Colombatto, Enrico --- "Hayek and Economic Policy (The Austrian Road to the Third Way)" [2007] ELECD 219; in Marciano, Alain; Josselin, Jean-Michel (eds), "Democracy, Freedom and Coercion" (Edward Elgar Publishing, 2007)

Book Title: Democracy, Freedom and Coercion

Editor(s): Marciano, Alain; Josselin, Jean-Michel

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847201263

Section: Chapter 3

Section Title: Hayek and Economic Policy (The Austrian Road to the Third Way)

Author(s): Colombatto, Enrico

Number of pages: 21

Extract:

3. Hayek and economic policy (the
Austrian road to the Third Way)
Enrico Colombatto

ON HAYEK'S VIEW OF ECONOMIC POLICY

The debate on the scope and moral foundations of economic policy began
as soon as economics strived to become something more than just a branch
of political philosophy and attempted to acquire its own identity as a social
science. By and large, its Founding Fathers characterized this discipline as
being concerned with how individuals behave and interact in order to
enhance their well-being. This justified the use of the term `political
economy', to emphasize the role of the institutional context within which
human action takes place. Towards the end of the eighteenth century
prominent authors went further and suggested that political economists
should not be confined to the mere description and explanation of human
action. Nor should they refrain from recommending how institutions
ought to be designed and modified in order to enhance welfare.1 Adam
Smith was of course a leading and effective supporter of this approach,2
which actually owed much to Galiani and, to a lesser extent, Quesnay.
At the beginning of the nineteenth century Say forcefully advocated the
need for a sharper partition between the realms of political economy and
of policy, the former referring to the study of human action under given
institutional rules; the latter to the rules of the game. He did not exclude
the importance of normative economics. Still, this branch was to remain
an exercise in simulation, with little ...