Niklas Blanchard has a post up on the Keynes-Hayek rap. He also takes issue with the "central planning" line (the list is getting longer). Steve Horwitz thinks we can just chalk it up to poetic license. Now I've been very good about noting the scope for poetic license in most of my commentary on the video, but this is an awfully odd way for Russ and John to exercise it. Poetic license seems to me to be useful for bending truths to fit rhymes... not to fabricate stuff. Why not substitute "fiscal plan" for "central plan"? The proof is in the pudding - many take it literally (Gary Gunnels), and John Papola seems to have intended it literally. And that's... well there's no point in sugar coating it: that's dishonest. In a political climate where I regularly get called a socialist, a statist, and even occasionally a fascist I personally don't think you can just call it "poetic license". Then again, I doubt Steve is ever called those things, which may explain his ability to shrug it off.
Anyway - that's not what I wanted to discuss. I wanted to discuss an interesting contrast that Blanchard draws between what modern self-identified "Hayekians" proclaim and what Hayek actually thought. He quotes David Frum:
"it is precisely a policy response that our modern self-described Hayekians preclude. Monetary policy? No can’t do that – it only leads to inflation and more bubbles. Stimulative government spending then? No that’s out, it leads to inflation, bubbles, etc. Tax cuts for the ordinary working person such as the payroll tax holiday? No way – we must balance the budget. So that leaves only supply-side tax cuts aimed at the upper-income brackets. balanced by large immediate budget cuts in Medicaid, food stamps, unemployment insurance. Does anybody believe that such a policy mix will lead to rapid employment growth? The Heritage Foundation claimed so, for approximately 48 hours, but now even they have abandoned that assertion."
I don't think I necessarily agree on this point about the tax cuts. Usually they aren't opposed to tax cuts for working Americans (although some seem to prefer not supporting any tax cuts to supporting only tax cuts for working Americans). But I think the real point is on monetary and fiscal policy. People who claim Hayek today are adamantly opposed to both.
Blanchard then cites White's JMCB article on Hayek and the depression and points out that Hayek was actually a proto-Sumnerian! When I worked through this paper for my 1920-21 article I remember thinking White's case was a little weak - I'd have to dig up the exact concerns I have. But the point still remains - White argues (I think most think persuasively) that Hayek was open to monetary policy at least, and maybe fiscal policy? (I'd have to review the paper).
This all makes me wonder why nobody talks about "Hayekian economics and the economics of Hayek". Why is that? I have to justify and clarify this point on Keynes all the time. I personally think the distinction between "Keynes" and "Keynesians" is vastly overblown. Neoclassical synthesis was different in presentation from Keynes, but it didn't change any of the fundamental points. The New Keynesians had a Pigovian streak, and I always note that. But that's about all. I also have always argued that while Keynes added new details (the multiplier from Kahn, etc.) his fundamental outlook didn't even change all that radically in his own life. It matured, as everyone's thinking does. But there was no stark difference between a young Keynes and an old Keynes.
Hayek is different - certainly his later focus on spontaneous order and the knowledge problem is an entirely new focus (although not exactly inconsistent with what he had written earlier). And as Blanchard points out, modern Hayekians to a large extent make very different arguments than Hayek if we are to take Larry White at his word. White himself of course is more consistent with what he says Hayek said. Steve Horwitz, who I mentioned above, is also one of those guys that matches White's Hayek in the JMCB article pretty closely. But aside from them and a few others, why is it that the libertarians who are the most consistent with Hayek himself (or White's version of him) are also the libertarians who are least identified with the Austrian school (Sumner, Cowen, etc.). I think someone oughta write a book to match Leijonhufvud's book, and title it On Hayekian Economics and the Economics of Hayek.
UPDATE: And Steve - you can add Greg Ransom to the list of people who think that Keynes advocated what amounted to the same thing Lange and Lerner were saying to Hayek on "collectivist economic planning". Lange and Lerner do advocate "central planning", and Greg thinks Keynes is on par with them. He's not taking it as "poetic license".
Procrastinating on December 6, 2016
2 hours ago