Hayek and Keynes at the LSE
August 3, 2011 Leave a comment
Friedrich August von Hayek never confronted Keynes before 1,000 people at the LSE in his lifetime. If it happened, the debate certainly would not have been preceded by a rap battle. What an age we live in.
I gladly attended the LSE debate between some of the world’s most prominent Hayekians and Keynesians last week, and I recommend all readers to give a listen to it, as it is being broadcast on BBC Radio 4 at 8PM this evening. Honestly, the roar of the Hayekians in the audience, compared to the whimper of the followers of Keynes, nearly brought a tear to the eye of this blogger. For once, there were more free-marketeers than statists at a British university! It was hard not to notice Hayek seemed to have more of the young people, despite the continued Keynesian domination of the high school economics curriculum. The future can belong to us.
Hayek won fairly easily of course, and the Hayekians fought fairly without the snide remarks and smears used by the Keynesian Lord Skidelsky. In one incident Skidelsky introduced a quote attributed to Andrew Mellon, Secretary of the Treasury under President Hoover when the Wall Street Crash hit:
liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate…it will purge the rottenness out of the system
This was a blatant attempt to link the disastrous Hoover policies of the Great Depression to Hayek. Hayek claimed recessions are the phase in which bad businesses and ventures that should not have happened (but did happen, thanks to artificial credit expansion) are indeed purged, and that these enterprises should certainly not be bailed out by the taxpayer. Of course, Hoover never followed Mellon’s advice and attacked him in his memoirs. In fact, he declared in his re-election campaign in 1932 that:
We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction.
I won’t spoil the debate for those who haven’t heard it: just hear it!