Friedrich A. Hayek taught at the University of Chicago from the fall semester of 1950 through 1962, a period during which the second, or new, Chicago School of Economics was formed. The question naturally arises: What was his role in its formation?

A quick look at the historical record, and common sense itself, suggests that it must have been close to nil. Milton Friedman, whom many would consider the central figure in the School, was hired in 1946, before Hayek had arrived. Hayek tried to get a job in the economics department in 1948, but they declined to make him an offer. He ended up instead on the Committee on Social Thought. During his time at Chicago (1950–1962) Hayek worked principally on political philosophy rather than economics, with The Constitution of Liberty (1960) being the end result. And Hayek famously disagreed with the leader of the Chicago School, Milton Friedman, on monetary theory and methodology, two of the defining aspects of Friedman’s legacy.

There are two elements of Hayek's background that justify our considering him an Austrian economist: first, that he was raised and went to university in Vienna in the first three decades of the twentieth century, and second, that when he finally decided on economics as his field of study, he was trained within the Austrian tradition in economics.

Hayek spent about a third of his life in Austria, mostly in his early days. When he was thirty-two he moved to England, where he would live for nearly twenty years. (He would later say that it was the place he felt most at home, both intellectually and emotionally.) From 1950 through 1962 he lived in the United States, and then moved to Freiburg, Germany, where (aside from a five-year period in Salzburg, Austria - an altogether depressing time for him, both emotionally and intellectually) he would spend the rest of his life. So the first place to look for Hayek as a distinctly Austrian figure is at the formative early period. Accordingly, I will discuss his family background, his early schooling, and his university days in Vienna. Within economics, of course, the adjective “Austrian” also signifies a specific school of thought. Once he had decided that he would become an economist, Hayek received training that would make him very much a product of that school. So a second part of the story is to examine what being trained as an Austrian economist might mean.

Introduction

Realism has entered economics in diverse ways. One fairly common exercise is to provide a realist interpretation of the work of some famous economist. The economists whose works are reconstructed typically did not explicitly endorse realism, but rather elements of their work had aspects that permitted a realist reinterpretation.

The Austrian economist F. A. Hayek is a case in point. Both Tony Lawson and Steve Fleetwood have portrayed Hayek as an early, if imperfect, proponent of transcendental realism. Lawson argues that Hayek's views went through a “continuing transformation.” He applauds Hayek's attack on positivism in the latter's wartime “Scientism” essay (Hayek [1942–44] [1952] 1979), but finds Hayek's alternative proposals there, which Lawson characterizes as a variant of hermeneutics, to be inadequate (Lawson, 1997, 149). Elsewhere, though, Lawson claims that in Hayek's later contributions one can find an “at least embryonic acceptance of something like a transcendental realist ontology,” hence the conclusion of Hayek's having undergone a continuing transformation (Lawson, 1994, 151). The suggestion that Hayek turned towards realism in his later work is addressed in greater detail in Fleetwood's Hayek's Political Economy: The Socio-Economics of Order (1995). Though he prefers a periodization of Hayek's work to Lawson's notion of a continuing transformation, Fleetwood agrees that after 1960 one can find ample evidence for what he calls “Hayek III's quasi-transcendental realism” (Fleetwood 1995, chapter 6). Fleetwood offers an extended realist reconstruction of Hayek's writings on the role of rules.

Introduction, acknowledgments, and dedication

This is a revised version of a paper delivered at the conference, The Popperian Legacy in Economics, held in Amsterdam in December 1985 to honor the retirement of J.J. Klant.

I apologize in advance for writing what is bound to be perceived as a very egocentric chapter. In it I trace the development of some of my ideas on methodology, and I attempt to construct a case for pluralism. In constructing my case, I try to answer some of the objections I have heard most often concerning pluralism. Most of these objections were raised by a number of people who commented on earlier drafts of this chapter. I am indebted to Neil de Marchi, Wade Hands, Uskali Maki, Bob Coats, Roy Weintraub, Dan Hausman, Mark Blaug, Larry Boland, and members of Neil de Marchi's workshop in the history of economic thought at Duke University for their thoughtful comments and criticisms. Finally, I would like to dedicate this chapter to J.J. Klant. I suspect that he will feel some ambivalence about this, since many of the ideas expressed here will not meet with his full approval. However, it should be clear that I share his desire to understand better the “rules of the game” in economics.