Friday, August 9, 2013

Did Hayek matter?

Jonathan Catalan picks up on a line in Krugman's post that I thought was interesting but didn't comment on. Krugman wrote:
"Or think about the economics rap video of Keynes versus Hayek everyone had fun with. Never mind that back in the 30s nobody except Hayek would have considered his views a serious rival to those of Keynes; the real shock should be, what happened to Friedman?"
Jonathan doesn't like this claim, and my prior has been to disagree with it too... but...

The more I think about it the idea that the Keynes/Hayek rivalry was a major rivalry seems to come from two sources: (1.) the claims of lots Austrians in the last quarter of the 20th century and the beginning of the 21st, and (2.) John Hicks towards the end of his life.

What I am not aware of (maybe it's out there) is John Hicks saying in the 1930s how important Hayek's view was.

Jonathan writes: "Otherwise, Keynes wouldn't have drafted Sraffa into his debate with Hayek, and Hayek wouldn't have received so much attention from Kaldor, Hicks, Knight, Pigou, et cetera (yes, the list does go on)."

I don't know if this quite does it. You'd think if it was that critical an opponent Keynes would have done the job himself. He did write a review of a Federal Reserve document in the same issue of the Economic Journal and he wrote in it often about topics that consumed him. Why is it always said that because Keynes thought Hayek was important to respond to that he assigned the task to Sraffa? Sraffa had the experience talking about Hayek's theory over lunch with Keynes and Wittgenstein. Perhaps Keynes asked him because he knew they were on the same page and he didn't think it was worth his own time to deal with.

This is all just an open question. Obviously Hayek was a good economist that people respected. But I didn't realize until reading Jonathan's post how much I just took for granted that Hayek's contribution was considered important at the time rather than simply being dressed up as such after the fact.

Is there any evidence of this that:

1. Doesn't come from a Hayek booster?, and
2. Doesn't come several decades later?

Did anyone associated with Cambridge in the 30s make the sorts of assertions about Hayek's importance that Hicks was to later?

I feel like we invent a lot of these stories after the fact and I'm just curious if we have a good reason to.

20 comments:

  1. This was decades later, but why did the committee feel compelled to award Hayek the Nobel?

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    1. I agree it's probably fair to say that Hayek's macro was no less important than Myrdal's macro as an alternative to Keynes in the 1930s.

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  2. Have you read the Wapshott book?

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    1. Nope - anything good in there for me to more firmly embrace what I had always taken to be true?

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  3. Krugman telegraphs his white-knuckle fear of the Austrians with each anti-Austrian post. If he had any confidence in his views of the Austrians, he would explain calmly in plain language exactly where they allegedly go wrong. Instead, he finds it necessary to imply that the Austrian School is nothing more than what political hack Paul Ryan allegedly learned from fictional Ayn Rand characters:

    What isn’t living on, however, is Friedman’s role as a guiding light for conservative economic policy.

    Think about Paul Ryan, who is, like it or not, the leading economic intellectual of the modern GOP. Ryan sometimes drops Friedman’s name — but when he does, it’s to cite Capitalism and Freedom, not A Monetary History of the United States. When it comes to monetary policy, Ryan has said that his views are based on fictional characters in Atlas Shrugged. No, really.

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  4. Why would this matter? Does anyone ask whether Van Gogh mattered in his time? Clearly, he did not, but he matters today. It is not always past influence that matters so much as the influence projected on the present. I'm a fan of Hayek, but his influence at any time sways me not. I like Keynes in some measure as well. I think good analysis lies somewhere between them. Arguments based on influence would seem very fallacious indeed. After all, we did believe the Earth was flat for a very, very long time.

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    1. It matters as a matter of intellectual history. You're right - I don't think anything is claiming that importance at the time of necessity equates to importance in general.

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    2. Im not sure what you are referring to with flat Earth belief. The spherical Earth theory came into existence around 2300 years ago. It has been universally accepted by cosmographers for about 1200 years. The myths surrounding Columbus are just bad textbooks telling a creative but false story.

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  5. I think that even at places like Oxford and Cambridge, gossip exists - it's human nature, after all. I wouldn't attach that much worth to it.

    One more reason why I think F.A. Hayek (and to a larger extent, economists from the European continent) didn't win out in the end was because of the fact that John Maynard Keynes was a Briton. Yes, F.A. Hayek took up British citizenship later in his life, but J.M. Keynes was a born and bred Briton, who himself was a student of Alfred Marshall.

    The framework provided by Alfred Marshall's Principles of Economics was largely ingrained into the English-speaking world by the time F.A. Hayek got around to reviewing A Treatise on Money.

    I don't know whether the other members of the Austrian School (like Carl Menger, Eugen von Bohm-Bawerk, Friedrich Wieser, and Ludwig von Mises) ever criticised Alfred Marshall himself or engaged in correspondence with J.M. Keynes's mentor, but I got the feeling (from what little I've gathered from primary sources) that one reason why the "Hayek versus Keynes Debate" never quite got resolved was because both men had different theoretical edifices in their heads.

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  6. Keynes did, in response to Hayek, and later in The General Theory, does criticize Hayek directly. Re Sraffa: What if Keynes thought Sraffa would do a better job, while Keynes worked on his general theory?

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    1. All possible I'm just not sure any of these are strong reasons to accept the premise. I'm kind of still biased towards the premise it's just that upon reflection I realize I don't have very strong reason to be except that everyone tells me it's the case.

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  7. This comment has been removed by the author.

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  8. I just remembered hearing this but I believe that Hayek was the third most cited economist of the time behind Keynes and Robertson. Can't give a citation for that.

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  9. KRUGMAN: All serious people know that libertarian economists eat infants for breakfast.

    DANIEL: Hmm I had never really thought about the issue much until Krugman's awesome post. Can anyone prove him wrong? I doubt you'll be able to show me solid proof of what every libertarian economist has eaten for breakfast since 1900. Now I'll just have to reserve judgment on the whole matter. Krugman once again has caused me to rethink my premises, and for that I thank him.

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  10. From that Hayek booster, Wikipedia:

    With the help of Mises, in the late 1920s Hayek founded and served as director of the Austrian Institute for Business Cycle Research, before joining the faculty of the London School of Economics (LSE) in 1931 at the behest of Lionel Robbins. Upon his arrival in London, Hayek was quickly recognized as one of the leading economic theorists in the world, and his development of the economics of processes in time and the coordination function of prices inspired the ground-breaking work of John Hicks, Abba Lerner, and many others in the development of modern microeconomics.[23]

    In 1932, Hayek suggested that private investment in the public markets was a better road to wealth and economic coordination in Britain than government spending programs, as argued in a letter he co-signed with Lionel Robbins and others in an exchange of letters with John Maynard Keynes in The Times.[24][25] The nearly decade long deflationary depression in Britain dating from Churchill's decision in 1925 to return Britain to the gold standard at the old pre-war, pre-inflationary par was the public policy backdrop for Hayek's single public engagement with Keynes over British monetary and fiscal policy, otherwise Hayek and Keynes agreed on many theoretical matters, and their economic disagreements were fundamentally theoretical, having to do almost exclusively with the relation of the economics of extending the length of production to the economics of labor inputs.

    Economists who studied with Hayek at the LSE in the 1930s and the 1940s include Arthur Lewis, Ronald Coase, John Kenneth Galbraith, Abba Lerner, Nicholas Kaldor, George Shackle, Thomas Balogh, Vera Smith, L. K. Jha, Arthur Seldon, Paul Rosenstein-Rodan, and Oskar Lange.[26][27][28] Hayek also taught or tutored all sorts of other L.S.E. students, including David Rockefeller.[29]


    Daniel, Krugman's statement is so absurd it's analogous to DeLong's "stupidest man alive." It's obviously not true at face value, and so then we're left saying, "Well clearly Krugman didn't mean that *literally*..." and so once again he gets to weasel out of his ridiculous assertions.

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    1. You seem to have confused the issue at hand. I don't think anyone denies that Hayek was a prominent economist or that he engaged with other prominent economists. I think you're being way too sensitive on this.

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  11. "I just remembered hearing this but I believe that Hayek was the third most cited economist of the time behind Keynes and Robertson. Can't give a citation for that."

    That's Snowdon & Vane, referring to the years 1931-35. Original source they cite is Deutscher, "RG Hawtrey & the Development of Macroeconomics."

    But 1931-35 was Hayek's peak as a macro man. In 1920-30 he failed to make the top 10 (Keynes squeaked in at 10th). In 1936-39 Hayek was joint 7th, trailing Keynes, Robertson, Hicks, Pigou, Harrod and Hawtrey. In 1940-44 he again dropped out of the top 10.

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