Tuesday, June 19, 2012

Hayek: Keynes was a Quack...

....who didn't know much about economics.

Bob Murphy prints this great quote from Hayek (My bold):
The chief root of our present monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples have given to the age-old superstition that by increasing the aggregate of money expenditure we can lastingly ensure prosperity and full employment.

It was John Maynard Keynes, a man of great intellect but limited knowledge of economic theory, who ultimately succeeded in rehabilitating a view long the preserve of cranks with whom he openly sympathized. He had attempted by a succession of new theories to justify the same…intuitive belief: just as there cannot be a uniform price for all kinds of labour, an equality of demand and supply for labour in general cannot be secured by managing aggregate demand.

The claim of an eminent public figure and brilliant polemicist to provide a cheap and easy means of permanently preventing serious unemployment conquered public opinion…

[Hayek quoting himself from 1939:] [I]t has…never been denied that employment can be rapidly increased…by means of monetary expansion…All that has been contended is that the kind of full employment which can be created in this way is inherently unstable, and that to create employment by these means is to perpetuate fluctuations.

One of our chief problems will be to protect our money against those economists who will continue to offer their quack remedies, the short-term effectiveness of which will continue to ensure them popularity.


  1. http://www.hayek.ufm.edu/index.php?title=Leo_Rosten_Part_II

    At the 16:40 mark:

    "Man had great many ideas, but knew very little economics."

  2. It's like me telling a bunch of alcoholics, "all your troubles will be solved by drinking MORE booze!". Remember, in the long run we're all dead anyhow :)

  3. Worse than a quack, an evil genius.