We'll obviously have to agree to differ over the interpretation of what
Keynes said about Hayek's ideas and what Hayek thought about Keynes's.
As to the "Efficient Market Hypothesis", it's a straw man as far as I'm
concerned. All the necessary information that would be necessary to test
it -- in economics -- can never be fully known. The principle of least
effort (maximum efficiency) is something that runs through all physics from
fundamental particles through to cosmological events but one would have to
be naive to believe that stock markets are anything other than approximate
manifestations of it.
Keith
At 11:34 11/07/2010 -0700, you wrote:
It's news to me that Schumpeter's creative destruction has been
"largely ignored". Paragraph five contains a remarkable instance of
argument by elision and insinuation. The only reference to Keynes in
"The Road to Serfdom" is a warmly approving citation of his 1915
critique of the militarization of industrial life in Germany. To say
that Hayek argued that Keynes's ideas would lead to Soviet-style
totalitarianism is a slander against Hayek. To then say that Keynes
acknowledged an argument that Hayek didn't make is then fatuous. But
let's get down to brass tacks. The idea that Hayek is criticizing, and
praising Keynes for criticizing, is summed up in the following:
"Individualism must come to an end absolutely. A system of regulation
must be set up, the object of which is not the greater happiness of
the individual... but the strengthening of the organized unity of the
state for the object of attaining the maximum degree of efficiency,
the influence of which on individual advantage is only indirect. --
This hideous doctrine is enshrined in a sort of idealism."
May I remind Keith that "the object of attaining the maximum degree of
efficiency" is the single overarching rationale for the market
fundamentalism of the last 30 years that has adopted Hayek as its
patron saint? Anyone heard of the Efficient Market Hypothesis? The
stuff is steeped in two things: the worship of "efficiency" and the
dogmatic certainty that the market and only the market is the
guarantor of "the maximum degree of efficiency."
On 7/11/10, Keith Hudson <[email protected]> wrote:
> John Maynard Keynes was one of the most humane and brilliant minds of the
> last century. At the Versailles Conference after the First World War and
> Germany's defeat, President Clemenceau of France was adamant that millions
> of German civilians should be allowed to starve to death. It was Keynes
> (then a Treasury official) who persuaded Prime Minister Lloyd George to
> oppose Clemenceau's plans and make sure that emergency food was sent.
>
> Unfortunately Keynes was less successful when trying to persuade Lloyd
> George and Clemcnceau not to punish Germany's economy too fiercely. It was
> then that he wrote one of his most famous books, "The Economic Consequences
> of the Peace" (1919) when he forecast the German instability that would
> follow France's vengeance. Thus the subsequent Weimar hyperinflation of the
> 1920s, the Great Depression which followed and the subsequent outbreak of
> the Second World War did not surprise him.
>
> Brilliant though Keynes was, he was also someone who could never quite make
> up his mind on other issues for most of his life. For some years he had a
> homosexual relationship with a young man, Sebastian Sprott at the same time
> as one with Lydia Lopokova, a leading ballerina of the 1920s. It became an
> effort of will to finally plump for Lydia, whom he married in 1925 (and a
> happy marriage ensued).
>
> He was equally vacillating about his economic ideas and the book for which
> he is best known, his "General Theory", is self-contradictory in places --
> which he acknowledged himself later. His main fault is that he said (most
> of the time anyway) that money was the prime motivator of consumer goods
> consumption and that if governments showered money on people in bad times
> then they would start buying goods and the economy would recover. But money
> is only a transient intermediary. It's the attractiveness of the goods
> themselves which causes people to work hard, save money and buy them.
>
> In fact, when Friedrich Hayek opposed Keynes' ideas in his book, "The Road
> to Serfdom" (1944) -- as leading to Soviet-style totalitarianism -- Keynes
> finally acknowledge that his own main idea had been wrong. He wrote to
> Hayek: "In my opinion it is a grand book ... Morally and philosophically I
> find myself in agreement with virtually the whole of it: and not only in
> agreement with it, but in deeply moved agreement."
>
> Furthermore, only ten days before he died of a heart attack in 1946 he told
> Henry Clay at a Bank of England lunch that he was finally a convert to Adam
> Smith's primary idea of the invisible hand. He said: "I find myself more
> and more relying for a solution of our problems on the invisible hand which
> I tried to eject from economic thinking twenty years ago."
>
> Keynes was brilliant enough to be able to change his mind -- and not to be
> ashamed when he did so. Unfortunately, that cannot be said of some public
> economists who are certainly clever but nowhere near as brilliant as Keynes
> or -- dare I say it? -- Hayek.
>
> Incidentally, the other great economist of the last century who also argued
> forcefully against Keynes' earlier ideas was Joseph Schumpeter, someone
> whose ideas of "creative destruction" are largely ignored because they're
> uncomfortable. But as we're living in uncomfortable times perhaps some of
> our public economists ought to do some reading of him also.
>
> Keith
>
> Keith Hudson, Saltford, England
--
Sandwichman
Keith Hudson, Saltford, England
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