Cringeworthy: Krugman on Hayek

For the record, I agree 100 percent with Daniel Kuehn over what parts of Krugmans’ recent posts people should focus on the most. But, I just couldn’t help looking past Krugman’s retelling of the Hayek v. Keynes debate,

Or think about the economics rap video of Keynes versus Hayek everyone had fun with. Never mind that back in the 30s nobody except Hayek would have considered his views a serious rival to those of Keynes; the real shock should be, what happened to Friedman?

It’s true that framing Keynes versus Hayek in the same way as Barcelona versus Real Madrid (or Boston versus L.A., I guess) is misleading. There were many other well-known and important economists at the time who had the same, or even more, weight than Hayek. Names that come to mind: Hawtrey, Cassel, Kahn, Hicks, Robinson, Robertson, et cetera.

But, none of this takes away from the fact that Hayek’s views were serious rivals to those of Keynes, and that they were considered so by many of their peers. Otherwise, Keynes wouldn’t have drafted Sraffa into his debate with Hayek, and Hayek wouldn’t have received so much attention from Kaldor, Hicks, Knight, Pigou, et cetera (yes, the list does go on). In fact, it was expected of Hayek to stand as a significant intellectual opponent to Keynes, because this is one of the major reasons why Robbins had invited Hayek to the LSE in the first place. Finally, Hayek made such an impression on his peers that, around the time that Hicks wrote his reflections on the IS/LM model, Hicks was also involved in developing his “Neo-Austrian” theory of capital (Capital and Time).

10 thoughts on “Cringeworthy: Krugman on Hayek

  1. valeriekeefe

    Above we see the author trying to make their readers intuit a somewhat snarky comment by Krugman about how Hayek wasn’t very popular in the 1930s with the idea that Hayek was forever an unregarded crank. You have to be a bad reader or assume that your audience consists of same to make that argument.

    Reply
    1. JCatalan

      No, I’m really saying that Hayek was one of Keynes’ major serious intellectual opponents.

      [Edit: And, yes, I do think that Krugman is calling Hayek a crank. How else can you interpret, “Never mind that back in the 30s nobody except Hayek would have considered his views a serious rival to those of Keynes” (emphasis mine). Isn’t accusing Krugman of being snarky worse than accusing Krugman of being wrong on his interpretation of history?]

      Reply
      1. valeriekeefe

        “Isn’t accusing Krugman of being snarky worse than accusing Krugman of being wrong on his interpretation of history?”

        Not really. Comes with being a reasonably entertaining writer on economic issues. And given that Krugman has previously been at pains to separate an economist’s popularity from their analysis, you can interpret through the lens of this excellent piece he wrote on the Malthusian trap:

        http://krugman.blogs.nytimes.com/2009/07/01/the-malthusian-insult/

        Reply
        1. JCatalan

          This has nothing to do with separating an economist’s popularity from their analysis. I’m not saying Hayek was popular in the 1930s. I’m saying his ideas were believed to be serious contenders to those of Keynes.

          Reply
  2. Stadius

    Of course Hayek and his ideas were taken seriously, at first. To an extent because he was a guest of the influential LSE economists, but essentially because they were largely new at the time (in England, at least), and all new ideas merit consideration and discussion. Hence all the discussion you mentioned.

    Fundamentally though, after this process was finished, it was abundantly clear who had won the day, and it certainly wasn’t Hayek. The adherents of Hayek and the Austrians have, since then, been cranks, and you certainly won’t find many of them among serious economists today*. So there’s an element of truth in both yours and Krugman’s posts.

    *I’m reminded of a documentary on Keynes that I watched last year by the BBC. The BBC, as a publicly-funded broadcaster, are rightly supposed to provide impartial analyses; increasingly, however, this simply means that for all the ‘left’ commentators and viewpoints they air, they have to air opposing ‘right’ commentators and viewpoints, no matter the increasing radicalisation or intellectually bankruptcy of the latter. In this particular case, this meant that pro-Keynes commentators (among them such weighty figures as Stiglitz, Krugman and Skidelsky) were followed by right-wing hacks, Thatcher’s former Chancellor, and charlatans from the Adam Smith Institute and the Institute of Economic Affairs. The problem here, of course, is that to Joe Public, the likes of the Institute of Economic Affairs undoubtedly sound like they must be quite authoritative, which creates a thoroughly misleading impression. This is a strategy which, I must say, the cranks have used to great effect on both sides of the Atlantic.

    Reply
    1. JCatalan

      Stadius, I get what you’re saying, and I think you’re half right: Hayek obviously did not win the debate with Keynes. He failed to persuade his peers. But, this isn’t what Krugman wrote, so I don’t know how you derive that he’s half right, because he’s not — he’s totally wrong. (I say you’re half right, because I disagree that “the adherents of Hayek and the Austrians have, since then, been cranks.” I don’t think this is remotely true.)

      Reply
  3. Nicky Glenn

    Paul Krugman is a Keynesian version of Rothbard. Obviously to a larger scale since he is part of a orthodox school.

    Reply
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