needless
to say, these practices further exacerbate the housing crisis. Repeal of rent
control would free up thousands of such rooms very quickly, dampening
the impetus toward vastly higher rents.

Austrian price theory is an ideology-driven subset of neoclassical value

theory. Americans value their National Parks and are prepared to pay
taxes in return for subsidized access; but for Rothbard, ‘nature’ ‘was
largely an untamed and dangerous foe. He was a man of culture. “Where
338 11 44: Europe, 1962–1992 (1)

there is nature there should be civilization” was his motto’ (Hoppe 1995,
36). If Austrians succeed in privatizing the National Parks, ‘civilization’
would consist of mining, fast-food outlets and theme parks.
The government-sponsored transport revolution transformed the US
economy. From a public perspective: if the annual ‘price’ of congestion is
2 per cent of national income (a deadweight loss equivalent to a tax), and
the ‘price’ of cutting that ‘tax’ in half is a 1 per cent annual tax-spend of
national income on infrastructure, what is the optimal solution? Likewise,
a city with inadequate public transport forces many inhabitants to take
taxis to the airport (a ‘tax’ that simultaneously increases congestion).
From a private perspective: when choosing an airline, the neoclassical
optimizing agent not only uses relative prices, but also relative time costs
(lay-overs), quality, safety records and so on. Some may also choose to
pay a premium for ethical objectives (favouring Virgin over British
Airways or Aeroflot) or opt-in to a carbon-offset tax.
For Hayek (1974b), prices will ‘never be known to man but was known
only to God’; for an economist, ‘prices’ have to be compared through
social cost-benefit analysis. Pigouvian and ‘opt-in-default’ behavioural
economics promote full-cost (i.e. externality-adjusted) prices and nudges,
which, operating as signals, do not tell ‘people what they ought to do,’
but rather provide an incentive structure which encourages them to
achieve their—and society’s—reported desired outcomes.
There would, for example, be at least seven (macroeconomic, micro-
economic and externality) consequences of an increase in the minimum
wage in the fast-food industry.

i. Capital would be substituted for labour: the marginal product of labour

would tend to increase (as would ‘equilibrium’ wages in that sector).
ii. Using more physical capital tends to assist the process of acquiring
human capital: fast-food jobs are more likely to become a step-up the
skills ladder rather than a dead-end.
iii. David Card and Alan Krueger (1994, 1997) found that an increase in
the New Jersey minimum wage did not reduce employment—but even
if it did, the relocation of some workers to jobs in the lower-­minimum-­
wage sector would increase productivity in the fast-food sector by
reducing the incentive to shirk (the efficiency wage hypothesis).
 44: The Social Market Middle Way (1) 339

iv. The price of fast-food relative to more healthy alternatives would

rise—presumably exerting downward pressure on obesity rates (and
thus reduces the associated health care costs).
v. An ‘ethical’ burger entrepreneurial space would open-up (by paying
above the minimum wage).
vi. According to the UN Food and Agriculture Organization (2006),
the livestock sector (primarily cattle, chickens and pigs) produces 37
per cent of all human-induced methane: global warming could be
mitigated by a switch towards other sources of protein.
vii. The subsidy that many fast-food workers receive would diminish—
which would tend to shrink the Welfare State. What is the most
efficient way of utilizing all this dispersed knowledge and informa-
tion so as to improve outcomes?

Hayek’s (1975b) alternative is to promote ‘major social instability’ to

reduce real wages. The ‘primary cause of the appearance of extensive
unemployment’ is disequilibrium prices and wages: ‘wages are only rigid
downwards … Remember, please: this is the crucial concept.’ A ‘second-
ary’ contraction or depression could make unemployment ‘general.’
Hayek, who could not specify how much ‘social unrest’ it would take in
‘restoring the market,’ stressed: ‘The point I want to make is that this
equilibrium structure of prices is something we cannot know beforehand
because the only way to discover it is to give the market free play.’
The 1974 Royal Swedish Academy of Sciences was

of the opinion that von Hayek’s analysis of the functional efficiency of dif-
ferent economic systems is one of his most significant contributions to
economic research in the broader sense … His guiding principle when
comparing various systems is to study how efficiently all the knowledge
and all the information dispersed among individuals and enterprises is uti-
lized … For him it is not a matter of a simple defence of a liberal system of
society as may sometimes appear from the popularized versions of his
thinking.11

Neoclassical economics is pedagogically attractive because the same

tangency tools are used for both consumer demand (indifference curves)
340 11 44: Europe, 1962–1992 (1)

and producer supply analysis (isoquants). Hayek (1978a) spent all of his
‘early years on utility analysis … I was very attracted, in a way, by the
indifference-curve analysis. I thought it was really the most satisfactory
form, particularly when it became clear that it unified the theory of pro-
duction and the theory of utility with a similar apparatus.’12 Likewise,
Public Choice theory seeks to apply the same optimizing framework to
both the public and private sectors, while inflation-targeting seeks to pre-
vent the short-term impulsive behaviour of politicians from generating a
political business cycle. Hayek (1952) and neuroscientists have pene-
trated deeper into human behaviour than Mises’ (1966) ideology-driven
Human Action: A Treatise on Economics: the two relevant ‘sovereigns’ relate
to short-term impulsive consumer behaviour and (self-reported) long-­
run desired outcomes. Should the long- or the short-run be sovereign?
Two Nobel Prizes (1976 and 1985) were awarded, in part, for the
analysis of consumption smoothing (Friedman 1956; Modigliani and
Brumberg 1954). Yet, if such intertemporal rationality described actual
behaviour, government unfunded liabilities would not be so astronomic
(see, for example, Kotlikoff and Burns 2005). The ‘interest rate in the
brain’ explains why some consumers report that they wish to avoid obe-
sity, poverty in retirement and long-term tobacco consumption—but
nevertheless succumb to advertising pressure and indulge in behaviour
which leads to those outcomes.
Austrians insist on time-induced ‘malinvestment’ while denying time-­
induced malconsumption. Hayek (1978a) attributed his suicidal
­depressions to tobacco withdrawal (Leeson 2015d, 181).13 And Margit
Mises (1984, 144) reflected about her husband:

Once I spoke to Fritz Machlup about this stubbornness, and he answered:

‘With a man like Ludwig von Mises you don’t call it stubbornness-you call
it character [emphasis in text].’ When the doctor advised Lu to give up
smoking, I was sorry truthfully, not for him. I liked to see him with a ciga-
rette, for then he was relaxed and in a good mood. He loved smoking,
though it was not a passion. Nevertheless, it was not easy for him to give it
up, especially while he worked. Sometimes when I entered his studio I
could tell he had been smoking. I understood and would not have said a
word, but he felt almost ashamed that the longing for a cigarette could
overpower him and break his will.
 44: The Social Market Middle Way (1) 341

Austrians promote ‘morals’ and ‘individual responsibility’—from that

perspective, malconsumption could be attributed to malevolent produc-
ers manipulating impulsive behaviour. But economics is concerned with
outcomes not moral posturing.
The consumer surplus ‘bubbles’ of unfunded liabilities, obesity, tobacco
addiction and so on have no self-correcting forces to facilitate a return to
a ‘natural’ state. To ‘immunize’ against old-age poverty and reduce the
Welfare State, some countries to have gone beyond the nudge and man-
dated compulsory retirement savings. But Austrian economics—origi-
nally formulated by the nanny-employing nobility—insists that this is
the road to the ‘Nanny State’: ‘liberty’ requires that individuals who fall
victim to the impulsive behaviour promoted by the sovereignty-seeking
producers who fund ‘liberty’ must resort to charity.
Charity can be rewarding for both donor and recipient—what is the
most efficient way of connecting the two? An electronically collected dol-
lar may only cost the donor 50 cents (after a tax-deduction); whereas a
dollar impulsively dropped into a tin may incur a collection cost of 50
cents: four times less ‘efficient.’ If a community donates x per cent of
national income to charity, and if ‘efficiency’ is measured by the least-cost
method of collection, and if all taxpayers are opted-in (unless opting-out)
to an x per cent pre-tax deduction (which they could electronically trans-
fer to the registered charity of their choice), this would eliminate the
collection costs of impulsive donations. These are market design issues—
the role played by the State is facilitatory and not, a priori, a violation of
‘liberty.’
Robbins forgave Hayek for his ‘bootleg’ divorce; Hayek’s (1978a)
UCLA oral history interviews contain dozens of references to his ‘friends’
and ‘closest friends.’14 But Hayek’s (1994, 47) only close friend was
Walter Magg, who had died in 1917. Hayek revealed to Cubitt (2006,
63, 381, 190) that Robbins and Popper were ‘intimates’; but that Popper
‘had had reason to be grateful to him.’ When Hayek died, his childhood
‘friend,’ Fürth, ‘thanked’ Cubitt ‘half a dozen times’ for telling him: ‘He
would tell Haberler, who could no longer write letters but might dictate
one, and then write to Mrs. Hayek himself.’ Six years earlier, when
Popper’s wife died, Hayek seemed ‘almost indifferent … there was noth-
ing he could do now because Bartley had not given him the Poppers’ new
342 11 44: Europe, 1962–1992 (1)

address.’ But according to Cubitt, Hayek was lying: ‘This was not true …
The only comment he could make was that he could no longer take any
interest in the other people’s problems because he was constantly forced
to think only about his own miseries.’
The ‘concern’ of the Jewish-born Fürth, ‘for Hayek’s state’ of physical
decline was ‘born of true friendship’; but Hayek told Cubitt (2006, 244,
51) that ‘he did not like’ Jewish people ‘very much, any more than he
liked black people.’ By any objective criteria, economists employed by
the Federal Reserve—unlike the academically unqualified ideologues that
Hayek fraudulently obtained academic positions for—are highly creden-
tialed. Fürth had been a Federal Reserve Board economist; but Hayek
(1978a) insisted that Fürth ‘wasn’t really an economist. He learned a lot
of economics by that [Geistkreis] association, but he was not primarily
interested in economics. He finally made use of this when he had to go to
the United States to get a position as an economist, but in Vienna he was
not an economist.’ Fürth ‘began’ with a teaching post at Howard
University, ‘one of the Negro universities in Washington.’15
Hayek’s LSE ‘was described as a court where the favourites were the
ones who adhered to Neo-classical principles and the non-favourites were
those who had affinities to Keynesian ideas. The former got promotion,
the latter were weeded out gradually’ (Shehadi 1991, 385–387). In 1938,
Hayek appeared to Terence Hutchison (1994) as possessing (or ­projecting)
a ‘rigid, unflinching, officer-like sense of duty.’ When not being hysteri-
cal, Mises also projected a carefully stage-managed image: ‘He could be
unbelievably stubborn, but people would not detect that in daily life, for
he had excellent manners. He was brought up at a time when Austria was
an empire and good manners and self-discipline were not only a prereq-
uisite of the court [emphasis added], but a must for a member of every
cultured family. One does not lose good habits in later life, nor did Lu’
(Margit Mises 1976, 143).
The Mafia survive by enforcing the code of silence—but Austrians rou-
tinely volunteer their unfavourable assessments about the competence
and integrity of their fellow ideologues. They present themselves as the
extreme proponents of capitalism—but often lack the human capital
required to be employed by non-rigged markets as academics (bogus
PhDs and titles) and appear to lack social capital (they do not trust each
 44: The Social Market Middle Way (1) 343

other or anyone else). Social capital plays important roles in Adam Smith’s
(1776) Wealth of Nations, de Tocqueville’s (2000 [1835; 1840]) Democracy
in America, and in the mutual blind trust of the New York diamond-­
dealers market (Halpen 2005): by tolerating and promoting fraud,
Austrians have debased the currency by poisoning the flow of scientific
knowledge.
In post-Feudal societies, social mobility and the distribution of income
and wealth are determined by a variety of factors: effort, ability, luck
and—most important of all—the distribution of human capital. Since
there are both private and (difficult to measure) social returns to human
capital, there will always be room for legitimate disagreement over the
extent of the socially optimal amount of tax-based subsidy.
The Habsburg Empire rested on ‘tradition, on dynastic rights’: in
1918, 85 per cent of the population were illiterate (Taylor 1964, 166, 41,
35). The Last Knight of Liberalism reported that in Habsburg Vienna,

three schools stood above the rest: the Theresianum, the Schottengymnasium,
and the Akademische Gymnasium. These were all-male schools. (Vienna
girls were taught in separate gymnasien, yet they could take the graduation
exam in one of the top schools.) Empress Maria Theresa had created the
Theresianum in the mid-1700s as a ‘knight’s academy’—a school to prepare
young aristocrats for future responsibilities as administrative and political
leaders of the empire. In Mises’s day, it remained a school for the sons of the
high aristocracy and admitted bourgeois pupils only as day students.

Among the latter were Schumpeter, Rudolf Hilferding, and Karl

Lueger (Hülsmann 2007, 36–37), the anti-Semitic Mayor of Vienna
whom Hitler (1939 [1925], 54, 88–89, 104–105, 145) admired (Bullock
1991, 36; Bullock 1993, 22–24; Wistrich 1989, 235, 647). What
Hülsmann (2007, 37) calls ‘Vienna’s better Jewish families’ preferred
‘The Akademische Gymnasium … The school had been established in
1453 … This is where Ludwig spent the next eight years.’
Hayek (1978a) told Craver that the ‘Wittgensteins themselves were
three-quarters Jewish.’16 His life-long obsession with his own ‘Aryan’
ancestry had a New World parallel: nine years before he was born, the
State of Louisiana passed the Separate Car Act that required that whites
and non-whites be segregated. Homer Plessy, who was classified as
344 11 44: Europe, 1962–1992 (1)

‘octoroon’ (seven-eighths European descent, one-eighth African descent)

objected; but the 1896 Plessy versus Ferguson Supreme Court decision
upheld the constitutionality of such State laws under the ‘separate but
equal’ doctrine. The 1954 Supreme Court Brown versus Board of
Education decision declared that ‘separate educational facilities are inher-
ently unequal’: racial segregation violated the Equal Protection Clause of
the 14th Amendment.
Hayek (1978a) asserted that ‘justice is an attribute of human action,
not of the state of affairs, and the application of the term social justice
assumes a judgment of the justice of a state of affairs irrespective of how
it has been brought about. That deprives it of its meaning. Nothing to do
with justice is an attribute of human action.’17 Although himself an athe-
ist, he wished that others would surrender to divine justice:

there are in the surrounding world a great many orderly phenomena which
we cannot understand and which we have to accept. In a way, I’ve recently
discovered that the polytheistic religions of Buddhism appeal rather more
to me than the monotheistic religions of the West. If they confine them-
selves, as some Buddhists do, to a profound respect for the existence of other
orderly structures [emphasis added] in the world, which they admit they
cannot fully understand and interpret, I think it’s an admirable attitude.18

The Arthur Balfour Professor of Genetics at Cambridge University,

R. A. Fisher, told Friedman (1976) how ‘accurately he could infer views
in genetics from political views.’ Referring to Richard Herrnstein and
Charles Murray’s (1994) The Bell Curve: Intelligence and Class Structure in
American Life, Rockwell (1994b, 18) stated ‘The modern errors in politi-
cal philosophy boil down to two: the Rawlesian, which says the state
ought to cater to the least among us, and now the Murraysian, which says
the state ought to cater to the most guileful among us.’
At the Atlas Network Liberty Forum & Freedom Dinner, John Tomasi
(2013), Romeo Elton Brown University Professor of Natural Philosophy,
asserted:

there’s no reason for people who care about free markets, and are commit-
ted to individual liberty and personal responsibility, there’s no reason for us
to be afraid of the term ‘social justice.’ Quite the contrary. If the test for a
 44: The Social Market Middle Way (1) 345

just society is which set of social institutions over time, over the course of a
generation or two, does the best for the least-well-off working class—that’s
Rawls’s test—then we have nothing to fear at all. We can match up our best
institutions, our preferred institutional forms, against their preferred insti-
tutional forms. And when you do that, I think you find that the free mar-
ket wins. So, the idea that I want to leave you with—you probably already
see it—is that we, maybe all of us in this room are the party of social
justice.

For Mises (1985 [1927], 115–116), there could be no disagreement:

a policy of compulsory education is incompatible with efforts to establish

lasting peace. … There is in fact only one solution. The state, the govern-
ment, the laws, must not in any way concern themselves with schooling or
education. Public funds must not be used for such purposes. The rearing
and instruction of youth must be left entirely to parents and to private
associations and institutions. It is better that a number of boys grow up
without formal education than they enjoy the benefit of schooling only to
run the risk, once they have grown up, of being killed or maimed. A healthy
illiterate is always better than a literate cripple.

To put this into a ‘more effective form,’ Hayek (1949, 420–421, 428)
asserted: ‘Though nobody [emphasis added] will regret that education has
ceased to be a privilege of the propertied classes, the fact that the proper-
tied classes are no longer the best educated and the fact that the large
number of people who owe their position solely to the their general edu-
cation do not possess that experience of the working of the economic
system which the administration of property gives, are important for
understanding the role of the intellectual.’ Rockwell (2010 [1999], 292)
put this into a Misean form: Rothbard had taught him that the State
‘cannot improve on, and indeed only destroys, the social and economic
system that grows out of property rights, exchange, and natural social
authority [emphasis added].’
Rothbard stated ‘If you wish to know how libertarians regard the state
and any of its acts, simply think of the state as a criminal band and all of
the libertarian attitudes will logically fall into place’ (cited by Sobran
1995, 39). In Austrian circles, Rothbard is known as ‘Robhard’ (Skousen
346 11 44: Europe, 1962–1992 (1)

2000)—he was not a scholar but an ideologue with ‘central commit-

ments: a defense of individual liberty and a lifelong war against our
enemy the state’ (Fleming 1995, 95). Shenoy (2003) revealed that the
Austrian School of Economics is a magnet for the corrupt: ‘the facilities’
at the 1974 Austrian revivalist conference ‘really were horrible. The chap
who organized the conference, who shall remain nameless, owed the
owner of the hotel some money, so the conference killed two birds with
one stone.’
Shenoy also refused to return Hayek family heirlooms that she had
borrowed for her non-existent ‘Order of Liberty’ biography; about 20 per
cent of the Hayek Archives appears to have been removed before arrival
at the Hoover Institution (including the Hitler postcards through which
the Hayek family communicated). Like George Roche III, Sennholz
(2002)—a ‘Misean for Life’ Luftwaffe bomber-pilot—was an Austria
morality-promoter: credit expansion and inflation takes ‘property from
millions of unsuspecting individuals and enrich politicians … I firmly
believe that good morals are the basis of a private property order. Moral
laws confirm individual dignity and responsibility. Think of the com-
mandments: Thou shalt not steal, thou shalt not kill, thou shalt not covet,
thou shalt not bear false witness. These are the very foundations of a
peaceful society and a productive economic system.’ Sennholz (2002)
then described what happened to the Mises Archives: George Roche
bought the Mises library,

although the students at Hillsdale surely could not read them, either. The
books are now locked up. Then, Mrs. Mises approached me with the
papers, and Grove City College purchased them. The paper are very inter-
esting, a gold mine for the right scholar. I have a suspicion, by the way, that
a few papers have disappeared.

Notes
1. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 Notes 347

2. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre

for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
3. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. Partial ‘atonement’ for his Austrian ‘sins’?
5. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
6. http://www.foxbusiness.com/features/2016/08/02/why-trump-got-out-
stock-market.html
7. The minority and the lobbyists might, of course, be revealed in hindsight
to be less-wrong that the majority. Such is the uncertainty of policy-
making.
8. ­h ttp://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/press.html
9. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
10. Mises (1985 [1927], 19) defined property as the ‘private ownership of
the means of production (for in regard to commodities ready for con-
sumption, private ownership is a matter of course and is not disputed
even by the socialists and communists).’
11. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/press.html
12. Friedrich Hayek, interviewed by Armen Alchian 11 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
13. ‘I was stopped from smoking by the doctor some five years ago and was
miserable for a long time. I was a heavy pipe smoker … So I started tak-
ing [snuff] up and I’ve become completely hooked. It is as much a habit-
forming thing, and you get all the nicotine you want; but the worst thing
about smoking, of course, is the tar, which you don’t get [with snuff]. So
I get my pleasure without the real danger.’ Friedrich Hayek, interviewed
by Robert Chitester date unspecified 1978 (Centre for Oral History
Research, University of California, Los Angeles, http://oralhistory.
library.ucla.edu/).
348 11 44: Europe, 1962–1992 (1)

14. For example, in Vienna, his ‘closest friend’ predicted that he would ‘end
as a senior official in one of the ministries … in this circle in which I
lived, my closest friends were either practicing lawyers—The philoso-
pher and mathematician was the director of the Anglo-Persian Oil
Company in Vienna; another one, a sociologist, was the secretary of one
of the banking associations; one or two were actually in some low civil
service positions.’ Friedrich Hayek, interviewed by Earlene Craver date
unspecified 1978 (Centre for Oral History Research, University of
California, Los Angeles, http://oralhistory.library.ucla.edu/). In London,
Robbins became his ‘closest friend, and still is, although we see each
other very rarely now.’ Friedrich Hayek, interviewed by Leo Rosten 15
November 1978 (Centre for Oral History Research, University of
California, Los Angeles, http://oralhistory.library.ucla.edu/).
15. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
16. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
18. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
 12
44: Europe, 1962–1992 (2)

According to Rockwell (1995, 115, 2015):

Secession is not a popular idea among the political and media classes in
America, to be sure, and regime libertarians may roll their eyes at it, but a
recent poll found about a quarter of Americans sympathetic to the idea,
despite the ceaseless barrage of nationalist propaganda emitted from all
sides. A result like this confirms what we already suspected: that a substan-
tial chunk of the public is willing to entertain unconventional thoughts.
And that’s all to the good. Conventional American thoughts are war, cen-
tralization, redistribution, and inflation. The most unconventional thought
in America today is liberty; Once we understand why private property
should be inviolable, troublesome notions fall by the wayside. There can be
no ‘civil rights’ apart from property rights, because the necessary freedom
to exclude is abolished. ‘Voting rights’ are also a fiction, which—depend-
ing on how they are used—can also diminish freedom … The security of
property provides lines of authority, restraints on behavior, and guarantees
of order. The result is social peace and prosperity. The conflicts we face
today, from affirmative action to environmentalism, are the result of false
rights being put ahead of private property.

© The Author(s) 2017 349

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_12
350 12 44: Europe, 1962–1992 (2)

44: The Social Market Middle Way (2)

According to Rockwell (1995, 111–112),

Rothbard showed that the only authentic monopolies are those created by
law: the government subsidizes a producer at others’ expense (public hos-
pitals and schools) or forbids competition altogether (the postal service).
Other forms of monopoly include licensure, that is, deliberately restricting
the supply of labor or number of firms in a certain industry. Government
monopolies always deliver inferior service at exorbitant prices. And they
are ‘triangular interventions,’ because they subsidize one party while pre-
venting others from exchanging as they would in a free market.

In 1912, the President of the British Medical Association condemned

the National Health Insurance Bill as ‘the most gigantic fraud which had
ever been perpetrated on the public since the South Sea Bubble.’
Successful eugenics must ‘begin with the unborn. The race must be
renewed from the mentally and physically fit, and moral and physical
degenerates should not be allowed to take any part in adding to it’ (cited
by Arnold 2012, 26–27; Courcy 2014, Chap. 4).
It is not optimal for the taxpayer to be entirely responsible for health
expenditures: private medicine should compete and, indeed, could have
a monopoly in areas, such as self- or insurance-funded end-of-life care
(Leeson 2013b). But if in 1946, the medical trade unions had employed
Mises as a lobbyist to defeat the National Health Service, the British
could still be contributing to ‘liberty’: twice the cost, worse outcomes.
Sennholz (‘Senior Writer, Private Practice, Oklahoma City,’ 1978–1992’1)
influenced Terree Wasley Summer’s (1992) What Has Government Done To
Our Health Care?—which promotes ‘Health Care Based on Consumer
Choice,’ purports to trace ‘our health care problems back to government
intervention,’ covers the ‘slippery slide to nationalized health care’ and
defines ‘socialized medicine’ as ‘grafting an alien approach to an American
culture.’ After working for Roche at Hillsdale College in the early 1970s,
Rockwell (2006) ‘turned to editing a journal of socioeconomic medicine
called Private Practice. I worked to integrate the work of the Austrians and
apply it to health economics and ­government intervention in that industry.
 44: The Social Market Middle Way (2) 351

It proved to be a fruitful mix, and in my mind [emphasis added] demon-

strated the possibilities of using the Austrian tradition to explain the way
the world works in a very practical way.’
In February 1974, Nixon proposed a ‘Comprehensive Health Insurance
Plan’; as editor of Private Practice Magazine, Rockwell (1974) informed
the ‘Manion Forum’ that this ‘pernicious’ bill would provide ‘lower qual-
ity medicine and more expensive medicine. I don’t think the American
people are interested in either one of those things.’2 But outside the
Austrian ‘mind’: according to the World Bank, in 2013, the United States
spent 17.1 per cent of Gross Domestic Product on ‘health expenditure’—
far in excess of Canada (10.9), Denmark (10.6), Finland (9.4), France
(11.7), Germany (11.3), Japan (10.3), Italy (9.1), Netherlands (12.9),
New Zealand (9.7), Singapore (4.6), Spain (8.9), Sweden (9.7),
Switzerland (11.5) and the United Kingdom (9.1).3 In 2013, Americans
spent $9146 per capita per annum on health care, while the British spend
US$3598 per capita per annum; in 2016, the US figure was projected to
rise to $10,000. By 2025, health care is projected to consume represent
20 per cent of the total US economy (Pear 2016).
By far the most expensive, American health outcomes also consistently
underperform the average: in 2013, American infant mortality rates were
identical to the former Communist territories of Bosnia and Herzegovina,
Macedonia, Serbia and the Slovak Republic; twice the rates that prevail
in Australia, Austria, Cyprus, Czech Republic, Denmark, Estonia,
Germany, Ireland, Israel, Italy, Korean Republic, Monaco, Netherlands,
Portugal and San Marino; and three times the rates in Andorra, Finland,
Iceland, Japan, Luxembourg, Norway, Singapore, Slovenia and Sweden.4
Dr. Ron Paul was a specialist in obstetrics and gynaecology. ‘Pro-life’
Austrians advance six arguments against ‘destructionist’ tax-and-spend
proposals to reduce (amongst other objectives) American infant mortality
rates:

i. According to the Rothbard-Rockwell-Report, the argument is based on

fraud: ‘The white medical establishment, it is said, denies black moth-
ers information about nutrition for their babies, whose mental growth
is stunted (as if caring for black children is the job of white doctors
and public health officials—but let that go)’ (Levin 1996, 9).
352 12 44: Europe, 1962–1992 (2)

ii. According to Mises (1985 [1927], 19), ‘The program of [classical]

liberalism, therefore, if condensed into a single word, would have to
read: property … All the other demands of liberalism result from this
fundamental demand [Mises’ emphasis].’

The ‘proletariat’ were Roman citizens without the property that was
required for military service. According to Hayek (1978a), ‘Socialism has
never been an affair of the proletarians. It has always been the affair of the
intellectuals, who have provided the workers’ parties with the
philosophy.’5
When Hayek speaks of ‘we’ is he referring to all citizens of the demo-
cratically elected government that succeeded the hereditary Habsburgs: a
‘republic of peasants and workers’?6 Or to reconstruct a neo-Feudal order
was it essential—for them—to see prices as ‘signals leading us, on the one
hand, to serve needs of which we [they?] have no direct knowledge, and
on the other hand, to utilize means of which we [they?] have no direct
knowledge. But it’s all through the price signals, which enable us [them?]
to fit ourselves in an order which we [they?] do not, on the whole,
comprehend.’7
Bork stated that ‘Property is essential to freedom, I suppose—are you
saying?—because it gives you an independence of government which you
would not otherwise have?’ Hayek (1978a) replied: ‘Independence of
government and my fellows. It’s really a sphere in which I cannot be
coerced. And if freedom is freedom from coercion, it depends really on
my being able to assemble a set of means for my purposes. That is the
essential condition for the rational pursuit of an aim I set for myself. If I
am at each stage dependent on, as it were, the permission or consent of
any other person, I could never systematically pursue my own ends
[emphases added].’8
According to Caldwell (2005a), prices play an important role

in coordinating social action where knowledge is dispersed … The social-

ists argued that individual entrepreneurs are just looking over their own
markets whereas the planners are taking everything into account. Hayek
said, ‘Well, wait a second, this does not make sense. Markets do a lot of
stuff, but this model does not shed light on what markets do.’ He zeroed in
on the critical assumption of full or perfect information. He said that in the
 44: The Social Market Middle Way (2) 353

real world, we have millions of individuals who have little bits of knowl-
edge. No one has full knowledge, and yet we see a great deal of social coor-
dination. As Frederic Bastiat said, ‘Paris gets fed.’

How does ‘Vienna’ get fed? ‘Dr’ Leube, ‘DLE,’ who, according to
Hayek, had failed to complete an undergraduate degree, extracted a price
and acquired property from Californian taxpayers as a full Professor of
Economics on the back of Hayek’s fraudulent recommendation.
According to Michael Levin (1996, 4), a career-long recipient of taxpayer
funds via the City University of New York, ‘People should not be forced
to support strangers.’ According to Rockwell (1995, 110–112),

The taxing power efines [sic] the state in the same way that theft defines a
robber … Taxation takes capital from private hands and prevents it from
being used to serve private interests and the consuming public … The least
harmful tax is a head tax or equal tax: a flat fee low enough for even the
poorest to pay … Economists rarely talk about liberty and private property,
and even less about what constitutes just [Rockwell’s emphasis] ownership.
Rothbard did, arguing that property acquired through confiscation, whether
by private criminals or the state, is unjustly owned. (He also pointed out
that bureaucrats pay no taxes, since their entire salaries are taxes)

In the Liechtenstein tax-haven, Leube is the ‘Academic Director’ of the

‘European Center of Austrian Economics Foundation … an innovative
European think tank that firmly stands for self-responsibility, individual
freedom, and limited government.’9 For Austrians, tax ‘loopholes’ ‘were
better labelled ‘zones of liberty,’ places where families might shelter their
possessions from a grasping state resting on a corrupt income tax law’
(Carson 1995, 55). According to Austrians and their fellow-travellers,
‘The American taxpayer never had a better friend and a more consistent
advocate than Hans Sennholz’ (Hendrickson 2007).

iii. According to Sennholz (2002), taxation provides ‘fertile soil’ for sin:

A society that is driven by envy and covetousness is bound to be a

poor society. The apparatus of government may be used to redistrib-
ute income and wealth according to the dictates of the envious.
354 12 44: Europe, 1962–1992 (2)

Industrious people may be forced to bear the expenses of transfer

programs and to face the costs of vice and crime. Envy and covetous-
ness are the fertile soil in which vice and crime do grow and prosper.
Moral ideas are essential to human wellbeing. That is why I believe it
is essential for economists to address these topics.

iv. Taxes are not Pareto efficient.

Leube reported that ‘Deacon’ McCormick was ‘not an impressive per-

son,’ not because he was a transparent fraud, but because ‘he was shabbily
dressed’ (Leeson 2015a, 178, n13). By his own account, Leube is a
descendant of a fourteenth-century Habsburg Count with a personal tai-
lor and a hair stylist: Austrian Nobel Economic Science kicks-away any
justification to tax him for the benefit of others. Indeed, the publicly
funded Rothbard (1992a, 8) insisted that Austrians must ‘Slash welfare.
Get rid of underclass rule’: he knew that the non-Austrian Welfare State
was ‘fraud which like a chainletter would inevitably end in bankruptcy’
(Hoppe 1995, 35).

v. Reducing infant mortality would increase lower class numbers and

thus increase the opportunity for ‘lower class plunder of the economi-
cally successful.’
vi. It would weaken individual responsibility: moral hazard.

Rockwell (2003, 113–115) quoted Mises:

There is no clearly defined frontier between health and illness. Being ill is
not a phenomenon independent of conscious will and of psychic forces
working in the subconscious. A man’s efficiency is not merely the result of
his physical condition; it depends largely on his mind and will … Those
who believed that accident and health insurance could be based on com-
pletely effective means of ascertaining illnesses and injuries and their con-
sequences were very much mistaken. The destructionist aspect of accident
and health insurance lies above all in the fact that such institutions pro-
mote accidents and illness, hinder recovery, and very often create, or at any
rate intensify and lengthen, the functional disorders which follow illness or
 44: The Social Market Middle Way (2) 355

accident … By weakening or completely destroying the will to be well and

able to work, social insurance creates illness and inability to work; it pro-
duces the habit of complaining—which is in itself a neurosis—and neuro-
ses of other kinds. In short, it is an institution which tends to encourage
disease, not to say accidents, and to intensify considerably the physical and
psychic results of accidents and illnesses. As a social institution it makes a
people sick bodily and mentally or at least helps to multiply, lengthen, and
intensify disease.

Rothbard (2007a [1958], 16) told Ayn Rand: ‘If Zarathustra should
ever return to earth, and ask me—as representative of the human race—
that unforgettable question: “what have ye done to surpass man?” I shall
point to Atlas Shrugged.’ Also invoking Friedrich Nietzsche, Rockwell
(2003, 115) summarized Mises’ objections to publically funded health
care: ‘Thus spake Mises. He was observing that there is a moral hazard
associated with socialized and subsidized medicine.’10 Yet in the United
States in 2013, 20.7 per cent of government expenditure was devoted to
health (compared to 16.2 per cent in the United Kingdom)11: America
already has ‘socialised and subsidized medicine’ for Federal employees,
such as Congressman Paul and his Chiefs-of-Staff, Rockwell and Jeff
Deist.
After his title was abruptly changed from ‘Professor of Economics’ to
‘Professor Emeritus,’ Leube was (according to his colleagues) allowed to
keep his California tax-funded pension; and the academic fraud, Shenoy,
was the beneficiary of a 24 per cent annual contribution into her personal
retirement account from the Australian taxpayer. Buchanan (1978) unin-
tentionally implied that most, if not all, Austrian-Americans should be
treated like pre-Voting Rights Act African-Americans: ‘We’ve got our-
selves into a situation where people who are direct recipients of govern-
ment largesse, government transfers, are given the franchise; people who
work directly for government are given the franchise; and we wouldn’t
question them not having it. Yet, to me, there’s no more overt conflict of
interest than the franchise [given] to those groups.’12
As Adam Smith (1776) famously noted: ‘People of the same trade sel-
dom meet together, even for merriment and diversion, but the conversa-
tion ends in a conspiracy against the public, or in some contrivance to
356 12 44: Europe, 1962–1992 (2)

raise prices.’ According to Mises Institute ‘Rothbard Medal of Freedom’

holder, Rothbard ‘believed in the conspiracy view of history for the same
reason that he believed in Mises’s individualistic epistemology: he held
that human action shapes history. Behind every great historical move-
ment, he knew, there is at least one self-interested group trying to get
ahead, all too often by means of the rhetoric of public benefit through
state action. He had one adjective to describe all those who invoke state
power to extend their own rent-seeking hidden agendas: monstrous’
(North 1995, 72). Neoclassical theory suggests that ‘monstrous’ rent-­
seekers will incur significant costs to extract about 7 per cent of national
income as rent. Rockwell found a trade union to promote; Friedman
found monopoly power to attack.
At the NBER, Friedman’s empirical investigations discovered that the
‘monopolistic practices’ of the American Medical Association (AMA) had
raised the cost and reduced the supply of medical care. C. Reinhold
Noyes, who was ‘in the pharmaceutical business,’ insisted that the NBER
not publish the findings because Friedman and his co-author and (later)
fellow Nobel Laureate, Simon Kuznets, had ‘allowed [neoclassical] theory
to blind them … I suggest that the subject of freedom of entry is a hot
poker and be dropped’ (cited by Friedman and Friedman 1998, 74–75).
In 1939, Morris Fishbein, the AMA’s president, insisted that

The introduction into this nation of a federal security plan, whereby the
nation itself as a federal agency, will step intimately into the sickness and
life of every person in the country, will be the first step in the break-down
of American democracy. Indeed, all forms of security, compulsory security,
even against old age and unemployment, represent a beginning invasion by
the state into the personal life of the individual, represent a taking away of
individual responsibility, a weakening of national caliber, a definite step
toward either communism or totalitarianism. (Cited by Campion 1984,
525)

According to T. R. Reid (2010), the term ‘socialized medicine’ was

‘popularized by a public relations firm working for the AMA in 1947 to
disparage President Truman’s proposal for a national health care system.
It was a label, at the dawn of the cold war, meant to suggest that anybody
advocating universal access to health care must be a communist. And the
 44: The Social Market Middle Way (2) 357

phrase has retained its political power for six decades.’ When in 1961, the
Kennedy Administration attempted to expand health care for the elderly
(the King-Anderson Bill, HR 4222), the AMA successfully lobbied to
defeat it. Through ‘Operation Coffeecup,’ doctors’ wives invited neigh-
bours to listen to ‘the Great Communicator on Socialized Medicine,’ a
recording of ‘Ronald Reagan Speaks Out Against Socialized Medicine,’
which highlighted the allegedly ‘foot-in-the-door’ leftist technique: ‘one
of the traditional methods of imposing statism or socialism on a people
… by way of medicine’ (cited by Rapaport 2009).13
In 1961, Reagan explained what the consequences would be if this
early version of the 1965 Medicare Act were passed: ‘Freedom is never
more than one generation away from extinction. We didn’t pass it to our
children in the bloodstream. It must be fought for, protected, and handed
on for them to do the same, or one day we will spend our sunset years
telling our children and our children’s children what it was once like in the
United States where men were free’ (cited by Feulner and Wilson 2006,
Chap. 1). This helped transform Reagan from ‘pitchman’ for General
Electric to political celebrity, and paved the way for his speech on behalf
of Barry Goldwater at the 1964 Republican convention, his Governorship
of California (1967–1975), his close-run ‘insurgency’ against incumbent
President Ford (1976), and his Presidency (1981–1989).
Who funds ‘liberty’? In 1982, when Rockwell (2010 [1999], 296)
started the Mises Institute, he ‘had enough savings to work a few years
without a salary.’ Rockwell’s address to the Manion Forum, was pub-
lished in the ‘Manion Forum Yearbook’: the 1978 ‘Yearbook’ contains
essays on ‘Leave Us Alone—U.S. Meddling in Rhodesia And South
Africa Hampers Black-White Cooperation’ (Howard E. Kershner),
‘Namibia—the New And Friendly African Nation With Vast Resources
Vital to the West’ (Benjamin J. Africa), ‘Confrontation—the Approaching
Crisis Between the U.S. and South Africa’ (Martin Spring), ‘Panamanian
People Prefer U.S. Control of Canal’ ‘Corporate Responsibility’ (Clay
J. Claiborne) ‘New Alliances Evolving in South America—Latin Nations
Are Wary of U.S. Will to Counter Soviet Expansion’ (Lewis A. Tambs),
and by the South African Prime Minister, P. W. Botha, on ‘A Nation of
the Future—South Africa Has the Means And the Will to Overcome
Internal And External Threats.’14
358 12 44: Europe, 1962–1992 (2)

The structure of scientific knowledge can beneficially be broken by

non-standard arguments (Kuhn 1962): the onus, however, is on persua-
sive logic and evidence, not mere ideological assertion. Likewise, as Mark
Twain’s (1876, 1885) novels illustrate (with respect to the slave-owning
neo-Feudal order for which some Austrians are so nostalgic), non-­
standard prose can be both entertaining and illuminating. Miseans
require neither ‘a more effective form,’ persuasive logic and evidence, nor
readable prose. According to Rockwell (2009, 1–2), Peterson is

one of the leading spokesmen for the free market during his long career.
These are rare qualities in an academic economist. Rarer still is his capacity
for clarity of expression and soundness of principle, which he has shown
throughout his life. The essays contained in this book illustrate the point
beautifully. Few have written so poetically about the capacity of the market
economy to bring social peace and prosperity in a manner that reveals the
true preferences of its society’s members. The market is the best and more
authentic form of true democracy, a point he has made throughout his life.

Peterson (2009, 68, 71–72) illustrates the quality of Austrian non-­

standard arguments—drop-out rates would fall if schooling was not
compulsory:

as P.J. O’Rourke famously said: ‘Giving money and power to government

is like giving whiskey and car keys to teenage boys.’ Economic and other
trauma too for our public K–12 schools dominated if not ruled by the
powerful National Education Association and its 50 state chapters. For
does not forced loss of school competition and critical parent-student
choice, much explain our high drop-out rates—about 33 percent nation-
ally, with the District of Columbia worse off as 41 percent of its student
body fail to earn a high school diploma.

While Hayek denied being Mises’ student, Peterson (2009, 71–72)

illustrated the non-standard nature of much Austrian prose and evidence:

As society votes to win what Mises [sic] student, Nobel economist

F.A. Hayek called ‘spontaneous social cooperation,’ his phrase for free
minds-free markets, for voluntarism-freedom of contract … Now, what of
 44: The Social Market Middle Way (2) 359

our ‘free’ (ha!) public schools? Mises—leery of state-propagandizing/mind-­

control—hit any state role whatever in education: Zero. Zilch … To which,
Dear Teachers, Dear Students, Dear Readers, I say, Amen, and Amen too,
with bias, for the gist of my remarks today per an ancient saying, ‘As a man
thinketh, so is he,’ Which I amend for our purpose: As a teacherstudent-­
citizen thinketh, so is he/she. To be continued. On and on. Why? Because
of sharper thinking, our positive ideas tend to live: On and on, as their
beacons—and hopefully yours, Dear Reader—light up future generations
or far beyond everyone’s own limited lease on life. Not a bad deal, Dear
Reader-Fellow Teachers-Fellow Students, not bad at all.

In the evidence-free world of Austrian economics, ‘liberty’ is the

licence to uncritically consume and regurgitate malevolent and/or
fund-raising fraud: for example thirteen times in a single paragraph. In
The Making of Modern Economics, the Columbia University professor,
Skousen (2009, 338–339), reveals the quality of Austrian ‘freedomfest’
thought:

It’s difficult to say at what point Pigou shifted views and became an under-
ground supporter of revolutionary causes [1] … there is considerable evi-
dence that he had been an underground agent for revolutionary causes
much earlier in his career [2]. According to British agent [3] Richard
Deacon (a pseudonym), in 1905 Pigou attended a clandestine meeting of
the Russian Social Democrats in London [4] and decided to become a
secret agent [5], committed to developing a British spy network [6] and
arranging payments for arms shipments to Russia [7]. He even kept a diary
that year written entirely in code (Deacon 1989: 44–45) [8] … he alleg-
edly met with the Soviet Secret Service to provide strategic information
concerning the location of airfields and squadrons in the Cambridge area
[9]. He also helped recruit young men to join the ring of Soviet spies in
Britain [10]. He would invite them on hiking trips or to his lakefront
home [11]… At one point, Pigou approached Friedrich Hayek [12], who
had transferred from London to Cambridge during the war. Hayek, like
Pigou, was an avid mountain climber whom Pigou invited to stay at this
lakefront home and go hiking. According to Hayek, Pigou was interested
in the names of people who could cross frontiers. But Pigou suddenly
dropped Hayek [13], who was singularly unsympathetic to Pigou’s cause.
(Hayek 1994, 136–137)
360 12 44: Europe, 1962–1992 (2)

In Economics on Trial: Lies, Myths and Realities, Skousen (1991, 12,

287, 276) declared that he saw ‘no justification for government subsidisa-
tion of education on the grounds of beneficial externalities’ because many
teachers ‘ridicule traditional religious and cultural values.’ Sennholz
(2002) agreed:

It is difficult to advance economically if the voices of education tirelessly

denounce and slander private property and capitalism. Politicians and reg-
ulators appeared on the education scene only recently, with the growth of
the omnipotent State. In the U.S., this happened during the middle of the
nineteenth century, when the claim was first made that the State has the
right to insist on universal education of its citizenry. The idea was that
everyone is likely to benefit richly from the education of his fellowman …
As individual parents, we would not think of seizing property from our
neighbors to finance the education of our children. But as members of
political society, we think nothing of taxing and spending so that our chil-
dren may receive a ‘good education.’ In the same way, we believe that it is
wrong to steal from widows and orphans, and yet, as members of the body
politic, we do not hesitate to levy confiscatory estate and inheritance taxes
that force people to surrender their wealth to tax collectors. It is as if we
have two souls in our breasts: one that seeks to live by Judeo-Christian
principles, and one that loves to steal and plunder, especially by majority
vote.

According to Alchian (1968):

The argument that the poor cannot afford to pay for a profitable college
education is deceptive. What is meant by a ‘poor’ person. Is he a college
calibre student? All college calibre students are rich in both a monetary and
non-monetary sense. Their inherited superior mental talent—human cap-
ital—is great wealth … When some zero tuition university alumni say that
without zero tuition they could not have attended college, they should
have a modest concern for the implications of that statement [emphasis in
original].15

The 1965 Watts riots were the worst in Los Angeles until the 1992
acquittals of the police officers who had beaten Rodney King. Referring
to the recipient of the 1950 Nobel Peace Prize and one of Myrdal’s (1944)
 44: The Social Market Middle Way (2) 361

collaborators in An American Dilemma: The Negro Problem and Modern

Democracy, Alchian (1968) continued:

One poor, ‘uneducated’ resident of Watts, upon hearing Ralph Bunche say
that he could not have had a college education unless tuition were free,
opined, ‘Perhaps it’s time he repay out of his higher income for that privi-
lege granted him by taxes on us Negroes who never went to college.’ That
reply spots the difference between educational opportunity and a redistri-
bution of wealth.

According to Rockwell, in European history,

the Habsburg monarchy was a famed guardian of Western civilization. But

even those of us devoted to the old American republic are aware of the
warm and long relationship between the Austrian school and the House of
Habsburg … The Emperor Franz Joseph ennobled Mises’ father, hired Carl
Menger to teach classical liberalism to Crown Prince Rudolf, made Menger
a member of the House of Lords, and appointed Eugen von Böhm-Bawerk
twice as Finance Minister, to institute and strengthen the gold standard.
Mises himself was decorated three times for bravery under fire as an artil-
lery officer in the emperor’s army. (Cited by Palmer 1997)

Trial-by-jury (a quasi-democratic component of the separation of

powers) can frustrate the prosecuting State: suspicions about misconduct
by the LA Police Department assisted the acquittal of the African-­
American former footballer, O.J. Simpson. Undergraduates can further
frustrate (by finding evidence that a ‘public defender’ did not or could
not provide to the jury): the Innocence Project has rescued 20 people
from death row.16
Austrian theocrats seek to end the separation of Church and State;
Rockwell appeared to seek the end of the separation of powers. ‘Liberty’
would be best-protected by removing restrictions on the coercive power
of the State and turning cops into ‘crooks’ for ‘liberty.’ On Christmas Eve
1951, officers of the LA Police Department arrested and savagely beat six
young men (including five Mexican Americans) who had refused to leave
a bar: one required two blood transfusions. After a drunken Christmas
morning party, about 50 officers participated in a ritualized beating—
362 12 44: Europe, 1962–1992 (2)

puncturing organs and breaking facial bones—that lasted for over an

hour and a half (Escobar 2003).
In the Los Angeles Times, Rockwell (1991) reported:

As recently as the 1950s—when street crime was not rampant in America—

the police always operated on this principle: No matter the vagaries of the
court system, a mugger or rapist knew he faced a trouncing—proportion-
ate to the offense and the offender—in the back of the paddy wagon, and
maybe even a repeat performance at the station house. As a result, crimi-
nals were terrified of the cops, and our streets were safe … What we do see,
over and over again, is the tape of some Los Angeles-area cops giving the
what-for to an ex-con [King]. It is not a pleasant sight, of course; neither is
cancer surgery. Did they hit him too many times? Sure, but that’s not the
issue: It’s safe streets versus urban terror, and why we have moved from one
to the other.

Using his ‘curious’ dissembling word, Hayek (1978a) reflected:

I am in a curious conflict because I have very strong positive feelings on the

need of an ‘un-understood’ moral tradition, but all the factual assertions of
religion, which are crude because they all believe in ghosts of some kind,
have become completely unintelligible to me. I can never sympathize with
it, still less explain it.17

Illiterate African slaves embraced the religion of their enslavers; and

after their emancipation were, reportedly, terrorized by the white sheets
worn by the ‘ghosts’ of the Confederate dead. As literacy rates rose, the
Klu Klux Klan (whose members often had day-jobs as ‘cops’ and other
law ‘enforcers’) used murders and lynchings for the same purpose. Later,
North Carolina Republicans sought to violate the US constitution by—
according to a federal appeals court—voting ID laws which ‘target
African-Americans with almost surgical precision’ (Graham 2016).
According to Austrian ‘liberty’ promoters, there are ‘serious’ disadvan-
tage associated with the ‘full glare of publicity … television is never
impartial in a situation of this kind: it invariably favours the [Red] terror-
ists and places the security forces at a disadvantage’ (Crozier 1974, 162).
When the African-American, James Meredith, enrolled for a degree in
 44: The Social Market Middle Way (2) 363

political science at the all-white University of Mississippi, he had to be

protected by Federal paratroopers (Gallagher 2012). President Kennedy
warned White Terrorists: ‘the eyes of the Nation and of the world are
upon you and upon all of us’ (Roberts 2012, xii).
Mises plagiarized ‘consumer sovereignty’ from Frank A. Fetter’s (1905,
212) reference to consumer boycotts and preferences: ‘The market is a
democracy where every penny gives a right of vote.’ Two years after
Brown versus Board of Education, the Montgomery ‘Bus Boycott’ led the
Supreme Court of the United States to declare the Alabama and
Montgomery laws requiring segregated buses to be unconstitutional—
the image of Rosa Parks became iconic. The following year, television and
front-page photographs of Little Rock High School led President
Eisenhower to violate ‘states’ rights’ and employ the 101st Airborne
Division to restrain White Terrorists from depriving nine African-­
American children of their constitutional right to access human capital
formation. And in 1964, the press captured images of the head of the
American Nazi Party, George Lincoln Rockwell, confronting Martin
Luther King in Selma, Alabama.18
According to the 1857 Supreme Court’s Dred Scott decision, the
Constitution protected slavery in all Territories. In 1858, Stephen
Douglas narrowly defeated Abraham Lincoln (to win re-election to the
Senate) by promoting the Freeport Doctrine (in effect, a rejection of
Dred Scott). Pro-slavery ‘Fire-eater’ Southerners from seven Deep South
states (Georgia, Alabama, Mississippi, Louisiana, Arkansas, Texas and
Florida) met before the 1860 Democratic National Convention to ‘stop
Douglas’ wining the presidential nomination. When the Northern
Democrats dissented from the South’s proposed pro-slavery party plat-
form the Southern delegates walked out, formed a ‘rump’ convention
and nominated Vice President John C. Breckinridge for President. The
Confederacy fought for ‘liberty’ and slavery: the Texas Capitol’s monu-
ment to the Confederate war dead celebrates those who ‘Died for state
rights guaranteed under the Constitution.’
In 1948, the States’ Rights Democratic Party (Dixiecrats) walked out
of the Democratic National Convention after Hubert Humphrey
declared: ‘There are those who say—this issue of civil rights is an infringe-
ment on states’ rights. The time has arrived for the Democratic Party to
364 12 44: Europe, 1962–1992 (2)

get out of the shadow of states’ rights and walk forthrightly into the
bright sunshine of human rights.’ Eugene ‘Bull’ Connor led the Alabama
delegation walkout: the resulting States’ Rights Democratic Party first
convened in Birmingham’s Municipal Auditorium (Nunnelley 1991).
In the 1948 presidential election, Strom Thurmond, the Governor of
South Carolina, stood against Truman’s ‘Police Nation in the United
States of America’ and ‘for the segregation of the races and the racial
integrity of each race … We oppose the elimination of segregation, the
repeal of miscegenation statutes, the control of private employment by
Federal bureaucrats called for by the misnamed civil rights program. We
favor home-rule, local self-government and a minimum interference with
individual rights’ (cited by Robin 2011, 259, n18).19
In 1948, Rothbard (1994f ),

naïvely … actually believed that the States’ Rights Party would continue to
become a major party and destroy what was then a one-party Democratic
monopoly in the South … I embraced the new states’ rights or ‘Dixiecrat’
ticket of Strom Thurmond for president and Fielding Wright of Mississippi
for vice president … At Columbia graduate school, I founded a Students
for Thurmond group. I showed up at the first meeting, which consisted of
a group of Southern students and one New York Jew, myself. There were a
brace of other New York Jews there, but they were all observers from the
Henry Wallace Progressive Party, puzzled and anxious to find out to what
extent fascism and the Ku Klux Klan had permeated the fair Columbia
campus. They were especially bewildered when I got up at the meeting and
made a fiery stump speech on behalf of states’ rights and against centralized
socialism. What was a nice Jewish boy doing in a place like this?

As a Roman Catholic, Rockwell would have been in the Klan’s cross-

hairs; as a Jew promoting ‘this brand of Christianity, which is epitomized
by the Roman Catholic Church’ (Salerno 1995, 80), Rothbard was
looking-­down a double-barreled shotgun.
In his 1963 inaugural address as Governor of Alabama, George Wallace
promised: ‘Segregation now! Segregation tomorrow! Segregation forever!’
President Kennedy violated ‘states’ rights’ by federalizing the Alabama
National Guard to enforce desegregation at the University of Alabama
and Tuskegee High School, Huntsville. Birmingham 1963: How a
 44: The Social Market Middle Way (2) 365

Photograph Rallied Civil Rights Support illustrates the threat to White

Terror posed by evidence (Tougas et al. 2011). As Birmingham
Commissioner of Public Safety (1937–1952, 1957–1963), Connor’s use
of fire-hoses and attack-dogs against protesters and their children pan-
dered to his ‘base’ while horrifying a wider audience. During the first
1965 Selma to Birmingham Voting Rights Movement march, State
troopers were televised rioting at the Edmund Pettus Bridge (‘Bloody
Sunday’).20 When Governor Wallace declined to protect future marchers,
President Johnson federalized the Alabama National Guard, who,
together with 2000 soldiers of the US Army, protected the third march
along ‘Jefferson Davis Highway’ (Beschloss 2001, 236).
Social change succeeds—or fails—primarily through knowledge con-
struction and dissemination. Marriage rights for homosexuals appear
increasingly reasonable through the comparison of wedding day images
with ‘fist-in-God’s-face’ homophobic hatred. Likewise, the ‘shot heard
round the world’ is an image of the American Revolution, the assassina-
tion of the Austrian Archduke Franz Ferdinand and the Rothbard
(1994d)-defended murders of those who sought to uphold the voting
rights guaranteed by the US Constitution.
Rockwell (2005) is aware of the iconic power of the image:

I often think back to a photograph of Mises when he was a young boy of

perhaps 12, standing with his father … The picture was grainy and distant.
And yet you sense that there was something in Mises’s eyes, a certain deter-
mination and intellectual fire, even at such a young age. His eyes seem
knowing, as if he were already preparing himself for what he might face….
We look and try to discern what it was about him that caused him to be
such a fighter, that caused him to stand while others fell, that gave him that
sense of moral certitude to fight for enduring truths regardless of the politi-
cal winds. Even in that grainy photograph, we have some sense that we see
it in his eyes, that glimmer that reflects a heart that would never compro-
mise with despotism but rather advance the truth of human freedom until
his last breath.

Rockwell (1991) saw evidence as a threat to the ‘liberty’ of the State

and its agents: ‘Liberals talk about banning guns. As a libertarian, I can’t
agree. I am, however, beginning to wonder about video cameras.’
366 12 44: Europe, 1962–1992 (2)

‘As recently as the 1950s’ and the 1960s, White Terrorists denied
African-Americans their constitutional right to vote. White Power
(accompanied by the Nazi salute) is as much a threat to democracy as
Black Power (accompanied by the clenched fist and the threat of vio-
lence): but one preceded—and caused—the other. The LA riots
occurred—not after the beatings—but when African-Americans felt let-­
down by the rule of law (the acquittals of the police officers, two of whom
were subsequently retried under Federal jurisdiction, found guilty viola-
tions of violating Rodney King’s civil rights and imprisoned).
The riots that plague American cities are caused by at least six factors:

a. The strength of gangs, who recruit from the inmates of the prison-­
industrial-­complex: without Rothbard-Rockwell-style rhetoric, many
of those who are incarcerated for non-violent often drug-induced
crime could be dealt-with or even rehabilitated in a manner that did
not assist criminals.
b. If the ‘recreational’ drug markets were controlled not by gangs but by
those Austrians denounce as ‘Public Health Nazis,’ this would elimi-
nate a major source of gang revenue, reduce government expenditure
and increase tax revenue.21
c. According to the Rothbard-Rockwell-Report: ‘Disproportionately many
illegitimate boys become criminals, whether because they lack the
guiding hand of a father or because they inherit a tendency to reckless-
ness from their patently reckless parents’ (Levin 1996, 5).

According to Austrians, crime can be explained by the prevalence of

the single-parent status that Mises and Hayek imposed on their wives.

d. Austrian-promoted defective inner-city human capital formation

opportunities.
e. Labour market discrimination—which Austrians deny exists.

According to Levin (1996, 4):

The labor market, in short, is race-neutral. By indulging all racial prefer-

ences without siding with any, it permits everyone to find a position in
 44: The Social Market Middle Way (2) 367

which he is most comfortable, at least as far as race goes. It asks no embar-

rassing questions about the origin of group traits, and it does not require
that every group bring the same traits to the marketplace. However, the
market provides no guarantee that every trait will be valued equally. Neither
the market nor the government can make labor more valuable than it is—
nothing can do that—but there is one impediment the government can
remove to less productive labor being paid what it is worth, and that is the
minimum wage … An actual disincentive to black workforce participation
is welfare, the abolition of which is also part of the market approach.
Opposition to welfare, like opposition to the minimum wage, is rooted in
an ethos of liberty and is unrelated to race per se. People should not be
forced to support strangers.

The empirical evidence suggests that in the United States (and, presum-
ably, elsewhere) ‘racial discrimination is still a prominent feature of the
labor market’: a ‘Black name’ requires about eight additional years of
human capital to have the same ‘market free play’ value as a ‘White name’
(Bertrand and Mullainathan 2003, 2004).

f. The sixth cause is an apparently genuine, but ill-directed, resentment

about the ‘Confederacy of the mind’ that Austrians promote.

According to Rockwell (1995, 115, 2015):

Secession is not a popular idea among the political and media classes in
America, to be sure, and regime libertarians may roll their eyes at it, but a
recent poll found about a quarter of Americans sympathetic to the idea,
despite the ceaseless barrage of nationalist propaganda emitted from all
sides. A result like this confirms what we already suspected: that a substan-
tial chunk of the public is willing to entertain unconventional thoughts.
And that’s all to the good. Conventional American thoughts are war, cen-
tralization, redistribution, and inflation. The most unconventional thought
in America today is liberty; Once we understand why private property
should be inviolable, troublesome notions fall by the wayside. There can be
no ‘civil rights’ apart from property rights, because the necessary freedom
to exclude is abolished. ‘Voting rights’ are also a fiction, which—depend-
ing on how they are used—can also diminish freedom … The security of
property provides lines of authority, restraints on behavior, and guarantees
368 12 44: Europe, 1962–1992 (2)

of order. The result is social peace and prosperity. The conflicts we face
today, from affirmative action to environmentalism, are the result of false
rights being put ahead of private property.

Austrians ‘understood that Murray Rothbard was attempting to create

a unified science of human liberty’ (Stromberg 1995, 45). Between the
Rodney King beatings and the acquittals, Rothbard (1992a) published
‘Right-Wing Populism: A Strategy for the Paleo Movement.’
For public consumption, Austrians maintain that Rothbard’s ‘entre-
preneurship’ was also constrained by his ‘rigid adherence to high ethical
standards.’ Rothbard believed in ‘playing the academic game according to
the rules of good conduct. He was honest and principled.’ He resisted all
temptations:

By fudging his principles a little, or muting his beliefs, Murray arguably

could have reached a wider audience, as he would have become more
‘respectable’ for mainstream economists to discuss.

But: ‘That was not Murray’s approach’ (Vedder 1995, 9).

When Rockwell (2010 [1999], 294) started the Mises Institute and
recruited Rothbard to ‘head academic affairs, he brightened up like a kid
on Christmas morning. We agreed that the goal should be to provide a
support system that would revive the Austrian School as a player in the
world of ideas, so that statism of the left and right could be fought and
defeated.’ Did Rothbard (1992a)—who sought a Classical Liberal ­alliance
with Neo-Nazi militia groups—brighten-up still further at the fund-rais-
ing opportunities that a race war would provide?
‘Lew’ Rockwell (2011c, 93) remembered ‘the old days when it was a
huge deal when I was able to publish an op-ed column in a newspaper. I
could spend days writing and editing it, going back and forth with the
editor.’ JoAnne Rothbard (1995, viii–ix) recalled: ‘Each weekday, and
often on weekends, Murray’s day began with a conversation with Lew on
the phone. Gales of laughter would shake the house or apartment, as they
checked in with each other.’
The police were videoed beating Rodney King on 3 March 1991;
Rockwell’s (1991) Los Angeles Times ‘COLUMN RIGHT: It’s Safe Streets
 44: The Social Market Middle Way (2) 369

Versus Urban Terror: In the ’50s, rampant crime didn’t exist because offend-
ers feared what the police would do’ was published seven days later—its
byline identified him and his donation-friendly mailing address: ‘president
of the Ludwig von Mises Institute, an economics think tank in Auburn,
Ala.’ Hayek’s (5 March 1975) challenge when confronted with the pros-
pect of having to deal with his ‘gone negro’ Chicago bank was to find an
alternative branch22; did Rothbard push Rockwell to use the King beating
to increase the donation-based ‘bank balance’ of the Mises Institute?
The Pure Theory of Capital (Hayek 1941) was written by an author
obsessed with establishing his ‘pure’ Aryan ancestry. Behind the ornate
facades of Hayek triangles lie some primitive sentiments about the
descendants of the victims of the slave trade triangle. According to Paul’s
1992 fund-raising newsletter, ‘Special Issue on Racial Terrorism’: ‘Order
was only restored in L.A. when it came time for the blacks to pick up
their welfare checks three days after rioting began … What if the checks
had never arrived? No doubt the blacks would have fully privatized the
welfare state through continued looting. But they were paid off and the
violence subsided.’23 Rothbard (1992c, 4) described the ‘socialist moral
sewer’ aftermath:

The Democrat convention was a ‘multicultural’ sewer … It seemed to me

that at the entire convention the only shots we saw were of black women
weeping at something or other. On the presidential rollcall, the Arizona
declaration of votes stood out, being delivered by three spokespersons: a
very boyish little tomboy type, a copper-colored Injun who jabbered away
in Navaho, and an equally swarthy Hispanic jabbering away in Spanish.
And throughout the convention, the banner of ‘Lesbian Rights’ flapped in
the breeze, almost as much as did ‘Clinton.’ And victimology, which the
Democrats of course have specialized in, sank to a new low, as a couple of
‘AIDS victims’ wailed about their diseases, and somehow put the blame on
the Bush Administration, with of course females, in this Year of the
Woman, sobbing throughout the arena. What in Hell is this?

In 1984 (two years after he resigned as Paul’s Chief-of-Staff to become

Mises Institute President), Rockwell and Paul set up ‘Ron Paul &
Associates’ which, by 1993, was earning $940,000 per year (Sanchez and
Weigel 2008). Rockwell was a consultant to Paul’s 1988 Libertarian Party
370 12 44: Europe, 1962–1992 (2)

presidential campaign, and vice-chair of the exploratory committee for

Paul’s 1992 Republican Party nomination campaign. Deist (2014–), his
successor as Mises Institute President,24 had been Paul’s Chief-of-Staff
during the 2012 election, and his press secretary in Congress
(2000–2006).25 According to Rockwell (2011c, 93): ‘we’re non political
… the Mises Institute is a tax-exempt scholarly organization.’
Before the various football codes established anti-racism task forces,
such ‘Monkey chant’ sentiments were commonly heard on the terraces—
and remains an accepted mode of academic discourse for Austrian School
economists. Many ‘Paul’ articles were written in the first person, giving
impression that Paul was the author: ‘even in my little town of Lake
Jackson, Texas, I’ve urged everyone in my family to know how to use a
gun in self defense … for the animals are coming.’26 According to Hayek,
‘animals’ were an expression of ‘a spontaneous order’ (Caldwell 2005b);
Hayek

said that he did not like ‘dancing Negroes’! He had watched a Nobel laure-
ate doing so, which had made him see the ‘the animal beneath the facade
of apparent civilization.’ (Cubitt 2006, 23–24)

As chair of the House Domestic Monetary Policy and Technology

Subcommittee, Congressman Paul invited Thomas DiLorenzo to exam-
ine the impact of central bank policies on job creation and the
­unemployment rate. After being accused by Rep. William Lacy Clay of
being associated with the League of the South (whose leaders have
expressed the desire to return to a pre–1865, white-dominated South),
DiLorenzo wrote that the African-American Clay ‘slithered’ out of the
congressional hearing room (Sonmez 2011). For criticizing Hayek’s mys-
tical ‘natural’ rate of interest, Sraffa, a Jewish refugee from Fascism, was
described as ‘rabid’ (Salerno 2008, xviii).
Without mentioning what Hayek wrote and spoke on the subject,
Caldwell and Montes (2014a, 50, b, 2015, 304) offer ‘conjectures’ to ‘the
uncomfortable question of why Hayek chose to remain silent about the
human rights abuses that took place under the [Pinochet] junta.’ They
fail to report that both co-leaders of the fourth-generation Austrian
School were contemptuous of human rights. Austrian economists are
 44: The Social Market Middle Way (2) 371

determined to use whatever means to preserve Rockwell’s (2010 [1999],

292) ‘natural social authority’ of ascribed status and Hayek’s (1978a) ‘cer-
tain conception’ of aristocratic intergeneration entitlement programmes.27
They despise ‘human rights’ (Hayek 1978a)28 and the ‘civil rights jugger-
naut’: ‘the good folks resented horrible intrusions into their communi-
ties, the media smears, and the attacks on their fundamental freedoms
that civil rights represented’ (Rockwell 2010 [1999], 289).
Martin Luther King’s ‘dream’ of a society in which judgments about
individuals are made on the basis of ‘the content of their character’ sym-
bolized the threat to those who aspired to carry ‘aloft the intellectual flag’
of the Habsburg ‘Invisible Empire’—many of whom are unable to acquire
sufficient human capital to justify non-fraudulent academic appoint-
ments. Their Klan allies had only one group with a lower ascribed status:
African-Americans. In a (failed) attempt to halt the enrolment of two
African-American at the University of Alabama, Governor Wallace made
a ‘Stand in the Schoolhouse Door’ (Raffel 1998, 270). Blocking access to
human capital formation is essential to preserve ‘liberty’—for enrolling
for a degree, Meredith was shot.
One ‘Paul’ article stated: ‘Given the inefficiencies of what DC laugh-
ingly calls the criminal justice system, I think we can safely assume that
95 percent of the black males in that city are semi-criminal or entirely
criminal.’29 ‘Paul’ suggested that black activists who wanted to rename
New York City after Martin Luther King, Jr. should instead rename it
‘Welfaria,’ ‘Zooville,’ ‘Rapetown,’ ‘Dirtburg’ or ‘Lazyopolis.’30 Austrian
School economists, such as DiLorenzo (2014) object to ‘the lying liber-
tine losers who call themselves “cosmopolitan” libertarians.’ ‘Paul,’ who
described the Reverend King as a ‘pedophile’ who ‘seduced underage girls
and boys,’ a ‘world-class adulterer’ and ‘lying socialist satyr,’ voted against
making his birthday a Federal public holiday because ‘Boy, it sure burns
me to have a national holiday for that pro-communist philanderer,
Martin Luther King. I voted against this outrage time and time again as
a Congressman. What an infamy that Ronald Reagan approved it! We
can thank him for our annual Hate Whitey Day.’31
In I Chose Liberty, both Rockwell (2010 [1999], 289) and North
(2010, 241–242) expressed similar sentiments in slightly muted lan-
guage: ‘I never liked Martin Luther King, Jr. I thought he was a fraud and
372 12 44: Europe, 1962–1992 (2)

a tool; when the U.S. Government suggested that employees drive with
their lights on out of respect to the anniversary of Martin Luther King’s
assassination, dad drove home that evening with his lights off, risking a
ticket and a collision.’
Rockwell describes himself as ‘one eighth Indian.’32 According to
Julian Sanchez and David Weigel (2008),

in interviews with reason, a half-dozen longtime libertarian activists—

including some still close to Paul—all named the same man as Paul’s chief
ghostwriter: Ludwig von Mises Institute founder Llewellyn Rockwell, Jr …
a source close to the Paul presidential campaign told reason that Rockwell
authored much of the content of the Political Report and Survival Report.
‘If Rockwell had any honor he’d come out and I say, “I wrote this stuff”,’
said the source, who asked not to be named because Paul remains friendly
with Rockwell and is reluctant to assign responsibility for the letters. ‘He
should have done it 10 years ago.’

Mises motto—‘Do not yield to evil but always oppose it with cour-
age’—applied to political democracy. In Mises in America, Peterson
(2009, 19) referred to Mises’ ‘courage’ in promoting ‘consumer sover-
eignty’ and the courage of his Austrian disciples:

let’s discuss some of his big ideas, dwelling on one, to me, very hopeful
idea: Lu’s widening the definition and application of an overworked and
much misunderstood word, democracy. Democracy is, I say, commonly
but wrongly equated with freedom, as shown in history, as I will cite. Yet
in the Mises sense of the word, it does equate with freedom beautifully,
effectively—getting, for example, not a biennial 50 percent but a 100 per-
cent daily election turnout of Americans and other Westerners. Call it
direct democracy, market democracy, above all, voluntary democracy. So
why don’t we call it as it is, America’s True Democracy?

According to Peterson (2009, 23–24), the last word on democracy had

been spoken in 1850 by Benjamin Disraeli, a ‘back-bench Tory M.P.’: ‘If
you establish a democracy, you must in due time reap the fruits of democ-
racy. You will in due season have great impatience of the public burdens,
combined in due season with great increase of public expenditure. You
 44: The Social Market Middle Way (2) 373

will in due season have wars entered into from passion and not from rea-
son; and you will in due season submit to peace ignominiously sought
and ignominiously obtained, which will diminish your authority and
perhaps endanger your independence.’ According to Austrians like
Peterson, democracy had to be replaced by one-dollar-one-vote ‘con-
sumer sovereignty’:

So, Misesians, let’s juxtapose America’s forceful Political Democracy with

Lu’s insight of voluntary Consumers/Market Democracy to see which is
which and why … In one democracy you vote but every other year for
candidates (who may not win) to ‘represent’ you and many others indi-
rectly on myriad issues. In the other, you vote daily, often, directly, for
specific vendors, goods, or services, an endless plebiscite going on every
minute of every day, with dollars as ballots. Yes, some get more ballots than
others. Yet Mises saw this result as logical and moral as some are more pro-
ductive than others … the very word ‘democracy’ is not to be found in the
entire Declaration of Independence, Constitution, or Bill of Rights …
look how the Framers, fearful of democracy, tied up our Constitution with
checks and balances from federalism (harmed by the Civil War, the 14th
Amendment of 1868, and the 17th Amendment of 1913).

‘Hayek lives!’ (Kresge 1994, 35)—and so, for related reasons, does the
‘Confederacy of the mind.’ Rothbard and Mark Thornton (1995, 27)
were ‘Copperhead Members of the Sons of Confederate Veterans.’
According to Joseph Stromberg (1995, 46, 47), Rothbard’s ‘sympathy for
secession … played well down here in the South, I can assure you.’ He
was ‘honored in May by a Confederate honor guard at Stone Mountain
for his services to the causes of liberty and Southern rights.’ According to
Rockwell (1995, 110, 112), Rothbard ‘especially liked the anti-New
Dealers, the anti-imperialists, the Confederates, the anti-federalists, the
tax resisters, the underground businessmen, the anti-state pamphleteers,
and other unsung heroes.’ Like Mises, Rothbard insisted that there is ‘no
room for a “third-way” like social democracy, the mixed economy, or
“good government,” and the attempt to create it is always disruptive.’ In
his last ‘scholarly’ article, Rothbard ‘developed the idea of the nation as
something separate from either the state or the individual, a collective
identity based on language, ethnicity, race, and religion.’
374 12 44: Europe, 1962–1992 (2)

The 14th Amendment, which was part of post-slavery reconstruction,

was contested and resented by the ex-Confederate States, which were
forced to ratify it to regain representation in Congress.33 The ruling
derived from the 14th Amendment—Brown versus Board of Education—
was a major victory for ‘social justice’ and paved the way for integration.
In its judgment, the Supreme Court cited Myrdal’s (1944) An American
Dilemma. Myrdal told his daughter that the greatest moment in his life
was when he stood at the Princeton train station ‘with the manuscript of
American Dilemma in my hands—ready! All that I had lived for’ (Bok
1991, xxi–xii); for Hayek, the equivalent moment came when he met the
Queen of England: ‘the happiest day of my life’ (cited by Ebenstein 2003,
305). Anna Anderson had sixty-four years of Romanov fraud; in 1984,
Hayek acquired a legitimate post-nominal honour as a House of Windsor
Companion of Honour (‘CH’) to compensate him for his sixty-five years
of Habsburg ‘von’ fraud (the 1919 loss of his prefix).
Brown versus Board of Education enlisted into the ‘Liberty Lobby’
those who were—and remain—opposed to the ‘mongrelization’ of the
‘white race’: the John Birch Society spearheaded the ‘radical right’ (Mintz
1985, 66, 75, 81).34 The Last Knight of Liberalism contains no mention of
either Robert Welch or his John Birch Society. Mises, however, met
Welch through the National Association of Manufacturers (Rothbard
1988, 103, n51); and according to the Managing Editor’s lead article in
American Opinion, the John Birch Society ‘maiden issue’ appeared early
in 1958 with a ‘masthead’ which ‘presented an Editorial Advisory Board
that included among many distinguished Americans the man who was
then without question the world’s greatest living economist. He was
Ludwig von Mises, and for fifteen years until his death in 1973 Professor
Mises’ name remained on our masthead to indicate that he was both our
friend and advisor.’ Falsely identifying Hayek as one of Mises’ students,
Stanley (1977) continued: ‘Over the years’ Mises’ work ‘appeared in our
pages, his portrait on our cover, and his books and those of his students
(including a Nobel laureate) were reviewed here with enthusiasm’ (see
also Metcalf and Reinemer 1967, 188).35
As part of the Fox News contribution to the 2016 US presidential
campaign, the Fox News pundit Bill O’Reilly stated that the slaves who
 44: The Social Market Middle Way (2) 375

co-built the White House were ‘well fed and had decent lodgings pro-
vided by the government’ and George Washington provided slaves with
‘meat, bread and other staples’ and ‘decent lodging’ (Victor 2016).
Similarly, the New York Times quoted Block:

One economist, while faulting slavery because it was involuntary, sug-

gested in an interview that the daily life of the enslaved was ‘not so bad—
you pick cotton and sing songs.’ (Tanenhaus and Rutenberg 2014)

Block tried to nuance this statement in New American (American Opinion

Publishing, a wholly owned subsidiary of The John Birch Society): the 1964
Civil Rights Act ‘to a much smaller degree of course, made partial slaves of
the owners of establishments like Woolworths … It forces Woolworths to
associate with people against their will. Thus, very paradoxically, the Civil
Rights Act of 1964 supports slavery’ (cited by Wolverton 2014).
North (2010, 238–239) came to ‘liberty’ through science fiction,
Goldwater and Welch (who suggested he read Mises). According to
Rockwell (2010 [1999], 288), Welch was ‘harkening back to a praisewor-
thy Americanist impulse.’ The John Birch Society list of ‘approved’
books—which they describe as ‘honestly written from an Americanist
point of view’ and which members had to commit to reading (at least one
per month)—includes Hayek’s Road to Serfdom (2007 [1944]),
Constitution of Liberty (2011 [1960]) and Capitalism and the Historians
(1954), plus Mises’ Human Action (1998a [1949]), Socialism (1951
[1922]), Theory and History (1957), The Anti-Capitalism Mentality (1956)
and Planning for Freedom (1960) (cited by Vahan 1962, 137, 140, 143).
According to Peterson (2009, 26): ‘Big I think Old Ben [Franklin] was
warning us: As political democracy swells, the individual shrinks. Yet—
voila—Lu Mises lit up a near unknown yet much safer and surer democ-
racy—a way out of our definitional crisis, if you will. In 1922, in his great
book Socialism, he saw true democracy at work in market action.’ Like
the Habsburg Pretender and the author of Democracy: The God that Failed
(Hoppe 2001), Peterson holds ‘the Gary G. Schlarbaum Award for
Lifetime Achievement in the Cause of Human Liberty. He has taught at
the University of Tennessee at Chattanooga, and Campbell University in
376 12 44: Europe, 1962–1992 (2)

North Carolina … For fourteen years, he wrote regular columns for the
Wall Street Journal’ (Rockwell 2009, 2).
The Buchanans of Tennessee include a State Governor and a Nobel
Laureate (Kyle 2012). Buchanan (1992, 130) observed that at Mont
Pelerin Society meetings there was ‘too much deference accorded to
Hayek, and especially to Ludwig von Mises who seemed to demand syco-
phancy.’ At GMU, Buchanan, after winning his Nobel Prize, ‘was treated
like resident royalty which, despite his disclaimers to the contrary, he
seemed to relish’ (Vaughn 2015).
Buchanan (1992, 130) met his first ‘Princess’ through one of Hayek’s
‘luxurious’ Mont Pelerin Society meeting. In 1968 in Memphis,
Tennessee, 1300 black sanitation workers—most the descendants of
slaves—went on strike and sought the right to join a trade union after
two garbage collectors were crushed to death by a malfunctioning com-
pressor truck (City rules prohibited non-white employees from sheltering
from rain anywhere but in the back of their compressor trucks—along
with the garbage). The Mayor of Memphis, Henry Loeb, refused to meet
with them and declared the strike illegal. While supporting their strike,
Martin Luther King was assassinated (Honey 2009).
Segregated schools restricted non-white human capital formation.
White supervisors addressed non-white garbage collectors (who were
paid less than white garbage collectors) as ‘boy’ (Honey 2009); in
response, protesters carried signs declaring ‘I am a Man.’ The Reverend
King’s assassin, James Earl Ray, hoped to escape justice and fight along-
side 1500 other American mercenary-volunteers for white supremacy in
Rhodesia (Horne 2000, 24; Hampton 2010, 62–63; Gann and Duigan
1991, 117, 92, 57–58, 122, 127–128, 175, 29).
According to Hayek (1949, 417), revolution required a long, round-
about period of time and effort:

Socialism has never and nowhere been at first a working-class movement. It

is by no means an obvious remedy for the obvious evil which the interests of
that class will necessarily demand. It is a construction of theorists, deriving
from certain tendencies of abstract thought with which for a long time only
the intellectuals were familiar; and it required long efforts by the intellectuals
before the working classes could be persuaded to adopt it as their program.
 44: The Social Market Middle Way (2) 377

Rothbard (1926–1995)—Hayek’s morbidly obese co-leader of the

fourth-generation Austrian School of Economics—was a revolutionary
in a hurry. Two centuries after the end of the French Revolutionary ‘Reign
of Terror’ (5 September 1793–28 July 1794), and two-thirds of a century
after Mises (1985 [1927]) embraced Fascism, Rothbard (1994d, 9)
defended Byron De La Beckwith Jr., the Klu Klux Klan assassin of the
civil rights activist, Medgar Evers, because he had been convicted for
being politically ‘incorrect.’
One ‘Paul’ investment newsletter described Israel as ‘an aggressive,
national socialist state’; another discussed the ‘tens of thousands of well-­
placed friends of Israel in all countries who are willing to work for the
Mossad in their area of expertise’; another quoted a ‘Jewish friend’ who
said the 1993 World Trade Center bombing was a ‘setup by the Israeli
Mossad.’36 James Kirchick (2008) concluded that they ‘reveal decades
worth of obsession with conspiracies, sympathy for the right-wing militia
movement, and deeply held bigotry against blacks, Jews, and gays.’
The World Trade Center was bombed on 26 February 1993, killing six
and injuring hundreds; the ‘Blind Sheik,’ Omar Abdel-Rahman, appar-
ently an al-Qaeda affiliate, was sentenced to life imprisonment. Six
months after the attack, the Jewish-born Rothbard (1993, 1) declared
that the ‘A-rabs’ under investigation ‘haven’t done anything yet. I mean,
all they’ve done so far is not assassinate former President George Bush,
and not blow up the UN building or assassinate’ the United States Senator
Al D‘Amato: ‘I must admit I kind of like that bit about blowing up the
UN building, preferably’ with UN Secretary-General ‘Boutros Boutros-­
Ghali inside.’
In jail, Charles Manson made a deal with the Aryan Brotherhood: his
female disciples would provide them with sex to guarantee his protection
from other prisoners (Guinn 2013, 387). Rothbard’s (1994a, 5) ‘New
Strategy for Liberty’ appears to be Manson-inspired solution to the ‘coor-
dination problem’ between Austrian economists and ‘Redneck’ militia
groups:

A second necessary task is informational: we can’t hope to provide any

guidance to this marvellous new movement until we, and the various parts
of the movement, find out what is going on. To help, we will feature a
378 12 44: Europe, 1962–1992 (2)

monthly report on ‘The Masses in Motion.’ After the movement finds itself
and discovers its dimensions, there will be other tasks: to help the move-
ment find more coherence, and fulfil its magnificent potential for over-
throwing the malignant elites that rule over us.

According to Richard Vedder (1995, 10–11), Rothbard sought ‘to

expand the appeal of his approach to economics by occasionally speaking
the language of those whose views were different.’ Echoing Manson,
Rothbard (1994e, 6) explained that ‘the least’ the Austrian family could
do is to ‘accelerate the Climate of Hate in America, and hope for the
best.’
When Rothbard died, Block (1995, 24) reflected: ‘In the movie ‘The
Godfather,’ when this worthy was shot it was said that his Mafia Family
lost 50 per cent of its power, despite having hundreds of armed men
under its control, and hundreds of millions of dollars in its coffers.
Something similar applies in this case.’ And according to Paul (1995, 5),
‘America has lost one of her greatest men, and the Freedom Movement
one of its greatest heroes: Murray N. Rothbard. In his 25 books and
thousands of articles—not to speak of his personal example—Murray
was an inspiration.’
Austrians named a university after Rothbard.37 Raico (1997), incensed
that ‘Mises was denied the Nobel Prize for economics,’ noted that the
‘Mises Summer University, a week-long seminar, has now been held for
the past thirteen years and has ‘graduated’ close to 2000 students from
America and overseas, very bright kids, filled with intellectual energy and
enthusiasm for liberty.’ At ‘Mises University at Stanford University,’
Rothbard (1990a, b) simply lied to these students: with respect to Mises’
reputation for ‘abrasiveness,’ he claimed that he ‘never saw it’; whilst
simultaneously recalling that after a comment about monopoly theory,
Mises called him a ‘Schmollerite. Although nobody else in the seminar
realized it, that was the ultimate insult for an Austrian.’
According to Rockwell (2010 [1999], 293, 299, 304), the United
States was the ‘evil empire … the imperial capital of the world. Its ani-
mating force is not ideas but graft, lies, and power … the greatest threat
to our liberties was not overseas but in the District of Columbia … it is
clear to anyone who cares about liberty that the real enemy is the ruling
 44: The Social Market Middle Way (2) 379

regime in government and academia, and that this ruling regime resides
within our own borders.’ He saw an opportunity:

The faculty at our conferences speak of their elation at escaping the stultify-
ing political rules of their home campuses. Our students feel it too. That
kind of freedom and collegiality is what a university is supposed to be
about … Right now, we are faced with a historic opportunity. In academia,
the old guard no longer has the same credibility among students. The left
has surrendered the mantle of idealism and radicalism. The Austrian School
is perfectly suited to be the new and fresh alternative. And in public affairs,
we need to take advantage of the declining status and moral legitimacy of
the central state to make a major push for libertarian ideas.

Rockwell (2010 [1999], 292, 291, 293, 295, 301) acknowledged that
Rothbard was a ‘loose cannon, as any cannon should be on the ship of an
imperial state … Ultimately, the question that must be asked and defini-
tively answered in the world of ideas was posed most famously by Lenin:
What is to be done? On the answer to that question rides the fate of
­civilization itself. And if those of us who believe in the magnificence of
the classical-liberal vision of society do not answer it definitively, we will
lose.’ Like Sennholz, Rockwell knew which age-bracket to recruit: in
D.C., his ‘happiest’ moments were receiving calls from students asking
about Ron Paul. But Rockwell wanted to ‘do more, but as I looked
around, I didn’t see any libertarian organization that focused on advanc-
ing academic scholarship specifically focused on the Austrian School.’
Hayek (1949, 432–433) sought recruits through ‘appeals to the imagi-
nation. We must make the building of a free society once more an intel-
lectual adventure, a deed of courage. What we lack is a liberal Utopia …
a truly liberal radicalism … courage to be Utopian.’ Likewise, Rockwell
(2010 [1999], 294, 297) was not interested in Ivy-League students with a
‘soft classical-liberal bent,’ preferring to ‘serve’ a ‘neglected generation’ of
students: ‘Idealism is what stirs the young heart.’ He founded the Mises
Institute to provide a ‘setting for unrestricted intellectual exploration in
the Austrian tradition, no matter how radical the conclusions may be.’
Rockwell (2010 [1999], 303) was optimistic: ‘the classical ideal of lib-
erty and private life is again gaining currency, and a major reason is the
successes that an intellectual vanguard of Austrian scholars and political
380 12 44: Europe, 1962–1992 (2)

dissidents have had in undermining the ideological foundations of the

state … Murray anticipated all this with his outreach efforts to marginal-
ized conservatives.’ Referring to Rothbard’s (1994a) ‘Outreach to the
Rednecks,’ Rockwell (2010 [1999], 303, 304, 297) described the ‘average
Americans who fear and resent anyone with a federal badge and gun …
Our goal always is to provide the resources that keep people’s attention
on the conceptual fundamentals: liberty and property versus the state and
its power … Some people say our approach is reckless. I can only hope
that it always remains so.’
According to the gold-dealer, Burton Blumert (1995, 63): ‘Murray is
gone but his power remains all about us. He is the beacon and the model,
and for as long as the printed word is available, there will be endless gen-
erations of Rothbardians.’ Thornton (1995, 28) agreed: ‘So effective was
he, that Murray will be known as one of the greatest men of all time,
unleashing what I call the Rothbard Revolution. Murray’s revolution is
defeating power right now, and will end with the destruction of the cen-
tral state.’ As did Justin Raimondo (1995, 92): Rothbard set

about building a movement, taking advantage of every opening, every

opportunity to garner a wider audience for libertarian ideas … [he] never
wavered in the certainty that the anti-statist revolution was coming … the
beginning of the anti-statist tidal wave that led to the Great November
Revolution—and has not crested yet. In the last few months of his life,
Murray was overjoyed that the anti-government upsurge he had confi-
dently predicted so many years ago had finally arrived. (That it arose when
it did, and how it did—militant, pugnacious, and ever-vigilant against sell-­
out—is due in no small part to his efforts.) This, he was convinced, was
Something Big. The prospect of overthrowing the central State, headquar-
tered in Washington, D.C., was no longer a distant prospect, but a very real
possibility. Like the 1905 Revolution that foreshadowed the Bolshevik vic-
tory of 1917, the events of November 1994 were, he believed, just a hint of
things to come. What we are seeing, he seemed to be saying in the final
months of his life, is the prelude to a revolutionary situation. It will, in fact,
be a counterrevolution, an undoing of what was done to our Old Republic
in this century. But the road to victory is strewn with many obstacles and
perils. Murray left behind a good roadmap, however, in the form of his
writings, if only his heirs and legatees have the wit and the imagination to
follow it through to the end.
 44: The Social Market Middle Way (2) 381

Hayek (1978a) noted that ‘All monotheistic religions are intolerant

and try to enforce their particular creed.’38 When Friedman (2017
[1991]) published ‘Say “No” to Intolerance,’ Rothbard abandoned the
advertised topic of a seminar to demolish ‘each paragraph of the piece’
(Gordon 1995, 61). Tolerance is antithetical to Austrian Truth:

‘tolerance,’ touted (not coincidentally) as the overarching, if not the only

scholarly virtue by both scientistic Friedmanite positivists and nihilistic
hermeneuticists, is the very negation of piety and humility. While uncriti-
cal tolerance may befit adherents of those peculiar and cultish doctrines
that proclaim the goal of scientific inquiry to be either democratic consen-
sus or protracted conversation, it ill serves in the great and time-honored
cause of scientific truth-seeking. Of course, the ‘tolerance’ of the positivists
and the hermeneuticists, both of whom ridicule and defame anyone who
dares speak the name ‘Truth,’ is not to be confused with the genuine and
discriminating open-mindedness born of humility and piety that was
exemplified by Murray Rothbard. (Salerno 1995, 83)

In the ex-Confederate States, memories linger of William Tecumseh

Sherman’s ‘March to the Sea’ and his torching of Atlanta. Rothbard was
heard ‘whimsically wondering in Atlanta whether, in a revolutionary situ-
ation, it would be immoral to blockade the hated New York Times’
(Stromberg 1995, 47).
Rothbard, who died on 7 January 1995, found a recruit: the twenty-­
seven-­year-old Timothy McVeigh, who on 19 April 1995, killed 168
people and injured over 600 by bombing the Alfred P. Murrah Federal
Building, Oklahoma City: McVeigh was ‘a true believer, in his mind a
combatant in the resistance movement or underground army battling the
New World Order, and other nations under the control of the United
Nations. He was a self-made patriot and freedom-fighter, defending his
country against the alleged forces of tyranny and treason’ (Wright 2007,
4). In July 2011, inspired by the frenzy distilled from 9 to 11 religiosity
and the Austrian School of Economics, the twenty-two-year-old Anders
Breivik bombed government buildings in Oslo and shot dead 69 Workers’
Youth League summer camp participants (Tietze 2015).
Buchanan found solace in—and support for—whatever the ‘market’
was currently delivering: ‘Well, you remember our old friend Frank
382 12 44: Europe, 1962–1992 (2)

Knight used to say that one of the supports for the market is that people
couldn’t agree on anything else, in terms of distribution. [laughter] I think
that there’s probably much in that.’ Hayek (1978a) replied: ‘Well, if they
had to agree it would be good. But with our present method of democ-
racy, you don’t have to agree, but you have to—You are pressed, on the
pretext of social justice, to hand out privileges right and left … of course
socialism and unlimited democracy come very much to the same thing.’
Before the election victories of Thatcher (May 1979), Reagan
(November 1980) and Helmut Kohl (October 1982), Buchanan was
optimistic: ‘Well, do you think this thrust is waning a bit in modern poli-
tics?’ Hayek (1978a) responded:

Well, I don’t know how it is in different countries. I am most concerned,

because it’s the most dangerous thing at the moment, with the power of the
[labour] trade unions in Great Britain. While people are very much aware
that things can’t go on as they are, nobody is still convinced that this power
of the [labour] trade unions to enforce wages which they regard as just is
not a justified thing. I believe it’s a great conflict within the Conservative
Party at the moment that one-half of the Conservative Party still believes
you can operate with the present law and come to an understanding with
the [labour] trade union leaders, while the others do see that unless these
privileges of the [labour] trade unions to use coercion and force for the
achievement of their ends is in some form revoked or eliminated, there’s no
hope of curing the system. The British have created an automatic mecha-
nism which drives them into more and more use of power for directing the
economy. Unless you eliminate the source of that power, which is the
monopoly power of the [labour] trade unions, you can’t [correct this] …
Fifteen years ago, when I knew more about it, it seemed to me that the
American [labour] trade unions were a capitalist racket rather than, in
principle, opposed to the market as such. There seem to be tendencies in
public opinion and in American legislation to go the British way, but how
far it has gone I don’t know.39

Hayek (1978a) saw parallels:

The reason why I was so very much acutely aware of the British significance
is because I happened to see the same thing in my native country, Austria,
which is also a country governed by the [labour] trade unions. At the
 44: The Social Market Middle Way (2) 383

present moment, nobody doubts that the president of the [labour] trade
union association is the most powerful man in the country. I think it works
because he happens to be personally an extremely reasonable man. But
what will happen if they get a radical in that position I shudder to think.
In that sense, the position in Austria is very similar to that in Britain. And
I think it’s worsening in Germany. I have always maintained that the great
prosperity of Germany in the first twenty-five years after the war was due
to the reasonableness of the [labour] trade unions. Their power was greater
than they used, very largely because all the [labour] trade union leaders in
Germany had known what a major inflation was, and you just had to raise
your finger—‘If you ask for more, you will have inflation’—and they would
give in. That generation is going off now. A new generation, which hasn’t
had that experience, is coming up. So I fear the German position may
increasingly approach something like [the British], but not quite as bad as
the British position, because the closed shop is prohibited by law in
Germany, and I don’t think that will be changed.40

The West German Social-Democratic Chancellorships of Willy Brandt

(1969–1974) and Helmut Schmidt (1974–1982) were preceded and suc-
ceeded by Christian Democrats: the formerly Nazi-affiliated Kurt
Kiesinger (1966–1969) and the Hayek-influenced Kohl (1982–1998). In
May 1977, Hazlett stated: ‘From 1948 until about a decade ago, West
Germany pursued pointedly free-market policies and experienced an eco-
nomic recovery so vital as to be judged a “German Miracle.” Yet, the
Social Democrats are firmly in power today.’ Hazlett was concerned
about consequences for the United States: ‘some American analysts have
suggested that this indicates a basic flaw in the philosophy or strategy of
the so-called Freiburg School, the group of free-market economists that
led the “German Miracle.” What mistakes did they make and what can
we learn from their example?’ Hayek (1992b [1977]) insisted:

First, the idea that the Germans are now governed by a socialist govern-
ment is just wrong. The present German Chancellor [Schmidt] admits—
perhaps not publicly, but in conversation—that he is not a socialist.
Secondly, until recently, the German [labour] trade unions were led by
people who really knew what a major inflation is. And, until recently, all
you needed to tell German [labour] trade unionists when they made exces-
sive wage claims is that ‘this will lead to inflation,’ and they would collapse.
384 12 44: Europe, 1962–1992 (2)

The German prosperity is due, to a very high degree, to the reasonableness

of the German [labour] trade-union leaders which, in turn, was due to
their experience with inflation.

The following year, Hazlett asked again: ‘Why have the liberals lost in
Germany? Why are they no longer influential, as they once were?’ Hayek
(1978a) elaborated:

Well, with the usual rules of the parliamentary system in which they func-
tion, they realize that with the present type of democracy, government is
inevitably driven into intervention, even against its professed principles.
It’s always the sort of cynicism of people who still believe it would be nice
if we could stick to our liberal principles, but it proves in practice to be
impossible. So they resign themselves reluctantly, and perhaps some more
cynically. They believe other people are getting out things from the process
of corruption; so they decide to participate in it. It’s quite cynical.41

Referring to the trip to the inaugural 1947 Mont Pelerin Society meet-
ing, Friedman recalled that ‘Britain was still in a sad way two years after
the war’ and that he would ‘never forget’ Eucken’s ‘pleasure at eating the
first orange he had seen in seven or eight years … His courage in resisting
the Nazis became legendary.’ Eucken and Ludwig Erhard ‘laid the foun-
dation’ for the ‘German economic miracle’ and the ‘groundwork’ for
their ‘social market economy’ (Friedman and Friedman 1998, 159, 160).
In Freiburg, Hayek encountered (or rather, re-encountered) the ordo-­
liberal social market ‘middle way’ associated with Eucken, its principal
founder (Vanberg 2013; Goldschmidt and Hesse 2013; Filip 2017a).42
After Erhard’s (1897–1977) death, Hayek (1988, 117) distanced Eucken
(1891–1950) from the ‘social market economy’—via an alleged conver-
sation from decades before: ‘He once assured me in conversation that to
him the market economy did not have to be made [Hayek’s or Bartley’s
emphasis] social but was so already as a result of its origin.’ And in the
Cold War magazine, Encounter, Hayek (1983b, 55) provided the Austrian
Truth: at a Mont Pelerin Society meeting, Erhard had—allegedly and
exclusively—confided in him: ‘I hope you don’t misunderstand me when
I talk of social market economy. I mean that the market in itself is social,
not that is must be made social.’ The following year, Hayek planned to
 Notes 385

reveal further Austrian Truth in Encounter or the Times: Pigouvian exter-

nalities were invented not by a ‘Great’ War ambulance driver but by one
Stalin’s gun-runners (Leeson 2015a).

Notes
1. http://www.sennholz.com/resume.php
2. The Manion Forum was named after Clarence Manion, the Dean of the
University of Notre Dame Law School (1941–1952).
3. http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS/
4. http://data.worldbank.org/indicator/SP.DYN.IMRT.IN/countries
5. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
6. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
7. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
8. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
9. http://ecaef.org/about-ecaef/
10. For a discussion of Hayek and Nietzsche, see Robin (2015).
11. http://data.worldbank.org/indicator/SH.XPD.PUBL.GX.ZS
12. UCLA oral history interview question to Hayek.
13. https://web.archive.org/web/20140331044617/http:/texasbestgrok.
mu.nu/archives/038360.php
14. http://archives.nd.edu/findaids/ead/index/MNN013.HTM
15. Alchian also proposed an income-contingent repayment scheme.
16. http://www.innocenceproject.org/inpr/faqs/what-is-the-innocence-
project-how-did-it-get-started
17. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
18. http://rarehistoricalphotos.com/american-nazi-party-leader-george-
lincoln-rockwell-confronting-martin-luther-king-jr-1965/
386 12 44: Europe, 1962–1992 (2)

19. http://www.presidency.ucsb.edu/ws/?pid=25851
20. The bridge was named after Edmund Pettus (1821–1907), a Confederate
General and Grand Dragon of the Alabama Ku Klux Klan (Feldman
2013, 9–10).
21. Many Austrians support drug legalization.
22. To Neil McLeod at the Liberty Fund. Hayek Papers Box 34.17.
23. http://www.newrepublic.com/article/politics/98883/ron-paul-incendiary-
newsletters-exclusive
24. Douglas French (2009–2012) preceded Deist (2014–) as Mises Institute
President.
25. https://www.mises.org/profile/jeff-deist
26. http://www.newrepublic.com/article/politics/98883/ron-paul-incendiary-
newsletters-exclusive
27. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
28. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
29. http://www.newrepublic.com/article/politics/98883/ron-paul-incendiary-
newsletters-exclusive
30. http://www.newrepublic.com/article/politics/98883/ron-paul-incendiary-
newsletters-exclusive
31. http://www.newrepublic.com/article/politics/98883/ron-paul-incendiary-
newsletters-exclusive
32. Against PC: The Fight for Free Expression. Speaker Panel. Recorded at
the Mises Circle in Dallas-Fort Worth on 3 October 2015. https://www.
youtube.com/watch?v=-nhGRQ7xOpc&t=16m45s
33. The 17th Amendment established the election of US Senators by voters
rather than State legislatures.
34. The ‘Liberty Lobby’ was formally established in 1957.
35. The internet-accessible copy appears to have belonged to Mises (his
name and address is pasted on the front cover).
h t t p : / / w i k i . m i s e s . o r g / m e d i a w i k i / i m a g e s / 8 / 8 c / A m e r i c a n _
Opinion%2C_February_1977.pdf
36. ­http://www.newrepublic.com/article/politics/98883/ron-paul-incendiary-
newsletters-exclusive
37. http://mises.ca/rothbard-university-2014/
 Notes 387

38. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
39. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
40. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
41. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
42. In contrast to Freiburg, where there was ‘no noticeable’ Marxist influ-
ence, Hayek (1978a) was ‘told’ that Bremen ‘is a completely Marxist
institution.’ Friedrich Hayek, interviewed by James Buchanan 28 October
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
 13
45–49: Europe, 1962–1992 (3)

45: Rawls
John Rawls’ (1971) Theory of Justice investigated the social order via a
hypothetical reincarnation exercise. In The Constitution of Liberty, the
high-born Hayek (2011 [1960], 186) explained that the ‘liberty’ or free-
dom of some is worth more than the liberty or freedom of others (Robin
2015). The less-free assist ‘liberty’ by embracing servitude: ‘It may indeed
be the most difficult task of all to persuade the employed masses that
in the general interests of society, and therefore in their own long term
interest, they should preserve such conditions as to enable the few to reach
[emphasis added] conditions which to them seem unattainable or not
worth the effort and risk.’
Hayek (1978a) sought to preserve the ascribed-status social order into
which he had been born: ‘It is my general view of life that we are playing
a game of luck, and on the whole I have been lucky in this game.’1 Rawls
implicitly asked what type of social order Hayek would prefer had he been
born—not at the top with a taste for ‘the art of living,’ but—amongst the
illiterate sub-nobles. While Hayek employed the artificial devise of the
‘un-understood’ ‘spontaneous’ order to justify his preferred social order,

© The Author(s) 2017 389

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_13
390 13 45–49: Europe, 1962–1992 (3)

Rawls (1971, 11) employed the artificial devise of the ‘Original Position’:
‘no one knows his place in society, his class position or social status, nor
does anyone know his fortune in the distribution of natural assets and
abilities, his intelligence, strength, and the like. I shall even assume that
the parties do not know their conceptions of the good or their special
psychological propensities. The principles of justice are chosen behind
a veil of ignorance.’ According to Rawls, this ignorance would lead to
principles that are fair to all—those in the Original Position would adopt
a maximin strategy which would maximize the prospects of the least well-­
off: ‘They are the principles that rational and free persons concerned to
further their own interests would accept in an initial position of equal-
ity as defining the fundamentals of the terms of their association.’ If all
citizens have an equal claim on what their society produces, unequal dis-
tribution could be justified only if it is to the advantage of the worst-off.
Within ‘Justice as Fairness,’ Rawls’ ‘Liberty Principle’ established equal
basic liberties for all citizens; and his ‘Difference Principle’ embraced
‘Fair Equality of Opportunity.’
In Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice,
Hayek (1976a, 189, n25) implicitly responded to Rawls. Hayek was aware
that he was able—through birth, application and ability—to lord-it-over
the socially deferential in a manner in which his professionally success-
ful middle-class children could not. In 1940, Hayek had been offered
the opportunity of sending his children to relative safety: this obliged
him to consider the ‘relative attractiveness of social orders as different as
those of the United States, Argentina and Sweden …’ For himself, with
a developed (aristocratic) personality, ‘formed skills and tastes, a certain
reputation and with affiliations with classes of particular inclinations,’ the
Old World was optimal; but ‘for the sake of my children who still had to
develop their personalities, then, I felt that the very absence in the USA
of sharp social distinctions which would favour me in the Old World
should make me decide for them in the former. (I should perhaps add
that this was based on the tacit assumption that my children would there
be based with a white not with a coloured family).’
Before the intervention of apparently being tacked-on to Myrdal’s
Nobel Prize, Hayek may have regarded Rawls’ (1971) Theory of Justice
 46: Popper 391

as ‘market free play’ check-mate. Some Austrians assert that whites are
genetically superior to African-Americans—but could Hayek have
resorted to assertions about the genetic superiority of inherited title-­
holders? This encounter with Rawls may have intensified Hayek’s second
suicidal depression (1969–1974); it certainly delayed the completion
of the three-volume Law Legislation and Liberty a New Statement of the
Liberal Principles of Justice and Political Economy.
For public consumption, Hayek (2013b [1973–1979], xx, 261), who
objected to Rawl’s use of the term ‘social justice,’ asserted that the dif-
ferences between himself and Rawls were ‘more verbal than substantial.’
Buchanan asked Hayek about his reference to Rawls: ‘in one sentence
you say that you think that you’re attempting to do the same thing, essen-
tially, that John Rawls has tried to do in his theory of justice. People have
queried me about that statement in your book.’ Hayek (1978a), who
stated that ‘dishonesty is a thing I intensely dislike,’2 apparently wished it
to be known how dishonest his public statements were:

Well, I perhaps go a little too far in this; I was trying to remind Rawls
himself of something he had said in one of his earlier articles, which I’m
afraid doesn’t recur in his book: that the conception of correcting the dis-
tribution according to the principle of social-justice is unachievable, and
that therefore he wanted to confine himself to inventing general rules
which had that effect. Now, if he was not prepared to defend social-­
distributive justice, I thought I could pretend to agree with him [emphasis
added]; but studying his book further, my feeling is he doesn’t really stick
to the thing he had announced first, and that there is so much egalitarian-
ism, really, underlying his argument that he is driven to much more inter-
vention than his original conception justifies.3

46: Popper
Popper influenced the LSE economists, Friedman’s (1953) methodol-
ogy of positive economics (Leeson 2000b, Chap. 3) and Hayek (Filip
2017b, c). In 1983, Hayek recruited Bartley (1934–1990) to be his own
third official biographer. Why?
392 13 45–49: Europe, 1962–1992 (3)

Bartley—who was already writing Popper’s biographer—had to read

an introductory economics textbook to write Hayek’s (Christainsen
2015). In a letter to Imre Lakatos, Bartley (13 December 1963) stated
(tongue-in-cheek, perhaps) that ‘as philosophers we are all passion-
ately, passionately interested in Truth—except when we are inter-
ested in jobs’ (cited by Leeson 2013a, 149). In his memorial essay for
Lakatos, Bartley (1976, 37) asserted that lying without self-deception
was morally superior to being a closet liar. He had previously regarded
Lakatos as

the most immoral man I had ever met. I later came to think this judge-
ment naive. Lakatos merely talked openly and appreciatively—with a
certain connoisseurship—of the sort of behaviour which is widespread
and almost universally covert. I can now appreciate the merits of his prac-
tise: although I often saw Lakatos lie when it suited his purposes, he was
never a hypocrite. He was remarkably without self-deception and remark-
able without cant. In this regard he was morally my superior [Bartley’s
emphases].

Bartley began his writing career with what appears to be an idiosyn-

cratic use of evidence. In ‘Its Effects on a Few Have Produced a Harvard
Myth,’ Bartley (1955) reported that

Last November, a Boston citizen mailed a letter addressed simply, ‘Kremlin

on the Charles, Cambridge 38, Mass.’ Without a question it was delivered
to the Eliot House room of the student leading the Censure McCarthy
campaign. That this could occur, and that the Post Office probably never
gave it a second thought is not surprising. For years, the name ‘Harvard’
has been equivalent in many minds to ‘communist,’ or at least to ‘pinko.’

Bartley’s assertion drew an angry response:

To the Editors of the CRIMSON: Mr. William W. Bartley III, in his story
on ‘Communism at Harvard’ in the CRIMSON of April 22, 1955, said a
letter addressed simply ‘Kremlin-on-the-Charles, Cambridge 38, Mass’
was delivered without question to Eliot House by the United States Post
Office. This letter was not delivered by the Post Office to Eliot House or to
any other place at Harvard University, but was endorsed ‘not found’ and
 46: Popper 393

returned to the sender. If such a letter was subsequently received at Eliot

House the writer must have carried it there himself.

Bartley had been caught-out by ‘Louis F. Geiffrion. Postman in

Harvard Yard’ (1955).
Shortly before the 1974 Nobel Prize, Bartley’s (1973) Wittgenstein had
been caught-out by Hayek (21 February 1974), who was convinced that
it contained fabricated knowledge about his cousin’s alleged encounters
with male prostitutes: some of the ‘allegations’ were ‘highly’ implausi-
ble, without proof, and highly incredible. Since the Wittgensteins were
one of the richest families in Vienna, had Ludwig procured homosexual
prostitutes in the Prater Park, Vienna (as Bartley asserted), this would,
Hayek insisted to Brian McGuiness, have led to blackmail. With respect
to Bartley’s (1985 [1973], 198) assertion that Wittgenstein had ‘pleaded
with a cousin living in England not under any circumstances to reveal
his [Jewish] descent,’ Hayek (21 February 1974) informed McGuiness
that this was ‘absurd’: he and John Stonborough were the only two of
Wittgenstein’s cousins living in England and both had confirmed that no
such suggestion had ever been made.4
Hayek also appeared to be unconcerned about Bartley’s connections
with Herbert Marcuse, the ‘Father’ of the Freudian New Left, and his
wife, Erica Sherover-Marcuse (Leeson 2013a, 183). According to a
Professor of Philosophy (who insists on anonymity to avoid recrimina-
tions from what he calls the ‘Popper Church’), Bartley gave a ‘plenary
session’ lecture at an Alpbach European Forum in Austria (which Hayek
may have attended) which was

was full of California ‘New Age’ rubbish about how hallucinogens can
break down the ‘bicameral mind’ and put you in touch with your ‘true self.’
(See also Theroux 2015)

In his Nobel Lecture on ‘The Pretense of Knowledge,’ Hayek (1974b)—

who lobbied to get a Nobel Prize for Literature for Popper—stated:

If we are to safeguard the reputation of science, and to prevent the arroga-

tion of knowledge based on a superficial similarity of procedure with that
of the physical sciences, much effort will have to be directed toward
394 13 45–49: Europe, 1962–1992 (3)

debunking such arrogations, some of which have by now become the

vested interests of established university departments. We cannot be
­grateful enough to such modern philosophers of science as Sir Karl Popper
for giving us a test by which we can distinguish between what we may
accept as scientific and what not—a test which I am sure some doctrines
now widely accepted as scientific would not pass.

According to Shenoy (2003), Hayek was ‘trying to ride two horses at

once and didn’t quite realize it. If you exclude all that he said about test-
ability and falsifiability, and just put it to one side, the rest of Hayek’s
method is quite coherent and completely an extension of the [Misean]
praxeological tradition. In fact, in a footnote in the Counter-Revolution of
Science he says that it would be a good idea to adopt the term praxeology.’
Caldwell (2009, 316) engaged Terence Hutchison in a methodenstreit
over whether there was a (Misean apriori) Hayek I and a (Popperian fal-
sificationist) Hayek II: ‘the sort of interpretive argument that is common
currency for historians of economic thought. And as is often the case in
such matters, there was evidence on both sides. I would further submit
that Hayek himself bears a considerable amount of the blame for the
profusion of conflicting pieces of evidence. He frequently manages to
say things that could support either argument.’ According to Hutchison
(1994, 228)

What Misesian, or ‘Modern Austrian’ praxeology succeeds in achieving is a

quite unacceptable combination of dogmatic, ‘apodictic certainties’ with
total empirical vacuity. Instead of being left with the traditional, full-­
knowledge ‘theory,’ we are provided with the marvellously rich, enlighten-
ing and totally uninformative model—or Misean ‘apodictic certainty’—that
people act with whatever tastes, and whatever kind of knowledge and igno-
rance, which they happen to possess.

According to Caldwell, Hutchison exaggerated Popper’s influence:

Hayek was never a methodological Misean. Yet Caldwell (2009, 316) also
cited Hayek as stating in 1982 that ever since reading Popper’s Logic of
Scientific Discovery in 1934 he had been a ‘complete adherent’ of Popper’s
methodology.
 46: Popper 395

This part of Hayek’s account is consistent with that provided earlier by

Hayek (1978a) to Craver:

it took me a long time, really, to emancipate myself from [logical positiv-

ism]. It was only after I had left Vienna, in London, that I began to think
systematically on problems of methodology in the social sciences, and I
began to recognize that positivism in that field was definitely misleading.
In a discussion I had on a visit to Vienna from London with my friend
Haberler, I explained to him that I had come to the conclusion that all
this Machian positivism was no good for our purposes. Then he coun-
tered, ‘Oh, there’s a very good new book that came out in the circle of
Vienna positivists by a man called Karl Popper on the logic of scientific
research’ [Logik der forschung 1934; Logic of Scientific Discovery 1959]. So
I became one of the early readers. It had just come out a few weeks
before.5

Popper (1992, 10) reported that he and Mises were ‘aware of a strong
opposition between our views in the field of knowledge and methodology.
I think that Mises saw in me a dangerous opponent—perhaps one who
had robbed him of the complete agreement of his greatest pupil, Hayek.’
He also confirmed that he had met Mises ‘early in 1935 in Vienna, owing
to his interest in’ Logic of Scientific Discovery (1959 [1934]). Apparently
referring to June 1936, Popper recalled meeting ‘Hayek about 6 months
later in London.’
Hayek (1978a) confirmed that Popper’s book

was so satisfactory because it confirmed this certain view I had already

formed due to an experience very similar to Karl Popper’s … our environ-
ment in which we formed our ideas was very much the same. But our
environment in which we formed our ideas was very much the same. It was
very largely dominated by discussion, on the one hand, with Marxists and,
on the other hand, with Freudians … I just accepted the Popperian phi-
losophy for spelling out what I had always felt. Ever since, I have been
moving with Popper … to a very large extent I have agreed with him,
although not always immediately. Popper has had his own interesting
developments, but on the whole I agree with him more than with anybody
else on philosophical matters.6
396 13 45–49: Europe, 1962–1992 (3)

It is also consistent with what Hayek (1978a) told Buchanan:

Popper, in writing already The Open Society [and Its Enemies 1945; 1947],
knew intimately my counterrevolution of science articles. It was in these
that he discovered the similarity of his views with mine. I discovered it
when The Open Society came out. Although I had been greatly impressed—
perhaps I go back as far as that—by his Logic of Scientific Discovery [1959
(1934)] his original book, it formalized conclusions at which I had
already arrived. And I arrived [there] due to exactly the same circum-
stances … we were exposed to the same atmosphere, and in the discus-
sion, then, we both encountered two main groups on the other side:
Marxists and psychoanalysts. Both had the habit of insisting that their
theories were in their nature irrefutable, and I was already by this driven
to the conclusion that if a theory is irrefutable, it’s not scientific. I’d never
elaborated this; I didn’t have the philosophical training to elaborate it.
But Popper’s book gives the justification for these arguments—that a
theory which is necessarily true says nothing about the world. So when
his book came out, I could at once embrace what he said as an articula-
tion of things I had already been thinking and feeling. Ever since, I have
followed his work very closely.7

Hayek (1978a) then qualified himself:

In fact, before he went to New Zealand, I met him in London—he even

spoke to my seminar—and we found very far-reaching, basic agreement. I
don’t think there’s anything fundamental with which I disagree, although I
some-times had, at first, hesitation. His present new interest about the
three worlds I was at first very puzzled about. I believe I now understand it,
and I agree. When, in that Hobhouse Lecture, I speak about culture as an
external element which determines our thinking, rather than our thinking
determining culture, this is, I believe, the same thing Popper means when
he speaks about the three worlds. Of course, in the few years we were
together at the London School of Economics—only about from ‘45 to
‘50—we became very close friends, and we see completely eye-to-eye on
practically all issues.8

It is also consistent with what Hayek (2009a [1979a], 8) told

Diego Pizano: ‘I have derived my epistemological position and many
 46: Popper 397

of my philosophical ideas from Karl Popper who has been my friend

for many years.’ It is also consistent with what Hayek (1978a) told
Rosten:

Well, you see, I spent my university days already arguing with these
Marxists—my opponents were Marxists and Freudians. We had endless
discussions, and it was really what I thought was the poverty of the argu-
ments of the Marxists which turned me against socialism. Incidentally,
I’ll let you in on another thing: both the Marxists and the Freudians had
the dreadful habit of insisting that their theories were irrefutable—logi-
cally, absolutely cogent. That led me to see that a theory which cannot be
refuted is not scientific, and that made me later praise Popper when he
spelled the same idea out, which he had gained in the same experience.
He was a few years younger; so we didn’t know each other. But we both
went through this experience, arguing all the time with Marxists and
Freudians.9

Hayek’s accounts are also simultaneously inconsistent with what he

told Hutchison (15 May 1983): ‘the 1936 lecture [1937] was written and
the lecture given and the before I knew anything about Popper’ (cited
by Caldwell 2009, 323–324). It was also inconsistent with what he told
Caldwell (29 September 1984): ‘I am sure [Popper] had no influence on
my method in economics—certainly not yet in 1936 when I had only
recently become acquainted with his Logik der forschung … at that time
I did not know him personally’ (cited by Caldwell 2009, 323–324). Yet
Hayek met Popper for the first time during a June 1936 LSE seminar
presentation which Hayek had arranged (Caldwell 2006, 114). Hayek
clearly told different stories to different people.
When asked ‘What did Hayek think about subject x,’ Ludwig Lachmann
would reply: ‘Which Hayek?’ (cited by Caldwell 2006, 112). Hayek (26
November 1981; 29 September 1984) flattered both Hutchison—‘You
are of course perfectly right’—and Caldwell ‘I greatly enjoyed [your arti-
cle] and am very grateful to you for clearing up Professor Hutchison’s
misunderstandings. I entirely agree with you.’ Caldwell (2009, 319) con-
cluded ‘So much for going to the horse’s mouth for clarification!’—and,
as the third general editor of The Collected Works of F.A. Hayek, devoted
his career to doing just that.10
398 13 45–49: Europe, 1962–1992 (3)

47: The British Conservative Party

In 1945—with Hayek’s approval—The Road to Serfdom played a surrepti-
tious role in election propaganda. Jeremy Shearmur (2006, 310) docu-
mented the ‘very specific, if not publicly acknowledged, contacts with
the British Conservative Party in the 1940s’: they transferred part of the
war-rationed paper supply that they had been allocated for the 1945 gen-
eral election for an abridged version of Road to Serfdom. A Conservative
Party Head Office functionary, Geoffrey Rippon (later a Monday Club
M.P. and Cabinet Minister), coordinated the abridgement; which had
been prepared by the Old Etonian M.P., Wing Commander Sir James
Archibald, who insisted that in 1937 Guernica had been destroyed—
not by aerial bombardment by the Luftwaffe’s Condor Legion at Franco’s
behest—but by the Republicans (Leeson 2017a).
The frontispiece of the abridged Road to Serfdom version replaced
statements from David Hume and de Tocqueville with an election state-
ment taken from an interview with Kingsley Martin in which Winston
Churchill stated: ‘The essential aspects of democracy are the freedom of
the individual within the framework of laws passed by parliament, to
order his life as he pleases, and the uniform enforcement of tribunals
independent of the Executive.’11 When the Ministry of Supply suggested
that this abridged version should indicate that it was published for the
Conservative Party, Cecil Franklin of Routledge replied that this would
be difficult since the book ‘was originally written for the Liberal Party.’12
Shearmur (2006, 312) noted that this statement ‘surely is just false.’
The 2009 government intervention to save jobs at General Motors
(through Chap. 11 re-organization) may have been justified on social-­
cost-­
benefit grounds. General Motors’ Road to Serfdom in Cartoons
warned of the dangers of propaganda, and insisted that government
intervention in the economy was poison: the choice lay between firing
squads or the right to fire employees.13 In a 1945 campaign broadcast,
Churchill also took a theme from The Road to Serfdom (1944): a Labour
Government would not

allow free, sharp or violently worded expressions of public discontent …

They would have to fall back on some form of Gestapo, no doubt very
humanely directed in the first instance. And this would nip opinion in the
 47: The British Conservative Party 399

bud; it would stop criticism as it reared its head, and it would gather all the
power to the supreme Party and the Party leaders, rising like stately pin-
nacles above their vast bureaucracies of Civil Servants, no longer servants
and no longer civil. And where would the ordinary simple folk—the com-
mon people as they like to call them in America—where would they be
once this mighty organism had got them in its grip? [Socialism was] insep-
arably interwoven with Totalitarianism and the abject worship of the State.
(Cited by Lane 2013, 52)

Hayek, who had just returned from his American Road to Serfdom pro-
motional tour, ‘lunched at the Reform Club with John Wood and Stanley
Denison the day after Churchill’s broadcast, and was evidently pleased
that his ideas had been taken up with such gusto’ (Cockett 1995, 95).
The British Labour Party leader, Clement Attlee, described Churchill’s
‘Gestapo speech’ as a ‘second-hand version of the academic views of an
Austrian professor, Friedrich August von Hayek’ (cited by Lane 2013,
52). Hayek (1994, 106) complained that henceforth he was ‘officially
in socialist terms, “Friedrich August von Hayek”.’ In Economica, ‘F. A.
von Hayek’ (1935) published an essay on ‘The Maintenance of Capital’;
presumably for tactical reasons, Hayek (1946) signed his Economica essay
on ‘The London School of Economics 1895–1945’ ‘FAH.’
According to Hayek (1978a), ‘my studies of politics provided, I
believe, answers for many problems which had begun to bother people
very seriously. There is a good reason why I am being rediscovered, so to
speak.’14 Mrs Thatcher, when encountering what she regarded as ‘middle
way’ treachery within the Conservative Research Department, ‘reached
into her briefcase and took out a book. It was Friedrich von Hayek’s
Constitution of Liberty. Interrupting our pragmatist, she held the book up
for all of us to see. “This” she said sternly, “is what we believe” and banged
Hayek down on the table’ (Ranelagh 1991, ix).
Two months after Thatcher’s victory, Hayek (2009a [1979], 20)
revealed the Austrian Truth: ‘I am no longer sufficiently informed
about the facts of any particular country to wish to have anything to
do with particular measures.’ The Times (10 March 1981) implicitly
reported that Hayek was lying—he had insisted on television that the
‘wet’ conservative leader, James Prior, must be sacked: ‘The minister in
charge’ of labour union reform is ‘not in favour of radical alteration. I
400 13 45–49: Europe, 1962–1992 (3)

have no hope that so long as the matter is in his hands the necessary
things will be done.’15 Prior was removed as Secretary of Employment
on 14 September 1981.
Not only did he seek to replace specific politicians, Hayek also encour-
aged those dependent on seeking office through elections to substitute
competition in the political market-place for one-dollar-one-vote con-
sumer sovereignty. In a letter to the Times, Hayek (1978c) stated:

A limited democracy might indeed be the best protector of individual lib-

erty and be better than any other form of limited government, but an
unlimited democracy is probably worse than any other form of unlimited
government, because its government loses the power even to do what it
thinks right if any group on which its majority depends thinks otherwise.
If Mrs. Thatcher said that free choice is to be exercised more in the market
place than in the ballot box, she has merely uttered the truism that the first
is indispensable for individual freedom, while the second is not: free choice
can at least exist under a dictatorship that can limit itself but not under the
government of an unlimited democracy which cannot.

Was it for fund-raising purposes that Caldwell (2010b) asserted in The

Washington Post: ‘Hayek himself disdained having his ideas attached to
either party’? During his reign as ‘free’ market monopolist of the Hayek
Archives, why has so much of the archival evidence not been reported?

48: Reagan and the Republican Party

Hayek’s (1978a) ‘principle’ was a carefully crafted illusion: while some
economists

are beginning to think about what is politically possible, while I have made
it a principle never to ask that question. My aim is to make politically pos-
sible what in the present state of opinion is not politically possible … Well,
of course, there is a limit. You see, I’m very interested in politics; in fact, in
a way I take part. I now am very much engaged in strengthening Mrs.
Thatcher’s back in her fight against the unions. But I would refuse to take
any sort of political position or political responsibility. I write articles; I’ve
 48: Reagan and the Republican Party 401

even achieved recently the dignity of an article on the lead page of the
London Times on that particular subject. I’m represented in England as the
inspirer of Mrs. Thatcher, whom I’ve only met twice in my life on social
occasions. I enjoy this, but on the principle that I will not ask, under any
circumstances, what is politically possible now. I concentrate on what I
think is right and should be done if you can convince the public. If you
can’t, well it’s so much the worse, but that’s not my affair.16

In his Ludwig von Mises Memorial Lecture at Hillsdale College,

Governor Reagan (1977) insisted that ‘Inflation is caused by one thing,
and it has one answer. It’s caused by government spending more than
government takes in, and it will go away when government stops doing
that, and not before.’ Embracing the non sequitur fallacy, Reagan also
insisted that the way to ‘instantly reduce the inflation rate by half ’ was
‘to eliminate unnecessary regulation of business and industry.’17 And any-
body who dissented ‘had no business being at an economic conference.’
Reagan insisted that Roche must become a US Senator—and academics
had to play a coordination role:

We can’t let the doctor remain alone in his lonely fight against socialized
medicine, or the oil industry fight its own battle against divestiture or crip-
pling controls, repressive taxes; or the farmer who hurts more than most
because of government harassment and rule changing in the middle of the
game. All of these issues concern each one of us regardless of what our trade
or our profession may be. Corporate America must begin to realize that it
has allies in the independent businessmen and women and the shopkeep-
ers, the craftsmen, the farmers, and the professions. All these men and
women are organized in a great variety of ways. But we talk within our own
organizations about our own problems—the drug industry for itself. What
we need is a liaison between these organizations to realize how much
strength we as a people still have, if we’ll use that strength.

The alternative to this alliance between academics and Corporate

America was the end of ‘liberty’: ‘Will we, before it is too late, use the
vitality and the magic of the marketplace to save this way of life, or will
we one day face our children, and our children’s children when they
ask us where we were and what we were doing on the day that freedom
402 13 45–49: Europe, 1962–1992 (3)

was lost?’ As President, Reagan (1984, 198) stated that ‘von Mises’ had
‘rekindled the flames of liberty in new generations of thinkers … we
owe an incalculable debt to this dean of the Austrian school of econom-
ics for expanding our knowledge and inspiring a new vision of liberty
in our age.’ Reagan (27 March 1984) also informed Eamonn Butler of
the Adam Smith Institute that Hayek had played ‘an absolutely essential
role in preparing the ground for the resurgent conservative movement in
America.’18
One dysfunctional dynastic legacy is symbolized by the eighteenth-­
century replacement of King George III with President George
Washington. A Vice President—chosen as a running mate for reasons asso-
ciated with ‘ticket’ balance—has an almost ‘hereditary’ right to his party’s
subsequent nomination for President. In 1945, was Harry S. Truman
qualified to become President after eleven weeks as Vice President? What
were the consequences for world history of Eisenhower’s 1952 choice of
Nixon as his running mate? Nixon first chose Spiro Agnew who resigned
to avoid jail and then Ford who by all accounts was a decent person but
largely incompetent to deal with foreign or economic affairs.
In a Parliamentary democracy, to compete for office a candidate
first has to win support from his fellow parliamentarians; while in a
Presidential democracy, a candidate has to obtain funds from optimizing
donors. A President arrives in Washington with thousands of jobs in his
back pocket, plus thousands of debts to donors. The resulting politiciza-
tion of the public sector is a significant contributor towards American
foreign policy debacles.
Reagan was influenced by ‘Dr’ Arthur Laffer’s curve and Sennholz: in
1978

Mary, holding Hans by the hand, approached the former California gover-
nor and introduced herself and her husband. Reagan replied excitedly,
‘Stay right here. Nancy, come here!’ Once Mrs. Reagan arrived, the gover-
nor exclaimed, ‘This is Hans Sennholz! Dr. Sennholz, I’ve been plagiarizing
you for years in my radio addresses.’ Sennholz replied, ‘You have had a
good teacher!’ Hans had supplied Reagan with no shortage of content.
From 1975 to 1979, Ronald Reagan gave more than 1,000 daily radio
broadcasts carried all over the country, two-thirds of which he wrote him-
 48: Reagan and the Republican Party 403

self. The topics in the three-minute broadcasts were wide-ranging, from

arms control to the environment to the Soviets to a variety of economic
issues, including specialties of Hans Sennholz, such as the inflation night-
mare of the 1970s. The coming Reagan Revolution is evident throughout
these short pieces. It’s likely Reagan read many of Sennholz’s articles in ‘The
Freeman.’ There is a well-known picture of the Reagans seated in an air-
plane. Nancy was dozing on her husband’s shoulder while Reagan was
reading. Look close at that picture. Reagan is reading ‘The Freeman.’
Perhaps it was a Sennholz article … ‘Bring them to me, I will educate
them!’ Sennholz said. And he did by the thousands. (Wishing 2007)

Sennholz made a fortune in real estate before becoming FEE President

(1992–1997) (Skousen 2011b); The Freeman was a FEE publication.
From the outset, the Mont Pelerin Society was split between Chicagoans
and Austrians: Hayek also delineated a quality-differential between
Hayekians and Miseans—telling Arthur Seldon that his Institute of
Economic Affairs was superior to the ‘propaganda’ emanating from
FEE (Leeson 2015a, 17). Did Friedman and Stigler regard the found-
ers of FEE and the real estate lobby as ‘crooks’ and ‘bastards’ for ‘liberty’
(Leeson 2015d, 55)?
Twenty of the 74 members of the Reagan pre-inauguration (1980–1981)
Task Forces were Mont Pelerin Society members (Hoover 2003, 213).
The archival record reveals that Hayek proposed to choreograph an elec-
tion stunt for Reagan—despite his ‘strict’ rule not to take part in cur-
rent political activities of a country of which he was not a citizen19; and
despite telling both his son (cited by Ebenstein 2003, 390, n12) and
Cubitt (2006, 144) that he had a low opinion of Reagan’s intelligence.
In An American Life, Reagan (1990, 19, 42) expressed his ‘life guard’
pride in having saved twenty-seven swimmers from drowning: was the
Reagan revolution really plagiarized from a ‘Misean for Life’ Luftwaffe
pilot who had a bomber plane engraved on his headstone? Hayek (7
June 1980) suggested to the Director of the Hoover Institution that dur-
ing his next visit, Reagan should be cross-examined before the press by
the Hoover Institution economists including himself: this would have
allow Reagan to show his confidence and demonstrate that he was taken
seriously by economists. Reagan (6 February 1911 to 5 June 2004) was
404 13 45–49: Europe, 1962–1992 (3)

almost seventy-eight when he left office. The eighty-one-year-old Hayek

(7 June 1980) sought a specific role in winning the forthcoming election:
he wanted to tell the media his ‘joke’ that since Reagan was twelve years
his junior, he was clearly ‘good’ for an unconstitutional third term.20

49: Pinochet
On 9–11, 1923, Ludendorff and Hitler made a Grab for Power (Dornberg
1982)21; in Liberalism in the Classical Tradition, Mises (1985 [1927], 44,
51, 19) promoted ‘Ludendorff and Hitler’ and other ‘Fascists’ as defend-
ers of ‘civilisation,’ ‘liberty’ and ‘property.’
On 9–11, 1973, Pinochet did to Chilean democracy what al-Qaeda
later sought to do to American democracy: Hayek described the klepto-
cratic Pinochet as an ‘honourable general’ and his government officials as
‘educated, reasonable, and insightful men’ (cited by Caldwell and Montes
2014a, 38, n121, b, 2015, 282).
When in 1916, Paul von Hindenburg was appointed Chief-of-the-­
General-Staff, Ludendorff, who had been his Chief-of-Staff on the
Eastern Front, titled himself Generalquartiermeister instead of ‘Second
Chief of the General Staff.’ But by 1917, Ludendorff had become the
military dictator, or at least ‘unquestionably the most powerful man in
Germany’ (Tipton 2003, 313). He must have approved the first proto-­
Nazi-­proto-Soviet Pact: Lenin’s April 1917 return to Russia on a German
‘sealed train’ (Marshall 2001, 321–322).
In September 1915, Nicholas II became Commander-in-Chief:
his incompetence contributed to the defeat of his country and his
Romanov dynasty, and the murder of his family (17 July 1918). In 1917,
Ludendorff’s campaign of unrestricted submarine warfare brought a
reluctant America into the war. Having unsuccessfully promoted ‘total
warfare,’ in November 1918, Ludendorff insisted that Germany must
avoid ‘total defeat’ (Parkinson 1979, 179).
In defeat, Hitler declared that Germans were unworthy of him and
committed suicide; in defeat, Ludendorff uttered similar sentiments,
before donning a false beard and leaving for the safety of neutral Sweden.
Before he left, Ludendorff insisted that democratically elected politicians
 49: Pinochet 405

should take responsibility for the defeat (and thus the Peace treaties)—
thus beginning the ‘stab-in-the-back’ by the ‘November Criminals’ myth.
Between November 1918 and February 1919, he wrote Ludendorff’s Own
Story (1919) (Wheeler-Bennett 1938; Weintraub 1985, 398–399).
Pinochet had been Commander-in-Chief of the Army for two weeks
before he destroyed the democratically elected government who, he
alleged, had been stabbing-Chile-in-the-back. The evidence linking the
Austrian School of Economics to both Pinochet’s coup and his liqui-
dating White Terror dictatorship is overwhelming: yet after decades of
devotion, all Caldwell and Montes (2014a, 50, b, 2015, 304) can offer
are ‘conjectures’ to ‘the uncomfortable question of why Hayek chose to
remain silent about the human rights abuses that took place under the
[Pinochet] junta.’
From Spann, Hayek (1994, 54) ‘got a few helpful ideas about the sig-
nificance of the logic of the means-ends structure in economic theory’—
Pinochet used torture for ends that Austrians approved. Hayek (1978a)
explained his own role in this neo-Feudal revolution: ‘to persuade the
intellectuals in the hopes that ultimately they could be converted and
transmit my ideas to the public at large. That I cannot reach the public
I am fully aware. I need these intermediaries, but their support has been
denied to me for the greater part of my life.’22
Trotsky described Stalin as the Communist Party’s ‘most eminent
mediocrity’ (Lee 2003, 278); and Hayek (1949, 1978a) was contemptu-
ous of his own ‘inferior … mediocrities’ (‘intermediaries’ for whom he
created a Welfare State)—whilst despising competing intellectuals who
could ‘reach the public’:

I don’t think there could ever be any communication between Mr. Galbraith
and myself. I don’t know why, but it’s a way of thinking which I think is
wholly irresponsible and which he thinks is the supreme height of intel-
lectual effort. I think it’s extremely shallow. I go so far as that when in this
recent plan, which had to be postponed, of challenging an opposite group
of socialist intellectuals, he was one of three whom I would exclude. I won’t
use the exact phrase, which would be libelous and which I don’t want to be
recorded, but he and two others I on principle excuse because they think in
a way with which I could not communicate.
406 13 45–49: Europe, 1962–1992 (3)

Chitester asked: ‘Can you give us a better sense of what the characteris-
tics of this are?’ Hayek (1978a) replied: ‘I don’t want to be offensive, but
it’s a certain attribute which is common to journalists of judging opin-
ions by their likely appeal to the public.’23 In The Constitution of Liberty,
Hayek (2011 [1960], 41–42) explained that this was his own strategy: ‘If
old truths are to retain their hold on men’s minds, they must be restated
in the language and concepts of successive generations … no statement
of an ideal that is likely to sway men’s minds can be complete: it must be
adapted to a given climate of opinion.’
Hayek (1978a) explained how ‘secondhand dealers in opinion’ could
assist his quest for political influence—through a three-step supply chain:

Oh, I’m sure you can’t operate any other way. [Step 1:] You have to per-
suade the intellectuals, because they are the makers of public opinion. It’s
not the people who really understand things; it’s the people who pick up
what is fashionable opinion. You have to make the fashionable opinion
among the intellectuals before [Step 2:] journalism and the schools and so
on will [Step 3:] spread it among the people at large.24

Caldwell’s (2004, 147) Hayek’s Challenge reported the Austrian Truth:

‘Hayek that made a point of keeping his disagreements with opponents
on a professional level.’ The evidence reveals that with very few excep-
tions, Hayek (1978a) slurred both his competitors and his supporters—
including those from whom he earned royalties: ‘I had, on the one hand,
unmeasured praise’ from people who probably never read The Road to
Serfdom and ‘a most abusive criticism from some of the intellectuals.’25
Neoclassical economics stresses self-interest—but is scholarship pri-
marily a manipulative search for ‘inferior’ intermediaries whose ‘sup-
port has been denied to me for the greater part of my life’ (Hayek 1949,
1978a)?26 Hayek earned $ 30,000 in royalties during the first two or three
years after publication of The Road to Serfdom (Ebenstein 2003, 209). In
2010, sales of The Definitive Edition of The Road to Serfdom were assisted
by the ‘puff’ provided by the Angel Moroni believer and media entrepre-
neur, Glenn Beck, and other Rupert Murdoch ‘journalists’—Caldwell
may have earned around $1,000,000 in royalties in one month alone
(Leeson 2015a, 19). In his editorial introduction (‘From Minor Hit to
 49: Pinochet 407

Cultural Icon’), Caldwell (2007a, 18, n61) provided a footnote in which

he chose to remain silent about the corrupt and possibility illegal role
that Hayek and his book played for the Conservative Party in the 1945
general election.
Caldwell (2010a)—one of Hayek’s ‘secondhand dealers in opinions’—
objected (with an exclamation mark) to evidence-based competition to
his hero’s producer sovereignty: associations being made to ‘authoritarian
regimes and thinkers, with fascism, and with hucksterism’; plus refer-
ences to

Mises’ sympathies for Italian [sic] fascism … Some of these claims are ris-
ible … Once such claims are out there, though, they very quickly get
picked up by what Hayek would call second-hand dealers in ideas: witness
the recent New York Times Book Review commentator who, in a breezy
piece on the brief rise of Hayek’s The Road to Serfdom to top seller on
Amazon.com in June, could not resist adding a slur about Hayek’s sunny
view of the Chilean dictator Augusto Pinochet.

In ‘On the Job Training with F. A. Hayek,’ Caldwell (2007b, 353)

provided a few ‘aphorisms’ including: ‘Make friends with the archival
record.’ Hamowy’s (2002) response to the evidence about Hayek’s anti-­
Semitism could only have been written by someone who was either igno-
rant of, or devotionally blind to, or determined to suppress, the archival
record.
Pinochet was a constructivist seeking to re-build a version of the Feudal
social order that had been imposed on the Americas by the Habsburg-led
First Reich (Leeson 2017a). When Dean Baker (1999) examined Hayek’s
distinction between ‘constructivism, as opposed to the sort of tinkering
around the edges,’ Hamowy (1999b) thought this impertinent: ‘Don’t
you think this is trivializing Hayek?’27 Why did Caldwell choose this
­particular intellectual historian to edit The Constitution of Liberty: The
Definitive Edition (2011 [1960])?
Hamowy (1999a) stated ‘At the time of his death, F. A. Hayek was
unquestionably the world’s preeminent spokesman for classical liberal-
ism and its most important thinker.’ But what were Hayek’s intentions?
Stephen Cox’s (2012) obituary reports that Hamowy’s ‘magisterial e­ dition’
408 13 45–49: Europe, 1962–1992 (3)

of Hayek’s The Constitution of Liberty ‘straightens out a great deal that

Hayek left, shall we say, unstraightened.’ Whether or not for fund-­raising
purposes, The Constitution of Liberty: The Definitive Edition contains
none of the archival record about one of Hayek’s purposes for writing the
book: to market his neo-Feudal social order to religion-­promoting dicta-
tors such as António de Oliveira Salazar in Portugal and later Pinochet
in Chile.
Like Bartley (1976, 37), did Hayek wish it to be (posthumously)
known that he thought it morally superior to lie without self-deception
than to be a closet liar? Hayek explained: ‘I am hardly capable of restat-
ing the ideas of another person because I read and embody what I like to
my own thought. I cannot read a book and give an account of its argu-
ments. I can perhaps say what I have learnt from it. But that part of the
argument which is not sympathetic to me, I pass over [emphases added]’
(cited by Kresge 2002, 504). This is not quite right: Hayek could be scan-
dalized by reading what was ‘not sympathetic’ to him. Immediately after
the coup, the international press began reporting on Pinochet’s campaign
of torture and Nazi-style disappearances (Leeson 2017a). Six years later,
Hayek (2009a [1979], 18) reported: ‘I did not see the system of political
control in enough detail to have a serious opinion about it … I also think
that the way in which Chile is covered by the international press is scan-
dalous [emphases added].’
Even Nixon was obliged to distance himself from Pinochet: ‘I am not
here to defend and will not defend repression by any government, be it
a friend of the United States or one that is opposed to the United States’
(cited by Frost 1978, 159–160). But Hayek (1978a) saw no ideologi-
cal advantage in evaluating evidence—he was a cynical manipulator of
opinion:

But I’ve always made it my rule not to be concerned with current politics,
but to try to operate on public opinion. As far as the movement of intel-
lectual opinion is concerned, it is now for the first time in my life moving
in the right direction;28 Oh, on the fact, in which I profoundly believe,
that in the long run, things are being governed by opinion, and opinion
just has been misled … So, again, what I always come back to is that the
whole thing turns on the activities of those intellectuals whom I call the
 49: Pinochet 409

‘secondhand dealers in opinion,’ who determine what people think in the

long run. If you can persuade them, you ultimately reach the masses of the
people;29 When I say ‘public opinion,’ it’s not quite correct. It’s really, again,
the opinion of the intellectuals of the upper strata which governs public
opinion.30

Hayek (1978a) sometimes denied being responsible for the Institute

for Economic Affairs; and sometimes stated: ‘I oughtn’t to praise them
because the suggestion of the Institute came from me originally; so I let
them on the job, but I’m greatly pleased that they are so successful31; [the
IEA] creates a coherent body of opinion which is probably more impor-
tant than any of the periodicals or newspapers in England.’32
This could also be ‘curiously’ consistent with Hayek’s (1974b, 1978a,
2009a [1979], 4–5) assertion that we are ‘constantly adapting ourselves
to factors that are unknown to us and for this purpose we can only use
limited and fragmented information;’ and his Nobel Prize confession:
‘I prefer true [?] but imperfect knowledge, even if it leaves much indeter-
mined and unpredictable, to a pretence of exact knowledge that is likely
to be false’; and his 1944 Truth about Soviet Red Terror: ‘We didn’t know
about these things yet.’33 It could also be consistent with his promotion
of religion and his instruction that

We have to recognize that we owe our civilization to beliefs which I have

sometimes offended some people by calling ‘superstitions’ and which I now
prefer to call ‘symbolic truths’ … We must return to a world in which not
only reason, but reason and morals, as equal partners, must govern our
lives, where the truth of morals is simply one [Hayek’s emphasis] moral
tradition, that of the Christian west, which has created morals in modern
civilization. ([1984] cited by Leeson 2013a, 197)34

Mises (1985 [1927], 158, 48) encouraged his ‘full of the best inten-
tions’ Fascist allies to ‘exterminate its adversaries and their ideas in the
same way that the hygienist strives to exterminate a pestilential bacil-
lus.’ He was unconcerned about human rights abuses in the ‘land of the
knout and the prison-camp’—and Hayek displayed the same attitude in
Pinochet’s Chile (Leeson 2017a).
410 13 45–49: Europe, 1962–1992 (3)

Notes
1. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
2. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
3. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. Hayek Papers Box 61.18.
5. Hayek (1978a) continued: ‘I found that Haberler had been rather mis-
taken by the setting in which the book had appeared. While it came
formally out of that circle, it was really an attack on that system [laugh-
ter].’ Friedrich Hayek, interviewed by Earlene Craver date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
6. Hayek (1978a) continued: ‘I found that Haberler had been rather mis-
taken by the setting in which the book had appeared. While it came
formally out of that circle, it was really an attack on that system [laugh-
ter].’ Friedrich Hayek, interviewed by Earlene Craver date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
7. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
8. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
9. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
10. http://www.tandfonline.com/doi/pdf/10.1080/13501780903129306
11. The interview ends: ‘you may be sure that the British people would
rather go down fighting than live in servitude.’
http://www.newstatesman.com/archive/2013/12/british-people-would-
rather-go-down-fighting
 Notes 411

12. At Routledge and Kegan Paul, Norman Franklin coordinated the pro-
duction of Hayek’s (1979) Law, Legislation and Liberty Volume 3: The
Political Order of a Free People, and appeared to play a similar role in the
production of The Fatal Conceit (Cubitt 2006, 9, 78, 85, 138, 245, 247,
262, 274). For biographical details of the Franklin family see Rubinstein
et al. (2011, 293–294).
13. https://fee.org/articles/the-essence-of-the-road-to-serfdom-in-cartoons/
14. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
15. http://www.margaretthatcher.org/document/114507
16. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. ‘A study of 700 of the largest corporations has found that if we could
eliminate unnecessary regulation of business and industry, we would
instantly reduce the inflation rate by half. Other economists have found
that over-regulation of business and industry amounts to a hidden five-­
cent sales tax for every consumer. The misdirection of capital investment
costs us a quarter of a million jobs. That’s half as many as the President
wants to create by spending 32 billion dollars over the next two years. And
with all of this comes the burden of government-required paperwork.’
18. Hayek Papers Box 24.72.
19. To David Boaz of the Council for a Competitive Economy, 17 June
1979. Hayek Papers Box 25.22.
20. Hayek Papers Box 16.43.
21. Or in the United States, 11–9.
22. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
23. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
24. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
25. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
412 13 45–49: Europe, 1962–1992 (3)

26. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
27. Baker (1999) responded: ‘I’m not trying to trivialize this at all, because
you’re making this point, you’re trying to distinguish between your refer-
ring to my views as constructivism, as opposed to the sort of tinkering
around the edges. My point is that there are very, very big issues in deter-
mining how our society is created. It’s not just nature that we ended up
with the pencil. We had a set of legal institutions, which are extremely
complex, and none of those have to be taken as given. Just because they
were there, you don’t want to be a conservative. Just because they’re there
doesn’t mean we should accept them. They’re extremely complex, they
help certain people, they hurt others. We have to look at those and we
can’t just say, okay, what’s there is great. It may not be.’
28. Friedrich Hayek, interviewed by Jack High date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
29. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
30. Friedrich Hayek, interviewed by Robert Bork 4 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
31. Friedrich Hayek, interviewed by Thomas Hazlett 12 November 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
32. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
33. Friedrich Hayek, interviewed by Leo Rosten 15 November 1978 (Centre
for Oral History Research, University of California, Los Angeles, http://
oralhistory.library.ucla.edu/).
34. http://www.margaretthatcher.org/document/117193
 Part IV
The 1974 Nobel Prize for Economic
Sciences, 50
 14
50: The Nobel Prize Community, 1901–

Austrians believe themselves to be a successful knowledge community:

‘We have persuaded the world that Hitler was German and Mozart was
Austrian!’ They have a case. Two years before the Royal Swedish Academy
of Sciences awarded the 1974 Nobel Prize to the co-leader of the fourth-­
generation Austrian School of Economics, the suspected Austrian Nazi
war-criminal, Kurt Waldheim, became Secretary-General of another
community, the United Nations (1972–1981). In his 1977 Voyager
spacecraft proclamation to the universe, Waldheim sent ‘greetings on
behalf of the people of our planet. We step out of our solar system into
the universe seeking only peace and friendship, to teach if we are called
upon, to be taught if we are fortunate. We know full well that our planet
and all its inhabitants are but a small part of the immense universe that
surrounds us and it is with humility and hope that we take this step.’1
By his own account, Hitler (1939 [1925], 55) did not encounter
anti-Semitism until he arrived in Vienna. The hold that he exerted over
Germans (in Austria and Germany) has a parallel in the hold that Hayek
and Mises exerted over Austrian School economists and post-1974 public
policy. Buchanan (1992, 130) observed that there was ‘too much defer-
ence accorded to Hayek, and especially to Ludwig von Mises who seemed

© The Author(s) 2017 415

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4_14
416 14 50: The Nobel Prize Community, 1901–

to demand sycophancy.’ American Opinion (the magazine of the John

Birch Society) and the Jewish-born Rothbard (1988, 115) supplied both
the deference and the sycophancy: ‘we all realized that in Mises we were
seeing the last trailing clouds of glory of the culture of pre-World War
One Old Vienna, a far finer civilisation than we shall see again.’
The gullible ‘sovereign’ consumers of Austrian ‘knowledge’—from
sources such as the hagiographic Café Hayek website—have not been
alerted by its producers to the role that Viennese Café intellectuals
(and gutter demagogues) played in Hitler’s intellectual development:
he absorbed the proto-Nazi climate created by prominent families like
the von Hayeks. Vienna remains an intensely anti-Semitic city; Austria
refuses to pay compensation to Nazi victims or to investigate senior
Austrian Nazis (Zuroff 2002); and when evidence about Waldheim’s
Nazi past emerged during the 1986 Austrian presidential campaign, his
electoral popularity increased (Art 2006, 116–117). But Waldheim had
lied: he had been in the ‘Balkans as Greek Jews were rounded up for
transport to concentration camps. Hayek was hardly exercised by these
allegations’ and told Cubitt (2006, 284) ‘that he had never had any liking
for Waldheim, but that the fuss made by the foreign press was foolish.’
To non-believers, some Austrian ‘knowledge’ appears indistinguish-
able from fraud. As a sovereign-producer, Hayek (2009a [1979], 13, 20)
regarded ‘knowledge’ as that which could profitably be sold to gullible
consumers: ‘as you perhaps know, at the beginning of 1929, I predicted
the American crash … I was asked to Chicago where I was a member of
the Committee on the Social Sciences [sic].’ The evidence reveals that
Hayek was ‘asked’ not to desert his family: his 1949 migration to Chicago
(via Arkansas) was driven by a sixteen-year failure to force his wife to relo-
cate herself and their two children to Vienna. Using one of his deceptive
words, ‘special,’ Hayek (1978a, 1994, 126, 98) explained:

I should never have wished to leave England, especially if I could have

continued to live at Cambridge … English ways of life seemed so naturally
to accord with all my instincts and dispositions that, if it had not been for
very special circumstances, I should never have wished to leave the country
again; I felt at home among the English because of a similar temperament.
This, of course, is not a general feeling, but I think most Austrians I know
 50: The Nobel Prize Community, 1901– 417

who have lived in England are acclimatized extraordinarily easily. There

must be some similarity of traditions, because I don’t easily adapt to other
countries.

Hayek disdained America: ‘I had been in America before I ever came

to England, I was here as a graduate student in ‘23 and ‘24, and although
I found it extremely stimulating and even knew I could have started on
in an assistantship or something for an economic career, I didn’t want to.
I still was too much a European and didn’t the least feel that I belonged
to this society. But at the moment I arrived in England, I belonged to it.’2
During a Road to Serfdom promotional tour, he

got up … without the slightest idea of what I was going to say. But I began
with a tone of profound conviction, not knowing how I would end the
sentence, and it turned out that the American public is an exceedingly
grateful and easy public. You can see from their faces whether they’re inter-
ested or not. I got through this hour swimmingly, without having any
experience, and if I had been told about it before, I would have said, ‘I can’t
possibly do it.’3

Hayek (1992a [1944], 208), who promoted ‘certain moral standards’

including the ‘sacredness of truth,’ was awarded the 1974 Nobel Prize
for two achievements. First, an apparently fraudulent 1931 job-interview
assertion about having predicted the Great Depression:

von Hayek’s contributions in the field of economic theory are both pro-
found and original. His scientific books and articles in the twenties and
thirties aroused widespread and lively debate. Particularly, his theory of
business cycles and his conception of the effects of monetary and credit
policies attracted attention and evoked animated discussion. He tried to
penetrate more deeply into the business cycle mechanism than was usual at
that time. Perhaps, partly due to this more profound analysis, he was one
of the few economists who gave warning of the possibility of a major eco-
nomic crisis before the great crash came in the autumn of 1929.4

Hayek told Bartley that he had noticed ‘very much nowadays, how
selective my memory is increasingly becoming … Another phenomena
418 14 50: The Nobel Prize Community, 1901–

of which I have recently became aware—I sometimes wish I could return

to psychology, I have so many ideas in that field—how much memory
depends on having remembered the thing before. And if you have never
remembered the thing before, usually it is gone’ (cited by Caldwell 2007a,
342). At best, Hayek had false memory syndrome. Shortly after winning
the Nobel Prize, he asserted that he ‘was one of the only ones to predict
what was going to happen. In early 1929, when I made this forecast,
I was living in Europe which was then going through a period of depres-
sion. I said that there [would be] no hope of a recovery in Europe until
interest rates fell, and interest rates would not fall until the American
boom collapses, which I said was likely to happen within the next few
months.’ This (non-)prediction provided Austrian business cycle theory
with religious certainty:

What made me expect this, of course, is one of my main theoretical beliefs

that you cannot indefinitely maintain an inflationary boom. Such a boom
creates all kinds of artificial jobs that might keep going for a fairly long
time but sooner or later must collapse. Also, I was convinced after 1927,
when the Federal Reserve made an attempt to stave off a collapse by credit
expansion, the boom had become a typically inflationary one. So in early
1929 there was every sign that the boom was going to break down. I knew
by then that the Americans could not prolong this sort of expansion indefi-
nitely, and as soon as the Federal Reserve was no longer willing to feed it by
more inflation, the thing would collapse. In addition, you must remember
that at the time the Federal Reserve was not only unwilling but was unable
to continue the expansion because the gold standard set a limit to the pos-
sible expansion. Under the gold standard, therefore, an inflationary boom
could not last very long [emphasis in original]. (Cited by Skousen 1993,
266–267)

During the early part of the Scientific Revolution, to avoid further

European depopulation, the Wars of Confession (1517–1648) ended
in truce: religious ‘knowledge’ would henceforth remain largely exempt
from scrutiny. In England, the 1647 Putney Debates overcame what
Christopher Hill (2012, 64) called the ‘stop in the mind’ to reject the
divine right of kings and plan a new constitution—which led, two years
later, to regicide.5 Hayek (1973, 19) hoped that his devotees would
 50: The Nobel Prize Community, 1901– 419

prevent scrutiny of the ‘cultural heritage’ of his desired neo-Feudal social

order: ‘not articulated in words and therefore also are not discussed or
consciously examined.’
Increasingly sophisticated and evidence-based pattern recognition
led—through astrology—to astronomy: religion has always been an inte-
gral part of the human story. The right to ‘believe’ or ‘not believe’ is the
hallmark of a tolerant society—but if someone ‘believes in’ both the fraud
Hayek and the Angel Moroni what else do they believe? Skousen (1993,
267), an ‘observant’ Mormon and Austrian School ‘wealth-building’
newsletter salesman observed: ‘Hayek’s report appeared in Monatsberichte
des Osterreichischen Instituts fur Konjunkturforschung (1929). Lionel
Robbins [2012 (1931)] referred to Hayek’s prediction of the depres-
sion in America in the Foreword to Hayek’s Prices and Production.’ In a
biographical essay (which Hayek read before publication), the German-­
speaking Hayekian, Leube (1984, xix), asserted that in February 1929,
‘Hayek became the first to predict the coming crisis in the United States.’
However, referring to the 1929 crash, the editor of the Business Cycles
volumes of The Collected Works of F. A. Hayek, confirmed: ‘there is no
textual evidence for Hayek predicting it as a concrete event in time and
place’; we lack ‘convincing evidence of a prediction that conformed to
what Robbins suggested in his foreword’ (Klausinger 2010, 227, 2012,
172, n10).
In 1934, Hayek’s job interview fraud was apparently uncovered by
two University of Chicago economists, one of whom became a founda-
tion member of his Mont Pelerin Society (Leeson 2017c). In 1984, over
lunch at the Reform Club, Hayek embraced and promoted the Austrian
School fraud that the ‘father’ of market failure, Pigou, was a gun-runner
for Stalin (Leeson 2015a).
The second justification for Hayek’s Nobel Prize was his understanding
of ‘knowledge’ and his promotion of ‘functional efficiency’:

The Academy is of the opinion that von Hayek’s analysis of the functional
efficiency of different economic systems is one of his most significant con-
tributions to economic research in the broader sense. From the mid-thirties
he embarked on penetrating studies of the problems of centralized plan-
ning. As in all areas where von Hayek has carried out research, he gave a
420 14 50: The Nobel Prize Community, 1901–

profound historical exposé of the history of doctrines and opinions in this

field. He presented new ideas with regard to basic difficulties in ‘socialistic
calculating,’ and investigated the possibilities of achieving effective results
by decentralized ‘market socialism’ in various forms. His guiding principle
when comparing various systems is to study how efficiently all the knowl-
edge and all the information dispersed among individuals and enterprises
is utilized. His conclusion is that only by far-reaching decentralization in a
market system with competition and free price-fixing is it possible to make
full use of knowledge and information.6

Secular-trained economists recognize both the strengths and weak-

nesses of markets: how market fundamentalism gained religious traction
within universities requires a detailed examination. One of the prin-
ciples of economics is that unregulated markets cannot make full use
of knowledge and information because of public good characteristics:
with free riders, the market would thwart invention and innovation. In
consequence, governments try to overcome this market failure through
(socially suboptimal) patents, copyrights and so on.
If the technology input into the production function is defined by
market failure, there are also strong reasons for suspecting the presence
of market failure in the market for the other two inputs. Pigouvian
human capital analysis emphasizes that the market for education is not
socially optimal: subsidies are required. If tertiary entry is controlled
by professional bodies (such as the American Medical Association), the
resulting income will be higher than necessary and rent will be captured
(Friedman and Friedman 1998, 71–76). Schools and universities pro-
duce both knowledge and accreditation—they have some sovereignty
power and access to the data about objective probabilities, while con-
sumers (parents and their children) have only a subjective calculation
about the probability that a particular qualification will lead to related
employment.
Many private secondary schools compete for customers by highlight-
ing their success in placing graduates in high-status courses (law, for
example), while universities have financial incentives to expand the mar-
ket for incoming law students regardless of the market for outgoing law
graduates. A business that turned expensive inputs into an excess supply
 50: The Nobel Prize Community, 1901– 421

of outputs would fail—unless the inputs are forced to bear the costs of
both the production and the excess supply. For example, in Australia—
which has 60,000 practicing solicitors—the number of law graduates has
increased from 6149 in 2001 to 12,742 in 2012 (Tadros 2014). Many
law graduates are obliged to do unpaid ‘internships’ (receptionists, etc.):
Hayekian deregulation has produced not human capital but structural
unemployment.7
Since non-piece rate labour has some control over its marginal revenue
product, ‘efficiency’ (above market clearing) wages paid to insiders might
increase effort, reduce shirking and lower Real Unit Labour Costs (leav-
ing a market-based problem for outsiders). And there are strong reasons
for suspecting that it is not privately optimal for banks to raise interest
rates to equilibrate supply and demand for loanable funds because of
asymmetric information: credit will be rationed in markets with imper-
fect information (Stiglitz and Weiss 1981). And privately optimal credit
crunches are recession-generating mechanisms.
Before The Road to Serfdom (1944), Hayek’s major contribution to
world history had been to promote the dysfunctional deflation that
exacerbated the Great Depression and facilitated Hitler’s rise to power.
Herman Obermayer (2011) has documented the American Nazi Party
in Arlington, Virginia 1958–1984. Coincidentally, perhaps, in I Choose
Liberty, Rockwell (2010 [1999], 291) explained that Arlington House
has, for Austrians, a quasi-religious significance: Neil McCaffrey, was a
‘brilliant student of Catholic theology, literature, and history, and a saintly
man’ who was ‘sound on the so-called civil war’ and had founded the
Conservative Book Club in 1964, and built a ‘booming market among
National Review and Human Events readers.’ McCaffrey then ‘noted
that there were not enough books for people to buy’ and so ‘founded
Arlington House in 1965, and named it after Robert E. Lee’s ancestral
home, stolen by Lincoln for a Union cemetery.’ Rockwell highlighted
a central concern of Austrian economists: ‘I still hope to see’ Arlington
House ‘returned some day … Though a Yankee, I never subscribed to
the Lincoln cult, and I admired the Southern secessionists for taking the
original constitutional compact seriously.’
422 14 50: The Nobel Prize Community, 1901–

According to his biographer, President Reagan was prone to

flights of fantasy that were loosely based on stories or statistics he had taken
from Human Events, Reader’s Digest, or the local newspaper and lodged in his
mental card file. Reagan was sort of an equal opportunity reader, who tended
to believe that anything he saw in print was true, particularly if it reinforced
his point of view. He had a powerful but indiscriminate memory that rarely
distinguished between the actual and the apocryphal … White House prag-
matists believed he often paid more attention to articles in Human Events,
particularly at the outset of his administration, than to the information he
received in his national security briefing. (Cannon 2000, 102, 316)

In 1947, as President of the Screen Actors Guild, Reagan supported

the ‘blacklist’ of alleged Communist sympathizers: ‘I detest, I abhor their
philosophy, but I detest more than that their tactics, which are those of a
fifth column, and are dishonest, but at the same time I never as a citizen
to see our country become urged, by either fear or resentment of this
group, that we ever compromise with any of our democratic principles
through that fear or resentment’ (cited by Cannon 2000, 245).
In 1950, Hayek was less scrupulous: within weeks of arriving at the
University of Chicago he constructed his own ‘Austrianlist’ of academics to
be targeted for liquidation (Chap. 10, above). According to Steve Hanke
(2007), a senior economist on Reagan’s Council of Economic Advisers
(1981–1982), ‘Hayek was one of Ronald Reagan’s favorite thinkers’—but
Hayek had a low opinion of Reagan’s intelligence (Cubitt 2006, 144).
According to Nicholas Wapshott (2013), when Reagan met Margaret
Thatcher in April 1975, they ‘bonded instantly. Although born almost
a generation and an ocean and continent apart, they found they were
completing each other’s sentences.’ Having received the Nobel Prize four
months before, Hayek was an international celebrity. But according to
Wapshott, ‘Both instinctive politicians rather than taught ideologues,
they discovered they had both found validation for their convictions in
the works of Friedrich Hayek,’ who he described as ‘at that time a long-­
forgotten theorist even among conservatives.’
Rockwell (2011a) appears to believe—or at least repeat—whatever
nonsense fits his ideological preconceptions—even when the nonsense is
 50: The Nobel Prize Community, 1901– 423

provided by a transparent fraud. For example, in ‘Australia Didn’t Have a

Lincoln,’ he reported that Shenoy had told him that her adopted country
was ‘freer than the US … Because Australia never had a civil war, and
so we still have states rights … Jefferson was correct about competitive
sovereignty helping to preserve liberty.’
Rockwell (1995, 117, 115, 2010 [1999], 292) described his Rothbard-­
inspired epiphany about ascribed status: Abraham Lincoln and Franklin
Delano Roosevelt were ‘dictators,’ and the State

cannot improve on, and indeed only destroys, the social and economic
system that grows out of property rights, exchange, and natural social
authority [emphasis added] … The good folks who resisted the civil-
rights juggernaut were not necessarily ideologically driven. Mostly they
resented horrible intrusions into their communities, the media smears,
and the attacks on their fundamental freedoms that civil rights repre-
sented; In defense of capitalism, Rothbard was uncompromising. But he
did not see the market as the be-all and end-all of the social order. For
him, capitalism was not a ‘system,’ but a consequence of the natural order
of liberty.

Sobran (1995, 38) heard Rothbard ‘attack Lincoln and defend the
Mafia (up to a point) on libertarian principles’; and Rothbard taught
Alan Carlson (1995, 55) ‘lessons I will never forget about the true identity
of the old American republic, and about the nature of a regime of liberty.’
Presumably referring to the era before the abolition of slavery, Rockwell
proclaimed that he is ‘devoted to the old [pre-1861?] American republic’
(cited by Palmer 1997).
By neoclassical assumption: the consumption of religious ‘knowl-
edge’ generates immediate utility (plus the expectation of eternal util-
ity), while its production, supply and conspicuous consumption are also
driven by the expectation of optimizing results. Branding allows farmers
to identify their sheep, and consumers to believe that they can utility-­
rank ‘Coke’ and ‘Pepsi’: ‘faith’ inspires a loyalty that secular producers
aspire to match. Using Alfred Marshall’s two blades of the scissors, British
neoclassical analysis separates the self-interested sovereignty-seeking sup-
pliers of religious knowledge (the First Estate and their successors) from
424 14 50: The Nobel Prize Community, 1901–

their consumers (the Third Estate), while in the Austrian version, tithe-­
receivers—allegedly—obey the commands of the tithe-givers. Hayek,
Mises and Rothbard were the Gods and Ayn Rand The Goddess of the
Market (Burns 2009).
Austrian references to ‘God’ are not a conceit, or fanciful metaphor,
but an indulgence-driven-certainty that hate-promoting, Jewish-born
atheists like Rothbard would go to Christian ‘Heaven’ because ‘The Lord
God knows His own’ (Paul 1995). Rothbard had ‘turned his back on the
devil’ (Gottfried 1995, 53); ‘One final trait of Rothbard’s: he was a man
of faith. He believed that there is order in the universe, that natural law is
real and intractable, that truth exists and that it can set us free. His faith
was the faith of all men who have put ideals ahead of selfish concerns’
(Rockwell 1995, 121).
Religiosity is the lingua franca of Austrian fund-raising—even for mili-
tant atheists. Thus Block (2007) revealed the source of Austrian knowl-
edge: ‘Although I am a devout atheist, I just know [emphasis added]
Murray is now up there somewhere, cackling away at a thousand miles
per hour with glee. God bless you, you are doing the Lord’s work, so
to speak.’ Their religion appears to be a (cynically?) manipulated tool
designed to extract tax-exempt funds from what they contemptuously
call ‘business conservative donors.’ The atheist Block (1995, 25) stated
that ‘Murray is now up there somewhere, looking down on us and root-
ing us on, while at the same time delighting himself with the human
condition. We can’t let him down.’ And Hamowy (1995, 97) stated: ‘I’m
not a religious man and I have no right to ask for a place in heaven. But I
hope that when I die God will choose to let me in, because it sure would
be nice to see Murray again.’
According to Clyde Wilson (1995, 41), Rothbard ‘deeply understood
the religious dimension of the American character, and he deeply under-
stood, and identified with, the rebellious populist streak that makes for
what in the national character is truly and distinctly American.’ According
to Robert Higgs (1995, 59): ‘Murray also had extensive knowledge of the
religious history of the United States, upon which he expounded with
great gusto in his historical lectures, in which the diabolical doings of
the postmillennial [sic] pietists figured prominently.’ And according to
Salerno (1995, 80):
 50: The Nobel Prize Community, 1901– 425

Regarding religion, Murray’s historical studies had increasingly convinced

him that it played an enormous role in both American political history and
the history of economic thought. In particular Murray recognized the
positive role in bolstering liberty in the U.S. played by liturgical
­
Christianity. This brand of Christianity, which is epitomized by the
Roman Catholic Church-according to Murray ‘the original and continuing
Christian Church’—emphasizes personal salvation through participation
in the Church’s liturgy and denies that the Kingdom of God can be
­established on earth by the puny efforts of man.

Salerno emphasized the sectarian nature of the Austrian cult:

Unlike the ‘pietistic’ sects of American Protestantism, which tend to be

millennialist, Catholicism denies that the second coming of the Messiah
depends on prior establishment of a Kingdom of God on earth and thus
places no duty on its members to purify and save the whole of humanity
through ‘social action’ (read, State compulsion). Moreover Murray,
although an agnostic, also came to conclude from his historical inquiries
that all societies are inevitably religious and that irreligion on a society-­
wide scale is impossible and undesirable, because a formal religion, specifi-
cally Christianity, is necessary as the natural repository of the traditional
moral rules [emphasis added] that are necessary to reinforce and comple-
ment a classical liberal or libertarian legal code in order for a real market
society to survive and flourish. Even Nazi Germany and the Soviet Union,
which were conceived in deranged attempts to abolish religion, succeeded
only in supplanting Christianity with pagan and Marxist millennialism,
respectively.

The Fourth Estate can strengthen or weaken democracy. Nixon was

exposed to justice by Washington Post reporters, while the Hayekian
Rupert Murdoch is (rightly or wrongly) suspected of ‘picking winners’
and offering to support their election campaigns (through the ‘creative
destruction’ of their opponents) in return for the selective deregulation of
media ownership laws.
Through ‘yellow journalism,’ William Randolph Hearst (1863–1951)
created the world’s largest newspaper and magazine ‘empire.’ His newspa-
pers ran columns, without rebuttal, from Nazis such as Alfred Rosenberg
426 14 50: The Nobel Prize Community, 1901–

and Hermann Göring; and although he lived openly with his mistress,
Hearst used his power to ‘puff’ both the Cold War and the morality-­
promoter, the Reverend Billy Graham (Nasaw 2000). In the highly
charged secular-religious atmosphere that his newspapers helped create,
his granddaughter, Patty Hearst (1982), was kidnapped by ‘crooks’ for
‘Equality’: the United Federated Forces of the Symbionese Liberation
Army. Ironically, the subsequent rendezvous with the police (17 May
1974) was the first ‘breaking news’ televised shoot-out (Toobin 2016).
From ‘God’-and-gold conquistadors, through Jamestown and
Jonestown and beyond, religion-promoting entrepreneurs have thrived
in America—many driven by a drug-and-alcohol-fuelled pursuit of
wealth, power and sex. ‘Liberty’ and ‘morality’ were invoked on both
sides of the debate over slavery and segregation. Martin Luther King is
remembered for his biblical phrases and secular civil rights achievements;
but thirty-four days before he was awarded the 1964 Nobel Peace Prize,
J. Edgar Hoover’s FBI sent him a threatening letter (which he may have
interpreted as an instruction to commit suicide): ‘King there is only one
thing left for you to do. You know what it is. You have just 34 days in
which to do. You are done. There is but one way out for you. You better
take it before your filthy, abnormal, fraudulent self is bared to the nation’
(cited by Theoharis 1993, 102–103).
On the other side of this divide, the offspring of a white supremacist
and his family’s sixteen-year-old African-American maid is described in
Dear Senator: A Memoir by the Daughter of Strom Thurmond (Washington-­
Williams and Stadiem 2006). For five years (1952–1957), Eugene ‘Bull’
Connor’s efforts to preserve white supremacy in Alabama as Birmingham
Commissioner of Public Safety (1937–1963) was interrupted after he
was found in a bedroom in the Tutwiler Hotel with his secretary. To
avoid the unintended consequences, Connor pleaded on behalf of his
‘poor sick wife’: ‘You’re crucifying me. You’re ruining me politically.’ At
a 1955 gathering at the Tutwiler Hotel, 300 Methodist ministers and
laymen were informed that those who promoted racial integration were
using ‘a sort of brainwashing’ (Eskew 1997, 97, 98, 112–113). In Selma,
when the Reverend King tried to enter the whites-only Hotel Albert, he
was assaulted by a State’s Rights Party activist, James Robinson (Bruns
2006, 109).
 50: The Nobel Prize Community, 1901– 427

In 1968, after assassinating King, James Earl Ray planned to escape

to Rhodesia (Horne 2000, 24); and in 2015, another white suprema-
cist, Dylann Roof, wore a jacket displaying the flags of both Rhodesia
and apartheid South Africa before killing four pastors (including the
Democratic State Senator Clementa Pinckney) plus five others at the
Emanuel African Methodist Episcopal Church in Charleston, South
Carolina.
The Economist (2007) reported that Ian Smith’s ‘Rhodesian rebellion
really had no similarities to the American revolt 200 years earlier. As reb-
els go, he had rather more in common with the Dixie variety.’ Wallace
(1919–1998), the Methodist Governor of Alabama who in 1968 waved
the Dixiecrat flag defined an Alabama segregationist as someone ‘who
conscientiously believes that it is in the best interests of Negro and white
to have a separate education and social order.’8 In 1940, Hayek (1976a,
189, n25) examined the ‘relative attractiveness’ of different ‘social orders’
and considered sending his children to America, ‘on the tacit assumption
that my children would there be based with a white not with a coloured
family.’
The 15th Amendment enfranchised 700,000 (male) former slaves and
empowered Congress to enforce voting rights state by state. Although
blacks only constituted 13 per cent of the overall population, they
were a majority in Mississippi and South Carolina. In 1868, the North
Carolina General Assembly adopted a new state Constitution that cre-
ated state-supported public schools; and several black Republicans were
elected to Congress. But Reconstruction ended when Northern troops
were withdrawn in 1877; and in 1900, North Carolina amended its
Constitution to require a literacy test and a poll tax. This was overturned
by the 1965 Voting Rights Act; which in 2013 was undermined by the
North Carolina Republican voter ID law (Ruttenberg 2015). In 2016,
the Fourth Circuit Court of Appeals delivered a ‘stern rebuke’ to North
Carolina’s Republican General Assembly and Governor Pat McCrory: ‘In
what comes as close to a smoking gun as we are likely to see in modern
times, the State’s very justification for a challenged statute hinges explic-
itly on race—specifically its concern that African Americans, who had
overwhelmingly voted for Democrats, had too much access to the fran-
chise’ (cited by Graham 2016).
428 14 50: The Nobel Prize Community, 1901–

The US Senator for South Carolina (1832–1843, 1845–1850), John

Caldwell Calhoun (2003 [1848], 651, 2013 [1837], 631), described a
version of what Hayek (1978a) later labelled ‘the traditional element, the
element of surrounding rules’9:

Ours is the government of the white man. The great misfortune of what
was formerly Spanish America, is to be traced to the fatal error of placing
the colored race on an equality with the white. This error destroyed the
social arrangements which formed the basis of their society. This error we
have wholly escaped; I take the higher ground. I hold that in the present
state of civilization, where two races of different origin, and distinguished
by color, and other physical differences, as well as intellectual, are brought
together, the relation now existing in the slaveholding States between the
two, is, instead of an evil, a good—a positive good … I hold then, that
there never has yet existed a wealthy and civilized society in which one por-
tion of the community did not, in point of fact, live on the labor of the
other.

The Constitution of Liberty (2011 [1960], 186–189, 190–193) was

organized around a variant of this theme: the motives of those who sup-
plied labour was ‘largely a matter of fitting himself into a given frame-
work … [this was] not only the actual but the preferred position of the
majority of the population.’ The great majority preferred to submit to
the workplace regime because it ‘gives them what they mainly want: an
assured fixed income available for current expenditure, more or less auto-
matic raises, and provision for old age. They are thus relieved of some of
the responsibilities of economic life … To do the bidding of others is for
the employed the condition of achieving his purpose.’ The ‘masses’ had
to be persuaded of the importance of aristocratic entitlements: ‘it is only
natural that the development of the art of living [emphases added] and of
the non-materialistic values should have profited most from the activities
of those who had no material worries.’
According to an article in William J. Buckley Jr.’s National Review,
the climax of the (post-Nobel Prize) Hillsdale College tax-exempt Mont
Pelerin meeting was George Roche III toasting Queen Elisabeth II—
accompanied by
 50: The Nobel Prize Community, 1901– 429

a mood of sheer bliss … as if an Invisible Hand had prankishly arranged a

sneak preview of Utopia … Such fellowship is of course much enhanced in
the vicinity of the bar, which was open three times a day … What we could
not expect was the pampering and elegant food that attended us from
beginning to end … One fellow disappeared into the service regions with
a bottle of champagne for the staffers, and almost immediately a fresh bot-
tle appeared on his table. It was magic … Clearly, unseen benefactors had
picked up the tab; otherwise Hillsdale’s budget would have rocketed into
federal orbit … It was lovely. (Wheeler 1975)

Shortly afterwards, Buchanan (2015 [1979], 260) described the

colonizing ideological mission of public choice theory and Austrian
economics:

We are now winning a few battles in the ongoing war of ideas, but we can-
not lapse into complacency. The islands of comparative strength in modern
American academia (Miami, VPI, UCLA, Chicago, Rochester, NYU,
Washington)—these must be strengthened and new islands (Auburn,
Colorado) must be created. The diverse approaches of the intersecting
Bschools must be the bases for conciliation, not conflict. We must marry
the property-rights, law-and-economics, public-choice, Austrian subjectiv-
ist approaches. And we must continue to be able to secure sufficient inde-
pendent and external financial support to ward off threats from the
academic enemies within our institutions. Let us jointly resolve, those of us
who labor in the academic vineyard and those of us who provide support.

According to Hayek (1976b, 189, n25), one of the ‘Old World’ tra-
ditional rules of conduct was the existence of ‘sharp social distinctions.’
Hayek (1949, 420–421) distinguished between ‘the real scholar or expert
and the practical man of affairs’ and non-propertied intellectuals, who
were ‘a fairly new phenomenon of history,’ and whose low-ascribed status
deprived them of what Hayek regarded as a central qualification: ‘experi-
ence of the working of the economic system which the administration of
property gives.’10 With respect to the administration of tax-exempt prop-
erty, Liggio regarded ‘follow the money’ scrutiny as the uninvited ghost
at the ‘liberty’ banquet (Chap. 3, above).
430 14 50: The Nobel Prize Community, 1901–

Roche (1977)—and Hayek—sermonized about morality on Buckley’s

Firing Line (‘Is There a Case for Private Property’): their ideological oppo-
nents had ‘undercut individual morality,’ and created ‘all sorts of depar-
tures from the idea that it is possible to establish a difference between
right and wrong … Morality is the difference between right and wrong
in concrete, specific decisions and transactions between and among indi-
viduals.’ Roche’s own life experiences had, he informed his audience, pro-
vided examples of the ‘responsibility of the parent to do something for
the education of his own children.’ As an illustration, Roche reminded
the audience that ‘none of our money comes from the federal government
or the state government’; which Buckley reinforced: ‘You disdain it.’
Rockwell (2010 [1999], 292) had known Roche while at Arlington
House and ‘admired the fact that he was … a free enterpriser with Austrian
sympathies.’ Miseans obsessed about Rothbard as Hamlet obsessed about
his father: ‘I shall not look upon his like again’ (Gordon 1995, 61). Roche
became a fund-raising liability after Lissa Jackson Roche confessed to her
husband, George Roche IV, that for nineteen years she had been having
sex with his father—and then apparently committed suicide by firing a
bullet into her brain (Rapoport 2001).
Hayek (1978a) noted that amongst ‘the pupils whom Mises had
taught in the United States. Some rather reluctantly now admit me as
a second head, and I don’t think people like Rothbard or some of the
immediate Mises pupils are really very happy that they are not …’ Hayek
changed the end of his sentence: ‘they are not—The rest are not orthodox
Misesians but only take part of their views from Mises.’11 After Hayek’s
death (23 March 1992), Rothbard and Sennholz became lead-bomber
pilots in the Austrian ‘accelerate the Climate of Hate in America’ mis-
sion. Using a term often reserved for religious revelation and incendiary
devices, Thornton (1995, 28) described Rothbard’s ‘siege of coruscat-
ing economic rationality.’ In ‘Murray Rothbard (Jew) Defending David
Duke’ on the ‘White Pride World Wide’ Stormfront website, Rothbard’s
(1992a, 5) defence of the former Klansman won a coruscated recruit:
‘Finally, a Jew I’d be willing to invite into my house.’12
The Klu Klux Klan used so much dynamite that Birmingham became
known as ‘Bombingham.’ In 1963, the Klan bombed the 16th Street
Baptist Church, killing four young African-American girls. The FBI soon
 50: The Nobel Prize Community, 1901– 431

identified the suspects and obtained boastful and incriminating taped

evidence. But where Nixon failed to withhold tapes from prosecutors, the
Presbyterian J. Edgar Hoover succeeded. However, in 1971, the newly
elected Alabama Attorney General, William J. Baxley, pursued the case
and in 1977, Robert ‘Dynamite Bob’ Chambliss was convicted of mur-
der. He refused to plea-bargain in the belief that Governor Wallace would
pardon him (Raines 2000).
Baxley discovered that the church-bombers believed that they had
‘God’ in their corner: ‘I thought we would have some deathbed confes-
sions—people not wanting to go to their maker with a guilty conscience.
We haven’t seen that. It just shows how far gone those hard-core haters
were. They don’t have any remorse. Hatred of people on account of their
color just overcomes other factors in their brains’ (cited by Raines 2000).
Abused wives and girlfriends were less supportive and testified about
those who had bragged about the bombings: after almost four decades
(2001 and 2002, respectively), Thomas Edwin Blanton, Jr. (the son of
a racist, Thomas Edwin ‘Pops’ Blanton, Sr.) and Bobby Frank Cherry
were also convicted of the murders. As Rothbard (1994d, 9) defended
Byron De La Beckwith, Jr., the Klan assassin of the ‘black’ voter regis-
tration activist, Medgar Evers, because he had been convicted for being
politically ‘incorrect,’ so Cherry described himself as a ‘political prisoner’
(O’Donnell 2004).
On the first Monday in June, the State of Alabama celebrates Jefferson
Davis Day—a public holiday to commemorate the President of the
Confederate States of America.13 In 1961, Robert Shelton (‘The Klan
is my belief, my religion’) expanded ‘The Alabama Knights of the Ku
Klux Klan’ into ‘The United Klans of America’ (with himself as ‘Imperial
Wizard’). The last recorded lynching in the US history occurred in
Alabama (of the nineteen-year-old African-American, Michael Donald)
on 21 March 1981—the ensuing legal battle bankrupted the organiza-
tion (New York Times 2003).
After failing to win the 1958 Alabama gubernatorial election, Wallace
reportedly told his campaign finance director; ‘I was out-niggered, and
I will never be out-nigggered again’14; the Republican Party is perceived
to have copied his 1968 Presidential campaign strategy of appealing to
‘alienated white voters’ (Anderson 1998). Did the Austrian School of
432 14 50: The Nobel Prize Community, 1901–

Economics have their own version of Nixon’s ‘Southern strategy’? Why

in 1982 did Rothbard and Rockwell locate their Austrian School tax-­
exempt ‘educational charity’ in Auburn, ‘Alabomber’—just a short drive
away from Greensboro, the site of the 1979 massacre undertaken by the
Klan and the American Nazi Party?
In ‘Right-Wing Populism: A Strategy for the Paleo Movement,’
Rothbard (1992a, 12) explained: ‘In a sense the strategy we are now
proclaiming is a strategy of Outreach to the Rednecks.’ According to
Codename Greenkil: The 1979 Greensboro Killings, Harold Covington,
after spending 1973–1976 in Rhodesia and South Africa, was intensely
associated with one of the involved organizations: the National Socialist
Party of America (Wheaton 2009). Dylann Roof claims Covington, a
science-fiction writer (in the style of Ayn Rand and Robert Heinlein)
as an inspiration for his hoped-for race war; and in turn, Covington’s
Radio Free Northwest website stated that ‘liberals’ were afraid of Roof ’s
Charleston shooting spree because it was ‘a preview of coming attrac-
tions’ (Thielman 2015).
‘Von’ Hayek, with his Nazi Party family, was ‘consciously devoted to
the vision and splendour of the Habsburg Empire’ (Leube 2003a, 12);
and was determined to ‘return to a world’ in which he was not subject to
the indignity of equality before the law. His disciples seek to carry ‘aloft
the intellectual flag’ of the Habsburgs (an Invisible Empire); the ‘Invisible
Empire’ of the Klan believe that non-whites should have ‘three-fifth’ priv-
ileges: a ‘Blue Blood’-‘Redneck’ marriage made in Austrian ‘Heaven’?
Was Rothbard a New York carpetbagger preying on the prayers of
Southern racists? The April 1992 acquittal of four police officers in the
Rodney King beating case provoked the worst riot (in terms of death-­
toll) since the 1863 New York draft riots: for fund-raising purposes, did
Rothbard try to provoke African-Americans into initiating a race war
(Chap. 11, above)?
According to Black Sun: Aryan Cults, Esoteric Nazism, and the Politics of
Identity, there is a symbiotic relationship between black separatists, such
as Elijah Muhammad, and white separatist, such as the American Nazi
Party and its Führer, George Lincoln Rockwell (Goodrick-Clarke 2003).
By 1972, Elijah Muhammad’s Nation of Islam had a net worth of $75
million (Evanzz 2001).
 50: The Nobel Prize Community, 1901– 433

Defectors are punished: for abandoning the Nation of Islam, ‘Malcolm

X’ was assassinated (Dyson 1995; DeCaro 1996); and to stem the flow of
defectors, Jim Jones forced his disciples to commit mass suicide in cult-­
camp ‘town’ named after himself (Hall 1987). Incumbents deter entrants:
prior to his murder in Carthage jail (1823–1844), the reception received
by the polygamist, Joseph Smith (after his alleged encounters with the
Angel Moroni and the hidden book of golden plates) was similar to that
received by Osama bin Laden between the Afghan Wars (1989–2001).
Boettke (2004) emphasized his non-deviationism in ‘Reflections on
Becoming an Austrian Economists and Libertarian, and Staying One.’
Scientific knowledge-construction is a constrained-optimization exer-
cise: suppliers are rewarded for reliable contributions, punished for error
and expelled for fraud. Austrian ‘knowledge’ is protected by the public
stoning theocrat, North (1986a, xix, xxiii):

Fighting to Win … At least we admit that we are street fighters. We prefer

to stab our opponents in the belly, publicly … Take no prisoners! If our style
is not considered polite in certain academic circles, then to avoid being
manhandled, it would be wise for these epistemological child molesters to
stay out of print, hidden from public view in their tenured classroom secu-
rity. If they go into print … they can expect ‘the treatment’ [North’s
emphases].

North’s mission is ‘to do what I can to get their funds cut off.’ Or as
Rockwell (2014) put it: ‘No, we don’t play nice. We tell the unvarnished
truth.’
Conspiracies and religiosity thrive in the John Birch Society: Alfred
Stern, ‘the millionaire Soviet spy who fled the country to avoid prosecu-
tion for espionage … financed the invention known as “the My Lai mas-
sacre,” in order to demoralize our troops and build anti-U.S. propaganda
around the world’ (Stang 1977, 47).
For ‘going into print,’ Hayek’s Nobel Prize co-recipient was also on the
John Birch Society hit-list:

radical Gunnar Myrdal recently got $575,000 from Carnegie to produce

race propaganda of the sort it hired him to do in 1937 when he employed
434 14 50: The Nobel Prize Community, 1901–

Reds to research ‘An American Dilemma’ … You will remember that

Myrdal’s book deserves a major share of the discredit for the present racial
bitterness in our country. It gave the Warren Court the excuse to give the
federal government direct control of our schools. It lead directly to the
present, neo-Nazi technique of forced bussing. In fact, the Carnegie gang,
apparently believes this Swedish Red did such a ‘good’ job that it is reward-
ing him with still more tax exempt money to do it all over again … It is
certainly fair to say that, without the help of these tax-exempt King Kongs,
the Conspiracy to enslave mankind would be pulling out its greasy hair.
The foundations supply the fertilizer that winds up polluting the national
atmosphere … Enough is enough, and it is well past time that tax exemp-
tion were withdrawn from those financing collectivism and subversion in
America. (Stang 1977, 35, 45, 53, 54)

Religious entrepreneurs know that capital and technology can increase

their marginal product: from the radio-priest, Father Coughlin, to
television-­evangelists, to recruiting intermediaries to fly planes into the
World Trade Center. Universities (and tax-exempt, pseudo-academic
think-tanks and Institutes) are modern Cathedrals: for the gullible, their
titles have sacerdotal potency. Salerno (1995, 80) described his devil-­
take-­the-hindmost ‘brand of Christianity’: ‘personal salvation through
participation in the Church’s liturgy … no duty on its members to purify
and save the whole of humanity through “social action”.’
To intensify brand-loyalty, religious entrepreneurs attach the ‘liberty’
label to their product: from the ‘anti-mongrelisation’ of the ‘white race’
‘Liberty Lobby’ (Mintz 1985) to Falwell’s ‘Liberty University.’ According
to Falwell, if Chief Justice Warren and his associates had ‘known God’s
word and had desired to do the Lord’s will,’ the 1954 Brown versus Board
of Education decision would ‘never had been made. The facilities should
be separate. When God has drawn a line of distinction, we should not
attempt to cross that line’ (cited by Cross 2014, 160).
In America, the newly arrived colonists were subjects of a practicing
homosexual and promoter of ‘The Divine Right of Kings’; the ‘children
of the book’ read The King James Bible. For public consumption, King
James I (1566–1625) listed sodomy—a capital offence in England—
among those ‘horrible crimes which ye are bound in conscience never to
forgive’ (cited by Sharpe 2000, 171, 211).
 50: The Nobel Prize Community, 1901– 435

In America, the leader of the left-Freudian cult, Wilhelm Reich, was

‘regarded as something akin to a messiah’ (Edwards 1977); so too was
Mises, the leader of the right-Freudian cult (Chap. 9, above). The sexual
activities of these cult leaders appear to be unlawful; and if reports about
Bartley’s interviews (on or off tape?) are accurate, Hayek’s sexual practices
with his cousin were also (at the time) illegal.
According to Falwell: ‘Gay folks would just as soon kill you as look
at you; AIDS is not just God’s punishment for homosexuals, it is God’s
punishment for the society that tolerates homosexuals’ (cited by Johnson
and Eskridge 2007). ‘God’s’ anger had caused 9–11:

I really believe that the pagans, and the abortionists, and the feminists, and
the gays and the lesbians who are actively trying to make that an alternative
lifestyle, the ACLU [American Civil Liberties Union], People For the
American Way, all of them who have tried to secularize America. I point
the finger in their face and say ‘you helped this happen.’ (Cited by White
2004, 55)

Through marketed fear of ‘Hell’ and stories about ‘doubting Thomas,’

the faithful are taught to respond to adverse evidence by intensifying
their brand-loyalty: When Prophecy Fails: A Social and Psychological Study
of a Modern Group that Predicted the Destruction of the World describes the
response of loyal consumers to predictive failure (Festinger et al. 1956).
Hayek responded to the predictive failures of Austrian business cycle the-
ory by encouraging greater faith (Chap. 4, above); and Caldwell (2010a)
appears to regard evidence of Austrian ‘hucksterism’ as sacrilege.
When sovereignty-seeking suppliers of ‘knowledge’ are exposed as
frauds, they have an alibi and a fund-raising device:

I beg you to forgive me. And most of all to you my Lord and my Savior, my
Redeemer, the one I serve and I love and I worship. I bow at his feet, who
has saved me and washed me and cleansed me. I have sinned against You,
my Lord, and I would ask that Your Precious Blood would wash and cleanse
every stain until it is in the seas of God’s forgetfulness, not to be ­remembered
against me anymore … I know that many would ask why, why? I have
asked myself that 10,000 times through 10,000 tears. Maybe Jimmy
Swaggart has tried to live his life as though he were not human.
436 14 50: The Nobel Prize Community, 1901–

Swaggart’s business model funnelled inputs (tithes) into outputs

(prostitutes); and when caught-out again, he told the ‘Family Worship
Center’: ‘The Lord told me it’s flat none of your business’ (cited by Bauer
2008, 238, 151).
The American Founding Fathers separated Church from State—a sep-
aration that theocrats like Cornelius Van Til and bin Laden sought to
end: public stoning is an essential part of their ‘liberty.’ Yet while 9–11
was not, apparently, taxpayer-funded, some of Van Til’s disciples are—via
the Austrian School of Economics. Their hero, Hayek (1978a), sought
to overthrow the Constitution of the United States and replace it with a
single sentence written by a dictatorship-promoting European aristocrat
(Chap. 1, above).15
According to Rockwell (2014): ‘And once you read Rothbard, you
never look at the world the same way again … PLEASE DONATE.’
According to Rothbard (1988, 35), between 1934 and 1940, Mises was
‘in exile in Geneva from fascist Austria.’ In reality, on 1 March 1934,
Mises became an Austro-Fascist (Vaterländische or Patriotic Front) mem-
ber 282632 and Austro-Fascist social club (Werk Neues Leben) member
406183 (Hülsmann 2007, 677, n149).
Hayek (1978a) was ‘always influenced by Mises’s answers, but not fully
satisfied by his arguments. It became very largely an attempt to improve
the argument, which I realized led to correct conclusions. But the ques-
tion of why it hadn’t persuaded most other people became important to
me; so I became anxious to put it in a more effective form.’16 In Liberalism
in the Classical Tradition, Mises (1985 [1927] 19, 44, 42–51) declared:
‘It cannot be denied that Fascism and similar movements aiming at the
establishment of dictatorships are full of the best intentions and that their
intervention has, for the moment, saved European civilization. The merit
that Fascism has thereby won for itself will live on eternally in history.’
To put this into a ‘more effective form,’ Hayek projected an image which
allowed his premier devotee to assert in The Washington Post: ‘Hayek
himself disdained having his ideas attached to either party’ (Caldwell
2010b).17
Hayek’s disciples regard him as Deus ex machina: sent by God as a
martyr to protect ‘liberty’ and block the road to serfdom. Hayek (1949,
427, 437, 1978a) required these (priestly?) ‘inferior … mediocrities’
 50: The Nobel Prize Community, 1901– 437

as intermediaries to operate between himself and ‘the masses.’18 As he

explained to Chitester, a television entrepreneur:

the secondhand dealers in ideas—have to play a very important role and

are very effective. But, of course, in my particular span of life I had the
misfortune that the intellectuals were completely conquered by socialism.
So I had no intermediaries, or hardly any, because they were prejudiced
against my ideas by a dominating philosophy. That made it increasingly my
concern to persuade the intellectuals in the hopes that ultimately they
could be converted [emphasis added] and transmit my ideas to the public at
large. That I cannot reach the public I am fully aware. I need these inter-
mediaries, but their support has been denied to me for the greater part of
my life.19

Wattenberg (1999) interviewed Hamowy, Vaughn and Dean Baker

for a Public Broadcast Service television programme on ‘Freidrich [sic]
Hayek.’ Wattenberg (1999) asserted that the Mont Pelerin Society
‘sought to combat vigorously the large government initiatives champi-
oned by intellectuals such as economist Sir [sic] John Maynard Keynes.’
Wattenberg continued: ‘That’s in the Constitution, copyright. I mean,
that was by the founders, the right to copyright … [patents are] also in
the Constitution.’ Baker (1999) corrected him—‘No, the patents are not
in the Constitution. Copyrights are, not patents’—before undermining
the central proposition of Hayek’s ‘spontaneous’ order: ‘the government
sets up rules that could be very beneficial to some groups, be very harm-
ful to others. How those rules are defined is not given to us by God, we
have to sit there and take a look at it and say, how does it make sense to
define these rules.’
Vaughn (1998, 1999)—the GMU author of Austrian Economics in
America: The Migration of a Tradition—uncritically repeated Hayek’s
propaganda:

It’s an issue of where those rules come from. Hayek did believe in the rule
of law … What he had a problem against was something he called con-
structivism, which is your notion of let’s sit around and figure out what
makes sense here, because he said, nobody, no group of people have enough
wisdom or knowledge to overturn these rules of law. What you can do is
438 14 50: The Nobel Prize Community, 1901–

tinker around the edges, and that’s—and which kinds of things that you
apply the rule of law to becomes very important.

After winning the Nobel Prize, Hayek’s (1975b) promotion of ‘major

social instability’ to reduce wages gathered momentum. The ‘primary
cause of the appearance of extensive unemployment’ is disequilibrium
prices and wages: ‘wages are only rigid downwards … Remember, please:
this is the crucial concept.’ A ‘secondary’ contraction or depression could
make unemployment ‘general.’ Hayek, who couldn’t specify how much
‘social unrest’ it would take in ‘restoring the market,’ stressed: ‘The point
I want to make is that this equilibrium structure of prices is something
we cannot know beforehand because the only way to discover it is to give
the market free play.’
Mrs Thatcher (1978) declared that

the old concept of a partnership between Church and State lies very near
the heart of traditional Tory thinking, and in that partnership Tories always
believed that the Church had primacy because it was concerned with those
things which matter fundamentally to the destiny of mankind … For a
nation to be noted for its industry, honesty and responsibility and justice,
its people need a purpose and an ethic. The State cannot provide these—
they can only come from the teachings of a Faith. And the Church must be
the instrument of that work.20

If Henry VIII’s Church of England is now ‘the Tory Party at prayer,’

Austrian ‘liberty’ is theocracy at work behind Hayek (1978a) at play:
‘I don’t believe a word of it. [laughter] … I suppose you understand I
practically never talk about [religion]. I hate offending people on things
which are very dear to them and which doesn’t do any harm.’21 Otto, the
Habsburg Pretender, was delighted to observe that ‘There is an extraor-
dinary revival of religion in France … I never would have thought one
could dare to say in France what Sarkozy is saying—that the separation of
church and state in France is wrong’ (cited by Watters 2005).
According to Herbener (2007), ‘Eschewing the typical professor’s
desire to teach fewer students in fewer classes, Sennholz taught large
classes in introductory economics in the belief that freshmen were better
 50: The Nobel Prize Community, 1901– 439

candidates for persuasion [emphasis added] than upper classmen … Under

his direction, Grove City College became the world’s leading undergrad-
uate center for the study of Austrian economics.’ Boettke (2005, 14–15)
claims to be a devout follower of Sennholz and Presuppositionalism,
one sect of which follows Van Til’s teachings. Presuppositionalism is a
branch of Christian apologetics which maintains that faith and divine
revelation are the only basis for rational thought. One of Van Til’s dis-
ciples, Rousas John Rushdoony—known as the ‘ayatollah’—promoted
the ‘Mosaic code’ under which homosexuals, adulterers and those who
show disrespect to their parents are executed by public stoning (Worthen
2008, 399–400). Another Van Til disciple, North (1985, 203, 1986b,
135, 304, 1987a, 461), insists that adulterers and ‘guilty animals’ and a
variety of others including blasphemers and ‘the Sabbath-breaker gath-
erer of sticks’ must be ‘stoned to death … It is clear why God established
stoning as the normal mode of execution in a covenantal commonwealth.
Stoning is the symbolic equivalent of head-crushing [North’s emphasis].’
According to North (2012), the second amendment of the Constitution
of the United States is justified by Mosaic Law. Non-stoning executions
were legitimized by secular states; in contrast, the ‘stones’ of an armed
citizenry were cheap and readily available. Under a regime of Austrian
‘liberty,’ Hayek would have been liable to multiple stonings.
The Charles Koch Foundation/Cato Institute’s Tom Palmer believes
that he needs handguns to protect himself from homophobes (Duggan
2007): he and other ‘gay liberationists’ (Bartley, Hamowy, Kresge, Raico,
etc.) also seek protection by promoting Austrian ‘liberty.’ In ‘Classical
Liberalism, Multiculturalism, and God,’ Rockwell (2008b), cited Pope
Benedict XVI: ‘rooted in the heart of liberalism is the Christian image
of God’; and in ‘The Libertarian Principle of Secession,’ Rockwell
(2015) referred to Raico as the ‘great libertarian historian.’ Rockwell is
also thought to be the author of ‘The Pink House’ (published in the
fund-raising Ron Paul Newsletter, Chap. 11, above): ‘I miss the closet.
Homosexuals, not to speak of the rest of society, were far better off when
social pressure forced them to hide their activities.’ Another (Rockwell-
or North-written?) ‘Paul’ newsletter, which asserted that HIV-positive
homosexuals ‘enjoy the pity and attention that comes with being sick,’
approved the slogan: ‘Sodomy=Death.’22
440 14 50: The Nobel Prize Community, 1901–

For theocrats, Idolatry=Death; and during the Third Reich, Elected

Socialist=Death. Sennholz (2002) taught that many economists are
‘acclaiming the praises of government. Since Keynes, they have unques-
tioningly accepted that public works promote employment, impart sta-
bility, and raise national income. According to this view, government
takes on a magical connotation and color. It is no longer legislators, regu-
lators, and tax collectors but a source of grace and goodness, virtue and
welfare. In a sense, it is regarded as God on earth.’
According to Austrian ‘knowledge,’ in death, Sennholz—who was serv-
ing a competitor ‘God’—went ‘on to receive the heavenly benediction,
“well done, thou good and faithful servant.” Godspeed, Hans, and thank
you for all you shared with us’ (Hendrickson 2007). During the Third
Reich, ‘Total War’ bombing raids targeted civilians to ‘break the morale’
of the ‘home front.’ Sennholz must have been traumatized by losing ‘his
parents and only sibling, his brother’ (Hendrickson 2007)—who, pre-
sumably, had been killed either by the democracies or the Soviet Union.
Did Sennholz devote his life to being revenged on those two systems?
To win the Iron Cross for flying a Messerschmitt Bf-109 Luftwaffe
bomber, Sennholz would, presumably, have had to follow Hitler’s instruc-
tions: ‘close your heart to pity’ (cited by Nicholls 2000, 317). Nixon told
Frost (1978, 128) that he wished to continue bombing South East Asia
to keep ‘a peace we had won … It would have been swift. It would have
been massive. And it would have been effective.’ In so far as Sennholz
had ‘empathy’ for his victims, for his own (short-run) psychological pro-
tection, did he persuade himself that ‘they deserve to die’? Many of the
Austrian economists interviewed for this AIEE series are aware—but
unconcerned—that their School is riddled with thieves and frauds: does
their ‘empathy’ lead them to project this collective self-image onto wel-
fare recipients?
According to Shenoy (2003), the Austrian revival was built on tax-­
exempt financial corruption: the facilities at the June 1974 revivalist
meeting in South Royalston, Vermont ‘really were horrible. The chap
who organized the conference, who shall remain nameless, owed the
owner of the hotel some money, so the conference killed two birds with
one stone.’ At the 1974 revivalist meeting, Austrians competed with each
other over what Friedman described as ‘rotten bastard’ proposals to force
 50: The Nobel Prize Community, 1901– 441

wounded veterans, the old, the young, the sick and the dying to seek
private charity (Chap. 9, above). Sennholz’s phrases ‘sang’ to Boettke—
such as the ‘welfare state as a giant circle with our hands in the pockets of
our neighbors … [which] communicated deep economic truths in easily
digestable [sic] nuggets … his lectures still ring loudly in my ears and
continue to make me think everyday. His lectures changed my life and it
is no exaggeration to say that they fuel my approach to economic educa-
tion to this day.’23 After a ceremony presided-over by the Pastor of the
Holy Trinity Lutheran Church in Grove City, Sennholz was buried with a
bomber plane engraved on his gravestone.24 Did he want it to be posthu-
mously known that he had ‘Hitlerian contempt for the democratic man’?
Many of Sennholz’s students regarded him as a ‘fascist.’ But according
to Austrians, he was the ‘quintessential antifascist, having lived under
a fascist regime, seen its errors, and come to America to remind us of
our own heritage of individual liberty; revealing, in that it exposed the
intellectual left in this country as the true fascists, eager to suppress any
position that dissented from their oppressive orthodoxy’ (Hendrickson
2007). Seven years after Sennholz’s arrival, Grove City College (1963–)
was deemed by the American Association of University Professors to have
become a violator of tenure and academic freedom—and has remained
on the list longer than any other college that is currently censured
(Hillsdale College joined the list in 1988).25 Sennholz, the sixth recipient
of the Mises Institute ‘Gary G. Schlarbaum Prize for lifetime defense of
liberty,’26 was

a legend … He discovered economic truth while in graduate school at

Marburg University after World War II … After becoming Mises’s first
American Ph.D. recipient, his own conversion to economic truth was com-
pleted when his mentor secured for him the job of translating Eugen von
Böhm-Bawerk’s 1,200 page, three volume work Capital and Interest into
English. Sennholz soon realized that an academic life would give him the
forum for proclaiming economic truth … Grove City College became his
home, as Mises was fond of reminding him ‘there is only one teaching posi-
tion where we are wanted—and you’ve got it’ … Like Mises, Sennholz
adhered to the twin beliefs that economics is rooted in the unchanging
nature of human action and that advancing economic truth is the right way
442 14 50: The Nobel Prize Community, 1901–

to live one’s life, even if the world remains unconverted … For him, eco-
nomic truth was a way of life, and his passion for it knew no bounds …
And, like leaven, the life of a gifted man well lived spreads its blessings ever
more widely [emphases added]. (Herbener 2007)

Austrian ‘economic truth’ inhabits a sphere that is unconnected to

either experience or evidence: in the 1970s, there will be ‘triple digit
inflation’ (Sennholz cited by Skousen 2007a); and when Britain left the
gold standard in 1931: ‘In one week England will be in hyperinflation’
(Mises cited by Hülsmann 2007, 633, 636, 641, n68). And Hayek’s mys-
tical ‘spontaneous’ order must replace rational examination. His disciples
promoted post-communist privatization—which led to the construction
of the ‘spontaneous’ neo-Feudal order of Russian of the Oligarchs.
Most economists favour ‘free’ trade; but only the devotionally incapac-
itated indiscriminately promote monetary unions: cost-benefit analysis
is required. But according to Sennholz (2002), assertions about reduced
costs and increased benefits were all that was required (to promote the
Euro): ‘The costs associated with currency exchange are reduced, and it
is easier to compare prices and costs across national borders. There are
many benefits to this.’27 For consumers, the prices of imported goods
have always been expressed in domestic currency terms (and for those
who now shop on the internet, converting foreign prices into domestic
currency costs are just a click away). Currency calculations for produc-
ers (seeking to compare domestic with international costs of inputs) is a
trivial part of the process.
If the Euro were abandoned, the costs associated with currency exchange
could be reduced to almost zero if the nineteen National Central Banks
of the ex-Eurozone supplied commission-free foreign exchange to domes-
tic banks—who could then be competitively encouraged to pass on the
zero cost to their customers.28 The Schuman Plan was designed to make
war between member states impossible. Having uncritically embraced
a single currency, the European unity project has revived anti-German
sentiment and the neo-Nazi right.
Sennholz (2002)—a ‘Misean for Life’—saw Mises, a card-carrying
Austro-Fascist, as ‘something of a father figure’: he was familiar with
Mises from his studies in Germany ‘but I did not know the full scope of
 50: The Nobel Prize Community, 1901– 443

Misesian economics until Human Action came out and my classes began
… I would sometimes use Human Action but would frequently skip the
first section on epistemology because the students weren’t ready for it.’ In
the second and third editions of Human Action, Mises (1963, 282, 1966,
282) lobbied for the ‘Warfare State’: ‘He who in our age opposes arma-
ments and conscription is, perhaps unbeknown to himself, an abettor of
those aiming at the enslavement of all.’
Sennholz (1922–2007) was twenty-five when the Luftwaffe bombed
the Spanish Republican town of Guernica; the Austrian ‘truth’ is that
Nazis were ‘wrongly blamed’: ‘It is, however, by no means certain that the
Germans bombed Guernica at all; that they did not is the likeliest infer-
ence to be drawn from an exchange of telegrams found in the captured
German archives. Nationalist planes did, however, bomb the railway
station and an arms factory—both legitimate military targets’ (Crozier
1967, 246–247).
According to Sennholz (2002), Mises ‘never despaired’; but as Margit
Mises and Hayek (1976a, 190) reported, Mises’ life was organized around
hysteria and despair: ‘since it was clear that the world was bent on the
cause whose destructive nature,’ as Mises’ Socialism ‘pointed out, it left
us little but black despair. And to those of us who knew Professor Mises
personally, it became, of course, soon clear that his own view about the
future of Europe and the world was one of deep pessimism. How justified
a pessimism we were soon to learn.’
In America, Sennholz (2002) ‘gave more than one hundred public lec-
tures to college assemblies and service clubs. I would fly my own plane, a
Grumman Tiger, from coast to coast for these engagements. I have been
a licensed pilot since I was 16.’ One of these ‘service clubs’ was the John
Birch Society for whom he gave nine fund-raising speeches in 1964 alone
(White Book of the John Birch Society 1964). His Grove City College
students were guinea pigs for these self-promotion tours: his ‘most mem-
orable classroom lectures’—‘from commodity speculation and real estate
investment to deficit spending and monetary inflation’—immediately
preceded his departure: ‘rehearsals’ on students: ‘At the heart of every
Sennholz presentation was a clarion call for personal responsibility, indi-
vidual liberty, and limited government’ (Reed 2007).
444 14 50: The Nobel Prize Community, 1901–

During the Third Reich, Jew=Death: ‘efficiency’ and ‘productivity’ had

sinister implications. Sennholz ‘did not believe in small classes because he
viewed himself as a missionary for liberty and he wanted to reach as many
of the “unconverted” as possible. He also argued that large classes were a
matter of “productivity”—one of his favorite themes.’ Sennholz recruited
students to become ‘academics’ because of the ‘verve and vibrancy’ of
his teaching and his ‘dedication to the moral order of freedom.’ Those
students now ‘hold posts of prominence in the battle for liberty whether
in the classroom, in non-profit advocacy groups, or in the board rooms
of foundations.’ One former student always introduced Sennholz at
Hillsdale College, Grove City College, and elsewhere with: ‘He speaks
with the incisive reason of a first-rate economist, the long-term perspec-
tive of an historian, and the fervor and conviction of an Old Testament
prophet, and all this with clarity of syntax punctuated with that distinc-
tive German accent.’ Whatever Sennholz lectured on, it could be ‘fully
comprehended by the uninitiated, respected by the veteran economist,
and which produced the will, in the listener, to defend liberty wherever it
was being threatened. For his contribution to my intellectual and moral
life and the lives of many thousands, I am eternally grateful’ (Sparks
2007).29
Like most, if not all, promoters of one-dollar-one-vote consumer sov-
ereignty, Sennholz sought to strip the dollar-paying consumers (his stu-
dents) of their sovereignty or sense of intellectual independence:

Interestingly, he did not encourage student questioning. That was just part
of the German continental view that in class, the professor had an exalted
place and therefore, he should be listened to attentively and without dis-
agreement or interruption … That German accent and his personal aura of
authority left it very clear to all members of the class—there would be no
disagreeing with Dr. Sennholz. (Sparks 2007)

The ‘observant’ Sennholz was ‘a very clever real estate investor and
became a multimillionaire by specialising in small-town rental properties.
He was probably the largest landlord in Grove City’ (Skousen 2007a).
This was the environment which produced Boettke (2004, 6, n4, 7),
who intellectually if not physically was one of Sennholz’s tenants: Mises
 50: The Nobel Prize Community, 1901– 445

and Hayek are both ‘advocates of the private property market order and
attempts to dehomogenize Mises and Hayek on the issue of private prop-
erty and knowledge is mistaken … Summing up, the argument made by
Mises and Hayek can be said to progress from property right to prices to
profit and loss and finally to politics.’
On one occasion, Sennholz’s rule was broken:

Once, Dr. Sennholz held forth for 45 minutes with a ringing defense of
free labor markets and a brilliant assault on compulsory unionism. With
five minutes left in the class, a student—obviously not an economics
major—raised his hand to ask a question. ‘Dr. Sennholz, what you say
sounds appealing but the fact is, not many people think that way. So there’s
got to be something wrong with what you’re saying.’ One hundred stu-
dents sat stone-faced and silent. Then came the response—gentle but firm,
and forever quotable. ‘Truth,’ said Hans, ‘is not a numbers game. You can
be alone and you can be right.’ Then a pause and the grand finale, ‘I may
be alone, but I am right.’ And of course he was …
Dr. Sennholz leaves a vast and enduring legacy. In all walks of life, thou-
sands of Sennholz students are spreading the good word about liberty and
free markets. Many are doing it from prominent platforms as economists,
educators, philanthropists, pastors [emphases added], and political leaders,
and all of us have endless and wonderful memories of how inspired we
were by the gold-plated tongue of our illustrious mentor. Hans always
urged his econ majors to put their freedom philosophy to work in the
teaching profession. (Reed 2007)

Sennholz (2002) ‘firmly’ believed that ‘good morals are the basis of a pri-
vate property order. Moral laws confirm individual dignity and responsi-
bility. Think of the commandments.’ With the exception of Mises (2007a
[1958]), after the Third Reich, most Germans and Austrians are sensitive
about appearing to apply the ‘unterlegen’ (inferior) label. But Sennholz
sought to humiliate his students into submission (and, presumably, did
the same with his one-dollar-one-vote renters). Scott Bullock, Senior
Attorney, Institute for Justice, Arlington, VA, recalled that Sennholz ‘did
believe students could ask stupid questions, and he did not hesitate to
inform of that, usually to great comedic effect.’30
446 14 50: The Nobel Prize Community, 1901–

What Harry Johnson (1975, 109) called the academic’s ‘40 hour week’
is sometimes difficult to explain to taxpayers. About half an academic’s
salary is for market-failure reasons: academic knowledge is published in
journals which do not pay fees. In contrast, think-tanks pay thousands of
dollars per fund-raising article. According to his resume, Sennholz pub-
lished ‘Thirty-six’ articles ‘in German journals and newspapers. Some
500 in American publications.’31 Sennholz published articles in American
Opinion, the journal of the John Birch Society (White Book of the John
Birch Society 1964); but unless a J-Store search has missed a treasure-­
trove, Sennholz published no refereed journal articles—just four pages of
reviews of German-language books (1958, 1963). How many hundreds
of thousands of tax-exempt dollars does that amount to per page? How
‘on earth’ does Grove City College distribute academic positions, tenure
and professorships?
Sennholz taught, ‘spoke and wrote’ Austrian Truth ‘like a drill ser-
geant. Dogmatic, zealous and driven’ (Skousen 2007a). In one of his two
book reviews, Sennholz (1963, 798–799) adopted a high moral tone:
‘In the opinion of this reviewer, a theory that fails to explain economic
reality either goes astray in its reasoning or is built on dubious premises.’
Sennholz (1987, 170) declared that AIDS-sufferers should be ‘treated as
criminals, yea, even as murderers, and … promptly quarantined from the
healthy community.’
Paul (2008a, 18, 5) declared: ‘Mises was the greatest economist of all
time’; and Rothbard and Sennholz were ‘especially helpful in getting first-
hand explanations of how the market functions. They helped me to refine
my answers to the continual barrage of statist legislation that dominates
the U.S. Congress. Their personal assistance was invaluable to me in my
educational and political endeavors.’ Paul was reciprocally helpful to
Miseans: in 1976, he employed the homophobic North (2010, 245–246)
to write a weekly newsletter. North, the self-styled ‘Tea Party Economist,’
is the recipient of the Mises Institute ‘Rothbard Medal of Freedom’ (which
Rockwell must have approved, if not initiated). According to Rockwell,
his own role in the newsletter was ‘just to bring the money in,’ while the
ghost-writer ‘is now long gone … He left in unfortunate circumstances’
(cited by Kirchick 2008).
 50: The Nobel Prize Community, 1901– 447

In Habsburg Austria, inferiors acknowledged their inferiority by bow-

ing to their superiors: the fourteen-year-old Hitler always ‘made a bow’
when greeting his Jewish family doctor (Hamann 2010, 20). In Austria,
even those with relatively low-ascribed status, such as Kurt Waldheim,
the son of a school inspector, looked down on him. Gitta Sereny (2001,
253, 250, 218) noted: ‘It is extraordinary in Germany and Austria, how
many people always smile when asked’ if they have read Mein Kampf:
‘that old condescension towards “Corporal Hitler, the house painter”
still survives.’ In Liberalism in the Classical Tradition, her delusional
step-father, Lieutenant ‘von’ Mises (1985 [1927], 44, 51, 19), promoted
General Ludendorff and Corporal Hitler and other ‘Fascists’ as defenders
of ‘civilisation,’ ‘liberty’ and ‘property’: ‘full of the best intentions.’
According to Rothbard, ‘never would Mises compromise his princi-
ples, never would he bow the knee to a quest for respectability or social or
political favor’ (cited by Rockwell 1995, 118). Mises had been ‘brought
up at a time when Austria was an empire and good manners and self-­
discipline were not only a prerequisite of the court, but a must for a
member of every cultured family. One does not lose good habits in later
life, nor did Lu’ (Margit Mises 1976, 143). In a letter to Ayn Rand, Mises
(2007a [1958], 11) implicitly explained what had been expected from
someone of Hitler’s lowly birth: ‘you are inferior and all the improve-
ments in your conditions which you simply take for granted you owe to
the effort of men who are better than you.’
Ludendorff must have approved the first proto-Nazi-proto-Soviet Pact:
Lenin’s April 1917 return to Russia on a German ‘sealed train’ (Marshall
2001, 321–322). When the Jewish-born journalist, Ella Winter (1963,
158), interviewed Ludendorff in 1931, he asked who she was working
for. When Winter replied, Harper’s Magazine and Scribner’s Magazine,
he responded: ‘In the hands of Freemasons, both of them; of course you
know that … The Freemasons, the Bolsheviks, the world international
financiers are trying to rule the world … They and the Jews.’ Winter
reflected: ‘I had not heard such talk outside a mental hospital and did
not know how to proceed with a supposedly rational political interview.’
Mises aspired to be the intellectual Führer of a Nazi-Classical Liberal Pact:
in 1938, he must have been shocked when the Nazis looted his Vienna
448 14 50: The Nobel Prize Community, 1901–

apartment. The chivalric Knights, von Ludendorff (November 1918) and

von Mises (July 1940), fled to safety in neutral countries.
Before the Nobel Prize, Hayek (17 April 1967) informed the
Administrator of Manuscripts at Syracuse University that he would
probably leave ‘instructions’ that his entire collection of correspon-
dence and manuscripts be ‘destroyed.’32 Had Machlup or the Nobel
Prize selection committee checked whether Hayek had predicted the
Great Depression they would, perhaps, have decided against taking him
on to Myrdal’s Prize as, apparently, a malicious practical joke (Chap. 1,
above). In 2024, the opening of the Nobel Archives may shed light on
this episode.33

Notes
1. https://www.youtube.com/watch?v=Bhuq9rNO_FQ
2. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
3. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
4. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/press.html
5. Hill was referring specifically to the Parliamentary ‘stop in the mind’—
which must have reflected a wider ‘stop.’ On 8 May 1660 (coinciden-
tally, 239 years before Hayek’s birth), Parliament proclaimed that King
Charles II had been the lawful monarch since the execution of his father,
Charles I (30 January 1649): the philosophies of both the Levellers and
the promoters of the divine right of kings were sidelined by a deepening
parliamentary democracy.
6. http://www.nobelprize.org/nobel_prizes/economic-sciences/laure-
ates/1974/press.html
7. Many law graduates should, presumably, be able to overcome their struc-
tural unemployment and retrain—or find less training-specific
employment.
8. http://www.pbs.org/wgbh/amex/wallace/sfeature/quotes.html
 Notes 449

9. Friedrich Hayek, interviewed by James Buchanan 28 October 1978

(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
10. ‘Though nobody will regret that education has ceased to be a privilege of
the propertied classes, the fact that the propertied classes are no longer
the best educated and the fact that the large number of people who owe
their position solely to the their general education do not possess that
experience of the working of the economic system which the administra-
tion of property gives, are important for understanding the role of the
intellectual.’
11. Friedrich Hayek, interviewed by Axel Leijonhufvud date unspecified
1978 (Centre for Oral History Research, University of California, Los
Angeles, http://oralhistory.library.ucla.edu/).
12. https://www.stormfront.org/forum/t566223/
13. In 2015, ‘Confederate Memorial Day’ and ‘Robert E. Lee’s birthday’
were removed from Georgia’s official state holiday calendar.
14. http://www.pbs.org/wgbh/amex/wallace/sfeature/quotes.html
15. Friedrich Hayek, interviewed by James Buchanan 28 October 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
16. Friedrich Hayek, interviewed by Earlene Craver date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
17. ‘Even though Hayek himself disdained having his ideas attached to
either party, he nonetheless provided arguments about the dangers of the
unbridled growth of government’ (Caldwell 2010b).
18. ‘Nobody, for instance, who is familiar with large numbers of university
faculties (and from this point of view the majority of university teachers
probably have to be classed as intellectuals rather than as experts) can
remain oblivious to the fact that the most brilliant and successful teach-
ers are today more likely than not to be socialists, while those who hold
more conservative political views are as frequently mediocrities … it
seems to be true that it is on the whole the more active, intelligent, and
original men among the intellectuals who most frequently incline toward
socialism, while its opponents are often of an inferior calibre’ (Hayek
1949, 427, 437).
19. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
450 14 50: The Nobel Prize Community, 1901–

20. http://www.margaretthatcher.org/document/103522
21. Friedrich Hayek, interviewed by Robert Chitester date unspecified 1978
(Centre for Oral History Research, University of California, Los Angeles,
http://oralhistory.library.ucla.edu/).
22. http://www.newrepublic.com/article/politics/98883/ron-paul-incendiary-
newsletters-exclusive
23. http://www.visionandvalues.org/2007/07/on-hans-a-compendium-
of-tributes-to-dr-hans-f-sennholz/
24. http://www.findagrave.com/cgi-bin/fg.cgi?page=gr&GRid=55113757
25. http://www.aaup.org/our-programs/academic-freedom/censure-list
26. https://mises.org/fellowships/gary-g-schlarbaum-prize-lifetime-
defense-liberty
27. Sennholz (2002) continued: ‘The problem is that the currency is a fiat
currency and a political creation. Unlike the gold standard, it is not a
market phenomenon. All high expectations for the euro have to be con-
sidered in light of that fact.’
28. Foreign exchange rate risk can be hedged against.
29. ‘He told me later, when I was teaching myself, that he always tried to
observe the rule of telling students what he was about to say, then saying
it, and then telling them what he had just said. That sounds redundant,
but with Sennholz’s ability at recasting material in slightly different ways
one never tired of listening to his presentations. His lectures were models
of economy themselves’ (Sparks 2007).
30. http://www.visionandvalues.org/2007/07/on-hans-a-compendium-
of-tributes-to-dr-hans-f-sennholz/
31. http://www.sennholz.com/resume.php
32. Hayek Papers Box 52.20.
33. http://www.nobelprize.org/nomination/archive/
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 Index1

NUMBERS & SYMBOLS Akademische Gymnasium, 343

101st Airborne Division, 363 Alabama gubernatorial election, 431
1647 Putney Debates, 418 Alabama National Guard, 364, 365
1863 New York draft riots, 432 Alchian, A., 36, 46, 114–116, 189,
1954 Supreme Court Brown versus 290, 292, 295, 296, 360, 361
Board of Education, 59, 344, Alexander, C.F., 157
374, 434 Al-Qaeda, 377, 404
1965 Voting Rights Act, 355, 427 Ambras Castle, 103
1965 Watts riots, 360 American anti-colonialism, 73, 161
1993 World Trade Center bombing, American banking system, 243,
136, 377 305
American Constitution, 13, 123,
212, 318, 362, 365
A American Medical Association
Aarons, M., 161 (AMA), 356, 357, 420
Adam Smith Institute, 221, 402 American Opinion, 374, 416, 446
Aerial bombardment, 398 American Protestantism, 425
Afghan Wars, 433 American Renaissance conference,
AIDS, 96, 97, 435, 446 191

Note: Page numbers followed by “n” refers to notes.

1

© The Author(s) 2017 501

R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution
of Economics, DOI 10.1007/978-3-319-52054-4
502 Index

American Revolution (1765–1783), Austrian business cycle theory and

42, 267, 365 Hayek triangles, 131–136
Amir, Y., 23 Austrian liberty, 7, 91
Amnesty International, 56 Austrian Nazi war-criminal, 415
Amonn, A., 279 Austrian School academics chant, 91
Anarcho-Hayekianism, 54 Austrian School of Economics, 12,
Anderson, A., 374 17, 50, 60, 69, 136, 153, 157,
Anderson, J., 239 194, 204, 206, 222, 262, 280,
Anglo-American neoclassical schools, 306, 319, 346, 377, 381, 402,
329 405, 415, 431, 432, 436
Annual price of congestion, 338 Austrian School Roman Catholics,
Anti-Comintern Pact, 56, 195, 218 336
Anti-federalists, 373 Austrian School United Front, 1–4
Anti-imperialists, 373 Austro-Fascist, 51, 52, 217, 251,
Anti-mongrelisation, 434 436, 442
Anti-New Dealers, 373 Austro-Hungarian Empire, 277, 293
Anti-Semitic campaign, 251, 328 Ayatollah, 439
Anti-Semitism, 3, 6, 11, 74, 89, 145,
158, 180, 218, 223, 224, 261,
264–266, 273n43, 279, 300, B
310, 407, 415 Backward people, 60, 103
Anti-state pamphleteers, 373 Al-Baghdadi, A.B., 22
Archival Insights into the Evolution Baker, D., 407, 437
of Economics (AIEE) series, 3, Baker, G.F., 299
4, 11, 440 Baker, P., 437
Arendt, H., 262 Balfour, A., 344
Arkansas National Guard, 59 Banzer, H., 215
Arlington House, 421, 430 Bark, D., 167
Armey, R., 287–288 Barker, G., 185
Aryan ancestry, 222, 343, 369 Bartley, W.W., 10, 74, 87, 88, 99,
Aryan Brotherhood, 222, 377 100, 109n60, 109n64, 128,
Assassination, 23, 59, 60, 124, 181, 189, 195, 220, 341, 391–393,
195, 253, 320, 365, 372, 376, 408, 417, 418, 435
377, 427, 431, 433 Bastiat, F., 353
Attlee, C., 399 Bauer, P., 100
Austria, 1, 33, 69, 112, 143, 171, Baxendale, T., 147
201, 235, 278, 310, 328, 350, Bebel, A., 269
393, 415 Beccaris, B., 225
 Index
   503

Bellerby, J.R., 252 Bright, J., 176

Below-full-cost pricing, 333 Britain, 1, 6, 56, 59, 76, 77, 121,
Bentham, J., 50, 329 155, 158, 182, 245, 248, 255,
Benton, J., 82–83 257, 264, 285, 384, 442
Berger, P., 11 British Broadcasting Corporation,
Bernadotte, F., 22 263
Bernays, E., 7, 282–300 British Conservative Party, 43,
Bernays, M., 301n10 398–400
Bernstein, E., 269 British Medical Association, 350
Beveridge, W., 147, 241, 242, 260, British Neoclassical School, 284
268, 280, 284, 288–290, 294 British West African Squadron, 73
Bin Laden, Osama, 433, 436 Brook, R., 122
Birmingham Commissioner of Browne, S., 207
Public Safety, 365, 426 Brüning, H., 6, 255–257
Black mothers, 351 Bruno, G., 132
Black Power, 366 Buchanan, J., 34, 48, 49, 55, 85,
Black Sea, 59 135, 209, 212–214, 227, 248,
Block, W., 3, 4, 18, 337, 375, 378, 265, 290, 313, 355, 376, 381,
424 382, 391, 396, 415, 429
Blumert, B., 380 Buckley, W.F., Jr., 84, 87, 305, 308,
Boettke, P., 3, 10, 11, 14, 15, 19, 34, 320, 428, 430
42, 80, 81, 83–85, 88, 94, 95, Bunche, R., 361
147, 151, 168n11, 237, 254, Burgess, G.F., 187
257, 259, 291, 309, 314, 433, Burns, A.F., 20, 176, 248, 313
439, 441, 444 Burns, J., 319
Bogart, H., 186 Bush, G.W., 23, 211, 377
Bolshevism, 173, 328
Bombingham, 430
Bork, R.H., 34, 46, 47, 97, 98, 127, C
132, 133, 164, 172, 209, 278, Café Hayek, 291, 416
279, 318, 352 Caldwell, B., 9–11, 34, 41, 42, 56,
Borlaug, N., 208 61, 62, 70, 85, 86, 104, 151,
Bostaph, S., 86 179, 207, 228, 254, 255, 262,
Bozell, L.B., 305 310, 312, 314, 352, 353, 370,
Branden, N., 92, 93 394, 397, 400, 405–407, 428,
Brandt, W., 383 435
Braun, S., 218 Calhoun, J.C., 70–72, 85, 86, 174,
Breckinridge, J.C., 363 175, 428
504 Index

California State College, 60, 320 Civilization of apartheid, 73, 209

California State University, 87 Civil Rights Act of 1963, 58
Calley, W.L., Jr., 125 Civil Rights Act of 1964, 375
Cambridge School of Economics, Classical Liberal ideas, 245
251 Classical liberalism, 58, 74, 152,
Cambridge University, 344 164, 176, 245, 254, 312, 328,
Campbell University, 375–376 337
Cannan, E., 241–243, 251–254, Classical Liberal Pact, 33, 217, 218,
284, 290, 330 222, 245, 447
Capital goods, 333 Climatologists, 334
Capitalism, 103, 134, 135, 173, 192, Clinton, H., 77
312, 320, 342 Coase, R., 2, 14, 77, 168n2, 241,
Card, D., 338 287, 313
Carr-Saunders, A., 298 Cold War, 61, 210, 235, 384, 426
Carson, A., 423 Commissioner of Public Safety, 365,
Carver, T.H., 79 426
Catholicism, 36, 149 Comprehensive Health Insurance
Cato Institute, 42, 439 Plan, 351
Censure McCarthy campaign, 392 Confederates, 373, 381
Central bank, 114, 146, 259, 332, Conservative Book Club, 421
370 Conservative Party, 43, 158, 382,
Certificate of Participation, 93 398–400
Chamberlain, J., 202, 227, 228, 307 The Constitution of Liberty, 54, 56,
Chamberlain, N., 121–122 58, 72, 76, 98–100, 104, 113,
Charity, 129, 153, 193, 194, 211, 120, 130, 153, 157, 161, 173,
212, 285, 322, 336, 341, 441 194, 216, 266, 288, 375, 389,
Charles Koch Foundation, 42, 43, 399, 406–408, 428
76, 439 Constructivism, 46, 100, 118, 174,
Chile, 131, 216 407, 412n27, 437
Chilean democracy, 404 Consumer sovereignty, 34, 40, 103,
China, 162, 165 131, 147, 150, 165, 213, 215,
Chitester, R., 47, 48, 111, 113, 144, 298, 363, 372, 373, 400, 444
406, 437 Contagious diseases, 96, 187
Christian Church, 95, 425 Copernicus, N., 132
Christianity, 43, 55, 164, 237, 238 Corporate America, 401
Church-bombers, 431 Covington, H., 432
Churchill, W., 398–399 Cowles Commission, 312, 313, 315
City University of New York, 353 Cox, S., 267, 407
 Index
   505

Craver, E., 34, 50, 51, 118, 144, Destructionist, 84, 351
193, 343 Destructive hurricane, 328
CRIMSON, 392 DiLorenzo, T., 20, 93, 370, 371
Croatia, 215 Disraeli, B., 121, 372
Crozier, B., 59, 84, 111, 216, 320 Dobb, M., 294, 298, 299
Cubitt, C., 9, 14, 43, 52, 56, 62, 80, Dobbs, Z., 268
98, 100, 109n60, 113, 129, Dollfuss, E., 217
158, 159, 173, 187, 220, 224, Domestic servants, 43, 116
265, 266, 331, 341, 342, 403, Donadio, D., 83
416 Drucker, P., 118, 223
Currie, L., 298 D'Souza, D., 191
Czechoslovakia, 240, 264 Dühring, E., 223
Duke, D., 306, 307, 322n3, 430
Dukes, B., 187
D
Dahrendorf, R., 159
Dalton, H., 10, 284, 285 E
Davies, J., 123 Ebeling, R., 17, 93, 99, 144, 145,
Davies, Sir H., 147 150, 331
Deacon, R., 35, 359 Economica, 89, 299, 399
Declaration of Independence (1776), Economic truth, 81, 259, 441, 442
58, 240 Economist, 82, 427
Decolonization, 73, 74, 158 Edelman, B., 95
Defectors, 433 Educational charity, 129, 153, 212,
Deflation, 2, 52, 69, 114–116, 152, 322, 432
154, 204, 209, 218, 225, 235, Edwards, Paul, 281
236, 242, 243, 246, 256, 259, Egalitarianism, 47
287, 330, 421 Eichmann, A., 211, 258, 262
Demand for money, 253 Eisenhower, D., 59, 210, 211, 402
De Marco, A. de V., 328 Encounter, 384, 385
Democracy, 39, 40, 52, 61, 69, 70, Engels, F., 192
104, 120, 135, 150, 152, English garden, 103
154–158, 160, 164, 172, 174, English language, strength of, 77, 79,
183, 184, 213, 216, 219, 244, 80
249–251, 259, 319, 328, 366, English revolution (1642–1649), 42
372, 373, 375, 382, 398, 402, Equal Protection Clause of the 14th
404, 425, 440, 448n4 Amendment, 344
Democracy-Soviet Pact, 56 Equilibrium wage, 116, 333, 338
506 Index

Eugenics, social hygiene, and Nazi Fishbein, M., 356

euthanasia, 57, 224–228, 350 Fisher, A., 131
Europe (1962–1992), social market Fisher, I., 114
middle way, 327, 350 Fisher, R.A., 344
European aristocrats, 13, 87, 212, Fixed exchange rates, 248
251, 436 Flexible exchanges, 248
European Center of Austrian Flowers, W., 23
Economics Foundation, 315, Flynn, M., 94
353 Foot-in-the-door leftist technique,
357
Ford, G., 24, 127, 320, 357, 402
F Fourth Circuit Court of Appeals, 427
Falwell, J., Jr., 130, 434, 435 Fourth Estate, 425
Falwell, J., Sr., 187 Fox News, 249, 306, 374
Family Worship Center, 436 France, 162, 182, 196, 264
Fascism, 3, 10, 34, 52, 56, 61, 153, Francis, S., 191, 306
179, 180, 195, 196, 215, 218, Free enterprise, 39, 40, 43
225, 243–245, 251, 254, 255, The Freeman, 403
297, 328, 370, 377, 407, 436 Free market, 9, 25, 45, 87, 148, 155,
Fascist-Classical Liberal Pact, 164, 256, 316, 331, 336, 383
217–218 Free-Market Economics (FEE), 81,
Fascists, 4, 13, 17, 52, 56, 57, 62, 190
152, 155, 178, 179, 185, 187, Freeport Doctrine, 363
190, 195, 215, 217, 218, 238, Free price-fixing, 26, 113, 334
244, 245, 253, 261, 278, 328, Free society, 44, 45, 78, 81, 258, 379
404, 409, 441, 447 Free trade, 165, 193, 198n24, 285,
Fascization, of America, 238 332, 442
Fashionable opinion among Free workers, 328
intellectuals, 75, 76, 155, 406 Freiburg School, 383
Federal paratroopers, 363 Freiherr, K., 256
Federal Reserve, 305, 342, 418 French Revolution (1789–1799), 42,
Federal Reserve Board, 342 156, 162, 175, 377
Ferdinand, F., 181, 365 Freud, S., 43–45, 49, 50, 54,
Fetter, F.A., 131, 147, 283, 363 277–282
Finer, H., 151, 152 Friedman, M.F., 2, 12, 20, 21, 27,
First Austrian Republic 94, 128, 225, 238, 248, 267,
(1919–1934), 69 285, 287, 306, 313–315,
First Estate, 35, 121, 135, 423 323–324n19, 324n21, 344,
First Reich, 22, 187, 407 356, 381, 384, 391, 403
 Index
   507

Frost, D., 52, 112, 133, 204, 440 Gestapo, 263, 398
Führer of a Nazi/Classical Liberal Global Financial Crisis, 112, 210
Pact, 3, 33, 34, 245, 447 Global warming, 339
Fundamental Constitutions of Goethe, J.W., 112–113
Carolina, 41 Goldwater, B., 83, 210, 357, 375
Fürth, J.H., 18, 37, 52, 206, 224, Gordon, D., 14, 314
261, 262, 341, 342 Göring, H., 426
GRACE, 123
Graduate Institute of International
G and Development Studies, in
Gaitskell, H., 205 Geneva, 336–337
Galbraith, J., 156, 288, 289 Graham, B., 23, 426
Galbraith, J.K., 286, 288 Great Depression, 17, 115, 117, 136,
Galilei, G., 132 147, 177, 209, 218, 235, 243,
Garrison, R., 146 246, 286, 305, 315, 336, 417,
Gary G. Schlarbaum Award for 421, 448
Lifetime Achievement in the Great libertarian historian, 439
Cause of Human Liberty, 375, Great Moderation, low-inflation, 248
441 Great November Revolution, 380
Gay dwarf, 100, 195 Greece, 68n58, 162
Gay liberationists, 42, 439 Greenspan, A., 24, 29n24, 320, 321
Gay libertarians, 100 Gregory, T.E., 242–243
Geistkreis, 37, 131, 201–219, 222, Gross Domestic Product, 351
342 Grove City College, 19, 84, 258,
General Electric, 357 439, 441, 443, 444, 446
General Motors, 398 Grumman Tiger, 443
Generalquartiermeister, 404 Grünberg, C., 34, 279, 280
General Theory (Keynes), 287 Guardian, 58
George III, King, 235, 402 Gullah, 41
German Weimar Republic Guzmán, J., 216
(1919–1933), 69
Germanness, 243
Germany, 1, 6, 10, 15, 34, 38, 52, H
121, 122, 129, 152–154, 162, Haag, J., 53, 130, 202, 217
182, 184, 186, 193, 195, 209, Haber, W., 310
210, 214, 220, 226, 256, 257, Haberler, G., 16, 17, 37, 51, 52,
260–262, 351, 383, 404, 415, 116, 145, 146, 203, 204, 241,
442, 447 261–263, 287, 298, 341,
Gerron, H., 300 410n5, 410n6
508 Index

Habilitation process, 51, 53, 263 Hearst, P., 426

Habilitations-Vater, 119 Hearst, W.R., 425
Habsburg Austria, 74, 132, 135, 447 Hein, D., 130
Habsburg Empire, 39, 69, 104, 127, Heinrich, H., 5, 6, 16, 132
162, 184, 277, 343, 432 Hell, J., 260
Hamowy, R., 18, 42, 61, 68n62, Helms, R., 126
76–78, 88–90, 100, 102, Herbener, J., 438
110n65, 195, 264, 266–269, Heritage Foundation, 84
314, 315, 407, 424, 437 Herrnstein, R., 344
Hanbury-Tracy, M.C.S., 159 Hicks, J.R., 146, 291, 292, 327, 329
Hanke, S., 422 Higgins, B., 119, 146, 147
Harberger, A., 143 Higgs, R., 424
Harris, S., 298 Hilferding, R., 343
Harrod, R., 150, 268, 270n43 Hill, C., 418
Hayek, C., 129 Hillsdale College, 60, 350, 401, 428,
Hayek, F.A., 1, 6, 9, 14, 15, 24, 25, 441, 444
34–38, 40, 41, 43–52, 54–57, Hitler, A., 37, 121, 153, 155, 159,
61–63, 69–104, 111–120, 163, 180, 187, 194, 195,
128, 129, 131–135, 144, 148, 209–211, 214, 217, 219, 221,
153, 155–157, 159–161, 163, 222, 224, 226, 236, 246, 250,
165, 167, 171–174, 176, 180, 259, 260, 264, 343, 415
183, 186–189, 192–194, Ho Chi Minh, 240
201–204, 206, 207, 209, 212, Hollinger, D., 310
214, 219, 220, 223–225, 227, Holocaust, 22, 152, 201–228,
228, 236, 237, 239, 241, 235–269
245–251, 253, 255–257, 260, and Austrian anti-Semitism,
262, 277–300, 322, 327–346, 260–9
350–385, 389–391, 393, Holroyd, M., 268
395–397, 399, 400, 405, 406, Holt, H., 122, 123
408, 409, 416–418, 427, 429, Holt III, E., 187
430, 436, 438 Holy Trinity Lutheran Church, 441
Hayekian ethics, 129 Homosexuality, 87, 96, 100, 194,
The Hayek Prophesies, 61 196, 268, 365, 393, 434, 435,
Hays, W., 309 439
Hazlett, T., 25, 47, 98, 131, 155, Honor, 120–131, 184, 189, 190
292, 383, 384 Honor Society, 120
Hazlitt, H., 319 Hoover, H., 243, 255, 305
Health expenditure, 350, 351 Hoover, J.E., 60, 426, 431
 Index
   509

Hoover Institution, 10, 84, 346, 403 340, 346, 383, 401, 403,
Hoppe, H.H., 18, 93 411n17, 442, 443
Horthy, M., 163 Innocence Project, 361
House of Habsburg, 163, 238, 361 Institute for Economic Affairs (IEA),
House of Lords, 100, 271n22, 361 14, 56, 131, 155, 265, 409
House of Windsor Companion of Institute for Justice, 445
Honour, 374 Intellectual classes, 75
Howard University, 342 Intellectuals, 2, 10, 24, 25, 33, 34,
Huckabee, M., 306 40, 41, 44, 46–48, 54, 64n6,
Hucksterism, 407, 435 74, 75, 89, 103, 128, 130,
Hudal, A., 132 144, 155, 163, 169n20, 172,
Hugenberg, A., 259 173, 265, 352, 379, 405, 406,
Hülsmann, J.G., 254, 343 416, 429, 437, 449n18
Human action calculation, 337 American, 76
Human capital, 116, 152, 177, 238, fashionable opinion among, 76
331, 338, 342, 343, 360, 363, Interest rates, 26, 114, 146, 259,
367, 371, 376, 420, 421 332, 333, 340, 418, 421
Human rights, 3, 56, 57, 73, 161, Internships, 421
164, 209, 364, 370, 371, 405, Invergordon Mutiny, 39
409 Iron Cross, 440
Humphrey, H., 186, 363 ISIS activists, 94
Hungary, 184, 244, 328 Al-Islam, S., 147
Hunt, H., 133 Italian-Austro-Lausanne opposition,
Hurwicz, L., 313, 316–319, 325n30 332
Hussein, King, 215 Italy, 40, 79, 162, 166, 182, 185,
Hutchins, R., 309 244, 251, 328, 331, 351
Hutchison, T., 342 Iyer, R., 91
Hutchison, T.W., 394, 397
Hutt, B., 188
J
Jacobs, S., 89
I James I, King, 434
Imperial medical garden, 103 Japan, 56, 162, 351
India, 60, 158, 160 Jefferson Davis Day, 431
Indonesia, 161–162 Jefferson Davis Highway, 365
Infant mortality rates, 351 Jensen, M., 21
Inflation, 52, 81, 114, 115, 175, John Birch Society, 58–60, 374, 375,
211, 219, 243, 246–249, 259, 416, 433, 443, 446
510 Index

Johnson, H., 36, 446 Kohn, H., 89

Johnson, L., 123, 150, 365 Koren, H., 16
Joseph, K., 185 Kornfeld, I., 265
Korsh, A., 256
Kresge, S., 10, 439
K Kristol, I., 47, 84
K-12 schools, 358 Krueger, A.B., 338
Kaldor, N., 77, 286, 289, 291, 292, Kuehnelt-Leddihn, E., 39, 157, 182,
294, 296, 297, 316 250
Katona, G., 323n16 Kuhn, T., 2, 9
Katser, L., 265 Ku Klux Klan, 306
Kaufmann, F., 263, 272n36 Kuznets, S., 356
Kennedy, J.F., 123, 357
Kennedy, R., 124
Kesari, D., 83 L
Keynes, J.M., 1, 2, 33, 36, 62, 77, Laar, M., 287–288
80, 94, 100, 112, 117, Labor market, 366
148–151, 192, 228n6, 242, Labor unionists, 103
251–253, 255, 258, 268, Labour Government, 39, 398, 399
273n43, 279, 284–287, 292, Labour Party, 59
293, 296, 308, 319, 323n19, Lachmann, L., 99, 103
330, 331, 437, 440 Lange, O., 294
Keynesian cult, 319 LA Police Department, 361
Keynesian Phillips Machine, 118, Laski, H., 79, 268
295 Lausanne schools, 329
Kimpton, L.A., 308, 309 Lawrence, T.E., 22
King, M.L., 124, 376, 426 League of Nations, 115
Kirchick, J., 377 Leeson, R., 11, 107n38, 310,
Kissinger, H., 23, 124, 175, 235 323n17
Kitabayashi, S., 220 Leijonhufvud, A., 15
Klausinger, H., 264 Lemkin, R., 163
Klein, L., 309–311, 313, 323n16 Lerner, A.P., 294–296, 299
Kleptocrats, 332 Letelier, O., 12
Knight, F., 79, 94, 153, 287, 299, Letwin, M.P.O, 265
308, 313, 381, 382 Letwin, W., 265
Knight’s academy, 343 Leube, K.R., 16, 17, 39, 87, 165, 166,
Koch, F.C., 42, 43, 58, 76, 439 184, 207, 217, 353–355, 419
Koestler, A., 166 Levin, M., 353, 366, 367
 Index
   511

Lewis, Sir A., 60, 159 Mafia family, 378

Libertarian score, 285 Magg, W., 341
Liberty Lobby, 124, 135, 152, 222, Malinvestment, 340
265, 374, 386n34, 434 Manahan, J., 188
Liechtenstein tax-haven, 353 Manion Forum, 351, 357, 385n2
Lieser, H., 207, 265 Manion Forum Yearbook, 357
Liggio, L., 110n68, 196, 197, 429 Marcuse, H., 6, 278, 280, 393
Lincoln, A., 363, 423 Market
Lindbergh, C., 306 as exo-somatic sense organ, 84
Little Rock High School, 59, 363 power, 85
Lizardo, T., 83 Market controls, 40
Lockean social contract theory, 280 Market society, 35, 45, 134, 135,
London School of Economics, 10, 157, 171, 212, 215, 236,
147, 396 425
Lorenz, K., 129, 224, 225 revolt against, 71–73, 107n33,
Ludendorff, E., 22, 69, 121, 153, 174, 208, 227
155, 183, 184, 195, 201, 219, Marriage rights, 194, 365
238, 244, 260, 261, 264, 404, Marshall, A., 33, 94, 238, 242, 284,
447, 448 290, 423
Ludwig, K., 103 Marshallian terms, 327
Lueger, K., 221, 343 Marshall of Italy, 251, 328
Luhnow, H., 313 Marx, K., 14, 94, 134, 192, 240,
269, 308
Masaryk, T., 240
M Maskin, E., 317
McArthur, D., 81, 190 Maximilian II, 103
McCarthy, J., 186, 188, 298, Mea culpa, 323n17, 330
305–312 Meade, J., 297
McCormick, D., 20, 35, 97, 128, Medicare Act 1965, 357
183, 268, 354 Menger, C., 33–37, 49, 113, 163,
McCormick, R., 306 207, 361
Machan, T., 245 Menzies, R., 122
Machlup, F., 25, 51, 86, 118, Meredith, J., 362, 371
138n20, 144, 146, 203–205, Merriam, C., 89
263, 265, 286, 340, 448 Messerschmitt Bf-109 Luftwaffe
McLeod, N., 159, 386n22 bomber, 440
Macmillan, H., 158 Metzler, L., 323n19
McVeigh, T., 23, 381 Militant atheists, 424
512 Index

Mill, J.S., 49, 94, 159 Moore, C., 59

Minimum wage, fast-food industry, Moral inheritance, 128
338–339 Moral tradition, 35, 74, 83, 132,
Ministry of Supply, 398 134, 135, 148, 163, 164, 362,
Minow, N., 14 409
Minz, I., 207 Moral world, 132
Mises, L., 3, 4, 7, 10, 33–35, 38–40, Morgenstern, O., 17, 51, 53, 145,
46, 57, 60, 62, 90, 91, 93, 218, 222, 263
103, 118, 144–148, 150–154, Moroni, A., 406, 419, 433
163–165, 168n14, 172, Morris, W., 129
176–181, 185–187, 189, 190, Mosaic code, 439
192–195, 201, 203, 207, 213, Mosaic Law, 439
217, 218, 238, 241, 243–246, Mossad, 377
250, 251, 253–255, 259, 261, Multinational Habsburg Empire,
336, 340, 345, 352, 409, 436, 277
447 Murray, C., 344
Mises, M., 20, 90, 340 Mussolini, B., 195, 243, 328
Mises Institute, 3, 33, 82, 93, 147, Myerson, R., 317
157, 177, 196, 268, 336, 337, The My Lai massacre, 125, 433
356, 357, 368–370, 372, 379, Myrdal, G., 27, 156, 292, 293, 360,
441, 446 361, 374, 390, 433, 434, 448
Mises Summer University, 378
Mitchell, W.C., 7, 283, 313,
323–324n19 N
Model colony, 103 Nanny State, 20, 341
Moffitt, R., 12 Napolitano, A., 249
Moggridge, D., 1 National Association of
Mommsen, H., 256 Manufacturers, 374
Money supply, 20, 114, 115, 137n9, National Education Association,
176, 252 358
Mongrelization, 374 National Health Insurance Bill, 350
Montes, L., 56, 128, 254, 370, 404, National Health Service, 350
405 National income, 146, 258, 333,
Montgomery ‘Bus Boycott’, 363 338, 341, 356, 440
Mont Pelerin Society, 8, 14, 18, 25, National Socialist Party of America,
45, 60, 94, 102, 128, 130, 432
143, 153, 176, 193, 196, 203, National Tertiary Education Union,
248, 307–309, 376, 384, 403, 85
419, 437 Nation of Islam, 432, 433
 Index
   513

Natural rate, 332, 333, 370 North, G.K., 18, 82, 94, 96, 100,
Nazi-Classical Liberal Pact, 3, 33, 268, 375, 433, 439
245, 447 November Criminals myth, 201, 405
Nazi Party, 155, 217, 226–228, 241, Noyes, C.R., 356
363, 432 Nymeyer, F., 308, 309
Nazi-Soviet Pact, 56
Negro slaves, 41, 60
Neoclassical economics, 119, O
332–334, 339, 406 Obermayer, H., 421
Neoclassical optimality, 209 Octoroon, 344
Neoclassical School, 33, 54, 251, Old-age poverty, 341
284, 329 Old aristocracy, empires of, 157–167
Neoclassical theory, 177, 332, 356 One-dollar-one-vote, 42, 150, 213,
Neo-Feudal market society, 35, 157, 251, 373, 400, 444, 445
174 One-dollar-one-vote ‘democracy’, 39
Neo-Feudal White Terror promoters, Operation Barbarossa, 56, 211
57 Operation Coffeecup, 357
Neo-Nazi-Militia, 33, 368 Orgone energy, 281
New American, 375 Otto Neurath tradition, 144
New World Order, 381 Owen, W., 166
New York diamond-dealers market,
343
Nietzsche, F., 355, 385 P
Nixon, R., 23, 24, 29n24, 52, 112, Palla, E., 217
124–127, 133, 139n41, 176, Pantaleoni, M., 251, 265, 328
204, 210–212, 235, 237–239, Pareto, V., 33, 40, 225, 327, 328,
241, 269n5, 278, 312, 320, 331, 332, 354
351, 402, 408, 425, 431, 440 Pareto principle, 40, 65n23
Nobel Peace Prize, 208, 360, 426 Parks, R., 363
Nobel Prize, 15, 17, 20, 24–27, 50, Parliamentary democracy, 251, 402,
129, 136, 159, 175, 204, 216, 448n5
221, 224, 256, 286, 290–292, Pass Law apartheid, 73, 161
309, 312, 313, 317, 320, 324, Paton, W., 309, 310, 323n16
340, 376, 378, 390, 393, 409, Paton, W.A., Jr., 310, 311
415, 417–419, 422, 433, 438, Paton’s Austrian credentials, 311
448 Paul, R., 82, 83, 351, 378, 379, 446
Non-white garbage collectors, 376 Per capita per annum, 351
North, G., 219, 309, 439, 446 Pétain, Marshal, 215, 219
514 Index

Peterson, W., 150, 151, 193, 285, Proto-Nazi, 3, 4, 34, 52, 64n6, 113,
336, 358, 372, 373, 375 145, 180, 224, 300, 416, 447
Pettit, S., 123 Proto-Nazi-proto-Soviet Pact, 404,
Philby, K., 187, 189 447
Phillips, A.W.H., 149, 297 Public Broadcasting Service, 14, 61
Pigou, A., 1, 2, 33, 58, 59, 183, 185, Public Choice theory, 340, 429
211, 212, 255, 284, 285, 291, Public Health Nazis, 239, 366
294, 334, 335, 359, 419 Public opinion, 2, 36, 70, 75, 80,
Pigou–Dalton principle, 284 155, 169n20, 212, 382, 406,
Pigouvian economics, 334 408, 409
Pinochet, A., 12, 56, 128, 161, Putnam, R., 9
214–216, 293, 332, 404–409 Pygmalion, 318
Plessy, H., 343, 344
Poland, 121, 162, 264
Political prisoner, 61, 431 Q
Popper, K.R., 54, 223, 265, 341, Quantity Theory of, value of money,
391–397 253
Pornography, 94–96 Queen Elisabeth II, 77, 128, 428
Positivism, 49, 107n33, 144, 395
Post-Feudalism, 208
Prater Park, Vienna, 393 R
Premarital sex, 90 Rabin, Y., 23
Presidential democracy, 402 Radio Free Northwest website, 432
Presuppositionalism, 81, 439 Radnitzky, G., 129, 185, 186
Pretium mathematicum Raico, R., 42, 93, 196, 225, 280,
(mathematical price), 54, 327, 328, 378, 439
148 Raimondo, J., 380
Prima Donnas’ of the Austrian Rainier III of Monaco, Prince, 215
School of Economics, 206 Rand, A., 8, 15, 19, 24, 39, 57, 91,
Primitive communism, 192 92, 108n49, 131, 154, 191,
Princip, G., 181 224, 319–322, 355, 424, 432,
Private Practice Magazine, 350, 351 447
Progressive taxation, 5, 201, 228n2, Rathenau, W., 201, 202, 213
329, 332 Rawlesian, 344
Proletariat, 327, 352 Rawls, J., 239, 269n4, 345, 389–391
Pro-slavery Fire-eater, 363 Reagan, R., 8, 111, 127, 185, 221,
Protectorate of Bosnia, 103 253, 265, 320, 357, 371, 382,
Protectorates, 60, 103, 215 422
 Index
   515

and Republican party, 400–404 Roche IV, G., 187, 430

Real estate investor, 444 Rockefeller Foundation, 153, 206
Real Unit Labour Costs, 421 Rockwell, G.L., 363
Reder, M., 266–267 Rockwell, L.H., Jr., 3, 12, 23, 34,
Redneck militia groups, 377 82–84, 88, 93, 134, 147, 187,
Red Terror, 57, 156, 165, 409 188, 196, 213, 306, 314, 344,
Red Terrorists, 57, 213 345, 349–351, 353–358, 361,
Reform Club, 78, 128, 187, 251, 362, 364, 365, 367, 368,
399, 419 371–373, 375, 378–380, 422,
Reich, J., 14 423, 430, 436, 439
Reich, W., 6, 278, 281, 282, 435 Röhm, E., 155
Reid, T.R., 356 Roman Catholic Cathedral, 103
Reign of Terror, 12, 377 Romania, 162
Religion, 4, 5, 9, 19, 33–68, Romanov dynasty, 404
111–113, 130, 132, 143–199, Romanov Empire, 277, 295
278, 336, 344, 362, 373, 381, Romeo Elton Brown University, 344
409, 419, 424, 425, 438 Rommel, E., 165
Rent control, 215, 300, 337 Ron Paul & Associates, 369
Report of the Committee on Higher Ron Paul Newsletter, 439
Education, 331 Roosevelt, F.D., 239
Republican Party, 8, 76, 210, 306, Roosevelt, T., 270n5
312, 370, 431 Rosenberg, A., 425
Revolt against market society, 70–73, Rosten, L., 27n2, 49, 50, 62, 64n8,
107n33, 157, 174, 208, 227 64n12, 65n13, 66n29, 66n31,
Rhodesian rebellion, 427 67n44, 67n45, 68n63, 97,
Rice planters, 41 105n4, 105n5, 106n18,
Richardson, E., 126 106n20, 106n24, 107n29,
Robbins, J., 219 107–135n33, 109n56,
Robbins, J.W., 81, 82 169n17, 169n23, 197n7,
Robbins, L., 146, 225, 241, 242, 199n27, 228n4, 230n28,
255, 257, 280, 281, 284, 286, 231n36, 232n49, 233n55,
290, 292, 294, 296, 298, 299, 248, 250, 262, 271n14,
312, 329–331, 341, 348n14, 271n18, 272n32, 300n5,
419 302n17, 302n20, 318,
Robinson, J., 77, 80, 100, 285, 286, 324n25, 325n33, 347n2,
291, 294, 299 348n14, 397, 410n9, 412n32,
Robbins Report, 331 412n33
Roche, G., 346, 350, 401, 430 Rothbard, J., 368, 373, 377
516 Index

Rothbard, M.N., 3, 11, 18–21, Schneider, H., 16

24–26, 33, 42, 52, 53, 80, 83, Schottengymnasium school, 343
88, 89, 91–94, 108n49, 120, Schuman Plan, 442
131, 136, 145, 149, 150, 176, Schumpeter, J., 43, 47, 54, 80, 173,
190–192, 204, 210, 215, 218, 223, 261, 289, 343
232n47, 237, 238, 264, 306, Schwarzwald, E., 45, 222, 223
307, 314, 319–321, 328, 336, Schwarzwald, H., 223
337, 345, 350, 353–356, 364, Schweinzer, P., 217
365, 368, 369, 373, 377–381, Scientific community, 13, 17, 334
416, 423, 424, 430–432, 436, Scitovsky, T., 293, 294
446, 447 Screen Actors Guild, 422
Rothbard Medal, 82 Second Reich, 37, 193
Rothbard Medal of Freedom, 268, Second suicidal depression, 293, 391
356, 446 Securities and Exchange
Rothbard-Rockwell-Report, 90, 351, Commission, 89
366 Seldon, A., 14, 403
Royal Swedish Academy of Sciences, Sennholz, H.F., 19, 81, 83, 84, 87,
27, 113, 289, 334, 339, 415 95, 96, 117, 190, 258, 259,
Ruckelshaus, W., 126 346, 350, 353, 360, 379, 402,
Ruff, H., 81 403, 430, 438–443, 445, 446,
Russia, 19, 20, 56, 60, 62, 162, 179, 450n27
182, 183, 244, 251, 328, 359, Separate Car Act, 343
404, 442, 447 Serbia, 127, 162, 181, 183, 351
Russian revolutions (1917–1922), 42 Sereny, G., 120, 447
Rutgers University, 60 Service clubs, 443
Sexual morality, 90
Shah of Iran, 111–112
S Shamir, Y., 23
The Sabbath, 96, 127, 439 Sharaf, M., 281
Salazar, A., 216, 408 Shearmur, J., 398
Salerno, J.T., 20, 25, 93, 94, 192, Shelton, R., 431
424, 425 Shenoy, B., 86
Samuelson, P., 224, 301n14 Shenoy, B.R., 77
Sanchez, J., 372 Shenoy, S., 34, 35, 77, 80, 85, 86,
Saturday Night Massacre, 126, 278 108n43, 111, 112, 185, 192,
Schanzkowska, F., 188 346, 355, 394, 423, 440
Schmidt, C., 35, 207, 226 Siberia, 162
Schmidt, H., 383 Sickle, J., 217
 Index
   517

Simon, H., 264, 305 Soviet spy, 285, 433

Simpson, D., 90 Spain, 178, 215, 264, 351
Simpson, O.J., 361 Spann, O., 4, 33–37, 51–63, 74–76,
Skidelsky, R., 1 130, 173, 174, 202, 203,
Skousen, M., 15, 38, 81, 87, 100, 205–208, 215–218, 225, 243,
171, 294, 332, 359, 360, 419 250, 262, 263, 265, 280, 281,
Slavery, 60, 71–73, 161, 174, 267, 405
329, 363, 375, 423, 426 Speer, A., 120
Slavery Abolition Act of 1833, 71 Spiritually, 54, 95
Slave Trade Act of 1807, 71 Stagflationary crisis, of 1970s, 149
Smith, A., 49, 89, 343, 355 Stanford University, 101, 378
Smith, I., 427 Stanley, S., 374
Smith, V.L., 204 State of Utah, 96
Snyder, K., 82 States’ Rights Democratic Party
Sobran, J., 423 (Dixiecrats), 363, 364
Social capital, 190, 342, 343 Statue of Liberty, 156
Socialism, 6, 36, 44, 46, 47, 56, 61, Stern, R., 8
64n6, 75, 79, 90, 120, 163, Stigler, G., 2, 25, 26, 305, 313,
172, 185, 186, 194, 202, 215, 324n23, 403
218, 245, 250, 254, 260, 282, Stochastic equilibrium model, 257
284, 294, 299, 352, 357, 364, Stone Mountain, 373
376, 382, 397, 399, 437, Strikebreakers, 327
449n18 Stromberg, J.R., 373
and Holocaust, 223–224 Suharto, 161, 162, 170n31, 332
Socialized medicine, 350, 356, 401 Summer, T.W., 350
Social mobility, 177, 331, 343 Sweezy, A., 298
Societal legitimization, 154 Sweezy, P., 298, 299, 306
Society for the History of Economics Symbionese Liberation Army, 426
(SHOE), 11, 86, 93, 310, Syracuse University, 448
323n17 System-builder, 94
Solonevich, I., 61
Somary, F., 156
South Africa, 73, 158, 161, 427, 432 T
South Sea Bubble, 350 Talmon, J.L., 249
Sovereignty, 7, 9, 34, 38, 76, 85, Tariffs, 176–178, 332
240, 282, 283, 290, 407, 420, Tate, J., 83
423, 444 Tax-exempt donor class, 7, 103, 177,
Soviet Secret Service, 359 312
518 Index

Tax-exempt property, 102, 429 Tudor-Hart, E., 187

Tax-funded pension, 355 Tugwell, R., 305
Taxpayers, 2, 9, 12, 13, 19, 81, 88, Turkey, 22, 184
212, 213, 238, 341, 350, 353, Tuskegee High School, 364
355, 466 Tutwiler Hotel, 426
Tax resisters, 373 Twain, M., 358
Tea Party Economist, 309, 446
Ten Commandments, 336
Terence Hutchison, 342, 394 U
Texas Capitol, 71, 363 Underground businessmen, 373
Texas Christian University, 86 UN Food and Agriculture
Thatcher, M., 2, 36, 43–45, 55, 59, Organization, 339
185, 253, 264, 265, 278, 382, United Kingdom (UK), 6, 26, 35,
399–401, 422, 438 52, 60, 79, 160, 162, 164,
Theory of evolution, 277 173, 174, 183, 246, 251, 260,
Theory of Wages (Hicks), 291 264, 266, 268, 290, 296,
Theresianum school, 343 302n31, 307, 330, 351, 355,
Third Estate, 103, 116, 135, 424 393, 401, 409, 416–418, 434
Third International, 218, 244, 253 United Nations, 42, 294, 377, 381,
Third Reich, 2, 5, 22, 76, 121, 156, 415
180, 193, 222, 228, 244, United Nations Framework
255–259, 287, 440, 444, 445 Convention on Climate
Thomas, N., 298 Change, 336
Thornton, M., 373, 380, 430 United States, 13–16, 25, 43, 58, 60,
Thurmond, S., 364 71, 73, 81, 101, 102, 117,
Tiso, J., 215 118, 123, 125–127, 150, 161,
Tocqueville, A., 44, 45, 120, 278, 162, 167, 176–178, 180, 183,
343, 398 184, 186, 190, 191, 204, 206,
Tolerance, 113, 289, 381 207, 209–211, 217, 221, 226,
Tomasi, J., 344 240, 246, 249, 267, 277–303,
Tory Party, 55 305–307, 309, 311, 342, 349,
Totalitarian democracy, 249 351, 355, 357, 362, 364, 367,
Trevelyan, G.M., 166, 181–183 378, 383, 390, 392, 399, 402,
Trial-by-jury, 361 404, 408, 417, 419, 426, 427,
Triple digit inflation, 442 430, 434, 435, 441, 443
Truman, H.S., 356, 364, 402 Universal Basic Income, 285
Trump, D., 76, 77, 130, 177, 210, Universities and pseudo-academic
306, 307, 333 institutes, 5, 111–119
 Index
   519

University of Alabama, 364, 371 Von Hindenburg, P., 259, 404

University of Chicago, 7, 8, 14, 85, Von Hötzendorf, F.G., 127, 181
89, 100, 168n2, 296, 306, Von Krosigk, J., 256
309, 312, 314, 315, 322n11, Von Krosigk, S., 221
325n30, 336, 419, 422 Von Metternich, K.W., 162, 173,
University of Mississippi, 363 193
University of Newcastle, 86, 108n43 Von Monakow, C., 220
University of Pittsburg, 87 Von Neurath, B., 256
University of Salzburg, 101, 102, Von Papen, F., 256, 259
265 Vons, H., 187
University of Tennessee, 375 Von Schleicher, K., 256
University of Vienna, 5, 34, 37, 51, Voss, H., 226
53, 118, 119, 150, 151, 173, Voting Rights Movement, 365
205, 224, 261, 263, 298 Voyager spacecraft, 415
Unterköfler, H., 261
US Defense Intelligence Agency, 94
W
Wagner, R., 213
V Wagner-Jauregg, J., 50, 224, 225
Vaughn, K.I., 2, 85, 89, 100, 437 Waldheim, K., 415, 416, 447
Vedder, R., 378 Wallace, C., 427
Verwoerd, H., 161 Wallace, G., 23, 123, 364, 365, 431
Vienna Economics Institute, 288 Wall Street brokers, 337
Vietnam, 27, 122–125, 240, 241 Wapshott, N., 422
Viner, J., 241 Warfare State, 93, 192, 212, 238,
Virginia, C., 188 443
Voegelin, E., 131 Warren, E., 60, 434
Volcker, P., 248 Warren Supreme Court, 60, 434
Von Aehrenthal, B., 181 Wars of Confession, 418
Von Böhm-Bawerk, E., 34, 51, 84, Washington, G., 375, 402
110n68, 163, 201, 203, 291, The Washington Post, 84, 171, 179,
308, 361, 441 191, 400, 425, 436
Von Braun, M., 256 Wattenberg, B., 61, 102, 437
Von Eduard Leopold, O., 193 Webb, B., 193
Von Eltz-Rübenach, P., 256 Webb, S., 193
Von Gayl, W., 256 Weigel, D., 82, 372
Von Hayek, H., 132, 226, 228, 300 Weimar Republic, 69, 213
Von Hayek, J., 71 Welfare-Warfare State, 93, 192
520 Index

Werin, L., 25 Wilson, W., 162, 191, 235, 239

Western Civilization, 95, 167, 361 Winter, E., 447
White medical establishment, 351 Wittgenstein, L., 222, 343, 393
White Power, 366 World Bank, 351
White races, 103, 135, 374, 434 World War II, 77, 78, 161, 163,
White supervisors, 376 212, 247, 281, 296, 331, 441
White Terror dictatorship, 405
White Terrorists, 215, 236, 244,
363, 366 Y
Wicksteed, P., 290 Yellow journalism, 425
Widerlicher (repulsive), 99 Young, A.A., 241
Wieser, F., 2, 5, 33–37, 69, 84, 119,
162, 163, 193, 201, 203, 208,
223, 228n2, 261, 264, 279 Z
Wilhelm, K., 182 Zero price, 315, 336
Wilson, C., 424