Indeed, Hayek Was a Giant of the Social Sciences - A Response To Quartz
By Edson Agatti
Hayek Global College and I were mentioned in the news website Quartz, in an article published in March 24, 2021, named, “Why have two long-dead Austrian economists become cult figures in Brazil?“. Given the relevance of Quartz and its reach as a news outlet, I would like to share some thoughts to clarify the mission of our institution, and why we chose to honor Friedrich Hayek.
The article states that Hayek has been “discredited – for simplistic dogmatism.” This statement is false. Hayek was one of the leading intellectuals of the past century, who made key contributions to economics and other sciences such as law, political science, philosophy, and psychology.
If, instead of evoking political discourse, we are to have a serious discussion on the merits or vices of his ideas, let us begin with: the economic calculation problem, dispersed knowledge, price as a signal and spontaneous order. In particular, I suggest reading The Use of Knowledge in Society, written in 1945. At the time, most mainstream academia ignored it, with the innate belief that a centrally planned economy would yield greater economic results. In this essay, Hayek had nothing to say about ideology or the morality of free markets. Instead, he elegantly exposed the inefficiency of a planned economy and showed the virtues of the price system. As history rolled out much of what Hayek had written was proven true, and circa the 60s and 70s he was acclaimed back to the spotlight. At this point, economists came to reappreciate Hayek´s insights, and thus as you also note, he was awarded the Nobel Prize in 1974.
Although he is not front and center in policy debates as he used to be, this is to be expected. Science moves forward, as Isaac Newton would say, “by standing on the shoulders of yesterday’s giants”.
One might argue that the Nobel prize by itself is not convincing enough to demonstrate the credibility/relevance of a scientist. To use another source, in February of 2011 a committee of renowned economists which included Kenneth Arrow, Robert Solow, and Daniel McFadden, were nominated by the American Economic Review (one of the most reputable journal of economics) to rank the top 20 articles published by the journal in the 20th century. Notably, Hayek’s The Use of Knowledge in Society, is listed in the top 20.
If you will claim Hayek is not a giant of the social sciences, you are also arguing against other “mainstream” giants such as Arrow, Solow and McFadden. Good luck with that one!
Reading and understanding Hayek will help you appreciate how a bottom-up decision-making approach will yield better results, as opposed to a top-down approach. These insights are highly applicable, despite still being largely underappreciated, to other social sciences such as management. One great example of this application can be found in Charles Koch´s fantastic book called Good Profit. In it, Koch explains the management system he created called Market-Based Management (MBM). MBM is largely responsible for the exponential growth of Koch Industries, one of the most successful corporations in US history. This corporation has highly benefited from using Hayek´s ideas which are a central theme all throughout MBM – and that is an undeniable fact. Koch Industries is also a great example of a company which created plenty of value to its customers, employees, communities, and society by the means of peaceful voluntary transactions with transparency and integrity.
Regarding Hayek Business Review, its purpose is to gather and promote tacitly, “dispersed knowledge” from real experiences of real managers, entrepreneurs, and business leaders all over the world who have an interesting case to share with our students and readers. The first issue was a huge success, and there is much more to come.
The Review contributes to bolster our Global MBA, a truly international, practical, and unique program that innovates in digital education using an active methodology and welcomes the new era of higher education. We already have top-notch professors and students coming from all over the world, participating in highly interactive sessions and working on purposeful projects.
To summarize, in the best of Hayek´s tradition, in our institution “we believe in individual liberty, responsibility and in the power that free people trading in free markets have to create shared prosperity and to improve the human condition all around the world.” Integrity, tolerance, and ethical entrepreneurship are some of the values we promote to our leaders.
Edson Agatti is the Founder and CEO of Hayek Global College and holds a Masters in Economics from George Mason University, and a bachelors in Marketing from Florida Gulf Coast University.
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