Hayek and Keynes - Nicholas Wapshott

Nikola slapshot is a is an author journalist and an online content consultant he has earned a degree in politics from the University of York a former senior editor at The Daily Beast mr. Webb shot has served as New York bureau chief and editor of the Saturday edition of The Times of London business columnist for The Sunday Telegraph and founding editor of The Times Magazine as political editor of The Observer he covered Margaret Thatcher's final years in office mr. Webb shot appears regularly on CNN MSNBC PBS and Fox News he is the author of numerous books including Thatcher one of the first biographies of Margaret Thatcher Peter O'Toole a biography Ronald Reagan and Margaret Thatcher a political marriage Carol read a biography and most recently Keynes Hayek the clash that defined modern economics please join me in welcoming our speaker nicholas pop shot [Applause] good evening it's very good to be here in Hillsdale I must say I've des reputation is enormous but I had not guessed how beautiful it was going to be what a lovely campus you are so privileged it's a great great treat to be here and particularly in such a strange week as it's turned out so this is this is sort of a perfect cap as far as I'm concerned on the end of I think it's true for all of us one of the most extraordinary weeks in our lifetimes politically and let's see economically to well I think is the mic on at the back do I do this oh I can hear myself man that must be good ok I'm sorry it's you want me to repeat what I just said I just said the tills day was a wonderful place and there's been a terrible week ok so here we are to talk about it first of all I'm not sure who made up the title but I'd like to thank them I am asked endlessly to talk about Keynes and Hayek and it took Hillsdale to say that I should have talked about Hayek and Keynes [Applause] and that's entirely worthwhile I have enormous admiration for Friedrich Hayek anybody who's looked at is long and extraordinary career will understand that he was a man of exceptional abilities and mind you I also have extraordinary time for John Maynard Keynes which might not be shared with everybody in this room but there's no doubt that John Maynard Keynes was an extraordinary person in terms of the history of the 20th century leaving Churchill aside I don't think anyone except for Keynes did more to change the world it might be good or bad but he changed the world in a way that very few original thinkers did and as a biographer one of the reasons that I'm delighted with this story a powerful fact that I'm a political economist so this stuff is obsessed me forever is that if you were to write the story of Einstein you wouldn't be able to put him in a room with Isaac Newton the big change the big paradigm shift couldn't be done because the two people weren't there but in this case this is a fascinating story this is a story about how John Maynard Keynes was on the brink of bringing forth his general theory which would transform economics it would invent effectively macroeconomics and totally changed the relationship between governments and the economy and the people they governed and he was on the edge of this extraordinary paradigm shift in economics and there was a late break when Friedrich Hayek from Austria came in order to say before you get too deep into this let me give you some warnings and that was an extraordinary act of courage in a way but it was also of course an act of career advancement I don't think that anyone would doubt that Friedrich Hayek always had his eye on the main chance and why not he was brought up in Austria of course that's why it's called the Austrian school von Mises and so on they were all genuine Austrians they lived in Vienna and he was one year more than the century so he's born in 1899 he had a not very good Great War as most Germans of Austrians didn't actually as it turns out because they were on the losing side but he he was active in the war and he fought on the Italian front and Dede almost hanged himself he was this is the days this is before satellite technology and so on this is when you send a guy up on a balloon with binoculars to see what the enemy is doing and they were bringing him down a bit fast because they'd started bombarding the balloon and he jumped out early but he kept his headphones on and he nearly strangled himself in which case this lecture would never have happened at his person anyway happily happily you survived but he was he was an ambitious fellow and he was a bit well you find it very difficult to guide himself he was for instance interested in first of all we should say this his his parents were academics not great academics but they were academics and he thought he had a life in academia particularly in economics he thought but he wasn't quite sure which direction to move in and then circumstances really introduced him to something which was became his life's obsession really and that is that when Germany and the austro-hungarians lost World War 1 and there both of their empires collapsed austria-hungary divided into its constituent parts which included all the bits and pieces of Serbia and Kosovo and so on but also Austria and Hungary were now a separate and like many countries in the immediate aftermath of World one the economy was shot this was now a new state unit it didn't it was that meant to be the head of a big vast sprawling trade empire and that was just the head people didn't make anything anymore if you will excuse a quote and he was interested in just what was happening to his country inflation had gone crazy I mean this is absolutely at the time when people turned up with wheelbarrows in order to take their cash home you could hear apparently a sort of 2:00 in the morning if you put your ear out of your window you lived in central Vienna you could hear the printing presses printing the money it was such dire state now he fell in with and good luck for him he fell in with Ludwig von Mises who as we know from Israel's good talk this afternoon von Mises actually is the key to the Austrian school it's all in von Mises actually and almost everything apart from the late work of Hayek we're moved into political philosophy but when it comes to economics really von Mises is the boy but Hayek was keen to stretch his legs he was keen to move outside of Vienna and he decided to engage the most famous economists of the time who was John Maynard Keynes no who was John Maynard Keynes do you ask well he's 16 years older than Hayek so he is born whatever 1899 minus 16 is 83 and he was a wunderkind to use the Austrian expression he was like as a young man he was recruited into the Treasury the British Treasury where his amazingly agile inventive mind allowed him to do instantly amazingly important work so before world one where even started john maynard keynes came to Wall Street and raised the money and he didn't just borrow it on behalf of Britain he borrowed it on behalf of France and Italy fighting against Germany austro-hungary an extraordinary responsibility for a man in his twenties it's just beyond belief and then when the war came to an end he was drafted in to be part of that huge circus which American historians will know all about which is the preparations for the Treaty of Versailles and rana maynard keynes part of the british treasury team visiting that extraordinary drawing-room where woodrow wilson everyday brought in all of the victors together to work out what to do with the wretched Germans and the Austrians and John Maynard Keynes worked out that actually what they wanted to do is punish the Germans and that meant turning Germany more or less into an agricultural community so it would never again way to war on France and on Italy and Keynes thought this was going to go terribly wrong and he wrote first of all he fretted he almost had a nervous breakdown he went home and in a very short time he wrote a book which would transform him and it turns out the post-war world which was called the economic consequences of the peace and in that he predicted that if you punished Germany and austria-hungary as the Allies wanted to do then what you would do was to store up a range of anger and resentment against the Allies that would spill eventually first of all it would be catastrophic people would be going hungry people there would be mass unemployment and that German Austrian population would fall victim to the first dictator who stuck his head above the parapet and said come this way I've got a solution to it he went out of his way actually to say how Austria was particularly badly treated and how there were women and children who were being starved there which Hayek must have taken some notice on and then Kayne's started thinking what happened in britain was and it's rather like what's happened after the brexit actually at the beginning of the war the pound to the dollar was something like 480 and then at the end of the war it was about 360 and what the government in its wisdom decided to do was to restore the value of the pan to its pre-war level and you don't have to be amazingly smart at economics to work out that actually if you've got very high prices for all of your goods your exports collapse and that's what happened there was mass unemployment throughout the 20s when America was enjoying an enormous boom the Roaring Twenties flappers the Charleston all that stuff you were going like a fair here meanwhile in Britain everybody was on the bread line there were long marches from the north of England to the south and so on there was turmoil and he got to thinking that this can't be quite right he would by the way he wasn't an economist at all keynes he was a mathematician which is no bad thing when it comes to working out economics today and he decided that something should be done about it and he got to thinking first of all he was amazingly eloquent he would work for the Daily Mail which is a tabloid newspaper for middle middle people and he would write for Vanity Fair and he would write for London Times which was for the ruling people he could write in any direction he wanted to make his argument and what he said was if these people are by government decision of the currency out of work then the government ought to find them work to do and this was revolutionary in those times well Hayek read a great deal of this his English was rather poor but he seemed to have reading English like everybody it does you have a language is easier to read than it is to speak and he read a lot of Keynes and so in 1927 this is the beginning of what was to turn out to be an extraordinary 20 year long who's gonna call it friendship it's there's no such a word as frenemy ship it's you know it's bit of both like neither one nor the other in 1927 he out of the blue this is some kid in Austria wrote a postcards to John Maynard Keynes already a world celebrity saying I wonder whether you have a copy of mathematical psychics an essay on the application of mathematics to the moral sciences well as it turned out as we might understand Keynes didn't have one of those but he was so well brought up he wrote a letter to Hayek and said sorry haven't got a copy of that but thanks for asking that letter is Knightly found in the Hoover Institution I don't think they make as much of it as they should it ought to be actually framed and there as you go in the lobby but anyway that was the beginning of what was to turn out to be an extraordinary encounter and duel which really set the tone for everything that's happened since in terms of even today the sort of arguments we have about whether governments should intervene or not so that was 1927 1928 he was invited to London by a man called Lionel Robbins he was the full professor of economics age 31 of the London School of Economics and bright fellow and he decided that with Keynes in Cambridge in Cambridge being the place for economics before Keynes there was a man called after P gu who was extraordinary his professor of economics and before him was a guy called Marshall and Marshall wrote the book I mean you know that was the textbook Marshall was everything about economics until Keynes came and upset his fun and so Hayek was invited by the LSE in order to really set up a rival to Keynes Cambridge Keynes in Cambridge and it seemed a good idea as far as robbins was concerned here's this great boom going on in Cambridge if we only set ourselves up as a rival we'd all do very well out of it and yeah it's true that robbins thought of calling von Mises which would have been the top star of Austrian economics that I think as you might have learned from izi von mises was an awkward cast to put it mildly he he was troublesome he was had a foul temper and he was awkward and he was also a bit old and grand as far as he was concerned he was a big deal and the last thing he needed was to go to London in order to become a junior professor in order to take on someone who didn't believe in at all but Hayek said I'll do it harder and this is typical drag instead of going to the LSE he went straight to Cambridge where he met with a group of people who were to vote it decays I mean Katie it's difficult to explain the charm of Cannes Cannes was so eloquent so extraordinary he people who followed him just like disciples like devotees and there was a group of them called the Cambridge circus and they were all the kids really who followed Keynes and Hayek came to explain what Austrian economics was all about and he got his blackboard and his chalk and he started writing diagrams and so on and it totally flummoxed them and got any idea at all in fact one of them one of them the man if you're interested in economics he's the man who actually proved that there was such a thing as a multiplier that is if you spend a pound it's worth far more than a pen by the time the pound is finished because if you give the pound to the butcher the butcher buys candles from the candlestick maker candlestick maker buys so I need sew on the money goes dad and this man called car ended up asking hiya Chris question is it your view that if I went out tomorrow and bought a new overcoat that would increase unemployment and Hayek said yes but it would take a very long time mathematically to explain my argument why that is the case I must say to this day I can't imagine the circumstances in which that would be the case but he did so 19:31 this is three years later Robin says we want this guy to be a professor at the LSE and all he has to do is give four lectures on Austrian economics and he's in and that's what he did I have given a lecture in the very lecture hall that Hayek gave and the LSE and I must say it's rather extraordinary to stand there imagining as you know Austrian economics gets a sort of mixed press and even at the LSE a wasn't considered really a hot thing to do for four nights in a row so Robins drafted a sort of three-line whip saying you will be there and so they all came and he was indeed given the post so there he was the first job that Lionel Robbins got got him to do was to review a book by john maynard keynes which he would imaginal be a bit inflammatory which it was the idea of course and Hayek was delighted with this was to actually snag Keynes's attention and actually get him embroiled in an argument about his views about spending borrowing government money and spending it on him in order to put people back to work and that's therefore he was given the latest book by Keynes to review well Hayek now it's true to say that Hayek says I told you his English wasn't too good he could be a little brisk and brusque to put it mildly he wasn't quite as bad as von Mises probably in temperament but he was pretty tough and he reviewed a book which actually no one has read ever since an essay by Kane said know it even even Keynes when he wrote it he said I don't really agree with this any more this is you know two years ago thinking I've moved beyond this which is one of the problems he got when Hayek took it very seriously and started taking it to bits in the most rude fashion possible and well Keynes never never one to turn down a fight instantly rotary passed and he was as rude as Hayek was and then that's economically this is September 1930 three months later they put in Keynes's were passed followed by the second episode of Hayek's assault on the book which was even ruder saying you don't answer any of the questions in Europe Aston ba ba ba ba ba ba he got to the stage of the P gu or I mentioned before the Cambridge economics person said this is sounding like Kilkenny cats fighting with each other please stop it you're giving economics a bad name but you didn't stop them they they carried on even on Christmas Day can you imagine this I mean this is a days of I'm not sure what the American post office is like well actually I know exactly what the post office is like well I can assure you that in even in Britain in 1931 on Christmas Day free deliveries that's an extraordinary thing they three two-and froze and it went on into January and then finally they sort of gave up on it the actual details of the argument is not really very illuminating in fact he gives you a headache if you try to understand what they were arguing about but the principle was important Hayek is now in London and he's in the right place because Keynes in the end said do I done enough with this Hayek guy there might be something in it but who can tell in anyway I've got stuff to do because what he was doing was preparing the full detail of the general theory which was the thing which was going to transform economics which was finished in 1935 and published in 1936 so they're sort of four or five year period when it came to the publication of the general theory Hayek of course was the obvious person to come out and take it a bit why not but that's not the way it worked out in economic at the LSE they actually chose someone else entirely they chose P GU who himself had been offended by what Keynes was suggesting and they thought that P gu was actually just a better counter than Hayek at this time Hayek meanwhile had said to Keynes you have an economics journal I wonder whether you would allow me to write of your general theory now Keynes one of the many things about Keynes was he was amazingly good at the market he was fantastic at drumming up business he knew when controversy would sell a book he was anxious he had actually sent proofs of the general theory to Hayek on the hope that Hayek would take it up and cause a fuss and he went and didn't happen just didn't happen so then it was thought that maybe it was because Hayek was writing a book which was going to be his equivalent of the general theory but even that got bogged down there's a sort of pathetic note he sends to a friend at one stage saying I'm bogged down in Chapter six and that's where sort of it's stuck however the the the key arguments would come out eventually and Hayek would be able to take him on but it meant that there was a sort of resolution of the two of them having been the bitterest enemies over an intellectual pursuit it turned out then that Hayek didn't return to Austria in 1938 when Hitler invaded with the angelus he decided that he would become a Brit and he stayed on at the LSE and in 1940 in the Blitz the LSE was bombed and the University had to move and they found that there was a College in Cambridge Peterhouse which was full of young undergraduate men and they'd all gone off to the war so it was mostly empty so the Elysee moved wholesale there this is typical of Keynes said Keynes called up Hayek and said Friedrich the architecture of Peter house is particularly poor let me find use in the space in King's College next to me so he invited his nemesis his arch enemy to become his colleague and throughout the war years they would dine on a regular basis they didn't talk about economics much as you might imagine but they they both collected old economics books first editions of economics tracts and things like that and they got on very well and their wives got on very well too so altogether it was very happy I opened my book with an extraordinary event where they both found themselves on the roster for defending King's College Chapel which is I don't know ever been to Cambridge is the most beautiful soaring English perpendicular church architecture they were both sat or stood on the roof with brooms and shovels against the German bombs incendiary bombs that were being bombed on Cambridge turned out that the RAF had been bombing all of the places where the u-boats were holed up in the Baltic States they were all medieval towns and so in order to get at the u-boats you had to destroy a medieval town and there was a German this is a typical piece of sort of German efficiency well if they're going to destroy our medieval towns we're going to destroy their medieval towns even though there was nothing military in most of them certainly nothing in Cambridge but they sent the the bombs over in order to teach Britain a lesson and that's where these two guys it's like the beginning of a movie isn't it kayak and canes stood there with planes raining overhead if Hayek didn't make any great progress when it came to economics he did actually understand what the outcome would be if people followed Keynes's advice and started spending money they didn't have in order to produce jobs that weren't there and he came to the conclusion it was rather more than economic efficiency which he thought was hopeless so in brief the Hayekian argument is that if you deliberately encourage the wrong sort of industries to over produce all you will end up is a lot of unsold goods and a lot of factories in the wrong place making the wrong sorts of things and that was the natural a problem because no-one was as wise as the market in allocating resources and I now say that it's a truism it's rather didn't hard to deny Keynes was on a sort of different level he was talking about he constantly he and Hayek constantly were worried about the business cycle if you remember that clash was in 1931 this is at the time of the Great Depression these are now there are any millions of unemployed in Britain there are tens of millions of unemployed in in America - and the obvious thing for someone like Roosevelt to do and I did it purely in ignorance he thought we should just employ some people let's get some ideas together and let's just let's get the states nor the state the federal government to employ people but it wasn't thought through what Keynes did was actually work out an economic logic which suggested that one of the reasons that you could not have a bottom of a business cycle is that demand has collapsed and if you borrowed and filled up the bottom of that but most importantly if you paid back the loans that you've taken out at the bottom of the business cycle at the top of the business cycle then you wouldn't get the sharp swings up and down which all business cycles up until then at least haddad free Hayek brought these ideas together he wasn't able to express himself very clearly it's true in economics and in terms of country Keynes but he did write the book for which everybody remembers him which is the road to serfdom and he wrote that in 1944 March 1944 it was published they were very foolish by the way the British government he was a person who spoke fluent German was absolutely on the side of the Allies he was a proper Democrat and he would have been amazingly useful to the war effort but although he volunteered he wasn't allowed to because he was a natural-born Austrian and he was actually jolly lucky not to rather like the Japanese to have been interned as all sorts of other young colonists from Italy and saw like piero sraffa was interned in the isle of man so he was lucky to escape there but at the same time he found himself kicking his heels and he started it would came obvious after 1941 as soon as the Americans came into the war that the the economic might of the United States and their manpower and the general drive would mean that Hitler and Mussolini and Japan would lose so in which case he turned his mind to what the post-war world would be like and so he in the road to serfdom if I can find the right and then I can't fight it deep throat septum is a really snappy good selling title the original one was not put in madly when I can't fight Overland I might find it a bit later on what he said was he was the first person really to confront those conventional thinkers who thought that somehow the communism was on the left and that fascism was on the right he said no no they're based in exactly the same place and that's because they have ignore what the free market they've ignored the role of prices and they have intervened they have planned that's the problem with both Stalin and both Hitler they plan every element of a country's life and individualism is chased out and really the road to serfdom says no more than we should be very careful when we look at the post-war world and we look how well the governments have managed to manage the economy and manage the war to think that somehow a very large role for the government should be maintained once peace arrives the Keynesian z' by this time Keynes had taken over by the way American economics were together particularly in Harvard but Keynes just swept the New Deal because it provided a justification for the sorts of things they were doing and made them a little smarter so d get this to explain it properly so Hayek argued in road to serfdom that we should he had to be a bit careful about the Russians cuz they were our allies still in 1945 but knowing that the Nazis had gone he tried to dress it up and it's I sure you've all read it all I can ask is that you read it again because you will have missed out a lot of stuff it's a very short book he wasn't served very well Reader's Digest bought the rights to it thinking they do immature good and they sort of put out a 50% addition which sort of missed more of the interesting arguments which but it did make him a great deal of money they sold more than a million copies in the United States alone of the Road to Serfdom and he found himself a great celebrity he wasn't actually best fitted to be a celebrity I mean Riz Keynes was sort of rock and roll he liked all of the attention and everything else Hayek was bit embarrassed I mean even in a crowd this side here he was not very comfortable with it but it's so very still it's a very useful piece of work I was talking at dinner and so I excuse me a little detour here one of the things that he said in the road to serfdom is that there should be a working welfare state and it should be provided by the central government if I can find it here I will read it to you because it's pretty easy you might think that's sort of anomalous for Hayek to say such a thing but remember he came from a European society where particularly those Germanic ideas such as Bismarck's welfare state of being going for good fifty years before World War two this is what he wrote in a road serfdom there can be no doubt that some minimum of food shelter and clothing sufficient reserve health and the capacity to work could be assured to everybody where as in the case of sickness and accident neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the revision of assistance where a short we deal with generally insurable risks the case for the state's helping to organize a comprehensive system of social insurance is very strong so there you are food shelter clothing and health was a prerequisite as far as Hayek was concerned well now I have the same to Keynes as Keynes attend to higher he sent him some proof copies of the Road to Serfdom hoping that Keynes would make a song and dance and say where and which case help sell the book in Britain he didn't need it in America as I've just said that and case was as it was was amazingly generous but there was always a bit of a sting in the tail see if I can find the very piece to have five says you have to excuse me for fitting around yet I'm so sorry I'm just gonna have to tell you what it said what he said flex of your very interesting ideas Friedrich we are all worried about this we're all right about the government goodness sake we've just just fought the Nazis off they were big government people were frightened to death of Stalin he's big government people but what you say is very interesting because what you say is actually yes let's have the free market and let's organize it properly let's have regulation as you suggest let's have a referee let's have all the things that you need to ensure that a market is fair fair what we call today a level playing field he said but I notice that you say that there are some things which are so important that actually the government themselves should intervene in the market and he quoted this bit he said in which case Friedrich what I think we're talking about here is that you and I would probably most likely agree on those things it's just a matter of where you draw that line between government and the market and once you get into agreeing that that's the case then actually you're not providing anything real different at all what you're just saying is you're marginally different to me it was a good argument and it left him Hayek sort of speechless he didn't know how to respond to the very final element of Hayek and Keynes was shortly before Keynes died when in King's College in the senior common room he's he did raise the subject of economics and he said I've been talking to some of your disciples and I must say they they're taking your theory and they're running with it and they are doing things which are going to cause enormous trouble I mean they take this really as a blank check for governments to do whatever they like and as as bigger scale as they like and things are gonna go wrong aren't they and Payne said I think you might be on to something if that were to ever to be the case don't worry because I will intervene and it'll take me three months just to turn around everybody's opinion and then it'll be fine well he was dead within three months and that was that there was there was no holding anyone back and as we know the history of the post-world War two world on both sides of the Atlantic has been until the mid seventies until inflation caught up with everybody it has been Keynesianism run riot and even presidents like eisenhower who really didn't believe in deficit spending on the other hand he found a very good way through national defense to set up interested state highways huge public works program which passed his defense spending so it didn't really get into the normal ways but otherwise every single president whatever they've said until the seventies used Keynesianism and the problem is that the business cycle and the electoral cycle don't stay in sync and the result is that if someone is running a great deficit and they've got an election coming up they're more likely to pile on with a little more spending to make a little more growth and a little more wealth come election day and so the the absolute prerequisite of Keynes's dictum was that you should pay debt off at the top of the business cycle was ignored that led to inflation of a hyper kind at most of you by the look at it we'll be able to remember the 70s and it really wasn't funny double-digit inflation was not funny it's bad for everybody it's particularly bad for working people who constantly have to go back to the boss and saying could you give me another 60% on what I had last year because the prices have gone up the person however who cured that or at least contributed to the theory which allowed it to be cured was Hayekian but not so much he was a Milton Friedman which is actually that subjects for my next book but what Hayek did after the war after the death of Keynes was set up the Mont Pelerin Society and he said he brought together a whole bunch of maverick conservatives and libertarians and colonists and she took them literally up a mountain in Switzerland and he gave them a lecture and he said look the left in the past has had all the running it has all the great ideas it has the romantic notions it has the big utopian future everybody's constantly looking forward to you know the the progressive age when everybody will be drinking milk and honey and you know listening to opera all day and everything and it'll be just a sublime and nobody asked to any work and that's what conservatives need and we need to find that philosophy and then we can make takers years it could take us 20 years well it actually took them 30 years before they really made any progress and that was because of actually the the person who did it more than anywhere else actually with Jimmy Carter but they were not doesn't quite fit the story does it Jimmy Carter was the person who appointed Paul Volcker to be the head of the Federal Reserve and he was the person who effectively what we now call rebooted the economy and purged the inflation from the system and then kept spending within limits I think that Friedman said you could go up to 2% a years about as much inflation as you would want in your economy so things change but the but Friedman actually wasn't sure I'd want to confuse this too much but Friedman wasn't an Austrian although he was amazingly fond of Hayek and Hayek was used to say that Friedman and Keynes were closer together than he was to either of them so I'll leave you to explore there are extra reading exactly what those complexities are but the basic principle of Hayek attempting to head off before it had even happened the Keynesian revolution was one of those gallant efforts probably always likely to run into the sand it's very very difficult to actually stand in the middle of a road when a juggernauts heading you away which is what Keynes and Keynesianism was but there's no diet that he was the person who put down which allowed 4050 years on a different way of looking at the economy and one which we have been in more or less ever since I'm going to turn it over to questions but I would just add this because we are now in a new world since Tuesday conservatism has meant many things it has certainly meant in recent years free trade that's going to be an interesting battle and the other thing which is sort of more Keynesian if you like the president-elect has promised a trillion dollars worth of spending on infrastructure projects well that'll certainly kick the economy alright I mean I'm sure that John may not cancel to be applauding in his grave at the moment but it's it's exactly what the house leadership of the Senate leadership of the Republican Party have tried to prevent happening so we've got these happy battles to cover the battle between Keynes and Hayek is not dead and and if you're interested in the the actual root of the the economics rather than the sort of the big picture stuff I wish you luck because it's not at all easy it is not at all it really even on a good day Hayek it can be very difficult to read Keynes was easy to read actually although it's might be worth as a final thing just reading this Paul Samuelson who became sort of the Pope of the Keynesian zs-- of the MIT wrote this about the general theory and then I'll take some questions it's a badly written book poorly organized its arrogant bad-tempered polemical and not overly general generous in its acknowledgments flashes of intuition intersperse tedious algebra an awkward definition suddenly gives way to unforgettable cadenza when it's finally mastered we find its analysis to be obvious and at the same time new in short it's a work of genius so there we are now who would like to set that to set the ball rolling do you need a mic yes good thank you very much missing shot mr. option is agreeing to sign copies of his book Keynes Hayek the clash that defined modern economics in the lobby immediately following the lecture we now have time for a few questions please raise your hand and the microphone will be brought to you Thank You Christian you said that John Maynard Keynes experienced in economics but how is it that he decided to come to the conclusion that more government intervention can help spur economic growth when in which in which history tell us has time and time and again throughout history we have been it's been proven that that does not work in centrally planned economies how it's interesting and how far you going back you know who built the Coliseum did a lot for growth these it's actually big large projects traditionally is to boost growth it's a matter of what they then do to the economy do they corrupt it so that you can never win yourself off it that's what Hayek was worried about if you spend the amount of money that you need to spend in order to stop a recession from happening where does that money go does it end up in the wrong places does it end up getting wasted and I guess the short answer is yes but I think the Keynes will say yes but that doesn't matter because in the mean time you've employed a lot of people they've all paid taxes you know the the human spirit has been maintained and all the rest of it and so it might be worth that that'll probably get Hayek I must say was never able to say exactly what would happen he just said it the world is so complicated things could go terribly wrong but I can't tell you exactly what which is not the strongest of to something which is promising sort of heaven on earth Keynes had the easier thing you've just pushed against an open door the government's wanted to spend this money anyway and that's the problem I guess you know the Keynesian is is too attractive and too even the president-elect seems to think so too you attributed the quashing of inflation to Jimmy Carter now having bought my first house in 1978 I can tell you the interest rate was 11 and a half percent as I remember Ronald Reagan beat Jimmy Carter on the basis of the so-called misery index which was a combination of inflation and interest rates and it was horrendous inflation was it must have been 11 and 12 percent so I was surprised that you claimed the Jimmy Carter quashed inflation when if there is an irony Paul Volcker is credited with purging inflation from the system you can't do it overnight Paul Volcker actually lifelong Democrat I see him quite often in New York still alive still fascinating still completely contrary to his own party when it comes to economics but he was the guy who actually insisted that a recession be introduced that was painful too but coming out of the recession there was no inflation left what Reagan did was confirm that Volcker should stay as the chairman of the Federal Reserve but actually you know many of these things happen in the administration before and they they don't quite come out so I think the Carter but by the way undoubtedly one of America's most intelligent presidents I don't know whether you've ever met presidents any presidents Bill Clinton plaintiff very intelligent man but artist astonishingly bright man and I don't know whether he knew what he was doing but anyway he should take he should take credit for were there reasonable objections to Mises theory were there good arguments against his point or were there or were those objections swift and emotional responses from fearful would-be administrators of the planned economy I don't think the you know the I don't think the individuals were important to either to Mises or indeed to the those individuals the individuals didn't read von Mises and von Mises made no attempt to popularize his theory or very little attempt this was an academic thing so as far as he was concerned and by the way if you read one book its socialism by von Mises where he explains that the border between the free market and tyranny and socialism started as soon as government started to intervene in it sure I'm sure that the people who would get fired maybe accept that what we know have been about government is however much you cut it it's the benefits there's all sorts of things that go but the people who actually run it on the whole don't get fired so it's it's not easier Mises wasn't in the real world actually and so your sort of question which is immensely practical and a good one I don't think he would have met many Treasury officials I mean he himself was well of course I shouldn't I should have said that respond Mises was employed by the state and then employed by American universities for his whole life Friedrich Hayek never got a private sector job in the whole of his long life he made a fortune out of the road to serfdom which he wasted mostly on a first wife who he left who he left on Boxing Day with three young children in order to marry his childhood sweetheart because he made an error 20 years before he ended up for Hayek he tried to get a job at Chicago in the Economics Department Friedman stopped him going there said it wasn't the sort of economist we needed instead he had to have a sort of second-rate job in a social science department he made no money in his life he didn't even prepare for his old age he had to sell his books to a German university then he had to move to Germany in order to be able to use his own books before shortly after that he died so actually the life of high occurs someone who was surprised at sector operator really doesn't come come about at all I do mention here that he got very close to doing some proper private sector work when he came on a one-way ticket to study at NYU the professor had gone out to the Hamptons for the weekend and so he was sort of stuck with no money no cash at all and he went into a cafe and said if he got any jobs and they said he'd come back at six o'clock even wash the dishes happily for Hayek the professor arrived about quarter to 6:00 so he didn't get his hands sofie's at all so that saved from that meanwhile this is one of these and paradoxes which were the the key to good storytelling really is that Keynes who people described as the socialist was never anything of the sort he wasn't even a member of the Labour Party in Britain and labor parties hardly socialist he was always a lifelong liberal he also was a master at manipulating the market he used to say this is a job I'm looking for he used to say in his bed till noon on the telephone as he called up his brokers selling mostly currencies during the 20s he lost a lot in 1929 but then he made it all back within a year and a half and more he was a master money maker the Bloomsbury group that you will know about artists poets novelists and so on the reason that they were able to pursue their artistic endeavors was because Keynes looked after their little trust funds than their parents are provided with so they didn't have to do any normal work if you like in the life tour they could be in purely aesthetic it's a it's an extraordinary story Akane's he live more than one life and it's not really fair to joy you know to pin him up with Hayek I mean very few people could it's bit like Churchill than anybody you know it's very difficult to to counter them so thank you I'm going to or simplify things a bit I think but my understanding is the Austrian school has never been implemented by any country whereas Keynes has taken over since the war and I just wonder if the politicians look at the Austrian school as totally free-market devoid of government intervention then what would a president do what would the Federal Reserve do of me they wouldn't have a job does that play into any of the thing you race it without your say is fascinating and it raises so many important points well it's truth to say that if you didn't have if you didn't waste any money on government you wouldn't waste any money on the House of Representatives or the Senate or the presidency so you might you might remove democracy altogether if you leave it all for them later Hayek was a great one for saying I mean Hayek was never political you know he he castigated Friedman who went to work for Richard Nixon he said you shouldn't do that you should never mix with these people you know don't you know this is bad they just give to give them the plan and let them mess it up but him I don't get involved yourself and that's sort of true the the implications of the Austrian school could be immensely traumatic if you had to balance the books you know what Dettol got 1.2 trillion and well if we even if you did that over the course of 10 years considering that there's very little discretionary spending left in the system you'd either have to cut drastically Social Security or defense or Medicare I can't see any notwithstanding the present president-elect I can't see anyone quite brave enough to take that on what's more I mean Keynes was right in as much as if you've borrowed 1.2 trillion that money is in the system and if you take it out of the system you're going to get a depression of some large size so the Austrian school I think is a what what I acted in the Mont Pelerin Society wish to say what we need is a goal we need a mission we need a way forward we need something that all conservatives on maybe libertarians too would have to march in step just as the left has over it's sort of socialistic utopia but as for being practical I'm not sure I mean he was in favor of no borders at all I mean the free movement of labour he wanted free movement we accept that you know he wouldn't build the wall you'd knock it down you know he was interested in the removal of democracy from cities for instance that is if a private company wants to run a city as a like a Gaugin biker sort of big style gated community then that'd be fascinating and if you didn't like living in your city because it didn't do what you wanted you just get in your car and you move to the next privately-owned city that did the same thing it it's great in utopian terms to disseminate stretches the brain to think about moving privatisation into everything and for that we should be most grateful because he's stretched our brains and he stretched what's possible but I don't think ever he quite thought that it would it was a sort of practical roadmap where as Keynes was quite the other thing he started off with a problem mass unemployment and tried to work out how to fix it now if the tools with which he fixed it weren't entirely appropriate he did for at least three decades if not four decades after World War two and during World War two 'we provide extraordinary numbers of jobs and prosperity to a lot of people you know you might be right for the wrong reasons and Hayek might be wrong for the right reasons but either way I think that the Austrian school I'd never seen anyone seriously say we should put this into effect and you should beware by the way people like Paul Ryan who say and Hayekian because in the next breath he says I'm an Indian and Rand spat at kyuk at parties constantly accused him of being a renegade and the selling outs and so on the when you get into that stuff it's it can be pretty tough and anybody who says I agree with all these things they haven't read the books because she can't agree even if you said I'm a Hayekian you're in trouble because he contradicted himself too I mean if you live that long and you write that much you know things are gonna go wrong but hey you're still better off reading some Hayek than you are almost anyone else just in terms of stretching your brain we have time for one more question okay you mentioned that I drew the line on how much of the government should intervene on housing food clothing medical services where would you say a Mises drew the line on that I wish I knew more about Mises that we need to Israel back to tell you because I just honestly just don't know the answer to that he came out of the same sort of society though in embracing society and I think that that in his germanic as well as austrian but the sense that actually the state should be coherent and look after its citizens is strongly felt and remains today it was strongly felt during Nazi Germany to so you know you ask mrs. Merkel as far as she's concerned everybody should be in a geographer which to have a home and so on and it's a it's it's not a party divided in that sense that whether Mises actually put it as clearly as Hayek put it in red serfdom I don't know I mean it's interesting that Hayek of course never referred to it again even though he was constantly being badgered by people saying but how do you do all this you know why do why didn't you get welfare dependency all the other things that we know could happen if you look after people a little too comfortably so I don't know we must write a note to Israel he'll tell you thank you thank you very much [Applause]

Channel: Hillsdale College

Views: 24,412

Rating: 4.8166666 out of 5

Keywords: hillsdale, hillsdale college, mises, wapshott, nicholas wapshott, ludwig von mises, von mises, economics, hayek, keynes, Friedrich Hayek, John Maynard Keynes, Austrian School of economics, Austrian School, CCA

Id: ZRICNB8kqoA

Length: 58min 45sec (3525 seconds)

Published: Sat Dec 31 2016

Reddit Comments

[u/Foiti]

Τεράστιοι οικονομολόγοι και οι δυο με γιγαντιαία επιρροή στη σημερινή οικονομία αμφότεροι. Μια ενδιαφέρουσα ιστορία είναι πως κατά τον Δεύτερο Παγκόσμιο τους ανατέθηκε ταυτόχρονα και μοιραία υπηρεσία πυρασφάλειας μαζί στο ίδιο σημείο. Δυστυχώς κανείς από τους δυο τους δεν έγραψε ποτέ τι μπορεί να συζήτησαν εκείνο το βραδύ μεταξύ τους. Σίγουρα ήταν μια ενδιαφέρουσα συγκυρία.

[u/Mpomposs]

Η ομιλία του Wapshott παρουσιάζει την διαμάχη του Χάγιεκ και του Κέυνς δυο εκ των μεγαλύτερων οικονομολόγων του περασμένου αιώνα με τον δεύτερο να έχει τιμηθεί με βραβείο νόμπελ οικονομικών το 1974. Ο Κέυνς δεν έλαβε ποτέ αυτό το βραβείο όχι λόγω προσωπικής ανικανότητας αλλά γιατί πέθανε πριν την ίδρυση του θεσμού, αν ζούσε λίγο ακόμη σίγουρα θα ήταν ένας εκ των πρώτων βραβευθέντων. Η "μάχη" τους ήταν ένα από τα σημαντικότερα γεγονότα των οικονομικών στον περασμένο αιώνα. Μαζί με τον Χάγιεκ συμμάχησε ολόκληρη η Αυστριακή σχολή με άτομα όπως ο Μίζες καθώς και άλλοι ατομικοί διανοητές όπως ο Σουμπέτερ. Ο τίτλος του αρχικού βιβλίου στο οποίο βασίστηκε η ομιλία είναι: Keynes Hayek: The Clash that Defined Modern Economics Ο συγγραφέας θα κυκλοφορήσει τον Αύγουστο δεύτερο βιβλίο για την ιστορία των οικονομικών: Samuelson Friedman: The Battle Over the Free Market .