Keynes Versus Hayek for Hipsters

Hip hop economics

March 30, 2010

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Eyes have been glued to the U.S. health insurance debate. Yet, as divisive as that has been – quite curiously from a Canadian point of view – there’s a far more fundamental debate raging in the economic precincts to our south, not so much about the size of government but the utility of government  at all – or at least stimulus spending.

That debate is pitched on liberal versus libertarian lines. Now it has a YouTube presence, pairing F.A. Hayek’s “malinvestments” with John Maynard Keynes’s “liquidity trap.”

The video was written by a George Mason University professor well known in libertarian circles, Russ Roberts.  But it was endorsed by noted Keynes biographer Robert Skidelsky. And, it got annotated on DailyKos,a liberal website. It scores high marks for accuracy (as well as for rhymes). As Daily Kos notes:

“Keynes and Hayek are the archetypes of two very different schools of economic thought. Keynes was a leading proponent of interventionist government policies. His ideas influenced, and often drove, economic policies in Western nations from WW II through the late ‘70s. In 1942, for his service to Britain, he was elevated to the peerage and become the First Baron of Tilton.

Hayek was the leading voice for free markets and against collectivism. He helped lift the Austrian School of economics from its mid-century obscurity. He described how spontaneous order can emerge from the uncoordinated actions of billions of people and how prices help society best use the local knowledge available to individuals. His ideas, with a little help from Milton Friedman and ‘70s-style stagflation, overturned Keynesianism in the early ‘80s, at least temporarily.

Hayek won the Nobel Prize in Economics for his efforts, but it’s Keynes who’s on top today.”

He’s not quite on top in the video, however. The video illustrates what Nobel Economics prize winner Paul Krugman once called the “hangover” theory of recession favoured by Austrians. Krugman of course is a leading neo-Keynesian, constantly sparring with proponents, not just of Austrian economics, but also the Chicago school, including such doyens as fellow Nobelists Gary Becker and Robert Lucas who are strongly critical of deficit spending.

Krugman accuses them of a panglossian belief in efficient markets. Maybe he could use a little help from YouTube.

How about: “The Night Chicago Died.”

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