Arthur Seldon, who has died at the age of 89, helped to found the free-market Institute of Economic Affairs which became the intellectual progenitor of the Thatcher revolution. Seldon challenged thepost-war Keynesian consensus on the welfare state and played a crucial part in creating a centre-right position rooted in economic liberalism. Although not naturally a conservative - he always called himself an old liberal - he had a great influence on Margaret Thatcher and, arguably, on Tony Blair. Many of Thatcher's policies originated in Lord North Street, Westminster, the home of the IEA. On his 80th birthday Baroness Thatcher paid tribute to him for championing free enterprise and the free market. His "visionary work", she said, had "inspired much of our success in the 1980s".

Seldon set up the IEA with Lord Harris of High Cross in 1957 when market economics were unfashionable. From obscurity throughout the 1950s and 1960s, Seldon and a distinguished cadre of writers managed to influence a generation of economists and writers into a fresh way of thinking on the market and on limited government. He also introduced them to such "foreign" economists as Milton Friedman and Friedrich Hayek, the free market econmists who became Nobel laureates.

Born in 1916 into relative poverty, the son of a Jewish immigrant family in the East End of London, his parents died in the 1918 flu epidemic and he was adopted by a cobbler and his wife. Educated at Raine's Foundation School, he won a scholarship to the London School of Economics where he came under the influence of Hayek, a recently appointed professor. He quickly learnt that almost everything the government does, the market and the private sector could do better. Most important, he realised that, if you want to advance the interests of the working class, capitalism always beats the government. This was the beginning of a life-long campaign against state welfare. From his earliest days he understood that spontaneous working class organisations such as the Friendly Societies provided better health care, old age pensions and unemployment benefit than the vast state bureaucracies that replaced them. Seldon's first paper for the IEA was a stunning piece on the inequities and inefficiencies of the state pension system: a subject that was to bother him all his life. As editorial director, he quickly set about recruiting some of the best names in free market ideas, teaching them how to write clear, concise English.

One of the many reasons for the new right's eventual triumph over the old left was the clarity, as
well as the perspicacity, of its arguments. Someone very receptive to Seldon's approach was Milton Friedman, who had a genius for conveying complex ideas in lucid prose, and he led the IEA's onslaught on Keynesianism from the early 1960s. Always anxious to keep his readers up to date with new thinking, Seldon quickly saw the significance of American "public choice" theory which was emerging in the 1960s. He was a natural anarchist who delighted in offending the welfare establishment. This reached its apogee in 1968 with the publication of The Price of Blood which presented the shocking idea that hospital shortages would be solved if blood were bought and sold like any other wanted good. Seldon was a prolific writer. His best work was probably on welfare in which he relentlessly exposed the denial of choice and the dull inefficiency that the state produced in health and pensions.

He and his wife, Marjorie - the couple had three sons - were indefatigable proponents of Friedman's idea of vouchers in education. Perhaps his finest work was the sadly unnoticed book Capitalism (1990). Here he celebrated the market system's efficiency but also its contribution to human freedom. He was working to the end - against the state. His seven volume works are being completed by the IEA. Only then will a full evaluation be possible.

Norman Barry

The author is professor of social and political theory at Buckingham University