Political philosopher and Nobel laureate F.A. Hayek helped spark the 20th-century revival of classical liberalism. Manhattan Institute President Lawrence Mone, in welcoming an audience to the Grand Hyatt on Thursday for the inaugural Hayek Lecture, said Hayek understood that markets do not work in a “moral vacuum.”

Mr. Mone thanked Manhattan Institute trustee Thomas Smith for being the inspiration behind the annual lecture. Mr. Mone then spoke of Hayek’s influence on Manhattan Institute founder Sir Antony Fisher, who visited Hayek and inquired about the best way to reverse the erosion of freedom. The author of “The Road to Serfdom” advised him not to begin with politics per se but to engage in combat in the battle of ideas. Change the ideas first, and the others would follow: In effect, politicians were often “lagging indicators,” Hayek believed.

The Reverend Richard John Neuhaus, founder of the Institute on Religion and Public Life, spoke next, introducing the first Hayek laureate, theologian Michael Novak. “To be part of an event honoring Friedrich Hayek and Michael Novak,” he said, “is indeed to be honored.” He said Hayek wrote a famous essay, “Why I Am Not a Conservative,” in which he described himself as a “Whig,” the party of liberty. The Rev. Neuhaus said Mr. Novak is very much a Whig, who has had a lifelong habit of “stealing the best cards from the liberal deck.” He praised Mr. Novak’s book, “The Spirit of Democratic Capitalism.” Before Mr. Novak, Rev. Neuhaus said, it was safe to say that among moral philosophers and theologians particularly, capitalism was radically criticized for its evil intentions while socialism, if criticized at all, was criticized “for the failure to achieve its good intentions.”

He said he frankly envied Mr. Novak’s patience in making an argument. When beginning with most obdurate, ignorant, prejudiced interlocutors, Rev. Neuhaus said, Mr. Novak would exhibit virtues of patience, persistence, and hopefulness. Arguing for a more promising future for Islam and democracy, Rev Neuhaus said, is not easy, but he could imagine no one better than Mr. Novak to do so.

“After all these years,” Mr. Novak said, stepping up to the podium, “about my humility, he still has nothing to say.”

Mr. Novak said the emergence of liberty as the main interpretive thread of human history coincided with the history of Judaism and Christianity. “Perhaps it doesn’t have to be that way, but that is how it has historically happened” because in the Jewish and Christian scriptures, the main action is God’s free offer of his friendship, which men and women are free to accept or reject. Mr. Novak quoted Jefferson: “The God who have us life, gave us liberty at the same time.”

After the events of September 11, 2001, Mr. Novak said, the question arose of whether Islam, like Christianity and Judaism, is compatible with liberty. In particular, he asked, is Islam compatible with democracy? Mr. Novak said there are six or seven reasons to believe the answer is no, and another six or seven to believe the answer is yes. “Let me deal with the bad news first,” he said.

First, he said, a political sect of violent Islamic extremists insist that democracy and Islam are not compatible. Second, Islamic teaching and tradition, while often wise and reasonable, “weighs in heavily on authority’s side,” commonly emphasizing Allah’s arbitrariness, will, and command more than his understanding, reason, and lawfulness.

Mr. Novak pointed out that in all cultures, demoralized young males are the significant source of social unrest. The high disproportion of these young males in Muslim populations today, combined with vast unemployment and lack of opportunity, proves to be another negative. Other reasons militating against democracy’s chances among Muslims include “the spiritual emptiness of Western secular states,” which dismays Muslims, and the long buildup over centuries of “ressentiment” by a proud culture “who were once the most glorious on Earth” but who had suffered defeats.

Mr. Novak next turned to reasons for hope, the first being the “Via Negativa.” Painful lessons of the last century – Baathist terror, the secret police, the religious police, and so forth – may prompt Muslims to seek a better life for their children while continuing to be devout. Noting the millions of Iraqis who held their purple fingers aloft to Abu Musab al-Zarqawi with pride, Mr. Novak – in a humorous aside – recalled the country and western song title “She Got the Ring and I Got the Finger.”

A second reason for optimism, Mr. Novak said, is that Islam is a religion of reward and punishment – like Judaism and Christianity. “Every religion of reward and punishment is implicitly a religion of liberty.” In the past year, Mr. Novak said, more articles and books are said to have been written on Islamic democracy than in the entire previous century.

A third reason for optimism, Mr. Novak said, is that more Muslim intellectuals are working abroad in democratic nations than at any prior time. They have learned, he said, by experience, to combine a democratic public life with a devout Muslim one. Fourth, television, cell phones, and the Internet provide new self-images and expectations: “While much of what they see on television offends them, much also inspires them,” he said.

Mr. Novak offered other reasons within the Muslim experience that may be of use in forming democratic habits, such as Allah bestowing dignity even on the humblest individuals. Also, Muslim political thought is increasingly taking account of the great diversity among Muslim regimes. Last, Mr. Novak struck a Hayekian chord by noting the excellent commercial habits that Muslim cultures have developed over the centuries. Given the right economic system and incentives, Mr. Novak said, “a flood of opportunity” would alter the future horizons of the young.

Among those in attendance were Herbert London of the Hudson Institute, sitting with Commentary Editor Neal Kozodoy; Naomi Schaefer Riley, author of “God on the Quad”(St. Martin’s Press); a former congressman, Herman Badillo; and Manhattan Institute senior fellow Walter Olson.

In his talk, Mr. Novak recalled that in 2003 he had estimated the chance of democracy being launched in Iraq at about 40%. During the question-and-answer session, audience member Peter Anderson asked if that percentage had changed.

Mr. Novak stayed with his initial estimate, referring to his “Eastern European pessimism.”

But the concluding lines of Mr. Novak’s talk that evening offered this hope: “Solzhenitsyn once wrote that the idea of truth is more powerful than all the arms in the world, and what he wrote seemed in 1977 so unlikely of realization – and yet we saw the Soviet tanks halt before flowers held by civilians in 1991.”

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While on the subject of Hayek, I will share with you a story that is told by the editor of the Sun. Back in the editor’s Hong Kong days, he was preparing to review a book called “Wealth of Nations in Crisis,” whose author, Ronald Nairn, had told the editor that the great Hayek had privately praised the book. The editor wanted to mention Hayek’s opinion but didn’t want to take the fact from the author. He heard, however, that Hayek was visiting a professor in California, where, on the editor’s next trip to New York, he arranged to stop over and meet the great man. The professor turned out to be a hospitable fellow who had a capacious living room-dining room combination, and after dinner at one end with some guests, the editor and Hayek retreated to the far end for a conversation. Hayek had just finished confirming his high opinion of the Nairn book when suddenly, he clapped his hands over his mouth and nose, slumped onto the couch, and began coughing and hacking in a fashion that alarmed the editor. He raced to the far end of the room to alert his host, only to be told, “Don’t worry, he’s just taking his snuff.”