Keynes vs Hayek FIGHT!

[rowyn]

This is an awesome video: Keynes and Hayek (two of the greatest minds in economics from the 20th century) in a rap performance about their competing economic models. No, really, it's better than it sounds. OK, so I'm an economics nerd but STILL. It's also surprisingly informative, serving as a good introduction to both philosophies, and pretty well-balanced. Give it a listen. :)

Watch on YouTube

(h/t level_head, who pointed it out in this post).

Comments

[elusivetiger.livejournal.com]

Yes, it's excellent! I've read a lot of von Mises, Hayek, and some other Austrian school influences and the video does a great job.

This seems to be the first one:

http://www.youtube.com/watch?v=d0nERTFo-Sk

[rowyn]

Yes! I saw that one too -- I love the "party's over, it's time to sober up" line -- but I liked the second one better. And didn't want to embed two and get the 'too long, didn't watch" phenomenon. I almost didn't watch this at all, since I'm not a big fan of videos. I'm glad that I did!

[jurann.livejournal.com]

I watched it, but I think it may have been over my head. And who won? There didn't seem to be a clear winner, but I know that I personally liked Heyek's angle better... Well, actually, I'm really confused. Heyek seemed to be championing "the people", but then he was also talking about laissez-faire freemarket a la De Tocqueville and Libertarianism... I'm not sure how those two go together... Yeah, this is why I don't do economics. =P I think the only reason to understand economics is to scam people out of their money. =/

[level-head.livejournal.com]

One of the points of the video seemed to be to illustrate that, although "Hayek" clearly knocked "Keynes" down (and almost out), Keynes was declared the winner anyway. The referee, then the adoring reporters, crowded around Keynes much to his own surprise, and Hayek was pushed out. (Notice Keynes' surprised and almost apologetic look at Keynes as the reporters are crowding around.)

I'm with you; Hayek's approach is much better, and actually works in practice.

There is a lot of philosophical overlap between libertarianism (leaving people free to make their own decisions) and Hayek's free market (leaving people free to make their own purchase choices).

Keynes was fairly volatile in his ideas, changing what he thought was a good way for government central planning to work from moment to moment. He died in 1946, freezing his last ideas as "the Keynes system" -- and was later discredited during the 1970s as various governments (including the US) tried to implement Keynesian centrally planned economies. They did not work; Nixon, then Carter, proved this with wage and price controls and hiring freezes and so on.

But governments like controlling things, whether central planning works or not; it wasn't long before we forgot the 1970s, Keynes' was restored as the governments' hero, and, well, here we are again.

===|==============/ Level Head

[rowyn]

Poor Hayak has not gotten nearly the exposure.

I didn't read the video as being that biased towards Hayak, but your interpetation makes sense and matches Terry's, so I am clearly being cleueless. :)

[rowyn]

The video doesn't have a clear winner because the debate is still ongoing in the real world.

Keynes advocates a top-down approach, where government manages the economy through regulation, and limits busts by increasing spending (preferably through borrowing, which doesn't impair the consumer's ability to spend the way higher taxes do). His argument is that gov't can act more intelligently than individuals, by being comprised of the best & the brightest.

Hayek advocates a bottom-up approach, where the government leaves people alone to manage their own affairs. The guiding principle here is that no one person or group of people will be able to understand or make the best decisions for *everyone*, because the individual situations are simply too numerous and complex. Tightly-regulated economies and stimulus spending are doomed to croneyism and failure. Hayek is also opposed to heavy borrowing, arguing that it creates inflation, not true growth.

So yes, Hayek is much more about individual freedom and control. The theory of this does go hand-in-hand with libertarian/laissez faire ideals. The practice is that Big Business can be just as destructive as Big Government, and it's not clear how (or if) both dangers can be avoided.

[jurann.livejournal.com]

Oy... There has GOT to be a solution that solves both issues. But perhaps that solution will require an r/evolution before it's possible...

[rowyn]

I think 'mitigation' is generally what you're looking for -- maximize the benefits and minimize the detrimental effects of your businesses and government. Both do good things and bad.

[jurann.livejournal.com]

Well, I'm talking about a New World Order akin to something like how economics worked in Star Trek... Kind of an Egalitarian State where everyone does what they want in life, whatever motivates or inspires them, but the harder they work and the more they do, the more they have to enjoy. The key differences there are that nobody has the singular ability to become ultra-wealthy or ultra-powerful - no monopolies, no cronies, no singular points of power (i.e. everything is done by committees where the committees are created with the sole requirement of being made-up of individuals from every viewpoint rather than having the ability to be corrupted into pandering to one single viewpoint or lobby). Of course, that would require casting off capitalism and religion and having a society that embraces secular humanist values and working toward the overall benefit of mankind (and indeed all life in general), and THAT is where (r)evolution is required. We can get there from here, but it's a massive step that current society is not ready for.

[rowyn]

I don't think that's happening without significant technological advancement that'll make societal change natural, and in keeping with the fundamentals of human nature.

[terrycloth.livejournal.com]

I saw these earlier... I thought it was kind of lame that they make Hayek out as the clear winner when the actual words of their own damn song don't support that, since he's got nothing but handwavey generalizations. Maybe his actual theories are better.

The problem with Keynes in practice is that no one actually implements the 'slow down the boom' half, so you get people using him as cover for 'borrow and spend indefinately'. There's no arguing that his methods work dramatically, though, and it's obvious why collective action is what you need when an individual would just get trampled by the crowd for trying to act alone. It's the same *concept* as the tragedy of the commons -- that's why you need a government.

Of course, you need a government that's willing to actually govern and not just play to the next election cycle.

[rowyn]

I hadn't felt like there was a clear winner in the video -- it seemed more like "Hayek got in a good punch, Keynes was pronounced the winner, and neither side is conclusive".

I kinda feel like reality is more a matter of 'right action at the right time' then that X or Y philosophy is clearly right. Even Keynes obviously valued free markets, although he also saw value to government intervention in them.

I should read more of their original material, though. Some of Keynes's stuff is probably free on Google Books ...

[terrycloth.livejournal.com]

Well, yeah. Neither of them is talking about a command economy or anything like that. Keynes as I learned about it in college wasn't even really about the government, it was just that Keynesian economics (which tried to explain markets in general) left a way for the government to intervene -- if you do X, then people will be encouraged to do Y.

Maybe he later went on to say that the government *should* in fact do X?

[rowyn]

I am sure his theories have been badly abused since his death. :/

[elusivetiger.livejournal.com]

I heartily recommend The Mises Institute at http://mises.org/ for a metric ton of relevant literature on the Austrian school, most free, both modern and historical.

Keynes himself was a big admirer of Hayek's, but Keynes gives government an excuse to meddle and tinker, consolidating power and an excuse for authority, while the Austrians don't.

[octantis.livejournal.com]

Okay, I may not have been able to follow every single point, and my own opinion is kind of a mix...

...but that was frickin' awesome. Taking normally dry but serious issues and giving them some kind of life without reducing the impact is a difficult thing to achieve, but we need more of it.

[level-head.livejournal.com]

That was my thought as well. The works of these two (and of economists in general) are dry as dust, until you have enough background where the jargon becomes an understood language. But by then you're so inured to the details that you miss key concepts, burying them in verbiage.

But here, this presentation grabs you. It's an improvement over the first video, I think, which was still trying to fit economic equations into the lyrics ("C I G = Y").

I've already seen one economics instructor suggesting as a result of this video that he was going to look at Hayek more closely -- and was wavering from his Keynes point of view. (Oddly, he used the word "waivering"--a curious hiccup for someone into economics jargon.)

This simple presentation allows you to think about things more broadly.

And I would second ElusiveTiger's recommendation of Mises.org for more information, much of which is free.

===|==============/ Level Head

[rowyn]

The video makes me want to read both of them. :)

[rowyn]

As bad a reputation as infotainment has, popularizing knowledge if a *great* goal. :)

[jordangreywolf.livejournal.com]

This was surprisingly awesome. :) I appreciated that they left the ending ambiguous.

[rowyn]

Yes! I suspect the 'fight' aspect is more in the minds of politicians and media than in the men themselves, really.

[detroitfather.livejournal.com]

The Ring Girl was cute.

Sorry, I am easily distracted.

[rowyn]

Hayek and Keynes are not quite up to her level in the eyecandy department, alas. :)

[quarrel.livejournal.com]

There is a detailed breakdown of the concepts from the first video here:
http://www.dailykos.com/story/2010/03/01/837337/-Smackdown:-Keynes-vs-Hayek-With-Poll.