The surroundings could not be more appropriate. We are overlooking Vienna from the 23rd floor of the Ringturm, the highest building in the city after the cathedral, Stephansdom. Tonight we are celebrating the Hayek Lifetime Achievement Award, given out annually by the Hayek Institute and the Austrian Economics Centre. Friedrich August von Hayek was, I believe, the thinker who provided the most cogent and plausible defence of Western civilisation in the twentieth century. The question he posed was: How can we accomplish so much when we, as individuals, know so little? His answer, in  brief, was: Because we can utilise the knowledge other people possess, and this we do through the price mechanism across places in the present, in the international free market, and through traditions and practices across times, generation by generation. Society is about the acquisition, transmission and utilisation of knowledge.

In his works, Hayek gives an account not only of individual reason, but also of collective reason, the accumulated cultural capital which we indeed call Western civilisation. Hayek’s theory of knowledge is not only a powerful research programme in the social sciences, but it also offers guidance to policy makers: their main task should be to remove hindrances to the free flow of information between people. For example, income distribution is not about a mother dividing up a cake between her children; it is rather an indispensable device providing us with information on how we can best use and develop our abilities and special talents for the benefit of ourselves and of others.

Previous winners of the Hayek Lifetime Achievement Award include Peruvian novelist Mario Vargas Llosa, the 2010 Nobel Laureate in Literature, Scottish historian Niall Ferguson, formerly at Oxford and Harvard and now at the Hoover Institution in California, prolific American economic historian Deirdre McCloskey, successful American entrepreneur Peter Thiel, and influential American economist Arthur Laffer, after whom the Laffer Curve is named. Last year I had the pleasure to give a speech here in Vienna in honour of Montenegran economist and educationalist Veselin Vukotic who won the award for his tireless efforts to improve the economic conditions of his small and beautiful country.

This year the Award goes to an old friend, Dr. Emilio Pacheco. He was born in March 1953 in Venezuela so he is only a month younger than me. In 1975, he graduated with a BA in Social Sciences from the Catholic University André Bello in his native country. Soon thereafter, he and his wife Isabel moved to England where in 1980 he completed an MA in intellectual history at the University of Sussex. After that, he came to Oxford where he studied politics at St. Anthony’s, and it was at Oxford that we became friends. I was there from 1981 to 1985. Emilio and Isabel stayed in Oxford until 1986 when Emilio graduated with a D.Phil. in Politics, and it was in Oxford that their older daughter Isabella spent her first years. They have a younger daughter, Iñez, and five grandchildren, Margot, Josefina, Agnes, Carmen and Oscar.

Emilio and I were both liberals in the classical sense, with me perhaps being more conservative than him. He was then as now a quiet, thoughtful scholar. We were both very interested in Hayek’s ideas. I had first met Hayek in 1980 when he came to Iceland and gave two lectures, and one of our teachers at Oxford, Dr. John Gray of Jesus College, shared our interest in Hayek and was himself working on a book on him. In the spring of 1983, Hayek visited us in Oxford, and we took him to a Chinese restaurant, Xian on Banbury Road. Over dinner, we had a long and fruitful discussion with him, not least about the two most prominent schools of free market economics, the Chicago School of Frank H. Knight, Milton Friedman, George J. Stigler, and Gary S. Becker, and the Austrian School to which Hayek himself belonged with Carl Menger, Eugen von Böhm-Bawerk, Ludwig von Mises and to some extent Joseph Schumpeter.

At the end of the dinner, we asked Hayek whether he would gave us permission to use his name because we wanted to found a Hayek Society at Oxford for regular discussions about liberal principles and problems. Hayek then said: “Of course I am delighted that young people are interested in my ideas. But if I am to give you permission to use my name, you have in return to make a promise to me, for your own good. Do not become Hayekians. I have noticed that the Marxists are much worse than Marx and that the Keynesians are much worse than Keynes. You have to maintain a critical distance from people. It is the ideas that matter. They are indeed much more powerful in the long run than special interests.”

We made the promise that Hayek wanted, although I am not sure that all of us were able to fulfil it. Speaking for myself, I am in agreement with Hayek on most things, except perhaps on nationalism. It left an indelible mark on Hayek that he had witnessed the collapse of the multi-national Danubian Empire of the Habsburgs which had been a vast free trade zone, sharing a sound and stable currency. He blamed its collapse on nationalism whereas I would argue for national sovereignty, but certainly in combination with free trade and an international competitive market. In other words, economic integration does not necessarily presuppose political integration.

In a sense, though, we followed Hayek’s advice because we sometimes invited critics of classical liberalism to speak at our biweekly meetings during terms. They included communist philosopher Gerry Cohen, always witty and sharp, market socialist David Miller, widely read and judicious, and social democrat Raymond Plant, who was interested in what Hegel and Hayek had in common. Most of our speakers were however broadly sympathetic to Hayek’s classical liberalism. Indeed, three of them published books on Hayek, Jeremy Shearmur (who had for a while been Karl Popper’s research assistant), Norman Barry and John Gray. After the meetings we took the speaker of the day out for dinner, usually at Michel’s Brasserie in Little Clarendon Street. This was often the most enjoyable and stimulating part of the event.

We kept in touch with Hayek, and in the spring of 1985 he told us that he would be in London one day and that we could meet. I wrote to Leonard Liggio who was in charge of the Hayek Fund which was supposed to encourage liberal scholarship, and he gave us a small grant which enabled us to invite Hayek to dinner at the Ritz in London. There were five of us at the dinner, Emilio, Chandran Kukathas, Stephen Macedo, Andrew Melnyk, and I. Our guest was in very good mood and told us a lot about his life and works.

For example, he told us that labels mattered. At a meeting with Pope John Paul II he had used the word ‘superstitions’ for certain ideas which might be useful, but neither analytically nor empirically true. When he noticed that the holy father was not very happy with his choice of words, he gently suggested that perhaps ‘symbolic truths’ would be more appropriate. Pope John Paul immediately agreed and seemed quite pleased. Although himself an agnostic, Hayek always thought that the liberal movement should regard the Christian churches as allies. He recalled that they had been almost the only centres of resistance to European totalitarianism in the period of what we could call ‘the thirty years war’ from 1914 to 1945. Hayek was not sympathetic to ‘liberation theology’, then much in vogue in Latin America. ‘Paradoxically, liberation can be the opposite of liberty. It can indeed destroy liberty. We should not liberate ourselves from our liberal heritage, for example, or the rule of law,’ Hayek said.

Hayek recalled that he had personally met four American presidents. The first one was Calvin Coolidge in 1923. Hayek was then in America as the research assistant of an economics professor, and when the American Economic Association held its general meeting in Washington DC, it was small enough that the President could invite all the participants to a reception in the White House. The second president Hayek met was Herbert Hoover but that was long after he had left office. During John F. Kennedy’s presidency he was once invited to the White House and again once by Ronald Reagan. ‘The interesting contrast between them,’ Hayek told us, ‘was that Kennedy was much less authentic than the professional actor Reagan. Kennedy pretended to have read several books of mine which of course he had not done, whereas Reagan told me that he had read one of my books, The Road to Serfdom, and that he had liked it a lot. Reagan had also been influenced by my old mentor Ludwig von Mises and by that brilliant journalist Frederic Bastiat.’

It was obvious that Hayek admired Margaret Thatcher who had become the Prime Minister of the United Kingdom in May 1979. She had been much influenced by Hayek. At the Ritz, Hayek told us that a few months after she took office she heard that he would be in London for a few days, and she therefore invited him to lunch at 10 Downing Street. She greeted him at the entrance with the words: ‘Professor Hayek, I know precisely what you are going to say. You are going to say that I have not done enough. And you are absolutely right.’ Hayek said that it had been difficult for him to be very critical of her after this greeting. He was however quite critical of her main opponents in the Conservative Party. He said that they were under an illusion created by John Stuart Mill: that there was a crucial difference between the production and distribution of wealth and the laws applying to one of these activities did not necessarily apply to the other one. Thus, they believed that income redistribution would not affect production much. In this they were wrong, since income distribution offered guidance to us on the channels in which we should direct our efforts.

Hayek also appreciated another famous English woman, Queen Elizabeth the Second. He had in 1984 been made Companion of Honour, and he received this award at an audience with the Queen at Buckingham Palace. ‘I had not thought much of the Queen one way or another before. But I was pleasantly surprised. She was very well-informed and quite impressive, She performed her duty impeccably,’ he told us. Later the same day his English friends gave a dinner for him at the Institute of Economic Affairs which had tirelessly been promoting his ideas for decades, and he said that this had been the happiest day of his life.

Although Hayek was a British citizen, he lived with his second wife in Freiburg in Germany. He told us that in his opinion the ablest German politicians at present were Otto von Lambsdorff from the Free Democrats and Franz Josef Strauss from the Bavarian Christian Social Union. The problem was however that they disliked each other and could not work together. They would have made a formidable team, Hayek said. Stephen Macedo asked him what he thought of the military junta in Chile and its policies. ‘We have to make a distinction between totalitarianism and authoritarianism,’ he replied. ‘The Chilean dictatorship is authoritarian and non-democratic, but it is not totalitarian. What is crucial, I think, is that such authoritarianism is reversible whereas totalitarianism is almost irreversible because it is in its nature to try and destroy all independent centres of thought and action, all that which we call civil society.’

Hayek drank Burgundy which he said was his favourite branch of wine. At the close of the dinner, a group of musicians who had been circulating around the dining room playing at various tables came to our table and asked us whether we had any special melody which we wanted them to play. ‘Play the City of my Dreams,’ one of us whispered to them. When they started playing, Hayek immediately recognised the tune, smiled broadly, and hummed the song in German. ‘Mein Herz und mein Sinn schwärmt stets nur für Wien …’ It is an intriguing fact that now, thirty-seven years later, we should be celebrating the Hayek award here in Vienna, with a wonderful view over the whole city, the city of dreams.