DUFF & NONSENSE!: A real heavy-weight match: Keynes vs. Hayek

A real heavy-weight match: Keynes vs. Hayek

Sorry, sorry, but my e-pal Hank sent me this link in 'Comments' and because I thought it was very witty and appropriate, I applied my usual high-tech skills, that is, clicking on every single button until something happens (did I ever tell you I served as a weapons officer on a nuclear sub?) in order to add it on at the bottom of my original post. Instead it has appeared at the top. Never mind, it's great fun, in fact, much better than my waffle! Thanks, Hank.

After the 'hand-bags-at-dawn' nonsense indulged in by two obviously brain-damaged boxers yesterday, I thought you might be interested in a real heavy-weight match. I am grateful to Brian Doherty of Reason.com for his review of a book by British journalist, Nicholas Wapshott: Keynes Hayek: The Clash That Defined Modern Economics. In it, the author attempts to score the 'contest' that took place between them over several rounds during the middle of the last century. Both were hugely influential but, from my less than expert eye, it seems obvious that Keynes was far and away the winner in terms of whose philosophy was applied the most by the most governments of the world.

I half-considered buying the book but Mr. Doherty is less than enthusiastic. He had assumed that the author would have considered whose economic theories would work best in our current and parlous economic condition but apparently he does not.

Wapshott does not ignore the present in favor of the distant past, although the bulk of the book’s narrative is set in the 1930s. But he seems to think his subjects’ contemporary relevance is best reduced to the big-picture conflict between government intervention (Keynes) and free markets (Hayek). Wapshott focuses on the disagreements the two had over political philosophy and practice rather than the technical specifics of their economics. Those political disagreements are important, but they arose from crucial differences in economic theory.

For example, Keynes believed that intelligent, well-meaning planners manipulating economic aggregates such as demand and employment can bring about a happy end to business cycles. Hayek, by contrast, insisted that individual decisions and imbalances between specific prices and demand, or interest rates and specific plans for long-term productive projects, are where the economic action is.

I cannot pretend to be an expert on either of the two distinguished subjects of this book although I am definitely more grounded in Hayek, judging by the number of his books on my shelves; but on the other hand, with the exception of a dozen or so years, I have lived most of my life under Keynesian regimes of one sort or another.

It strikes me that in any competition for the attention of government ministers, Keynes was bound to be a winner because his theories provided both employment and power to ministers! Hayek's philosophy, on the other hand, was quite specific in wanting to reduce the power of politicians and hand it back to people - dread thought! (Well, 'dread thought' if you are a politician!)

Were I to be banished to that mythical desert island with my eight records and just one book beyond the collected works of Shakespeare, I think Hayek's Law, Legislation and Liberty would be my choice. It's ages since I read it but I have just taken it down from the bookcase and it fell open to a page with one paragraph that begins thus:

Much confusion of this issue is due to a tendency (particularly strong in the Continental tradition, but with the spreading of socialist ideas growing rapidly also in the Anglo-Saxon world) to identify 'state' and 'society'. The state, the organization of the people under a single government, although an indispensible condition for the development of an advanced society, is yet very far from being identical with society, or rather with the multiplicity of grown and self-generating structures of men who have any freedom that alone deserves the name of society. In a free society the state is one of many organisations - the one which is required to provide an effective external framework within which self-generating orders can form, but an organisation which is confined to the government apparatus and which does not determine the activities of free individuals.

Yeeeees, well, you can see why the politicians and their bureaucrats sniffed at Hayek's propositions! Also, you can appreciate even more the intellectual courage of the one and only British prime minister who did her best to follow Hayek's philosophy.

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