Posted to the SHOE (Societies for the History of Economics) email list earlier today:
Sergio Noto’s note somewhat overstates the case for Knight’s favor toward Hayek. I’ll use the occasion to respond to it as a chance to also comment on Hayek’s appointment.
1) It is not strictly true that Chicago’s department of economics rejected Hayek. Or, to put it differently, the department never had an “up-down” vote on him. As far as I have seen in the Departmental Records, Hayek never made it onto the list of economists the department would consider for hires (this was generated internally by T.W. Schultz with rankings by the departmental members). So the department did not “reject” him.
2) Of course, this simply shifts the question to: why was he never included on the list? But the answer there seems obvious: before the post-war period, Chicago generally hired Americans, or people who had a connection to the department. Indeed, between 1946 and 1952, they lost R. Blough, P. Douglas, S. Leland, and H.C. Simons (the only non-American to leave was O. Lange). These were replaced with M. Friedman, E.J. Hamilton, L.A. Metzler, and M. Reid. Metzler, of course, was a Keynesian; Friedman a former student; Reid through her Iowa State connection to Schultz; and Hamilton through Nef and Knight.
3) Did Knight work for or against Hayek? Sergio notes their respect for each other, which did exist. But David Mitch’s story (in his essay “Chicago and economic history” in the Elgar Companion to the Chicago School) about Knight’s help in hiring Hamilton is potentially telling in regard to the hiring of Hayek. Chicago considered hiring another economic historian twice in the 1940s; both times Harold Innis and Earl Hamilton were ranked highest by the faculty. Nef preferred Innis, whose vision of economic history was broad. Knight preferred Hamilton, who “grounded his work in perspectives from economic theory” (Mitch, p. 115). Knight won, and Hamilton was hired. What the choice of Hamilton suggests is that Knight encouraged the department to seek economists, narrowly defined, rather than those with a broader vision of economics and society. The choice was ironic in two senses: a) Knight himself had never been an economist, narrowly defined (although he did define economics narrowly), and b) Hamilton became the object of criticism from Friedman students later for his wage-gap theory of inflationary adjustment during the time of Spanish treasure. Knight would, in this accounting, not support a Hayek hire in the department.
4) But Knight did support, and assist with, the hiring of Hayek in the Committee on Social Thought (see my paper on CST). In fact, given Knight’s own role in the Committee, it seemed the obvious place for someone with economics training and broad philosophical interests. The workshop system emerging in the department during the 1950s — aimed at creating applied policy economists through rigorous scientific training of graduate students and faculty — would have been inappropriate for someone like Hayek (Hamilton, actually, ended up with the same problem — it wasn’t until Fogel replaced him that the economic history workshop took off). And the College, which taught the undergraduate students, would not have been appropriate for someone of Hayek’s scholarly interests. Hayek needed access to a scholarly community including graduate students. The Committee, which came into existence in the mid-1940s, was a perfect fit. Indeed, in the same year Hayek joined the Committee, Leo Strauss was hired in Political Science (a very eclectic department at that point which couldn’t decide what it wanted to do), with a cross appointment in the Committee. Hayek and Strauss played important roles in shaping what the Committee became over the next 20 years.
5) And, yet, there is more to the Hayek-Knight relationship to mention. Late in life, in an interview with Jim Buchanan, Hayek muses on his relationship with Knight and wonders why Knight never seemed to reciprocate Hayek’s respect and friendliness toward him. I have argued the roots of the matter go back to the capital debate, not in its theoretical aspects, but in the fact that, just as Hayek and Knight came to seeming agreement on capital (in their correspondence in the early 1930s), Hayek turned around and published an article which dismissed their discussion in favor of a “systematic exposition” of a position that did not account for what they were agreeing upon in the letters. I have quoted Knight’s response in my online essay on Knight’s capital theory — see the quote at the beginning of the page. See also my essay on Knight and Hayek in the newly released Hayek, Mill and the Liberal Tradition (ed. by Andrew Farrant).
If you combine Knight’s response to Hayek in 1934; his comments about The Road to Serfdom that now appears in the definitive edition edited by Bruce Caldwell (a representative quote is here); and his criticism of Hayek’s The Constitution of Liberty (JPE, 1967; also the title essay in vol. 2 of my FHK collection), you see that Knight did not hold Hayek in the same high esteem that Hayek did Knight. In the latter item, he uses words like “pretentiousness,” “anarchistic,” “notably absurd,” supremely “absurd,” and a “flagrant example of false generalizing.” Oh, and later in the essay “Hayek reaches the peak of fallacy.” David Levy tells the story of Knight walking out of a Hayek lecture at about this same time (Knight was sitting in the middle of one of the front rows, so his departure was obvious to everyone!).
A complex relationship which needs a complex story to tell it.
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