A cool rap - updated

A cool rap that tries to cover the difference between Keynseian intervention and Hayek's faith in markets.



The pity is that while it neatly outlines some of the differences it doesn't really get to the real point; this isn't either/or, they are both right.

The Keynseian approach fell apart in practice because Governments got addicted to intervention, there was too much perpetual pump priming. The free market fell apart from an artificial goal of keeping interest rates too low, creating Hayek's (and Minsky's) debt problem.

Update: Many thanks to reader Tim for alerting me to this piece from The Guardian that makes much the same point about the error in configuring the issues as a dichotomy between Keynesian and non-Keynesian views.

Interesting to note the emphasis on the "international" solutions. That is the case but there are a few European countries that haven't got a clue how to save themselves from their aging population and pension problems. Just how much we have to be thankful to the Hawke-Keating Government is really not realised. In this case it is what was achieved for national saving through compulsory superannuation.

Novae Meridianae Demetae Dexter delenda est

Hayek Surprise

That sounds like a recipe for a new desert I know, but really it is about economist/polemicist Friedrich Hayek. Hayek is labelled by many as the founder and genesis of the revival of extreme liberalism that I refer to as "economic libertarianism".

The description of Hayek at the History of Economic Thought website states:

Hayek turned in 1944 to the political arena with his Road to Serfdom, a polemical defense of laissez-faire - the work for which he is best known outside academia. His subsequent political activities include the foundation of the libertarian "Mont Pelerin Society" in the 1940s.

It is instructing to mount against this the following quotes from pages 18 and 19 of The Road to Serfdom.

"Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez-faire."

"No sensible person should have doubted that the crude rules in which the principles of economic policy of the nineteenth century were expressed were only a beginning, that we had yet much to learn, ...There were many obvious tasks, such as our handling of the monetary system, and the prevention and control of monopoly, and an even greater number of less obvious but hardly less important tasks to be undertaken in other fields, where there could be no doubt that the government possessed enormous powers for good and evil;"

So at least in his introduction Hayek doesn't advance the view most commonly ascribed to him. Let us see how the book ends (another day).