Loosening the grip of Keynesian thought
There is a video doing the rounds at the moment that can be found on Youtube under the name, the “Keynes-Hayek Rap” although more formally titled, “Fear the Boom and Bust”. It has had a million hits and if nothing else it has brought economics into households that would never likely pay the slightest attention to issues in the history of economic thought.
Keynes is, of course, the author of the twentieth century’s most influential book on economics – although it might be noted that the economist who has been most influential on the economies of the twentieth century is more likely to have been Karl Marx. But Marx wrote in the century before. In the twentieth century, the laurel goes to Keynes.
Hayek was the counterfoil to Keynes in the economics world of the 1930s (although he lived on into the 1990s while Keynes died in 1946). During the 1930s Hayek spent a good deal of his time demonstrating that Keynes’s ideas were unsound, but strangely, and much to his own regret, he never properly dealt with the General Theory when it first appeared in 1936 and I’m not sure he did so even after.
The economics of Hayek is described as “Austrian”, a school of thought that originated in the 1870s. The Austrian School is the single largest segment of pre-Keynesian economic thought that remains alive today.
If you have not seen the presentation, you should. It lays out the differences between Keynes and Hayek in ways that are not only unimaginably funny, but does so with Hayek as the unmistakeable winner of the argument. A sure sign of the times that Keynesian economics is now very definitely on trial.
Meanwhile, but on an entirely related matter, I have just returned from presenting the Ludwig von Mises lecture at the Mises Institute in Auburn, Alabama. The Mises Institute is the centre for Austrian economic studies in the United States and my presentation was part of the Austrian Scholars Conference.
The Keynes-Hayek Rap provides a contrast of the theories and associated policies of Keynes and Hayek. At the Conference, on the evening before my own presentation one of the two producers of the video, John Papola, spoke on how it was made. You can watch his own presentation which is filled with insight not just into economics but into movie making as well. Quite a lot of thought and effort went into what is a tape of only just over seven minutes. John’s Mises Institute not-to-be-missed discussion can be found in the “media” section on the Institutes website here…
My presentation also dealt with the history of economics, but for me the relevant history was how Keynes ended up falsely accusing his classical predecessors of having no explanation for involuntary unemployment. Keynes then used this accusation as a vehicle to undermine the classical theory of the cycle with a theory of his own, a theory which pre-Keynesian economists had been virtually unanimous in recognising as fallacious.
If you are interested in what is a little known story in the history of ideas, which also discusses the pre-Keynesian theory of the cycle, my presentation is here…
The grip of Keynesian theory on governments, which gives them the authority to spend our money copiously, stupidly and in any way they please, is going to be hard to break. But the two presentations, as different as they may be in style and content, are attempts to explain why this most urgently needs to be done.