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Keynes vs. Hayek In Rap: Rounds One and Two

Jim Prevor’s Perishable Pundit, May 2, 2011

Our piece, Is Locally Grow Produce “Worth It”, argued that the push for promotion of “locally grown” as a public policy did not stand up to basic economic scrutiny, a point we emphasized by quoting extensively from Nobel Prize winner Paul Krugman’s essay titled, Ricardo’s Difficult Idea.

Of course, economic literacy is important for everybody in a democracy, as we all have the opportunity to influence public policy through our votes and by reaching out to our elected representatives. We wanted to share two absolutely terrific rap videos that attempt to delineate the differences between two economists: John Maynard Keynes and F.A. Hayek.

F.A. Hayek and John Maynard Keynes
Round I
“Fear the Boom and Bust”

 

F.A. Hayek and John Maynard Keynes
Round II
“Fight of the Century”

The inside joke of the pieces is that, although these are ideas that have been in contention for a long time, it really is not the case that there has been a big debate between the two going on all this time. Lord Keynes was the celebrity and you catch that in the videos at various places where Keynes is treated as a rock star, and the more scholarly Hayek is an unknown. Even at the end, the media is all around Keynes, not Hayek. Hayek’s ideas, and those of his compatriots in the school known as Austrian Economics, though for a moment in the 1930s in deep contention with those of Lord Keynes, were marginalized. 

Hayek got a break when Reader’s Digest condensed his most readable work, The Road to Serfdom back in 1945. At the time, Reader’s Digest had a circulation over 5 million and the condensed version, which you can download here, made Hayek a celebrity in America. If you have never read it, it comes highly recommended.

By 1971 Richard Nixon, the supposedly rabid conservative, took America off the gold standard and declared “I am now a Keynesian in economics,” which is popularly portrayed as him declaring, “We are all Keynesians now” — a line used in one of the videos.

Already, though, it was becoming clear to professional economists that Keynesian models were incomplete and unable to address the stagflation of the 1970s. By 1974, when Hayek received the Nobel Prize in economics, his ideas were already being paid new attention.

By 2010, conservatives in America began seeking to popularize alternatives to the Keynesian inspired stimulus plans and so started talking about Hayek. By June, Hayek’s The Road to Serfdom, a 66-year-old book, had become the #1 seller on Amazon.

The videos mention many key phrases. F.A. Hayek wrote a book called, The Fatal Conceit: The Errors of Socialism, and the video also mentions his Noble Prize lecture titled, The Pretence of Knowledge.

Keynes was destined to dominate in part by dint of personality but also because of the way democracy often functions.

Keynes was always ready to step in after a bust to try to solve the problems. Hayek was more focused on how to create conditions that avoided artificially inflated bubbles that were bound to burst. But in democracies, the constituency is small for those who want to temper exuberance and large for those who would like to be bailed out when things go wrong.

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