Segments in this Video

Free Market Visionary (02:54)


F.A. Hayek was a champion of the market who inspired many leaders including Margaret Thatcher. The financial crisis shook the West's faith in the free market, but it also enhanced Hayek's reputation. His advice: don't intervene.

2008 Financial Crisis Predictable (02:35)

Western leaders relied on the free market to generate wealth, but thought it could be fine-tuned. Hayek would say government interference caused the crisis, that the Federal Reserve's low interest rate policy fueled the housing bubble.

Radical Rejection of State's Role in Regulating the Market (01:14)

Hayek didn't believe the Federal Reserve should set interest rates at all. He thought the market was self-regulating. Peter Schiff equates the Fed setting interest rates to price fixing. Market rates would have been much higher, averting the crisis.

Early Influences on Hayek's Thinking (01:54)

Born in Vienna in 1899, Hayek grew up surrounded by intellectuals. From an early age, he tried to make sense of the modern world and the workings of the economy, choosing not physics, but evolutionary biology, as his model.

Market as Communications System (01:31)

Hayek viewed the global market as something that emerged naturally, conveying information about needs, desires, and resources through prices. He opposed government meddling because it distorts price signals.

Ruinous Effects of Inflation (02:36)

After World War I, the Austrian government tried printing money to pay its huge debt, not realizing that pumping more money into the economy would cause prices to spiral ever higher. The experience instilled in Hayek a fear of inflation.

Boom and Bust (02:16)

People thought the Roaring 20s in America would never end. But Hayek, working in Vienna at the new Institute for Business Cycle Research, theorized that the seeds of busts were sown during booms. He predicted the 1929 crash.

Beginning of Modern Monetary Policy (03:01)

In the 1920s, Benjamin Strong, Governor of the New York Federal Reserve, tried to keep the boom going by keeping interest rates low. It worked--money poured into the market--until the bust came in 1929, as Hayek predicted it would.

Cause of the 2008 Crisis (01:40)

With today's global crisis, cheap credit fueled a property boom. Hayek's followers blame the Federal Reserve for keeping interest rates too low. Peter Schiff, Paul Volcker, and Paul Krugman disagree about where to place blame.

Cause of the 1929 Crash and Depression (01:04)

Hayek said the crash was caused by too low interest rates during the boom. But free market economist Milton Friedman argued the exact opposite. Jeffrey Sachs says Hayek was wrong; the Depression was not due to malinvestment.

Fight of the Century (02:53)

The dispute between Keynes and Hayek in the 1930s is relevant today. Keynes was for government intervention in the economy on moral grounds. Hayek was opposed, fearing unintended consequences. The debate goes on.

Keynes Wins the Battle of Ideas (01:40)

It was one of most important intellectual battles of the 20th century. Roosevelt's New Deal was Keynesian policy. Hayek saw the government spending as an artificial stimulant preventing the economy from cleansing and healing itself.

Keynesian Response to 2008 Crisis and Recession (02:04)

When Lehman Brothers collapsed in 2008, the U.S. government intervened massively to rescue big companies. Central banks continue to keep interest rates low to stimulate the economy. Austrians (Hayekians) say this creates a bubble.

Hayek's Greatest Insight (01:49)

The battle of the 1930s was capitalism versus communism and fascism. Hayek said central planning would fail because the world is so complex. Only a market system can convey all the information. He worried that wartime planning in Britain would continue after the war.

"The Road to Serfdom" (01:37)

Hayek wrote a book attacking government planning that would change the course of history and start a political battle that continues today. He argued that government control of the economy ultimately erodes people's freedoms.

Hayek Strikes a Chord With Americans (01:50)

"The Road to Serfdom" went unnoticed in Britain but made a huge impact in the U.S. in 1945 after being excerpted in the "Reader's Digest." Hayek gave an explanation for the welfare state and an alternative vision: freedom within the rule of law.

Into and Out of the Wilderness (03:03)

Hayek favored a government safety net. Experts discuss the pros and cons of the welfare state. In the 1950s and 60s, governments embraced Keynesianism. Hayek was all but forgotten. But in 1974 he won the Nobel Prize in Economics.

Postwar Keynesian Consensus Crumbling (01:54)

By the 1970s, Britain was in economic decline. Inspired by Hayek, Margaret Thatcher brought him into the political mainstream. As Prime Minister, Thatcher initiated a bold change of direction that created the world we live in today.

Britain Moves Hayek's Way (02:19)

Margaret Thatcher began rolling back the state, privatizing industries. The Conservatives' battle with powerful British trade unions was framed in terms of liberty. Thatcher didn't share Hayek's concern about concentrated government power.

Too Big to Fail (01:55)

Hayek's followers say the financial deregulation of the 1980s and 90s played a big role in the financial crisis because the system wasn't really free. It was distorted by the implicit promise of government rescue. Paul Krugman disagrees.

Hayek's Most Revolutionary Idea (02:34)

Hayek thought instead of a single currency issued by a central bank, having many competing currencies could stop governments abusing the power of money. So Bernard von Nothaus coined and sold the Liberty dollar.

Views on Government Control of Money (01:40)

Since the 1920s, central banks have used their control over the money supply to try to manage the economy. To Hayek's followers, central banks are the problem, not the solution. Paul Krugman says history refutes this idea.

Monetary Architect Charged With Counterfeiting (01:14)

In 2007, the FBI raided the office of Bernard von Nothaus, who had issued the Liberty dollar. Von Nothaus quoted Hayek in his defense. He was found guilty and faces 25 years in prison for counterfeiting U.S. currency.

Honors and Awards (02:09)

Although Hayek inspired politicians with his belief in the free market, for policy advice they turned to Milton Friedman, who believed governments could steer the economy through monetary policy. Hayek thought that was impossible.

Pretense of Knowledge (01:53)

Hayek warned against hubris in economic policy. He helped bring about a shift away from the state, toward markets. But in the financial crisis, rather than follow Hayek's advice to let go, politicians rushed to save the market from itself.

Credits: Hayek and the Free Market: Masters of Money--Three Economists Who Changed the World (00:41)

Credits: Hayek and the Free Market: Masters of Money--Three Economists Who Changed the World

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Hayek and the Free Market: Masters of Money—Three Economists Who Changed the World

Part of the Series : Masters of Money: Three Economists Who Changed the World
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According to conventional wisdom, the 2008 financial crisis happened because markets were not regulated enough. But what if the opposite is true? What if excessive government meddling in business caused the crash? To better understand that avenue of thought, it’s necessary to study the work of a classical liberal thinker whose reputation continues to grow, even in a postcrisis world that seems to place a premium on Keynesian solutions. Shot in London, Vienna, and across the U.S., this program looks at the extraordinary life and influence of the radical free-market economist Friedrich Hayek. Hearing from high-ranking bank officials, leading politicians, and a Nobel laureate about the development and implications of the Austrian-born scholar’s philosophy, viewers are encouraged to ask why, despite his influence, no government has ever dared to fully implement the central tenets of Hayek’s monetary theory. Produced by the Open University. A part of the series Masters of Money: Three Economists Who Changed the World. (53 minutes)

Length: 53 minutes

Item#: BVL51975

ISBN: 978-0-81608-768-6

Copyright date: ©2012

Closed Captioned

Reviews & Awards

“This documentary, shot in London, Vienna, and across the U.S., presents the most comprehensive history behind the current world depression...and traces the origins of the political power structure which rules the world today....The archival black-and-white film and still footage interspersed with current fascinating and used to remarkable effect. Recommended.” —Educational Media Reviews Online

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