05/21/2023
Though economics aspires to scientific and mathematical rigor, it’s foundations are inescapably political and ideological. The clash between Keynes and Hayek can never be settled on a blackboard ( or calculator) - their differences inevitably come down to such things as your definition of freedom. Are you primarily concerned with freedom FROM outside interference or does freedom mean being provided with the opportunity TO grow and develop your capacities? Is government meant to be a provider of goods or is it always threatening to arbitrarily take them away? For Hayek, the welfare state was “the road to serfdom.” Only the free market , uninterferred with, could represent the collective will of the people. For Keynes, the market was capricious and certainly not omniscient. Hayek asserted the market would in the long run always return to equilibrium . Keynes replied that in the long run we’re all dead and there are times - like the Depression - when active government intervention is vital. Over the years, Hayek has been embraced by opponents of big government, usually either in the name of cutting social welfare and starving government by lowering taxes, but as one former Hayek-Ian put in, in a foxhole, everyone is a Keynesian. No one wants the government to do nothing in a banking crisis. Keynes’ macroeconomic perspective is now taken for granted, but the underlying ideological divide is unresolvable.
