Recently, the Deseret News featured a debate between supporters of the economic theories of John Maynard Keynes and Friedrich Hayek ("GOP tax policy should ditch Keynes for Hayek," Sept. 21). Which of them offers a better solution to our nation's economic woes? I would like to suggest that the answer to that question should be neither of them.
The fact is, the ideas of both men were shaped by four previously unsuspected, unforeseen, never again repeated calamities: the end of World War I and the subsequent Versailles Treaty, hyper-inflation in Germany, the Great Depression and World War II. Keynes advised the Roosevelt administration regarding the Great Depression, but his recommendations were only implemented in part, and in a piece-meal fashion. Hayek's great book, "The Road to Serfdom," was a response to fascism and to the rise of communism. It was both an analysis and a prophecy, a prediction of events that did not and will not occur.
Keynes invented macroeconomics, but was always responsive to new data; they evolved throughout his life and would likely have continued to evolve had he lived very long after the seminal Bretton Woods conference, which he chaired, and which resulted in the creation of the World Bank and International Monetary Fund.
And what neither of them could really have predicted, and what Hayek spent much of his career sort of grumpily decrying, was the rise of a new thing entirely, the hybrid economy, combining the best features of free markets and socialism; the model of modern Western society.
We face different challenges than either of them faced, and we have at our disposal data neither of them could possibly have anticipated. Seventy years have passed since Keynes and Hayek held their celebrated debates, though of course Hayek was alive for many of those years. The economists we should be listening to are those who build on both their insights (in my opinion, much more Keynes than Hayek), but who have modified their views in the light of that subsequent history and the data that have resulted.19 comments on this story
This leads me to suggest such economists as Paul Krugman, Brad Delong, Larry Summers and, of course, Milton Friedman. It discourages me to see the current Republican Party's fascination not just with Hayek, but with such figures as Ayn Rand and the 19th-century French satirist Frederic Bastiat. We shouldn't rely on the insights of such marginal figures.
Instead, let's look to the best work of current Nobel Prize winners in macroeconomics. Krugman should be the central figure in our economic debates. He can certainly be a testy and combative writer. He also has a track record of predicting economic developments correctly that's pretty well unsurpassed.
Eric Samuelsen is a local playwright and former BYU theater professor. His latest play, "Clearing Bombs," is about John Maynard Keynes and Friedrich Hayek.