including much of economics, on the simplistic ground that human behaviour
and interaction was too complex for human understanding. (It is said that his
contempt for most economists gave him very mixed feelings about accepting
the Nobel Prize for economics in 1974.) He believed that prediction and
forecasting were impossible in economics, and developed this into an attack on
all forms of government planning. According to Hayek only the market,
comprising the experience and ideas of millions of actors, could set prices
and production levels efficiently, and government intervention was bound to
distort this market decision-making process. In fact his opposition to planning
was more a matter of political principle, because he saw it as an unjustified
interference with individualfreedom. He had an extremely low opinion of
politicians, and this also influenced his belief thatgovernmentshould have no
economic regulatory powers, because otherwise they would try to bribe the
electorate before elections, producing inflation. Planning, however, was
defined extremely broadly, so government was to be forbidden all social
welfare roles as well as regulatory economic powers. All other institutions that
threatened to distort the pure unfettered working of the market were equally
anathema, especially thetrade unions, which he described as ‘monopolists of
labour’.
In technical economics he was one of the earliest advocates ofmonetarism.
Later, in 1979 he argued for a squeeze on themoney supplyso intense that it
would end inflation completely, even accepting that this might require 20%
inflation for a period. This combination of monetarism and pessimism about
politicians led to his most extreme suggestion, in the mid-1970s, that money
should be ‘denationalized’, that is, there ought to be competing public and
private currencies. Although he was largely ignored by economists and
politicians for most of his career, he became extremely influential in the
1970s and 1980s, when his ideas found favour with the Reagan Administration
in the USA and, above all, with the Thatcheritewing of the British
Conservative Party. This influence in the United Kingdom came about largely
through the activity of the Institute of Economic Affairs, which he had
persuaded an early supporter to set up in 1957, and which became a think-
tank for the Conservative right soon after. He continues to be taken seriously
as a political theorist, in part because of the collapse of the previous main
alternative for centrist political thought, the doctrines ofsocial democracy.
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