The Great Pretenders

It is 50 years ago Wednesday that economist Friedrich Hayek accepts his Nobel Prize with a warning about economists.

Published in The New York Sun.

It will be 50 years on Wednesday since economist Friedrich Hayek’s Nobel Prize lecture, “The Pretense of Knowledge,” our Alex Pollock reminds us. That was the speech in which Hayek decried the “accelerating inflation” of the day — and the bitter irony that it had “been brought about by policies which the majority of economists recommended and even urged governments to pursue.” He concluded: “As a profession we have made a mess of things.”

It was of a piece with Hayek’s role as a contrarian in the economics profession that his “brilliant presentation,” Mr. Pollock notes, “explained the inherent limits of economics and the inevitable failure of trying to make it a predictive mathematical science.” Fifty years on, Hayek’s warning “applies particularly to central banks and their yearning to be economic philosopher-kings,” Mr. Pollock adds. Is this anniversary being marked by the pretenders at the Fed?

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The refusal to consider gold as a factor in monetary deliberations reflects the failure to heed Hayek’s warning of 50 years ago. Mr. Pollock conveys a hope that institutions like the Fed “have taken to heart Hayek’s lesson that the ‘insuperable limits to knowledge’ ought to teach humility.” Central bankers, in Mr. Pollock’s telling, have reason to be “skeptical about their own forced guessing.” Yet if there is one thing that is in short supply at the Fed, it’s humility.