Hayek on Keynes

Let’s start with some quotes.  I’ll be updating this posting through the month.

Hayek on Keynes as an economist:

  • “His ideas were rooted entirely in Marshallian economics, which was in fact the only economics he knew.” (Collected Works, Vol. 9. p. 241)
  • “[H]is aim was always to influence current policy, and economic theory was for him simply a tool for this purpose.”  (Collected Works, Vol. 9. p. 248)
  • “Keynes was not a highly trained or a very sophisticated economic theorist.”  (Collected Works, Vol. 9. p. 242)
  • “his knowledge of nineteenth-century history and even of the economic literature of that period was somewhat meager.” (Collected Works, Vol. 9. p. 228)
  • “John Stuart Mill’s profound insight that demand for commodities is not demand for labour, which Leslie Stephen could in 1878 still describe as the doctrine whose “complete apprehension is, perhaps, the best test of a sound economist”, remained for Keynes an incomprehensible absurdity.” (Collected Works, Vol. 9. p. 249)
  • “[Keynes] was neither a highly trained economist nor even centrally concerned with the development of economics as a science.” (Collected Works, Vol. 9. p. 248)

Hayek on the nature of Keynes’ economics:

  • “[Keynes] was guided [in his theoretical efforts] by one central idea .. that general employment was always positively correlated wit the aggregate demand for consumer goods.”  (Collected Works, Vol. 9. p. 249)
  • “[Keynes] based his own argument on what may be called the assumption of full unemployment, i.e. the assumption that there normally exists unused reserves of all factors and commodities .. But the assumption that all goods and factors are available in excess makes the whole price system redundant, undetermined and unintelligible.”  (Collected Works, Vol. 9. p. 243)
  • “[Keynes started from] the naive assumption of a direct dependence of investment on final demand.”  (Collected Works, Vol. 9. p. 249)
  • “the determinants of employment other than final demand are the factors which Keynesian macroeconomics so fatally neglects.”  (Collected Works, Vol. 9. p. 250)
  • “The volume of investment is far from moving proportionally to final demand.  Not only the rate of interest but also the relative prices of the different factors of production and particularly of the different kinds of labour will affect it, apart from technological change.”  (Collected Works, Vol. 9. p. 250)
  • “This constant reallocation of resources is wholly concealed by the analysis Keynes chose to adopt.”  (Collected Works, Vol. 9. p. 251)
  • “John Stuart Mill’s profound insight that demand for commodities is not demand for labour, which Leslie Stephen could in 1878 still describe as the doctrine whose “complete apprehension is, perhaps, the best test of a sound economist”, remained for Keynes an incomprehensible absurdity.” (Collected Works, Vol. 9. p. 249)
  • “In the course of the years I had several occasions to discuss these issues with Keynes.  It became quite clear that our differences rested wholly on his refusal to question [Keynes' naive assumption of  a direct dependence of investment on final demand] .  On one occasion I succeeded in making him admit .. that in certain circumstanced, preceding investment might cause an increase in the demand for capital.”  (Collected Works, Vol. 9. p. 249-250)

Hayek on the Keynesians:

  • “It was [Keynes'] revival of this underconsumptionist approach [long preached by cranks and radicals] which made his theories so attractive to the Left.”  (Collected Works, Vol. 9. p. 249)
  • “some of the most orthodox disciples of Keynes appear consistently to have thrown overboard all the traditional theory of price determination and of distribution, all that used to be the backbone of economic theory, and in consequence, in my opinion, to have ceased to understand any economics.”  (Collected Works, Vol. 9. p. 243)
  • “the community of economists [has] forgotten much that had been fairly well understood before the “Keynesian revolution”.  (Collected Works, Vol. 9. p. 247)
This entry was posted in Keynes and tagged . Bookmark the permalink.

11 Responses to Hayek on Keynes

  1. Pingback: PrestoPundit

  2. Pingback: “Taking Hayek Seriously”

  3. Pingback: “Taking Hayek Seriously” « PrestoPundit

  4. Harold Ransom says:

    Greg, Your new site looks great. Your subject is so in vogue.

    My friends have lost lots of money in their investments, and their local, state and federal taxes keep going up. None of them have a clue of why it is happening.

    The problem “at hand” as seen by the government, administration and congress, is that government is not spending enough. Not one word has been heard about cutting government spending .

    Increased government spending and reducing government revenue by current policies is a continuing disaster for our national security and freedom.

    Dad 1/21/09

  5. Pingback: Hayek on Keynes « O Insurgente

  6. Pingback: Hayek on Keynes « O Intermitente (R)

  7. Hi Greg, good to see the site up again!

  8. John Brodbeck says:

    I have a 6 minute video clip produced by Hayek called Serfdom. It is a black and white clip that has only slides with subtitles and music, no announcer. But the copy I have appears to be cut off at the end. Does anyone know where I could get the untruncated version.

    Thanks

    John

  9. Pingback: Government Broadcasting Does Hayek vs Keynes

  10. Pingback: The Hayek vs. Keynes Rap — “Fear the Boom and Bust”

  11. The clearest proof that, ‘Keynesian’ ways of thinking had been fairly widespread in Britain and the USA before the General Theory appeared in 1936 is that Keynesian policies where conducted by the Hoover and Roosevelt during the 1930s, long before the General Theory was written.
    3. Hayek argues that all depressions involve a pattern of resource misallocation, including and especially of labor, particularly among higher order industries and lower-order industries. This misallocation of capital and resources is a result of the inflationary boom that brings about entrepreneurial errors induced by a false price signals that are cause by the distortion of the interest rates by the central bank and monetary and bank credit expansion. 4. According to Hayek, all attempts to cure depressions and recessions through deficit spending and cheap money, may work temporarily, but intensify the misallocation of resources, postpones the inevitable adjustment, and prolong the economic malaise .
    Source: All the Facts Behind The Hayek vs. Keynes Rap Anthem

Comments are closed.