Die Wiener Schule brachte nach Mises hingegen bloß Richard Strigl als einzigen
Habilitanden hervor. Die Erwartungen an Mayer waren deshalb überaus groß und
tatsächlich konnte er anfangs auch eine Reihe von begabten Assistenten
rekrutieren, die später alle reüssieren sollten, wie etwa Oskar Morgenstern
(1902-1977), Paul Rosenstein-Rodan (1902-1985) und Alexander Gerschenkron
(1904-1978). Mayer war jedoch kaum willens oder fähig, allen an der Wiener
Schule Interessierten eine universitäre Heimstatt zu bieten. Als externer
Privatdozent fühlte sich etwa Ludwig Mises von ihm auf Grund von
Eifersüchteleien und administrativen Gängelversuchen derart behindert, dass er
Mayer diesbezüglich sogar mit Spann verglich (vgl. Mises 1978, 61f). Spann
selbst ließ keine Gelegenheit aus, seine Verachtung für den Individualismus
der Wiener Schule öffentlich kundzutun (vgl. Hennecke 2000, 53). Die Fehde
wurde zeitweise sogar über Zeitungen ausgetragen und gipfelte in rüden
antisemitischen Ausfällen von Othmar Spann und seinem Kreis, in denen die
Grenznutzentheorie als „Ausgeburt polnisch-jüdischen Geistes“ und Menger und
Böhm-Bawerk als Juden beschimpft wurden (vgl. Mayer 1952, 250, 252 u. 256).


Nacheinander waren fünf Habilitierte der Schule ins Herrenhaus berufen worden,
fünf waren zu Ministerehren gekommen, einige sogar mehrmals, und zwei gehörten
dem Reichsrat an. Fünf von insgesamt 17 habilitierten Nationalökonomen und
Finanzwissenschaftern waren „Exzellenzen“ und damit hochrangige Repräsentanten
der Monarchie geworden (vgl. Vorlesungsverzeichnis 1911, 10). Abgesehen von
der Hochbürokratie und dem Zeitungswesen fanden sich Mitglieder der Schule
auch in der Gewerbe- und Handelskammer oder standen an der Spitze großer
Banken und Industriekonglomerate, wie Rudolf Sieghart (Boden-Credit-Anstalt)
oder Julius Landesberger (Anglo-Österreichische Bank). Gegen Kriegsende
erreichte der Einfluss der Schule seinen Höhepunkt: Ihr gehörten ein
Ministerpräsident und Kabinettschef des Kaisers (Ernst von Seidler), mehrere
Minister (Ernst von Seidler, Friedrich von Wieser, Viktor Mataja), der letzte
Präsident des Reichsrates (Gustav Gross), Vertreter der Hochbürokratie
(Richard Schüller, Ignaz Gruber, Hans Mayer, Richard Reisch) und führende
Mitarbeiter in der kriegswirtschaftlichen Zentralverwaltung an (etwa Joseph A.
Schumpeter, Eugen Peter Schwiedland oder Julius Landesberger).


Schumpeters Leugnung eines Kapitalzinses in der statischen Wirtschaft und
seine These von der inflationären Finanzierung neuartiger Produktionsprozesse
erregte jedenfalls den Unmut seines ehemaligen Lehrers Eugen von Böhm-Bawerk,
der in einer ausführlichen Kritik vor der „Gefährlichkeit einer so
einschmeichelnd, mit so viel Geist und Sprachgewalt vertretenen Irrlehre“
warnte (Böhm-Bawerk 1913a, 61). Schumpeters kleinlaute Replik (Schumpeter
1913a) sowie Böhm-Bawerks Duplik (Böhm-Bawerk 1913b) machten den tiefen
Graben, der sich zwischen Schumpeter und der Wiener Schule aufgetan hatte, nur
allzu deutlich.


Zwar war Schumpeter jederzeit imstande Kollegen, Studenten und Zuhörer mit
seiner polyglotten Bildung, seiner Fabulierkunst und seiner enormen
intellektuellen Beweglichkeit zu faszinieren, doch gelang es ihm nie, auf
längere Zeit Schüler um sich zu versammeln. Selbstkritisch machte er dafür
seinen Mangel an „Führungskraft“ und „Überzeugung“ verantwortlich: „Ich [...]
habe kein Gewand, das ich nicht ablegen könnte. Relativismus liegt mir im
Blut. Das ist einer der Gründe, warum ich nicht siegen kann – nicht a la
longue“, notierte er in sein Tagebuch (vgl. Schäfer 2008, 107 u. 195).


Hayeks „Reply“ konnte die nachhaltigen Zweifel nicht mehr ausräumen (vgl.
Lachmann 1986, 240). Manche meinten später, dies hätte seinen Grund darin
gehabt, dass sein kapital-theoretisches Fundament letztlich unzulänglich war
(vgl. Kurz 2000, 170; Steele 2001, 140).


hinterließ die scharfsinnige und aggressive Kritik von Piero Sraffa
(1898–1983) ein verunsichertes Fachpublikum. Hayeks Unterscheidung von
„freiwilligem“ Sparen und „Zwangssparen“ geriet ins Wanken, genauso wie die
fast selbstverständliche Annahme der Wiener Schule, dass der
„Gleichgewichtszins“ in einer Naturalwirtschaft ohne Geld und Banken nicht
gestört werden könne (vgl. dazu Kurz 2000, 169f).


1931 wurde Hayek zu einer Vorlesungsreihe an die London School of Economics
eingeladen, in der er unter anderem das Konzept des „Zwangssparens“
entwickelte. Veränderungen der Geldmenge oder des Zinssatzes, so Hayek, würden
stets zu einer Verschiebung der Nachfrage nach Konsumgütern und
Produktionsmitteln führen, so dass im Unterschied zum „freiwilligen“ Sparen,
dem echte Konsumwünsche zugrunde liegen, etwa im Falle einer Ausweitung der
Geldmenge die Gesamtheit der Konsumenten „gezwungen“ werde „ihren Konsum
einzuschränken [...] nur weil sie weniger für ihr unverändertes Geldeinkommen
erhalten“ (vgl. Hayek 1931, 56).


Auf Grund dieser theoretischen Überlegungen konnte Hayek im Februar 1929 eine
große Wirtschaftskrise in den USA voraussagen, die dann im Oktober des
gleichen Jahres tatsächlich eintrat (vgl. Steele 2001, 9).


So stieg der Geldumlauf im Jahre 1920 von 12 auf 30 Milliarden Kronen, Ende
1921 auf rund 174 Milliarden und erreichte im August 1922 die Grenze zur
Billion (vgl. Sandgruber 2005, 354f).


In Wien sank das Einkommen einer Arbeiterfamilie von der Messzahl 100
(1913/14) auf 34 (1917/18), das einer Beamtenfamilie sogar von 100 auf 19
(vgl. Winkler 1930, 159 u. 206). Die Inflation nivellierte unerbittlich: Ein
Wiener Hofrat hatte 1915 noch das 8,6fache der niedrigsten Dienstklasse
verdient, 1920 war es nur mehr das 3,3fache (vgl. Sandgruber 2005, 358).


Die sichtliche Neigung der älteren Wiener Schule staatliche Eingriffe in das
Geldwesen stets aus der Perspektive von Missbrauchsmöglichkeiten zu sehen,
hatte ihren Ursprung in der soliden juristischen Ausbildung ihrer Mitglieder,
die eine gewisse Sensibilität für Grundrechte zur Folge hatte. Erfahrungen aus
der Währungsgeschichte der Donaumonarchie trugen ebenso zu dieser Haltung bei.
Bereits Carl Menger hatte Kronprinz Rudolph gelehrt, dass staatliche
Notenpolitik „Willkür“ und „Gewaltthätigkeit gegen die Bürger“ enthalte (vgl.
Streissler/Streissler 1994, 136).


Markus Ettinger, Anwalt für Kartell-, Wettbewerbs- und
Wirtschaftsverwaltungsrecht, der als einer der ersten das Versagen jeder
Planwirtschaft prognostizierte, denn „nur der Marktpreis [sei] ein
verlässlicher Regulator“ (vgl. Ettinger 1919, 10)


In den 80er und 90er Jahren versammelte Carl Menger auch graduierte, bereits
berufstätige und an Nationalökonomie Interessierte in seinem Seminar. Viele
von ihnen trugen später mit Fachbeiträgen zur Verbreitung der Wiener Schule
bei. Einer der herausragendsten jener Schüler war der ungarisch-stämmige
Julius Friedrich Gans von Ludassy (1858-1922), der als Redakteur verschiedener
Zeitungen regelmäßig die nationalökonomische Literatur rezensierte und selbst
ein bemerkenswertes, über 1000-seitiges methodologisches Werk Die
wirtschaftliche Energie (1893) verfasste. Bemerkenswert ist seine frühe Kritik
am mechanischen Bild des homo oeconomicus (vgl., 403-425) sowie seine
Schlussfolgerung, dass „Ökonomik [...] die Wissenschaft vom Handeln überhaupt“
sei (ebd., 982). Fünf Jahrzehnte später wird Ludwig von Mises diesen
handlungsorientierten Ansatz fruchtbringend weiterentwickeln, ohne allerdings
auf Ludassy ausdrücklich Bezug zu nehmen.


Richard Schüller (1870 – 1972, habilitiert 1903): Der „Lieblingsschüler“ (vgl.
Nautz 1990, 89) und letzte Habilitand von Carl Menger entstammte einer
jüdischen Familie in Brünn und musste sich sein Studium auf Grund der
Insolvenz des elterlichen Betriebes weitgehend selbst verdienen. Mit seinem
Erstlingswerk Die klassische Nationalökonomie und ihre Gegner (1895)
demonstrierte Schüller noch einmal den kämpferischen Geist des
Methodenstreits. Mit Schutzzoll und Freihandel (1905) konnte er sich
schließlich habilitieren und betrat damit als erster der Wiener Schule das
Terrain der Handelspolitik. Als außerordentlicher Professor publizierte er
zwei nennenswerte Beiträge zur Arbeitskräftenachfrage sowie zum Arbeitsmarkt
(Schüller 1911). Nach Mengers Tod unterstützte er die Herausgabe der zweiten
Auflage der Grundsätze mit einem sehr persönlich gehaltenen Geleitwort (Menger
1923). […] Bis 1928 lehrte er an der Universität Wien, war von 1930 bis 1937
Mitherausgeber der Zeitschrift für Nationalökonomie, entfernte sich jedoch
zusehends von der Wiener Schule (vgl. Schüller 1936). 1940 musste Schüller in
die USA emigrieren und setzte dort bis 1952 seine Lehrtätigkeit fort.


Viktor Mataja (1857 – 1934; habilitiert 1884): Aus seiner breitgefächerten
Publikationstätigkeit ragt besonders das bahnbrechende Werk Recht des
Schadenersatzes vom Standpunkt der Nationalökonomie (1889) hervor, das auf
Basis der Grenznutzenlehre das Feld für die moderne Rechtsökonomie
aufbereitete. In reiferen Jahren befasste er sich als einer der ersten im
deutschen Sprachraum mit dem „Ankündigungswesen“ und schuf mit Die Reklame
(1910, 4.Auflage 1926) das Stiftungsdokument der modernen Werbewissenschaft.
Mataja war durch und durch ein Mann der Bürokratie. Erst wurde er
Sektionschef, dann zweimal Handelsminister (1909 u. 1911) und schließlich
Präsident der Statistischen Zentralkommission (1914-17 u. 1919-22). Gegen
Kriegsende fungierte er der Reihe nach als Handelsminister, als Minister ohne
Portefeuille sowie als Minister für „Soziale Fürsorge“, der erste in einem
europäischen Industrieland. Seine statistischen Arbeiten machten den
vielseitigen und originellen Denker zu einem geschätzten Partner für
Arbeitergeber- und Arbeitnehmervertreter; das „dritte Lager“ goutierte seinen
deutsch-österreichischen Zentralismus. Aus-gerechnet ein Vertreter der Wiener
Schule schuf so den Nukleus der späteren Sozialpartnerschaft (vgl. Pellar
1986).


Gustav Gross (1856 – 1935; habilitiert 1884): Gross, der sich selbst der
Tradition Albert Friedrich Eberhard Schäffles und Adolph Wagners zurechnete
(vgl. Gross 1888, Vorrede), wurde von Menger bei der Aufzählung seiner
Habilitanten anlässlich seiner Emeritierung nicht erwähnt (vgl. Ikeda 1997,
2). In der Staatswirtschaft, die er als „Gemeinwirtschaft“ bezeichnete, sah
Gross grundlegend andere Gesetze walten als in der Privatwirtschaft (Gross
1900, 165) und vertrat Wagners These von der steten Ausweitung der
Staatsaufgaben, der langfristig nur durch die Familie Grenzen gesetzt würden
(ebd., 168f).


Robert Meyer (1855 –1914, habilitiert 1884): Als subjektivistischer
Werttheoretiker begründete er in seiner Habilitationsschrift die
Steuerprogression (Meyer 1884, 332f), die er bei der Reform der direkten
Personalsteuer mit Böhm-Bawerk als leitenden Beamten auch tatsächlich umsetzen
konnte (vgl. Tomo 1996, 147-153 u. 164-178). Ab 1911 fungierte er als
Mitherausgeber der Zeitschrift für Volkswirtschaft, Socialpolitik und
Verwaltung. In sozial- und wirtschaftspolitischen Fragen vertrat er einen
prallen Etatismus.


Bis 1904 blieb Böhm-Bawerk Beamter, wurde dreimal Finanzminister (1895,
1897/1898, 1900-1904) und 1899 zum lebenslangen Mitglied des Herrenhauses
ernannt. Neben seiner Mitwirkung an der Steuerreform 1896, in Zuge derer eine
progressive Einkommenssteuer von maximal fünf Prozent eingeführt wurde (vgl.
§172, RGBl. Nr.220/1896), gelang es ihm weiters, durch die Konversion der
Staatsschulden die Zinsbelastung des Staates zu reduzieren (vgl. Weiss 1924,
V). Besonderen Wert legte Böhm-Bawerk auf einen ausgeglichenen Staatshaushalt,
da er nur so die Stabilität des Geldwerts für gesichert hielt. Auch scheute er
nicht davor zurück, politisch motivierte großmannsüchtige Projekte ohne
gesicherte Finanzierung, wie etwa ein Schiffskanalnetz über die gesamte
Donaumonarchie, mit allen Kunstkniffen des erfahrenen Bürokraten zu verhindern
(vgl. Gerschenkron 1977, 81 u. 120-127).


Wenige Wochen nach Erscheinen seiner [F. von Wieser] Theorie brach der Erste
Weltkrieg aus. Als einer der ganz wenigen „Österreicher“ verfasste er mehrere,
im Ton zwar moderate, aber doch eindeutig kriegsbejahende Schriften (vgl.
Auflistung bei Hayek 1926, 529). Am Höhepunkt der „Kriegs- und
Übergangswirtschaft“, dem altösterreichischen Experiment einer zentralen
Planwirtschaft, wurde der überzeugte Etatist Friedrich von Wieser Mitglied des
Herrenhauses. In den drei letzten Regierungen von 1917-1918 bekleidete er das
Amt des Handelsministers und zeitweise parallel dazu das Amt des Ministers für
„Öffentliche Arbeiten“. Der Zerfall der Monarchie traf den überzeugten
Deutschösterreicher demnach besonders hart (vgl. Schams 1926, 447; Mayer 1929,
193).


Es war schließlich Emil Sax, der mit Der Kapitalzins (1914) die erste
umfassende Kritik vorlegte und damit all jene Argumente zusammenstellte, die
auch spätere Autoren gegen Böhm-Bawerk ins Treffen führen werden. Böhm-Bawerks
Kapital- und Zinstheorie sei „eine zu kunstreich ausgesponnene Gedankenkette,
die wegen der Ungleichmäßigkeit ihrer Glieder die Zerreißprobe nicht aushält“
(Sax 1914, 229). Vor allem glaubte Sax nachweisen zu können, dass die drei
Gründe für die Wertdifferenz zwischen gegenwärtigen und zukünftigen Gütern im
einzelnen fragwürdig seien, dass Dauergüter (Fixkapital) an sich gar keinen
Zins abwerfen könnten, dass der Begriff „durchschnittlicher Produktionsumweg“
zu unbestimmt sei und dass es in der Positiven Theorie keinen Platz für einen
Zinseszins gäbe. Der Kapitalzins dokumentierte so nur eine weitere Etappe im
Auseinanderdriften der Wiener Schule am Höchststand ihrer internationalen
Geltung. Äußere Ereignisse, wie der dauerhafte Rückzug Mengers aus dem
Universitätsbetrieb, Böhm-Bawerks Tod 1914 sowie der Ausbruch des Weltkriegs
ließen diese innere Spaltung jedoch kaum an die Oberfläche dringen.


So entwickelte der erst 28-jährige Joseph A. Schumpeter (1883-1953) eine
eigenständige „dynamische Theorie des Zinses“ (Schumpeter 1912, 324-413), die
Böhm-Bawerk als eine Schmähung der bürgerlichen Wirtschaftsmoral sowie als ein
Loblied auf eine inflationistische Hasardpolitik erscheinen musste und die er
mit seltener Eindringlichkeit ablehnte. (Böhm-Bawerk 1913, 1-62 u. 641-655).
Schumpeters Replik fiel dementsprechend kleinlaut aus (Schumpeter 1913,
599-639). Auch Ludwig von Mises (1881-1973) kritisierte im Rahmen von Böhm-
Bawerks Seminar, dass dessen Kapital- und Zinstheorie von einer „Neutralität
des Geldes“ ausgegangen war. Nach Mises soll Böhm-Bawerk am Ende seines Lebens
bereits weit über seine veröffentlichen Theorien hinausgekommen sein (vgl.
Mises 1978, 37; auch E.L. 1923, 164).


Im kleineren Kreis ging er sogar so weit, Böhm-Bawerks Theorie „als einen der
größten jemals begangenen Irrtümer“ zu bezeichnen (Schumpeter, Joseph A.,
Geschichte der ökonomischen Analyse, 2 Bde., Vandehoeck & Ruprecht, Göttingen
1965, 2.Bd., 1033 FN36). Es ist viel darüber gerätselt worden, was Menger zu
dieser strikten Ablehnung bewogen haben mag. Der nicht hinreichend konsequente
Subjektivismus Böhm-Bawerks konnte es kaum gewesen sein, da auch Mengers
werttheoretische Definitionen noch einige objektive Residuen enthielten (vgl.
Gloria-Palermo 1999, 39-50; Mises 1934, 91 u. 160-162). Eine deutliche
Trennlinie war hingegen deren unterschiedliche methodologische
Herangehensweise. Menger tadelte an Böhm-Bawerk die „augenfällige
Künstlichkeit“ mancher seiner Theorien (Menger 1914, 11 u. 16). Und in der Tat
nahm Böhm-Bawerk in methodologischen Fragen eine fast unbekümmerte,
pragmatisch-eklektische Position ein. Bezeichnend für diese Haltung war, dass
er die Anwendung der Mathematik in der Nationalökonomie nicht wie Menger aus
grundsätzlichen erkenntnistheoretischen Erwägungen ablehnte, sondern weil ihm,
wie den meisten seiner Fachkollegen, schlichtweg die notwendigen
mathematischen Kenntnisse fehlten (vgl. Böhm-Bawerk 1894, 163-165). Darüber
hinaus erweckt die Positive Theorie den Eindruck, in manchem in Richtung
moderner Makroökonomie zu weisen. Im Unterschied zu anderen Hauptwerken der
„Österreicher“, enthält sie eine unverkennbare Tendenz zur Bildung
hochabstrakter Aggregate und zeigt einen lustvollen Hang zur Quantifizierung,
wenn auch noch im ärmlichen Gewand einfacher Grundrechnungsarten.


Zur Jahrhundertwende zählte Böhm-Bawerk zu den weltweit bekanntesten und
meistdiskutierten Ökonomen (vgl. Kurz 1994, 151). 1900 erschien eine zweite
Auflage, die eine stark erweiterten Marx-Kritik enthielt, 1913 eine dritte
Auflage. Beiden Auflagen wurden Exkurse beigefügt, in denen auf vorgebrachte
Einwände eingegangen wurde (vgl. Böhm-Bawerk 1921, Bd.3). 1921 besorgte
Friedrich von Wieser schließlich noch eine vierte Auflage, eine Gesamtausgabe
in drei Bänden, die unter dem Titel Kapital und Kapitalzins veröffentlicht
wurde.


Später sollte sich zudem noch herausstellen, dass ein nach Kanada
ausgewanderter und in Vergessenheit geratener Schotte, John Rae (1796-1872),
bereits 1834 die Positive Theorie in wesentlichen Punkten vorweggenommen hatte
(vgl. Böhm-Bawerk, Eugen v., Kapital und Kapitalzins, 3.Bde., hrsg. mit einem
Geleitwort von Friedrich Wieser, Gustav Fischer, 4. Aufl., Jena 1921,
277-317).


In seiner Positiven Theorie, deren Veröffentlichung sich über Jahre hinweg
verzögerte, definierte Böhm-Bawerk „Kapital“ als „Inbegriff von Produkten, die
zu fernerer Produktion zu dienen bestimmt sind“ bzw. als „Inbegriff von
Zwischenprodukten“ (Böhm-Bawerk 1889a, 38). Basierend auf diesem
Kapitalbegriff sei ein Kapitalertrag auf dreierlei Weisen denkbar: als Ertrag
aus einem Darlehen, als Ertrag aus der Vermietung eines dauerhaften Gutes oder
als Ertrag aus einem Produktionsprozess. Alle drei Ertragsarten könnten
letztlich auf die subjektivistische Werttheorie zurückgeführt werden.
Ausgangspunkt sei die Beobachtung, dass gegenwärtige Güter in der Regel mehr
geschätzt werden als künftige Güter gleicher Art und Zahl, wofür zwei Gründe
anzuführen sind. Zum einen sei das Verhältnis zwischen Bedarf und Deckung in
verschiedenen Zeiträumen unterschiedlich, da die persönliche Lebenslage sowie
Zukunftsaussichten ständig variieren (ebd., 262). Zum anderen würden wir
unsere „künftigen Bedürfnisse“ sowie die „Mittel, die zu ihrer Befriedigung
dienen“ systematisch unterschätzen. Die Ursachen diese Fehleinschätzung lägen
in unserer lückenhaften Vorstellung über die Zukunft, in unserer
Willensschwäche sowie in der „Rücksicht auf die Kürze und Unsicherheit des
Lebens“ (ebd., 266-269; vgl. Menger 1871, 124). Aus all dem folgerte Böhm-
Bawerk, dass der „Grenznutzen künftiger Güter gleichsam in perspektivischer
Verkleinerung“ erscheine und deshalb „das Agio auf gegenwärtige Güter
emporgetrieben“ werde (ebd., 272f.).


Eine schicksalhafte Wendung hatte das Leben Mengers erheblich verändert. Aus
seinem Verhältnis zu der aus Galizien stammenden und um 29 Jahre jüngeren
Feuilletonistin Hermine Andermann (1869-1924) war ein unehelicher Sohn, der
spätere Mathematiker Karl Menger (1902-1985), hervorgegangen (vgl. Klose 1902,
I, 224). Die gesellschaftlichen Konventionen veranlassten ihn dazu, 1903 in
den vorzeitigen Ruhestand zu treten und in der Folge auch zum weitgehenden
Rückzug aus der Öffentlichkeit. Hochbetagt entschloss sich Menger noch zur
Ehe. Bis zu seinem Tod, am 26. Februar 1921, lebte er mit seiner Familie und
umgeben von einer zuletzt 25.000 Bände umfassenden Bibliothek im 9. Wiener
Gemeindebezirk, in der Fuchsthalergasse 12. Er publizierte nur mehr
geringfügig, pflegte aber bis ins hohe Alter regelmäßigen Kontakt zu seinen
Schülern, die an der Sprachregelung des freiwilligen Rückzugs zum Zweck
weiterer Studien eisern festhielten, so als wollten sie mit diesem „echten
Wiener Geheimnis“, das jeder in Wien kannte, aber niemand öffentlich
aussprach, den Esprit de Corps der Schule bis zuletzt beweisen.


In den 90er Jahren, nachdem die Neuauflage seiner Grundsätze ein weiteres Mal
verschoben worden war, begann Menger noch einmal umfassende Studien aus
angrenzenden Fachgebieten zu betreiben (vgl. Menger 1923, VIIf.). Eingehend
befasste er sich mit Biologie, Physiologie, Mathematik und Ethnologie, was
sich in etwa 1.100 Büchern zur Völkerkunde, zur Anthropologie und zu diversen
Forschungsreisen in seiner Bibliothek niederschlug (vgl. Katalog I, 849-948).
Der Zweck dieser Bemühungen war der Plan, eine „Soziologie“ zu publizieren,
die jedoch nicht mehr zur Ausführung gelangte, da er unerwartet in den
vorzeitigen Ruhestand trat (vgl. Somary 1959, 31).


Carl wuchs in einem streng katholischen Elternhaus auf (vgl. Grünberg 1908,
2). Dies muss für ihn und seine beiden Brüder Max (1838-1911) und Anton
(1841-1906), die als deutsch-liberaler Abgeordneter bzw. als sozialistischer
Universitätslehrer ebenfalls große Bekanntheit erlangen werden, derart
beengend gewesen sein, dass alle drei später entschiedene Distanz zur Kirche
hielten und Anton sogar ein bekennender Atheist wurde.


Seine Mutter Karoline stammte aus einer wohlhabenden Kaufmannsfamilie, die in
der weiteren Umgebung die Grundherrschaft Maniowy erworben hatte. Sein Vater
Anton war der Nachkomme einer einst aus Böhmen zugezogenen Familie und führte
das Adelsprädikat „Edler von Wolfensgrün“ (vgl. Boos 1986, 3f.).


Die erste nachweisbare Konnotation der Menger-Gruppe mit „österreichisch“
erfolgte am Höhepunkt des Methodenstreites (vgl. Dietzel 1884b, 116 u. 118).
Kurze Zeit später las man von einer „Menger’schen Schule“ (vgl. R.F. 1886, 77;
Blumenthal 53 u. 77) und es war schließlich Schmoller, der 1888 in einer
Rezension anerkennend über die „jüngere Wiener Schule“ berichtete (vgl.
Schmoller 1888c, 730). Die Bezeichnung Österreichische Schule wird zunächst in
ausländischen Publikationen fremdsprachig verwendet, als „scuola austriaca“
(vgl. Graziani 1889, 165; Loria 1890) oder als „Austrian School of Economics“
(vgl. Bonar 1888; Wieser 1891). 1889 war in einem Zeitungsartikel Mengers dann
erstmals von einer „österreichischen Schule von Volkswirten“ die Rede (vgl.
Menger 1989, 2; Menger 1891, 261). Die Etikettierung Österreichische Schule
wird bald darauf in einem viel gelesenen Aufsatz von Heinrich Dietzel
verwendet (Dietzel 1890, 570) und schließlich ins Lehrbuch von Schmollers
Kollegen Adolph Wagner (1835-1917) übernommen (vgl. Wagner 1892, 187 u. 308).
In den folgenden Jahren bürgern sich die Bezeichnungen Österreichische Schule
bzw. Wiener Schule nach und nach ein (vgl. Elster 1894, 452; Böhm-Bawerk 1894,
328; Hasbach 1895, 772). Die bis heute behauptete pejorative Absicht dieser
Namensgebung (vgl. Mises 1984, 19; Smith 1986b, VII) ist in keinem Fall
nachweisbar.


Die Wiener Dozenten Robert Meyer, Gustav Gross, Viktor Mataja, Robert
Zuckerkandl und Johann von Komorzynski brachten in den 80er Jahren
Monographien auf Grundlage der Lehren Mengers hervor; in den 90er Jahren
folgten Hermann von Schullern zu Schrattenhofen, Siegmund Feilbogen und
Richard Schüller.


Eugen-Maria Schulak and Herbert Unterköfler, Die Wiener Schule Der Nationalökonomie: Eine Geschichte Ihrer Ideen, Vertreter Und Institutionen , Enzyklopädie Des Wiener Wissens (Weitra: Bibliothek der Provinz, 2009).


““Keynes was exceedingly comfortable with the economic system he so
brilliantly explored,” observed Galbraith. “So the broad thrust of his
efforts, like that of Roosevelt, was conservative; it was to help ensure that
the system would survive. But such conservatism in the English-speaking
countries does not appeal to the truly committed conservative... . Better to
accept the unemployment, idled plants, and mass despair of the Great
Depression, with all the resulting damage to the reputation of the capitalist
system, than to retreat on true principle... . When capitalism finally
succumbs, it will be to the thunderous cheers of those who are celebrating
their final victory over people like Keynes.”” (Wapshott, 2011, p. 315)


“While Hayek believed “the ‘Keynesian Revolution’ will appear as an episode
during which erroneous conceptions of the appropriate scientific method led to
the temporary obliteration of many important insights,” he thought him “so
many-sided that when one came to estimate him as a man it seemed almost
irrelevant that one thought his economics to be both false and dangerous... .
He would have been remembered as a great man by all who knew him even if he
had never written on economics.”” (Wapshott, 2011, p. 315)


“Nixon’s economic adviser Herbert Stein wrote in 1986, “Conventional
conservatives have regarded Keynes as a dark and evil influence bent on
undermining the free economic system. In fact, however, he helped to save the
free system at a time when much more radical changes in it were being
seriously advocated.”” (Wapshott, 2011, p. 313)


“He has been placed on the social studies syllabus at Harvard, the American
wellspring of Keynesianism. But, despite the championing of the political
commentator Glenn Beck, who has devoted considerable time to popularizing the
message of The Road to Serfdom, Hayek remains a little-known figure […].”
(Wapshott, 2011, p. 309)


“Anthony Quinton, Thatcher’s favorite philosopher, called him a “magnificent
dinosaur,” […].” (Wapshott, 2011, p. 308)


“Paul Samuelson, Keynesianism’s chief proselytizer, was, as expected, more
robust. “As I write in 2007, Sweden and other Scandivanian places ... are the
most ‘socialistic’ by Hayek’s crude definition. Where are their horror camps?”
he asked. “Have the vilest elements risen there to absolute power? When
reports are compiled on ‘measurable unhappiness,’ do places like Sweden,
Denmark, Finland and Norway best epitomize serfdoms? No. Of course not.” Even
by Hayek’s own measure of well-being, economic growth, the Scandinavian social
democracies outperformed their free-market neighbors. Hayek did not concede
the point. He believed Sweden achieved economic success despite, not because
of, its large state sector and that the ennui he sensed among Swedes was a
symptom of their loss of freedom. “Sweden and Switzerland are the two
countries which have escaped the damages [sic] of two wars and have become
repositories of a large part of the capital of Europe,” he suggested. But such
broadly shared prosperity and lack of unemployment came at a heavy price.
“There is perhaps more social discontent [by which he perhaps meant suicides]
in Sweden than in almost any other country I have been. The standard feeling
that life is really not worth living is very strong in Sweden.”” (Wapshott,
2011, p. 307)


“Thatcher awarded Hayek the Companion of Honour, one of Britain’s top
accolades, as a reward. The compliment was not entirely reciprocated.
Interviewed by Mises’s stepdaughter, Gita Sereny, in 1985, Hayek was at pains
to point out that “it is, of course, not true that I advise Mrs. Thatcher.”
Hayek’s disappointment was evident, too, when a writer for Forbes asked him in
1989 to assess Reagan and Thatcher’s achievements. He thought their policies
“as reasonable as we can expect at this time. They are modest in their
ambitions.” Neither Thatcher nor Reagan made more than a start on achieving
Hayek’s ultimate aim to replace the state with private enterprise. Of the two,
Thatcher achieved the most, though she started from a lower base, having
inherited a mixed economy that was ripe for reform.” (Wapshott, 2011, p. 307)


“Hayek believed the issuance of money was the key to ending the business cycle
that was the common concern of him and Keynes. “I believe that if it were not
for government interference with the monetary system, we would have no
industrial fluctuations and no periods of depression,” Hayek declared. “If you
place the issue of money in the hands of firms whose business depends upon
their success in keeping the money they issue stable, the situation changes
completely.”” (Wapshott, 2011, p. 306)


“According to Friedman, speaking in 2000, “There is no doubt who won the
intellectual argument... . The intellectual opinion of the world today is much
less favorable towards central planning and controls than it was in 1947.
What’s much more dubious is who won the practical argument. The world is more
socialist today than it was in 1947. Government spending in almost every
Western country is higher today than it was in 1947... . Government regulation
of business is larger.”” (Wapshott, 2011, p. 306)


“Friedman adopted Keynes’s idea of running an economy through macroeconomics,
and politicians have gone along with it, whatever Hayekian rhetoric they may
sometimes employ. […] Hayek conceded that “Milton’s monetarism and
Keynesianism have more in common with each other than I have with either.”
When it came to politics, however, Friedman was closer to Hayek.” (Wapshott,
2011, p. 305)


“As Friedman put it, “We all use many of the analytical details of the General
Theory; we all accept at least a large part of the changed agenda for analysis
and research that the General Theory introduced.” Friedman, by his monetarist
prescriptions, refined Keynes, but he did not replace him. “[Monetarism] has
benefited much from Keynes’s work,” he wrote in 1970. “If Keynes were alive
today, he would no doubt be at the forefront of the [monetarist] counter-
revolution.” Keynes was looking for a cure for mass unemployment. His remedy
was to increase total aggregate demand. He suggested a number of routes:
through monetary means, by lowering interest rates and funneling new money
into the economy; by tax breaks; and through public works. Friedman persuaded
economists that when on an even keel, the economy would be served better by a
gradual, moderate, predictable increase in the supply of money.” (Wapshott,
2011, p. 305)


“As his biographer Robert Skidelsky explained, “Hayek was defeated by Keynes
in the economic debates of the 1930s, not, I think, because Keynes ‘proved’
his point, but because, once the world economy had collapsed, no one was very
interested in the question of what exactly had caused it.” […] Friedman’s
acknowledgment in 1966 that “in one sense, we are all Keynesians now; in
another, nobody is any longer a Keynesian” is a more accurate, if teasingly
ambiguous, assessment of the state of economics in the early twenty-first
century.” (Wapshott, 2011, p. 304)


“At the June 2010 G-20 meeting in Toronto, Canada, the same world leaders that
backed Keynesian solutions just eighteen months before insisted on sharply
reducing government spending and paying off national debt. Their turnaround
was like giving an aspirin to someone with a headache, then immediately
pumping their stomach. Two years after Obama’s stimulus package was passed,
there was little evidence that it had succeeded. The unemployment rate rose to
9.8 percent in November 2010, with more than fifteen million out of work. Home
foreclosures continued at a fast pace.” (Wapshott, 2011, p. 302)


“In November 2006, the Republicans lost their majority in both Houses. The
defeat, according to Dick Armey, the House majority leader from 1995 to 2002,
marked the end of the Hayekian small-government revolution of 1994.”
(Wapshott, 2011, p. 297)


““Reagan proved deficits don’t matter,” Cheney interrupted. “We won the mid-
terms. This is our due.” Shortly after, O’Neill resigned. […] Congressman John
Boehner of Ohio, an architect of Contract with America, wrote in 2003, “It
turned out the American people did not want a major reduction of government.””
(Wapshott, 2011, p. 297)


“the surpluses were gone six to nine months after George W. Bush took office
[…]. Bush cut taxes on dividends from stocks by 50 percent […].” (Wapshott,
2011, p. 296)


“Bush did not think long about how to spend this rare legacy: he wanted to
blow the whole of the surplus—and more—on cutting personal taxation. With a
Republican majority in both Houses, he was free to announce $1.35 trillion in
tax cuts, stretching to the end of 2010, with an instant rebate of $400
billion, or $600 per American household. […] By July, federal tax revenues
began to plunge as a 20 percent collapse in the Standard & Poor’s index
between January and September caused capital gains tax receipts from stock
transactions to plummet.” (Wapshott, 2011, p. 295)


“In his 1996 State of the Union address, Clinton proudly sang from the Hayek
hymnal: “We know big government does not have all the answers. The era of big
government has ended.” Clinton followed Hayekian thinking by easing business
regulations. In a move favored by Treasury Secretary Robert Rubin, and
strongly endorsed by Greenspan, in 1999 he approved the Gramm-Leach-Bliley
Act, abandoning the rules on banking, insurance, and financial companies that
Franklin Roosevelt set during the Great Depression. For the first time in
sixty years, investment banks were allowed to merge with depository banks.”
(Wapshott, 2011, p. 294)


“The debt had been reduced by $360 billion in three years, with $223 billion
paid in 2000, the largest one- year debt reduction in American history. At
this rate, the $5.7 trillion national debt would be completely paid off by
2012. Greenspan hailed Clinton as “the best Republican president we’ve had in
a while” […].” (Wapshott, 2011, p. 294)


“As Greenspan recalled, “The hard truth was that Reagan had borrowed from
Clinton, and Clinton was having to pay it back.” […] He benefited from the
“peace dividend,” the ability to cut defense spending as the Cold War wound
down, and he presided over the advent of the digital age, in which computers
boosted business efficiency. In 1997, Clinton introduced the Balanced Budget
Act, mostly cutting Medicare costs to balance the budget by 2002. In the
summer of 2000 he announced a budget current account surplus for the third
year in a row, $69 billion in financial year 1998, $124 billion in 1999, and
an estimate of at least $230 billion in 2000 […].” (Wapshott, 2011, p. 293)


“When Gingrich provoked a second shutdown, casting 260,000 federal employees
onto the street for twenty-one days over the Christmas holidays, moderate
Republicans like Senator Bob Dole, who was weighing a presidential run,
abandoned the fight. Gingrich’s Hayekian uprising collapsed.” (Wapshott, 2011,
p. 292)


“The Republican plan was to shut down the federal government by depriving it
of funds if the president did not comply […]. In mid-November 1995 the
inessential elements of the government duly ground to a halt for five days.
Eight hundred thousand federal employees were laid off.” (Wapshott, 2011, p.
292)


“But Greenspan was not prepared to loosen the money supply to foment a
preelection boom. As the 1992 presidential election loomed, Bush’s plight was
made terminal by the emergence of a third-party candidate, the diminutive Ross
Perot, a Texan Don Quixote tilting at open-trade borders and the federal
deficit. The ultimate beneficiary of Perot’s intercession was the handsome
former Arkansas governor Bill Clinton, whose campaign mantra was “It’s the
economy, stupid.” Clinton advocated a balanced budget and progress toward
reducing the national debt; educating Americans with skills to make them more
employable; and free trade. Once in the White House, Clinton was eager not to
be perceived as a Keynesian tax-and-spend liberal. Mindful of the fact that
under Reagan and Bush the national debt had rocketed to $3 trillion, he
advocated a “third way” that melded conservative economic measures with
progressive social policies. He tempered a tight monetary policy with specific
social programs that cost the government little, such as granting maternity
and sick leave without loss of pay. He urged selective tax cuts for the
“middle class” and higher income taxes for the wealthy. To broaden the market
for American goods, he pushed ratification of a free-trade deal with Canada
and Mexico he inherited from Bush.” (Wapshott, 2011, p. 291)


“The ninety-two months of the Reagan boom, the longest since the
Kennedy/Johnson prosperity of the 1960s and the second longest period of
uninterrupted economic expansion since 1854, came to an abrupt end in July
1990 […]. Inflation rose to 6.1 percent by the end of the year, and
unemployment climbed to 6.7 percent in 1991 and 7.4 percent in 1992. The
budget deficit doubled from $152 billion in 1989 to $290 billion in 1992.
Obliged to strike a deal with a Democratic Congress, Bush’s compromise was to
raise taxes rather than cut spending, a decision that undermined his
credibility with many Republicans, including Friedman.” (Wapshott, 2011, p.
290)


“By the early 1990s, Taylor’s rule, showing the trade-off between interest
rates and the rate of inflation, named after the Stanford economist John
Taylor, came to replace the Phillips curve, the trade-off between employment
and inflation, as the equation of choice for those running the economy. Bush,
a Northeasterner turned Texan patrician who had majored in pre-Keynesian
economics at Yale, had dismissed monetarism during the 1978 Republican
primaries as “voodoo economics,” but he kept his skepticism to himself when
Reagan put him on the ticket as vice president. By the time Bush ran for
president against Democrat Michael Dukakis in the 1988 election, he had
adopted the Reaganite tax-cutting, small-government rhetoric Republicans
wanted to hear.” (Wapshott, 2011, p. 290)


“It was above all the confidence with which Greenspan expressed his
inscrutable take on events that convinced four presidents in succession that
he was the man to ensure economic stability. As the American journalist
Michael Kinsley put it, “Greenspan took the newfound importance of monetary
policy, mixed in his number-crunching talents on the one hand and his social
and business prestige on the other, topped it off with his soon-to-become-
legendary mumbo jumbo at hearings, stirred the mixture, drank it and turned
into a wizard.”” (Wapshott, 2011, p. 289)


““By about 1980, it was hard to find an American academic macroeconomist under
the age of forty who professed to be a Keynesian,” reported Alan S. Blinder, a
Keynesian Nobel economics laureate at Princeton. The University of Chicago
Nobel Prize–winning economist Robert Lucas, who did much to undermine
traditional Keynesian concepts, found that “people even take offense if
referred to as ‘Keynesians.’ At research seminars, people don’t take Keynesian
theorizing seriously any more. The audience starts to whisper and giggle to
one another.” The Hayekian counterrevolution seemed complete. James K.
Galbraith, son of the Keynesian pope John Kenneth Galbraith, recalled that
“suddenly it was the conservatives who were the brave and brash bad boys of
American culture, while liberals like myself had become the country’s
killjoys, young fogies hopelessly in the grip of old ideas.” According to
Blinder, by 2004 Keynesianism was so redundant that “virtually every
contemporary discussion of stabilization policy by economists ... is about
monetary policy, not fiscal [tax and spending] policy.” Hayek declared in
1978, “As for the movement of intellectual opinion is concerned [sic], it is
now for the first time in my life moving in the right direction.”” (Wapshott,
2011, p. 287)


“On one side were the “freshwater economists,” so called because their
universities clustered around the Great Lakes; on the other, the “saltwater
economists” who hailed from schools on the coasts. Freshwater economists
considered, like Hayek, inflation to be a country’s worst curse; saltwater
economists thought, like Keynes, unemployment more serious. The freshwater
group believed the economy should be thought of as a sentient organism ruled
by the rational decisions of those who participate in the market. While
government should ensure that a market was free and fair, government spending
and taxation perverted the natural order of an economy. They assumed that
individuals made rational decisions based on what they understood the future
to hold; that businessmen held back from new investments when they feared that
state spending to spur economic growth would lead to higher taxes and
inflation; and that globalization and the rise of electronic communications
led to more efficient markets that benefited all. Recessions, they claimed,
were routine aspects of an economic cycle that must be endured, not cured.
They preferred “supplyside” remedies that encouraged businesses to provide
cheaper goods and thereby boost demand by removing government inhibitions such
as regulations and business taxes. The saltwater tribe believed that an
economy left to its own devices would not suit everyone. They considered
recessions symptoms of an economy in poor health, or the result of unforeseen
shocks, and sought to cure unemployment at the bottom of the business cycle.
They believed markets, particularly in unionized labor, to be slow to respond
to changes, and competition to be imperfect. They acknowledged the logic of
supplyside reforms, but put more emphasis on “demand-pull” remedies that
concentrated on putting more money into the system to make goods more
affordable.” (Wapshott, 2011, p. 287)


“Strict monetary measures were found to be such unreliable indicators that
interest rates became the favored device by which inflation was kept under
control.” (Wapshott, 2011, p. 285)


“this was done by people who didn’t really understand Keynes and who were
critical of him. We had involuntary anonymous Keynesianism.”” (Wapshott, 2011,
p. 284)


“Robert Solow, “The boom that lasted from 1982 to 1990 was engineered by the
Reagan administration in a straightforward Keynesian way by rising spending
and lowered taxes, a classic case of an expansionary budget deficit.”
Galbraith agreed. “[Reagan] came into the presidency as the country was
experiencing a rather disagreeable recession and [implemented] lots of strong
Keynesian policy,” […].” (Wapshott, 2011, p. 283)


“Reagan also hosed taxpayers’ money into the economy at an unprecedented rate.
Reagan trimmed welfare programs for the poor, but that was small change
compared to his increased spending on defense, which soared from $267 billion
in 1980 to $393 billion in 1988 in constant dollars.68 Public debt grew from a
third of GDP in 1980 to more than half of GDP by the end of 1988, from $900
billion to $2.8 trillion. […] When Reagan entered the White House, America was
the world’s largest creditor; by the time he retired to his Santa Barbara
horse ranch, it had become the world’s largest debtor, owing foreign lenders
about $400 billion. […] “I don’t worry about the deficit,” he quipped. “It’s
big enough to take care of itself.”” (Wapshott, 2011, p. 283)


“In 1982, Reagan, alarmed by the fast-increasing budget deficit, rescinded
various tax breaks on high earners, increasing taxation by a postwar record of
$37 billion, or 0.8 percent of GDP.” (Wapshott, 2011, p. 282)


“While Volcker’s monetary squeeze led to a deep recession that lasted sixteen
months in 1981–82, inflation fell dramatically, from 11.8 percent through 1981
to 3.7 percent in 1983. But the price was high. Unemployment rose to its
highest level since the Great Depression. In 1980, Reagan inherited a jobless
rate of 7.1 percent; by 1983 and 1984 it had reached 9.7 and 9.6 percent. The
much derided Phillips curve, which appeared to have lost its relevance when
stagflation struck in the mid1970s, seemed to be back in business. By Laffer’s
reckoning, Reagan’s tax cuts proved every bit as effective as the Kennedy tax
cuts. In the four years after Kennedy’s cuts reduced the top rate from 90
percent to 70 percent, growth in real federal income tax revenue leapt from
2.1 percent in the previous four years to 8.6 percent. Real GDP growth rose
from 4.6 percent to 5.1 percent in the same period, and the unemployment rate
fell from 5.8 percent in January 1962 to 3.8 percent in December 1966.
Reagan’s tax cuts were deeper. He sliced income taxes 25 percent across the
board, with tax rates for the highest earners slashed from 70 percent in 1981
to 28 percent in 1988. Corporate taxes fell from 28 to 20 percent. According
to Laffer, the results were impressive. While between 1978 and 1982 the
economy grew at 0.9 percent in real terms, between 1983 and 1986 it soared to
4.8 percent. That growth, in turn, translated into jobs, and by the time
Reagan left office in January 1989 the jobless figure was at 5.3 percent.”
(Wapshott, 2011, p. 282)


““Nor should the argument seem strange that taxation may be so high as to
defeat its object,” Keynes had written in 1933, “and that, given sufficient
time to gather the fruits, a reduction of taxation will run a better chance
than an increase of balancing the budget.” Keynes likened those who kept
raising taxes to a manufacturer who, “wrapping himself in the rectitude of
plain arithmetic,” kept raising his prices, even though no one was buying
because prices were too high. The “trickle-down effect” had a Keynesian
derivation too, drawing on the logic of Richard Kahn’s multiplier, that those
who bought goods created jobs and more spending down the line. However,
Reagan’s tax cuts made Hayek distinctly nervous. “On the scale on which it is
being tried, I’m a little apprehensive,” he said in 1982. “I’m all for
reduction of government expenditures, but to anticipate it by reducing the
rate of taxation before you have reduced expenditure is a very risky thing to
do.”” (Wapshott, 2011, p. 281)


“The ensuing recession contributed to Carter’s unpopularity and defeat in
1981. With Reagan in the White House, Friedman and Shultz agreed with Volcker
that the remedy for inflation was to deepen the recession. But Reagan was a
man who liked to be liked. When Thatcher had brought on a similar recession in
Britain, it had made her the most unpopular prime minister since polling
began. […] Over dinner in December 1974 with President Ford’s chief of staff,
Donald Rumsfeld, and his deputy, Dick Cheney, Laffer had argued that there was
an optimum income tax rate that would reap the maximum revenue. He illustrated
his reasoning by drawing a bell curve on a napkin, showing where the sweet
spot might lie.” (Wapshott, 2011, p. 280)


“Paul Volcker, who, visiting the LSE as an undergraduate, had become enamored
with Austrian School capital theory. Volcker considered stagflation “a dragon
that was eating at our innards” and believed Friedman was right: regulating
the money supply was the key. “It came to be considered part of Keynesian
doctrine that a little bit of inflation is a good thing,” Volcker recalled.
“What happens then, you get a little bit of inflation, then you need a little
more, because it peps up the economy. People get used to it, and it loses its
effectiveness. Like an antibiotic, you need a new one.”” (Wapshott, 2011, p.
279)


“Through a conservative think tank, she sought the advice of the Swiss
monetarist Jürg Niehans, who told her she was controlling the supply of money
too tightly and setting interest rates too high, causing the pound sterling to
rise and making British exports too expensive. Friedman blamed the initial
failure of monetarism in Britain on the “gyrations” in money supply that had
been allowed to occur. “It’s gone down, it’s gone up, it’s gone down, it’s
gone up,” he explained. The result, said Friedman, was “a much more severe
recession than would have been necessary.”” (Wapshott, 2011, p. 279)


“Nicholas Kaldor, Hayek’s star pupil at the London School of Economics, now
emeritus professor of economics at Cambridge, scoffed at the Hayekian notions
behind Thatcher’s counterrevolution and published a tract that invoked the
spirit of Keynes, The Economic Consequences of Mrs. Thatcher.” (Wapshott,
2011, p. 278)


“Thatcher, a Methodist, declared war on the consensus: “The Old Testament
prophets did not say, ‘Brothers, I want a consensus.’ They said, ‘This is my
faith. This is what I passionately believe. If you believe it too, then come
with me.’” Thatcher knew that Hayek made an annual visit to the Institute of
Economic Affairs in London, headed by Mont Pelerin member Ralph Harris.
“Thatcher’s office came on [in 1976] and said could she come and drop in to
see him,” recalled Harris. “And so she called by, and there was a period of
unaccustomed silence from Margaret Thatcher as she sat there, intense,
attending to the master’s words.” Hayek and Friedman became regular visitors
to her office in 10 Downing Street. In June 1979, Thatcher was elected prime
minister. By coincidence, it was Hayek’s eightieth birthday. He wrote her a
telegram: “Thank you for the best present to my 80th birthday that anyone
could have given me.” Thatcher wrote back: “I am very proud to have learned so
much from you over the past few years. I am determined that we should succeed.
If we do so, your contribution to our ultimate victory will have been
immense.”” (Wapshott, 2011, p. 277)


“Thatcher’s philosophy was based on convictions learned at the knee of her
shopkeeper father, but she had also searched for an intellectual justification
for her views. At Oxford, where she studied chemistry, she had read The Road
to Serfdom […].” (Wapshott, 2011, p. 276)


““When I was a young man, only the very old men still believed in the free
market system. When I was in my middle ages [sic] I myself and nobody else
believed in it. And now I have the pleasure of having lived long enough to see
that the young people again believe in it.” Two years after Hayek received his
Nobel prize, Friedman too was awarded the Nobel Prize for economics. In his
address to the Nobel committee, Friedman donned his cap at Hayek […].”
(Wapshott, 2011, p. 276)


“According to Friedman, by yoking Myrdal to Hayek the Nobel committee hoped to
avoid the charge of sympathizing with the Left. In the event, the double bill
provoked substantial controversy, with Hayek declaring that Nobel Prizes for
economics were absurd and worth neither giving nor receiving, and Myrdal
condemning the Nobel committee for honoring Hayek. […] The prize was a
considerable personal boost to Hayek, whose years of clinical depression
seemed to vanish on receiving the award.” (Wapshott, 2011, p. 274)


“Friedman became an informal economic adviser to Nixon. “[Nixon] was intensely
ambitious and seemingly ready to jettison his professed principles at the
slightest sign of political advantage,” recalled Friedman.” (Wapshott, 2011,
p. 273)


“He agreed in 1964 to become the California state cochairman of the Goldwater
campaign […]. Reagan’s “Time for Choosing” broadcast came too late to save
Goldwater from the drubbing that ensued, but it proved a great hit with the
conservative faithful, transforming Reagan overnight into a conservative
darling and launching him on a trajectory that would start in the governor’s
mansion in Sacramento and end in the White House. Friedman met Governor Reagan
in Los Angeles in 1967. Reagan knew of Friedman from his 1962 book Capitalism
and Freedom, and he recruited him to help reduce the size of California’s
government.” (Wapshott, 2011, p. 272)


“Reagan found he was no longer in demand, yet he owed an enormous tax bill
from the years he had been earning big money. Facing financial ruin, he
concluded that tax was not so much an evil necessity as an outright evil and
bolstered a rotten system of waste and dependence. At Eureka College in
Illinois, Reagan had learned orthodox economics long before Keynes. Though in
no sense an intellectual, Reagan was an avid reader, a habit formed during the
interminable hours of waiting on the movie set and, because he feared flying,
on long train journeys. […] “I have read the economic views of von Mises and
Hayek,” he explained. Reagan first met Goldwater at the home of his wife
Nancy’s parents, who had retired to Phoenix.” (Wapshott, 2011, p. 271)


“For years Reagan had preached to factory workers on behalf of General
Electric a philosophy of self-help and small government. During the
Depression, his father, Jack, had taken a New Deal job in Dixon, Illinois,
helping unemployed neighbors find work. The young Ronnie watched his father’s
pain as the contradictions of the welfare payment system kicked in: when Jack
found someone a job, that person was docked unemployment benefits, leaving him
worse off than when he was not working. On top of this life lesson, on
reaching Hollywood Reagan learned another, that progressive taxation provided
a disincentive to work. As an actor earning over $5 million a year, he was
taxed a stinging 79 percent on his income in 1937, rising to 94 percent in
1943. “I know what I did,” he explained. “I would be offered scripts of
additional pictures and, once I had reached that bracket, I just turned ’em
down. I wasn’t going to go to work for six cents on the dollar.”” (Wapshott,
2011, p. 271)


“November 1964: Johnson defeated Goldwater in a landslide. The crushing loss
appeared to deal a fatal blow to the hope of translating Hayek and Friedman’s
ideas into action. Yet some good came of it from Friedman’s point of view. As
the public voice of Goldwater’s economic policy, he earned a place in the
public mind as the thinking man’s conservative and Hayek’s natural heir.”
(Wapshott, 2011, p. 271)


“Friedman was introduced to Goldwater in 1961 or 1962 by the senator’s adviser
Bill Baroody of the conservative American Enterprise Institute, and the three
often discussed how to put Hayek’s notions into practice. Friedman contributed
to Goldwater’s speeches and found himself in great demand to explain the
senator’s platform. […] While declaring that Goldwater “fully supports” the
1946 Employment Act “to promote full employment and stable prices,” Friedman
cautioned that he “would call first on monetary policy” to fulfill those
ends.” (Wapshott, 2011, p. 270)


“Friedman was critical of much of Hayek’s work in economics. By contrast, he
was always free with his praise of Keynes, for his originality of mind and his
invention of macroeconomics.” (Wapshott, 2011, p. 269)


“Britain enjoyed “a largely incorruptible civil service” and “a law-obedient
citizenry.” He was less optimistic that a benign welfare state could take root
in America. “[America] has no tradition of an incorruptible or able civil
service,” he wrote. “The spoils system formed public attitudes... . As a
result, Keynes’s political bequest has been less effective in the United
States.” […] “Friedrich Hayek’s influence has been tremendous,” he gushed
after the 1975 Mont Pelerin Society meeting in Hillsdale, Michigan. “His work
is incorporated in the body of technical economic theory; has had a major
influence on economic history, political philosophy and political science; has
affected students of the law, of scientific methodology, and even of
psychology... . [And above all strengthened] the moral and intellectual
support for a free society.”” (Wapshott, 2011, p. 268)


““I believe that Keynes’s theory is the right kind of theory in its
simplicity, its concentration on a few key magnitudes, its potential
fruitfulness,” he wrote. “I have been led to reject it ... because I believe
that it has been contradicted by evidence.” Friedman believed that “Keynes’s
bequest to technical economics was strongly positive” but that his political
legacy was strongly negative.” (Wapshott, 2011, p. 267)


“he reasoned that had the Federal Reserve between 1929 and 1933 increased the
supply of money by lowering interest rates rather than sharply contracted it,
the slump would have lasted only a couple of years. The Great Depression was,
therefore, by Friedman’s reckoning, the “Great Contraction,” a manmade
disaster that might have been avoided. To ameliorate the business cycle,
Friedman suggested keeping a tight rein on monetary growth, only allowing the
supply of money to grow slowly, a policy that became known as “monetarism.”
Friedman concluded that Keynes had misread the situation. “Keynes ... believed
that the Great Contraction ... occurred despite aggressive expansionary
policies by the monetary authorities,” Friedman wrote. “The facts are
precisely the reverse... . The Great Contraction is tragic testimony to the
power of monetary policy—not, as Keynes ... believed, evidence of its
impotence.”” (Wapshott, 2011, p. 267)


“In the 1930s, Friedman, born in Brooklyn, was a socialist who, after earning
degrees at Rutgers, Chicago, and Columbia, followed the migration of young
economists eager to take part in Roosevelt’s New Deal, finding a job at the
National Resources Committee in Washington, D.C. As he was to recall, “The New
Deal was a lifesaver for us personally.” At the end of the war he returned to
Chicago and began to adopt the free-market ideas of Frank Knight and George
Stigler. One Mont Pelerin Society member, Stanley Dennison, a Cambridge
economist, encouraged Friedman to apply for a Fulbright scholarship, which he
received, to study at Cambridge, and that is where he met the Keynesians.
Among those he befriended were Richard Kahn, the inventor of the multiplier,
Joan Robinson, keeper of Keynes’s flame, and Nicholas Kaldor, once Hayek’s
most-promising pupil.” (Wapshott, 2011, p. 266)


“In 1943, Hayek’s Viennese economist friend Fritz Machlup showed a typescript
of The Road to Serfdom to Director, who passed it to Frank Knight in Chicago.
Despite Knight’s skeptical report, the University of Chicago Press agreed to
publish it. The decision proved to be highly profitable for the press, with
sales of the book still strong nearly seventy years later. Director, a devout,
articulate, and persuasive Hayekian who argued against government subsidies,
railed against import tariffs, and opposed trade unions, reviewed the book and
described Hayek as “our most accomplished historian of the development of
economic ideas.” But it was a family tie that provided Director’s contribution
to the success of Hayek’s long march to reburnish economic liberalism.
Director’s sister Rose had joined him in Chicago, where in her economics class
she sat next to, then fell in love with, Milton Friedman, who at that time was
a Keynesian.” (Wapshott, 2011, p. 265)


“Carter was dealt a death blow in January 1979 when the Islamic Revolution in
Iran sparked turmoil in the Middle East. The president became caught up in a
second oil crisis that rivaled the OPEC hike of 1973, resulting in severely
reduced gasoline supplies. He imposed price controls on fuel, leading to long
lines at filling stations. He appointed as chairman of the Federal Reserve a
lifelong Democrat, Paul Volcker, with a mission to raise interest rates to
choke off the demand that was thought to be the root of inflation. Carter’s
failure to bring prices under control in time for the November 1980 election
was a gift to his Republican rival, the handsome, affable, twinkle-eyed Ronald
Reagan, who asked voters, “Are you better off than you were four years ago?”
The answer was a resounding no.” (Wapshott, 2011, p. 264)


“Jimmy Carter reached the White House on the Keynesian pledge of returning
America to full employment. In 1978, he approved the Humphrey-Hawkins Full
Employment Act, a reprise of the Full Employment Bill of 1945, mandating the
president and the Federal Reserve to keep aggregate demand high enough to
maintain full employment. In apparent contradiction, the act also directed the
president and Congress to balance both the budget and the balance of trade.”
(Wapshott, 2011, p. 263)


““Stagflation was the end of naïve Keynesianism,” observed Milton Friedman.
Economists, once omniscient, were left scrabbling for explanations. “A
remarkable consensus on economic policy emerged in Washington—a convergence of
attitudes between the liberal left and the conservative right,” Greenspan
recalled. “Suddenly everyone was looking to restrain inflation, cut deficit
spending, reduce regulation, and encourage investment.”” (Wapshott, 2011, p.
262)


“hapless successor, the former University of Michigan football star Gerald
Ford,86 who presided over rates of inflation and unemployment not experienced
since the Great Depression. One of Nixon’s final acts was to appoint the
ultra-conservative Alan Greenspan head of his Council of Economic Advisers.
Greenspan had resisted Nixon’s blandishments for years and was grateful not to
have been implicated in the policy U-turn that introduced price and income
controls. But he could do little to save Ford. He watched from the sidelines
as the amiable president was pressed by a gaggle of conflicting advisers to
flip-flop from one putative panacea to the next.” (Wapshott, 2011, p. 262)


“Any chance that Nixon would be the master of his economic destiny was
delivered a mortal blow by a fourfold increase in oil prices imposed by the
Arab oil cartel, the Organization of Petroleum Exporting Countries (OPEC), in
1973–74 to punish America for rearming Israel during the Yom Kippur War. The
result was higher prices and the brakes being slammed on economic growth.
Traditional tools such as the Phillips curve seemed no longer to apply. Low or
no economic growth was accompanied by inflation in a combination hitherto
thought impossible, dubbed “stagflation.”” (Wapshott, 2011, p. 261)


“In line with what he called his “New Economic Policy,” he approved the
devaluation of the dollar followed by the removal of the dollar from the gold
standard; a financial stimulus of lower taxes and increased spending that
plunged the federal budget into a $40 billion deficit; cheap federal loans to
prevent aircraft company Lockheed from going broke; and in August 1971, a
legal ban on the raising of prices and wages. Later, free trade was abandoned
and a 10 percent import levy imposed.” (Wapshott, 2011, p. 260)


“A candid line in Nixon’s 1970 State of the Union address betrayed the
calculation behind his change of mind. “I recognize the political popularity
of spending programs,” he said, “and particularly in an election year.” […]
Friedman, Nixon’s economic adviser during the 1968 campaign, concluded, “Nixon
was the most socialist of the presidents of the United States in the twentieth
century.”” (Wapshott, 2011, p. 260)


“Richard Nixon arrived in the White House in January 1969 suggesting he was
ready to turn back the Keynesian tide. “In the decade of the Sixties the
federal government spent $57 billion more than it took in in taxes,” Nixon
said in his 1970 State of the Union address. “Millions of Americans are forced
to go into debt today because the federal government decided to go into debt
yesterday. We must balance our federal budget.” He concluded that full
employment fueled by the deficit had caused a scarcity of labor that was
pushing up wages and prices. To counter inflation, Nixon directed his
conservatively inclined economic team, among them Paul McCracken, head of the
Council of Economic Advisers; Herbert Stein, a Council member soon to be
McCracken’s successor; and George Shultz, director of the Office of Management
and Budget, to balance the budget by sharply cutting spending. The cuts,
however, coincided with a mild recession in which unemployment rose from 3.9
percent in January 1970 to 6.1 percent at the end of the year. In line with
Nixon’s belief that unemployment led him to lose the presidential race in
1960, Nixon switched tracks, saying he wanted “a full employment budget, a
budget designed to be in balance if the economy were operating at its peak
potential. By spending as if we were at full employment, we will help to bring
about full employment.” He proposed an expansionary budget to “stimulate the
economy and thereby open up new job opportunities for millions.” It was pure
Keynesianism, prompting Nixon in January 1971 to declare, “Now I am a
Keynesian in economics.”” (Wapshott, 2011, p. 259)


“Far from introducing creeping authoritarianism, as Hayek had predicted, the
new wealth that Keynesian planning produced offered new freedoms. Women,
African-Americans, and teenagers began to flex their newfound liberty. The
Keynesian Revolution was accompanied by a cultural revolution that questioned
the traditional mores of a poorer, quainter society. The Keynesian miracle
continued to work for Johnson. Productivity increased, real take-home pay
doubled compared to that during the Eisenhower years, and joblessness was down
from 4.5 percent in 1965 to an average of 3.9 percent in the subsequent four
years. Johnson increased the proportion of the federal budget spent on
antipoverty programs from 4.7 percent in 1961 to 7.9 percent in 1969. On top
of his domestic overhaul, Johnson escalated the war against communist
insurgents in South Vietnam. With eventually half a million Americans posted
to Vietnam, defense spending leapt from $49.5 billion in 1965 to a mammoth
$81.2 billion in 1969. The budget remained in surplus, but it was dwindling
fast […].” (Wapshott, 2011, p. 258)


“Bolstered by a booming economy and burgeoning tax revenues, Johnson set about
building his legacy. In May 1964, at the University of Michigan in Ann Arbor,
he declared, “We have the opportunity to move not only toward the rich society
and the powerful society, but upward to the Great Society.” He vowed to end
poverty and racial inequality, to protect the countryside, to educate every
child, and to “rebuild the entire urban United States.” Armed with a landslide
victory over the ultra-conservative Barry Goldwater in the 1964 election,
Johnson, an avid New Dealer in the 1930s, embarked on a vast public spending
spree.” (Wapshott, 2011, p. 257)


““Economists ... sit confidently at the elbow of almost every important leader
in Government and business, where they are increasingly called upon to
forecast, plan and decide,” Time chirruped. Keynesianism had even won over
hard-nosed businessmen. “They have begun to take for granted that the
Government will intervene to head off recession or choke off inflation, [and]
no longer think that deficit spending is immoral... . Nor, in perhaps the
greatest change of all, do they believe that Government will ever fully pay
off its debt, any more than General Motors or IBM find it advisable to pay off
their long-term obligations.” (Wapshott, 2011, p. 257)


“In December 1965 Time gave its “Man of the Year” accolade to John Maynard
Keynes.” (Wapshott, 2011, p. 257)


“Within four years critics of the tax cuts from both Left and Right were
proved wrong. Federal tax revenue rose by $40 billion, while economic growth
increased from 5.8 percent in 1964 to 6.4 percent in 1965 and 6.6 percent in
1966. The unemployment rate fell from 5.2 percent in 1964 to 4.5 percent in
1965 and 2.9 percent in 1966. Inflation remained under 2 percent in 1964 and
1965, sliding up to 3.01 percent in 1966. Kennedy’s gamble had paid off
spectacularly.” (Wapshott, 2011, p. 256)


“Galbraith complained that cutting taxes amounted to a “reactionary” form of
Keynesianism that did not address public ills as readily as targeted spending.
Besides, tax cuts were inflationary. Heller, however, was no gambler. He was
operating according to the latest neo-Keynesian notions that intended to offer
a more predictable means of managing the economy. Keynes’s protégé Roy Harrod
and Harvard’s Evsey Domar had, in their “Harrod-Domar model,” built on Kahn’s
multiplier theory to predict how tax cuts could lead to economic growth. And
Heller himself, working with his colleague Robert Solow, took account of the
work in 1958 of an LSE economics professor, the New Zealander William
Phillips, who postulated in a graph dubbed the “Phillips curve” a trade-off
between reducing unemployment and rising inflation. By formulating policy
according to the Phillips curve, Heller believed he had found a way to provide
full employment without provoking higher prices.” (Wapshott, 2011, p. 256)


“Arthur M. Schlesinger Jr., JFK’s Boswell, described Kennedy as
“unquestionably the first Keynesian President.”” (Wapshott, 2011, p. 254)


“Kennedy surrounded himself with Keynesians, chief among them Galbraith, who
wrote JFK’s stump speech on economics. When Kennedy took office, Galbraith was
installed in the Executive Office Building with a roaming brief from JFK to
“tell me not what I should do but what I should tell others to do.” […] At
first he approached Samuelson to chair the Council of Economic Advisers, then
sounded out Galbraith, who opted to become ambassador to India, before picking
Walter Heller, who dubbed the administration’s Keynesian approach the “New
Economics.” Heller, joined on the council by Kermit Gordon and James Tobin,
was convinced they could deliver full employment—which they defined as a 4
percent unemployment rate—without inflation. Kennedy’s economic aim was to
bridge the “growth gap,” the difference between what the American economy
produced when left to private enterprise and the fully productive economy he
believed possible if the administration intervened.” (Wapshott, 2011, p. 253)


“The ensuing space race over the next fifty years would lift the NASA annual
budget to a truly astronomic $18.7 billion, with a further $20-plus billion
spent on Pentagon satellites and rockets. “We are living under a curious kind
of military Keynesianism in which Mars has rushed in to fill the gap left by
the market economy,” wrote historian Richard Hofstadter in 1950. By the end of
his presidency, Ike had spent more on defense than Roosevelt spent on winning
World War II. […] Eisenhower’s remorse was that his administration’s vast
spending on arms had led to “the military-industrial complex.” “We must never
let the weight of this combination endanger our liberties or democratic
processes,” he warned. […] In Britain, Harold Macmillan, a Keynesian, won the
1959 election on the slogan, “You’ve never had it so good.” Eisenhower was the
first president to fully understand that manipulating the economy by Keynesian
measures gave the incumbent an electoral advantage […].” (Wapshott, 2011, p.
251)


“The vast network of interstate highways that started construction in 1956—the
perfect example of a Keynesian infrastructure project—was billed the “National
Defense Highway” program and sold to conservatives as a means of transporting
supplies in the event of a military emergency.” (Wapshott, 2011, p. 250)


“Galbraith’s biographer Richard Parker suggests that “Ike may have been the
first Keynesian Republican President.”” (Wapshott, 2011, p. 250)


“Eisenhower depended on Arthur Burns, the Austrian-born expert on business
cycles and chairman of his Council of Economic Advisers, who substantially
revised the conservative position on Keynesian macroeconomic management.”
(Wapshott, 2011, p. 249)


“Keynesian thinking was given a boost in 1948 with the publication by Paul
Samuelson, a student of Hansen at Harvard and a professor at MIT, of
Economics: An Introductory Analysis, which was to become the Keynesians’
bible. In the early editions Samuelson ignored orthodox economics; he
described only two alternatives: “socialism” and Keynesianism. Neither Mises
nor Hayek nor the Austrian School warranted a mention. In the next sixty
years, 40 million copies were sold in more than forty languages, ensuring that
Keynesianism became the new orthodoxy in the noncommunist world. Where Keynes
read Alfred Marshall, the Keynesians read, then taught, Samuelson. “I don’t
care who writes a nation’s laws,” Samuelson said, “if I can write its
economics textbooks.”” (Wapshott, 2011, p. 249)


“In 1969, Hayek moved back to Austria for financial reasons. The University of
Salzburg, a minor college with a tiny economics department, bought his library
for a decent sum, and by moving there Hayek was able to draw upon his books
and continue to write. The same year he suffered a second heart attack, which
was again not diagnosed correctly. For the next five years he endured long
periods of ill health, pain, and acute depression, preventing him from working
for any length of time. The debilitating condition lasted for the rest of the
decade and he resorted to antidepressant drugs. According to Ralph Harris,
“When Hayek moved back to his native Austria, he was depressed. The success of
mixed economies made his free market theories, and Hayek himself, seem more
irrelevant than ever.” “The world was very much a socialist world,” remembered
his son, Laurence. “His ideas were not fashionable. Nobody seemed to listen to
him. Nobody seemed to agree with him. He was alone.” Hayek was at his lowest
ebb. “My impression was, ‘I’m finished,’” he recalled.” (Wapshott, 2011, p.
242)


“Robbins had at first swallowed the Hayekian diagnosis whole and written a
book, The Great Depression, hewing closely to Hayek’s argument that a tough-
love policy toward the broken economy and its victims was the only way to
purge the capital imbalance and restore the economy to health. But he came to
describe the volume as “something which I would willingly see forgotten” and
“the greatest mistake of my professional career.” He was filled with remorse,
not only for his adherence to Hayek’s beliefs, but also for his slowness in
embracing Keynesianism. As he put it, “It will always be a matter of deep
regret to me that, although I was acting in good faith and with a strong sense
of social obligation, I should have so opposed policies which might have
mitigated the economic distress of those days.”” (Wapshott, 2011, p. 242)


“For Robbins, the breaking point came when Hayek and Mises blamed the Great
Depression in America on businessmen borrowing too much money at too low an
interest rate and investing it in loss-making businesses. Robbins, in his
English understated way, described this explanation as “misleading” and
described Hayek’s remedy for the Depression—letting the market find its own
level by writing down mistaken investments and raising interest rates to
encourage more saving and to deter consumer spending—“as unsuitable as denying
blankets and stimulants to a drunk who has fallen into an icy pond, on the
ground that his original trouble was overheating.”” (Wapshott, 2011, p. 241)


“In 1960, Hayek suffered his first bout of clinical depression. The following
year he experienced a mild heart attack that was not diagnosed properly, and
he fell further into gloom. In 1962, still anxious about his failure to make
adequate financial arrangements for his old age, and concerned he might leave
Helene in penury, he accepted a post with a pension at the University of
Freiburg […].” (Wapshott, 2011, p. 241)


“coincided with a crisis in the Mont Pelerin Society, which, after years of
dwindling membership and attendance, became riven by factionalism, personal
animosity, and infighting whose details were so embarrassingly petty they have
not been made public. […] at the 1960 meeting he stepped down as president and
declined to attend the 1961 gathering.” (Wapshott, 2011, p. 241)


“Robbins argued, like Keynes, that state intervention in aid of the public
good is only as bad as the society in which it takes place. In the hands of a
benign population, state aid could be worthwhile. […] Robbins wrote. “Hayek is
somewhat too apt ... to assume that deviations from his norm lead cumulatively
to disaster... . Why should he argue as if these were at all likely to lead us
to social disintegration and the concentration camp?”” (Wapshott, 2011, p.
240)


“the few who did review it found fault, even those who might be expected to
agree with its conclusions. […] Viner complained of Hayek’s oversimplicity,
self-contradiction, and poor academic method, of “the conspicuous absence in
Hayek’s argument of ifs and buts and of painful wrestling with the task of
weighing pros and cons.”” (Wapshott, 2011, p. 239)


“Hayek finished writing The Constitution of Liberty on May 8, 1959, his
sixtieth birthday, and it was published in February 1960. He sent signed
copies to Richard Nixon, Herbert Hoover, Walter Lippmann, John Davenport,
Henry Hazlitt, to the publisher of Time, Henry Luce, and to a top editor at
Reader’s Digest, hoping the magazine might publish a short edition, as it had
with The Road to Serfdom. Not only was his project of reviving liberalism at
stake, but Hayek needed income. With two wives and two children to support,
and retirement looming but no pension, he dearly hoped the book would become a
best seller. It fell flat. While it received encouraging words from the usual
suspects, it failed to take off in the public mind. Compared to The Road to
Serfdom, it was long-winded and heavy going.” (Wapshott, 2011, p. 238)


“Alan Ebenstein explained, “He hoped The Constitution of Liberty would be
[Adam Smith’s] The Wealth of Nations of the twentieth century.” Over the next
nine years he worked on and off on […].” (Wapshott, 2011, p. 235)


“Hayek’s venture into doomsday prognostication in The Road to Serfdom was also
cited as evidence that he lacked the intellectual rigor expected at the
Chicago School. According to John Nef, chairman of Chicago’s Committee on
Social Thought, some Chicago economists believed The Road to Serfdom “too
popular a work for a respectable scholar to perpetrate. It was all right to
have him at Chicago so long as he was not associated with the economists.” In
the fall of 1950, at the suggestion of Nef, Hayek became professor of social
and moral science in the Committee on Social Thought, a chair funded in part
by the Volcker fund. Despite the rebuff, Hayek accepted the post.” (Wapshott,
2011, p. 235)


“Hutchins’s suggestion that Hayek join the school was therefore hampered from
the start, though antipathy to Hutchins was not the only reason Hayek was
rejected. “He was not a person they would have chosen to add,” explained
Friedman. “They didn’t agree with his economics... . If they had been looking
round the world for an economist to add to their staff, their prescription
would not have been the author of Prices and Production’” […].” (Wapshott,
2011, p. 234)


“Hayek tried to obtain a teaching post at the Institute for Advanced Studies
at Princeton University, which was not happy for a salary to be designated by
a private concern. Hayek then approached the University of Chicago, hoping for
a position in the School of Economics, where he felt he would be welcomed by
scholars such as Frank Knight and Jacob Viner. Hayek’s request was taken up
with enthusiasm by the university’s president, Robert Maynard Hutchins, an
educational reformer who, in his effort to make Chicago a more serious
institution, had abolished fraternities and the football program, reforms that
made him unpopular with the faculty, not least the conservative-minded
professors at the School of Economics.” (Wapshott, 2011, p. 233)


“He needed to earn a larger salary than he received from the LSE to support
Hella and the children while maintaining himself and Helene. […] after
delivering a lecture at the Economic Club in Detroit, Hayek was approached by
Harold W. Luhnow, president of the libertarian William Volcker Charities Fund,
who invited him to write an edition of The Road tailored toward Americans.
Luhnow was prepared to pay Hayek’s asking price of $10,000 a year for three
years.” (Wapshott, 2011, p. 233)


“As a young man in Vienna he had first fallen in love with his cousin, Helene,
but when he traveled to New York in 1923 the distance proved too much, and
“through some misunderstanding of intentions,” Helene tired of waiting and
married another. Hayek married Hella soon after, because, he explained, she
looked somewhat like Helene. Hella became “a very good wife to me,” he
recalled. After the war, in 1946, when Hayek was visiting Vienna, alone, to
discover how his relations had fared under the Nazis, he met Helene, who told
him she was free to marry him. Despite the years of Hella’s devotion and the
existence of a daughter, Christine, aged seventeen, and a son, Laurence, aged
twelve, and contrary to his lapsed Roman Catholic faith, Hayek decided to
divorce Hella and marry Helene. Hurt and angry, Hella refused to grant Hayek a
separation and the divorce negotiations became acrimonious. Hayek celebrated
Christmas Day 1949 with Hella and the children in their snug family home in
Hampstead. Two days later he left them for good, traveling to New York to
attend the American Economic Association convention. Hayek’s finances were
more on his mind than economics. To avoid the expense of a contested divorce,
he slipped a note under the hotel room door of Harold Dulan, chairman of the
economics and business department at the University of Arkansas, Fayetteville,
asking for a teaching post. Hayek’s plan was to establish residency in
Arkansas, a state whose permissive marriage laws would allow him to wrest a
cheap divorce from Hella. Dulan duly obliged, as did the chancery division of
the Arkansas high court. Hayek’s divorce became absolute in July 1950.
“Finally I enforced it,” Hayek recalled. “I’m sure that was wrong, and yet I
have done it,” he said. “It was just an inner need to do it.” The divorce
scandalized Hayek’s LSE colleagues, none more so than Robbins, who was
dumbfounded when Hayek resigned his LSE post in February 1950. Robbins wrote
that he felt Hayek had “behaved in such a way ... I find impossible to
reconcile with the conception of his character and his standards which I have
cherished through twenty years of friendship. As far as I am concerned, the
man I knew is dead.” In the following ten years, such was Robbins’s disgust
that he resigned from the Mont Pelerin Society in protest at Hella’s treatment
and made no contact with Hayek. The two men were reconciled only after Hella’s
death, when Robbins attended the wedding in 1961 of Hayek’s son, Laurence, his
godson.” (Wapshott, 2011, p. 232)


“Typical was John Kenneth Galbraith’s dismissal: “The small remaining band of
free market economists met on an Alpine peak to form a society which, however,
soon foundered over a division within its ranks on the question [of] whether
the British Navy should be owned by the government or leased from the private
sector.”” (Wapshott, 2011, p. 231)


“Declaring that “the central values of civilization are in danger,” Robbins
asserted that the threat to freedom had been “fostered by the growth of a view
of history which denies all absolute moral standards and by the growth of
theories which question the desirability of the rule of law. It holds further
hat they have been fostered by a decline of belief in private property and the
competitive market.” He concluded, “The group does not aspire to conduct
propaganda. It seeks to establish no meticulous and hampering orthodoxy. It
aligns itself with no particular party. Its object is solely ... to contribute
to the preservation and improvement of the free society.” Hayek was confident
that the conference would mark “the rebirth of a liberal movement in Europe.”
Friedman considered it “an attempt to offset The Road to Serfdom, to start a
movement, a road to freedom as it were.” It took more than a year to arrange
the second meeting, in 1949 in Seelisberg, Switzerland, but the society met
annually from then on.” (Wapshott, 2011, p. 231)


““The place is unbelievably wonderful,” Friedman gushed in a postcard home to
his wife Rose. […] “Our sessions were marked by vigorous controversy,” […].
Mises accused Haberler of being a communist. As Friedman explained, “Mises was
a person of very strong views and rather intolerant about any differences of
opinion.” To literally cool things down, walks were arranged to explore the
surrounding mountainside. The combative atmosphere of the first meeting set
the tone for subsequent meetings, leading to repeated rows and resignations as
the contrarians argued over differences imperceptible to an outsider. As
Samuelson drily noted, “The number of Mont Pelerin resignations never quite
reached the number of its new members.”” (Wapshott, 2011, p. 230)


“Milton Friedman, a thirty-five-year-old Chicago economist enjoying his first
trip outside the United States. Friedman, who had briefly met Hayek in Chicago
during the The Road to Serfdom publicity tour, was invited at the suggestion
of his wife’s brother Aaron Director […]. Director had met Hayek at the LSE
and was instrumental in having the University of Chicago Press publish The
Road to Serfdom.” (Wapshott, 2011, p. 229)


“As soon as the war was won, Hayek contacted the “Colloque Walter Lippmann”
attendees and other like-minded thinkers. Hayek proposed a summit in the most
literal sense, a ten-day conference in April 1947 at the vertiginous Hôtel du
Parc, which sat atop Mont Pèlerin, looking down over Lake Geneva, near Vevey
in Switzerland. A top manager of the Schweizerische Kreditanstalt underwrote
93 percent of the 18,000 Swiss francs the symposium cost to stage. Albert
Hunold, a Zurich businessman who headed the Swiss watch manufacturers,
diverted money intended for a liberal journal. There were grants from the
free-market Foundation for Economic Education in Irvington-on-Hudson, New
York, and from the libertarian William Volcker Charities Fund of Kansas City,
Missouri, that funded Americans making the trip. Hayek invited about sixty,
promising that all expenses would be paid, and thirty-seven from ten countries
accepted, about half from America.” (Wapshott, 2011, p. 228)


“The distinguished American journalist and commentator Walter Lippmann became
the subject of a colloquium in Paris to boost his book The Good Society, which
highlighted the threat to liberty inherent in planned societies such as Soviet
Russia and Nazi Germany. Hayek, Mises, and Robbins were invited, along with
the anti-Marxist French sociologist Raymond Aron, the Manchester University
economist Michael Polanyi, the free-market thinker from Freiburg Wilhelm
Röpke, and twenty or so others to discuss “the crisis of liberalism.””
(Wapshott, 2011, p. 228)


““Everywhere I went I met someone who told me that he fully agreed with me,
but that at the same time he felt totally isolated in his views and had nobody
with whom he could even talk about them,” he said. “This gave me the idea of
bringing these people, each of whom was living in great solitude, together in
one place.”” (Wapshott, 2011, p. 227)


“As the journalist Ralph Harris recalled, “Hayek went through a period in the
Fifties and Sixties [when] he was hated, execrated. Academics on the Left, who
were by no means unpleasant individuals, would not meet him. I had occasions
when a professor of philosophy at Oxford didn’t want to meet ‘That Man.’ ...
It was a deep hatred.” […] “There was something of a religious war about it,
that to criticize this noble ideal of socialism, of fairness, of equality, was
to desecrate something that was fine.”” (Wapshott, 2011, p. 226)


“I said, ‘My God, I have never done this. I can’t possibly do it. I have no
experience in public speaking.’ […] For the next five weeks he crisscrossed
America, speaking to attentive crowds. He had become an instant hero. […]
“What I did in America was a very corrupting experience,” he recalled. “You
become an actor, and I didn’t know I had it in me. But given the opportunity
to play with an audience, I began enjoying it.”” (Wapshott, 2011, p. 224)


“Hayek, too, wrote to Lydia, describing Keynes as “the one really great man I
ever knew, and for whom I had unbounded admiration. The world will be a very
much poorer place without him.” Hayek told his wife that with Keynes dead he
was now “probably the best known economist living,” a remark he was to
“bitterly regret.” “Ten days later it was probably no longer true,” he
remembered. “At that very moment Keynes became the great figure and I was
gradually forgotten as an economist.” As he put it some forty years later, “In
the middle 1940s—I suppose I sound very conceited—I think I was known as one
of the two main disputing economists: there was Keynes and there was I. Now,
Keynes died and became a saint; and I discredited myself by publishing ‘The
Road to Serfdom,’ which completely changed the situation.”” (Wapshott, 2011,
p. 223)


“In January 1946, Hayek and Keynes met in Cambridge. Hayek turned the
conversation from Elizabethan books to the way, it seemed to him, that
Keynes’s followers—it is thought Joan Robinson and Richard Kahn were
mentioned—appeared to be adapting Keynes’s ideas for their own ends. Did this
not trouble Keynes? What could he do about it? “After a not very complimentary
remark about the persons concerned,” Hayek recalled, “he proceeded to reassure
me by explaining that those ideas had been badly needed at the time he had
launched them. He continued by indicating that I need not be alarmed; if they
should ever become dangerous I could rely upon him again quickly to swing
round public opinion—and he indicated by a quick movement of his hand how
rapidly that would be done.” -- “Keynes had a supreme conceit of his power of
playing with public opinion,” recalled Hayek. “He believed he could play with
public opinion as though it were an instrument. And for that reason, he wasn’t
at all alarmed by the fact that his ideas were misinterpreted. ‘Oh, I can
correct this any time.’ That was his feeling about it.” Three months later,
Keynes was dead.” (Wapshott, 2011, p. 222)


“The quarrelsome libertarian Ayn Rand, who rarely met Hayek in person, and
when she did dismissed him as a “compromiser,” was enraged by the book. In the
margins of her copy she scribbled abusive comments, calling Hayek a “God damn
fool,” an “abysmal fool,” an “ass,” and a “total, complete, vicious bastard.””
(Wapshott, 2011, p. 221)


“Another University of Chicago professor, Herman Finer, responded with The
Road to Reaction, in which he dismissed Hayek’s “jungle of fallacies.” He went
on, “Hayek’s apparatus of learning is deficient, his reading incomplete, ...
his understanding of the economic process is bigoted, his account of history
false, ... his political science is almost nonexistent, his terminology
misleading, his comprehension of British and American political procedure and
mentality gravely defective; and ... his attitude to average men and women is
truculently authoritarian.” He described the work as “the most sinister
offensive against democracy to emerge from a democratic country for many
decades.”” (Wapshott, 2011, p. 221)


“George Orwell […] “In the negative part of Professor Hayek’s thesis there is
a great deal of truth,” […]. “Professor Hayek ... does not see, or will not
admit, that a return to ‘free’ competition means for the great mass of people
a tyranny probably worse, because more irresponsible, than that of the State.
The trouble with competitions is that somebody wins them. Professor Hayek
denies that free capitalism necessarily leads to monopoly, but in practice
that is where it has led, and since the vast majority of people would far
rather have State regimentation than slumps and unemployment, the drift
towards collectivism is bound to continue if popular opinion has any say in
the matter.”” (Wapshott, 2011, p. 219)


“When the University of Chicago Press asked Frank Knight, who might have been
expected to approve the book’s warnings, to advise on whether the press should
publish the book, he said that Hayek had overstated his case. “The work is
essentially negative,” Knight wrote. “It hardly considers the problems of
alternatives, and inadequately recognizes the necessity, as well as political
inevitability, of a wide range of governmental activity in relation to
economic life in future. It deals only with the simpler fallacies,
unreasonable demands and romantic prejudices which underlie the popular clamor
for governmental control in place of free enterprise.” He concluded, “I doubt
whether it would have a very wide market in this country, or would change the
position of many readers.” […] Starting with a print run of two thousand in
America, the book received a prominent review in The New York Times describing
it as “one of the most important books of our generation.” A second run of
five thousand was followed quickly by a third, of ten thousand. Then Max
Eastman, a former leftist firebrand who had turned against socialism, arranged
for an abridged version in Reader’s Digest that coincided with the death of
Franklin Roosevelt on April 12, 1945, when the New Deal and the future of
economic policy became a hot topic. Before long a million copies had been
ordered. Look magazine even printed a cartoon version.” (Wapshott, 2011, p.
218)


“Keynes […] “I come to what is really my only serious criticism,” Keynes
wrote. “ […] But as soon as you admit that the extreme is not possible, and
that a line has to be drawn, you are, on your own argument, done for, since
you are trying to persuade us that so soon as one moves an inch in the planned
direction you are necessarily launched on the slippery path which will lead
you in due course over the precipice.”” (Wapshott, 2011, p. 216)


““In my opinion it is a grand book. We all have the greatest reason to be
grateful to you for saying so well what needs so much to be said. You will not
expect me to accept quite all the economic dicta in it. But morally and
philosophically I find myself in agreement with virtually the whole of it; and
not only in agreement with it, but in a deeply moved agreement.” If Hayek’s
spirits were lifted by such warm praise, he was in for a shock. Keynes was
soon on the counterattack. “I should say that what we want is not no planning,
or even less planning, indeed I should say that we almost certainly want
more,” Keynes continued. “But the planning should take place in a community in
which as many people as possible, both leaders and followers, wholly share
your own moral position. … Moderate planning will be safe if those carrying it
out are rightly orientated in their own minds and hearts to the moral issue.
This is in fact already true of some of them. But the curse is that there is
also an important section who could almost be said to want planning not in
order to enjoy its fruits but because morally they hold ideas exactly the
opposite of yours, and wish to serve not God but the devil.” Keynes conceded
that some British socialists were closet totalitarians.” (Wapshott, 2011, p.
215)


“Hayek had in April sent The Road to Serfdom to Keynes, who had responded that
the book “looks fascinating. It looks to me in the nature of medicine with
which I shall disagree, but which may agree with me in the sense of doing me
good. ... Something to be kept at the back of one’s head rather than at the
front of it.”” (Wapshott, 2011, p. 214)


“Keynes was so far ahead of his time that the terms “macroeconomic” and
“microeconomic” were not even coined until after his death. “Econometrics,”
too, was Keynes’s unintended and much disparaged invention […].” (Wapshott,
2011, p. 212)


“The Road to Serfdom was published in Britain on March 10, 1944, in an edition
of 2,000. Within days, however, Routledge ordered 2,500 more and thereafter
struggled to keep up with demand. In America, the University of Chicago Press
published the book on September 18, 1944, after a number of mainstream
publishers declined.” (Wapshott, 2011, p. 210)


“Hayek had written to Walter Lippmann in 1937, “I wish I could make my
‘progressive’ friends here understand that democracy is possible only under
capitalism and that collectivist experiments lead inevitably to fascism.”
Originally titled “The Nemesis of the Planned Society,” the book drew on ideas
Hayek had explored in two essays in 1938 and 1939 […].” (Wapshott, 2011, p.
209)


“In August 1940, Keynes was given an unpaid Treasury job that allowed him to
rove across all areas of economic policy. In particular, he was asked to
negotiate war loans from America. He developed plans for a postwar economic
order to replace the unbridled competition between nations that had fomented
the war, and he invented a more orderly system of currency trading fixed
around a revived gold standard, what became the Bretton Woods agreement. He
was also instrumental in conceiving two other pivotal organizations, the
International Monetary Fund and the World Bank.” (Wapshott, 2011, p. 209)


““We shared so many other interests, historical and outside economics,” Hayek
recalled. “On the whole when we met we stopped talking economics. ... So we
became personally very great friends, including Lydia Lopokova.”” (Wapshott,
2011, p. 209)


““During the war I was fighting on Keynes’s side against his critics, because
Keynes was very much against inflation,” Hayek said later […].” (Wapshott,
2011, p. 208)


“Unable to serve in the British armed forces because of his former
nationality, in September 1939 he wrote to the Ministry of Information,
suggesting that his “exceptional experience and somewhat special position
might enable me to be of considerable help in connection with the organization
of propaganda in Germany.”” (Wapshott, 2011, p. 206)


“In June 1937, Roosevelt re-embraced orthodoxy with spending cuts, a credit
squeeze, and an increase in taxes. The work of federal job-creating agencies
was slowed. Soon after, America was heading back into recession. The
“Roosevelt Recession” lasted throughout 1938 and caused industrial production
to slump by a third, prices to fall about 3.5 percent, and unemployment to
climb to 19 percent. Roosevelt tried to avoid blame by attacking big business.
In January 1938, with a fall election looming, the president switched course,
sending Congress a $3.75 billion spending bill and a further $1.25 billion in
April, to fund fresh job-creating initiatives.” (Wapshott, 2011, p. 204)


“Hayek intended The Pure Theory of Capital to be succeeded by a complementary
work, The Pure Theory of Money, but he never completed the second half of his
schema.” (Wapshott, 2011, p. 202)


“By denying the operation of the free market, Keynes had redefined scarcity as
an “artificial” state of affairs “created by the determination of people not
to sell their services and products below certain arbitrarily fixed prices.””
(Wapshott, 2011, p. 199)


“Later he was to confess that “it very gradually dawned on me” that “the
thing’s become so damned complicated it’s almost impossible to follow it.””
(Wapshott, 2011, p. 199)


“As Milton Friedman, a disciple of Hayekian thinking, put it, “I am an
enormous admirer of Hayek, but not for his economics. I think Prices and
Production was a very flawed book. I think his capital theory book is
unreadable.”” (Wapshott, 2011, p. 198)


“He put the work aside for a second time in 1937. In 1938 he was in such
disarray that he discovered he had lost part of the manuscript and had to ask
his fellow Viennese economist friend, Fritz Machlup, who had been reading the
work in progress and suggesting changes, for his copy of the missing pages.”
(Wapshott, 2011, p. 193)


““The chance exists just now to isolate Keynes and to bring to a stand a
common front of other Cambridge and London [economists],” Hayek confided to
Haberler. “These possibilities we would not [want to] jeopardize by putting
Economica in the forefront of the attack. Pigou’s article will cause enough
sensation.” In May, Hayek offered Harbeler his verdict on The General Theory.
He said he was “of course awfully annoyed” by the work, not least because
“through his formulation [Keynes] discredits many important ideas, which now
lie in the air, among many people, and it will make it hard to try to persuade
them without tackling all the other nonsense.” […] Hayek concentrated his
efforts on completing the first part of The Pure Theory of Capital, a two-
volume work he hoped would directly compete with The General Theory.” […] for
the next four years he struggled to explain to his own satisfaction the key
role that capital and money played in an economy.” (Wapshott, 2011, p. 192)