There Is No Nobel Prize in Economics

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But Hayek and Friedman’s usefulness went way beyond Sweden.

At the time of the prizes, neoclassical economics were not fully accepted by the media and political establishment. But the Nobel Prize changed all that.

What started as a project to help the Bank of Sweden achieve political independence, ended up boosting the credibility of the most regressive strains of free-market economics, and paving the way for widespread acceptance of libertarian ideology.

Take Hayek: Before he won the award, it looked like Hayek was washed up. His career as an economist was essentially over. He was considered a quack and fraud by contemporary economists, he had spent the 50s and 60s in academic obscurity, preaching the gospel of free markets and economic darwinism while on the payroll of ultra-rightwing American billionaires. Hayek had powerful backers, but was out on the fringes of academic credibility.

But that all changed as soon as he won the prize in 1974. All of a sudden his ideas were being talked about. Hayek was a celebrity. He appeared as a star guest on NBC’s Meet the Press, newspapers across the country printed his photographs and treated his economic mumblings about the need to have high unemployment in order to pay off past inflation sins as if they were divine revelations. His  Road to Serfdom hit the best-seller list. Margret Thatcher was waving around his books in public, saying “this is what we believe.” He was back on top like never before, and it was all because of the fake Nobel Prize created by Sweden’s Central Bank.

Billionaire Charles Koch brought Hayek out for an extended victory tour of the United States, and had Hayek spend the summer as a resident scholar at his Institute for Humane Studies. Charles, a shrewd businessman, quickly put the old man to good use, tapping Hayek’s mainstream cred to set up and underwrite Cato Institute in 1974 (it was called the Charles Koch Foundation until 1977), a libertarian thinktank based on Hayek’s ideas. Even today, Cato Institute  pays homage to the Swedish Central Bank Prize’s role in the mainstreaming of Hayek’s ideas and Hayek’s influence on the outfit:

The first libertarian to receive the Nobel Prize was F.A. Hayek in 1974. In the years leading up to the prize announcement, Hayek had reached a professional and personal nadir. Unable to maintain an appointment in the United States, Hayek had returned to Austria to take up a position at the University of Salzburg, Austria. With the announcement of the prize in 1974, however, Hayek’s work, and the fortune of Austrian economics, took a remarkable turn.

Hayek’s influence on Cato is profound. Two of Cato’s first books were by Hayek: A Tiger by the Tail: The Keynesian Legacy of Inflation & Unemployment and Monetary Policy: Government as Generator of the “Business Cycle.” Perhaps more than any other intellectual in the twentieth century, Hayek has inspired Cato and its researchers to develop policies that ensure a free society. When Cato moved into its current location in 1992, its auditorium was named in Hayek’s honor.

Friedman’s Nobel Prize had a similar impact. After getting the prize in 1976, Friedman wrote a best-seller, got his own 10-part PBS series Free to Choose and became President Ronald Reagan’s economic advisor, where he had a chance to put the society-crushing policies he developed in Chile under Pinochet.

Friedman would spend the rest of his time denying it, but he was deeply involved and invested in the Pinochet’s totalitarian-corporate  economic experiment. Chilean economist Orlando Letelier published an article in The Nation in 1976 outing Milton Friedman as the  “ intellectual architect and unofficial adviser for the team of economists now running the Chilean economy” on behalf of foreign corporations. A month later Letelier was assassinated in D.C. by Chilean secret police using a car bomb.