Lesson 3 of 6
Which Hayek carries the economics
One 1948 collection holds most of what this track uses: the knowledge essays and the three calculation papers. What else is worth reading and in what order.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- One volume does most of the work: Individualism and Economic Order, 1948, which collects the knowledge essays and all three calculation papers.
- The cycle material is elsewhere and is technical. It was written in the early 1930s, before the knowledge essays, and reads as a different kind of work.
- Modern collected editions carry introductions by scholars inside the tradition. Those are advocacy alongside the text, and are worth reading as such.
Hayek wrote across six decades and several fields, and a reader who starts from a bibliography will bounce. For this track almost everything needed is in one book.
What is in the 1948 collection
- 1937Economics and KnowledgeChapter two. What it would mean for an economy to be in equilibrium once people's knowledge is part of the data.
- 1945The Use of Knowledge in SocietyChapter four. The argument this track uses most, and the shortest way into his economics.
- 1935Socialist Calculation, one and twoChapters seven and eight. The nature and history of the problem, and the state of the debate as it stood.
- 1940Socialist Calculation, threeChapter nine. The reply to the competitive solution, and the sharpest thing in the volume.
- 1942The Ricardo EffectChapter eleven. The technical article where he answers Kaldor and defends the mechanism.
The order to read them in
The 1945 paper first, as in the previous lesson, because it is short and complete in itself.
Then chapter nine, the 1940 essay on the competitive solution. It is the most concrete thing he wrote about how an institution would actually have to work, and it contains the objections that a reader can check against any organisation they have worked in: decisions waiting on reports, prices published for categories rather than cases, and goods made to individual order.
Then chapters seven and eight if the history interests you, and chapter two if the theory of equilibrium does. Chapter two is the hardest of them and the least necessary for this track.
Chapter eleven last, and only if the mechanism is what you care about. It is a technical dispute with a critic and it assumes the capital theory.
The cycle books, and why they are not first
The cycle material is earlier and harder: Prices and Production, delivered as lectures in 1931 with a second edition in 1935, and Monetary Theory and the Trade Cycle, which appeared in English in 1933. Both are collected in a single modern volume published by the Mises Institute in 2008.
They are technical, they use a capital theory the reader has to bring with them, and they were written before the knowledge essays that made their author famous. A reader who wants the cycle theory in a form that can be argued about will do better with the treatment in this track or with the modern formalisations, and then come back to the lectures for the original.
Reading the editorial apparatus
That 2008 collection is a good example of something a reader meets constantly in this literature. The primary text is a technical work by Hayek. The introduction is by a present-day scholar in the tradition, and it is written as a defence.
Its language is not neutral: it describes Hayek as taking on all comers without fear or favour and inevitably emerging victorious, calls one of his review essays a positive thrill to read, and characterises a critic who reviewed him as one of Keynes's uncomprehending and rabid disciples. That critic is Sraffa, whose objection the second course of this track treats as serious enough to have prompted a modern repair from inside the tradition.
None of that makes the volume less useful. It is a well-produced edition of texts that are otherwise hard to obtain. It does mean the introduction should be read as a case being made and the text read separately, which is the subject of the next lesson.
Check yourself
Which single volume holds most of what this track uses?
- Prices and Production
- Individualism and Economic Order, 1948
- Monetary Theory and the Trade Cycle
Show the answer
Answer: B.
It collects the 1937 and 1945 knowledge essays and all three socialist calculation papers, which is the material the fourth course of this track is built on.Why is the 1940 calculation essay recommended second?
- Because it is the shortest
- Because it is the most concrete about how a planning institution would have to work, with objections a reader can check against organisations they know
- Because it summarises the other two
Show the answer
Answer: B.
Its objections are about reporting delays, prices published by category, and goods made to individual order, all of which are recognisable outside economics.How should a modern edition's introduction be read?
- As part of the primary text
- As a case being made by a present-day scholar, read separately from the text
- As the most reliable summary available
Show the answer
Answer: B.
The introduction to the 2008 collection is written as a defence, and its language is evaluative in a way the primary text is not.Sources
- Hayek, Individualism and Economic Order, University of Chicago Press, 1948: chapter two, 'Economics and Knowledge', first published 1937; chapter four, 'The Use of Knowledge in Society', first published in the American Economic Review in 1945; chapters seven and eight, the first two socialist calculation essays of 1935; chapter nine, 'Socialist Calculation III: The Competitive Solution', first published in Economica in 1940; and chapter eleven, 'The Ricardo Effect', first published in Economica in 1942.
- Hayek, Prices and Production and Other Works, edited with an introduction by Salerno, Ludwig von Mises Institute, 2008: the contents, which collect Monetary Theory and the Trade Cycle of 1933 and Prices and Production of 1931 and 1935 among other works, and the editor's introduction, whose characterisations of Hayek's disputes and of Sraffa are quoted in description here.
What this leaves out
- This is a heterodox tradition. The mainstream account of the same phenomenon differs, and nothing here is a forecast or a view on any security.
- This lesson covers the works this track uses. Hayek's writing on law, psychology and political philosophy is outside it and no characterisation of those works is offered here.
- The editorial introduction discussed here is one editor's, in one edition. It is described because it is a clear example, not because it is representative of every edition.