Saturday, November 19, 2011

Nicholas Wapshott Lecture on Keynes versus Hayek

This is a lecture by Nicholas Wapshott, given as part of the Hayek Lectures at Duke University (November 3, 2011). He is introduced by Bruce Caldwell, no less. Nicholas Wapshott is the author of Keynes Hayek: The Clash That Defined Modern Economics (W. W. Norton & Company, 2011).

Some meaningless trivia: Keynes was taller than Hayek! I was surprised by Wapshott’s mispronunciation of Mises’s name as “Meez” (it is actually pronounced as IPA ['mi:-zəs]).

More important points:
(1) Sraffa’s critique (1932) of Hayek’s Prices and Production was not vituperative. I have read it many times and Sraffa’s article is a careful criticism of Hayek’s arguments, not personal invective.

(2) In the debate of Hayek and Keynes on Hayek’s business cycle theory, it was Hayek who eventually changed his position: Hayek later approved of and supported monetary stabilisation and eventually limited fiscal policy.

(3) Milton Friedman was no Hayekian or even a “disciple” of Hayek, despite what Wapshott says from 37.30. Friedman’s brand of monetarism is in many ways far removed from Austrian economics.

(4) I am also of the opinion that Hayek’s influence is overrated:
“Hayek vs. Keynes Round 2: Amusing Rubbish,” May 4, 2011.
Certainly, in terms of his influence on contemporary neoclassical policy-makers in Europe and America, Hayek’s influence is in fact grossly overrated. Today’s debates are between New Keynesians and advocates of the New Consensus macroeconomics, with the more strident New Classicals and monetarists having the most poisonous and pernicious influence. All of these economists are neoclassicals, however, and the free market New Classicals and monetarists are not Austrians.


  1. I haven't read the book but I think it's a massive overstatement to say the clash defined modern economics. Keynes had ongoing debates with many far better economists than Hayek.

    In fact, Keynes basically ignored Hayek's economics, with the exception of his critique of treatise.

  2. It is true that Friedman rejected Hayek's cycle theory, he accepted Hayek's "Use of Knowledge" microeconomics. The Use of Knowledge Article has been on the PhD reading list for PhD micro for decades. Lucas more than likely got the idea for the "Island's Model" from Hayek. So Hayek had influence, hard to measure how much though