Keynes and Hayek revisited

Erik Kain 4 Comments

 

I’ve been thinking about this video lately, which is really quite excellent, and it struck me that the two economist-rappers are essentially not arguing at all – they’re simply talking past one another.

Keynes is talking specifically about what to do in an economic recession. Hayek is talking much more broadly about the economy itself. Keynes isn’t really arguing for central planning so much as he’s advocating an increase public spending to make up for the downturn in private spending. Hayek, on the other hand, is describing why central planners inevitably fail, and that government policies aimed at hitting full employment, for instance, might have unintended consequences.

These don’t strike me as exactly competing narratives so much as different narratives. Hayek doesn’t really answer the question about what he’d do to get out of the recession, he just moves back to the broader subject of the economy. And while I think the Hayekian take on the broader economy is correct, I’m left feeling short-changed on any ideas Hayek may have to actually spark recovery.

Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the editor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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4 Comments

  1. I’m very far from being an expert, but isn’t Hayek’s position (at least as summarized in the video) that recessions are part of the natural cycle and shouldn’t be mucked with at all (since we’re more likely to just make things worse)?

    • Yes, this is the Hayekian position here. The notion that government can substantively correct the boom-bust cycle is specific to Keynes, and Hayek is arguing that it doesn’t work that way.

  2. If you want to know what really happened in the original debate between Keynes and Hayek, my Keynes Hayek: The Clash That Shaped Modern Economics is published by W.W.Norton in October.
    Professor John B.Taylor of Stanford and the Hoover Institution says that: “Nicholas Wapshott brings the Keynes-Hayek fight of the 20th century back to life, making the clash both entertaining and highly relevant for understanding economic crises of the 21st century.”
    Sean Wilentz, Professor of History at Princeton, says, “‘Nicholas Wapshott’s Keynes Hayek is a smart and absorbing account of one of the most fateful encounters in modern history, remarkably rendered as a taut intellectual drama. Wapshott brilliantly brings to life the human history of ideas that continue to mold our world.”
    If you wish to read an extract, access: https://sites.google.com/site/wapshottkeyneshayek/

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