ARCHIVAL INSIGHTS INTO THE EVOLUTION OF ECONOMICS HAYEK: A COLLABORATIVE BIOGRAPHY Part X: Eugenics, Cultural Evolution, and The Fatal Conceit Robert Leeson Robert Leeson Hayek: A Collaborative Biography Part X: Eugenics, Cultural Evolution, and The Fatal Conceit 2017 Contents Part I The Gods of the ‘Free’ Market 1 1 Fighting to Prevent the ‘World from Being Made Safe for Democracy’ 3 2 Eugenics and the Austrian Third and Fourth Generation 43 3 Das Hayek Problem and Solution 89 4 The Austrian Shadow and ‘The Slogan of Liberty’ 131 Part II Eugenics, Cultural Evolution, and Ethics 175 5 Hayek’s ‘More Effective Form’ Eugenics? 177 6 Background to the Eugenics Movement and Influences on Friedrich Hayek 225 v vi Contents 7 Eugenics and American Economics in the Interwar Years: The Case of Thomas Nixon Carver 281 8 Economists and Eugenics: Progressive Era Racism and Its (Jewish) Discontents 317 9 The Evolution of Hayek’s Ethics 355 10 ‘Dictatorial Democracy,’ the Four Habsburg Estates, and ‘The Ethical Foundations of a Free Society’ 373 Part III Imanishi, Darwinian Evolution, and the Fatal Conceit 417 11 Beyond Darwinism: Examining the Hayek-Imanishi Dialogues 419 12 Hayek, Evolution, and Imanishi 435 13 Crossing Paths: On Hayek’s Darwinian Evolutionism 455 Index 475 Notes on Contributors Baffi Carefin Centre for Applied Research on International Markets, Banking, Finance and Regulation, Bocconi University, Milan, Italy. Keith William Diener Assistant Professor of Law, Stockton University, USA. Susumu Egashira Professor of Economics, Otaru University of Commerce, Japan. Ruth C. Engs Professor Emerita, School of Public Health, Indiana University, USA, author of The Eugenics Movement (2005), has published widely on eugen- ics and other Progressive Era health and social reform movements and reformers. Luca Fiorito Associate Professor of Economics, University of Palermo, Italy. Tiziana Foresti Centre for Applied Research on International Markets, Banking, Finance and Regulation, Bocconi University, Milan, Italy. Geoffrey Hodgson Editor-in-Chief, Journal of Institutional Economics, Research Professor in Business Studies, University of Hertfordshire, UK. Robert Leeson Visiting Professor of Economics, Stanford University, Adjunct Professor of Economics, Notre Dame Australia University. Yusuke Yoshino Researcher, Faculty of Letters, Kyoto University, Japan. vii Part I The Gods of the ‘Free’ Market 1 Fighting to Prevent the ‘World from Being Made Safe for Democracy’ The Österreichische (Eastern Reich, Austrian) School of Economics was founded by Carl Menger (1840–1921) and developed in its second gen- eration by Eugen Böhm Ritter von Bawerk (1851–1914) and Friedrich Freiherr von Wieser (1851–1926), neither of whom had been directly taught by Menger. The third generation was led by Othmar Spann (1878–1950), who had been one of Menger’s students, Hans Mayer (1879–1955), and Ludwig Elder von Mises (1881–1973); and the fourth generation (and its epigones) was presided over by Friedrich von Hayek (1899–1992) and Murray Rothbard (1926–1995). Included among the epigones are Hillsdale President, George Roche III (1935–2006), Walter Block (1941–), Hayek’s ‘closest collaborator,’ Kurt Leube (1943–), the co-founder of the Ludwig von Mises Institute and the suspected author of the racist and homophobic Ron Paul Newsletters, Llewelyn Rockwell Jr. (1944–), the academic fraud, Sudha Shenoy (1943–2008), the ‘free’ mar- ket monopolist of the Hayek Archives, Bruce Caldwell (1950–), two presidents of the Foundation for Economic Education, the Mormon founder of FreedomFest, Mark Skousen (1947–) and Richard Ebeling (1950–), plus two devout Presuppositionalists, the public stoning theo- crat, Gary North (1942–), and the Mont Pelerin Society President, Peter Boettke (1960–). Three—Shenoy, Leube, and Caldwell—are official © The Author(s) 2017 3 R. Leeson, Hayek: A Collaborative Biography, Archival Insights into the Evolution of Economics, https://doi.org/10.1007/978-3-319-61714-5_1 4 R. Leeson Hayek biographers as are two others, Hayek’s secretary (1977–1992), Charlotte Cubitt (circa 1930–), and William Warren Bartley III (1934–1990). The distinguished historian of economic thought, Terence Hutchison (1978, 176), noted that ‘Revolutions depend upon and create their own myths. Sometimes the leader is responsible, or partly so, for starting such myths, and sometimes the followers build them up further in order to maintain revolutionary momentum and exclusiveness.’1 Hayek (1994, 137) fabricated myths about the co-leaders of the British Neoclassical (market failure) School: ‘it was only when I looked at a certain book by Richard Deacon [1979], which is a pseudonym, that it occurred to me why [Arthur Cecil] Pigou suddenly got interested in me. Deacon sug- gests that Pigou was interested in people who could cross frontiers. I had forgotten about the fact that … Very soon after that, Pigou got inter- ested in me, and the contrast of his sudden interest in me and then sud- denly dropping me—after he had asked me to come up to the Lake District and stay with him, and climb with him—fits in so well with the Deacon story.’2 The transparent fraud, Donald ‘Richard Deacon’ McCormick (28 September 1984), was ‘delighted’ to have been invited to form a ‘knowl- edge’ pact with Hayek: ‘though not an economist, I am not only a fervent admirer of what you preach, but probably in my enthusiasm for your code and rules that I almost go beyond it. I believe … that we awakened too late to the insidious, if seemingly plausible doctrines of [John Maynard] Keynes, and that he spelt the doom of 19th century Radical Liberal free trade, free market economics, even ruining the Liberal Party of any credence in the process.’ Hayek then confirmed the authenticity of the transparently fraudulent 1905 diary in which Pigou—implausibly— kept a coded record of his gun-running efforts on behalf of Stalin despite knowing that ‘Deacon’ McCormick (the possessor of the diary) ‘may be sometime [sic] making things up. I suppose his exactitude is not that of a scholar, but of a journalist’ (Leeson 2013, Chap. 9; 2015a). In The Fatal Conceit: The Errors of Socialism, Hayek (1988, 57) also misrepresented Keynes’ (1923, 79–80) famous dictum about the long-­ run and short-run effects predicted by the quantity theory of money: ‘But this long run is a misleading guide to current affairs. In the long run Fighting to Prevent the ‘World from Being Made Safe... 5 we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.’ Hayek asserted that Keynes—as an ‘immoral- ist’—was referring to his general belief in a management of the market order, on the grounds that ‘in the long run we are all dead’ (i.e., it does not matter what long range dam- age we do; it is the present moment alone, the short run—consists of public opinion, demands, votes, and all the stuff and bribes of demagoguery— which counts). In George Orwell’s Nineteen Eighty Four, the ‘Ministry of Truth’ was devoted to ‘rectifying’ historical records. Alive, Mises—who suffered from depression and hysterical malice—had been a liability; while dead, he could be marketed as a martyred saint: Rothbard only began planning the first Austrian revivalist conference when it was clear that Mises was incapacitated—it took place in June 1974, eight months after his death (Leeson 2017a). Rothbard (1973) was an Orwellian rectifier: Mises was ‘unbelievably sweet’; he had a ‘mind of genius blended harmoniously with a personality of great sweetness and benevolence. Not once has any of us heard a harsh or bitter word escape from Mises’ lips’; he was ‘Unfailingly gentle and courteous.’ With respect to Mises’ reputation for ‘abrasiveness,’ Rothbard (1990a) claimed that he ‘never saw it.’ Simultaneously, Rothbard (1990b) recalled that after a comment about monopoly theory, Mises called him a ‘Schmollerite. Although nobody else in the seminar realized it, that was the ultimate insult for an Austrian.’ Mises and Hayek rectified ‘knowledge’ about the reason for Menger’s withdrawal from both the Austrian School and academia. According to Mises (2003 [1969], 17), ‘Menger, Böhm-Bawerk, and Wieser looked with the utmost pessimism upon the political future of the Austrian Empire.’ Mises projected his own depressive tendencies onto ‘all sharp-­ sighted Austrians.’ Troy was both a factual and a legendary city. Mises compared Menger—and, implicitly, himself—to King Priam and the fall of Troy: ‘Menger barely had the first half of his life behind him when he recognized the inevitability of the demise of his own Troy. This same pes- simism consumed all sharp-sighted Austrians. The tragic privilege 6 R. Leeson attached to being Austrian was the opportunity it afforded to recognize fate.’ Hayek insisted that Menger was working on ‘wider and wider’ material but was defeated by old age (Leeson 2015c, Chap. 3). The archives tell a different story: according to Hayek, Menger, in his early 60s, fathered an illegitimate son, Karl Menger (1902–1985).3 According to Eugen Maria Schulak and Herbert Unterkofler (2011, 32), the mother was a journal- ist, Hermine Andermann (1869–1924), who was 29 years his junior, and according to J. Herbert Fürth, Karl’s mother was Menger’s Jewish house- keeper. Menger got his son legitimized by Imperial decree but Karl never forgave his father for not marrying his mother.4 According to Schulak and Unterkofler (2011, 32), fathering an illegitimate child violated