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Hayek On Keynes: "Economics Was A Sideline For Him"

Tyler Durden's picture


Keynes will be remembered as "a man with a great many ideas that knew very little economics," Friedrich Hayek notes in this brief interview and when challenged on his 'parochial' knowledge of economic history he was "not sheepish in the least... he was much too self-assured." Hayek's perspective casts Keynes in a very different light than his fan's apostolic adoration might suggest, "he was utterly contemptuous of anything that had been done before." While Hayek describes Keynes as one of the most intelligent people he had known, he perhaps sums up the man's work in this brief phrase - "economics was just a side-line for him." As we note below, many describe Keynesian policy as 'dumb', however a more appropriate word would be 'foolish'.


Hayek On Keynes


Keynesian Policies: Not Dumb, Just Foolish (via the Ludwig von Mises Institute of Canada)

A lot of my Austrian friends refer to Keynesian policies as “idiotic,” “stupid,” etc., but that’s not really accurate. Indeed, the Keynesian policy prescriptions are so counterintuitive–they so defy common sense–that only very intelligent people with plenty of schooling could have the confidence to utter them with a straight face.

Rather than describing Keynesian policies as “dumb,” I think a more appropriate word is foolish, because the technical analyses of IS/LM curves, talk of the “liquidity trap” and so on, utterly ignore political realities. A great example of this is Matt Yglesias and his handling of Argentina. Back in May 2012–not that long ago, by any stretch–Yglesias held up Argentina as a model for the eurozone countries. He wrote:

Spain is in a complete economic crisis…But perhaps there is a way out, one suggested by the recent experience of Argentina, a nation that’s currently enjoying full employment. 

…[W]hen the world economy hit a snag in 2001, trouble emerged for Argentina. Unrelated hidden risks were revealed elsewhere in the global investment landscape and everywhere people got nervous. The foreign capital began to abandon Argentina, reducing investment, employment, and incomes. This in turn sharply reduced the Argentine government’s tax revenues and led to calls for sharp budgetary consolidation…Protesters and rioters took to the streets. President Fernando de la Rua’s party took a beating at the polls. Argentina defaulted on its external debt, broke the rigid linkage between the peso and the dollar, and went back to pursuing an independent monetary policy….

Default and devaluation were hardly a party. They destroyed the country’s banking system and wiped out many Argentines’ savings. But it did work. Argentina has grown rapidly in subsequent years and its unemployment rate has fallen steadily…

So Yglesias was recommending that Spain and other troubled countries ditch the euro and default on their sovereign debts, so they could free their printing press from the shackles of Brussels. The obvious Austrian (and generally free-market) response would be to warn that debasing the currency is hardly the path to prosperity, and that “solving” a crisis in this way would merely sow the seeds of a greater problem down the road. The prosperity coming from the printing press was an illusion.

Well, the economy in Argentina is now “melting down”–Yglesias’ own term. But our fearless Keynesian pundit has nothing for which to apologize. He explains in a January 2014 post:

With Argentina’s economy melting down, I’ve gotten various queries from people asking whether I regret having praised the country’s successful 2002 devaluation and default back in 2012 as an example for Spain and Greece to emulate.

The answer is: absolutely not!

Argentina is a country that has not, historically speaking, been well-governed. In fact one reason that the 2002 default was necessary was that Argentina  previously embarked on a deeply misguided currency board scheme. To say that Argentina’s 2002 default and devaluation was the right thing to do and that there are important lessons to be learned from it is not to say that all countries should always emulate Argentina in all respects.

So there you have it, folks: Countries that historically have been ill-governed should follow Argentina’s lead by defaulting on their debts and debasing their currencies, but they should stop right before the bad consequences of these actions come home to roost. Simple as pie. Sort of like giving a bottle of Jack Daniels to some frat guys and sending them to the library to study–what could possibly go wrong?


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Mon, 02/17/2014 - 18:21 | 4445896 buzzsaw99
buzzsaw99's picture

what? no mention of the imminent asian contagion? raff out roud. when zh and soros agree the end is truly nigh. lulz

Mon, 02/17/2014 - 18:31 | 4445931 knukles
Mon, 02/17/2014 - 18:51 | 4446001 Stackers
Stackers's picture

Sounds like he's describing Krugman to me.

Mon, 02/17/2014 - 19:09 | 4446026 TruthInSunshine
TruthInSunshine's picture

Keynes actually believed (as in truly believed) that recession and high unemployment are mainly the result of insufficient spending in the private sector.

I don't believe that there's even one "credible" Keynesian who would contest that this was, indeed, a fundamental underpinning - foundation, if you will - of Keynes' collective body of economic theory.

I would argue that this is why, over time, any economic system built of a truly Keynesian foundation will inevitably collapse upon itself.

Does anyone here actually believe that government, which inevitably takes assets of the productive members of its citizenry, is more efficient at determining what the "appropriate amount" of spending in the private sector should be, and if so, does anyone here believe, as a secondary concern that government is nearly as efficient at "spending" as the private sector?

I'd argue an emphatic no to the former question, and an even more empatic no to the latter one (I don't think it can be overstated how much LESS EFFICIENT government is at spending than the private sector is).

Mon, 02/17/2014 - 19:12 | 4446043 Boris Alatovkrap
Boris Alatovkrap's picture

If Boris is meet Keynes, maybe break JMK's face. Of course, is for benefit of stimulation for local economy, nothing is personal.

Mon, 02/17/2014 - 20:32 | 4446266 0b1knob
0b1knob's picture

"a man with a great many ideas that knew very little economics"

perhaps he was also a man with a great many ideas WHO knew very little economics....

Mon, 02/17/2014 - 20:36 | 4446278 Alethian
Alethian's picture

Well done - you just corrected Hayek. Cookie?

Mon, 02/17/2014 - 21:05 | 4446358 JeffB
JeffB's picture

Actually, I think he corrected the transcript of Hayek's interview. It sounded to me like Hayek said that Keynes "was a man with a great many ideas who knew very little economics".

Mon, 02/17/2014 - 21:30 | 4446408 National Blessing
National Blessing's picture

There's never been a good economist.  They all get it wrong.  Blockheads.

Mon, 02/17/2014 - 22:11 | 4446520 Alethian
Alethian's picture

I didn't rewatch the video, but I wouldn't be surprised if Hayek said "who". He was very particular about his English.

Mon, 02/17/2014 - 23:27 | 4446749 TruthInSunshine
TruthInSunshine's picture

I almost wandered over to Paul "When Mars Attacks" Krugman's cult-of-personality blog to see if he dared to bother defend Yglesias's position & prognostication vis-a-vis Argentina, and if so, in what possibly tortured manner.

And then I asked myself a very simple question: "Why bother?"

I therefore saved at least 10 minutes of my life not being subjected to the abject torture that is further reading/hearing/considering anything Krugman.

Congratulations to me.

Tue, 02/18/2014 - 00:09 | 4446870 Ranger4564
Ranger4564's picture

He said "who" in the video.

Mon, 02/17/2014 - 23:53 | 4446836 DanDaley
DanDaley's picture


"a man with a great many ideas that knew very little economics"

perhaps he was also a man with a great many ideas WHO knew very little economics....


"That" can be used as a relative pronoun for a person or an object, whereas "who" is used exclusively for a person. "Which" is used exclusively for non-persons. It's not that complicated.


Mon, 02/17/2014 - 20:50 | 4446268 0b1knob
0b1knob's picture

(accidental double post)

Tue, 02/18/2014 - 04:57 | 4447246 John Wilmot
John Wilmot's picture

broken window fallacy meets broken face reality

Mon, 02/17/2014 - 18:59 | 4446019 Annoyingserf
Annoyingserf's picture

Just started 'The Road to Serfdom'.

Methinks my education is just begining....

Mon, 02/17/2014 - 20:37 | 4446284 Alethian
Alethian's picture

Read _The Constitution of Liberty_ afterwards. And be sure to read his essays on knowledge, intellectuals, and conservatism.

Mon, 02/17/2014 - 21:05 | 4446357 Not Too Important
Not Too Important's picture

Then read 'Tragedy And Hope' and know that nothing else matters. Nothing.

Mon, 02/17/2014 - 22:16 | 4446538 Annoyingserf
Annoyingserf's picture

Thank you for the suggestions; both will be added to my collection for study.



Tue, 02/18/2014 - 10:20 | 4447717 limit_less
limit_less's picture

An excellent book.

Mon, 02/17/2014 - 18:28 | 4445922 Ex Cathedra
Ex Cathedra's picture

Austrians = austerians = dead wrong.

Why are data, evidence, and reality not dreamt of in the Austrian philosophy?

Mon, 02/17/2014 - 18:31 | 4445932 THX 1178
THX 1178's picture

Data is always incomplete. Evidence is not always valid. Reality is dreamt of in Austrian economics.

Mon, 02/17/2014 - 18:40 | 4445963 Ex Cathedra
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Like the reality that their predictions have been wrong? 

Mon, 02/17/2014 - 18:46 | 4445983 THX 1178
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Peter Schiff was right. Youtube. Nuff Said.

Mon, 02/17/2014 - 19:14 | 4446051 Boris Alatovkrap
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Dear Mr. Catheter

Attendant phlebotomist is urgent call, your blood test is come back, you are full of sh¡t.



Mon, 02/17/2014 - 19:28 | 4446095 maskone909
maskone909's picture

Lol u must work in medical boris

Mon, 02/17/2014 - 19:52 | 4446126 Boris Alatovkrap
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Boris is once work in hospital as chief assistant custodial facilitator. During tenure, Boris is form profitable program for recycle IV and catheter. Hospital is save money and patient population is drastically reduce.

Mon, 02/17/2014 - 19:39 | 4446121 Anusocracy
Anusocracy's picture

Ex Cognition's problem is that he can't accept a world where people are free from his beliefs.

Mon, 02/17/2014 - 19:43 | 4446132 Boris Alatovkrap
Boris Alatovkrap's picture

You are think is maybe only single problem...? Maybe is multiplicity of compound problem, if believe Keynesian clap trap.

Mon, 02/17/2014 - 19:25 | 4446081 Harbanger
Harbanger's picture

Speaking of Schiff, gold made some strange vertical moves today.

Mon, 02/17/2014 - 19:54 | 4446152 Boris Alatovkrap
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Odd... Boris' bowel is also make strange vertical move today.

Mon, 02/17/2014 - 20:01 | 4446171 Harbanger
Harbanger's picture

Mother in law is use too much caraway seed.

Mon, 02/17/2014 - 18:59 | 4446020 X_mloclaM
X_mloclaM's picture

Marc Faber was right on portfolio allocation over medium term in big ways, predicted crashes, ever since getting in the business ... he understands economics.

Also, here is a short list of Austrians that warned of the Housing Bubble well in advance:

Mon, 02/17/2014 - 20:28 | 4446257 A Nanny Moose
A Nanny Moose's picture

To what predictions exactly are you referring?

Tue, 02/18/2014 - 00:29 | 4446909 ebworthen
ebworthen's picture

When the FED and the Treasury are robbing citizens blind - predictions of sanity and reality making their way back to Earth never materialize because our Ponzi is off in the ether of space.

Mon, 02/17/2014 - 18:32 | 4445935 Irene
Irene's picture

Probably because Austrians understand that human action can't be captured by static numbers.

Mon, 02/17/2014 - 18:39 | 4445960 Ex Cathedra
Ex Cathedra's picture

So ignore it?

Mon, 02/17/2014 - 18:44 | 4445975 maskone909
maskone909's picture

Keynes endorses consolidated power. Therefore will always be the tasters choice of monarchs and elites. Propaganda is a powerful thing

Mon, 02/17/2014 - 18:45 | 4445981 Ex Cathedra
Ex Cathedra's picture

Are you capabe of representing Kynes' views?  Evidently not.

Mon, 02/17/2014 - 18:47 | 4445986 maskone909
maskone909's picture

I dont have to. This mess we all live in represents it appropriately. How are those employment and deficit numbers coming along?

Mon, 02/17/2014 - 19:19 | 4446059 Boris Alatovkrap
Boris Alatovkrap's picture

If adjust data and invert axis, graph is look very very nice, just like is village on Dnieper River.

Mon, 02/17/2014 - 19:27 | 4446090 Herd Redirectio...
Herd Redirection Committee's picture

Its the beautiful THRIVING metropolis of Potemkin!

Mon, 02/17/2014 - 19:56 | 4446163 Boris Alatovkrap
Boris Alatovkrap's picture

You are visit and witness utopian glow of harmonious living arrangement?! Yes, Potemkin is was wonderful thriving community, 8:00 to 17:00 every second day (transport bus for "resident" is not so reliable).

Tue, 02/18/2014 - 04:40 | 4447237 sylviasays
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Hayek On Keynes: "Economics was a sideline For him"


Keynes real job was producing toilet paper. 

Mon, 02/17/2014 - 18:50 | 4445998 hobopants
hobopants's picture
"The historicist and positivist programs, Mises pointed out, were fatally flawed from the outset in their failure to appreciate the necessarily theory- laden nature of all ‘‘facts.’’ This insight is not new to Mises but was emphasized by Goethe who stated: ‘‘everything in the realm of fact is already theory’’ (1995: 307). Mises employed a version of this argument when he pointed out that empiricists are ‘‘able to believe that facts can be understood without any theory only because they failed to recognize a theory is already contained in the very linguistic terms involved in every act of thought. To apply language, with its words and concepts to anything is at the same time to approach it with theory"


Mon, 02/17/2014 - 18:59 | 4446002 lordylord
lordylord's picture

Like the way Keynesians ignore all historical evidence?  Like the way you ignore the last 100 years of economics in the US leading us to today?  Whatever happened to Keynes' prediction of a perpetual boom in the business cycle?  Foolish is the right word.  It would not be so bad if your economic theories pertained only to economics.  The problem is that your economic theories spill over to politics.  It gives tyrannical government the means to enact their atrocities.

Mon, 02/17/2014 - 19:00 | 4446023 Irene
Irene's picture

Wow, all those input-output tables etc. used by non-Austrian economists proved to be just so on the money. But I suppose if you're happy with statist, top-down management of an economy you'd be happy with that sort of thing. They do such a swell job capturing the work of worker bees.  Then again, they totally FAIL! with anything involving human ingenuity.

In a nutshell, if all you're measuring is known production capabilities, you don't need to study econ.  Okay?  Today is the same as yesterday is the same as tomorrow.  And if your economic theory can't explain starts, jumps and changes in the economy, all the math in the world ain't gonna help. 


Mon, 02/17/2014 - 19:59 | 4446169 Optimusprime
Optimusprime's picture

Irene, you deserve 1000 upvotes for this--this captures what needs attention.

Mon, 02/17/2014 - 19:59 | 4446170 Optimusprime
Optimusprime's picture

Irene, you deserve 1000 upvotes for this--this captures what needs attention.

Mon, 02/17/2014 - 19:05 | 4446030 centipede
centipede's picture

You have obviously no idea what Austrians are talking about. They are actually saying that the reality in the economy is too complex and is not going to behave according to anyone's control, planning and prediction. That is the reason that they do not agree with any control and planning in macroeconomics. That is the essence of the free market. So it is not a scientific theory. It is a default solution if we don't know how to find a solution.

Mon, 02/17/2014 - 19:42 | 4446129 hobopants
hobopants's picture

Correct, It would be akin to us trying to come up with accurate models for a complex ecosystem, down to the micro flora and fuana and then using that model as justification for moving energy to and from certain points in order to abtain certain results.

The hubris involved is astounding, central planners only have a hammer and the economy is much more than a group of nails. The unintended consequences for imposing simplistic models onto a complex system will be horrific.

Mon, 02/17/2014 - 20:38 | 4446285 centipede
centipede's picture

Actually it is even worse, because a complex ecosystem if we exclude people is probably more deterministic than society and it might be possible to influence some redistribution of its energy in certain more controlled manner. People are always going at least to try to outsmart central planners.

Mon, 02/17/2014 - 22:16 | 4446526 hobopants
hobopants's picture

Hmm... I think it's more a matter of the whole being more than the sum of it's parts. The starting point should be the recogniztion that because of the sheer number and variety of inputs and outputs, complex systems will remain in a constant state of dynamic change, and what was true yesterday may not be true today do to something as simple as a butterfly farting in texas or whatever.

Models should only help in our interpertation of a system, but there is a difference between interpreting and understanding. too often they are seen as axiomatic and that's where the trouble starts.

The Odum brothers set out to come up with a set of deterministic algorithms to explain ecosystems and they failed miserably. The problem was that everything was in constant flux from the weather, to populations, to avaliable resources and the resulting change they created in the behavior of the participants. The static enviroment needed for Input A to always equal output B isn't to be found in nature, which is the foundation of our economy. The result is that every model has an unknown expiration date.



Tue, 02/18/2014 - 04:11 | 4447227 FreedomGuy
FreedomGuy's picture

It is worse than that. I like the analogy of comparing a free economy to a rain forest.

Central planning leftists would look at a rain forest and say "I can improve that." It is the fatal conceit talked aboiut by Hayek, himself. The central planner can turn a part of the rain forest into a corn field or even an English garden but they can never get the raw tonnage of life out of the same space. All interventions ultimately pick a small number of winners, reduce the total activity and by definition eliminate the ability to adapt.

Tue, 02/18/2014 - 07:48 | 4447339 ultimate warrior
ultimate warrior's picture

Nice analogy. 

Mon, 02/17/2014 - 19:12 | 4446045 i_call_you_my_base
i_call_you_my_base's picture

Yes. The illusion of knowledge is much more dangerous than simply accepting you don't have it.

Tue, 02/18/2014 - 10:22 | 4447726 limit_less
limit_less's picture

No, acknowledge that it is infinitely complex and go from there 

Mon, 02/17/2014 - 19:05 | 4446032 X_mloclaM
X_mloclaM's picture

Yes, Austerity woud be nice. Slashed budgets would leave the starving EZ people with resources and renewed expectation of incentive.

Unfortunately the word is actually another semantic game, meaning rout public-facing policies, leaving govt bureaucratic spending portion unchanged

... alll ... over ... the ... EU

Mon, 02/17/2014 - 21:44 | 4446449 Accounting101
Accounting101's picture

Are you serious??? Austerity has literally destroyed a generation in Ireland and Greece and has Spain on its knees. The world's big banks convinced governments throughout the western world to take trillions in private debt and socialize it. That's what 2008 was all about. The biggest bait and switch in human history.

To compound that tragedy, we have useful idiots who now preach the evils of public debt. Debt that was forced on the public by bailing out insolvent, private entities. One couldn't make this shit up if he tried.

You have to be a sadistic bastard to advocate austerity if you have any economic literacy.

Mon, 02/17/2014 - 22:58 | 4446657 JeffB
JeffB's picture

The problem is that the government and the banksters have put everyone in an untenable position. We're all between a rock and a hard place. It would be similar to a family finding out that their father just blew all of the family savings on the gambling boat, the credit cards are maxed out and the sheriff is comint tomorrow to throw them out of their home.

Austerity sucks, no doubt. But austerity didn't really cause the predicament, it is the natural result of prior stupidity and/or criminality... the root cause of the suffering is elsewhere.

It seems to me that our choices are a little like those of an addict who has crashed. Stopping cold turkey now is going to be a painful nightmare, but getting another fix isn't going to take care of the problem either... it's just going to push the day of reckoning further down the road, and probably make it worse yet.

I guess our choices are to let everything crash, default and reset, or to try to wean ourselves slowly off of the crack of exponentially growing debt and fiat printing, or austerity in the extreme, and/or for an extremely long time.

None of the choices are good, and unless we can slap some sense into our politicians, or jail them and educate the public to get a complete change of paradigm, the pain will have been wasted and we'll just start the stupidity all over again.


Mon, 02/17/2014 - 23:03 | 4446692 The Wedge
The Wedge's picture

At this point, no government in the world can curb spending without varying degrees of increased suffering. The derivatives black hole is currently being back filled by central banks not by putting this on government balance sheets per say (some for sure) but by inflating the money supply. Some refer to this as the death spiral. Those that don't carry heavy debt loads will come out of this better than those that do. Excessive public debt is a bad thing. Debt does not equal prosperity.

So the root problems are horribly bad monetary and fiscal policies over decades. And governments that didn't understand the dangers of complex wall street exotic financial instruments. Now we have a quadrillion + derivatives black hole that will end in ruin, war and lots of death. At best it will end with no more middle class anywhere in the world, just reduced number of extremely rich and the vast majority poor.

So no, can't really do austerity but this is not a good thing. It means the only way out is inflate which will hurt the lower classes anyway.

Tue, 02/18/2014 - 10:26 | 4447761 limit_less
limit_less's picture

101 - There is no austerity in Greece.

The only thing that has happened in Greece is that taxes have been increased massively. Austerity would have been the government making do with less ie keeping taxes the same, reducing the workforce and return the extra to pay off debt.

"Kamikaze measures" not "austerity measures".

Tue, 02/18/2014 - 10:43 | 4447830 Lebensphilosoph
Lebensphilosoph's picture

So you admit government spending caused this but in the very same paragraph blame it on austerity? Please tell us what austerity had to do with 2008 and the bankster bailout.

Mon, 02/17/2014 - 21:04 | 4446355 HardAssets
HardAssets's picture

Are you really Webster Tarpley ?

Mon, 02/17/2014 - 22:45 | 4446632 JeffB
JeffB's picture

Would you buy an app some guy programmed to tell you who you should fall in love with, and then rely solely/heavily on it? Would you then follow those mathematically computed recommendations on how to win her over, even if these theories seemed to go against all common sense?

Would it make any difference to you if you saw that others had used this app and it had ended catastrophically for them?

Or would you trust your own common sense, and follow proven strategies that are logical and have worked well for ages?

Would it make any difference to you if you saw that those who subscribed to this common sense, proven strategy predicted the catastrophic consequences of the strategies based upon mathematical theories that seemed rather ridiculous when you first heard them?


Mon, 02/17/2014 - 18:30 | 4445929 hobopants
hobopants's picture

Read "economic possibilities for our grandchildren" if you want to understand Keynes. Unlike his followers he saw an expiration date as to the usefulness of his polices.

Mon, 02/17/2014 - 21:07 | 4446362 HardAssets
HardAssets's picture

Economist & historian Murray Rothbard had Keynes figured out --


Tue, 02/18/2014 - 10:28 | 4447769 limit_less
limit_less's picture

Debunking Economics is a good book for those wanting to read more true Keynesianism

Mon, 02/17/2014 - 18:34 | 4445943 maskone909
maskone909's picture

There u have it. Keynes was another krugmanesque sell out

Mon, 02/17/2014 - 18:35 | 4445948 Irene
Irene's picture

Jesus, it's almost surreal to hear someone intelligently discuss a contested matter - and without going lunatic.

It's so sad to see how much our culture has lost.

Mon, 02/17/2014 - 18:39 | 4445961 maskone909
maskone909's picture

Dont fret. At our darkest moments light shines the brightest. Information and truth are currently setting small brushfires in a drought ridden landscape. Like a Phoenix we will emerge glorious!

Mon, 02/17/2014 - 21:30 | 4446406 Accounting101
Accounting101's picture

Right, and if you listen very carefully, you can hear the Oligarchial call, "Hey rubes! You're assets belong to us."

Mon, 02/17/2014 - 18:40 | 4445962 Ignatius
Ignatius's picture

Economics is about living.

Mon, 02/17/2014 - 18:40 | 4445967 LetsGetPhysical
LetsGetPhysical's picture

Keynes was a Fascist.

Mon, 02/17/2014 - 18:44 | 4445977 Ex Cathedra
Ex Cathedra's picture

Hayek was wrong. 

Mon, 02/17/2014 - 18:51 | 4446000 X_mloclaM
X_mloclaM's picture


"Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance—where, in short, we deal with genuinely insurable risks—the case for the state’s helping to organize a comprehensive system of social insurance is very strong." -- "What I mean by “competitive order” is almost the opposite of
what is often called “ordered competition.” The purpose of a competitive order is to make competition work; that of so­ called “ordered competition,” almost always to restrict the

effectiveness of competition"

Mon, 02/17/2014 - 19:22 | 4446075 centipede
centipede's picture

Yes, he was totaly wrong claiming that Keynes was very inteligent. An inteligent sane person can not come up with such bad ideas.

Mon, 02/17/2014 - 18:44 | 4445976 lordylord
lordylord's picture

Who would have that that the man who founded Keynesian economics thought he knew it all and was "much too self-assured"?

Mon, 02/17/2014 - 18:45 | 4445980 X_mloclaM
X_mloclaM's picture

So Yglesias says Greece & Portugal shoul incur serious euro (or BTC) denom debt, isn't that what these successive Trokia bailouts are doing... rolling debts into larger, longer maturity obligations for the benefit of northern EZ banks, and the Yglesian of the effective local curr ?

Mon, 02/17/2014 - 23:04 | 4446697 JeffB
JeffB's picture

It sounds to me like the heart of Yglesias' recommendations are to default and devalue.

"Argentina defaulted on its external debt, broke the rigid linkage between the peso and the dollar, and went back to pursuing an independent monetary policy….

Default and devaluation were hardly a party. They destroyed the country’s banking system and wiped out many Argentines’ savings. But it did work.

Mon, 02/17/2014 - 18:48 | 4445992 Cult of Criminality
Cult of Criminality's picture

Hayek & Keynes Rap (with nice chicks)
Newbies watch and learn.

Mon, 02/17/2014 - 18:50 | 4445997 Cacete de Ouro
Cacete de Ouro's picture

Why do some economists and market commentators encourage a view of eccentricity and intelligence by wearing a bow-tie?

To paraphrase Chris Angel, " it's distraction, so we won't notice the bullshit coming out of their mouths"

Mon, 02/17/2014 - 19:06 | 4446034 Irene
Irene's picture

You think that's bullshit coming out of Hayek's mouth?  Wow.

Mon, 02/17/2014 - 21:09 | 4446366 Not Too Important
Not Too Important's picture

If he was worth anything he'd be at least a VP at G-S. He's not, is he? Is he running some technocratic illegal government? No. Is he filthy rich after a career of siphoning off other's life's savings? No.

Geez, get with the program.

Mon, 02/17/2014 - 23:04 | 4446699 Irene
Irene's picture

You do know he died over 20 years ago, right?  Winning the Nobel Prize in Economics isn't good enough for you?

Tue, 02/18/2014 - 10:45 | 4447840 Lebensphilosoph
Lebensphilosoph's picture

There is no Nobel Prize in Economics.

Mon, 02/17/2014 - 21:25 | 4446397 Accounting101
Accounting101's picture

I don't know. Was Hayek trying to convince me that my assets aren't real or will not be there when I want them. If that is what he is saying then yes, Hayek was spouting bulllshit.

Tue, 02/18/2014 - 16:49 | 4449576 Urban Redneck
Urban Redneck's picture

Not to stoop to Obozo-level intellect, but my take away from that exchange was that Hayek was quite aware that Austrians don't speak Austrian.

Unless one actually speaks (or can read) German, an individual really can't comprehend both the volume and breadth of economic thought that they are IGNORANT of.

But one could go to a good Library of economic literature and stare at shelf feet and imagine...

Mon, 02/17/2014 - 18:53 | 4446006 Son of Captain Nemo
Son of Captain Nemo's picture

"economics was just a side-line for him."

As well as this evil manipulative scum!

Mon, 02/17/2014 - 19:15 | 4446053 ILikeBoats
ILikeBoats's picture

I truly feel that if those who wanted to become economists were forced to work as carpenters or dairy farmers for 1 year before entering into schooling, a lot of BS would be prevented. Because the students would be laughing at their teachers' views.

Mon, 02/17/2014 - 19:16 | 4446056 The Econ Ideal
The Econ Ideal's picture

An expert of the Elizabethan Age ... lol

Everyone should read The Road to Serfdom. Classic, for all ages. 

Mon, 02/17/2014 - 19:26 | 4446082 GeoffreyT
GeoffreyT's picture

Folks are simply not aware that Keynes studied economics for one term (roughly ten weeks) - read Rothbard's exquisite "Keynes - The Man" (PDF).


The money shot: "[Keynes] completed an undergraduate degree at Cambridge without taking a single economics course. Not only did he never take a degree in the subject, but the only economics course Keynes ever took was a single-term graduate course under Alfred Marshall."


Marshall was a mate of Keynes' father - the sole reason that both Keyneses (père et fils) were able to get jobs as economic academics.


The moment one learns that Keynes had so little training in economics, the lightbulb clicks on, and it becomes clear that the entire Keynesian platform was an exercise in giving a pseudo-academic imprimatur to the expansion of the State's role in 'managing' the economy... with soi-disant übermenschen like the dilletante pederast Keynes and his ilk considering themselves the 'right men for the job'.

Mon, 02/17/2014 - 21:19 | 4446388 Not Too Important
Not Too Important's picture
'When Hayek Was Blackballed by the University of Chicago's Economics Department'


"The interview has lots of good information. The interviewer asked him why the publisher asked him to write an introduction. Hayek had died two years earlier. Friedman gave a long answer about how he had been a member of the Mont Pelerin Society, which Hayek had founded in 1947. It was an association of free market economists.

What Friedman never mentioned was that the department of economics at the University of Chicago refused to hire Hayek in 1946. Hayek returned to the London School of Economics. Then, in 1950, Hayek came to the University of Chicago to teach in the tiny and obscure Committee on Social Thought. His salary was paid by the William Volker Fund. He cost the University nothing. He received no pension.

He won the Nobel Prize in economics in 1974.

Why did the economics department do such a thing, which it did, and which it has always concealed? Officially, because Hayek did not meet its rigorous standards of academic excellence. That was nonsense, and was understood as such at the time by the few people who knew of the blackball. He was an Austrian School economist who reminded people that Chicago School economists had sold out to the Keynesian mainstream in methodology, as well as on the idea of anti-monopoly regulation."

Mon, 02/17/2014 - 19:28 | 4446098 realWhiteNight123129
realWhiteNight123129's picture

Henry Thornton has always been my hero:

His two major writings written in 1801 and 1810 can be used again and again today to trade.

You can find the books for free on the internet if you look in google books. 

Once you have read Thornton, you know 80% of what you need to know, than with a bit of banking school with Tooke and Fullarton you are all set. 

No surprise we are in such funk with Keynesian economics, the guy never read Thornton!

Mon, 02/17/2014 - 19:30 | 4446099 highwaytoserfdom
highwaytoserfdom's picture

hey my hero...   Noted           Keynes in the future may be better known for the Carthaginian Peace comments on the
Treaty of Versailles.   The world trade and the like....    It haunts me to think that  reparations may be due coming to neo-con weapons of mass destruction hegemony. Denson  does an background on  "Carthaginian Peace".

Be very careful  and demand decency.

Mon, 02/17/2014 - 19:32 | 4446105 chump666
chump666's picture

Humans are corruptible.  Therefor no economic theory works.  Keynes is a fool, LSE has churned out a slew of Keynesian followers, all attached to banks that lobby government to keep flowing the cash, it's a crony theory that has f*cked up some times it's not funny any more.  The ECB is wall to wall with these nutcases.  Europe is doomed, America, so sad, is done.   Asia 'Krugman's' white-knight will go to war with it's self, while Nature makes a mockery of us all.

There's the current equation, go smoke it...

Mon, 02/17/2014 - 20:26 | 4446251 yellowlight4570
yellowlight4570's picture

You are correct, if it wasn't Keynes it would be the same theory expoused by some other stooge. As Hugo say's "We have met the enemy and he is us."  Well at least a lot of us, the something for nothing crowd and those that promise something for nothing. And those always seeking to rule.

Mon, 02/17/2014 - 21:02 | 4446352 chump666
chump666's picture

That was very well said.

Mon, 02/17/2014 - 21:16 | 4446376 HardAssets
HardAssets's picture

"Keynes is a fool"

You think it was about 'economics' ?

Most economists (like lawyers) are tools for those in positions of power. They make up stuff to bamboozle the masses & especially the physical enforcers in the military & police - - - who are often the most clueless on such matters as finance and law. (Too many dumb ex h.s. jock types).

No, Keynes wasn't a fool . . . . he was an evil s.o.b.

Tue, 02/18/2014 - 01:29 | 4447030 chump666
chump666's picture

He was probably a hustler, worked for government which he apparently hated, but still was on the payroll.  Thought economics wasn't that important, but wrote a theory that every crony has embraced.  


Tue, 02/18/2014 - 10:31 | 4447779 limit_less
limit_less's picture

Austrian economics is based on human corruptability/nature hence a push for sound money and economic freedom.

Mon, 02/17/2014 - 19:54 | 4446153 yogibear
yogibear's picture

Keynes = US Fedral Reserve's god

Mon, 02/17/2014 - 22:07 | 4446509 The Wedge
The Wedge's picture

I was about to comment the very same thing when I happened upon your missive. I would only add that Keynes theories was/is a central bankers and central planners dream come true.

Tue, 02/18/2014 - 00:20 | 4446902 ebworthen
ebworthen's picture

Yes, something from nothing at the expense of real people is the goal and dream of every Central Banker.

Mon, 02/17/2014 - 20:27 | 4446254 Spungo
Spungo's picture

Keynes was probably smart as hell, but his followers are fucking retarded. Keynes never said to run perpetual deficits. Keynes was also against inflation. Keynes was a lot closer to Hayek than he is to retards like Krugman.

Mon, 02/17/2014 - 22:49 | 4446645 SKY85hawk
SKY85hawk's picture

Wow!  A voice of reason.  Keynes also said to pay back the deficit spending during GOOD times, yes?

Tue, 02/18/2014 - 10:32 | 4447786 limit_less
limit_less's picture


Mon, 02/17/2014 - 23:53 | 4446794 MagicMoney
MagicMoney's picture

Problem is, government binge spending doesn't create sustainable growth. If government spending  created sustainable market growth, then europeans like the Greeks wouldn't be complaining of austerity measures. Proof enough there that already debunks Keynes. The US did have a surpluse before George W. Bush became president. The stock market bubble crashed on Bush's first year, then he went to deficit spend to to prevent a recession. The Fed slashed interest rates to promote growth like it always does, inflated a housing bubble, and rest is history. Keynes had a simple metholody in his approach to economics for example if one sees spending in the economy drops, let's have government spending to fill in the gap, and this supposedly stimulates the economy into sustainable growth paths in the future, which the stimulus can be withdrawn. Keynes simply sees what is infront of his face. He doesn't necessarily know why spending has dropped, he just knows it has dropped compared to historical reference. Same type of methodology plagued Milton Friedman. Macro economics neglects the causes of things naturally, by avoiding the causes, and effects that happen in micro activity.


Tue, 02/18/2014 - 02:47 | 4447145 Clowns on Acid
Clowns on Acid's picture

Started a lot earlier than that ya dumb fuck. Look at the CRA Act on steroids under Clinton, the repeal of Glass Stegal. Then look at Barney Frank and Chris Dodd's support of Fannie and Freddie. All these things lead to the credit excesses and collapse of 2007/08.

Talk about Keynes or Mises but the poltical realities of the Bolsheviks in the USA led to the collapse. They are Keynsians only because they claim him, Keynes would not want to be associated with these economic monosyllabic dbags like Krugman, Robert Reich, Janet Yellen, etc. Although he might enjoy making Barney Frank bite the pillow.  

Tue, 02/18/2014 - 14:32 | 4448970 novictim
novictim's picture

Was it necessary to put in the ignorant, BS accusations against Krugman?  

Is that how you make "friends" here?

If you acknowedge that we are a consumer driven economy then you should praise both Krugman's ignored recommendations and Keynes realized polices of the 30's, 40's, 50's, 60's.  ...And ditch those idiots who have no clue about the true nature of our capitalist economy.

Mon, 02/17/2014 - 21:58 | 4446486 AchtungAffen
AchtungAffen's picture

I consider Hayek's economics a lot more "foolish" than Keynes, sorry.

Mon, 02/17/2014 - 22:47 | 4446634 SKY85hawk
SKY85hawk's picture

So, explain a bit more.

Mon, 02/17/2014 - 22:53 | 4446663 centipede
centipede's picture

And would you care to explain what in particular?

Mon, 02/17/2014 - 23:30 | 4446766 AchtungAffen
AchtungAffen's picture

Well, for starters "Road to Serfdom"'s "lesson" is actually the real road to serfdom. And would add his branching away from Menger's school too (well, that was Mises to begin with, but he continued with the same BS).

Tue, 02/18/2014 - 00:18 | 4446900 ebworthen
ebworthen's picture

Reality is a sideline for most economists.

They'd be better off trying to turn lead into Gold.

Tue, 02/18/2014 - 00:40 | 4446945 Prairie Dog
Prairie Dog's picture

Hee hee. This is like reading Nordstrom on why Einstein was a second-rate physicist, or Salieri on why Mozart was overrated.

Tue, 02/18/2014 - 00:48 | 4446959 Prairie Dog
Prairie Dog's picture

A lot of my Austrian friends refer to Keynesian policies as “idiotic,” “stupid,” etc., but that’s not really accurate. Indeed, the Keynesian policy prescriptions are so counterintuitive–they so defy common sense–that only very intelligent people with plenty of schooling could have the confidence to utter them with a straight face.


Is the theory of relativity common sense? Isn't it common sense that the shortest distance between two points is a straight line? Isn't it common sense that the sun rises in the East in the morning and sets in the West? Galileo? What did he know!

Tue, 02/18/2014 - 10:54 | 4447868 Lebensphilosoph
Lebensphilosoph's picture

Given that what common sense refers to as space and distance are analagous to a Euclidean metric space, common sense is entirely justified. And according to General Relativity the sun does rise in the east and set in the west - if you choose the right non-inertial frame of reference, which is mathematically no less absolutely justified than any other choice. Good old common sense - it's just common sense.

Tue, 02/18/2014 - 23:39 | 4451297 Prairie Dog
Prairie Dog's picture

The trouble is that Euclid was wrong. Doh! The theory of relativity is a more advanced understanding of the world, and common sense most definitely will not lead you there. Likewise, the Keynesian view of the economic machine, while counter-intuitive, has been proved by theory and experience to be correct.


Tue, 02/18/2014 - 05:13 | 4447254 Amagnonx
Amagnonx's picture

The conclusion of this article is crap - it suggests that default is not the correct course for a government.  Default is the second best course of action for an indebted government, the best course is to assign the debt to the politicians who voted that debt into existence - and make them pay it back, upto and including siezing all of their assets and selling them off to cover it.


Governments have no right to create debts and throw those debts onto the people.  Paying back those debts enriches the banksters, and the politicians of course get a cut (usually by giving contracts to favored corporations in which they are invested).


The govt of Argentina cleared its debts by default - which should translate to a reduction in taxes on people, and damage to the bankster class only. 


Of course the people of any nation have the right to default on debts which are created by the political class.  Elected politicians should be LIABLE for the debts which they create.


The problem was not the default - the problem is not learning the lesson that borrowing money and throwing that debt onto the people is CRIMINAL!

Tue, 02/18/2014 - 05:28 | 4447260 Ar-Pharazôn
Ar-Pharazôn's picture

well... looking at the current situation, Argentina is not the best example of economic recovery.

Tue, 02/18/2014 - 05:30 | 4447262 Ar-Pharazôn
Ar-Pharazôn's picture

that's really a strange article.


begin saying that keyne's policies are bad, and close saying that it's the only way.



Tue, 02/18/2014 - 08:17 | 4447376 Global Observer
Global Observer's picture

Keynes recognised that credit serves the same function as money in an economy, make commerce possible when idle production capacity and demand both exist in a society. However, he was also aware that no one including the government has infinite creditworthiness and advised government spending on credit (deficit spending) only countercyclically and retiring public debt during economic booms.

His followers on the otherhand, having tasted the power of government spending on economic growth, made permanent, government expenditures that were meant to be exclusively countercyclical and advised even more spending programmes should a recession hit. That works as long the economy has the resources to keep growing. But when it reaches the limit of its capability to grow, it becomes a huge problem because a large section of the population has grown accustomed to believing that prosperity comes from government spending and government owes them a certain standard of living if they cannot earn it themselves.

Tue, 02/18/2014 - 13:22 | 4448507 MagicMoney
MagicMoney's picture

Keynes let loose all kinds of implications with government spending, and policies. There is no evidence that government spending leads to sustainable growth paths. It's no different than the Federal Reserve view that pumping the economy with liquidity for a period of time will grow a economy in a sustainable way when the Federal Reserve decides to withdraw that stimulus by removing the excess liquidity. It's wishful thinking, and one of based on hopes. There is a reason why economies crash, or collapse, because of "unsustainability" of current allocation of resources. Government spending, and monetary stimulus does not mean better allocation of resources, it can mean even worse allocation of resources, and the principle is the same when you try to cure a down economy with stimulus of both sorts. You can force savors into speculators, government binge spend giving the impression to the economy there is more demand, and income than the real economy has, and making consumers with little savings to binge spend when they don't have much money.  A recession is a cure to misallocation of resources as Austrians see it. Keynes implied that recessions are to be avoided, which is a natural course of the economy to correct itself. The economy collapsed in 2007-2008 because there was huge leverage on housing and consumer spending which was created by easy credit conditions and expansion of credit that allowed that to happen. Too much speculative housing, and consumer spending, which buying a house is a type of consumer spending was unsustainable, the Keynesian cure is always to try to fill the missing gap, that is more debt, and more consumer spending to the problem "contracting debt, and contracting consumer spending." The problem in the eyes of Austrians was too much debt, and too much consumer spending. So as you can see Keynesians only address things that are flopping before their eyes. They see contracting debt, and consumer spending, and advocate policies that promote more debt, and consumer spending.  Keynesians don't acknowledge allocation of resources at all!! This is why Austrians think that Keynes theories, not ALL theories, but his prominent theories of how to counter a recession, or business cycle are fallacious.


Keynes let loose all kinds of implications by his theories, it's no wonder why we have many types of Keynesians these days. Post Keynesian, Neo Keynesian, New Keynesian, MMT, which is some kind of new age neo-keynesianism. Deficit spending, devaluation, etc, you name it. However all their ideas on predicated on the notion that government knows how to do things better than a market economy of millions of individuals who are striving to make thier own lives better.

Tue, 02/18/2014 - 09:42 | 4447536 Loophole
Loophole's picture

Keynes' theory is just a rationalization for forceful govt redistribution of wealth. That is, for stealing.

Ditto for all the "monetary policy" theories.

Which makes them all immoral.

Even Friedman's.

But you rarely see anyone, even their opponents, observing that. Most just argue that they aren't good "policy."

It's people dealing by force rather than by trade.

Like savages.

People will come to realize that one day and will look back upon it as the primitivism it is.

Tue, 02/18/2014 - 10:32 | 4447788 jaygould
jaygould's picture

this is classic or comical: hayek who?????????

Tue, 02/18/2014 - 14:16 | 4448845 novictim
novictim's picture

And of course the author of this STUPID article is none other than Tyler Durden.

The choice is between FAILED Trickle Down (Hayek) Supply side economics and SUCCESSFUL Trickle up (Keynes) economics.  If you acknowledge that our economy requires a wealthy middle class to thrive then Keynes is your man.

Seriously, anyone who studies history knows that FDR employed KEYNES during the worst economic period (barring today?) of US modern history.  Keynes ushered in the greatest boom in consumerism society had ever seen.

Keynes employed classic Consumer Side stimulus to the economy by encouraging fiscal spending to employ millions of Americans without jobs in building a infrastructure we still marvel at.  Keynes encourage puting an end to elder-poverty by instituting what we now today accept as absolutely good: Social Security.  

(Social Security: A system that if not for rich folks puting a cap on the contributions for earnings greater than $133,000 would be not just be solvent in-perpituity but could actually increase payouts!)


But then we get these SUPPLY SIDE TRICKLE DOWN Economic folks starting in the Reagan Administration who con us into thinking that if we just make Rich people Richer then they will eliminate poverty.  No TAX BREAK was ever turned down with them.  The Hayek folks employed the tried and true strategy of giving the wealthiest just what they wanted...minimal taxation.  Guess who then payed the taxes?  YOU.

Tyler Durden, when you attack Keynesian economics then you deny the best years of AMerican Economic Growth.

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