The Nobel Prize in Economic Sciences is a dubious thing at best.
First, it’s not a “real” Nobel Prize in the sense the Nobel Foundation neither chooses nor pays the recipient(s). Technically, it’s the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.” The award itself is of checkered provenance, created by Swedish central bankers hoping to bolster the scientific image of economics. It’s chosen by committee members who purposely apply the same principles used to determine winners in medicine, physics, and chemistry, thereby hoping the public won’t much notice its lack of connection to the late Alfred Nobel (or his surviving family, one of whom blasted the prize as a PR effort designed to improve the bad reputation of economists).
More importantly, though, the “Nobel Prize confers on an individual an authority which in economics no man ought to possess,” as none other than Friedrich Hayek exclaimed in his own remarkable acceptance speech upon receiving the award in 1974.
In Hayek’s view, the Prize threatened to create an aura of hard science certainty around the decidedly social science of economics. This veneer, he worried, would influence both government officials and the public to view economic theory more like laws of physics or properties of molecules.
This was dangerous, in the view of a man who had seen Europe and Russia collapse under “scientific” socialism and written extensively about political economy in The Road to Serfdom and The Constitution of Liberty. He understood the deadly combination of hubris and certainty, and hoped to impress upon the audience that economics remained a discipline that studied humans, with all their irrationalities and frailties. In this sense he demonstrated the degree of respect he still had for the praxeological foundation of his then recently-departed old mentor Ludwig von Mises.
Murray Rothbard, writing in Human Events, had fulsome praise for Hayek as the surprise winner who eschewed the mathematical orientation of previous recipients:
The Nobel award comes as a surprise on two counts. Not only because all the previous Nobel Prizes in economics have gone to left-liberals and opponents of the free market, but also because they have gone uniformly to economists who have transformed the discipline into a supposed “science” filled with mathematical jargon and unrealistic “models” which are then used to criticize the free-enterprise system and to attempt to plan the economy by the central government.
F.A. Hayek is not only the leading free-market economist; he has also led the way in attacking the mathematical models and the planning pretensions of the would-be “scientists,” and in integrating economics into a wider libertarian social philosophy. Both concepts have so far been anathema to the Nobel establishment.
Rothbard saw Hayek’s achievement not only as a refutation of the Keynesian orthodoxy regarding stumulative monetary policy, but also as a demolition of the whole socialist political program flowing from Keynes’s followers:
The political prescription that flows from the Hayekian theory is, of course, the diametric opposite of the Keynesian: stop the artificial inflationary boom, and allow the recession to proceed as fast as possible with its work of readjustment. Postponement and government attempts to stop or interfere with the recession process will only drag out and intensify the agony and lead to our current and probably future turmoil of inflation combined with lengthy recession and depression. The Mises-Hayek analysis is not only the only cogent theory of the business cycle; it is the only comprehensive free-market answer to the Keynesian morass of government planning and “fine tuning” that we are suffering from today.
But F.A. Hayek did not stop with this monumental contribution to economics. In the 1940s he widened his approach to the entire area of political economy. In his best-selling Road to Serfdom (1944) he challenged the prosocialist and pro-Communist intellectual climate of the day, showing how socialist planning must inevitably lead to totalitarianism, and demonstrating examples in the way in which the socialistic Weimar Republic paved the way for Hitler. He also showed how the “worst always get to the top” in a statist society.
So today let us celebrate Friedrich Hayek, the reluctant and worthy Nobel winner—rather than this year’s recipient, William Nordhaus, an economist who once wrote this, in a textbook no less:
The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.
This article was originally published at mises.org