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Behind the Scenes at the Hayek v. Keynes Debate

by George Selgin August 3rd, 2011 2:08 pm

BBC Radio 4 is about to air the debate between myself and Jamie Whyte (defending Hayek) and Lord Skidelsky and Duncan Weldon (defending Keynes),so I thought I might supply a little background on it for the sake of anyone who may be interested in how these things shape up.

I was only asked to take part in the debate about two weeks before it was scheduled to take place, presumably because one or two or half a dozen other persons couldn't or wouldn't do it. But as I am actually an admirer of Lord Skidelsky (his biography of Keynes is truly splendid), and the LSE venue was itself classy enough, despite having only recently returned from a long stay in Europe I was glad to accept.

It was only after I did so that I learned that this was to be one of those debates in which each speaker had only a few minutes (originally 3.5, later expanded to 4) to make his case. Boiling down Hayek's position to what (given my slow manner of talking) amounted to about 500 words was no easy matter; and here I must say the Keynes team had something of an advantage, since Hayek's is a rather involved boom-bust theory, whilst Keynes's is only a theory of how spending is what's needed to end busts.

So I set to work reading and re-reading works by Lord Skidelsky, who had obligingly written several things specifically dealing with Hayek, and thereby formed what turned out to be a very good guess of the arguments he would in fact make. I also contacted Jamie Whyte, who I did not know, to coordinate my efforts with his. We agreed that I would follow Skidelsky and that he would handle the second round against Duncan Weldon.

Just before I was to leave for London, however, the BBC decided that they wanted Jamie to go first, which rather put a wrench in our works. What's more in London they suggested that terms like "Fannie" and "Freddie" and "cyclical unemployment" that had appeared in my originally prepared remarks, though fine for the LSE crowd, might go over the heads of some of the 1-million-odd Radio 4 listeners. In fact I'm sure they were worried stiff that I was going to bore everyone to death. So they suggested some changes which, besides not being my own words, added on another 500 words or so! Consequently I spent much of Tuesday morning rewriting my talk from scratch in light of their concerns, getting it down to about 700 words, with a paragraph I could dump if I needed to (which in fact I did).

Despite all the last-minute changes the debate itself seemed to go very well--certainly everyone had a good time, thanks partly to Paul Mason's excellent mood-setting (and occasional, unintentionally funny bloopers). I hope that shows in the broadcast version. (I certainly hope that I don't end up boring anyone to death after all.)

There were times, though, when I regretted not having had the chance, or sometimes not having had the wit, to answer or answer more fully some of the arguments made on Keynes's behalf. I especially regret not having been called upon to answer Duncan Weldon's claim that Hayekians are like dentists who have nothing to offer someone who is suffering from a rotten tooth. I might then have been tempted to point out, first of all, that it was pretty cheeky for a British proponent of greater government intervention to be bringing up dentistry. But what I really wanted to observe was that it is the Hayekians who, after all, are all for pulling an economy's "rotten teeth" not only to eventually stop the pain but also to keep them from stinking it up, whereas it's the Keynesians who say, in effect, "Oh, don't worry about that tooth...just have some more candy and everything will be all better."

I wish as well that I'd had more time to address Lord Skidelsky's suggestion that one had to be far gone to believe that FDR's New Deal actually delayed U.S. recovery from the Great Depression. He evidently is unaware of the very substantial body of research pointing to the harm done by certain New Deal programs, and especially by the National Recovery Administration, none of which by the way is due to crazy Hayekians. Indeed, some is by scholars generally considered sympathetic to Keynesian ideas.

Finally, neither Jamie nor I managed to make as much hay as we ought to have out of Skidelsky's assertion that government spending of whatever kind is as good as any other sort for promoting long-run economic growth. Here surely was a chance, had we only the time, to draw attention to the rotten heart of Keynesian economics. For Skidelsky's argument--that workers will supply factories with orders for things no matter who pays them--illustrates in all its naked crudity the dangers of ignoring the "supply side" of economic activity. After all, it isn't just what workers would like to have in exchange for their paychecks that determines what they can have. On the contrary: what they can have depends crucially on what they themselves actually produce in exchange for the payments they receive. An army of government workers employed digging and refilling ditches, for instance (and the sweeping nature of Skidelsky's assertion warrants the reductio) contributes absolutely nothing to either its own or others' ability to consume, let alone to the maintenance or augmentation of the stock of productive capital. A body of economic doctrine that lends itself to such a serious misapprehension of the basis for economic prosperity can hardly be expected to provide sound advice for nursing a sick economy to health.

19 Responses to “Behind the Scenes at the Hayek v. Keynes Debate”

  1. avatar Eitan says:

    I really want to watch or listen to you crush those Keynsians, Professor Selgin. Will BBC make the entire thing available as a podcast, or online anywhere? I've been trying to track it down since your debate.

  2. avatar Scott Burns says:

    It's too bad the debate had to be so brief. I'm a bit surprised they didn't schedule for more time, regardless of how much BBC4 could afford to air. The rest could've gone online. Besides, this debate has persisted for more than 7 decades...i don't think anyone who understands it would've felt a 30 minute debate would be adequate to summarize 75 years of argumentation. Then again, it's best to keep things short whenever Keynes is involved. We all know what happens "in the long run..."

    The Dentistry quip would've been a nice comeback, FWIW. Although it might've gotten you placed in the gallows...

  3. avatar Scott Burns says:

    Am I correct in expecting that this entire debate will take place as a Rap Battle ala the "Keynes v. Hayek" videos?

    And to your last point, George, I like the way Arnold Kling describes the flaw in using GDP to measure economic progress: GDP (in your example, propped up by government spending) measures weight, but it doesn't differentiate fat from muscle. In a similar vein, I like to speak of GDP as a measure of the economies caloric intake--it tells us how many calories we consume, but not whether or not they are healthy nor what we produce with the energy from them. There's a big difference the 12,000 calories a day Michael Phelps consumes and the 12,000 calories a coach potato consumes. Metaphorically speaking, one of these "economies" is healthy--in fact, olympic champion-quality health--while the other is grotesquely unhealthy and is living off a completely unsustainable diet in the long run (when, of course, everyone is dead--except for my generation).

    • avatar George Selgin says:

      Scott, there's no plan, alas, to make a rap video of the debate. But John Papola (producer and director of the K-H rap videos) and I am working together on a project dealing with the Federal Reserve System.

      • avatar Scott Burns says:

        Great to hear.

        And I have to agree with Martin. Excellent debate performance. Had they granted you the time to add the comments listed in this blog entry, the result would've been even more one sided. I think Lord Skidelsky caught on to this towards the end of the debate and got a bit ruffled; clearly you didn't fit into his caricuature of what a "backwards thinking Hayekian" should believe about responding to crisis.

        3 other things I would've loved to interject had I participated:
        1. Skidelsky basically regurgitated the Keynesian myth that economic orthodoxy prior to "The General Theory" was entirely laissez-fair with no room for government-friendly "heretics." To the contrary, many (if not most in the US and UK) economists seemed to feel government should play an active role in directing economic activity. That these ideas weren't as fully fleshed out in how to respond to a recession is beside the point; the economics profession has arguably never suffered from a monopolistic contigency of laissez-faire thinkers. That laissez faire ideas gained traction at all was an unavoidable consequence of the unprecedent explosion in wealth in relatively liberal economies.
        2. Skidelsky also leaned heavily on the argument Hayek didn't "see the light" on preveting catastrophic liquidations until around 1936, after being an "unrepented liquidationists" for the previous 7 years. While there's some truth to this, let's not forget that Keynes, himself, wasn't an omniscient observer and didn't fully flesh out his aggressive response to crisis until about the same time. The General Theory, after all, was also released in 1936. I'm not claiming Keynes prior to 1936 was any sort of liquidationists, but rather it is a flimsy argument to heave at Hayek.
        3. For all Skidelsky's protestations regarding Hayek that "those are just words," perhaps no economic doctrine has strayed further from the "real world" than the Keynesian doctrine. I give Keynesians as much of the benefit of the doubt as possible, but no one can deny they ascribe near transcendent powers to "G." If he wanted to talk about real world consequences, that would've been a good time to talk about creating REAL wealth rather than merely propping up spending by digging ditches.

        All in all, very impressive. As a debator myself, it's not often I listen to a debate and say "He couldn't have done any better," but given your time constrains, you were just about flawless.

  4. avatar Lee Kelly says:

    Goerge, the downloadable podcast of the event cuts off your closing remarks about what Hayek would have to say if he were with us now.

    Anyway, I really enjoyed the debate. Both sides made good arguments for their respective positions. I think it is important to appreciate good arguments, even when one does not agree with them. That said, I suspect Lord Skildesky has never met a good argument that didn't agree with his position, if you take my meaning -- he comes across as quite insufferable.

    • avatar D. Thomas says:

      "Goerge, the downloadable podcast of the event cuts off your closing remarks about what Hayek would have to say if he were with us now."

      -------------------------------------------------

      I'd like to ditto what Lee said. I just downloaded the file and haven't listened to it yet, but if what Lee says is true I'd love to know what your closing remarks were too.

      Thanks very much.

  5. avatar Paul Marks says:

    You did well Sir.

    Although the ignorance shown by the Keynesians, over things like President Franklin Roosevelt's "New Deal", was a little surprising (and even a little scary).

    For example, one can be a "create more credit money and spend it" person (which is what Keynesians basically are) without believeing in all the insanities of the "New Deal".

    For example, the deliberate destruction of food and other products (to try and keep up prices), the encouragement of cartels (via the National Economic Recovery Act and its National Recovery Agency - and via many other interventions) and so on.

    In fact one has to be at least borderline nuts to believe that the New Deal was actually good for the economy - because it violates just about every principle of political economy (not just the princple that states that one can not create real lasting prosperity by producing more credit - lending that is not from real savings).

    Or one has to be totally ignorant of what the "New Deal" and just think in the following terms.

    "F.D.R. nice man - F.D.R. produce New Deal - therefore New Deal good".

    But this level of "reasoning" can hardly be called economics.

  6. avatar RickDiMare says:

    George, I thought you did a great job, too, perhaps the most clear and convincing debater there.

    Regarding comments about FDR's New Deal policies discussed here above, again from my totally unconventional legal perspective, I don't think we've yet begun to experience the positive effects of FDR's Supreme Court "revolution of 1937," which is when the 1935 bifurcated Social Security tax was Constitutionalized. In other words, I don't think FDR should be trashed until one fully understands the unique American concept of "income derived from property sources" vs. "income derived from non-property sources" (or, as the Massachusetts Constitution states, "income not derived from property").

    Nick Gillespie from Reason Magazine recently did a YouTube video commemorating Milton Friedman's 99th birthday, wherein he stated something to the effect: "Friedman's era is far from over. Indeed, it may just have begun." I would tend to agree, and add FDR in there with Milton, based on my belief that FDR and Friedman set up a legal mechanism for working people across the globe that greatly expanded upon what the Lincoln administration did in the U.S. for slaves in the South during and after the Civil War.

  7. avatar D. Thomas says:

    Hmm. This guy thinks the Keynesians won: http://socialdemocracy21stcentury.blogspot.com/2011/08/skidelsky-versus-selgin-on-keynes-and.html

    I guess it's no surprise that somebody with the name "Lord Keynes" would think that.

    • avatar Martin Brock says:

      Somehow, many common people actually believe that the lords want states to sell entitlement to tax revenue (and entitlement to rents more generally) to the lords for the good of the taxpayers rather than the good of the lords.

    • avatar George Selgin says:

      I have now added comments to the "Social Democracy" blog addressing some of "Lord Keynes'" criticisms.

  8. avatar Rich says:

    Just to add that I also thought the performance by Selgin and Whyte was excellent. My experience is that many biographers fall in love with their subjects, as Skidelsky has clearly done, perhaps long ago. He imagines, I feel sure, that were the articulate, dapper, and erudite Lord Keynes alive today, he and Lord Skidelsky would be among the very closest of friends and mutual admirers. Anyway, it was extremely enjoyable for me to listen to on my long commute through the Kentucky countryside. Much obliged...

  9. avatar Justin R. says:

    Thanks for the recommendation on Skidelsky'a book. Did you intentionally link to the abridged version, or would you recommend the full text?

  10. avatar Andy says:

    Master Selgin you are the man!!! Your performance in the debate was unreal....I cracked up laughing when I heard your response about the government not being able to think of anything better to do with the money than give it to the banks.
    Those Keynesians just got a SCHOOLING!

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