If you take Hayek seriously (like I do), don't read Taking Hayek Seriously

Greg Ransom, the author of Taking Hayek Seriously, is impressive in his ability to marshall up texts by Hayek and as a general resource.

But please, please, please, don't take his interpretive claims about Hayek for granted. This is not Daniel the Keynesian talking - I know a lot of Austrians have big reservations about him too.

My motivation, now, for saying this is this post by Greg:

"As pointed out by an endless stream of leading academic specialists, Jeffrey Sachs & Paul Krugman are constantly making false and deeply ignorant claims about Friedrich Hayek and his work.

The latest false and ignorant claims of Jeffrey Sachs and Paul Krugman can be found in "Masters of Money – Friedrich Hayek" presented by Stephanie Flanders on the BBC.

Here is Hayek’s clearly stated view:

"I agree with Milton Friedman that once the [1929] Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation. So, once again, a badly programmed monetary policy prolonged the depression."

F. A. Hayek, interviewed in 1979, from Conversations with Great Economists: Friedrich A. Hayek, John Hicks, Nicholas Kaldor, Leonid V. Kantorovich, Joan Robinson, Paul A.Samuelson, Jan Tinbergen by Diego Pizano.

"I think it is certainly true that ending an inflation need not lead to that long-lasting period of unemployment like the 1930s, because then the monetary policy was not only wrong during the boom but equally wrong during the Depression. First, they prolonged the boom and caused a worse depression, and then they allowed a deflation to go on and prolonged the Depression."

F. A. Hayek, interviewed in 1977

In "Masters of Money" Sachs and Krugman flatly and falsely say that Hayek denied what he directly asserts just above."

Notice both these are from the 1970s - 40 years after the depression. This was not what he was saying during the depression.

Take "The Fate of the Gold Standard", in 1932:

"Although there can be no doubt that the fall in prices since 1929 has been extremely harmful, this nevertheless does not mean that the attempts made since then to combat it by a systematic expansion of credit have not done more harm than good. In any case, it is a fact that the present crisis is marked by the first attempt on a large scale to revive the economy immediately after the sudden reversal of the upswing, by a systematic policy of lowering the interest rate accompanied by all other possible measures for preventing the normal process of liquidation, and that as a result the depression has assumed more devastating forms and lasted longer than ever before."

The claim in the 1970s - that the response to the depression was wrong because it allowed deflation - is completely different from the claim in the 1930s - that the response to the depression was wrong because it didn't allow for enough liquidation! Indeed the whole essay is an argument against what Hayek called the "stabilization theorists" who were arguing what Hayek would come to argue in the 1970s - that you wanted to avoid both inflation and deflation.

Greg could responsibly argue that some time in the intervening 40 years, Hayek changed his mind and agreed with the Keynesians and the monetarists. But he cannot accuse Jeff Sachs and Paul Krugman of "bottomless ignorance" for accurately presenting Hayek's view at the time of the depression. This was the common perception of the Hayek-Robbins position, and it was a common perception for good reason. If you want to talk secondary deflations we can talk secondary deflations and that sort of thing. But Hayek, in 1932, was critical of the Federal Reserve because it ameliorated too much of the deflation; whatever deflation was occuring, Hayek of 1932 thought there should be even more of it.