Remember Round 1? Here now, the two economics heavyweights square off again, in spectacular rap-ified fashion:
You can find more related material here. It is the co-creation of Russ Roberts, who you may remember making some provocative arguments in our “What Would the World Look Like If Economists Were in Charge?” podcast.
And here‘s a Q&A with Roberts about the videos.
and 
. You can also watch it on 
When citizens fall into poverty in a recession or depression they have no capital to do what Hayek dreams of. To feed ones family a citizen will do anything including, steal, beg, borrow and in extreme poverty kill to survive. Citizens will not wait for a minority of creative types to create wealth.
The Canadian government in the 1930s did nothing for many years during the depression. In effect without knowing it they stayed out of the economy just like Hayek states, the result was that by the mid 1930s unemployment continued to accelerate, riots and massive unrest grew, finally with Canada on the edge of nation wide revolt the conservative government changed course.
Kaynes was wrong, spending dose not in itself create long term growth or wealth and yet Hayek could not see the other side of this coin, that sustained periods of unemployment and poverty create anger, despair and chaos.
The last time this was allowed to happened was in Europe and we ended up with communist and fascist dictatorship.
Kaynes theory short circuits this crisis outcome but offers no solution to debt.
Hayek cannot talk to the common citizen for all he offers is despair if that citizen dose not have talent or ability to become a creator of wealth.
With despair faith crumbles, no faith no fear, I will take what I want.
We all know were that leads.
Weren’t the unemployment and poverty that led to fascism in Europe also caused by the Weimar government going off gold and onto the printing press…?
Neither of these philosophies will work in thier pure state. One thing both philosophies don’t take in to consideration, along with Adam Smith’s Invisible Hand and all the other pure models, are human failings.
People are greedy. Some people are mean spirited. Governments want control. In the 1930′s Stalin confiscated most of the agricultural production of the Soviet Union to feed the city dwellers. When the farmers starved to death, there was no more food being grown leading to millions of people starving to death. This is going on right now in North Korea.
National governments also have an interest in full employment. It keeps the riots down, provides for reliable taxation and people don’t scrutinize the goverment as much.
One thing that the US government doesn’t do is let “Moral Hazard” take it’s course, obviating the Heyek philosophy. Another thing the US Government does is subsidize business it feels are valuable creating imbalance in the system by using the government as a super consumer.
On the Keynes side, the US Government uses deficit spending during both good times and economic down turns. So while the government is spending they are Keynsians. What are they when the deficit spend during good times? Neither Keyens nor Heyek are really respresented in the economy here. Only in a very shallow way are either implemented. Since neither are really represented, huge distrotions result in markets like exports, finance, employments etc. While it’s fun to pontificate about pure theories, we don’t seem to have a thoery that works in the real world.
Several things we have learned is that free markets require rules (regulation) to make up for human nature. Another is that you cannot continually spend your way to prosperity. At some point you have to let the markets work. I think this means both Keynes and Heyek are useful for maintaining a healthy economy.
If you want to know what really happened in the original debate between Keynes and Hayek, my Keynes Hayek: The Clash That Shaped Modern Economics is published by W.W.Norton in October.
Professor John B.Taylor of Stanford and the Hoover Institution says that: “Nicholas Wapshott brings the Keynes-Hayek fight of the 20th century back to life, making the clash both entertaining and highly relevant for understanding economic crises of the 21st century.”
Sean Wilentz, Professor of History at Princeton, says, “‘Nicholas Wapshott’s Keynes Hayek is a smart and absorbing account of one of the most fateful encounters in modern history, remarkably rendered as a taut intellectual drama. Wapshott brilliantly brings to life the human history of ideas that continue to mold our world.”
If you wish to read an extract at, access: https://sites.google.com/site/wapshottkeyneshayek/
There is no FIGHT!!! Obviously everything at its core is driven by the FED which is an inflationist central bank, which is Keynes, all booms and ensuing busts are caused by the inflationary monetary policies, most notably artificially lowering interest rates, and printing money out of thin air (post 1971, when the dollar lost its backing by gold), the dollar has lost 95% of its value since the FEDs inception, the moral hazard caused by the Keynes/ marxist thought, and the list goes on…. HAYEK is TRUE, HISTORY PROVES!!
The comment from Adam Voight is, to me, typical of a Hayek supporter comment. But where is the content? The “obviously” is not obvious. It is not clear why the dollar losing 95% of its value over 100 years is bad, if the result is much higher production over the past 100 years. Somehow Keynes is spuriously linked to marxism, “and the list goes on”.
Where is the reasoned argument?
Where is the rebuttal of the Paradox of Thrift, or the zero bounds liquidity trap?
The Hayek stuff seems more like a moral philosophy than a reasoned and practical approach. Inflation is bad (why is it always?), government intervention is bad (why is it always?), therefore….the reasoning seems more like a word salad than a argument.
Hi Jon,
I think I was 9 when I figured out that dollars are linked to the value of work performed by people as well as physical goods. Not sure why we’d link it to some specific commodity pulled out of the ground by some specific group of people. (And the value of that dollar could still fluctuate in terms of gold-weight.)
Feds printing money amounts to an implicit tax across all users of the Dollar; which is probably the only way to get revenue out of affluent folks or corporations dodging through tax loopholes or simply lying on their tax filings. Granted foreign entitites turn around and demand higher interest, but maybe there’s a shortrun arbitrage for the government in the delay, I don’t know. Folks collecting more in interest on treasury bills than they pay in taxes (or even lending what they should be paying) amounts to negative revenue. Sorry interest rates are low and there’s collateral damage to my accounts, but I don’t see why the Fed should pay much interest to corporations who can’t pay taxes or go out and work for themselves.
If you want gold standard though, or simply to short-sell the dollar, go trade your dollars for gold bars for pete sake. Gold seems to be leveling a bit now, but maybe it outperforms inflation.
Rest of the folks here are mostly smarter than me. Good points about not every human individual having the capacity to start their own enterprise to create their own wealth; especially with Republican philosophy slashing education to maintain an un-educated population to control. Pulling the rug out from under their own feet there. I like the government program helping long-term unemployed people figure out hwo to start their own small businesses all the same.