Keynes versus Hayek

I recently listened to an interesting Planet Money podcast titled Obama, Ryan And Two Dead Economists. You can listen to the podcast at this link. The two "Dead Economists" are John Maynard Keynes and Friedrich Hayek. The podcast includes an interview with Nicholas Wapshott, author of Keynes Hayek: The Clash That Defined Modern Economics. The difference between the two is briefly summarized in the book description which states the following:

John Maynard Keynes, the mercurial Cambridge economist, believed that government had a duty to spend when others would not. He met his opposite in a little-known Austrian economics professor, Friedrich Hayek, who considered attempts to intervene both pointless and potentially dangerous.

One interesting topic explored by the podcast is how some of Hayek's ideas are contrary to what Paul Ryan and other Republicans are pushing for. A Planet Money blog about the podcast states the following:

In our conversation, Wapshott cited to two places where Hayek and Republicans disagree:

1. Taxes

Cutting taxes before you have money to do is very Keynesian ... not Hayekian. Hayek specifically said unless the government is in surplus, you shouldn't cut taxes, because that would only increase the debt.

2. Universal Health Care

Hayek also said a country should have:

A generous welfare system, a safety net for people who fall through the cracks, everyone should be provided with home, universal healthcare. This seems to be skipped over by all the people who call themselves Hayekians.

An Ezra Klein column expands on this latter point, attributing the following statement to Hayek:

There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.

The column sources Hayek's well-known book The Road to Serfdom. However, it's worth reading the actual page to get the full context since the statement above seems to leave out a few lines.

In any event, I found the podcast very interesting and a good introduction to some of the subtleties in the theories of Keynes and Hayek. I highly recommend it.

Comments

Post a Comment

Popular posts from this blog

Do the Trump Tax Cuts Mostly Pay for Themselves?

On April 9, 2018, the Congressional Budget Office released The Budget and Economic Outlook: 2018 to 2028 . The next day, the Investor's Business Daily ran an editorial titled It's Official: Trump Tax Cuts Are Boosting Growth And Mostly Paying For Themselves . That editorial begins: When the Congressional Budget Office released its updated budget forecast, everyone focused on the deficit number. But buried in the report was the CBO's tacit admission that it vastly overestimated the cost of the Trump tax cuts, because it didn't account for the strong economic growth they would generate. Further on, the editorial states: The CBO report also makes clear that this faster-growing economy will offset most of the costs of the Trump tax cuts. In a table buried in the appendix of the CBO report, it shows that, before accounting for economic growth, the tax cuts Trump signed into law late last year would cut federal revenues by $1.69 trillion from 2018-2027. But it goes on ...
Read more

From Record Monthly Surplus to the Largest Annual Deficit in 6 Years

Image
On May 25, 2018, Judy Woodruff interviewed Marc Short, White House Director Of Legislative Affairs, on the PBS Newshour. The video and transcript can be found at this link. At 2:43 in the video, Marc Short states the following: And, lastly, in April, we had the largest surplus on record in American history. That is a result of the growth and the revenues coming into the federal government because of the tax plan. READ FULL REPORT
Read more

Who Will See Their Taxes Go Up under the Final GOP Tax Bill? (Part 2)

Image
Taxpayer Examples Cited by Supporters of the Tax Bill In my last post , I looked at several groups of taxpayers who would pay higher taxes under the new GOP tax bill. The Committee on Rules has posted a Summary of the bill , a Joint Explanatory Statement , and the full bill . Since then, however, it seems like Republican members of Congress are focusing more and more on just a couple of examples that show taxpayers who will receive large tax cuts. For example, a Washington Examiner article quotes Mitch McConnell reading an outline of a possible script for an advertisement that he expects will air: “Here’s the commercial against Joe Manchin: ‘Head of household, family of four, making $73,000 a year, gets a $2,000 tax reduction. Now maybe Sen. Manchin that doesn’t sound like a lot of money to you, but for me it’s a 58 percent reduction in my taxes; 58 percent,’” McConnell said, playing the role of ad voiceover. “Or Sen. Heitkamp: ‘Maybe $1,300 doesn’t sound like a lot to you, bu...
Read more