Keynes vs. Hayek, round II

From Russ Roberts, the new and spectacular video is here.  Arnold Kling comments and I agree.

Comments

This actually a pretty catchy tune!

Drop what you're doing and get to an audiologist immediately.

I'm amazed at the quality of this. They must have gone to great expense, and yet it was free. I derived a great deal of utility from something with a price of zero. I want Cowen in round 3 with Infovores and TGS, and both Keynes and Hayek regarding each other with looks of mutual confusion.

"They must have gone to great expense, and yet it was free"

Apparently they utilized idle resources.

AWESOME! Perfect for classrooms, too. Now I won't have to show Commanding Heights!

Fun to watch, but as a pedagogy tool, one would have to be careful to point out that this is pretty tilted towards the Austrian view.

False Equivalence, round II

Too slanted against Keynes.

Here's what Keynes should have said:

Liquidity preference determines money demand,
this simple fact you simply don't understand.
Anxious investors hold an idle cash balance;
without loanable funds entrepreneurs can't exercise their talents.

Investment is spending, don't try to pretend,
that you support production while its partying I defend,
What's truly irresponsible is letting jobless workers rot.
Expectations were shattered, real resources were not.

Bravo. Very well done.

Agreed. This really is quite good.

This is most awesome.

I admitted the importance of liquity preference.
Changes in money demand can distort the prices of reference.
To ease this double burden on the system of prices
in the first best world the Fed MV stabilizes.

If this i admit you also must admit
that government spending is a wasteful way to quit
the liquidity trap of unitilized resources
this secondary recession which the economy curses.

Don't limit your focus to the output gap,
without a good allocation all production is crap.
Consumer preferences expressed in prices are the key
to produce real wealth, not just spending, in our economy.

A problem of knowledge prevents government
from satisfying consumers preferences with our taxmoney spent.
Also, have you considered the political incentives?
Spending in recessions is easy, whats difficult is taxing.

Special interests groups will make powerful demands
politicians who want reelection, ignore them they can't.
Power for discretion will be utterly abused
interventions will leave the economy confused.

If the market can fail, then politics can fail.
In a prosperous society our common preferences must prevail.
How to limit the harmful discretion of politics
is a open research question for economics.

The feds mixed record shows there may be gains in reform,
economics the quest for a better monetary constitution can inform.
A supply of private money is what i proposed,
an idea to which economists are still widely opposed.

Lets search together for a better constitution
that allows the price system to function
while protecting the consumers from expropriation
through political money manipulation.

That's what Keynes should have said. It wouldn't make it true, though...

Kudos. You should help with round 3.

This is a mugs game.

The Hayek stuff is just as over simplified.

One difference -- Hayek at a more detailed level has substantive take-downs of Keynes and the Keynesian. The contrary is not the case.

multipledrafts and uglyrhymes is much better. As you delve deeper into their respective theories the difference may not be as conflicting as the video makes out. i bet they could reach consensus with the knowledge learned to-date in an academic or less-political environment.

Good post on this from Skidelsky:

http://www.skidelskyr.com/site/article/hayek-versus-keynes-the-road-to-reconciliation/

Maybe if it was Kanye vs. Hayek, Hayek would have a chance.

Why does the video imply that Keynes gets an undeserved victory because everyone likes to party? There's no new stimulus bill, only talk of tax cuts. The Fed is winding down QEII. Everyone's tightening their belts (at least rhetorically) when unemployment is still near double digits. Seems to me that Keynes won the first couple rounds but Hayek is now ahead on points.

To New Keynesians, I think tax cuts are treated the same as direct government spending. Revenue out > revenue in, any deficit will stimulate aggregate demand. If there are useful government projects that would have eventually been done anyway, you can also get their benefit while taking advantage of lower borrowing costs.

Edit: No new stimulus only talk of spending cuts.

I'd like to see one of these where Keynes's lines are written by someone who thinks Keynes was right.

Lyrics here: http://hayekcenter.org/?p=4804

Great job cutting the black guy's part out of the lyrics, racist.

Greg,

I see you got thanked. Were you the one having Keynes supporting central planning even though he praised Hayek for his Road to Serfdom critique of same?

Not surprising that Tyler likes it, given that it was co-sponsored by Mercatus.

Despite some flaws in the text, it is hilarious to watch. Pappola (sp?) is mighty believable as Bernanke (or a Bernanke look-alike stand-in), and Ed Stringham eagerly interviewing "Keynes" at the end is a hoot.

Favorite part -- Munger with a rubber glove.

2nd favorite -- Keynes banking wrenches as 1940s cars drive by in the background

First one was way better.

I liked the lyrics - the visuals, on the other hand, seemed to play into an Austrian school victimization narrative centered around the idea that since Government makes the decisions, and Keynes supports Government, Keynes always wins - regardless of the merits of the arguments.

This overshadows one of the really important points in the video - Hayek never actually answers Keynes' question about what one does with the unemployed, instead simply expressing faith that without Government to provide perverse incentives, they'll figure it out, and everything will be great. To be fair, in the end, both arguments rely an awful lot on faith. But were I confronted with a choice where one alternative was a plan, even with obvious flaws, and other alternative seemed to be "do nothing," predicated on faith that it would work, I think I'd go with the plan.

I also think that too great an attempt was made to cast Keynes' position as "any and all government spending in a crisis is a Good Thing," including simply the funneling of money to cronies of officials. I seriously doubt that Keynes would support such naked corruption in the name of "fiscal stimulus."

Barkley -- guessing I was thanked for spreading around the donation drive information.

Or for the "High Explosives" bit.

I'm not the person you falsely imagine me to be, Barkley. Like many who constantly attack me (or Hayek), you seem to live in a world of imaginary phantoms.

My pre-release concern posted at Cafe Hayek is that Hayek's actual positions on what do to about beyond productivity norm deflation would be misrepresented (Hayek supported both monetary & fiscal measures -- and partly for humanitarian reasons even supported public works projects). But this concern seems to have been at a degree of specificity below the level of generality of the content of the rap, which is fine.

Barkley writes.

"I see you got thanked. Were you the one having Keynes supporting central planning even though he praised Hayek for his Road to Serfdom critique of same?"

no one finds this inconsistent?

"I want real growth, not a series of bubbles
stop bailing out losers, let prices work"

it seems to me - without any background in all of this - that the Hayekian perspective is perhaps more wise, but the Keynesian perspective is more useful.

Let us not forget that Keynes had a very powerful view of people as being full of blood and muscle - Akerlof makes this point forcefully in his work on norms in macroeconomics - and so could not view the economy as an "engine" as it is being portrayed. Or if he could, then it doesn't make sense.

Ah, so this is how the high production values are paid for: http://mercatus.org/charles-koch

I hope not, considering they heavily solicited donations from their blog-readers.

That made my day.

When are they going to bring in Milton Friedman? I believe Hayek once said he was closer to Keynes than he was to Friedman, so it would be fun to see the two friends/opponents close ranks against an upstart.

@Aaron,

Isn't that the point, the political incentives are always 'to do something' (bailouts, stimulus, etc), whereas 'to do nothing' would take too much courage and therefore is the road less travelled

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