Readers looking for an articulate, well‐informed exposition of Hayek's multifaceted intellectual achievement will be pleased with Bruce Cald‐well's new book, Hayek's Challenge: An Intellectual Biography of F. A. Hayek. Readers interested in a more critical consideration of Hayek's ideas, or in their ability to withstand cross‐examination from the positions Hayek himself criticized, are less likely to be satisfied. But even for the latter group, Caldwell has performed a useful service, compressing the varied elements of Hayek's complex thought into a lucid (...) synopsis that should facilitate engagement with those outside the Austrian camp. (shrink)

Abstract In the ideal market of general equilibrium theory, choices are made in full knowledge of one another, and all expectations are fulfilled. This pre?harmonization of individual plans does not occur in real?world markets where decisions must be taken in ignorance of one another. The Austrian school grants this, but claims that real?world price systems are nonetheless effective in coordinating saving and investment decisions, which are motivated by disparate considerations. In contrast, Keynes held that without the pre?reconciliation of individual plans, (...) investment and employment would be less than optimal, and the resulting distribution of income arbitrary and inequitable. (shrink)

G.L.S. Shackle stood at the historic crossroads where the economics of Hayek and Keynes met. Shackle fused these opposing lines of thought in a macroeconomic theory that draws Keynesian conclusions from Austrian premises. In Shackle 's scheme of thought, the power to imagine alternative courses of action releases decision makers from the web of predictable causation. But the spontaneous and unpredictable choices that originate in the subjective and disparate orientations of individual agents deny us the possibility of rational expectations, and (...) therewith the logical coherence of market equilibrium over time. (shrink)

Reason, objectivity, and human nature are now suspect ideas. Among postmodern thinkers, Richard Rorty has advanced an especially forceful critique of these notions. Drawing partly on Wittgenstein's philosophy of language, Rorty contends that objectivity is no more than a metaphysical name for intersubjective agreement, and that “human nature” is an empty category, there being nothing beneath history and culture. Wittgenstein himself, however, recognized within the world's many civilizations “the common behavior of mankind,” without which Rorty's ethnocentric “solidarity” would be inconceivable. (...) This common form of life—the life of those who speak—encompasses countless human activities that presuppose and are interwoven with the concepts of reason and objectivity. (shrink)

Neoclassical and Austrian economic theory lend support to a conception of laissez‐faire capitalism as an ideal scheme of cooperation in which individual decisions are harmonized, and income is distributed according to one's productive contribution. Keynes's critique of this conception has an often‐overlooked moral dimension, according to which the coordination problems that trouble real‐world market economies produce an arbitrary and inequitable distribution of wealth and income.

In real‐world markets, individual intentions cannot be brought into perfect harmony before decisions are taken. Choices made without this pre‐ordering—choices made in ignorance of one another—produce unwanted outcomes. It is this absence of coordination among plans, not centralized banking, that is the primary cause of macroeconomic market failure. Steven Hor‐witz's free‐banking alternative would aggravate the collective‐action problems inherent in economies without complete markets.

In his reply to my critical book review, ?Don't Shoot the Messenger: Caldwell's Hayek and the Insularity of the Austrian Project,? Bruce Caldwell criticizes my account of Carl Menger's ?imaginary goods,? and rejects the line of reasoning I advanced in drawing Keynesian conclusions from Hayekian premises. But Caldwell's proposed methodology for assessing the significance of ?imaginary goods? in advanced market economies is ill conceived; and my pathway from Hayek to Keynes merely pursues a thoroughgoing subjectivism to its inexorable conclusion, which (...) is not, as Caldwell suggests, countercyclical fiscal policy. (shrink)

In “Popper, Weber, and Hayek: The Epistemology and Politics of Ignorance,” Jeffrey Friedman argues that markets are superior to democratic institutions because the price system doesn't require people to make the kind of difficult counterfactual judgments that are necessary in order to evaluate public‐policy alternatives. I contend that real‐world markets require us to make all kinds of difficult counterfactual judgments, that the nature of these judgments limits the effectiveness of the price system in coordinating our activities, and that the market (...) participant who is capable of making reasonably good economic judgments can also become the kind of well‐informed citizen who is essential to democratic self‐government. (shrink)

In the concluding chapter of The General Theory, Keynes offers a vision of socialized investment, which, according to Allan Meltzer, informs Keynes's entire analysis and critique of laissez?faire capitalism. Roger Garrison adds a critical dimension to Meltzer's interpretation, contending that Keynes's vision of the ?comprehensive socialisation of investment,? with its zero rate of interest, is Utopian, thereby weakening Keynes's case against real?world capitalism. This paper defends Keynes, arguing that Garrison and Meltzer misconstrue both Keynes's theory of interest and his proposed (...) socialization of investment. The paper criticizes Garrison's justification of interest earnings as ?a reward for waiting,? provides an alternative account of the economic arrangements implied by socialized investment, and, more generally, argues that Keynes's economic analysis shaped his social vision, not vice versa. (shrink)

This book examines Rousseau’s ideas about the natural transparency of human intention, the loss of this transparency in the opaque cities of Europe, and the possibility of its restoration within small republican communities. The author weaves together Rousseau’s provocative conjectures about transparency and opaqueness to provide an original interpretation of Rousseau’s political thought and its bearing on several contemporary controversies. He also argues that civic cooperation in Rousseau’s model republic requires mutual surveillance; that Hobbes’s argument for a sovereign state assumes (...) the natural opacity of human intention; and that Adam Smith’s “invisible hand” cannot efficiently coordinate the self-interested choices of opaque traders. (shrink)