Wednesday, February 8, 2012

Lachmann Endorsed Keynesian Stimulus in a Depression

Following on from my last post, I want to emphasise the gulf that exists between Ludwig Lachmann and many other Austrians today.

Ludwig Lachmann explicitly accepted certain government interventions in a depression. You can read his statement on this question below, or just click on the quote and hear Lachmann in his own words:
“The question is to be welcomed, because we historically have [?] certain points. In the British situation of 1932, Hayek and his friends rejected the proposals of Keynes and some non-Keynesian British economists – that at the bottom of the depression the government should take certain steps, and so on. Hayek has now realised that that was wrong. That is to say, I think Austrians today would not reject all measures to relieve unemployment and increase employment, in a situation in which nothing really is scarce. And in this respect I think Austrians … would have … have ... learned.”
This statement was made in the question session of a lecture on the history of Austrian economics, but Lachmann also said much the same thing in print.

What is extraordinary is Lachmann’s belief that “Austrians today would not reject all measures to relieve unemployment and increase employment, in a situation in which nothing really is scarce.”

The type of Austrian economists Lachmann has in mind here are far from the hordes of anarcho-capitalists and denizens of the Mises Institute, whose irrationality and hostility to government put them in a completely different category from Lachmann. The latter type of Austrians haven’t learned anything from history.

3 comments:

  1. So would you consider Lachmann a free market economist?

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  2. "So would you consider Lachmann a free market economist?"

    Of course he was. Relative to monetarists, supply-siders or New Classicals, he was more free market.

    Support for free markets is really one of a degree. Even Keynesians could be called "free market" relative to communists.

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  3. Take the label 'free market economist' with a grain of salt. As LK says correctly, such label is one in which you have to have it relative to something. The respectable 'free market' economists* know that under certain situations, government is needed. Lachmann and (older) Hayek knew this, as do modern free market economists. George Selgin, for example, advocated a 'Swedish' alternative as a solution to the most recent recession.**
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    * Respectable in my opinion anyway.
    **The Keynesians Answer Back

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