Hayek and Keynes

If you are thinking of giving an economist-nerd friend a book for Christmas, you might be attracted to a new publication that ranks #38 on Amazon.com’s “best sellers” list of economics books, with an average customer review of 4 stars. Popularity, however, is not everything. After reading the reviews, it becomes clear that Keynes Hayek: The Clash that Defined Modern Economics (Norton, 2011), by Nicholas Wapshott, would probably not be a good choice for a nerdy economist friend.

Economist Herbert Gintis wrote a scathing review of the book at Amazon.com (see the link above), and gives it three stars only because of its entertainment value.

The problem with the book is that the two figures [Keynes and Hayek] really did not much interact, either in words or in real life, and each was preoccupied with a major battle that did not involve the other. Keynes’ polemic was against the received wisdom in British and American economics, which held that economic downturns are self-correcting, provided the monetary authority maintained the value of the currency and did not run exorbitant deficits. Of course the Austrian school believed this too, but this school was practically unknown in Anglo-American circles. Hayek was concerned with business cycle theory, but his contributions were exceeding arcane and unpersuasive. Rather, Hayek was the dedicated enemy of central planning of the state socialist variety. ….

I think the world of both Keynes and Hayek, the former as a wise practitioner whose economic theory is completely ridiculous (it took Hicks, Samuelson, and other serious economists to “make sense” of Keynes’ impenetrable prose—“make sense” not by clarification of Keynes’ ideas, but rather by offering an alternative analytical framework in which underemployment equilibrium is possible), and the latter as brilliant intellectual who was almost destroyed (despite his Nobel prize) by his adherence to the bizarre and irrelevant doctrines of the Austrian school, whose economic theory was dogmatically dictated by its paranoid fear of state intervention.

Read this for fun, dear reader, the same way you read People magazine. Don’t think you will get some deep insights in the the nature of modern political economy. You won’t.

Herbert Gintis (born 1940), now Professor Emeritus at the University of Massachusetts, in 1968 co-founded the Union for Radical Political Economics. He also co-authored, with Samuel Bowles, Schooling in Capitalist America: Educational Reform and the Contradictions of Economic Life (Basic Books, 1976), which at the time had a large influence on me.

At the other end of the political spectrum, Greg Ransom titles his Amazon review “This is a fantasy not history, constructed via cut & paste”, and gives the book two stars (from a maximum of five – no star at all is not an option).

I’ll give the book two stars rather than one, in part for this — Wapshott digs out quotations of British newspapers which haven’t been republished before, and he digs out a few original quotations from British archive materials which are new to the book literature.

Ransom blogs at Taking Hayek Seriously and is an expert on Hayek.


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