April 28, 2011

• Keynes vs Hayek

  Perhaps surprisingly, I really really like these videos:

   

   

   

  The first of these videos has the more clear references to actual economic theory and is really sort of a masterpiece. The second one has catchier music and excellent production quality, but is much less informative. Still, maybe it proves how much of a nerd I am, cuz I greatly enjoyed them both.

  I’m no economist, but I suspect the central conceit (though perhaps a necessary conceit) of both of these videos is the idea that Economics is somehow stuck in this deep fatal war between Keynes and Hayek. The idea that we must choose one or the other or else! Only one can be true. There can’t be even a whiff of truth in the other. One will stand. One will fall.

  If I had to choose between these extremes I’d choose Keynes, though I think Hayek makes some good points. But I think judging by the video I’d much rather hang out with Hayek and couldn’t stand five minutes around Keynes. Nevertheless, that’s not really the reality we live in. Nobody, I hope, is advocating purely following the will of Keynes or Hayek.

  In reality the theory of economics is far more vast and interesting than these two albeit extremely influential chains.  Mill, Bagehot, Wicksell, Fisher, Friedman, Tobin… There’s a LOT of economic theory and it builds on each other in meaningful and important ways. It’s inconceivable to me that modern economists are simply trying to force the government to choose between following Hayek’s vision and Keynes’s vision. In reality I suspect theories are much more complex and recommendations are rooted in more than just these explanations.

  That being said, I’m not at all sure economists know what the heck is going on now either. I think we know a lot more than we did in the past, but that doesn’t equate to certain knowledge. However, I just don’t think it’s the ignorance of our economic theory that’s our core problem. We aren’t stuck on one or the other wrong evolutionary track.  Rather I think the problems are 3:

  1. Not all of economists who speak authoritatively and are listened to and influence policy are actually knowledgeable or as knowledgeable as they claim to be in the body of economic theory to date. This is a huge failure of education.

  2. Those economists who ARE knowledgeable about the theory of economics, at least the best that we’ve got in that regard, are not listened to, or even in some cases highly regarded by the people who are in charge of making policy.

  3. Often there are ideological motivators that are infleuncing decision making that have nothing to do with the theory or the body of knowledge we have developed.

  I might consider adding a fourth that the public is also too lacking in a basic understanding of that theory sufficient to make sound judgments about whether or not we are abiding by it.

   

  In short, I think what’s happening in economics is roughly equivalent to what’s happening in Climate Change.  The economics profession has started to be treated as if it lacks credibility and the least credible amongst them are being elevated to positions of influence beyond their knowledge or ability.

  Don’t get me wrong, I don’t think even the best economists are perfect and I’m sure, sure they have gotten things vastly wrong and will get things vastly wrong in the future, even the best and the brightest of them.  But I’d rather put my future in the hands of those economists who are well trained, well versed, intelligent and knowledgible about the history and theory of economics than I would in just random chance or cowering away and just letting things happen. And I’d CERTAINLY trust them a lot more than some of the ideologues who seem to have outsized influence today and are driving things based on ideological concerns and not fact or principal or science.

  But what seems to be happening today is that we are trending away from a belief in fact and a belief in knowledge and fact in general.  We ignore Climate Change. We question evolution. We doubt the birth certificate evidence of our own eyes. We question 9/11. Conspiracy theories thrive in their stead.

  And the deep problem underlying that erosion of belief in fact and knowledge is a parallel erosion in our trust for one another. We’ve become so partisan that we can barely talk to one another without malice. We’ve become much more geographically, economically, racially,  and socially segregated that we are willing to admit in or refusal to give up the conceits of the mixing pot. The gap between generations stands wider than ever. Our scientists are seen as liars, our politicians as opportunists, our military and police as draconians, our doctors and lawyers as thieves, our media figures as children playing games, our clergymen as threats to our children, our businessmen as crooks, and our economists as fools. To be sure many if not all of these institutions have not performed admirably in recent years. However, though there is certainly good reason to doubt them, we run wholesale away from them at our great peril. There has to be a way to reform these institutions and to reform our perception of them so that they can become again the pilars on which a functional society is built. And at the same time we need to change the way we perceive each other so that we can start to work together to create a better future again.

   

  If we need to create some more fun rap videos to encourage more people to care about and think about knowledge in general as a valuable goal in and of itself, then I’m all for it. I’m 100% on board with these even though I think they are clearly tilted more in the direction I don’t agree with. Maybe these kinds of things can get us to talking with one another about things more momentous than a birth certificate in a fair and rational way again.

  Keep at it. I want to see more fun creativity like this. Biology, Physics, Politics, Philosophy, History, Sociology. All of it. We need it.

  • 7:54 pm
  • 4 Comments