Music video: John Maynard Keynes VS F. A. Hayek

[ErikNikolai]

I found this very amusing. The material is written by Russ Roberts, a free market economist from Stanford University.

In Fear the Boom and Bust, John Maynard Keynes and F. A. Hayek, two of the great economists of the 20th century, come back to life to attend an economics conference on the economic crisis. Before the conference begins, and at the insistence of Lord Keynes, they go out for a night on the town and sing about why there's a "boom and bust" cycle in modern economies and good reason to fear it.

Watch it here (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

[Blse]

Wow, this is excellent. I just mailed this to my econ professors and might use this as TA in my econ courses. Good find!

[phej]

Everybody seems to be emailing me this particular video. To which, I wonder why not Friedman instead of Hayak?

[ErikNikolai]

Everybody seems to be emailing me this particular video. To which, I wonder why not Friedman instead of Hayak?

There's a pretty big difference between the economics of F. A. Hayek (an Austrian economist) and Milton Friedman (a monetarist). As an example, Hayek opposed the existence of the Federal Reserve, while Friedman supported an active Federal Reserve. Hayek thought the Feds involvement in the Great Depression prolonged it, while Friedman thought the Fed didn't do enough.

One of the creators of the music video, Russ Roberts, supports the Austrian theory of the business cycle and blogs at Cafe Hayek.

[rwm4768]

I just watched part of this on Tuesday in one of my economics classes.

[Causa Mortis]

There's a pretty big difference between the economics of F. A. Hayek (an Austrian economist) and Milton Friedman (a monetarist). As an example, Hayek opposed the existence of the Federal Reserve, while Friedman supported an active Federal Reserve. Hayek thought the Feds involvement in the Great Depression prolonged it, while Friedman thought the Fed didn't do enough.


Friedman advocated for the abolition of the Federal Reserve, stated that if its going to exist it should only do so under very strict and generally limited interventionist guidelines, and was a vehement critic of interventionist monetary policy up to the appointment of Greenspan. He advocated for a fixed rate money supply growth rule that would have led to near-zero inflation, which, had it been implemented, would have likely averted both the Great Depression and the inflation of the 1970s. He did criticize the Fed for its response to the Great Depression - they contracted during a deflation which is loldumb - but I believe that is the onl strong-form position he's taken on government during th great depression.

Hayek's main contribution to macro is a normative assertion that we should do away with national currency and trade in Wells Fargo Dollars and Bank of America Pounds. Cause, like, bankers won't grossly inflate the money supply. Larry White picked up this football and ran pretty far with it, but this was long after Hayek made the assertion.

Keynes created a framework for understanding growth, inflation, and unemployment but got a lot of things flatly wrong (eg the role of money in inflation), and also had a few positions that were too easy for politicians to abuse (ie governments should run counter-cyclical fiscal policies). Friedman utilized Keyne's framework to show where Keynes went wrong and made about a half a dozen significant positive contributions to the field that haven't been substantively refuted, emprically or logically, 30+ years after the fact.


So basically, Keynes came up with a good theory but missed a few key insights and so got a lot of stuff terribly wrong. Friedman filled a few gaps and drew different conclusions and doesn't appear to be wrong on much in positive macro. Most modern economists take concepts from both fields.

Hayek said that they whole system fucking sucks and we should let Wells Fargo manage the money supply...I say that hippopotomosses should manage the money supply, how do you want to settle this Fredrich? (Note: this paragraph isn't economics, its low-browed political bullshit)


...the Austrians are to be taken very seriously in some areas (micro, IO, public choice, and Schumpeter), but macro is a real weakness of the austrian school. Most just say "Oooh la-tee-dah 1/4 workers are out of a job and output has contracted by 35%, its all just the result of consumer preference for more real money holdings, we'll do nothing cause the market is sacred" which is flatly asinine. Throw in a bit of anti-empiricism and some


I suppose I don't object to Hayek being the front-man for market capitalism, I just think his ideas were not as viable as Friedman's, and none of his ideas ever really came to fruition except through Friedman/Reagan/Greenspan.