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Hayek vs Keynes at the London School of Economics

In front of an admittedly pro-”Austria” crowd at the LSE, it seems that academics defending the free market views of the late F.A. Hayek managed to fairly heavily beat those speaking up for JM Keynes.

This may not amount to much, but what I think these things accomplish is to remind the defenders of people such as Keynes (such as Lord Skidelsky, his biographer), that there are now hundreds, in fact thousands, of smart young economics and politics graduates and undergraduates who regard, say, Keynes and other economic interventionists, as wrong. Some of these people will become teachers and lecturers themselves, or, if they want to make serious money, work in banks and the like. Slowly but surely, all those people teaching stodgy, wrong Keynesian ideas are getting older and greyer and newer people with other ideas are taking over, however slowly at first. This LSE debate is the sort of event that makes me think that while the 2008 financial crash might be seen, in one way, as a supposed setback for “unregulated capitalism” (yeah, right), it has also pushed attention on ideas that got out of focus in the lazy, fat years of the dotcom boom and the early parts of the past decade. (And then of course there are all those tens of thousands of book sales of Atlas Shrugged, etc).

Libertarians and other non-socialists like to moan how our places of Higher Learning have been gradually taken over by people with bad and wrong ideas. We need, I think, to realise that that argument can cut both ways. People with good, insightful ideas can also enter these institutions, however slowly at first, and make a key difference. I think this is happening more than people realise. I know that optimism is deeply out of fashion these days. Wallowing in despair is, in my view, a cop-out.

13 comments to Hayek vs Keynes at the London School of Economics

  • Remember, most of the people who think they are Keynsian’s haven’t read or fully understood his life’s work.

    These people take from his work what they need to justify their own beliefs (usually pump-priming) and then ignore all of the rest or extrapolate pump-priming into ‘Spending by the State is always Stimulus’.

    As Peter Clark said in his book “Keynes: The Rise, Fall, and Return of the 20th Century’s Most Influential Economist” upon visiting a group US Keynsians in 1944 – “I was the only non-Keynesian there“.

    I am not a Keynsian, I believe the Austrian School based upon freedom of the markets is the only way to generate the necessary growth needed in the West.

    The problem is that Keynes is not that 2-dimensional either. If you read much of the body of his work, even with hindsight, it has validity (not all of it).

    Most of the Keynsian issue is down to personal interpretation by collectivists, not the actual work of Keynes himself – although some of his ideas were flawed a lot of it is perfectly straight-forward.

    Unfortunately, it is the straight-forward aspects of Keynes (like how you should pay down debt when the economy is in surplus) that gets conveniently forgotten.

    Give me the no nonsense plain speaking of Hayek any day.

  • RRS

    As far as institutions of “Higher Learning” are concerned, we might reflect on how so many of the “Think Tanks” came into being as Academe has been infested with its present level of ever-increasing mediocrity.

    For some time to come, for the objectives of those who want to provide others with a more open learning forum, it will be best not to try to occupy any part of the infested “sanctums.” Rather, build upon the resources of the strongest of the Think Tanks, the “smaller” independent schools, and a new basis for primary and secondary education.

  • Laird

    John Galt, with regard to your comment that Keynes “has validity”, I recommend that you read “Where Keynes Went Wrong”. It’s a thorough deconstruction of the man’s extensive litany of idiocies. If he has any “validity” it is only by happy accident.

    As to the main point of this post, it’s a nice thought that all those young economics students will someday occupy positions of influence and help to throw off the yoke of Keynsianism, but unfortunately that doctrine meshes too perfectly with the goals of power-mad politicians to be discarded that easily. We’ve been down the “Keynsianism is dead” route before, but it invariably rises from the grave to consume more brains. So far no one has been able to permanently drive a stake through its heart, and I doubt that anyone ever will. With proponents such as Paul Krugman (the poster boy for articulate ignorance) I fear it will be ever among us.

  • And even if John Galt above is right, it doesn’t really matter: what matters is what all those people in positions of power actually believe – which is utter nonsense. You can call it The New Keynesianism, if you like.

  • Ian Bennett

    This may be of interest in light of Johnathan’s second paragraph. In summary, when a vocal minority reaches 10%, it rapidly becomes more effective.

  • Then let me rephrase – instead of “it has validity (not all of it)”, then let me say “it has some measure of validity, but a lot of it is wrong”.

    I am not trying to defend Keynes so much as point out that those who say they are Keynesian’s REALLY AREN’T.

    They are just collectives using the shadow of Keynes to mask their own greedy neo-Marxist ambitions.

    Is that enough clarity or would you like some more?

  • Laird

    That works for me, John.

  • Laird

    Very interesting article, Ian; thanks for posting it. Note that it’s not a “vocal” minority, but rather a committed minority whose views are inflexible, which creates a “tipping point” at 10%.

    That is indeed apropos of Johnathan’s second paragraph. A bit off-topic, but might it also be relevant to the issue of the growing Muslim minority in Europe? Specifically, when that minority (which is, almost by definition, committed and inflexible in its views) attains 10% of the population, does this article suggest that it will relatively rapidly attain dominance?

  • I am not trying to defend Keynes so much as point out that those who say they are Keynesian’s REALLY AREN’T.

    They also call themselves ‘liberals’, ‘anarchists’, ‘freedom fighters’, ‘moderates’ – need I go on? Collectivists appropriating the language and distorting facts to use to their advantage – what next, I ask?

  • We should also remember that misguided or not, Keynes effectively gave his life for this country to obtain a massive postwar loan from the US at an incredible rate of interest that helped re-establish Britain after it was decimated in the Second World War.

    My only complaint is that the initially reasonable approach taken by the Beveridge Report into the foundation of the UK’s Welfare state was manipulated by politicians from an affordable fully-funded insurance style scheme to the bloated, politicized, ponzi scheme we see today.

  • Paul Marks

    The Keynes versus the Keynesians argument.

    Mrs Thatcher used to argue this – and so did a lot of other good people.

    However, I did not believe it as a young man (from my own reading of Keynes) and I still do not.

    My own view of Keynes was that he was no good – both that he was no good at economics, and that he was a no good in moral terms.

    For a recent defence of this point of view see “Where Keynes Went Wrong” by Hunter Lewis.

  • Paul Marks

    An example of J.P.s last pont is the University of Alberta Calgary.

    A govenment university – but a some free market people (of various sorts – they manage to conexist and cooperate) have posts there – and have managed to keep them.

    They have also managed to influence both Alberta and Canadian politics.

    So it is possible – but all the institutional factors make it incredibly difficult.

  • Paul Marks

    I forgot John Galt’s Welfare State point.

    In every country on Earth that has introduced these schemes the cost has grown out of control – many times what was predicted when they were introduced.

    I do not believe that the reason for the British cost increases are to be found in politicians perverting Lord B.s proposals.

    On the contrary, I believe that the fact that this has happened everywhere else also, indicates that there is something wrong with the basic concept itself.