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April 28, 2011

(Video) Fight of the Century: It's Hayek vs. Keynes, Round Two

Russ Roberts has produced a new Keynes v. Hayek video, which is well worth taking the time to watch immediately:

The security guard at the beginning is Duke University economist Mike Munger. It's a great performance, followed by a great line by Keynes, who says to Hayek, "I see you took a detour down the road to serfdom." He's referring to Hayek's book Road to Serfdom, in which Hayek says that government is taking us down the Road to Serfdom ... and it doesn't just mean that more of us must work for the government.

As John Stossel points out, It means that we are changing from independent, self-responsible people into a submissive flock. The welfare state kills the creative spirit.

[...] According to the Tax Foundation, 60 percent of the population now gets more in government benefits than it pays in taxes. What does it say about a society in which more than half the people live at the expense of the rest? Worse, the dependent class is growing. The 60 percent will soon be 70 percent.

Rep. Paul Ryan of Wisconsin seems to understand the threat: He worries that "more people have a stake in the welfare state than in free enterprise. This is a road that Hayek perfectly described as 'the road to serfdom.'"

Jeffrey Tucker provides some background for those who no little about the great debate that never actually happened:

The debate between J.M. Keynes and F.A. Hayek, both living and teaching in Britain in the 1930s, was one of the great debates of the century. Sadly, the charming globetrotter Keynes had the podium and the audience, to the point of influencing policy the world over even to the present day. Meanwhile, the quiet and studious Hayek never really did gain an audience. Like his colleague and mentor Mises, Hayek wrote in scholarly journals and was heard only by those with skeptical minds, people who doubted the theoretical and policy conventions and looked beneath the surface.

In one sense, then, the debate between these two was one of the most critical for the shape of the world over the last 75 years. In another sense, however, this debate never really occurred, for the Hayekian point of view has been systematically marginalized and kept at bay by the political and economic establishment ever since Keynes was prematurely declared the victor in the late 1930s.

The beauty of new media is its capacity for showing us what we otherwise might miss. Fear the Boom and Bust, a YouTube video made by producer John Papola and economist Russ Roberts, and backed by the Mercatus Center of George Mason University, turns this advantage to the point of genius, pitting Keynes and Hayek against each other in a rap that captures a reality few have fully understood until now.

[...] It is left to Hayek to restore reality to the discussion. He dismisses Keynes on the grounds that there is too much aggregation in his equations, which ignore human action and motivation. Hayek compares postrecession stimulus to drinking the "hair of the dog" to cure a hangover. He points out that there can be no prosperity without saving and investment, and he proceeds to school Keynes in the Austrian perspective.

Here's Round One:

Very much related: Today's GDP Report Perpetuates Myth That Imports "Subtract" from Growth [According to the prevalent (and incorrect) Keynesian view, rising imports depress economic growth by causing domestic demand to “leak” abroad.[

Posted by Hyscience at April 28, 2011 10:59 AM

• (Video) Fight of the Century: It's Hayek vs. Keynes, Round Two - Apr 28, 2011