Eucken, Hayek, and the Road to Serfdom

[Introduction] Walter Eucken (17 January 1891 - 20 March 1950) was the leading and most prominent figure of German liberal economics from the 1920s until well after his death. He represented the convergence between the liberalism of the Austrian school of economics' 'third generation' and the liberal tradition in German economics that gained momentum during the 1930s in opposition to the very strong socialist, national-socialist and romanticist movements in German economics (Goldschmidt and Wohlgemuth 2008; Janssen 2009). Only after the war, when the 'ordoliberal' school of economic thought was erected at the University of Freiburg, did this strand of German economic reasoning become influential, especially in German economic policy pertaining to the reorganization of the West-German economy. Though it was influential after the war, the influence of 'ordoliberalism' in academia faded out after Eucken's death in the 1950s, for many reasons (Hesse 2010). Therefore, the similarities as well as the differences between the German and the Austrian schools of liberal thought have remained neglected in the literature. The differences often appear marginal. They seem to result from the particular historic situation in which they were articulated. But as circumstances evolve over time and fundamental global economic crises return, it is, in our opinion, worthwhile to take a closer look at the differences between these two strands of liberalism, one having been developed within the totalitarian regime of Nazi Germany and the other one 'in exile'. We think the correspondence between two of the most outstanding figures of the two 'schools' of thought might be a fitting starting point for this approach. In the following we first want to shortly describe the evolution and the nature of the contact between Eucken and the last Viennese generation of the Austrian school of economics. In a second step, we will analyze the differences between the schools following a close reading of a detailed comment by Eucken on Friedrich A. Hayek's (1944) 'Road to Serfdom', written in March 1946, a few months after a German translation of the book was published. Our examination begins first with a remark by Eucken criticizing Hayek's neglect of the German liberal tradition. Finally, the third chapter of the article deals with Eucken's observations that highlight the minute yet significant differences between the two approaches of (Neo)Liberalism.