Political philosopher John N. Gray has a fascinating article discussing Friedrich Hayek's work in the New Statesman. The piece provides a sweeping review of what Hayek got right, and what he got wrong. In the article Gray discusses how Hayek's ideas stack up against other economists that he touched during his academic career. Here's a snippet ...
... No doubt markets transmit information in the way that Hayek claimed. But what reason is there to believe that – unlike any other social institution – they have a built-in capacity to correct their mistakes? History hardly supports the supposition. Moods of irrational exuberance and panic can, and often do, swamp the price-discovery functions of markets.
When considering how to overcome the Great Depression, Hayek opposed Keynes-style fiscal stimulus for the same reason he opposed monetary expansion of the sort later advocated by his friend the American economist Milton Friedman (1912-2006). In attempting to generate recovery by macroeconomic engineering, both monetarism and Keynesianism required a knowledge of the economy that no one could possess. Unlike monetarism – with which it has sometimes been confused – the Austrian school of economics that Hayek promoted insists that the quantity of money cannot be measured precisely, and that expanding the money supply cannot reflate the economy in a sustainable way.
Living to the age of 92, Hayek's life experience would include standing guard on the roof tops of Cambridge University with John Maynard Keynes during World War II, to witnessing the neoliberal monetarist revolution inspired by Milton Friedman (and Hayek) during the 1980s.
|Friedrich Hayek (L) and John Maynard Keynes (R)|
While the article assumes the reader is familiar with the ideas behind our political and economic systems, it's worth taking a look because it also reads like a primer on liberalism, monetarism, and fiscal policymaking.
I encourage you to read it. Click here for access.
For those of you who want a quick primer on the ideas of Keynes and Hayek, this "Fear the Boom and Bust" rap video is place to start ...