Transcript: Firing Line – Hayek meets Buckley

Friedrich Hayek discussed Keynes, unemployment, general rules, and the notion of “society” with William F. Buckley, Nov. 7, 1977.  Read the PDF transcript here.  (Note well — the transcript contains a number of mistakes.)

Listen to Hayek on Keynes:

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From the transcript:

“Lord Keynes .. was operating [in the 1930s] in a very peculiar situation.  Now in Great Britain a successful attempt was made after World War I — which brought a good deal of inflation — to bring prices down to the pre-war level.  Prices came down but wages did not, so you had in the 1920s a position in Great Britain where wages were internationally too high and Britain had become noncompetitive on the world market.  The problem in Great Britain was to make Britain competitive again and it was clear that this required a reduction of real wages.

Notice these real wages had been artificially increased by increasing the value of the pound.  So because the pound was par to its former level, people receiving the same wartime wages, or inflated wages, could buy much more.  Wages had not come down.

Now his first argument was wages must come down.  Then the conclusion was that is politically impossible, so we must find another way, instead of getting money wages down, we must depreciate the pound so that given money wages should correspond to a lower level of real wages.

And then by a curious intellectual somersault, I would almost say, he led himself to believe that even bringing down money wages was not any use.  It involves a very complex economic argument and all he said, concluded, was that, a, well, we must inflate, in short.”

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