Monday, November 5, 2012

Hayek on Krugman

Christopher Barcelo sends along this clip from Friedrich Hayek's Nobel banquet speech, and titles it, "Hayek on Krugman."

Your Majesty, Your Royal Highnesses, Ladies and Gentlemen, 
Now that the Nobel Memorial Prize for economic science has been created, one can only be profoundly grateful for having been selected as one of its joint recipients, and the economists certainly have every reason for being grateful to the Swedish Riksbank for regarding their subject as worthy of this high honour. 
Yet I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it. 
One reason was that I feared that such a prize, as I believe is true of the activities of some of the great scientific foundations, would tend to accentuate the swings of scientific fashion. 
This apprehension the selection committee has brilliantly refuted by awarding the prize to one whose views are as unfashionable as mine are.
I do not yet feel equally reassured concerning my second cause of apprehension.
It is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess. 
This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. 
But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.
There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society - as the press tends to treat him till in the end he may himself be persuaded to believe.
One is even made to feel it a public duty to pronounce on problems to which one may not have devoted special attention.
I am not sure that it is desirable to strengthen the influence of a few individual economists by such a ceremonial and eye-catching recognition of achievements, perhaps of the distant past.
I am therefore almost inclined to suggest that you require from your laureates an oath of humility, a sort of hippocratic oath, never to exceed in public pronouncements the limits of their competence.
Or you ought at least, on confering the prize, remind the recipient of the sage counsel of one of the great men in our subject, Alfred Marshall, who wrote: 
"Students of social science, must fear popular approval: Evil is with them when all men speak well of them".


  1. That reminded me of the Lauren Lyster interview with Bill Bonner when he said economist went off the rail when they started believing they were scientists and could make things better rather than trying to explain why thing were the way they were.

  2. Brilliant find. Thanks Bob!

  3. "But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally."

    I recommend the piece from which the following is quoted:
    "Economics as a discipline is largely only accepted – outside academia at least – when its claims receive conjunctural and structural confirmation. Otherwise, economics is fairly useless to political communication. In politics, being right but unsuccessful counts for little. The susceptibility of economic expertise to its circumstances reflects back on its basic character as both science and instruction. That it can fail as instruction while explaining the structural shifts responsible for its changing fortunes is an irony of the discipline. Individual experts might perceive this as tragedy: they must propound doctrine with all the conviction they can muster, but at any time can find themselves overtaken by the reality of the economic process. Yet generally, they rarely become aware of the tragic brevity of their time in the limelight. They tend instead either to be politically ambitious or naive – and perhaps this naivety is necessary in order to keep talking. Economic expertise never actually fails, it either fits the situation or it doesn't."