My first Workspace


second test note from ida


test from ida


note


idas second note


test


“the reason the concepts of moral and ethical are peculiarly human is the same
as that accounting for the evolution of selfawareness, consciousness, purpose,
conscience, and many other human attributes that seem tied to our complex and
almost indefinitely iterated social interactions. I see these special
attributes of the human psyche as a system for prediction and manipulation of
the future—especially the social future—when the main actors will be other
humans. From a complex beginning in interactions between cooperating parents
and between parents and offspring, then among kin of several sorts and other
unrelated but repeated interactants, humans have evolved to recognize one
another individually and to cooperate and compete in groups with respect to
partial confluences and conflicts of interest. It is the general awareness of
multiple confluences of interest, and the uniquely human ability to translate
this awareness into rules, enforced and used by groups and
subgroups—ultimately in their competition with other similar groups and
subgroups—that created the systems of indirect reciprocity that we now call
moral systems. I will argue (see pp. 79ff.) that this condition arose because
for humans, unlike any other species, other humans became the principal
hostile force of nature—the principal cause of failure to survive or
reproduce. The primacy of this group-against-group competition within the
species meant that the resulting evolutionary race would be an unending one.
[…] the race that created the human psyche, and the unique and complex social
capabilities of humans.” (Alexander, 1987, p. 96)


“nearly all that is newsworthy involves conflicts of interest. […] It is
conflicts of interest that people write about, worry over, and ponder most
intensely, that fill the literature and all forms of the condensed versions of
life that in the broad sense can be called “theater.” It is how we deal with
conflicts of interest that will determine the fate of the world and the future
of humanity.” (Alexander, 1987, p. 95)


“Moral systems are systems of indirect reciprocity. They exist because
confluences of interest within groups are used to deal with conflicts of
interest between groups. Indirect reciprocity develops because interactions
are repeated, or flow among a society’s members, and because information about
subsequent interactions can be gleaned from observing the reciprocal
interactions of others. To establish moral rules is to impose rewards and
punishment (typically assistance and ostracism, respectively) to control
social acts that, respectively, help or hurt others. To be regarded as moral,
a rule typically must represent widespread opinion, reflecting the fact that
it must apply with a certain degree of indiscriminateness. Moral rules are
established and maintained primarily by application of the concepts of right
and wrong.” (Alexander, 1987, p. 94)


“ Unrestrained embellishment characterizes signals passed between sharply
competitive individuals, such as brief interactants and nonrelatives, in which
the degree of embellishment is determined, not by shared interests between
signaler and signalée, but by how much the signaler can get away with—what
Otte (1974) called “the limits of gullibility” in the responder. […]
Unrestrained embellishment differs from total deception mainly because
gullibility may be reduced among conspecific competitors.” (Alexander, 1987,
p. 93)


“ Restrained embellishment involves signals such as those passed between
relatives or cooperative mates, in which the signaler would lose by too much
deception because it shares so many of its interests with those of the
individual to which it is signaling. The core of truth is large and the amount
of embellishment rather small, because too much deceit is contrary to the
interests of the signaler. Included are most signals between close relatives
such as parents and offspring and siblings, and most signals between male and
female in bonded pairs if either or both sexes invest parentally to any large
degree (unless philandering or channeling of assistance to one’s own
relatives, as opposed to those of the spouse, is possible, thus interfering
with a likelihood of complete sharing of interests and honesty in signaling).
Similarly, restrained embellishment should typify communication between long-
term or lifetime friends who may reasonably expect repeated and reciprocal
interactions.” (Alexander, 1987, p. 91)


“Now biologists realize that the conflicts of interests that exist because of
histories of genetic difference imply instead that nearly all communicative
signals, human or otherwise, should be expected to involve significant deceit
[…] in rare circumstances, such as honeybee workers dancing about food sources
or a pair of parents wholly committed to lifetime monogamy, signals may be
totally honest. It is the rarity of this expectation from biological
considerations that is most intriguing to us at this point. Conversely,
signals involved in predator-prey relations, such as the mimicking of a
poisonous prey species by a harmless one, may be expected to be totally
deceptive.” (Alexander, 1987, p. 90)


“why some sizes and kinds of societies involved huge disparities in individual
opportunity (those intermediate in size; Alexander, 1979a), while others
(large and small) have leveled them to extreme degrees. I think the answer
will come from comparing the histories of interaction between neighboring
societies, effects of physical or physiographic barriers on their sizes, and
separation of warriors (soldiers) from their families.” (Alexander, 1987, p.
90)


“In humans the laws and mores of larger and larger groups seem increasingly to
(1) guarantee to every individual the right to produce and rear its own
offspring and (2) restrict the amount and likelihood of variation in
reproduction among families. China is currently an extreme in both size (over
one billion) and regulation of reproduction […] the government of India now
pays individuals who submit to sterilization. More subtle, but also more
widespread, are laws that reduce variance in access to resources, such as
graduated income taxes, the vote, representative government, elected (not
hereditarily succeeding) officials, and universal education.” (Alexander,
1987, p. 89)


“The imposition of monogamy by custom or law has the interesting effect of
reducing both male-male and male-female conflicts to a minimum, especially
when clans are discouraged (as in nation states” (Alexander, 1987, p. 88)


“To the extent that males and females (of any species) commit themselves to
lifetime monogamy, the interests of two individuals in a pair approach being
identical. […] to the extent that (1) philandering is unlikely or too
expensive to be profitable, and (2) the relatives of one or the other are not
significantly more available for nepotistic diversions of resources, each
member of the pair will profit from complete cooperation with the other to
produce and rear their joint offspring. In humans this condition is most
likely in (1) societies in which (a) families live and work separately and (b)
husband and wife are in fairly close contact most of the time and (2)
societies in which married couples are “neolocal,” living in some new location
apart from both sets of relatives but close enough to be affected by the
interests of their kin networks in sustaining the marriage. In such societies
(which historically have probably been most often agricultural), I predict
that the devotion of husband and wife will be measurably most complete.”
(Alexander, 1987, p. 88)


“A corollary to reproductive opportunity leveling in humans may occur through
mitosis and meiosis in sexual organisms. It has generally been overlooked that
these very widely studied processes are so designed as usually to give each
gene or other genetic subunit of the genome (= the genotype or set of genetic
materials of the individual) the same opportunity as any other of appearing in
the daughter cells. […] the leveling of reproductive opportunity for
intragenomic components—regardless of its mechanism—is a prerequisite for the
remarkable unity of genomes” (Alexander, 1987, p. 87)


“One consequence is that the human individual has evolved to be
extraordinarily complex (and evidently to revere individuality), and another
is that the complexity and variety of social interactions among human
individuals is without parallel. Because human social groups are not enormous
nuclear families, like social insect colonies, a third consequence is that
competition and conflicts of interest are also diverse and complex to an
unparalleled degree. Hence, I believe, derives our topic of moral systems.”
(Alexander, 1987, p. 86)


“Humans have taken a route to ultrasociality entirely different from that of
the social insects. In the largest and evidently most unified or stable human
groups (i.e., large, long-lasting nations) partial (rather than complete)
restrictions on reproduction have the effect of leveling or equalizing
opportunities to reproduce. Socially imposed monogamy and graduated-income
taxes are examples of such reproductive opportunity leveling.” (Alexander,
1987, p. 86)


“the two basic reasons for honeybees having evolved such potency in their
communication are (1) they have something complicated and important to
communicate about and (2) conflicts of interest have been dropped to near zero
among workers. The objects of communication for honeybees are bonanza food
sources—nectar and pollen —that last long enough, and are sufficiently
difficult to locate” (Alexander, 1987, p. 85)


“the cells of the bodies of metazoans such as ourselves are also clones of
genetically identical units, and not only do they reach enormous numbers, but
their cooperation is so complete that the result is unitary: a human being
composed of hundred of millions of cells can think about a single goal and
direct all of its attention to its realization.” (Alexander, 1987, p. 84)


“One indicator of the degree to which conflicts of interests among social
individuals have been minimized is the size of the group: only when conflicts
are minimal should very large group sizes be reached. The reason is that there
are automatic costs to group living, mainly involving access to resources […]
Conflicts of interest are not expected when all group members are genetically
identical. This is the case in clones of aphids, rotifers, or any other
organisms in which reproduction occurs through parthenogenesis or fission
without sexual recombination of the genetic materials” (Alexander, 1987, p.
83)


“Complex sociality should be expected to arise only when confluences of
interest produce benefits that override the costs of conflicting interests”
(Alexander, 1987, p. 83)


“To understand our social and moral systems we have to unravel their fabric
until we begin to see precisely how it has been created from the interlacing
of the threads of individual reproductive striving. […] conflicts of interests
arise out of a history of genetic individuality. […] altruism appears
generally to diminish with decreasing degrees of relatedness in sexual species
whenever it is studied—in humans as well as nonhuman species” (Alexander,
1987, p. 82)


“The longer the usual lives of individuals, and the longer individuals
continue to interact significantly and repeatedly with one another, the
greater will be their adeptness at assessing and acting appropriately with
respect to partial confluences of interest, as well as conflicts of interest,
and the more complex will be society.” (Alexander, 1987, p. 82)


“as we age, and as senescence proceeds, large numbers of potential sources of
mortality tend to lurk ever more malevolently just “below the surface,” so
that, unfortunately, the odds are very high against any dramatic lengthening
of the maximum human lifetime through technology.” (Alexander, 1987, p. 79)


“Abandonment or cannibalism of offspring, infanticide, abortion, and
miscarriage may all be mechanisms in some mammals by which offspring
replacement or “culling” is effected at minimal expense. The evidence for
widespread superovulation in mammals (ovulation of more eggs than can survive)
appears also to be evidence of offspring replacement, although if selection of
superior offspring is involved it is not clear whether in many cases the
selection is occurring before or after fertilization.” (Alexander, 1987, p.
78)


“The remarkable difference between the patterns of senescence in semelparous
(one-time breeding) and iteroparous (repeat-breeding) organisms is probably
one of the best simple demonstrations of the central significance of
reproduction in the individual’s lifetime. How, otherwise, could we explain
the fact that those who reproduce but once, like salmon and soybeans, tend to
die suddenly right afterward, while those like ourselves who have residual
reproductive possibilities after the initial reproductive act decline or
senesce gradually?” (Alexander, 1987, p. 76)


“if early and late effects of genes should happen to be opposed, deleterious
late effects will accumulate, because alleles will be saved as a result of
their early effects and in spite of their later ones. This will lead to
deteriorative effects that can be identified as the process of senescence. […]
all genes are simultaneously pleiotropic (have multiple effects) and epistatic
(affect one another’s effects).” (Alexander, 1987, p. 67)


“Williams’ (1957) paper on senescence was the initial contribution to the
refinements of evolutionary theory that created the current revolution in
humanity’s understanding of itself. It is therefore ironic that the principal
criticism leveled at this revolution is that its practitioners are
“adaptationists” in the sense that they insist on finding an adaptive function
for every trait of every organism. Williams’ argument, however, was that
senescence is a maladaptive consequence of other adaptive traits. Moreover, he
also argued, in his pivotal 1966 book, that adaptation is an onerous concept
to be invoked only with great care and after considerable investigation. The
primacy and prominence of these two arguments alone put the lie to the attack
on evolutionary biologists as glib “adaptationists” who see evolved function
in all effects of all traits.” (Alexander, 1987, p. 65)


“But we also do a very large number and variety of things that jeopardize
survival. Most of this risk-taking has to do with status-seeking, resource
control, and mate competition. If selection had always favored survival, risks
should never be taken except in connection with acquiring basic resources,
such as food, to enable continued survival.” (Alexander, 1987, p. 56)


“Those who agree cooperate; those who disagree conflict or compete; and those
who cooperate also use their enhanced abilities from cooperation to compete
with those with whom they have conflicts of interest. […] That people are in
general following what they perceive to be their own interests is, I believe,
the most general principle of human behavior.” (Alexander, 1987, p. 53)


“Moral and ethical problems and questions exist solely because of conflicts of
interest; moral systems exist because confluences of interest at lower levels
of social organization are used to deal with conflicts of interest at higher
levels.” (Alexander, 1987, p. 52)


“Happiness and its anticipation are thus proximate mechanisms that lead us to
perform and repeat acts that in the environments of history, at least, would
have led to greater reproductive success. This is a central hypothesis in
evolutionary biology. Paralleling it in importance is the hypothesis that
control of resources is the most appropriate route to reproductive success
(the juvenile lives of all organisms represent a process of increasing control
of resources up to the point—through growth and development—that reproduction
becomes possible). Similarly, I presume that status is typically a vehicle
toward resource control and an outcome of it. If these ideas are correct, then
humans should always experience pleasure when they gain in status or increase
their control of resources (unless they do so at large expense to close
relatives or spouses), and they should experience some converse feeling when
they lose status or resource control (except, sometimes, when they transfer it
to relatives or spouses).” (Alexander, 1987, p. 45)


“the greatest weakness of reduction by generalization is not that it is likely
to be trivial but that errors are probable through unjustified leap from
hypothesis to conclusion, by either those who generate hypotheses or those who
hear about them.” (Alexander, 1987, p. 37)


“Proximate-cause reductionism (or reduction by dissection) sometimes advances
our understanding of the whole phenomena. This happens when the mechanism
discovered or elucidated is unique or new, has a special kind of practical
application, or itself represents a simplification through generalization.
Discovering that diseases are caused by microorganisms, that cancer results
from mutated genes, or that the genetic materials of all life are likely to be
deoxyribonucleic acid are obvious examples. When evolutionary reduction
becomes trivial in the study of life it is for a reason different from
incompleteness; rather, it is because the breadth of the generalization
distances it too significantly from a particular problem that may be at hand.
For example, if a group of political scientists or physicists meeting to avert
an imminent nuclear disaster were presented with a discussion of the general
principles of conflict strategies and confrontations throughout the history of
life (nonhuman as well as human), they might think that someone had changed
the subject. Even if they realized that this was background material they
should have had available to them to make the best decisions, there might be
no time to review or absorb it.” (Alexander, 1987, p. 36)


“biologists proceed as if the lives of all organisms can be understood better
by seeing them first as predictable patterns of somatic and reproductive
effort” (Alexander, 1987, p. 36)


“The “How?” or partial causes approach is most likely to evoke criticism (1)
because understanding is sometimes better achieved by dealing with the
original whole (e.g., the effort to assuage hunger rather than the underlying
morphological and physiological components of the effort), (2) because it is
noticeable that similar ends may be achieved by many different kinds of
subordinate or contributing mechanisms (causing the individual mechanisms to
be less important), and (3) because of the likelihood that something important
may be missing when reconstitution of the dissected phenomenon is attempted.
All three realizations cause us to regard even essential contributing
proximate phenomena as usually more trivial than the functional results of
their collective and cooperative interactions. In contrast, the “How come?” or
ultimate cause approach seeks to simplify, explain, or “reduce” complex
phenomena such as human activities by hypothesizing directly that they are
parts of even grander sets or combinations of actions. Thus, merely to
identify a complex set of activities by a hungry human as an effort to eat is
a step in this kind of reduction; another step is to see that effort as part
of a lifelong effort to build (as a juvenile) and maintain (as an adult) a
soma (phenotype, self) in the further interest of using it in the reproduction
of one’s genetic materials. This reduction by generalizing, because it seeks
the adaptive significance of acts, also tends to identify the larger contexts
within which specific acts or functions are carried out, and as a result
identifies likelihoods of compromise or adjustment in the act that would not
be obvious from any other approach. Without knowledge of food or ingestion,
for example, we might be puzzled about failures to optimize other observed
uses of lips and teeth like kissing, biting, or speaking.” (Alexander, 1987,
p. 35)


“I expect collective interests to be better served when decisions are made
with more information and by a larger proportion of the people involved, and
partly that I expect deception to be more difficult as knowledge about
morality is enhanced.” (Alexander, 1987, p. 33)


“immoral is a label we apply to certain kinds of acts by which we help
ourselves or hurt others, while acts that hurt ourselves or help others are
more likely to be judged moral than immoral.” (Alexander, 1987, p. 32)


“The value of an evolutionary approach to human sociality is thus not to
determine the limits of our actions so that we can abide by them. Rather, it
is to examine our life strategies so that we can change them when we wish, as
a result of understanding them.” (Alexander, 1987, p. 29)


“As a consequence of the general ignorance of biology, many discussants of
human behavior fail to realize that nearly all traits of organisms are
variable or plastic. Those traits that in usual environments are not so
plastic, and that still reflect genetic variation within the human species
(like eye color, nose shape, ear lobe attachment, and hair patterns on the
back of the hand), are actually rare and probably will require special
explanations. Many such traits in humans are involved in individual and kin
recognition” (Alexander, 1987, p. 28)


“Three decades ago Konrad Lorenz also tried to name a “new field” which he
also said consisted of the evolutionary study of behavior. The label he used,
“ethology,” also came to be associated with his particular views concerning
the physiology, development, and inheritance of behavior and as a result
eventually became obscure and less frequently used.” (Alexander, 1987, p. 26)


“we are evidently evolved not only to aid the genetic materials in our own
bodies, by creating and assisting descendants, but also to assist, by
nepotism, copies of our genes that reside in collateral (nondescendant)
relatives. […] nearly all humans believe it is a normal part of the
functioning of every human individual now and then to assist someone else in
the realization of that person’s own interests to the actual net expense of
those of the altruist. […] despite our intuitions, there is not a shred of
evidence to support this view of beneficence” (Alexander, 1987, p. 23)


“Because between-group competition and aggression are major concomitants of
within-group cooperativeness, moreover, I will also argue that moral
“advances” are not necessarily related to the philosophical ideal of morality
as either indiscriminate or self-sacrificing beneficence or producing the
greatest good for the greatest number.” (Alexander, 1987, p. 22)


“Moral systems are societies with rules. Rules are agreements or
understandings about what is permitted and what is not, about what rewards and
punishments are likely for specific acts, about what is right and wrong. […]
Moral behavior, in general, consists of following the rules—of not “cheating.”
[…] the concepts of moral and ethical arise because of conflicts of interest,
and that—at least up to now—moral systems have been designed to assist group
members” (Alexander, 1987, p. 21)


Richard D. Alexander, The Biology of Moral Systems , Foundations of Human Behavior (Hawthorne, N.Y: A. de Gruyter, 1987).


“The Tea Party movement, with its espousal of free-market ideology and fiscal
conservatism, helped avowedly pro-Austrian politicians like Justin Amash, Ted
Cruz, Rick Perry, and Paul Ryan in their campaigns. [...] It was in this
context that Glenn Beck propelled Road to Serfdom to the best-seller list with
his hour-long encomium on Fox News. [22. Josef Herbert Furth to Fritz Machlup,
June 27, 1979, Box 39, FMP.]” 308


“In the fortnight leading up to the caucus, Paul faced obloquy for a series of
racist, white supremacist, antisemitic, and homophobic articles that appeared
in his 1980s and 1990s newsletters, Ron Paul's Freedom Report, Ron Paul
Political Report, and Ron Paul Survival Report. The comments found in those
pages fit well with Rothbard, Rockwell, and Hoppe's conservative worldview.
Among other salacious claims, the newsletters asserted that black people were
lazy, addicted to welfare, and predisposed to criminality; a race war in US
cities was imminent; Martin Luther King Jr. seduced underage girls and boys
and abused his paramours; Jewish bankers conspired to plot the demise of the
US economy; Israel was an "aggressive, national socialist state"; AIDS was a
federal-gay cover-up. The newsletters also defended antigovernment militias
and the idea of secession. These newsletters first surfaced in 1996 during a
congressional run and again during Paul's 2008 presidential campaign, yet Paul
never issued a recantation that took responsibility for the hateful comments
published under his name [...]. He also refused to return a campaign donation
he received from the president of Stormfront, a leading neo-Nazi website. He
also stood by his 2008 speech to the John Birch Society at the extremist
group's fiftieth-anniversary celebration.” 308


“It was the 2012 presidential campaign that announced the Austrian School's
return. It started with Ron Paul, but it involved the entire Tea Party
phenomenon.” 307


“On January 1, 2010, the leading Austrian blog, Austrian Economists, changed
its name to Coordination Problem. In the post announcing the name change,
Peter Boettke conceded that they—the GMU crowd—had lost the battle for
Austrian economics: "It has become evident to us that our efforts have been
futile. Rather than resist the pure ideological identification, we are
choosing to devote our efforts elsewhere. The name Austrian economics has been
lost as a focal point for a tradition of economic scholarship, and is now a
focal point for something else. We have to let it go."” 306


“In a curious irony, Hoppe reimagined the Austrian legacy as one of
authoritarianism, conservatism, antidemocracy, and anti-Enlightenment. He
alternately dubbed Democracy "An Austrian View of the American Age," in which
he celebrated the Habsburg "world of yesterday." For him, the successes of the
fin-de-siècle age—and the Austrian School—were not the product of liberal
predominance or cosmopolitan values but of the ancien régime and its
restrictive social order. He decried the "decivilizational" process that
Austria and the world experienced after World War I, identifying ways to
supersede the fateful error of democratic governance.” 304


“A major fissure within the school opened in the late 1980s when Koch-financed
GMU scholars, inspired by the rediscovery of Schütz and work by Ludwig
Lachmann, took a "hermeneutic turn," which downplayed praxeology and even the
role of subjectivism, concentrating instead on the "life-world" of human
experience to explain complex social phenomena. Deploying the ideas of
phenomenology, economic sociology, and Hayekian "spontaneous orders,"
"cultural Austrians," represented by Boettke, Horwitz, Lavoie, and Richard
Ebeling, proffered new challenges to the "economism" and "scientism" of
neoclassical economics. They increased their emphasis on the role of
institutions in shaping social and economic orders, offering an alternative
economics approach to prevailing models built on a utility-maximizing,
rational homo economicus living in a world of perfect information,
competition, and efficient markets. "Institutions matter" became a rallying
cry for this grouping. The response of Misesian and Rothbardian Austrians to
the cultural turn was swift. In some ways, this fight reprised the school's
oldest internecine feud: between Böhm's deductive, theoretical approach and
Wieser's sociological, institutional method. Rothbard attacked "renegade
Austrians" for their skepticism and moral relativism and for their importation
of "foreign" ideas into the tradition.” 301f


“According to a recent evaluation of heterodox journals, the RAE, Quarterly
Journal of Austrian Economics, and Advances in Austrian Economics rank thirty-
seventh, fifty-first, and fifty-sixth, respectively, out of sixty-two
heterodox publications in terms of reputation. The most impactful Austrian-
inspired publication is again a Schumpeterian one, the Journal of Evolutionary
Economics.” 299


“The terms "Austrian economics" and "Austrian School of economics" reached
all-time highs in 1993, the former term appearing ten times more frequently
than it had during the 1970s revival. References to Mises peaked in 1993 at a
frequency twice as great as at any point during his lifetime. Hayek crested in
2000, at a rate nearly four times that of 1974, his Nobel Prize year. While
Haberler's, Fritz Machlup's, and Oskar Morgenstern's numbers plummeted after
the end of their respective careers, Friedrich von Wieser, Eugen von Böhm-
Bawerk, and especially Carl Menger saw a spike in their popularity in the
early 1990s. Last but not least, Joseph Schumpeter became far and away the
most popular Austrian. He reached an all-time high in 1993.” 297


“On November 18, 1991, US President George H. W. Bush awarded Friedrich Hayek
the Presidential Medal of Freedom "for a lifetime of looking beyond the
horizon." As Hayek himself was unable to attend the event, his son accepted
the award on his behalf.” 295


“it was the most marginalized, dogmatic, and perhaps least representative
grouping, Mises's New York seminar, that played the largest part in
propagating "Austrian economics" in the United States.” 291


“Into the 1990s, Herbert Furth convened a Geist-Kreis-style session at his
home in the Washington, DC, suburbs for his Viennese friends. Haberler,
Machlup, and Martha Steffy Browne joined him.” 290


“The biggest symbolic defeat for a restored Austrian School was the failure of
the Carl Menger-Institut in the 1980s. Even the backing of the Atlas Network
was no match for Austrian apathy. In 1984, a consortium of free-market
associations decided to establish a center for "education and research in
market economics" named after the founder of the Austrian School. Enlisting
Austrian magnates (Julius Meinl and Manfred Swarovski) and international
banking institutions (Citibank), executive director Albert Zlabinger
envisioned a policy outfit in the mold of IEA. Zlabinger recruited Hayek to
the position of honorary president. Haberler, Karl Menger, and Martha Steffy
Browne served on the advisory board, which also included younger "Austrians"
such as Kirzner, Lachmann, and Erich Streissler and international free-market
stalwarts like James Buchanan, Peter Bauer, and the general secretary of the
MPS, the Austrian Max Thurn. In publicizing a "think tank for market
economics" and its coterie of "militant thinkers," the Menger-Institut relied
on endorsements from AEI, Cato, FEE, Heritage, Hoover, and the Liberty Fund.
The letters of support stressed the need to restore and develop the liberal
tradition in German-speaking central Europe, especially in Menger's home
country. In spite of the best efforts of Austrians and their friends, the
Menger Institute collapsed within four years. It hosted lectures and
conferences and reconvened Mises's private seminar in his former Chamber of
Commerce office. It published seminal Austrian economic texts, many of which
had never appeared in German. Nevertheless, the organization's revenues
quickly dwindled, dropping by over 50 percent between 1986 and 1987. The
institute's board demanded new leadership and a more activist political
orientation, which drove away its intellectual adherents. The institute ceased
its activities soon thereafter. Its failure seemed to confirm former
chancellor Bruno Kreisky's mirthful comment to the economist John Kenneth
Galbraith about the lack of interest in Austria for Austrian economics: "'How
do you explain, Chancellor,' asked Galbraith, 'Austria's superb postwar
economic performance: low inflation, full employment, steadily increasing
productivity, a dense and all-encompassing structure of social benefits and
public investments?' 'I explain it,' replied Kreisky, 'by our attention to
export. We exported all of our economists.'"” 289


“Reagan acknowledged that he was a "legatee" of Hayek's ideas, greatly
admiring Road to Serfdom. He employed about twenty MPS members in economic
task forces and was known to cite Hayek. The two men exchanged a few letters,
and Hayek enjoyed a visit to the White House; yet there is little evidence of
Hayek's influence on Reagan's policy choices. [...]. The Hoover Institution
and Heritage Foundation served as his primary US benefactors. In 1978, 1983,
and 1985, he enjoyed extended stays in Palo Alto, where he was a scholar-
inresidence. He also orchestrated the acquisition of the MPS papers for
Hoover, which complemented his personal archives. By dint of his efforts,
Hoover became the primary location for Austrian School correspondence—
Haberler's and Machlup's respective papers also ended up there, as did the
archives of the IHS. [...] Cato paid the salary of his English-language
secretary in the late 1970s [...].” 287


“In endorsing this position, he singled out not only Pinochet but also
Portugal's Antonio Salazar, England's Cromwell, and West Germany's first
chancellors, Konrad Adenauer and Ludwig Erhard, as good models of
authoritarian leadership. [...] Hayek spent the next year defending Pinochet
against the Western media. He argued that Europeans had a false impression of
the regime. [...] Even the liberal Frankfurter Allgemeine Zeitung refused to
publish these opinions. His enthusiasm was rewarded by the Chileans, however.
When Pinochet introduced a new, authoritarian constitution in 1980, he named
it after the Constitution of Liberty. Meanwhile Hayek never recanted his
support. In fact, he doubled down, helping to bring the regional meeting of
the MPS to the home of the Pinochet rebellion, the coastal resort town of Viña
del Mar, in 1981.” 286


“In 1977, Pinochet invited Hayek to Chile [...]. Famously, the Viennese
econometrician Gerhard Tintner attacked Friedman for his support of Chile's
"Nazis." A few Austrian-friendly libertarians even warned Hayek about the
backlash that a visit would precipitate. He went anyway. Hayek came away from
the visit impressed. He met with politicians, businesspeople, and policy
advisers. He called the Chilean officials "educated, reasonable, and
insightful men." In a twenty-minute audience with Pinochet, he discussed the
evils of unlimited democracy and the need for strong leadership, especially in
times of crisis. He promised to send Pinochet an excerpt of Law, Legislation,
and Liberty to help guide his reconstruction of Chilean society. When he
returned to England, he wrote Margaret Thatcher, urging her to introduce
similar liberalizing reforms. She demurred, recognizing that the repressive
measures Pinochet employed to implement policy were not available to her. In a
later interview with the Santiago newspaper El Mercurio, Hayek reiterated his
support for Pinochet and "temporary" dictatorship in the name of liberal
values: "Well, I would say that, as long-term institutions, I am totally
against dictatorships. But a dictatorship may be a necessary system for a
transitional period. At times it is necessary for a country to have, for a
time, some form or other of dictatorial power. As you will understand, it is
possible for a dictator to govern in a liberal way. And it is also possible
for a democracy to govern with a total lack of liberalism. Personally I prefer
a liberal dictator to democratic government lacking liberalism. My personal
impression—and this is valid for South America—is that in Chile, for example,
we will witness a transition from a dictatorial government to a liberal
government. And during this transition it may be necessary to maintain certain
dictatorial powers, not as something permanent, but as a temporary
arrangement."” 285f


“Margaret Thatcher met Seldon and Harris in the early 1960s and joined their
ideological ranks thereafter. [...] When she came to power in 1979, Ralph
Harris was one of her first appointees to the House of Lords, and she wrote a
letter of thanks to IEA because, she said, "it was primarily your foundation
work which enabled us to rebuild the philosophy upon which our Party succeeded
in the past." [...] By 1981, Fisher and his IEA cadre had so many active
projects that Fisher created the Atlas Economic Research Foundation to
coordinate the global network of free-market organizations. Fisher and Hayek
plotted Atlas's strategy together. Hayek wrote Fisher, "I entirely agree with
you that the time has come when it has become desirable and almost a duty to
extend the network of institutes. The future of civilization may really depend
on whether we can catch the ear of a large enough part of the upcoming
generation of intellectuals all over the world fast enough." Today the renamed
Atlas Network consists of more than 480 think tanks [...].” 284


“The popular 1972 publication A Tiger by Its Tail collected Hayek's anti-
inflation, antiunion essays; it sold widely in the United Kingdom. Hayek
argued that trade unions had a monopoly that exerted a baleful impact on the
price level. He assigned unions a major share of the blame for deteriorating
economic conditions around the world. In contrast to Milton Friedman's
monetarism, which argued that inflation could be contained using transparent
and consistent monetary policy alone, Hayek maintained that the stranglehold
of unions on wage negotiations had to be broken too, to allow market economies
to correct. These kinds of pamphlets helped IEA gain the backing of
multinational corporations like Barclays and British Petroleum, which,
alongside the Kochs, financed IEA's operations. [...] By the 1960s, IEA
attracted young Tories like Keith Joseph and Enoch Powell, who felt the
Conservatives needed new ideas [...].” 283


“The IEA grew out of Hayek's MPS as the original free-market think tank. It
offered educational and policy materials to politicians dissatisfied with the
postwar economic order. Antony Fisher founded the organization in 1955. He was
a businessman converted to Hayek's positions by the Reader's Digest
condensation of Road to Serfdom. Seeing himself as a secondhand dealer in
ideas, he appointed fellow MPS members Ralph Harris and Arthur Seldon to
leadership roles. He attracted disaffected Liberal Party members with his
mantra of "re-teaching the economics of the free market." The IEA proposed to
create a liberal Fabian Society to counteract the pernicious influence of
socialist thinkers, Labour Party welfarists, and economic planners. IEA's
founders did not see it as a traditional think tank à la Brookings; instead,
it was an evangelical association on behalf of traditional liberalism. In this
way, Fisher followed the lead of Leonard Read (FEE) and Baldy Harper (IHS),
yet he took free enterprise proselytizing one step further. IEA created a
template for the activist think tanks that emerged in the 1970s, which was
emulated by Heritage, Cato, and AEI in the United States. In 1959, IEA hosted
the annual meeting of MPS in England [...].” 282f


“IHS, the Center for Libertarian Studies, and the Center for the Study of
Market Processes, founded at Rutgers University in 1979, became institutional
homes for latter-day Austrian economics. The Rutgers center explicitly invoked
Austrian ideas in its name, and its founder, Richard Fink, idolized Hayek and
Mises—not only as intellectuals but as ideological impresarios. Fink completed
his PhD in the Austrian economics program at NYU in the late 1970s, and he
impressed Charles Koch with his ability to "get something done and make it
effective." He was instrumental in the move of the Austrian center of gravity
from NYU to Rutgers to George Mason University (GMU). The market process
center he directed, now known as the Mercatus Center, moved to GMU in 1980.
The Kochs have given more than $30 million to GMU, much going to Mercatus and
related conservative projects in public choice theory and law and economics.
They also moved the IHS from California into the same building in Virginia.
Mercatus's primary funding over the years has come from the Koch, Scaife,
Bradley, Devos, Earhart, and Goodrich Foundations, a veritable who's-who of
conservative donors.” 281


“AEI barely retained its nonprofit, tax-exempt status in the 1960s when much
of its personnel joined the Goldwater campaign and invalidated its
"unpolitical" stance. As political debates turned corrosive in the early
1970s, conservative foundations increased their financial support for
institutions like AEI. The Coors, Koch, Olin, and Scaife Foundations provided
millions of dollars to counter "liberal" outfits like Brookings. With this
financial windfall, AEI recruited a stable of prominent conservatives to its
ranks, led by Gerald Ford, the former Fed chairman Arthur Burns, the future
Supreme Court justice Antonin Scalia, and the neoconservative Irving Kristol.
Haberler was the resident guru on business cycles, international trade, and
inflation. An inflation and deficit hawk, Haberler assailed the profligate
spending habits of the US state, blaming it for the predicament of high
inflation and slow growth. He produced dozens of articles, pamphlets, and
books disseminated by AEI. He became one of the leading denouncers of
"stagflation," a portmanteau word he despised nearly as much as the phenomenon
itself. Despite the turn to political advocacy, Haberler's reputation survived
intact. The Nobel laureate Paul Samuelson, a former student and colleague and
perhaps the best-known (American-style) liberal economist, extolled Haberler's
contributions to the Austrian tradition and the economics profession: "Of the
three great Austrian economists who elevated world and American
economics—Joseph Schumpeter, Friedrich Hayek and Gottfried Haberler—it was
Haberler who was the 'economist's economist,' a creative and eclectic advocate
of free trade."” 277


“Haberler parlayed his profile as a laissez-faire economist into political
relevance. After tentative connections to Barry Goldwater's presidential
campaign in 1964, he developed working relationships with Gerald Ford and
Ronald Reagan, serving on Reagan's preinauguration economic team and his
International Monetary Task Force. He exchanged birthday cards with both men
and received an invitation to Reagan's first inauguration. He wrote pro-free-
trade and anti-inflation opinion pieces in the Washington Post, the Wall
Street Journal, and the New York Times. Most significantly, when he retired
from Harvard in 1971, the conservative think tank AEI appointed him its first-
ever scholar-in-residence; he remained there until his death in 1995.” 276


“Morgenstern was therefore left deeply disappointed when the Nobel Memorial
Prize overlooked him year after year. It was an especially bitter blow when
Hayek received the nod. [...] After decades of near-constant criticism,
Morgenstern's appreciation of Mises increased with time. When Mises died, the
New York Times reached out to Morgenstern. He brought Machlup along for the
interview. In his journal, he reminisced about his Viennese days, placing
Mises above the other active economists of his generation: "Mises overshadowed
Mayer by a lot, he was already a personage. He always treated me respectfully,
although we did not agree on many things. When I look back I see that I owe
him a great deal. The Mises-Kreis was a major factor."” 274


“After John von Neumann's tragic death in 1957, Morgenstern grew close with
another Viennese, the mathematician Kurt Gödel. He mentored the Nobel laureate
Martin Shubik and produced late-career work on the unpredictability of the
stock market with Clive Granger, another Nobelist. The latter work, developed
with Burton Malkiel, inspired Malkiel's well-known random walk theory
concerning the stock market.” 273f


“When Machlup and Kirzner conducted much of their exchange, they both taught
at NYU, which became the hub of the Austrian tradition in the 1970s. The
university had a decades-long affiliation with Mises, even if he was only an
untenured instructor. In the 1970s, the Koch Foundation provided a large
financial outlay to build an Austrian economics program. Starting with
Kirzner, the Kochs provided funds for additional hires, fellowships, and
publications. Kirzner recruited Lachmann to NYU from South Africa in 1975.
Lachmann, after studying with Kauder in Berlin, became one of Hayek's prize
pupils at the London School of Economics in the 1930s. [...] These radical
positions put Lachmann at odds with Kirzner, and his Hayekian priors
displeased Rothbardians, yet Lachmann enhanced the profile of Austrian
economics in New York further. Now the two most influential non-Austrian
Austrians were housed at the same institution. One of the first postdoctoral
fellows they attracted was Mario Rizzo, a University of Chicago-trained
economist sympathetic to Hayekian arguments on knowledge and ignorance. He
became an assistant professor in 1978.” 271


“Machlup and Kirzner enjoyed cordial relations since the 1960s; the elder
Viennese enthused about the American's work. Machlup worked on issues of
imperfect competition throughout the 1940s and 1950s. His studies with Edith
Penrose and others on the impact of patent protections in the 1950s stressed
the distortive effects of intellectual property restrictions on the market and
economic growth, since they stifled information flows. Most salient for his
affinity with Kirzner was his two-decade research on the role of knowledge in
the economy, a monumental task that occupied him until his death in 1983.
Beginning with The Production and Distribution of Knowledge in the United
States (1962) and culminating with an intended eight-volume project—of which
he completed three volumes—Machlup explored the emergence of the "knowledge
industry" in the United States. He investigated the diffusion of knowledge
within the economy, placing him alongside Jacob Mincer, Theodore Schultz, and
Gary Becker in 1960s discussions of the idea of human capital. His venture
focused on "the 'promotion' of knowledge from the rank of an exogenous
independent variable to that of an endogenous variable."” 269


“Machlup's conciliatory nature led him in search of common ground. After
initially excluding Schumpeter, he added him back. He included a section on
non-Austrian Austrians, which highlighted the work of Kirzner, Rothbard, and
Lachmann. Heeding Furth, he also downplayed the political aspirations of the
Mises branch. In defining the school, he identified eight main tenets, yet he
downgraded consumer sovereignty (which implied "complete avoidance of
governmental interference with the markets") and political individualism (that
economic freedom is constitutive of political and moral freedom) to
"controversies within the School." These were the most Misesian of the tenets
and also the least consistent with the tradition as a whole. Machlup's
interlocutor Furth felt vindicated by these concessions; interestingly, so did
Kirzner. Kirzner's views on the school paralleled Machlup's preference for
value-free science. Since Kirzner had completed his dissertation in 1957 under
Mises, he had always worked to reconcile Austrian precepts with mainstream
economics.” 268


“Kirzner doubted whether "Rothbard's work should or will have lasting value
within the Austrian School," yet without him, Machlup's account of Mises's
students would be "seriously incomplete." Rothbard's inclusion, however, could
lead to the accusation that Austrian economics was a political program.” 267f


“Furth declaimed the "non-Austrian Austrian" libertarians for distorting
Austrianism. He insisted that Machlup "indicate that the equation of Austrian
economic theory with radical libertarianism is simply wrong." Furth feared
that Machlup's definition of the school elevated an ancillary
principle—political liberalism of a laissez-faire variety—to a central tenet.
Machlup found himself caught between a rock and a hard place, between a school
denoted by geography, theory, and style and one defined by dogma. Machlup
ultimately qualified his comments, yet his article still emphasized the US
Austrian approach. In addition to Furth, Machlup also shared his Austrian
economics article with Israel Kirzner, the most distinguished of Mises's US
students, who expressed complementary concerns to Furth's. The American felt
some trepidation about a definition of Austrian economics that emphasized
libertarianism—and Murray Rothbard—too heavily. Although proud of his
intellectual patrimony, Kirzner struggled with the politics that contemporary
Austrians derived from their economics: "1) Your [Machlup] reference to
"political individualism" ... can surely be questioned. While Mises and Hayek
indeed endorse this view, it can hardly be described as part of Austrian
economics. ... 2) It is quite true that for many in the U.S. the term
"Austrian economics" is synonymous with laissez-faire. And I suppose it
happens to be true the Austrian economists are generally "in favor of" the
free market. But it can, I believe, be maintained (at least I hope so) that
Austrian economics by itself does not embody those judgments of value without
which, I believe, a case for nonintervention cannot be built.'” 266f


“Rothbard referred Kauder's works to the Volker Fund for financial support,
and he used Kauder's interpretation in every subsequent history he wrote. In
time, Kauder was invited to participate in the earliest Austrian revival
events. After cataloguing Carl Menger's personal library (which was now
located in Tokyo) and conducting interviews with many living members from the
Austrian tradition, Kauder published his History. His definition of marginal
utility followed Mises's, and he cited members of the Mises-Kreis throughout
to buttress his arguments—he even quoted from the original seminar songs! It
is no wonder that the Austrians loved the book, but outsiders—including
Hayek's friend Lionel Robbins—found the book polemical and biased. [...] When
the editor asked Hayek to review Rothbard's article on Mises, Hayek spoke out
against Rothbard's hagiographic portrait. Confidentially Hayek criticized
Rothbard for overemphasizing Mises's centrality to the movement.” 265


“Milton Friedman, showing up unannounced at South Royalton, archly commented
on the Austrian revival. He challenged the assemblage with the provocative
assertion that "there is no such thing as Austrian economics—only good
economics, and bad economics."” 262


“According to a recent history of the Nobel Prize, the Hayek selection "may
well have been the most significant of all [selections]. Hayek's claim to the
prize was not obvious." In fact, the award was a shock to many people in the
economics profession, since Hayek's work was rarely cited and he had not
worked primarily in economics since 1941. The Nobel rescued his reputation
from desuetude. For Hayek, the prize money freed him from a dependence on the
welfare state for costly medical treatment and lifted his spirits in a time of
despair. Given the surprising conferral, reactions were intense. His fellow
recipient, the Swedish theorist Gunnar Myrdal, believed the Hayek award
demeaned the prize. It pointed to the partisan tendencies of the key figure on
the selection committee, Assar Lindbeck, a staunch opponent of social
democracy and an advocate of Hayek's philosophy. Lindbeck's intervention on
the Nobel committee ushered in a more ideological phase in the prize's
history, during which neoliberal economists, many associated with the MPS,
received a large number of the prizes. These included Hayek, Milton Friedman
(1976), George Stigler (1982), James Buchanan (1986), Maurice Allais (1988),
Ronald Coase (1991), and Gary Becker (1992).” 260f


“Nearly two hundred economists attended the SEA panel; one hundred
participated in a postconference luncheon. These two events precipitated a
series of conferences and meetings throughout the 1970s that helped develop a
new network of scholars sympathetic to Austrian ideas. The conservative
publisher Sheed and Ward published the proceedings as books, exposing a still-
larger audience to these discussions. From a disciplinary standpoint, these
events launched Austrian economics as a heterodox economic approach. And it
was fundamentally a Misesian interpretation of Austrianism that came out of
these discussions.” 260


“In 1974, the libertarian IHS sponsored a small conference on Austrian
economics to showcase the enduring impacts of the tradition. Founded in 1961
by F. A. "Baldy" Harper, a former Cornell professor and early MPS member
[...]. Harper, an early champion of Mises's, was a hero to free-market
thinkers and activists like the public choice theorist James Buchanan and the
billionaire Charles Koch. The Volker Fund provided seed money for the IHS; by
the mid-1970s, Koch served as president and financial patron. [...] As Koch
drew up his battle plan, he reached out to Hayek in 1973 to undertake
leadership of the institute after Harper's death. Hayek declined, yet Koch
followed up with an Austrian economics conference proposal. A group of nearly
fifty individuals gathered in South Royalton, Vermont, in June 1974. [...]
Israel Kirzner, Murray Rothbard, and Ludwig Lachmann were the keynote
participants. Unfortunately for the assembled, Hayek withdrew at the last
minute. Thus, at the first official "Austrian economics" conference, no one
from Austria attended! Even though Koch reached out to Hayek first, the real
inspiration for the conference was Mises, who had passed away in 1973. More
than an Austrian year, 1974 was about Mises. In addition to the South Royalton
conference, a panel at the Southern Economic Association (SEA) conference
offered a reappraisal of Mises's legacy, involving Machlup, Kirzner, Rothbard,
and others. These two conferences led to the first edited volumes expressly
referring to something called "Austrian economics."” 259


“In 1965, Machlup argued against a return to the gold standard in several
venues—at Bellagio, before the US Congress, and at the AEA and MPS. Mises was
in attendance at the latter discussion, and he was not happy. For him, the
abandonment of gold was a betrayal of Austrian principles and an unforgivable
offense committed by his most loyal student. [...] After the MPS talk, Machlup
"tried to talk to Professor Mises, but he abruptly turned around and marched
away. The break in friendly relations lasted for several years."” 253


“They helped bring about the end of the Bretton Woods system by proposing
viable alternative monetary regimes, including a floating currency system,
which replaced the gold exchange standard after the United States went off
gold in 1971. The shift from gold-backed to floating currencies has been
called "probably the most significant market reform of the last 25 years," and
Machlup spearheaded its inception. The Machlup Group, MPS, AEI, and other
free-market institutions turned a fringe idea into a dominant one. Supporters
for liberalized capital exchange and floating currencies were a tiny minority
in the early 1950s (about 5 percent of economists), but by the late 1960s they
were hegemonic (about 90 percent). According to Matthias Schmelzer, no two
individuals were more instrumental than Machlup and Haberler. The monetary
changes they wrought developed hand in hand with liberalized international
trade, globalization, the rise of multinational corporations, and a growing
confidence in the power and logic of market thinking. Behind these
developments were ideas about value and the economy, commitment to elitist
policy intervention, and a knack for institution building, several of the
Austrian School's calling cards.” 252f


“After the first four conferences, Machlup published International Monetary
Arrangements, which he shared with the IMF and G10. Machlup caught the
attention of the G10's chairman of deputies, Otmar Emminger, with whom he
forged a working relationship. This collaboration produced Bellagio 2.0: the
Joint Meeting of Officials and Academics. Over the next thirteen years, the
Machlup Group met eighteen times. Although officials attended the conferences
as private individuals, not as state representatives, the Bellagio meetings
reconciled policy directives with the latest academic research. After the
final official Bellagio meeting in 1977, its leaders introduced the G-30,
which exists to this day. Machlup served on the Group of Thirty as its
intellectual lodestar until his retirement.” 252


“In Plans for Reform of the International Monetary System, Machlup began to
frame policy discussions. He reached out to Haberler, the fellow central
European émigré and MPS member William Fellner, and the Yale economist Robert
Triffin for assistance. They then approached the RF and FF. Both foundations
came through with funding, permitting thirty-two academics to gather four
times between December 1963 and June 1964.” 251


“Writing to Haberler and the economists Willy Fellner and Robert Triffin in
1982, Machlup reminisced about their decades-long collaboration on elite
advisory boards: "The four of us were once called 'the Quartet.' ... I can
assure you I miss the presence of you [at the Group of Thirty, or G- 30]." The
G-30, a powerful consulting group formed in 1978 to address problems in the
global economy, evolved out of a series of conferences on the international
monetary system that "the Quartet" had orchestrated in the early 1960s. Over
twenty-seven meetings, Machlup and his colleagues reshaped the Bretton Woods
landscape, providing the intellectual foundation for the shift from the
postwar gold exchange standard to floating exchange rates and financial
liberalization. [...] Machlup convened the first conference of scholars at the
RF-owned Villa Serbelloni on Lake Como in Bellagio, Italy, in 1963 [...].” 250


“Machlup published on the international patent system, and he recruited
impressive students to Johns Hopkins, especially Edith Penrose and Randall
Hinshaw. Like Haberler, Machlup expressed concerns that governments would use
patent policy to inhibit trade and restrict innovation. What was needed was
greater liberalization—if not at the national level, then internationally. The
significance of this ongoing Haberler-Machlup collaboration climaxed in the
1960s with the Bellagio Group, also known as the "Machlup Group," which
revolutionized the international monetary order.” 249


“Haberler would amplify these arguments in his work as the first fellow of the
conservative think tank the American Enterprise Institute (AEI). His ideas
found resonance with the MPS members Karl Brandt, Peter Bauer, and Deepak Lal.
AEI, the London-based Institute for Economic Affairs (IEA), and the Heritage
Foundation touted these ideas in the late 1970s and early 1980s, providing a
new model for development, neoliberalism's LIEO.” 248f


“the Prebisch-Singer thesis called for industrialization based on import
substitution and preferential tariffs on exports from developing countries.
The United Nations Conference on Trade and Development (UNCTAD) and the G-77,
the caucus of Third World countries, both formed in 1964, adopted these
principles. The latter organization launched the New International Economic
Order (NIEO) based on these tenets. Meanwhile liberal economists such as Mises
and Jacob Viner excoriated Prebisch-Singer, arguing that it hindered
international trade and global economic growth. [...] Haberler made a lasting
contribution as an economic adviser for GATT and a proponent of the anti-NIEO
program, the Liberal International Economic Order (LIEO). The GATT Report of
1958, nicknamed the "Haberler Report," marked the reorientation of liberal
internationalism away from developmentalism toward trade liberalization and
globalization. After GATT's postpartum struggles, GATT officials chose to
investigate the international terms of trade discussed by Prebisch-Singer,
commissioning a report in 1957 with Haberler as the lead economist. Two future
Nobel laureates, Jan Tinbergen (Haberler's former colleague at the League of
Nations) and James Meade, served under him. In the final report, Haberler
argued for the liberalization of trade policies, especially in developed
countries. [...] The Haberler Report, characterized as one of the opening
salvos in the "counter-revolution in development economics" [...].” 247


“Haberler fit well at Harvard, where interdisciplinary workshops similar to
the Viennese seminars served as the foundation of the social sciences. In
1943, he joined the Board of Governors of the Federal Reserve; he recruited
his brother-in-law Herbert Furth there. In time, Haberler was appointed to the
board of directors of NBER and acted as president of the International
Economic Association and American Economic Association (AEA).” 246


“by the mid-1930s Gottfried Haberler was a leading expert on international
trade. Since 1933, he had advocated for the reduction of tariffs, an end to
protectionism, and curtailment of government intervention in foreign trade.
Using a marginal utility framework and the idea of opportunity costs, he
argued that tariffs increased comparative costs of exchange, reducing trade.
[...] This work led Arthur Loveday to recruit Haberler to Geneva to join the
League of Nations Economic Section. His work Prosperity and Depression became
the model for all subsequent League publications on economic conditions. His
approach became known as the "Haberler method." While in Switzerland, he
participated in the discussions of the "Geneva School" of neoliberalism, which
featured William Rappard, Wilhelm Röpke, and Mises.” 245


“Hayek met with representatives of the FF, the Austrian education minister and
secretary of state, the head of the Austrian National Bank, and others to get
the project off the ground. Ultimately, a less expensive proposal from Paul
Lazarsfeld won favor. Central to the negotiations was Morgenstern, a favorite
of the FF and the ruling conservative party in Austria, the ÖVP. Hayek was
left somewhat out in the cold. He served as an inaugural fellow in 1962-63,
but he only played a minor role thereafter. The IAS became the site of
administrative dysfunction and political infighting, which soured him on it.
Hayek also felt betrayed by its members and the Austrian government after an
abortive attempt to return to Vienna from Chicago in 1961. When neither the
University of Vienna nor the IAS agreed to pay the shipping costs for his six-
thousand-volume library, he instead accepted a professorship in Freiburg,
Germany, the home of German ordoliberalism. Morgenstern, not Hayek, became the
driving force behind the IAS in the 1960s: he cofounded the institute with
Lazarsfeld and became director in 1965. The IAS became one of the leading
European centers of social scientific research. A large number of émigrés made
their way back to Vienna to teach summer courses and serve as visiting
professors. Morgenstern, Hayek, Haberler, and Gerhard Tintner accepted
fellowships or professorships. Even with this success, only Tintner
permanently returned [...].” 244


“Hayek foresaw a grand undertaking: a center with twenty senior fellows with
permanent positions, forty junior fellows (fiveto seven-year appointments),
and a guaranteed yearly budget of about $1 million ($8.5 million in 2019
dollars). He also sought either an endowment of $25 million ($212.9 million)
or a $15 million ($127.3 million) commitment over twenty years. He provided a
list of "ex-Austrian" scholars who might be lured back. In economics, he
identified Haberler, Machlup, and Morgenstern.” 243f


“Between 1955 and 1960, Hayek devised a program for an "Institute for Advanced
Human Sciences at Vienna" that he proposed to Henry Ford II, then the FF, and
finally the Austrian government.” 243


“Morgenstern [...] secured travel funding for himself, Hayek, Haberler,
Machlup, and Voegelin, though the latter two eventually withdrew. For the
émigrés, the four-week Vienna trip was encouraging [...]. Their lectures
attracted hundreds of people, and their seminars drew fifty to eighty.
Students appeared "eager" and "intelligent" yet "inadequately prepared."
Morgenstern identified a "considerable interest in economics" that "may
perhaps produce very lasting effects."” 242


“After Hayek's first trip to Vienna in 1946, he wrote to the RF, "There is
clearly an opportunity to preserve Vienna as an intellectual centre, and the
Austrians themselves are trying hard to get the help of those people who
during the inter-war period have left Austria. ... I am naturally most
interested in seeing the tradition in Economics preserved." Hayek proposed "to
get some of the Austrian economists who are now located in the United States
or in England to go to Vienna for a short concentrated course." He mentioned
Haberler, Machlup, Morgenstern, Mises, Schumpeter, and Eric Voegelin.” 241


“starting in 1949, the European Forum received $2,000 yearly from the RF. With
the US dollar exchanging for between twenty-one and thirty-seven Austrian
schillings in 1948-49, this represented 40,000-70,000 schillings. Total
expenditures for the 1947 meeting had been 80,000 schillings, meaning that the
RF immediately became the forum's biggest donor, surpassing Austrian federal
and provincial outlays. The RF renewed the grant the following year. The funds
came out of Marshall Fund grants that the RF received from the US government.
The RF expanded its participation in 1950 with a $7,000 grant to establish an
Institute for Current European Cultural Research, a group committed to
"European unity, especially on the cultural side." The RF provided another
$52,000 through 1955 to support these endeavors. [...] The same year as the
initial MPS meeting, Hayek attended the forum and, convinced of its merits,
began touting it. Over the next twenty years, he developed his work on
spontaneous orders, systems theory, and cybernetics in these conferences. He
contacted the RF about the forum's successes and its need for financial
support. He also gushed to Morgenstern about the quality of the students: "the
group of Austrian students, with whom I spent three weeks in Alpbach, were as
keen, intelligent and openminded as one could wish to find anywhere." [...]
Hayek recruited Popper for the 1948 meeting. The rest of the Austrian
economists soon joined. Haberler led the economics discussions in 1949;
Machlup participated before the decade was out.” 240


“Fritz Molden took advantage of his ties to the US political and business
elite. He had married Joan Dulles, daughter of OSS (and future CIA) head Allen
Dulles, in 1948. Fritz urged his brother to reach out to John Dulles, Allen's
brother, who was chairman of the Board of Trustees at the RF. In application
materials, Fritz cited the commitment of the Austrian College to "break[ing]
down the barriers of nationalistic resentments" by "study[ing] and
discuss[ing] the problems, spiritual and scientific." In a supplemental
report, Otto emphasized the commitment of the college's founders to Austrian
patriotism, anti-Nazism, resistance to totalitarianism, and the principles of
Western freedom.” 239f


“Ironically, though Mises's seminar was one of the least impactful of postwar
Austrian ventures, it was to have the greatest influence on the "rebirth" of
Austrian economics in the 1970s and on contemporary understandings of
Austrianism. Haberler, Hayek, Machlup, and Morgenstern kept their distance
from Mises's sect, yet they also tried to revive earlier traditions.” 237


“Kirzner selected Mises as a mentor at NYU, since the Austrian was the most
prestigious economist on staff. He completed his dissertation in 1957, and his
first book, The Economic Point of View (1960), connected praxeology with ideas
of rationality and valuation prevalent in economics.” 237


“A new breed of students flocked to Mises's NYU seminar and his FEE talks in
the 1950s, from which he selected for a Privatseminar held in his apartment.
As opposed to the earlier seminar—in which Mises was primus inter pares in a
group that ostensibly cultivated "neither school, nor community, nor sect"—the
new circle relied on idol worship and adherence to dogma. Primary among the
nascent Misesian "Austrians" were Hans Sennholz and Israel Kirzner.
Libertarians affiliated with FEE, especially Rothbard, George Reisman, Ralph
Raico, and Leonard Liggio, also participated. Mises himself enjoyed cordial
relations with Ayn Rand and her emerging circle. The two groups cross-
pollinated in the late 1950s before an acrimonious falling out. While Mises
attracted an imposing group of followers, without the richness of the Viennese
cultural world, much of the school's earlier diversity was lost.” 236f


“With a raised profile and financial backing from pro-business organizations,
Mises had a second chance to create what he had in Vienna: a Kreis. It was
still not the Mises-Kreis 2.0, however. From the outset, it was a dogmatic
project, with strong ideological undertones. To sustain Mises's circle, the
Earhart Foundation provided travel funds and scholarships for his acolytes,
and NAM financed lectures and tours. The Volker Fund paid him for talks and
seminars and provided a yearly fellowship for deserving students to attend
NYU. Mises himself nominated the candidates. Richard Cornuelle, an officer of
NAM and Volker, started attending the seminar in the late 1940s and described
it thusly: 'Mises arrived last, always on the stroke of the appointed hour,
impeccably dressed. He took a single page of notes in German from a small
envelope ... and spoke without interruption for an hour and a half, in a kind
of accented chant as if he were reciting scripture from memory. Then there
were questions, which he usually answered by repeating, almost word for word,
the part of his recitation the question suggested.'” 236


“John Kenneth Galbraith critiqued it in the New York Times Book Review. It
went through three reprints in 1949, selling four thousand copies. One of
Mises's earliest New York followers, George Koether, distributed one hundred
thousand excerpts through the Christian Freedom Foundation (CFF). Percy
Greaves, a CFF employee, and his future wife, Bettina, joined Mises's small
New York seminar, which restarted in the wake of Human Action's success. The
Greaveses would be the key popularizers of Misesian economics in the 1960s and
1970s. Human Action also inspired the conservative Sun Oil magnate J. Howard
Pew to establish a libertarian journal, the Freeman, in 1950. Human Action
attracted a couple of important libertarian converts to Mises's economics,
Murray Rothbard and Ayn Rand. Finally, it increased Mises's profile at NYU and
the reputation of his flagging seminar. This drew the most important figure of
the subsequent academic revival of Austrian economics into Mises's orbit,
Israel Kirzner.” 233f


“While in California, the emerging epicenter of US libertarianism, Mises
encountered Leonard Read, who became one of Mises's patron saints. Read
disseminated Mises's works and provided him a regular stipend. Read, Henry
Hazlitt, and Lawrence Fertig, a New York University trustee, orchestrated
Mises's appointment to a visiting professorship at the NYU Graduate School of
Business Administration in 1945. Like Hayek at Chicago, NYU did not pay
Mises's salary; private contributions did. After the appointment, Mises began
holding lectures and seminars, first in Manhattan and later in Irvington-on-
Hudson, where FEE purchased an opulent estate in one of New York City's
wealthiest suburbs. Harold Luhnow and the Volker Fund also provided support
for Mises's endeavors from 1947 onward. Thanks to his benefactors, Mises found
stability, yet his reputation and profile remained lower than he expected,
especially in comparison to his Austrian compatriots. Mises's unexpected
breakthrough came in 1949 with the appearance of Human Action [...].” 233


“Its vice president, Robert Welch, spun off the radical John Birch Society in
1958 to counter the Communist threat. The two organizations made common cause
on many issues. With NAM's support, Mises wrote position papers excoriating
the Bretton Woods international monetary system and advocating a return to the
gold standard. In the wake of the 1944 publications Bureaucracy and Omnipotent
Government, Mises traveled the country lecturing to local NAM chapters as "the
most eminent and uncompromising defender of English liberty and the system of
free enterprise which has reached its highest development in the United
States."” 232f


“Mises's perceived isolation in the United States exacerbated his anger and
despondency. [...] Eventually he received a series of one-year fellowships
from the RF to work for the National Bureau of Economic Research (NBER). He
made an initial essay at a renewed Privatseminar in 1941, which the émigrés
Machlup and Helene Lieser visited. Mises relayed to Hayek the seminar's
disappointing achievements: "My seminar is going on. Last week M. and L. took
part. I think that their impression was that it is still far below the
Stubenring standard." At a nadir, Mises referred to his ongoing research as
his "posthumous works." Mises's fortunes began to turn with the aid of new
friends and a few sympathetic pro-business associations. The National
Association of Manufacturers (NAM) offered Mises a yearly honorarium to serve
as a consultant for its antistatist agenda. These payments more than doubled
his income. NAM was founded in 1895 as an advocacy group supporting free
trade. By the 1930s, it had become one of the leading organizations opposing
Franklin Delano Roosevelt and the New Deal.” 232


“"If I had regarded it as my task to acknowledge all indebtedness and to
notice all agreement, these notes would have been studded with references to
Ludwig von Mises, Frank H. Knight, and Edwin Canaan; of Walter Eucken and
Henry C. Simons; of Wilhelm Röpke and Lionel Robbins; of Karl R. Popper,
Michael Polanyi, and Betrand de Jouvenel." He singled out the MPS and its "two
intellectual leaders," Mises and Knight. He mentioned a number of Viennese
friends (Machlup, Mises, Walter Fröhlich, and Gerald Stourzh), Chicago
contacts (Knight, Friedman, Viner, David Grene), financial backers (Pierre
Goodrich, Floyd Harper, Richard Ware), and foundations (Volker, Guggenheim,
Earhart, and Relm). Hayek saw Constitution as the culmination of a lifetime's
work. The book was not the success Hayek envisaged, however. [...] Its lack of
impact coincided with the end of his American phase, since he left Chicago in
1962 when the Volker Fund disbanded and the money for his salary dried up.
[...] One of the biggest blows for Hayek had to be Mises's ambivalent
response. Mises lauded the first two parts for "brilliant exposition" on the
meaning of liberty and civilization, but he panned the last part. Mises called
it "disappointing" because of its misjudgment of the compatibility of the
welfare state and liberty.” 231


“Hayek believed Constitution would increase his popular reputation and restore
his academic status. Dedicating the book "to the unknown civilization that is
growing in America".” 228


“The Chicago years proved stimulating and productive. Hayek was academically
active and well liked. His seminars became the stuff of legend. As described
by Shirley Letwin, "Every Wednesday he conducted a seminar of staggering
catholicity. On Wednesdays after dinner, a large assortment of the wise and
the callow, coming from all disciplines and all nations, assembled around a
massive oval oak table in a mock Gothic chamber to talk about topics proposed
by Hayek." Among the luminaries were Knight and Friedman, the physicists
Enrico Fermi and Leo Szilard, and the sociologist David Riesman.” 227


“Henry Simons seemed enthusiastic about developing a project around Hayek with
Volker money. He proposed an institute with Aaron Director as head and
involving Friedman, Machlup, and Herbert Stein. Among insiders, it was
affectionately called "The Hayek Project." This proposal evolved into the Free
Market Study (FMS), a three-year pilot program dedicated to the production of
a popular work on free markets and economic freedom. Although Simons died in
1946 and Hayek returned to London, the FMS brought Director and Friedman back
to Chicago. The Volker Fund paid Director's salary at the Law School for five
years until he could go up for tenure. One can justifiably say that Hayek laid
the foundations for the Chicago School's postwar success, since Director was
the driving force behind Chicago's economics imperialism. The difficulties
Hayek faced in securing permanent employment in the United States were
nevertheless discouraging. The Volker Fund tried to find a position for Hayek
at the Institute for Advanced Studies in Princeton and the Department of
Economics at Chicago in 1948, yet both declined, raising concerns about
appointments funded by private donors. Eventually, Chicago's Committee on
Social Thought agreed to terms with Hayek in 1949. The Volker Fund, not the
university, paid his full salary throughout his US academic career. Hayek's
arrival was delayed by his collapsing marriage, however. For years, he had
wanted to divorce his first wife, Hella, to marry his childhood sweetheart,
Helene. The generous Chicago salary facilitated the separation and covered
child support, yet he also needed to find a location that would permit the
divorce over Hella's opposition. To this end, Hayek arranged a one-term stay
at the University of Arkansas; the state of Arkansas had the laxest divorce
laws in the United States.” 226f


“US members felt disconnected, since most meetings took place in Europe, and
Hunold, the European secretary, was dismissive of the British and Americans.
[...] A series of nasty exchanges between Anglophone members and Hunold and
Röpke erupted in the late 1950s, sparking the Hunold Affair. Hayek, who
opposed Hunold's propagandistic style, sided with the Anglophones. The Chicago
and Austrian clans rallied to him, whereas Continental Europeans supported
Hunold. The Europeans saw the affair as not over tactics but over vision. To
them, the Mises-Hayek-Friedman faction seemed too laissez-faire. They elevated
economics to a worldview, reducing social and political problems to economic
ones. The German cadre preferred to balance philosophical and cultural ideas
with economic concerns. Hunold's worries were somewhat justified; the MPS
shifted toward more "economistic" concerns in the years to come. At the
affair's climax, Hayek resigned the presidency, and Hunold and Röpke left the
MPS. The Hayek faction carried the day.” 225


“Contrary to MPS members' self-professions of marginalization, they emerged as
leaders in postwar European politics and in international associations, which
were experiencing a conservative upturn. The election of Luigi Einaudi as
president of Italy in 1948 and the appointment of Ludwig Erhard as the
minister of finance in West Germany in 1949 signaled the ascendancy of a more
conservative European liberalism. Both men were MPS members. Walter Eucken,
another member, helped design the postwar West German "social market economy."
Meanwhile the final chapter of Hayek's Road to Serfdom—"The Prospects of
International Order"—inspired British free-market Tories like Winston
Churchill and Maxwell Fyfe as they created international institutions like the
Council of Europe and the European Convention on Human Rights. Individuals at
the European Economic Commission also turned to Hayek's globalist visions in
designing regulations on capital and investment rights.” 224f


“The Austrians attended all the meetings in the 1940s and 1950s and appeared
on every program. Mises, often portrayed as an outcast, played a vital if
underappreciated role in the society's success by bridging the gap to anti-New
Deal US businesspeople. For these American crusaders, Mises's participation
signaled an unwavering commitment to freedom and free enterprise. Two of the
MPS's primary backers, Crane and Pierre Goodrich, who founded the Liberty Fund
in 1960, scoured the list of invitees for undesirables. They personally
collected over $40,000 for travel and operational expenses for the Princeton
meeting. Most of the money came from Crane, Goodrich, J. Howard Pew of Sun
Oil, Sterling Morton of Morton Salt, Irene Du Pont, and the Volker and Relm
Foundations. Crane and Goodrich stressed to Hayek the indispensability of
Mises, since he embodied uncompromising dedication to principle: "This is
Hayek's society, of course ... but there is also in this First American
Meeting a top place for Von Mises. I would not be suggesting this if I did not
also think that Von Mises had a great deal to contribute. It is no argument
against Von Mises that he may seem to some people to be more clear and adamant
in his theories than some others are." Because of these interventions, Mises
received top billing, delivering the opening keynote at the 1958 meeting.”
223f


“The early meetings all occurred in opulent surroundings: Mont Pèlerin (1947);
the Swiss town of Seelisberg near Lake Lucerne (1949, 1953); Bloemendaal, the
wealthiest region in the Netherlands (1950); the French Rhone town Beauvallon
(1951); Venice (1954); Berlin (1956); and St. Moritz (1957). The first US
meeting took place in 1958 in Princeton. The selection of resort towns set in
the natural splendor of Europe's mountain and lake regions recalled the summer
trips of the Habsburg Bildungsbürgertum. The seclusion and lavishness recalled
the cultural and socioeconomic values that these men associated with culture
and civilization. The stress on extracurricular activities—walks, tours, and
meals—evoked the spontaneity of Alpine hikes and late-night Kaffeeklatsch of
Viennese cafés. The early MPS programs reveal the significance of sociability
to the thought collective. [...] Several hours separated panels at 9:30 a.m.,
2:30 p.m., and 8:30 p.m., permitting long repasts and relaxing intermezzi.”
223


“Röpke and Hunold discussed forming a new journal, Occident, to revitalize
humanistic discourse in Europe. Röpke attracted the support of Hayek and the
Italian éminence grise social scientist Benedetto Croce, yet Röpke's demand
for complete editorial control ran afoul of the project's financial backers.
Occident never got off the ground. Röpke intended Occident as an ecumenical
journal, unifying antifascist scholars under a common banner. This reinforced
the German's preference for partnership over conflict in a changed postwar
Europe. Hayek preferred greater ideological purity. When he began developing
the idea of a neoliberal organization, he avoided the eclecticism of Röpke's
vision. The early MPS restricted the range of acceptable views to ones that
fell within the liberal spectrum. This proscription ruled out European social
democrats, UK Labour supporters, and US New Dealers. Hayek also permitted
nonintellectuals to participate in the conference's proceedings, including
journalists and the society's financial backers. This gave the MPS a more
clearly partisan profile than earlier endeavors had. With a broader base and a
clearer mission than Röpke's project, the first MPS received with a positive
response. The founding members agreed on a statement of aims, penned by
Robbins. Within a year of establishment, the society's membership expanded
from 40 to 115, and its European members arranged a second meeting, again in
idyllic Swiss surroundings. Despite concerns about financing, Hayek and the
founders remained optimistic. The fund-raising efforts of Hunold and Luhnow
ensured continued viability by providing the cash to make all-expenses-paid
meetings possible.” 221


“Luhnow also requested that the former DuPont executive Jasper Crane be
present, since he provided financial support for FEE and other pro-business,
anti-New Deal organizations. Crane declined to attend, but Loren Miller,
another businessman and a gadfly in early libertarian politics, did make the
trip. Crane and Miller worked to get the oilman H. B. Earhart to support the
MPS. The Earhart Foundation became a primary sponsor of the MPS [...].” 218


“Austrians, with their theoretical sophistication, linguistic capabilities,
and intellectual broadmindedness, were coveted by government agencies and the
burgeoning policy sector. Fritz Machlup joined the Office of Alien Property
Custodian, which managed the property and assets of enemy aliens. With a
specialization in intellectual property and business enterprises, Machlup
dealt with seized German assets. Herbert Furth joined the Federal Reserve
Board. Alexander Gerschenkron worked at the Fed in the Research and Statistics
department, becoming the bank's foremost scholar on the Soviet economy and the
head of its International Section. Karl Pribram worked for the Brookings
Institution on labor economics, unemployment policy, and social insurance.”
214f


“The Austrians pursued distinctive paths to influence, which these two works
neatly encapsulate: a Hayekian one involving liberal social philosophy, free-
market advocacy, and ideological work; a Morgensternian one dedicated to
social scientific research, policy expertise, and behind-thescenes
governmental influence. Both of these tendencies had their origins in their
Viennese experience working at the institute and arguing in the GeistKreis and
Mises seminar. In fact, they trace back further to the days of Menger, Böhm,
and Wieser, who served as bureaucrats and policy advisers, as well as
antisocialist, liberal polemicists.” 214


“For war planners, defense experts, and policy advisers, Theory of Games
pointed to potential solutions to issues of operations, logistics, military
strategy, and diplomacy. Both men received requests from the state, even if
von Neumann was the hotter commodity. In the coming years, he worked for the
following governmental agencies: the Ballistic Research Laboratory, the
National Defense Research Committee, the Navy's Section for Mine Warfare, the
Atomic Energy Commission, and, most famously, the Manhattan Project. He was
also hired on by the RAND Corporation, the think tank of "defense
intellectuals" at the heart of Cold War social scientific thought. Morgenstern
too landed at the hub of US policy work. By the late 1940s, he conducted work
for RAND, the US Strategic Bombing Survey, and the Office of Naval Research.
He produced studies on logistics and operations research for the Navy. He
wrote a number of studies for the National Bureau of Economics Research
(NBER). He also established an Economic Research Project at Princeton in 1948
(later the Econometric Research Program), which received commissions from the
Lawrence Livermore Laboratory and the Sandia Corporation. The latter owned
Sandia National Laboratories, which spearheaded research on the nonnuclear
components of nuclear arms. In the 1960s, he worked on Operation Plowshare,
which sought peaceful uses of for nuclear explosives. He testified to Congress
and advised government agencies, becoming a well-regarded defense
intellectual. By the 1960s, Morgenstern tired of government advising and
shifted in the direction of management and strategic consulting. He served on
the board of the Market Research Corporation of America and founded
Mathematica, Incorporated, which advised corporations and government agencies
on investment strategies. His list of clients included General Motors, General
Dynamics, DuPont, Raytheon, and Scudder Investments. Even as he grew
disillusioned with US foreign policy decisions and US party politics, he made
a substantial portion of his living by catering to the military-industrial
complex and power elite. Despite these new opportunities, the opinions of
Austrians still mattered to Morgenstern. "I was at Harvard 1-4 [June 1944],
staying with the Haberlers. It was really great. Every night saw people. ...
The best was Schumpeter, especially when one could talk about the history of
doctrines with him. We amused ourselves brilliantly many times. ... However,
nobody had read Theory of Games."” 212f


“This discussion bore similarities to the way that Austrians like Hans Mayer,
Leo Schönfeld, and Paul Rosenstein-Rodan spoke about complementarity of values
in the 1920s and 1930s. Individuals are not necessarily in the position to
maximize their utility in a straightforward way, since they are constrained by
the actions of others. Exchange within society is not a "maximum problem" but
a "minimax" one, in which the expectations and calculations of participants
may coincide, but they may also conflict. Economic actors could act
individually or form alliances with others. Individuals therefore have to
devise plans, "strategies," to account for the full range of potential actions
by their fellow participants and adjust their actions to maximize their
return. To make such complex calculations—which grow more complex the more
actors and choices involved—a theorist needed a new method. [...] Measurement
would not consist of the calculation of marginal units using infinitesimal
calculus but computation of the expected, maximum result in an n-person
(generally zero-sum) game. [...] He introduced new assumptions into his
theoretical apparatus —rationality, perfect knowledge, free competition—that
ran counter to his earlier views and those of his mentors. He had broken from
the Austrian and Walrasian traditions methodologically, yet he remained a
proud marginalist, believing that his work stood in the tradition of the
"intellectual eminence" of Böhm and Menger. For him, Theory of Games was a
"catharsis" that restored his faith in his profession and his heritage.” 211


“True to his Austrian roots, he situated the economic behavior of individuals
and the maximization of utility at the core of economic inquiry. He suggested
that economic theory remained underdeveloped and required greater
formalization to rise to the level of the physical sciences. Theory of Games,
Morgenstern argued, offered the beginning of a partial theory in economics,
not a "universal system." [...] Instead of deploying differential calculus and
a large system of equations, as Walras, Pareto and the Lausanne School had
done, Morgenstern indicated that economic theory had to retreat to "a limited
field": "the behavior of the individual and ... the simplest forms of
exchange." [...] Like Menger and Böhm, he returned to the examples of the
isolated individual (Robinson Crusoe) and the idea of barter exchange to
ground his economic theory.” 210


“Morgenstern was the primary author of only one section, the introduction.”
209


“Morgenstern's path began to diverge from his Austrian peers in the early
1930s. Morgenstern pivoted away from his earliest work on time and economic
methodology under the influence of Karl Menger and through collaboration with
Abraham Wald. He became convinced that advanced mathematics provided the way
forward for economics. Upon arrival at Princeton, he struck up a fast
friendship with the Hungarian émigré mathematician John von Neumann, who had
been at the Institute for Advanced Studies since fleeing Germany in 1932. This
friendship became the most meaningful of Morgenstern's life. Its culmination
was the 1944 book The Theory of Games and Economic Behavior, the foundational
work of game theory. Morgenstern believed that the work continued the
revolution that the marginalists had initiated. Von Neumann's mathematical
genius bewitched Morgenstern, drawing the Viennese into the former's
intellectual world. In 1937, von Neumann began to lecture and write on the
analysis of games. Examining two-person games like dice and poker, von Neumann
used the "modernist" mathematical tools of his mentor, David Hilbert, and the
Göttingen School—axiomatization, mathematical logic, set and group theory—to
examine the kinds of strategies and behaviors available to players to achieve
optimal results. With conditions deteriorating for his family and friends in
Hungary and the threat of European war looming ever larger, von Neumann began
to apply his game theoretical concepts to questions of more immediate
significance, like economics, diplomacy, and warfare. Morgenstern's expertise
in economics and interest in formal mathematics dovetailed with von Neumann's
strengths. Shortly after meeting in 1940, they set to work on "a treatise ...
about games, minimax, bilateral monopoly, and duopoly. What fun." If von
Neumann delighted in the formalization of game theory, Morgenstern reveled in
the possibilities that the theory opened for marginal utility theory: "the
treatise will surely be of far reaching significance, especially because it
touches upon the foundation of the subjective theory of value."” 208


“Oskar Morgenstern, another reader of the early manuscript, damned it with
faint praise: "There is nothing profound in it. Naturally I don't like
planning either, but the intellectual situation is much more complicated."
When the Friedrich Hayek celebrity tour breezed through Princeton in April
1945, the jealous and competitive Morgenstern had even more complaints: "Hayek
was here ten days ago. I threw a party. He is seemingly unchanged;
unfortunately, in the hands of an evil collective. In Col. [colloquium] I
heard him after a dinner. I simply cannot make common cause with him anymore.
Neither with him nor his opponents; none of it is Science." His disappointment
stemmed from Hayek's abandonment of economics for seemingly partisan politics
and the bad name that Road gave to the Austrian tradition.” 207


“In Detroit, he met Harold Luhnow, who became one of Hayek's primary
benefactors. Luhnow, a Kansas City businessman, worked for William Volker &
Company, managing its philanthropic trust, the Volker Fund. The foundation was
devoted to the dissemination of free-market ideas. Luhnow saw Hayek as the
ideal scholar to further his own ideological machinations, and he offered
Hayek research support for a "market study" of the United States—a Road to
Serfdom for America. He hoped Hayek would bring together like-minded scholars
to mount a popular defense of free enterprise. Luhnow offered to establish a
center at a US university built around Hayek or to pay his salary at a US
institution. In 1946, Luhnow orchestrated Hayek's introduction to Jasper
Crane, a former vice president of Du Pont, an active participant in anti-New
Deal, pro-business organizations, and a trustee of the FEE. Crane and Hayek
discussed the possibility of an international society devoted to free-market
ideas.” 206f


“Hayek was disappointed that approval came almost exclusively from
businesspeople, while his intended audience—"socialists of all
parties"—spurned the work[.]” 206


“Henry Hazlitt, a prominent business journalist, offered a glowing, front-page
review in the New York Times Book Review. Hazlitt, who had reviewed other
Austrian works favorably, had a long-standing relationship with Hayek, having
introduced the latter to businessmen like Leonard Read, the head of the
Western Division of the United States Chamber of Commerce and a founder of the
libertarian Foundation for Economic Education (FEE). The condensed version of
Road that appeared in Reader's Digest exposed Hayek to millions of other
potential readers. Max Eastman, one of the United States' most famous lapsed
socialists and a dogged anti-Communist, edited the abridgment.” 205f


“Hayek was not suggesting that either the United Kingdom or the United States
was on the road to Nazism; rather, they were headed to the failures of Weimar
and the destruction of liberal democracy. If British and American socialists
proposed the same solutions as their German brethren, they would open the door
to future fascisms. Hayek offered a narrative for the rise of Nazism that
identified socialism as its producer and liberalism as the bulwark against
totalitarianism[.]” 202


“Hayek [and] Karl Popper. The two had not known each other in Vienna and were
seemingly unaware of each other's work before 1935, when they met for the
first time. Their mutual admiration intensified after 1937. Popper, safely at
Canterbury College in New Zealand, was working on "A Social Philosophy for
Everyman," later The Open Society. Hayek, who read Popper's work with great
satisfaction, proposed to a British publisher that it translate and publish
Popper's first book, Die Logik der Forschung. In the course of revision,
Popper decided that Hayek's work on knowledge and the social sciences required
critical engagement, leading the two into a fruitful correspondence. Popper
published three long articles in Hayek's Economica, titled "The Poverty of
Historicism." Meanwhile Hayek's and Popper's political ideas fell into
harmony, which was somewhat surprising given Popper's social democratic
tendencies and Hayek's liberal ones. They sensed, however, that they had found
kindred spirits. Their views became so alike that Popper added dates of
completion to sections of the Open Society manuscript to avoid accusations of
plagiarism. From April 1943 until November 1945, the two men dissected each
other's works, writing pages-long letters from halfway around the world. They
debated planning, notions of freedom, the fate of capitalism, and the
methodological differences between the natural and social sciences. They did
not agree on everything, but their disagreements remained minor. Popper
believed that piecemeal engineering was possible and that there was a
methodological unity for all sciences. He also felt Hayek's attacks on
"scientism" and rationalism in the social sciences showed a deficient
understanding of the nature of scientific inquiry. Nonetheless, Popper looked
up to Hayek, three years Popper's senior. Moreover, Hayek's political project
was nearer completion, so their repartee mostly contributed to reworking
Popper's, not Hayek's, manuscript. Finally, Popper needed Hayek's assistance
more: he struggled to find a publisher in the United Kingdom. Hayek and the
Viennese émigré art historian Ernst Gombrich acted on Popper's behalf. Hayek
played an instrumental role in Routledge's acceptance of The Open Society in
1944. Popper felt indebted to Hayek, saying that Hayek had "saved his life" by
finding an outlet for the work that jump-started Popper's later career. Even
with the productive stimulation provided by Popper, Road to Serfdom languished
without a publisher for almost a year. Machlup had been working as Hayek's de
facto literary agent in the United States since 1942 with little profit.
Walter Lippmann, whom Hayek also approached, had no luck with his publisher
and displayed little enthusiasm for the project. The intercession of Aaron
Director, Frank Knight, and Jacob Marschak at the University of Chicago proved
decisive. Director proposed that their university press publish the book.
Knight deemed the book "an able piece of work, but limited in scope and
somewhat one-sided in treatment." He judged it "hardly a 'popular' book" yet
worthy of publication. Jacob Marschak believed it would start "a more
scholarly kind of debate." Chicago accepted it after receiving these reports.”
200f