Hayek and Keynes Debating in Wonderland

by Thomas McQuade

Here’s what Alice might have recited to the Caterpillar, had Charles Dodgson been a 20th century economist of sorts:

You are old, Maynard Keynes, and your theory’s askew,
It’s easy for one to see through it –
Yet everyone thinks that you’ve said something new.
Just how did you manage to do it?

In my youth, said the sage, I dabbled in stock,
For serious profits contesting,
And it wasn’t too long but I saw what a crock
Was the classical take on investing. Continue reading

Scientism in the Way of Science

by Gene Callahan

I repeatedly find attacks on positions in the social sciences made based on extremely limited and, frankly, antiquated views of how the physical sciences proceed. I will give one example from a rightist criticism of a leftist view, and one that is a leftist criticism of a rightist view, to illustrate that my point has nothing to do with ideology — or perhaps, that it has to do with the way ideology can lead one to embrace flimsy criticisms of other’s positions.

The first excerpt is from Hunter Lewis’s book, Where Keynes Went Wrong:

“In chapter 15, we saw how Keynes wrote N = F(D), which means that employment, denoted N, is a function of demand. Demand however is defined as expected sales, not actual sales. We noted that expectations are not a measurable quantity and thus do not belong in an equation.”

Well, one way to measure these expectations would be to walk around and ask the entrepreneurs “How much do you expect to sell this year?” then total up those amounts. Why in the world this would not be a fine measurable quantity is unclear. Continue reading

Microfoundations are not a “Morality Tale”

by Mario Rizzo

 

In his column today in the Financial Times the often-excellent Martin Wolf drops the ball. He endorses the view which he associates with J.M. Keynes “that one should not treat the economy as a morality tale.”  

The third and most important lesson is that one should not treat the economy as a morality tale. In the 1930s, two opposing ideological visions were on offer: the Austrian; and the socialist. The Austrians – Ludwig von Mises and Friedrich von Hayek – argued that a purging of the excesses of the 1920s was required. Socialists argued that socialism needed to replace failed capitalism, outright. These views were grounded in alternative secular religions: the former in the view that individual self-seeking behaviour guaranteed a stable economic order; the latter in the idea that the identical motivation could lead only to exploitation, instability and crisis. ……

This same moralistic debate is with us, once again. Contemporary “liquidationists” insist that a collapse would lead to rebirth of a purified economy. Their leftwing opponents argue that the era of markets is over. Continue reading