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Source link: http://archive.mises.org/9729/the-keynes-hayek-debate/

The Keynes-Hayek Debate

April 2, 2009 by

About a year ago, the Mises Institute began looking for a way to bring the important book by John P. Cochran and Fed R. Glahe into print. It is one of the few original narratives in book form that focuses on what is in fact a crucial if not central debate in 20th-century economic thought: The debate between Keynes and Hayek and its lessons for our time. This 240-page book explores all the literature, much of it forgotten but all of it extremely important. What they show is that Hayek was right on point after point. They show how and why, and where Keynes went wrong.

As for that cover, which is pathetic, this edition was put together solely for the Mises Institute to make available to its members. We sought the release of the book so that we could make it as attractive as possible. But the publisher wouldn’t budge. This is what they came up with. On the other hand, they were previously going to mark up the retail price by twice what it is, so given the way publishing works, we should be grateful for this at least.

In any case, what matters is that this very important book is once again in circulation. The prize fight between Keynes and Hayek is back on, and Hayek delivers the knock-out blow.


Dennis April 2, 2009 at 3:18 pm

Thanks so much for making this book available. Yes, the Hayek/Keynes debate is one of the most crucial of the 20th century, and Hayek’s demolition of Keynes’s arguments needs to be made available to as wide an audience as possible.

While Hayek had his reasons, it is unfortunate that he did not pursue a detailed critique of Keynes’s “General Theory” a few years later. Although given the then (and still) prevailing political climate, I wonder if Hayek’s criticisms, no matter how scientifically justified, would have had much real-world influence on policy.

ehmoran April 2, 2009 at 3:40 pm


“….would have had much real-world influence on policy”.

Likely not much. Wasn’t Keynes Knighted?

Dennis Sperduto April 2, 2009 at 3:56 pm


I corrected a typo in my earlier comment, and my meaning should now be more clear.

ehmoran April 2, 2009 at 4:09 pm


What I was getting at is Keynes was too important and pushed the Ruling Elite’s agenda and other potential influencing economic thoughts of the time, no matter how logical, were rejected.

Sort of like Aristotle. I like many of Aristotle’s thoughts, but, in my opinion, he set the scientific community back about 400 years due to the very same attitudes: as far as listening and accepting other scientific opinions and thoughts at the time.

Like the four forms of matter: Earth, Wind, Fire, and Water (I think that’s what they were). Other varying opinions of science, from my understanding, were oppressed for about 400 years. (But I do like his Prime Mover opinion)…..

Charles Hueter April 2, 2009 at 4:21 pm

Dennis, I am halfway through Hazlitt’s “Failure of the New Economics” (http://mises.org/store/Failure-of-the-New-Economics-The-P337.aspx) and so far he’s done a pretty good job of kicking the “General Theory” up and down the block.

Gil April 2, 2009 at 8:35 pm

So what’s the cat saying? The debate is irrevelant? You prefer Keynesianism, I prefer Austrianism? Or is he saying the debate is over – just as the debate over whether germs cause disease or astrological allignments? Austrianism is true, Keynesianism is false and I like watching Seinfeld?

markb April 2, 2009 at 9:15 pm

Gil, I think the cat is the typical prol, revealing, with his nonsensical reply, that he is incapable of the thought required to govern him- (or her) self. On a related note, I recently read a great analogy about this debate. It went something like this :”Asking a modern economist how he likes Keynesianism is like asking a goldfish how he likes the water. He doesn’t even know there is water. It is just the stuff he lives in, and doesn’t even realize it’s there.”

phrizek April 3, 2009 at 1:37 am

Speaking of covers Jeffrey, who designs the covers for the Mises Institute published books? All of the ones I have seen in the past year or so have been creative, tasteful, and generally wonderful.

Arend April 3, 2009 at 5:35 am

markb, I recognize what you’re saying about the goldfish escpecially when tapping the fishtank. A modern economist is taught just to accept the lore of the modern economists that came before them. Which makes the profession kind of like a religion. I cannot even imagine how to live and breathe in the mainstream economics profession. Before you know and/or start you’re stumbling upon a methodological/epistemological issue which the profession is completely clueless on (because any critical approach of the subject is non-existent, methods are just delivered by the great economists before us). Which is maybe the reason why (non-Austrian) journal economics deals with uninteresting and hardly relevant details of math games. Opportunism is not something they despise as well, as it it obvious that Keynesianism is relevant is these days. It’s obvious, nothing is told about the empirical refutation of Keynesianism in the 70′s or what paradigm messed up this time. They’ll just put in the fact that this was LORD Keynes, and the argument that he was really pwned by Hayek over and over doesn’t really matter because Keynes won the argument because he is relevant again, and was (i.e. non-sequitur after non-sequitur). This argument is turned around in that Keynesianism was surpressed after the ’70′s stagflation and now that Neoliberalism has screwed over Keynesianism is relevant again: the typical A is opposed to B, so when B fails we’ll choose A and vice-versa or in practice: the pseudo-dichotomy of positivism/interpretativism (institutionalism/historicism or *funny* post-positivism).

I hope I can stick to Rothbard’s dictum that at least bullying the bad-guys is fun, seeing them struggle in cognitive dissonance when the Austria heretic enters the debate…. meh

J.K. Baltzersen April 3, 2009 at 7:36 am

Likely not much. Wasn’t Keynes Knighted?

I am unaware of any knighthood. He was bestowed with a hereditary barony, which became extinct upon his demise, as there was no heir.

No issues, who had to worry about the long run!

Matt van Holdstean April 3, 2009 at 9:06 am

“In the long run we’ll all be dead.”
I always thought that meant one of two things. In the long run Keynes will be dead, after people finally realize how horrible his theories were. The other meaning could be that in the long run we’ll all be dead, and it will be Keynes’ policies that took us to our grave.

Matthew April 3, 2009 at 1:03 pm

@Matt van Holdstean

Maybe Keynes had time preference of a cosmic scale, measured in eons. Maybe he decided that if the sun’s going to consume the Earth somewhere down the road or the universe is going to collapse on itself, what does anything really matter anyway since the human race will likely come to an end…

(I’m mostly joking here.)

D. Saul Weiner April 3, 2009 at 9:03 pm

Arend, the dynamic you describe is similar to our political system where now many are disenchanted with the Repubs so they put their faith in the Dems. It is a cartel which gives us the “choice” between the frying pan and the fire.

Joe O. April 4, 2009 at 7:01 am

You know, I’ve had economic conversations with people just like the one depicted in the cartoon. The cat represents the ignorant masses who would rather focus on simple and silly things eventhough their futures to stand on the precipice which will eventually be decided by the Hayek-Kenes debate.

ehmoran April 4, 2009 at 8:18 pm

Keynes was a confirmed eugenicist and imperialist (his reason for demanding a single world currency was to obliterate nation-states). In Keynes’ preface to the 1937 German edition of his General Theory, he admitted that his economic approach was “better adapted” to the Nazi state.

p.m.ella February 6, 2010 at 2:28 am


If Prof. Cochran and Glahe will so allow, their book ought to be retitled “Hayek Bitchslaps Keynes”

ehmoran May 9, 2010 at 1:49 pm

“ehmoran April 4, 2009 at 8:18 pm

Keynes was a confirmed eugenicist and imperialist (his reason for demanding a single world currency was to obliterate nation-states). In Keynes’ preface to the 1937 German edition of his General Theory, he admitted that his economic approach was “better adapted” to the Nazi state.”

Who’s using my name? I (the real “ehmoran”) didn’t post this……….

ehmoran May 9, 2010 at 1:55 pm

But I guess we could find out from the required “email” address?

Keron Hopkins December 5, 2010 at 11:14 pm

Markb, I like your goldfish analogy and I will try to use it to make my point as it relates to Hayek. I don’t know enough about fish to be able to say with any certainty whether they have the intellect to determine whether they like water or not. I agree with you and suppose they do not. What I do know is that when you take a fish out of water, they fight like anything to get back into it, the same way humans would fight for air if it was taken away from them. I am reminded of an article I read in Forbes magazine where Hayak is quoted as saying, “It is not easy to promote a theory that proclaims the virtues of laissez-faire… People just don’t like thinking of themselves and their children at the mercy of something beyond their control, that cold invisible market.” The government, in your analogy, is the water. The people are the goldfishes. People will always embrace Keynes because Keynes supports government intervention, and this intervention has become the people’s life source. It is where the people turn to calm their uncertainty.

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