Tuesday, August 13, 2013

Hayek said liquidationist things and he said stable nominal income things and the latter doesn't erase the former

Larry White has a very odd response up to Paul Krugman on Hayek.

For those of you that don't know about his JMCB article, White makes a great argument that Hayek said he wanted to stabilize MV in response to a piece by Brad DeLong. The trouble is, he also made alarmingly liquidationist statements. I hate this tendency to act like people are dummies because of Hayek's inconsistency or the tendency to act like because Hayek said X on Tuesday it means he didn't say Y on Friday. The latter absolutely does not follow from the former.

It's hard to get around this: "...if we pass from the moment of actual crisis to the situation in the following depression, it is still more difficult to see what lasting good effects can come from credit expansion."

That is not stabilizing MV. Krugman is quite right.

You see this with Road to Serfdom too, such that I've just developed the habit of tuning out of any posts about the book. Farrant and McPhail do a really masterful job on this one taking down the Caldwell/Boettke position by pointing out that - as with the MV stabilization/liquidationist issue - Hayek did indeed make strong slippery slope arguments sometimes and didn't at other times. The Caldwell/Boettke camp usually responds to this by pointing out the times that Hayek wasn't making the strong slippery slope arguments. But that doesn't disprove the point - that only demonstrates that Hayek was highly inconsistent!

Hayek lived a long life, people are allowed to change their minds, and people are also allowed to be careless with words sometimes. What bothers me is:

1. Cases like Larry White treating Krugman like he's being intellectually lazy for pointing out that Hayek was clearly a promoter of liquidationism on many occasions, and

2. The failure to recognize that this seems to be a particularly common problem with Hayek. You wouldn't get liquidationism jumbled up together with anti-liquidationism in Keynes or Friedman, for example. But you do with Hayek, and it's a problem that seems to come up a lot. If we still can't agree on the message of the Road to Serfdom or if we still can't agree on the message of the interwar macro work, it seems to me the obvious conclusion is not that Krugman is a dummy - but that Hayek was all over the map. And it seems to me it's reasonable to assume he is culpable for being all over the map - i.e., to the extent that he was a liquidationist he was culpable for being a liquidationist and deserves to be called out on it.


  1. I haven't read White in a while, and I don't know exactly what you mean about Boettke etc., but I definitely agree with your general opinion on Hayek. In my PIG book on the Great Depression, I trumpeted the liquidationist Hayek (and Robbins)! Those guys were hardcore before the Keynesians scared it out of them.

  2. "The failure to recognize that this seems to be a particularly common problem with Hayek."

    This claim really doesn't make much sense. People are always trying to explain away Keynes' obsession with eugenics just to give one example of how people can bend over backwards to deal with a idea that find they find to be unpleasant that was held by someone they consider great. Jefferson and slavery, Stalin and the purges, etc. are more dramatic examples of this phenomenon, and I am sure that we could all come up with similar examples. This isn't unique to Hayek in other words.

    1. Got an example? My experience is that people are pretty open about Keynes's eugenics.

      Do you just mean that they don't throw everything Keynes wrote away because he was a proponent of eugenics? That's a different claim. I honestly don't know all the details of what Keynes actually supported (there's quite a range when it comes to eugenics! By early 20th century standards, modern proponents of birth control and abortion rights would have been welcome in the eugenics movement). It's not relevant enough to what I'm interested in in Keynes for me to look in any great detail. But I'd hardly say I'm "explaining it away". I imagine most people are in a similar position.

      Same with Jefferson and slavery.

      Are there really serious people out there trying to explain this away?!?!? Not that I'm aware of.

      None of this has anything to do with what I'm saying here about Hayek (although he has his own skeleton's in the closet). I'm simply saying here that in a lot of cases he can't seem to keep his arguments straight. Forget the more salacious stuff!

  3. Daniel,

    Serious people have been trying to explain away Jefferson's ownership of slaves, his views on race, etc. for a very, very a long time. Indeed, there is a memorial to Jefferson in D.C. that has been doctored to do that very thing. See the fifth sentence on the northeastern wall for an example of this. Next time you are there go up to a member of the Park Service and ask them to explain to you why they dropped the unflattering language from the quote they stamped up there.

    "I'm simply saying here that in a lot of cases he can't seem to keep his arguments straight."

    How in any objective manner can you demonstrate that Hayek is somehow more inconsistent than Friedman or Keynes or anyone else who has written as extensively as all three of these people have? Given that all three are now the subject of academic arguments about "What they really meant?" I'd say that you are barking up the wrong tree.


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