He's right. He just is. Hayek is not an important figure in macroeconomic thought not matter how much that disappoints Greg Ransom (I would have just shared my thoughts on Ransom's own blog - but he's blocked me because I had the temerity to disagree with his interpretation of Hayek's views on Social Security - he subsequently called me a liar and blocked me - he is always welcome here at F&OST).
Krugman is right - he just is. All this stuff you hear about "Keynes vs. Hayek" is largely political. I do think it's accurate to say it was an important debate in the early 1930s, before Keynesianism had really even fully emerged. But it hasn't made an impact on macroeconomics. Hayek is a stand-in now for a lot of anti-Keynesian ideas, but that's not Hayek. That's what the internet and the Tea Party and the Ron Paul movement have made Hayek into - in some cases with greater fidelity than others.
As Krugman points out, this doesn't have to be right and we don't have to like it. I, for one think - and have always said - that there's something very reasonable about ABCT as a mechanism that relates the interest rate to the structure of the productive capacity of the economy - something Keynes is largely silent on. And obviously credit plays a big role in bubbles and expectations, which are crucially important in Keynesian economics. I wish Hayek would have been better and more explicitly incorporated, even though I don't think he provides anywhere near a satisfactory macroeconomic theory. But it really hasn't been the case.
The problem with Greg Ransom is that he takes very simple observations like this and he gets so angry he doesn't quite know how to deal with it reasonably. It's not that Hayek is a joke. It's not that Hayek is never cited. He's a freaking Nobel laureate. Of course the man is brilliant and of course he's cited - as well he should be. But the fact that some staff economist at the BIS has taken interest in him in the last couple years doesn't mean he's had an appreciable impact on macroeconomics. He hasn't. That's just a fact.
I like Hayek and I think Hayek has a lot of very important things to say. The sooner we banish this "clash of the titans" mentality as if he was some kind of counter-weight to Keynes, the sooner we can accept him on his own terms and really appreciate him for his contributions. It's this insistence that we always pit him against Keynes that's the real obstacle to getting him heard. Part of this involves deflating the legend of Hayek. Part of this involves refraining from demonizing Keynes.
Monday, December 5, 2011
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"Hayek is a stand-in now for a lot of anti-Keynesian ideas, but that's not Hayek."
ReplyDeleteIt is. Hayek makes this increasingly clear throughout his writings - it just has a lot less to do with the observations of the Austrian school is all (and I believe that is where most observers of Hayek go astray). Hayek's ultimate conclusion is that modern economies/societies are simply too complex for social scientists to do much with. Hayek's plea is for intellectual humility in the face of that complexity; he sees that as being far different from the project Keynes was bent on pursuing.
"...even though I don't think he provides anywhere near a satisfactory macroeconomic theory."
By the time TRTS was published he clearly had the inkling that it was an impossible task, and that explains why he abandoned it - he became interested in different, but related questions. So he has a response for Keynes, it just isn't a response wrapped in the pretty bow of a macroeconomic theory. When you get around to reading Hayek I believe you'll understand how this is a direct assault on Keynes but from a completely different angle. That's much of why the second phase of Hayek's career is so brilliant.
No Gary, it's not Hayek. People pass off a lot of ideas today on Hayek that - even if he might agree with the spirit of - have very little do with his macroeconomic work. His later work on the complexity of the economy is not what Krugman is talking about here, it's not macroeconomics, and even if you want to call it macroeconomics it still hasn't made an impact.
ReplyDeleteHayek is a catch-all for a lot of anti-Keynesianisms floating around out there. I note this in defense of Hayek.
re: "So he has a response for Keynes, it just isn't a response wrapped in the pretty bow of a macroeconomic theory."
TRTS is hardly a response to Keynes.
re: "That's much of why the second phase of Hayek's career is so brilliant."
Finally you've said something defensible. What did you make me wait for the last sentence for?
I'm not interested in arguing this point anymore - there's a lot of his macroeconomic thought in the 1930s that is a lot more relevant that deserves to be discussed here, as well as discussion of modern appropriations of Hayek.
Jacob Viner would be a better counter.
ReplyDeleteI never wrote TRTS was a response to Keynes. I wrote that by the time he published TRTS he had the inkling that it was an impossible task; that says nothing about such being in the TRTS; in this instance the publication of TRTS is used as a means to divulge the time period in question where the idea first started to grow in his mind. Am I going to start having do sentence diagrams next?
ReplyDelete"His later work on the complexity of the economy is not what Krugman is talking about here..."
No doubt, but that is beside the point.
"...it's not macroeconomics..."
Hayek's response would be (if I may paraphrase in a rather vulgar way) "Who cares? Macroeconomics is a bunch of philosophically muddled garbage to start with."
"Finally you've said something defensible."
Everything I wrote was defensible actually.
"I'm not interested in arguing this point anymore..."
Well, don't argue it then.
Of course it is unfortunate that there wasn't some sort of counter to Keynes at the time; but intellectual fads always run the their course sooner or later. Who will write the counter to the modern Almagest? ;)
ReplyDeletere: "Of course it is unfortunate that there wasn't some sort of counter to Keynes at the time"
ReplyDeleteWell Hayek provided a counter to Keynes on macroeconomics at the time, he was just abysmally unsuccessful. I think the unfortunate casualty of that failure has been that a lot of legitimately good ideas from Hayek have been lost to the mainstream.
People get mixed up about this.
ReplyDeleteModern mainstream macro--Hayekian? Not at all. Was Hayek a big deal in the 30s? Yeah. Does he have important insights that have generally been neglected or misunderstood? Yeah. Should modern mainstream macro be more Hayekian than it is? Could be, you could make a decent case for it.
These claims are separate and distinct. Krugman seems to have made the first one. Although, the article he links to was somewhat rubbish.
TRTS is an underappreciated gem. Even many who ostensibly support the book's message don't really appreciate the excellent economics it contains. The political message makes people stupid, and so they miss the truly high quality economics. IMO it's his best economics work.
Although, Hayek-Knight and Hayek-Keynes had huge impacts on macro, but in a way that you don't feel the Hayek at all, Hayek-Knight in particular, I think.
ReplyDeleteDaniel, as you write that "All this stuff you hear about "Keynes vs. Hayek" is largely political." and you say "He's a freaking Nobel laureate. Of course the man is brilliant and of course he's cited - as well he should be.", I think it is neccessary to reflect that the "Nobel" on the one hand was awarded for "pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena" (he first half of which clearly is macroeconomics and the second is about reasons why we should be careful with macro) and on the other hand that this "Nobel" prize was very controversial - so that political considerations may have had a big impact on the Myrdal Hayek double prize.
ReplyDeleteThis in turn means that the way macroeconomics was evaluated was political and I would add that it still is. The libertarian logic "everything is so difficult and complex, so let's keep the government out of it" may not be justified by logic, but it seems to give a framing for which macroeconomist someone likes.
Daniel,
ReplyDeleteHayek's response would be I think that he was playing on the wrong pitch.
Krugman makes a similar point that Lord Skidelsky does that what became of the Hayek/Keynes conflict - Hayek's economics are remembered largely because of a loose connection to political philosophy.
ReplyDeletehttp://www.skidelskyr.com/site/article/hayek-versus-keynes-the-road-to-reconciliation/
Then again, one could make the argument that what boils down to the optimism of Cambridge confronting the fatalism of Vienna, as Skidelsky does make in his article...
Daniel, what exactly are you taking to be "our side's" claims regarding Hayek? It sounds like you and Krugman are saying, "The thousands of professional economists today who claim they were inspired by Hayek are simply mistaken. No they weren't."
ReplyDeleteThe standard, self-serving sob story we Austrians preach is that Hayek was the leading counterweight to Keynes in the 1930s, at a time when the Austrians were world-renowned. He was, there is no doubt about that. If you and Krugman are doubting that, you are kidding yourselves.
Then, the self-serving sob story continues, KEYNES WON THE DEBATE in the eyes of academia. No Austrian has ever claimed otherwise, for to do so would be as ridiculous as, well, as ridiculous as Krugman claiming that there was never a Hayek/Keynes debate.
Consider again the infamous rap videos. You are fixated on Keynes barfing into a toilet, and apparently you missed the whole theme of Keynes being famous and respected, and Hayek being ignored. In the first video, the girl at the desk is honored and flustered by Keynes' magnificence, while she doesn't even know how to spell "Hayek."
In the second video, they upped the ante, and had Hayek get anally probed before being allowed into the courtroom/ring (or whatever).
So either you and Krugman are just endorsing what we Austrians have claimed all along, or you are demonstrably wrong. Take your pick.
What "our" are you talking about, Bob? Until YESTERDAY I'd heard from many Austrians the (admittedly stylized here) story that Hayek stopped doing macro in 1941, and focused on other questions. That was completely uncontroversial before yesterday. But have Krugman say he argued with Keynes in the 1930s and then didn't make an impact on macroeconomics since then and everybody is up in arms screaming bloody murder. I tell ya - Krugman is like catnip to you guys.
ReplyDeletere: "If you and Krugman are doubting that, you are kidding yourselves."
Warsh seems dismissive. I'm not sure exactly what Krugman thinks - he seems to attach some importance to the debate in the 1930s. I agree with your assessment here, although I think that debate fell pretty flat for the Austrians. It was probably a tactical error as much as it was any issue with the Austrians themselves. If Hayek didn't bother with PTC and actually wrote a review of the GT, the world might look very different today. Those initial responses really helped shape the debate for the next several decades.
re: "No Austrian has ever claimed otherwise, for to do so would be as ridiculous as, well, as ridiculous as Krugman claiming that there was never a Hayek/Keynes debate."
Which is precisely why I'm wondering why everyone is so mad at Krugman! Did Hayek's counter argument fall flat? Yes. Did he do anything important or have any important effect on macro afterwards? No. There. Krugman's point is essentially proven. What more is there to talk about? (one thing we may want to talk about is the Lucas critique - I'm not sure how dependent that was on Hayek).
re: "So either you and Krugman are just endorsing what we Austrians have claimed all along, or you are demonstrably wrong."
ReplyDeleteWho is "we Austrians"? I didn't think until this morning that it was controversial that:
1. Hayek's work in macro was mostly in the 1930s
2. He had a debate with Keynes. He lost.
3. He didn't have an notable impact on macro after that and was working on other stuff.
I thought that was uncontroversial. I thought we all agreed on that.
You tell me why Peter Boettke, Russ Roberts, Greg Ransom, Alex Tabbarok, and others are up in arms this morning when Krugman says what I thought was common knowledge.
Daniel, I don't see in your list of three things this claim:
ReplyDeleteHayek is not an important figure in macroeconomic thought...
which is how you started off this blog post. There are other statements from Krugman's blog that don't fit into your list of non-controversial statements.
It's weird that Hayek would win the Nobel Prize in 1974 if he weren't an important figure, isn't it?
Last thing and I'll drop it: Daniel, you have this tendency to paraphrase Krugman and then defend something that is much more defensible than what he actually wrote. For example, in today's episode, here is what Krugman actually said:
ReplyDeleteThese days, you constantly see articles that make it seem as if there was a great debate in the 1930s between Keynes and Hayek, and that this debate has continued through the generations. As Warsh says, nothing like this happened. Hayek essentially made a fool of himself early in the Great Depression, and his ideas vanished from the professional discussion.
Now you are trying to tell me that as of yesterday, all Austrians endorsed the above?
Of course you will never find any self-described Austrian who has ever said any of the following:
(1) There wasn't a grand debate between Hayek and Krugman in the 1930s.
(2) Hayek made a fool of himself with his anti-inflation views in the 1930s.
(3) His ideas have vanished from the professional discussion.
And yet you are acting as if we're changing our tune just because Krugman said these three things. No, we're not. Krugman goes out of his way to be a jerk, and says things that are crazy, and you constantly paraphrase him and accuse us of overreacting.
re: "It's weird that Hayek would win the Nobel Prize in 1974 if he weren't an important figure, isn't it?"
ReplyDeleteBut Bob he is an important figure in economics. It's just that - as Russ Roberts has said in his response - he isn't particularly notable in macroeconomics. There are lots of Nobel laureates who aren't particularly important in macroeconomics.
On your last post - I'm not sure what you want me to say here. Krugman noted a point in history - in the early thirties - when Hayek was at the center of the macroeconomic discussion. Warsh and Krugman say he bombed it. I said they're a little harsh on that, but basically right. Then they say he "vanished from the professional discussion". Come on Bob - you can't vanish from a discussion you were never a part of! That doesn't make sense. Krugman quite plainly said Hayek was a part of the discussion in the early 1930s, and he basically hasn't been a part of the discussion since then.
ReplyDeleteI see no stretching of Krugman on this on my part. I see nothing fundamentally wrong with what Krugman said on this point.
But look at what's going on here. Krugman makes a true statement about Hayek's influence in macroeconomics and maybe is guilty of not highlighting his other contributions.
I've never seen Krugman accuse Hayek of being an ideologue, but that's what Russ Roberts calls him.
I've never seen Krugman accuse Hayek of "blatantly ignorant and unscientific ravings", but that's what Greg Ransom calls him.
I've never seen Krugman accuse Hayek of not being a real economist, but that's what Don Boudreaux says of him.
And this isn't even getting into William Anderson's travesty of a blogging career.
Maybe he doesn't always handle Hayek with the kid gloves that people wish he would, and maybe he gets into hyperbole. But there isn't a snowball's chance in hell you're going to get me, in comparing the behavior of the Austrian blogosphere writ large and the behavior of Krugman to come down on Krugman as the jerk. No way. In this gaggle of hyperbole and impoliteness Krugman in comparison is a model citizen - and certainly the analysis he provides is more penetrating.
And look, I would feel no need to defend him at all if people didn't always raise hackles about what a jerk he is.
ReplyDeleteSure he's a jerk sometimes. I think I'm pretty fair about accepting that he is when he is. But compared to what gets dished out at him, it's minimal.
When you have a group of people constantly telling you you're a statist, you're not a real economist, you hate markets, you're an ideologue, you're a hack - when there is a peanut gallery that constantly hurls that at you of course you're going to lash out sometimes.
You have no idea how tiring it gets to be repeatedly told that you hate freedom and you're against markets. It's bullshit and I'm not going to blame him for pushing back a little.
Daniel, if I understand you correctly, is it that we must distinguish Hayek's contribution to understanding of prices and production from Hayek's contribution to business cycle theory? That the latter was not the area in which he was the strongest?
ReplyDelete@Gary Gunnels
ReplyDelete"Who will write the counter to the modern Almagest? ;)"
Let's consider for a moment that Ptolemy's Syntaxis Mathematica is written as a practical guide to various phenomena. It is necessarily a piecemeal work because Ptolemy had a number of factors limiting him - not enough observations of enough quality; no telescopes; none of Kepler's mathematical brilliance; none of Galileo's observational and deductive ability.
Yet because he threw this system out there does not make him an intellectual fraud, as is often so nearly stated. I have been given to understand that in other works Ptolemy actually was interested in finding a more reasonable system than the practical system (or, more accurately, systems), since he was well aware of the limitations.
From the description of Hayek you've given, it seems as if he was tempted to claim the task of macroeconomics impossible and throw up his hands. "I've done my work, let me rest on my laurels!" Sorry, but people still will make good use of a macroeconomic guide. Even the Almagest served its purpose for nearly one and a half millennia, and it was no great burden to the creators of ephemerides, or to the users of them seeking to learn when to plant crops, or when to celebrate Easter.
To say that a theory has no use because it might conceivably be improved is to miss the point of having a theory in the first place, and this seems only increased in the case of one of the "soft sciences" like macroeconomics.
"Yet because he threw this system out there does not make him an intellectual fraud, as is often so nearly stated."
ReplyDeleteWho in the world considers Ptolemy an "intellectual fraud"?! I have studied the history of science for a decade, and have not once run into that view.
Kuehn, if Krugmans comments are really so on the money then why do words like 'fundamentally', 'basically', 'essentially' etc. feature so regularly when you defend them? These are the kind of words you use when you are looking to get to the core of something you think is either obscured or burdened by extraneous details. Your every summary of Krugman is a tacit admission that there is more to the original than the summary and yet you're always protesting mystification that anyone can see anything more into Krugman's words than you can. It's crazy annoying.
ReplyDeleteGene Callahan writes: "Who in the world considers Ptolemy an 'intellectual fraud'?! I have studied the history of science for a decade, and have not once run into that view."
ReplyDeleteSee Robert R. Newton, The Crime of Claudius Ptolemy (1978). He argues that Ptolemy fabricated data.
Edwin Herman,
ReplyDeleteIt was a joke.
PSH,
I'll have to read that. It wouldn't be that surprising.