The Institute Blog

Bringing in the Gunslinger: Nicholas Wapshott on Keynes vs. Hayek

Keynes and Hayek were defining figures in 20th century economics. In this INET interview, Nicholas Wapshott talks about his book, Keynes Hayek: The Clash that Defined Modern Economics, and about the intellectual clashes between two foundational economic thinkers. He details how the "gunslinger," Hayek, was brought in to London to bring down the "panther," Keynes. Things were about to get ungentlemanly.

Keynes' Optimism vs. Hayek's Pessimism

Watch Wapshott discuss the different characters of Keynes and Hayek, which he says had a profound influence on their preferred policy programs. While Keynes was an optimist, Hayek was a pessimist who "assumed that if things could go wrong, they would go wrong."

The Humble Hayek

Let us be humble, and appreciate the limits of our knowledge -- such was Hayek's credo, as Wapshott explains in part 3 of this INET interview.

The Economics of Keynes

Wapshott suggests that modern economists would do well to remember the work of Keynes now, as they have strayed too far from the lessons of Keynes in pursuit of ever more refined modeling technique. In the same vein, modern policy makers would do well to remember paying off debt during a boom, as Keynes had suggested.

Keynes vs. Hayek: The Debate Wages On

In part 5 of the interview, Wapshott discusses how the conflict between Keynes and Hayek has carried forward into modern debates over the proper role of governance. As policy debates still wage on today over austerity vs. stimulus, the ideological clash of these two great economists seems more relevant than ever.

Comments

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Wonderful!

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Nobody doubts the US' ability to pay its debts? Really? Is money-printing really a solution to insolvency? Wapshott is out of his mind. Keep watching the US--we'll know in 3-5 years if this guy's assumptions hold up.

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Actually yes, Mcbirdman, printing money is the solution to insolvency. Govt. printing that is. And that is what we are not doing right now, which is what Wapshott actually referred to, but most people will never understand because they are so indoctrinated in the beliefs and mantra of the debt-money system. We are insolvent because we have extended borrowed credit to the max...or are nearing it. Same thing if you ask me. If the U.S. would print U.S. notes (debt free currency), like we do with coins from the mint mind you, instead of going in debt to rent currency that BEP is prints anyway, just with the name 'Federal Reserve' on it, the U.S. wouldn't even be having this conversation.

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It's all well and good for US to print money. It can print as much as it likes. Handy for debts to shrink, but not so nice for savers.

Question is: how will the purchasing power of the US dollar change if/when another instrument is used for global reserve currency.

The accelerated printing of dollars may hasten the day when it loses its reserve status.

The US needs oil. With the purchasing capacity crippled the shelves in American supermarkets can end up very empty. The thin veneer of civility may not be strong enough to hold back a lot of hungry/angry people.

I am not surprised that the US congress has just put into law the right for the military to police civilians and hold them indefinitely.

I am also not surprised to see the US picking a fight with yet another oil rich country. The leadership, however short sighted, knows it will be game over if the flow of oil can not be maintained.

Economics need to be concerned with the question how to promote local resilience and economic and resource independence by different regions of the world, and how to promote thriving world trade from that basis without weakening the local resilience.

Economics must not remain in isolation from reality. If it can keep the quality of life of the poorest and the most numerous members of the society front and centre, and sustainability, even with finite global resources, at its heart it can be of benefit.

What model of economics can through its basic structure, without adding a forest of afterthought laws and regulations, prevent the growth of financial institutions to a cancerous size? What model of economics can make it dead easy for any mom and pop to start a store, with minimal red tape?

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