Nicholas Wapshott’s *Keynes Hayek*

I very much enjoyed this book — which is detailed and entertaining and conceptual all at once — and I wrote a lengthy review of it for National Review (not on-line that I can find, issue of 11/28).  It’s a model of how to write popular history of economic thought, and still teach professional economists at the same time.  Excerpt from my review:

For all his brilliance, Hayek didn’t — at the critical time — have a good enough understanding of the dangers of deflation.  He didn’t realize the extent of sticky wages and prices and, more deeply, he didn’t see that ongoing deflation would render the “calculation problem” of a market economy more difficult…

Hayek’s biggest [recent] intellectual victory probably has come in the aftermath of the Obama fiscal stimulus.  A lot of the modern-day Hayekians, most notably Mario Rizzo of New York University, predicted that the stimulus would not provide lasting aid to the economy but rather would impose an artificial boom-bust structure on the economy.  The early spending of money would boost measured national income, but eventually those jobs would prove unsustainable: the stimulus funding would run out, the jobs would disappear, and the economy would slow down once again.  That is exactly what we saw in the spring and summer of 2011.

A Hayekian perspective leads one rather naturally to the view — now quite vindicated — that the aid to state and local governments would preserve some jobs but the spending projects would mostly fail, including when it comes to sustainable job creation.  It’s often neglected that Hayek’s macro is a general perspective which goes well beyond the particular cyclical story involving the time structure of production.

In the review, loyal MoneyIllusion readers will enjoy my discussion of Scott Sumner and how he fits into these debates (“These days I cannot go anywhere in the world of economics, or blog readers, without hearing his name.”).

You can buy the book here.

Addendum: I quite agree with Alex’s take on Hayek, and had drafted a post of my own, saying much the same thing.  Eighty or so years later, people are still taking potshots at Prices and Production, among Hayek’s other works.  Eighty years into the future, how many current Nobel Laureates will be receiving comparable attention?


Comments for this post are closed