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"Fear the Boom and Bust"
Tuesday, January 26, 2010
Now popping up everywhere is this very educational and entertaining EconStories video that looks back at the century long debate between economists John Maynard Keynes and Frederick Hayek, a debate that has never been as pertinent as it is today.
It's got a very catchy little hook - "We've been going back and forth for a century. I want to steer markets (Keynes) and I want them set free (Hayek). There's a boom and bust cycle and a reason to fear it..."
2 comments:
During the Great Depression, Hayek's message to do nothing was politically unacceptable. Hayek should have advocated a temporary charity program to help people get through the GD. Stock the soup kitchens, and give displaced persons a warm place to sleep. When the excessive debt was finally paid down, the economy would have naturally recovered.
Maybe the nation could have avoided the mad cap print/borrow stimulus programs that have created a dysfunctional debt based economy.
Of course, getting rid of zoning regs that mandate McMansions would be crucial today to give people a warm place to sleep. The bottom 60% cannot afford McMansions. Allow them to build modest dwellings that they can afford without debt slavery for life ($70,000 homes).
Hayek's message is a bit misunderstood. I think he actually said do nothing too. What he meant and probably should have said instead is governments need to stand back allow the affected parties to sort it out themselves. By getting involved in economic planning, it prevents malinvestments from being liquidated and creates more of them.
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