Tuesday, November 29, 2011

A day which will live in infamy...

...the macro professor I TA for showed the first Keynes-Hayek rap in class today.

Oh well :)

In seriousness, though, I was surprised to hear her even raise the issue of the Austrian school halfway through the lecture - and I was glad she did. We finished our coverage of fiscal policy, and then she started talking about criticisms. She mentioned New Classical macro and then she said that the most prominent criticism today was from the Austrian school. Within a certain context (i.e. - as the most publicly/politically prominent criticism) this is probably correct.

She didn't get into anything too detailed, but she did talk about their views on interest rates and the housing bubble, and perspectives on the Fed and interest rate determination in the loanable funds market.

The feedback from the class on the video was telling. We've talked explicitly about Keynes and Keynesianism for two and a half lectures now - first with aggregate demand and supply, then with actual discussion of fiscal policy, and finishing up that discussion today - and she's discussed Keynes by name in each lecture. No real discussion of the Austrian school, but after the video she asked "who thinks Keynes won the debate" [two hands or so went up out of the whole lecture hall... I refrained to register my vote], then she asked "who thinks Hayek won" [a bunch of hands shoot up - although in fairness most of the 250 or so present abstained - probably a fifth raised their hands].

It just goes to show you, when you make a video where (1.) Keynes says he wants to steer the economy, (2.) Hayek says he wants you to be free, (3.) Keynes appears indifferent between waging wars and constructing public works, (4.) Keynes is acting like a jackass generally, and (5.) Keynes the jackass ends the video barfing in a toilet, then yes - undergraduates who have never read Hayek or Keynes will respond positively to Hayek but not Keynes.

And this is really the issue - that the video really doesn't help the students understand the actual disagreement between Keynes and Hayek. It is fun, yes. But it takes an important debate in economics and acts like it's a debate about ideology where one guy likes freedom and the market and the other guy likes government and control. And it should be no surprise at all that this is the message that the video conveys, since it is a message that is explicitly embraced by its creators, Russ Roberts and John Papola.

I have a macro review session tonight - I'll be going over the liquidity preference, the multiplier, crowding out, and automatic stabilizers - but it will be interesting to see if the students bring up the video.

As a side note, I had not noticed until today that Mike Munger is in the first video as well as the second.


  1. While I agree with you Daniel Kuehn, I'm tempted to stretch a few specious details into an argument, which may be stupid, but here it goes. So yes, it is a veiled commentary, but there's still room to argue for Keynes from that video. You could make the argument that just because Keynes is presented as a "work hard, play harder" type of person that lived to the next morning that it's all to do with paradigms (hence the "animal spirits" line). If paradigms become unhealthy (i.e., the growth of a monstrous bubble), then the government needs to intervene when the crash comes.

    Because Keynes lived to see the next day, despite having a hangover, that point can be used to argue against Hayek. Or am I not making sense at all?

    While it isn't necessarily helpful to getting to the core of the Hayek/Keynes debate, the videos by Papola and Roberts at the very least get people to be aware of who Hayek and Keynes are, and from there, a chance to go down that rabbit-hole.

    Then again, the argument could be made that there is no simplifying the issue to a video or a book, and the best way to understand the Hayek/Keynes conflict is to read not only each economist's works, but their correspondence. The argument could also be made that the Hayek/Keynes conflict, like any classic clash, isn't really that new either, and has precedents...


  2. I think making the case for Keynes despite the framing is exactly why you see people like Skidelsky endorsing the video. I can appreciate that argument, although I think it lets the video off too easily.

    Yes, all the lines Keynes said were technically fine... a few odd turns of phrase (the indifferent attitude towards war, the idea that savings are bad, etc.) - but nothing horribly inaccurate on a technical level. However, as John Papola knows very well, that's only a small part of the information that is conveyed in the video. Indeed, he relies on that - any producer worth his salt does (and by all indications Papola is a good producer). And most of the other information conveyed about Keynes is very misleading. And like I said - this isn't news. Roberts and Papola talk explicitly about Keynes in this way.

    As for the "better with a hangover than dead", I get your point. And it's certianly true - when what actually happens looks bad, thinking about worse counterfactuals isn't very comforting for most people. Nevertheless, the hangover in the video doesn't seem to be of this variety. The counterfactual is that if Keynes hadn't gotten drunk he wouldn't have had a hangover. That's the Austrian view. That's wrong. It's simply wrong. So yes - a hangover is better than dead. But I think you're giving that plot element too much credit!

    re: "While it isn't necessarily helpful to getting to the core of the Hayek/Keynes debate, the videos by Papola and Roberts at the very least get people to be aware of who Hayek and Keynes are, and from there, a chance to go down that rabbit-hole."

    This is the redeeming quality I see. Still - it introduces them in a very skewed way. That is not costless.


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