Daniel Kuehn is teaching a history of economic thought course next semester and he’s interested in including the Austrians. An ideal history of thought class would probably require two semesters, but nobody (as far as I know) has that privilege. There’s a lot of material to cover and including the Austrian School can be difficult, unless you’re teaching an Austrian program — Daniel isn’t. He wants to introduce the Austrians in his lecture on Keynes, but actually I don’t think that’s such a good idea. Instead, I would introduce students to one, and only one, Austrian contribution: Mises’ critique of socialist calculation.
I assume that Daniel wants to offer some coverage on the debate between Hayek and Keynes. There’s a number of reasons I don’t support this approach. First, Hayek’s critique of Keynes is complicated and summing it up, without distorting the picture, can be very difficult. Throughout the debate, including when Hayek first reviewed Keynes’ two volume A Treatise on Money, Hayek emphasized the importance of capital theory. There simply isn’t room in a one-semester history of thought course to teach Austrian capital theory, and that assumes the professor is willing and able to sum it up and that the students are able to understand it. While I trust Daniel more than most other non-Austrians (in doing a good job of introducing the Austrians), I just don’t think there is anyway of depicting the Keynes–Hayek debate as anything but as a battle between pro-fiscal stimulus and anti-fiscal stimulus. I don’t think this is fair to any side, but at least the Keynesian position is better explained in intermediate macroeconomics. Hayek, on the other hand, doesn’t have that privilege, so students are likely to accept the simplified caricature.
Second, the relationship between Hawtrey and Keynes may be more interesting. This is probably closer to the more important aspects of the current debate: monetary v. fiscal policy. One could note that Hayek, in Prices and Production, advocated stabilizing nominal income. But, if you’re going to frame Hayek within the “monetary side,” then you might as well teach Hawtrey instead. There’s also the advantage that an article on the differences between Hawtrey and Keynes was written by another major economist who had a close relationship with both (and Hayek, to boot!): John Hicks’ “Hawtrey,” in Economic Perspectives.
Instead, the one Austrian thing I would teach is Mises’ work on rational economic calculation under socialism. I don’t think there is anything Austrian that has been more influential than this. It has an advantage over capital theory: it’s easier to teach and easier to understand. And, it leads the class right into the 1930s, since it was during the 30s that the debate really became heated. It was during the 30s that economists like Knight, Lange, Hayek, Hawtrey, Dobb, and many others contributed to the debate. It was Mises’ work that helped provide a stronger basis to the formalization of price theory and the concept of price-led economic coordination. And, I think the socialist calculation debate ought to be taught to students, whether it focuses on the Austrian contribution or not.
You can even transition to Keynes–Hayek by arguing something along the lines that Hayek extended the Austrian contribution to the problem of capital. Hayek thought that fiscal stimulus and excessive monetary stimulus can distort production, leading to further economic problems. You can argue that what Hayek didn’t realize is the possibility of a macroeconomic market failure, where the rate of interest is higher than the natural rate, leading to underinvestment. If this were developed into a lecture, I think this would be a great way of introducing the Keynes–Hayek debate. Austrians, including me, would say that this isn’t exactly right (it’s not that Hayek didn’t realize the macro market failure, it’s that he didn’t agree that it existed), but this is just Austrians being pedantic. I think it’s accurate enough and it gives Hayek’s position a sense of complexity, so that students genuinely interested in the subject don’t just dismiss him.
As reading material, I suggest Boettke’s “Economic Calculation: The Austrian Contribution to Political Economy” (it’s a SSRN link, but it downloads a copy of the chapter in Advances in Austrian Economics). Another great thing about teaching the calculation debate is that it also leads straight into Hayek’s work on the knowledge problem. And this, of course, goes with the aforementioned link between calculation and the debate with Keynes. But, if I lectured on the Keynes–Hayek debate and Hayek’s work on knowledge at all, it would be only as a conclusion to the main lecture on the socialist calculation debate (or, I’d move the part on Keynes v. Hayek to the main lecture on the interwar debate, and make it secondary to Keynes v. Hawtrey).
Tangentially, if I were to teach my ideal class on the history of thought, I’d probably throw out all pre-marginalist thought. It’s not that it’s unimportant, because that would be blatantly wrong. If I taught it at all, it would make up maybe two weeks of the course: Smith and Ricardo. I might assign a reading assignment on pre-Smithian thought (something on Cantillon and the Mercantilists). But, the bulk of the class would focus on the history of thought between ~1870 and 1945. That way I could focus on the more relevant background for the state of the science today. Like with classical economics, I might cover some developments after 1945 in the final weeks, and very superficially. But, a lot of this is already implicitly taught in undergraduate intermediate macroeconomics courses (i.e. monetarism v. Keynesianism). Some major themes would be the subjective theory of value, the calculation debate, early developments in price theory, and the inter-war period. This latter set of lectures would include the debate on counter-cyclical policy (Hayek–Keynes–Hawtrey) and the introduction of economic dynamics, including Hayek’s work on knowledge and non-stationary equilibrium. Maybe I’m overshooting for an undergrad class.
But, if I were teaching a non-ideal history of economic thought class, if I were to choose one Austrian theory to showcase it would be that on economic calculation under socialism. This is the kernel of most other Austrian theory — it all flowers out of this “calculation” seed. It certainly gives students a better idea of the school than lecturing on Hayek’s debate with Keynes.