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Friedrich August von Hayek CH (8 May 189923 March 1992) was an Austrian economist and philosopher known throughout the world for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought. He is considered to be one of the most important economists and political philosophers of the twentieth century. One of the most influential members of the Austrian School of economics, he also made significant contributions in the fields of jurisprudence and cognitive science.
He shared the 1974 Nobel Memorial Prize in Economics with Gunnar Myrdal "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena." He also received the U.S. Presidential Medal of Freedom in 1991.
Hayek lived in Austria, Great Britain, the United States and Germany, and became a British citizen in 1938.
k was born in Vienna, Austro-Hungarian Empire, the son of a doctor in the municipal health service.
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Quotations
Human reason can neither predict nor deliberately shape its own future. Its advances consist in finding out where it has been wrong.
I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it.
If we are to understand how society works, we must attempt to define the general nature and range of our ignorance concerning it.
Chapter 2
New Studies in Philosophy Politics, Economics and the History of Ideas (1978)
No human mind can comprehend all the knowledge which guides the actions of society.
Personally I prefer a liberal dictator to democratic government lacking liberalism.
Interview in El Mercurio (1981)
Encyclopedia
Friedrich August von Hayek CH (8 May 189923 March 1992) was an Austrian economist and philosopher known throughout the world for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought. He is considered to be one of the most important economists and political philosophers of the twentieth century. One of the most influential members of the Austrian School of economics, he also made significant contributions in the fields of jurisprudence and cognitive science.
He shared the 1974 Nobel Memorial Prize in Economics with Gunnar Myrdal "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena." He also received the U.S. Presidential Medal of Freedom in 1991.
Hayek lived in Austria, Great Britain, the United States and Germany, and became a British citizen in 1938.
Early life
Hayek was born in Vienna, Austro-Hungarian Empire, the son of a doctor in the municipal health service. Hayek's grandfathers were prominent academics working in the fields of statistics and biology. The paternal line had gained the title of Austrian nobility for its services to the state, a generation before his maternal line, which had also gained the lower order of nobility. Hayek's father turned his work on regional botany into a highly esteemed botanical treatise, continuing the family's scholarly tradition.
His mother's family were wealthier bourgeoisie. On his mother's side, Hayek was second cousin to the philosopher Ludwig Wittgenstein. His mother often played with Ludwig's sisters. Inspired by the accident of this family connection, Hayek became one of the first to read Wittgenstein's Tractatus Logico-Philosophicus when the book was published in its original German edition in 1921.
As a teenager, at his father's suggestion, Hayek was reading the genetic and evolutionary works of Hugo de Vries and the philosophical works of Ludwig Feuerbach. In school Hayek was much taken by one instructor's lectures on Aristotle's ethics.
In 1917 he joined an artillery regiment in the Austro-Hungarian Army and fought on the Italian front. Much of Hayek's combat experience was spent as a spotter in an aeroplane. He survived the war without serious injury and was decorated for bravery.
Hayek decided to pursue an academic career with the determination to avoid the mistakes that led to World War I. Said Hayek of his experience, "The decisive influence was really World War I. It's bound to draw your attention to the problems of political organization." He vowed to work for a better world.
Student and economist
At the University of Vienna, he earned doctorates in law and political science in 1921 and 1923 respectively, and he also studied philosophy, psychology and economics with a keen interest. For a short time, when the University of Vienna closed, Hayek studied in Constantin von Monakow's Institute of Brain Anatomy, where Hayek spent much of his time staining brain cells. Hayek's time in Monakow's lab, and his deep interest in the work of Ernst Mach, inspired Hayek's first intellectual project, eventually published as The Sensory Order (1952). It turned Mach's contribution on its head, locating connective learning at the physical, neurological levels in a direct rejection of the "sense data" associationism of the naive empiricists and logical positivists.
Initially sympathetic to socialism, Hayek's economic thinking began to shift after reading Ludwig von Mises' book Socialism. He was a student of Friedrich von Wieser. Hayek worked as a research assistant to Prof. Jeremiah Jenks of New York University from 1923 to 1924. He then aided the Austrian government with the legal and economic details of the Treaty of Versailles at the close of the First World War. It was at this time that Hayek began attending Ludwig Mises' private seminars along with several friends, including Fritz Machlup, who had been participating in Hayek's own more general private seminar.
After his work for the government, Hayek founded and served as director of the Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) in 1931 at the behest of Lionel Robbins. In the 1930s, Hayek enjoyed a considerable reputation as a leading economic theorist, but his models were not received well by the followers of John Maynard Keynes. Debate between the two schools of thought continues to this day. While at LSE in the 1930s, Hayek tutored David Rockefeller. Others who studied with Hayek at the L.S.E. include Arthur Lewis, Ronald Coase, John Kenneth Galbraith, Abba Lerner, Nicholas Kaldor, George Shackle, Thomas Balogh, Vera Smith, L. K. Jah, Arthur Seldon, Paul Rosenstein-Rodan, and Oskar Lange.
In 1950, Hayek left the London School of Economics for the University of Chicago, becoming a professor in the Committee on Social Thought. Hayek's position was funded by outside sources, a common practice at the U. of Chicago. Hayek was famously spurned by the economics faculty, which sought to resist further power grabs by U. of Chicago President Robert Hutchins. Hutchins' "Great Books" program under the Aristotelian entrepreneur Mortimer Adler was considered akin to medieval "scholasticism" by the "hard scientists" in the economics department. At Chicago, Hayek worked on the philosophy of science, economics, political philosophy, and the history of ideas. Most of his economic notes from this period have yet to be published.
Refugee
Unwilling to return to Austria after the Anschluss brought it under the control of Nazi Germany in 1938, Hayek remained in Britain and became a British subject in 1938. He held this status for the remainder of his life, although he did not live in Great Britain after 1950. He lived in the United States from 1950 to 1962 and then mostly in Germany, although briefly in Austria as well.
The Road to Serfdom
It was during this time that The Road to Serfdom was written. Hayek was concerned about the general view in Britain's academia that Fascism was a capitalist reaction against socialism. A chapter in the book is entitled, "The Socialist Roots of Nazism." The book was to be the popular edition of the second volume of a treatise entitled "The Abuse and Decline of Reason". It was written between 1940-1943. The title was inspired by the French classical liberal thinker Alexis de Tocqueville's writings on the "road to servitude". It was first published in Britain by Routledge in March 1944 and was quite popular, leading Hayek to call it "that unobtainable book," also due in part to wartime paper rationing. The book was favourably reviewed by George Orwell among others. When it was published in the United States by the University of Chicago in September of that year, it achieved greater popularity than in Britain. The American magazine Reader's Digest also published an abridged version in April 1945, enabling The Road to Serfdom to reach a far wider audience than academics.
The libertarian economist Walter Block has observed critically that while the The Road to Serfdom makes a strong case against centrally-planned economies, it appears only lukewarm in its support of pure laissez-faire capitalism, with Hayek even going so far as to say that "probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all of the principle of laissez-faire capitalism" . In the book, Hayek writes that the government has a role to play in the economy through the monetary system, work-hours regulation, social welfare and institutions for the flow of proper information.
In 1950, Hayek left the London School of Economics for the University of Chicago, becoming a professor in the Committee on Social Thought. Hayek's first class at the U. of Chicago was a faculty seminar on the philosophy of science attended by many of the University's most notable scientists of the time, including Enrico Fermi, Seward Wright and Leó Szilárd.
In Chicago Hayek had turned his interests not only towards philosophy of science, but also towards political philosophy, although he continued to work on economic issues, and planned a new book on economics which was never written. Most of his economic notes from this period have yet to be published.
The Constitution of Liberty
After editing a book on John Stuart Mill's letters he planned two books on the liberal order. He completed The Constitution of Liberty in May 1959, with publication in February 1960. Hayek was disappointed that the book did not receive the same enthusiastic general reception as The Road to Serfdom had fifteen years before.
From 1962 until his retirement in 1968, he was a professor at the University of Freiburg, where he wrote most of Law, Legislation and Liberty. This was intended for a technical audience, and it was published in three volumes in 1973, 1976 and 1979. He became professor at the University of Salzburg from 1969 to 1977; he then returned to Freiburg, where he spent the rest of his days.
In 1974, he shared the Nobel Memorial Prize in Economics, causing a revival of interest in the Austrian school of economics. In 1984, he was appointed as a member of the Order of the Companions of Honour on the advice of British Prime Minister Margaret Thatcher for his "services to the study of economics". In 1991 President George H. W. Bush awarded Hayek the Presidential Medal of Freedom, one of the two highest civilian awards in the United States, for a "lifetime of looking beyond the horizon". Hayek died in 1992 in Freiburg, Germany.
Work
The economic calculation problem
Hayek was one of the leading academic critics of collectivism in the 20th century. Hayek believed that all forms of collectivism (even those theoretically based on voluntary cooperation) could only be maintained by a central authority of some kind. In his popular book, The Road to Serfdom (1944) and in subsequent works, Hayek claimed that socialism required central economic planning and that such planning in turn had a risk of leading towards totalitarianism, because the central authority would have to be endowed with powers that would have an impact on social life as well, and because the knowledge required for central planning is inherently decentralized.
Building on the earlier work of Mises and others, Hayek also argued that while, in centrally planned economies, an individual or a select group of individuals must determine the distribution of resources, these planners will never have enough information to carry out this allocation reliably. The efficient exchange and use of resources, Hayek claimed, can be maintained only through the price mechanism in free markets (see economic calculation problem). In The Use of Knowledge in Society (1945), Hayek argued that the price mechanism serves to share and synchronize local and personal knowledge, allowing society's members to achieve diverse, complicated ends through a principle of spontaneous self-organization. He used the term catallaxy to describe a "self-organizing system of voluntary co-operation."
In Hayek's view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible.
Spontaneous order
Hayek viewed the free price system, not as a conscious invention (that which is intentionally designed by man), but as spontaneous order, or what is referred to as "that which is the result of human action but not of human design". Thus, Hayek put the price mechanism on the same level as, for example, language. Such thinking led him to speculate on how the human brain could accommodate this evolved behavior. In The Sensory Order (1952), he proposed, independently of Donald Hebb, the connectionist hypothesis that forms the basis of the technology of neural networks and of much of modern neurophysiology¹.
Hayek attributed the birth of civilization to private property in his book The Fatal Conceit (1988). He explained that price signals are the only means of enabling each economic decision maker to communicate tacit knowledge or dispersed knowledge to each other, in order to solve the economic calculation problem.
Investment and choice
Perhaps more fully than any other economist, Hayek investigated the choice theory of investment involving the inter-relations between non-permanent production goods and "latent" or potentially economic permanent resources, building on the choice theoretical insight that, "processes that take more time will evidently not be adopted unless they yield a greater return than those that take less time." Hayek's work on the microeconomics of the choice theoretics of investment, non-permanent goods, potential permanent resources, and economically adapted permanent resources mark a central dividing point between Hayek's work on central planning, trade cycle theory, the division of knowledge, and entrepreneurial adaptation and that of most all other economists, most especially that of the macroeconomic "Marshallian" economists in the tradition of John Maynard Keynes and the microeconomic "Walrasian" economists in the tradition of Abba Lerner.
The business cycle
Capital, money, and the business cycle are prominent topics in Hayek's early contributions to economics. Mises had earlier explained monetary and banking theory in his Theory of Money and Credit (1912), applying the marginal utility principle to the value of money and then proposing a new theory of industrial fluctuations based on the concepts of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this body of work as a starting point for his own interpretation of the business cycle, which defended what later became known as the "Austrian Theory of the Business Cycle". In his Prices and Production (1931) and The Pure Theory of Capital (1941), he explained the origin of the business cycle in terms of central bank credit expansion and its transmission over time in terms of capital misallocation caused by artificially low interest rates. Hayek claimed that: The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process. In accordance with arguments outlined in his essay The Use of Knowledge in Society, he argued that monopolistic governmental agency like central bank can neither possess the relevant information which should govern supply of money, nor have the ability to use it correctly.
Social and political philosophy
In the latter half of his career Hayek made a number of contributions to social and political philosophy, which he based on his views on the limits of human knowledge, and the idea of spontaneous order in social institutions. He argues in favor of a society organized around a market order, in which the apparatus of state is employed almost (though not entirely) exclusively to enforce the legal order (consisting of abstract rules, and not particular commands) necessary for a market of free individuals to function. These ideas were informed by a moral philosophy derived from epistemological concerns regarding the inherent limits of human knowledge.
In his philosophy of science, which has much in common with that of his good friend Karl Popper, Hayek was highly critical of what he termed scientism: a false understanding of the methods of science that has been mistakenly forced upon the social sciences, but that is contrary to the practices of genuine science. Usually scientism involves combining the philosophers' ancient demand for demonstrative justification with the associationists' false view that all scientific explanations are simple two-variable linear relationships. Hayek points out that much of science involves the explanation of complex multi-variable and non-linear phenomena, and that the social science of economics and undesigned order compares favorably with such complex sciences as Darwinian biology. These ideas were developed in The Counter-Revolution of Science: Studies in the Abuse of Reason, 1952 and in some of Hayek's later essays in the philosophy of science such as "Degrees of Explanation" and "The Theory of Complex Phenomena".
In The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology (1952), Hayek independently developed a "Hebbian learning" model of learning and memory an idea which he first conceived in 1920, prior to his study of economics. Hayek's expansion of the "Hebbian synapse" construction into a global brain theory has received continued attention in neuroscience, cognitive science, computer science, behavioral science, and evolutionary psychology.
Hayek and conservatism
Hayek attracted new attention in the 1980s and 1990s with the rise of conservative governments in the United States and the United Kingdom. Margaret Thatcher, the Conservative British prime minister from 1979 to 1990, was an outspoken dévotée of Hayek's writings. Shortly after Thatcher became Leader of the party, she “reached into her briefcase and took out a book. It was Friedrich von Hayek's The Constitution of Liberty. Interrupting [the speaker], she held the book up for all of us to see. ‘This’, she said sternly, ‘is what we believe’, and banged Hayek down on the table.” After winning the 1979 election, Thatcher appointed Keith Joseph, the director of the Hayekian Centre for Policy Studies, as her secretary of state for industry in an effort to redirect parliament’s economic strategies. Likewise, David Stockman, Ronald Reagan’s most influential financial official in 1981 was an acknowledged follower of Hayek.
Hayek wrote an essay titled Why I Am Not a Conservative (included as an appendix to The Constitution of Liberty), in which he disparaged conservatism for its inability to adapt to changing human realities or to offer a positive political program. Although he noted that modern day conservatism shares many opinions on economics with classic liberals, particularly a belief in the free market, he believed it's because conservatism wants to "stand still", whereas liberalism embraces the free market because it "wants to go somewhere". Hayek identified himself as a classical liberal, but noted that in the United States it had become almost impossible to use "liberal" in its original definition, and the term "libertarian" has been used instead. However, for his part Hayek found this term "singularly unattractive" and offered the term “Old Whig” (a phrase borrowed from Edmund Burke) instead. In his later life he said: "I am becoming a Burkean Whig".
Influence and recognition
Hayek's profound influence on the development of economics can be universally acknowledged. Hayek is the second most frequently cited economist (after Kenneth Arrow) in the Nobel lectures of the prize winners in economics. A number of Nobel winners -- such as Vernon Smith and Herbert Simon -- recognize Hayek as the greatest economist of the modern period.Hayek is widely recognized for having introduced the time dimension to the equilibrium construction, and for his key role in helping to having inspired the fields of growth theory, information economics, and the theory of spontaneous order. The "informal" economics presented in Milton Friedman's massively influential popular work "Free to Choose" (1980), is explicitly Hayekian in its account of the price system as a system for transmitting and coordinating knowledge. This is hardly an accident -- Friedman taught Hayek's famous paper "The Use of Knowledge in Society" (1945) in his graduate seminars.
Harvard economist and former Harvard University President Lawrence Summers explains Hayek's place in modern economics this way: "What's the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That's the consensus among economists. That's the Hayek legacy."
By 1947, Hayek was an organizer of the Mont Pelerin Society, a group of classical liberals who sought to oppose what they saw as socialism in various areas. He was also instrumental in the founding of the Institute of Economic Affairs, the free-market think tank that inspired Thatcherism. In his speech at the 1974 Nobel Prize banquet, Hayek, whose work emphasized the fallibility of individual knowledge about economic and social arrangements, expressed his misgivings about promoting the perception of economics as a strict science on par with physics, chemistry, or medicine (the academic disciplines recognized by the original Nobel Prizes).
Hayek had a long-standing and close friendship with philosopher of science Karl Popper, also from Vienna. In a letter to Hayek in 1944, Popper stated, "I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski." (See Hacohen, 2000). Popper dedicated his Conjectures and Refutations to Hayek. For his part, Hayek dedicated a collection of papers, Studies in Philosophy, Politics, and Economics, to Popper, and in 1982 said, "...ever since his Logik der Forschung first came out in 1934, I have been a complete adherent to his general theory of methodology." Popper also participated in the inaugural meeting of the Mont Pelerin Society. Their friendship and mutual admiration, however, do not change the fact that there are important differences between their ideas.
Hayek heavily influenced Margaret Thatcher's economic approach, and some of Ronald Reagan's economic advisers such as Martin Anderson and his director of Office of Management and Budget (OMB) David Stockman. After the fall of Communism Hayek became one of the most-respected economists in Eastern Europe. It was reported that during one of her first Conservative Party executive meetings as leader, Thatcher said: "When people ask what we stand for ..." then she reached into her briefcase and took out a book. It was Hayek's The Constitution of Liberty. Interrupting the speaker, she held the book up for all of us to see. "This", she said sternly, "is what we believe", and banged Hayek down on the table.
Hayek's greatest intellectual debt was to Carl Menger, who pioneered an approach to social explanation similar to that developed in Britain by Bernard Mandeville and the Scottish moral philosophers (cf. Scottish Enlightenment). He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology and anthropology. For example, Hayek's discussion in The Road to Serfdom (1944) about truth, falsehood and the use of language influenced some later opponents of postmodernism.
Legacy and honors
Even after his death, Hayek's intellectual presence was noticeable, especially in the universities where he had taught: the London School of Economics, the University of Chicago, and the University of Freiburg. A number of tributes resulted, many posthumous.
- A student-run group at the LSE Hayek Society, was established in his honor.
- At Oxford University, the Oxford Libertarian Society was previously known as the Hayek Society.
- The Cato Institute named its lower level auditorium after Hayek, who had been a Distinguished Senior Fellow at Cato during his later years.
- Also, the auditorium of the school of economics in Universidad Francisco Marroquín in Guatemala is named after him.
Hayek's work on price theory has been central to the thinking of Jimmy Wales about how to manage the Wikipedia project.
Selected bibliography
See also: List of books by Friedrich Hayek
- 1) Rules and Order, 1973
- 2) The Mirage of Social Justice, 1976
- 3) The Political Order of a Free People, 1979
Bibliography
- Birner, Jack, 2001, "The mind-body problem and social evolution," CEEL Working Paper 1-02.
- Birner, Hack, and Rudy van Zijp, eds., Hayek: Co-ordination and Evolution: His legacy in philosophy, politics, economics and the history of ideas (1994)
- Brittan, Samuel "Hayek, Friedrich August (1899–1992)", Oxford Dictionary of National Biography, (2006)
- Caldwell, Bruce, 2005. Hayek's Challenge: An Intellectual Biography of F.A. Hayek.
- Cohen, Avi J. "The Hayek/Knight Capital Controversy: the Irrelevance of Roundaboutness, or Purging Processes in Time?" History of Political Economy 2003 35(3): 469-490. Issn: 0018-2702 Fulltext: online in Project Muse, Swetswise and Ebsco
- Doherty, Brian. 2007. Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement
- Ebenstein, Alan O., 2001. Friedrich Hayek: A Biography.
- Frowen, S. ed., (1997) Hayek: economist and social philosopher
- Gamble, Andrew. (1996) The Iron Cage of Liberty, an analysis of Hayek's ideas
- Gray, John, 1998. Hayek on Liberty.
- Hacohen, Malachi, 2000. Karl Popper: The Formative Years, 1902 – 1945.
- Horwitz, Steven. "Friedrich Hayek, Austrian Economist." Journal of the History of Economic Thought 2005 27(1): 71-85. Issn: 1042-7716 Fulltext: in Swetswise, Ingenta and Ebsco
- Issing, O. (1999) Hayek, currency competition and European monetary union
- Kasper, Sherryl, 2002, The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers. Chpt. 4.
- Kley, Roland, 1994. Hayek's Social and Political Thought. Oxford Univ. Press.
- Muller, Jerry Z., 2002. The Mind and the Market: Capitalism in Western Thought. Anchor Books.
- Pavlík, Ján. 2004 . University of Economics, Prague F. A. von Hayek and The Theory of Spontaneous Order. Professional Publishing 2004, Prague .
- Rosenof, Theodore, 1974, "Freedom, Planning, and Totalitarianism: The Reception of F. A. Hayek's Road to Serfdom," Canadian Review of American Studies.
- Samuelson, Richard A. "Reaction to the Road to Serfdom." Modern Age 1999 41(4): 309-317. Issn: 0026-7457 Fulltext: in Ebsco
- Shearmur; Jeremy, 1996. Hayek and after: Hayekian Liberalism as a Research Programme. Routledge.
- Touchie, John, 2005. Hayek and Human Rights: Foundations for a Minimalist Approach to Law. Edward Elgar.
- Vanberg, V. (2001). "Hayek, Friedrich A von (1899–1992)," International Encyclopedia of the Social & Behavioral Sciences, pp. 6482-6486.
- Vernon, Richard. "The 'Great Society' and the 'Open Society': Liberalism in Hayek and Popper." Canadian Journal of Political Science 1976 9(2): 261-276. Issn: 0008-4239 Fulltext: in Jstor
- Weimer, W., and Palermo, D., eds., 1982. Cognition and the Symbolic Processes. Lawrence Erlbaum Associates. Contains Hayek's essay, "The Sensory Order after 25 Years" with "Discussion."
- Wolin, R. 2004. The Seduction of Unreason: The Intellectual Romance with Fascism from Nietzsche to Postmodernism. Princeton University Press, Princeton.
Primary sources
- Hayek, Friedrich. Hayek on Hayek: an autobiographical dialogue, ed. S. Kresge and L. Wenar (1994)
- Hayek, Friedrich. The collected works of F. A. Hayek, ed. W. W. Bartley and others (1988–)
See also
External links
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- on Econlib
- Hayek's book, as illustrated by Look Magazine, condensed into a 5-minute movie
- Directory of links on Hayek from the Open Source Directory
- on the website
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- (describes the conservatism vs. liberalism dispute)
- essay included in the book by the hayekian Len Brewster
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- by Bruce Caldwell
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- by Barry Smith
- The most extensive list of links on Hayek
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- , interview in Reason by Thomas W. Hazlett
- by Israel Kirzner
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