Tuesday, January 26, 2010

Do You Care a Rap About the Business Cycle?

John Maynard Keynes was perhaps the most imposing economist of the Twentieth Century.  He is the father of macroeconomics (John Hicks might be called the midwife: indeed Hicks is probably the most influential, although his influence across the board in modern economic theory is so pervasive he is seldom cited.)

Friedrich von Hayek developed the ideas of Wicksell and the Austrian School theory of capital based on Boehm-Bawerk and von Mises into a coherent theory of the business cycle which does much to explain the mess we are in.

Keynesian economics justifies the use of stimulus programs such as are being used around the world to revive the world economy.  Nations around the world are following President Richard Nixon when he said, "We are all Keynesians now."

One should not assume Keynes would approve of current economic policy.  At a meeting of American economists shortly before he died, Keynes remarked "Perhaps I am the only non-Keynesian in the room." (as quoted in Bran Domitrovic's Econonoclasts: the History of the Supply-Side Revolution.)

Many thanks to both Ryan Pendleton and the Kansas Policy Institute who alerted me to this.

1 comment:

Ryan Pendleton said...

You know, this may be the very thing the Austrian's need to get their foot in the door. Hayek had a brilliant mind and it's good to see him get the attention he deserves. Roger Garrison has picked up where Hayek left off and done some great work in showing how to apply macro level Austrian theory. I am reading Prices and Production by Hayek currently and find it quite fascinating.