Essential Scholars Series

Nobel laureate economist F.A.Hayek first revolutionized economists' understanding of markets, and then profoundly challenged the public's understanding of government. Hayek is one of only a few social scientists over the past 200 years who thoroughly rethought the relationship between individual people and both the market and the state. While countless works have discussed the importance of Hayek and his ideas, none have focused on making his core ideas accessible to average people. This volume highlights and explains Hayek's basic insights in plain language to ensure that his critical ideas about the nature of society are both accessible and enduring.

Adam Smith (1723–1790) is widely hailed as the founding father of the discipline now known as economics, and he is widely credited as the founding father of what is now known as capitalism. Smith’s 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, is often cited as the beginning of both economics and capitalism, and its influence since its publication ranks it among the most important works of the last millennium.

Robert Nozick was a professor of philosophy at Harvard University who is most famous for his contributions to political philosophy. His 1974 book Anarchy, State, and Utopia helped establish the classical liberal or libertarian perspective as a viable alternative to redistributive egalitarian liberalism and to socialism. Despite many philosophers’ disagreements with Nozick’s arguments, those arguments could not be ignored. Robert Nozick was born in Brooklyn, New York, in 1938, and received his undergraduate degree at Columbia University in 1959. At Columbia he was active in socialist politics, but during his time there and in graduate school at Princeton University, he was exposed to a variety of political perspectives, and he notes in the preface to his most famous book, Anarchy, State, and Utopia, that it was discussions with friends that “led me to take libertarian views seriously enough to want to refute them, and so to pursue the subject further.” This included ideas such as individual rights, the need for limits on government, and the wealth-growing mechanisms of a free market system.

No single individual is ever the sole founder of any major stance in political philosophy. Nevertheless, if one were forced to name the founder of the classical liberal perspective in political thought which holds as its primary political principle that individual liberty is to be respected and protected one would have to point to the English philosopher John Locke. This short book offers a sympathetic account of the key contentions and arguments that add up to Locke's classical liberal political philosophy. Not every claim Locke makes within political philosophy fits comfortably within the classical liberal paradigm. Nor was every policy stance Locke took consistent with the abstract principles of his political doctrine. Nevertheless, the picture found in this book of Locke as the fountainhead of classical liberal political thinking both captures the essence of Locke as a normative political theorist and reveals a good deal of the character and plausibility of the classical liberal vision.

Joseph Schumpeter is one of the most accomplished economists of the twentieth century. Included among his many contributions is his path-breaking work on entrepreneurship—one of the quintessential characteristics of all market economies. His timeless phrase describing the entrepreneurial process as one of “creative destruction” is likely second only to Adam Smith’s “invisible hand” in its daily use in popular tweets, blog posts, speeches, and articles. Renowned Chicago economist Jacob Viner praised Schumpeter’s History of Economic Analysis as “by a wide margin … the most brilliant contribution to the history of analytical phases of our discipline which has ever been made”. However, it is Schumpeter’s Capitalism, Socialism and Democracy, in which Schumpeter describes the mechanisms—entrepreneurs, innovation, and capital reallocation—that drive the “incessant” recreation of capitalism that is by far his most popular and successful work.

When economists are called “influential,” it usually means they’ve changed the way other economists think. By that standard, Milton Friedman was one of the most influential economists of all time. He revolutionized the way economists think about consumption, about money, about stabilization policy, and about unemployment. He demonstrated the power of committing oneself to a few simple assumptions about human behaviour and then relentlessly pursuing their logical implications. He developed and taught new ways of interpreting data, testing his theories by their ability to explain multiple disparate phenomena. His successes were spectacular and his techniques were widely emulated. It would take several large volumes to do justice to Friedman’s extraordinary contributions to economic theory, economic practice, economic policy, and economic literacy. The few brief chapters that follow will give an overview of what those volumes might contain.

The origin of the Austrian School of economics is the publication of Carl Menger’s Principles of Economics in 1871. Menger, William Stanley Jevons, and Léon Walras are considered the co-founders of the “marginal revolution” in economics, a shift to the marginal utility theory of value from the labour theory of value. The revolutionists argued that value is not based on the amount of labour expended but reflects how useful people perceive the commodity to be in satisfying their ends. This revolution had radical implications for the way economists understood the world: consumer valuations, and not the amount of effort, is what determines prices. But what determines consumer valuations? This question had long perplexed social scientists. Why do consumers value diamonds, a luxury item, more than water, an essential for life? By introducing the concept of marginal utility, Menger and his co-revolutionaries were able to resolve this paradox. The labour theory of value, however, was not Menger’s only target in his Principles. He was also engaging the German Historical School, which held that economic science is incapable of producing universal principles. In contrast, Menger, using marginal utility analysis as a foundation, argued that universal economic laws do apply across time and geographic space. Those in the German Historical School took issue with the claims by Menger and his colleagues about the possibility of universal theory and labeled them the “Austrian School” because they taught at the University of Vienna. Subsequent generations of scholars have developed the insights of the Austrian School. The purpose of this book is to present an overview of the key tenets of Austrian economics by synthesizing the insights from these thinkers in a set of eight topics that capture the core elements of Austrian economics.

The oldest of nine children, John Stuart Mill was born on May 20, 1806; he died in France, where he spent many of his later years, on May 7, 1873. Mill had a very extraordinary, strenuous education, overseen by his ambitious father James, who believed that one becomes improved via education and, once educated, that is the end of the matter. John Mill was reading Greek at age three and Latin at the age of eight. He was at heart always reform-minded, however, and his more mature views allowed that people might come to realize how best to reform, remake, and improve themselves. In fact, reform-mindedness is a major theme in Mill’s life. Among the many liberal causes associated with him are the defense of the abolition of slavery, repeal of the Corn Laws, extension of the franchise and property rights to women, reform of Irish property arrangements, and the question of birth control. In the summer of 1830, Mill met and fell headlong in love with the already married Harriet Taylor and began an intense and prolonged relationship with her. The repercussions of his friendship with and eventual marriage to Harriet were profound—and costly—and included isolation from family and friends. The experience formed the backdrop to his strong denunciation in On Liberty of the oppression associated with public opinion. Harriet’s influence on Mill’s work was significant. Beginning in 1846 in a newspaper article and then recurring frequently thereafter, Mill attributed much of his work as a “joint production” with Taylor. In 1861, Mill completed one of his and Harriet’s most influential works, The Subjection of Women, on which he had collaborated closely with Harriet until her sudden death in 1858. Published in 1869, it was filled with many ideas ahead of their time.

David Hume (1711–1776) is a towering and intriguing figure. He was the preeminent philosopher in what is now called the Scottish Enlightenment, a time that was “crowded with genius” and in a place regarded as the rebirth of the golden era of Athens. His writing displayed an astonishing range, addressing everything from metaphysics to politics, and in subject after subject he produced fresh, novel, and brilliant insights.

James (“Jim”) McGill Buchanan (1919-2013), surely seemed an unlikely prospect for winning a Nobel Prize in Economics when he was born in rural Tennessee on October 3rd. Many of the works on Buchanan’s extensive list of publications stemmed from a single insight from early in his career: because neither the state nor society is a singular and sentient creature, a great deal of analytical and policy confusion is spawned by treating them as such. Collections of individuals cannot be fused or aggregated together into a super-individual about whom economists and political philosophers can usefully theorize in the same ways that they theorize about actual flesh-and-blood individuals. Aggregative thinking lumps together a great many individuals into large categories such as “the nation” or “the government” and then treats each of these categories as if it is a unitary thinking, choosing, and acting individual. Under this approach, “the social welfare” is promoted by “the government,” with the latter treated as if it’s an organism possessing a brain, and as if that brain’s main interest lies not in serving itself but, rather, in serving the nation. Overlooked are the processes—all churning with assorted incentives and constraints—that lead individuals with diverse interests to undertake actions such as forming governments, becoming government officials, and dealing with government both as citizens who receive benefits from it and who incur costs to sustain it and to affect its activities. From the very start, nearly all of Buchanan’s lifetime work was devoted to replacing this approach with the individualistic one—a way of doing economics and political science that insists that choices are made, and costs and benefits are experienced, only by individuals.

Ronald Coase (1910-2013) was one of the most influential economists of the 20th century. His influence is due largely to two publications, the only two cited in the announcement of his Nobel Prize: “The Nature of the Firm” (1937) and “The Problem of Social Cost” (1960). These two articles are among the most-cited works in economics. The ideas Coase developed in these two works led to entirely new fields of inquiry in economics, law, management, and political science, and in conjunction with his article on using markets to allocate radio spectrum (Coase 1959), spawned new market design theory and practice that helped to transform our society and enable innovation and digitization. Coase’s style of theory, analysis, and persuasion was narrative, fact-driven, and much less formal than is the norm in economics. Coase spent his career asking deceptively simple questions that revealed profound complexities in the arrangement of economic activity. Why do firms exist? Why don’t we allocate scarce resources such as radio spectrum by using markets instead of regulation? Can people resolve conflicts over resource use through bargaining and contracts, or is government regulation necessary? Is a lighthouse a public good that requires government provision? How does a durable goods monopolist price its output? Ronald Harry Coase was born in Willesden, a London suburb, on December 29, 1910. While attending the University of London, from which he graduated with a Bachelor of Commerce degree in 1932, Coase was awarded the Sir Ernest Cassell Travelling Scholarship. This scholarship enabled him to travel to the United States, study at the University of Chicago from 1931 to 1932 with Frank Knight and Jacob Viner, and visit several factories to learn how they organized production. In particular, his visits to Ford and General Motors factories provided an empirical foundation for his first paper, “The Nature of the Firm” (1937).

The political ideas that fully came together under the name “liberal” in the early nineteenth century—the ideas we often now refer to as “classical liberalism”—emerged out of major debates and developments from the late 1600s to the late 1700s, part of the broad European intellectual movement of that era that came to be known as “the Enlightenment.” This volume shows how the Enlightenment and the development of liberal ideas were woven together by looking at three defining figures of the era: Baruch Spinoza (writing in the mid-1600s), the Baron de Montesquieu (mid-1700s) and Immanuel Kant (whose career reached its height in the final two decades of the 1700s). Both Spinoza and Kant were concerned with fundamental philosophical questions about what we could know about God, morality, the nature of the world, and humanity’s place in it. Montesquieu wrote almost nothing about such questions, drawing instead from global history and comparative law. While the Enlightenment is associated with many things, one of them was the struggle to understand morality and human nature through the use of reason rather than relying on religious authority; another was the attempt to understand political and social orders in ways that would prevent a return to the wars of religion that had divided Europe in the 1500s and the first half of the 1600s. In various ways, Spinoza, Montesquieu, and Kant all argued for religious toleration—for the peaceful coexistence of different organized ways of understanding God within civil governments that didn’t enforce any one of those ways. Their support of freedom of religious thought also made all of them supporters of free inquiry and free speech. The three thinkers likewise shared commitments to the rule of law and to constitutional forms of government that would constrain the discretionary power of any one ruler.

The UCLA tradition carries on in the work of dozens of economists who earned their PhDs at UCLA during its golden years. Because their work spread beyond UCLA, the tradition lives on in the work of scores of economists who had no formal connection with the School. The most important economists at UCLA during the 1970s were Armen Alchian, Harold Demsetz, Sam Peltzman, Benjamin Klein, Robert Clower, Alex Leijonhufvud, Jack Hirshleifer, William Allen, and George Hilton. A distinguishing feature of most of the UCLA economists’ contributions is that they were non-mathematical. This was especially notable in an era in which mathematics had almost taken over economics. The major UCLA School contributors used mainly words and occasionally graphs. Another distinguishing feature is their use of basic economic analysis to understand behaviour that had previously not been understood or had even been misunderstood. The best-known member of the School, Armen Alchian, taught at UCLA from 1946 until his retirement in 1984. His insights and writings underlie a distinctive theme of the School’s approach to economics: in most productive activity, the profit motive, combined with private property rights, successfully aligns the interests of producers and consumers, often in subtle ways. Alchian had no use for formal models that did not teach us to look somewhere new in the known world. Nor had he any patience for findings that relied on fancy statistical procedures. Alchian saw basic economics as a powerful tool for explaining much of human behaviour in both market and non-market settings.

Few ideas have been as influential in the development of moral, political, legal, and economic thought in the broad Western tradition as the idea of natural law. It is also true that the understanding of natural law and its influence on specific norms and institutions—rights, justice, private property, rule of law, limited government, etc.—is not anywhere near as widespread in the twenty-first century as it was just 100 years ago. This book aims to help rectify this deficit by explaining the basic principles of natural law and highlighting significant contributions that key natural law scholars have made to ideas and concepts that have encouraged the growth of free societies. The idea of natural law holds that all people, whatever their ethnicity, culture, or religion, can know the difference between good and evil, right and wrong. The idea, for example, of the Golden Rule—do unto others as you would have them do unto you—is understood as a principle of moral conduct that everyone can know. While such beliefs are applied to different and changing conditions and problems, the core principles always apply. However, natural law is not a static tradition of thought. It has developed over time, partly through natural law theorists clarifying particular concepts, and partly through its proponents responding to ongoing intellectual challenges to its positions and changes in the realm of politics, society, and the economy. Whether it was the encounter between Europeans and the peoples of the New World in the late fifteenth century, or questions about what justice meant in the context of emerging market economies in the late eighteenth century, natural law scholars have applied natural law principles to discern how people should choose and act in these changing contexts.

The thinkers discussed in this volume are a remarkably diverse group. They were born in the eighteenth, nineteenth, and twentieth centuries, and their work extends into the twenty-first. Some are economists primarily addressing other scholars, others popular writers aiming at the general public. Their educational backgrounds range from entirely informal schooling to PhDs from major universities. They include a former telegraph operator, a one-time Hollywood wardrobe department manager, and a graduate of secretarial school. Some were shaped by the frontier, others by the city. They are storytellers and data collectors, committed Christians and confirmed atheists, devoted to family life and resolutely single. Two are recognized here as the intellectual partners of their illustrious spouses. The work introduced in these essays exemplifies numerous strands of thought within the classical liberal tradition, from feminism and abolitionism to the Chicago School of economics. These thinkers include some of the most significant figures in the development of mid-twentieth-century American libertarianism, with its emphasis on the autonomous individual, alongside some of the most influential analysts of how social interaction brings forth order without top-down design. Some of these writers emphasize empiricism, others theory. Addressing why the West grew rich, one has written a three-volume history informed by literature, culture, and massive amounts of data. Another developed the metaphor of mechanical energy to argue for the freedom of creative individuals. One blamed the Great Depression on contractionary monetary policy, another on Americans “declining resilience” in the face of hardship.