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Economics as Ideology: Keynes, Laski, Hayek, and the Creation of Contemporary Politics

Author(s):Hoover, Kenneth R.
Reviewer(s):Horwitz, Steven

Published by EH.NET (April 2004)

Kenneth R. Hoover, Economics as Ideology: Keynes, Laski, Hayek, and the Creation of Contemporary Politics. Lanham, MD: Rowman and Littlefield, 2003. xv + 329 pp. $27.95 (paper), ISBN: 0-7425-3113-9.

Reviewed for EH.NET by Steven Horwitz, Department of Economics, St. Lawrence University.

Attempting to weave together intellectual and personal biographies of more than one great thinker is a daunting enough task, but when the attempt includes three of the towering figures in twentieth-century political economy, the task is that much more difficult. Kenneth Hoover, a political scientist at Western Washington University, takes on this high-degree-of-difficulty act of authorship in his book on Keynes, Laski, and Hayek, and is quite successful, at least for the first two-thirds of the book. For the first eight chapters, Hoover does a marvelous job in interweaving the ideas and lives of these three men by setting them against the great events of their time. Rather than offer us sequential biographies of each, Hoover organizes his chapters by decades and events, and then demonstrates how each thinker’s life and ideas were affected by the events of their times. The result in those eight chapters is a rich portrait of the politics and intellectual life of Great Britain (and to a lesser extent, the United States) during the formative events of the century, and these chapters serve as a good, though flawed, general introduction to the ideas of these three men.

Hoover’s analytical framework is what he terms “identity relations analysis,” where an individual’s identity is not determined by fixed characteristics such as gender, nor is it solely about one’s “personal characteristics, nor an artifact of an exercise of power nor of social construction, but a dynamic set of relations in which both self and society play an inescapable role” (p. 6). Hoover is particularly interested in the ways in which these identity relations link to the formation of ideologies. One way of capturing the perspective he brings is his interest in how the events of one’s personal life and social context help to create one’s identity and then how one’s ideological views in turn reflect that understanding of one’s identity. That is, how did the lives and contexts of these three great thinkers affect the ideas that have become associated with them both during their lives and after? In Hoover’s own statement of this perspective, there is not a simple, direct line between one’s “inner self” and one’s ideological perspective, e.g., it is not the case that we adopt particular views because we are the product of divorced parents, or because we clamored for attention among numerous siblings. It is a more complex interplay of history, psychology, and social relationships.

His account of Keynes is fairly standard in seeing Keynes’s privileged upbringing and association with the Bloomsbury crowd as central to his identity formation and the ideas that emerged from it. Keynes is the hero of this story, it should be noted, with his, in Hoover’s view, more pragmatic commitment to the importance of democratic processes and intellectually-oriented leadership and expertise being preferred to Laski’s and Hayek’s more rigid ideological stances to Keynes’s left and right respectively. Keynes’s background is linked to his rejection of accepted social norms and ideas, and his willingness to “tinker” with those through various processes of trial and error. Hoover also sees Keynes’s background and eventual rise through the ranks of British intellectual and political circles as forcing him to both trim off any ideological excesses and maintain a willingness to shift ideas and strategies as the demands on him changed. Hoover sees his ongoing shifts in position as evidence of discovery and learning (though he is notably unwilling to extend the same charitable interpretation to Laski and Hayek), and evidence of his ultimate trust in the morality of the leadership, encapsulated in Keynes’s famous quip about the acceptability of “dangerous acts” in communities that “think and feel rightly” as well as the similar idea in his comments on Hayek’s Road to Serfdom about the danger being lessened with “right-minded” people making policy.

Hoover’s take on Laski centers around Laski’s rebellion against both his family and the capitalist structure of society. Laski’s marriage to Frida Kerry was a slap in the face of his Jewish family and their expectations of him and his future. Their relationship, in Hoover’s view, both symbolized Laski’s willingness to challenge radically the old order, and also provided him with the intellectual and personal companionship that made his productive career possible. His sympathies to socialism were further rebellion against his family background from the merchant class of Manchester. His well-to-do upbringing also enabled him to get the “cultural tools” necessary to engage in the battle of ideas in the decades to follow. These tools and the motivation coming out of his family circumstances help to create Laski’s position as radical critic of the existing economic order, both through the world of ideas and through his political and social activism. In addition, the variety of communities with which Laski identified, from his Judaism to his upbringing in Manchester to the academic communities of the U.S. and U.K. to his work with union organizers, help to explain his “initially pluralist approach to politics” (p. 226).

Interestingly, Hoover’s interpretation of Hayek parallels Laski’s in some important respects. Hayek, as the child of a family of academics and intellectuals and coming to adulthood during World War I, would understandably be attracted to the world of ideas and to saving civilization from what appeared to be forces gathered against it early in the century. Not originally seeing himself as a radical or intellectual rebel, it would be his contact with von Mises and the rise of Soviet Russia that would push Hayek toward the political views that are now so tightly associated with him. But as Hoover rightly notes, Hayek wrote little of broader political concerns in the 1920s and 30s, sticking with his more technical work in economics in his battles with Keynes and the market socialists. What Hoover wishes to explain is Hayek’s move to a more “ideologized” perspective. Hoover’s answer is that an important explanation for that move is Hayek’s contentious divorce from his first wife Hella and remarriage to his first love Helene in the early 1950s.

In Ebenstein’s (2001) recent biography, as well as Caldwell’s recent book (2003), more details of Hayek’s divorce and remarriage have come to public attention. The archival materials do not paint a very pretty picture, with Hayek going through a number of legal maneuvers, including taking a one-term position in Arkansas to take advantage of their liberal divorce laws, so as to force a divorce on Hella that she would not consent to. In addition, the archival materials suggest he made limited provisions for his kids, although there appears to be some dispute about that claim as newer archival materials may tell a different story. Hoover makes much of this series of events, seeing them as possibly central to Hayek’s “increasingly antistatist attitudes” because restrictive divorce laws overly limited individual choice (p. 232). Hoover also adds some important details about Hayek’s contacts with the nascent American conservative movement of the post-War era, and the role it played in bringing him to the U.S. and making the divorce possible. Hayek’s personal circumstances and the relationships that he was cultivating with U.S. conservatives are seen by Hoover as a turning point in Hayek’s identity formation that led to a more ideological approach to his understanding of the social world.

In offering a few words of criticism, I will keep my focus on his treatment of Hayek, as that is the one of the three I am most capable of commenting on, and because some of the issues I wish to raise apply more generally. Although the approach Hoover takes has its moments of insight, I find it too psychologically driven in key places. It is difficult to deny that psychological, personal, and relationship factors matter for the ways in which a thinker’s ideas might evolve over time. However, the relative weight those factors should play as compared to genuine moments of learning and discovery, as well as the pressure exerted on a thinker by other people’s ideas, is a matter of much more uncertainty. For example, Hayek’s move to political philosophy and his increasing “anti-statism” could be explained a variety of other ways. Caldwell (2003) offers one such explanation, seeing it as part of a broader evolution in Hayek toward grasping the nature of the social sciences, and hence society, in response to his perceived defeat at the hands of Keynes and the market socialists. From Hoover’s perspective, why would Hayek turn toward methodology and the theory of mind at the very same time he is angling for his divorce and becoming a “client” of conservative foundations? The book contains no references to the essays that comprised The Counter-Revolution of Science nor The Sensory Order, both of which were written during this stormy period of the late 40s and early 50s, and neither of which has an obvious connection to the divorce. Could it be that Hayek’s turn toward political philosophy was the product of his engaging in the very same process of “learning and discovery” that Hoover attributes so charitably to Keynes’s shifting ideas?

This points to a more general problem with Hoover’s treatment: he relies mostly on the major books of each thinker as well as archival material, and does very little with journal articles and other forms of publication. In the case of Hayek, this leads to several problems, one of which is not seeing the alternative, and in my belief, more plausible explanation for Hayek’s turn toward political philosophy. Granted, trying to deal with three major thinkers in a 300-page book, one is limited, but one also has an obligation to provide as complete treatment as possible. Two examples of this problem with respect to Hayek are his misreading of Hayek’s critique of social justice and his assertion that Hayek provides no evidence for his various claims about the division and effective use of knowledge in the market.

Hoover (p. 228) claims that Hayek argues that “if morality is an attribute only of individual voluntary acts, not of collective or coerced actions, then government actions are amoral at best.” However, that is not Hayek’s position. Rather he claims that morality can only be ascribed to intentions not to patterns of outcomes that are unintended consequences. The dichotomy for Hayek is between the intended (to which attributions of morality apply) and the unintended (to which they do not because they were not the product of intentional choice). Thus, Hayek’s critique of social justice is that market outcomes, such as the distribution of income, are not the product of anyone’s intention, thus they cannot be judged immoral or unjust. Governments, or other collectives such as firms and families, can take actions that can be judged moral or immoral, or just or unjust, just as individuals can. Hoover does not cite volume two of Law, Legislation, and Liberty (Hayek 1977), where this argument is spelled out most clearly.

In his treatment of Hayek’s work on knowledge, Hoover does not cite any of Hayek’s seminal papers (1937, 1945, 1978), all of which provide arguments for his contention that markets serve as knowledge discovery and conveying social processes. Hayek provides the “scientific” evidence for his view of knowledge in The Sensory Order (1952) and in several essays in the late 1960s. None of that work is cited, either. Nowhere in the book does Hoover discuss Hayek’s distinction between scientific, articulate knowledge, and the tacit and contextual knowledge “of time and place.” This distinction is crucial to understanding Hayek’s epistemic defense of the market and critique of many forms of state intervention, yet it makes no appearance here when those subjects are treated. Again, no author can be expected to do it all, but then the author should be careful where he treads.

Hoover’s own ideological perspective is at work in his treatment of Hayek as well. One example of this is his continued insistence that Hayek’s defense of capitalism is a defense of economic privilege and that his defense of freedom of choice works to the benefit of the wealthy and to the detriment of the poor. This may or may not be true, but, importantly, it was not Hayek’s (1973: p. 62) view of the matter:’Capitalism’ is … always [a] misleading [name] because it suggests a system which mainly benefits the capitalists, while it is in fact a system which imposes upon enterprise a discipline under which the managers chafe and which each endeavours to escape.The principle of charitable interpretation once again rears its head and suggests that Hoover should have been more circumspect in making such claims.

The second example is Hoover’s word choice in describing Hayek’s ideas and those of his followers. The last third of the book is littered with invocations of “scripture,” “proselytize,” “faith,” “corps of committed believers,” and even “peddlers.” This is unfair both to Hayek and to those who attempted to put his ideas into practice. After all, there would appear to be no less reason to apply the same sort of language to Laskian socialists or Keynesian technocrats. Were not The General Theory and Samuelson equally the Old and New Testament of the macroeconomics of the post-War era? To Hoover, the Laskians are cute, well-meaning, but overly radical seekers of social justice and the Keynesians are open-minded, flexible, morally-aware intellectuals out to save the Western world from the excesses of capitalism and socialism, but Hayek and the Hayekians are the equivalent of fundamentalists for whom the defense of the market is an article of “faith” rather than a reasoned argument for what is best for society.

It is unfortunate that a book that tells, for the first two-thirds, such a wonderful and rich story of three key players in the development of economics and of twentieth-century politics ends up with not “economics as ideology” but “ideology as intellectual biography” when it comes to making sense of that story. However, the strengths of the first eight chapters ultimately outweigh the problems in the last few, making this a useful read for historians of economics and economic thought, as well as those with an interest in the development of political thought in the twentieth century.


Caldwell, Bruce. 2003. Hayek’s Challenge: An Intellectual Biography of F.A. Hayek. Chicago: University of Chicago Press.

Ebenstein, Alan. 2001. Friedrich Hayek: A Biography. New York: Palgrave.

Hayek, F.A. 1937. “Economics and Knowledge,” reprinted in Individualism and Economic Order, Chicago: University of Chicago Press, 1948.

Hayek, F.A. 1945. “The Use of Knowledge in Society,” reprinted in Individualism and Economic Order, Chicago: University of Chicago Press, 1948.

Hayek, F.A. 1952. The Sensory Order, Chicago: University of Chicago Press.

Hayek, F.A. 1973. Law, Legislation, and Liberty, volume 1, Chicago: University of Chicago Press.

Hayek, F.A. 1977. Law, Legislation, and Liberty, volume 2, Chicago: University of Chicago Press

Hayek, F.A. 1978. “Competition as a Discovery Procedure,” in New Studies in Politics, Philosophy, Economics and the History of Ideas, Chicago: University of Chicago Press.

Steven Horwitz is Professor of Economics and Associate Dean of the First Year at St. Lawrence University in Canton, NY and is the author of Microfoundations and Macroeconomics: An Austrian Perspective (Routledge 2000).

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII