A phat jam from Russ Roberts & Co. Download the song here.
Hat Tip: CafeHayek. Listen to Russ Roberts’ weekly EconTalk podcast here.
A few notes. Hayek frequently introduced himself as “Hayek — as in High Explosives”. If I made a change, I might add that to the intro.
And Hayek’s friends called him “Fritz”, not “Freddie”, though Hayek preferred “Friedrich” or “Professor Hayek”. In their letters, Keynes and Hayek addressed each other as “Dear Hayek” and “Dear Keynes”.
I might also note that in the 1930’s when Hayek was reducing Keynes to drooling — and sending him back to the drawing board (anybody still reading Keynes’ Treatise?) — Hayek had a good deal more hair on his head than Keynes.
And don’t miss my collection of Hayek quotes on Keynes.
UPDATE: The lyrics:
We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits
[Keynes Sings:]
John Maynard Keynes, wrote the book on modern macro
The man you need when the economy’s off track, [whoa]
Depression, recession now your question’s in session
Have a seat and I’ll school you in one simple lessonBOOM, 1929 the big crash
We didn’t bounce back—economy’s in the trash
Persistent unemployment, the result of sticky wages
Waiting for recovery? Seriously? That’s outrageous!I had a real plan any fool can understand
The advice, real simple—boost aggregate demand!
C, I, G, all together gets to Y
Make sure the total’s growing, watch the economy flyWe’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spiritsYou see it’s all about spending, hear the register cha-ching
Circular flow, the dough is everything
So if that flow is getting low, doesn’t matter the reason
We need more government spending, now it’s stimulus seasonSo forget about saving, get it straight out of your head
Like I said, in the long run—we’re all dead
Savings is destruction, that’s the paradox of thrift
Don’t keep money in your pocket, or that growth will never lift…because…
Business is driven by the animal spirits
The bull and the bear, and there’s reason to fear its
Effects on capital investment, income and growth
That’s why the state should fill the gap with stimulus both…The monetary and the fiscal, they’re equally correct
Public works, digging ditches, war has the same effect
Even a broken window helps the glass man have some wealth
The multiplier driving higher the economy’s healthAnd if the Central Bank’s interest rate policy tanks
A liquidity trap, that new money’s stuck in the banks!
Deficits could be the cure, you been looking for
Let the spending soar, now that you know the scoreMy General Theory’s made quite an impression
[a revolution] I transformed the econ profession
You know me, modesty, still I’m taking a bow
Say it loud, say it proud, we’re all Keynesians nowWe’ve been goin’ back n forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Keynes] I made my case, Freddie H
Listen up , Can you hear it?Hayek sings:
I’ll begin in broad strokes, just like my friend Keynes
His theory conceals the mechanics of change,
That simple equation, too much aggregation
Ignores human action and motivationAnd yet it continues as a justification
For bailouts and payoffs by pols with machinations
You provide them with cover to sell us a free lunch
Then all that we’re left with is debt, and a bunchIf you’re living high on that cheap credit hog
Don’t look for cure from the hair of the dog
Real savings come first if you want to invest
The market coordinates time with interestYour focus on spending is pushing on thread
In the long run, my friend, it’s your theory that’s dead
So sorry there, buddy, if that sounds like invective
Prepared to get schooled in my Austrian perspectiveWe’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spiritsThe place you should study isn’t the bust
It’s the boom that should make you feel leery, that’s the thrust
Of my theory, the capital structure is key.
Malinvestments wreck the economyThe boom gets started with an expansion of credit
The Fed sets rates low, are you starting to get it?
That new money is confused for real loanable funds
But it’s just inflation that’s driving the onesWho invest in new projects like housing construction
The boom plants the seeds for its future destruction
The savings aren’t real, consumption’s up too
And the grasping for resources reveals there’s too fewSo the boom turns to bust as the interest rates rise
With the costs of production, price signals were lies
The boom was a binge that’s a matter of fact
Now its devalued capital that makes up the slack.Whether it’s the late twenties or two thousand and five
Booming bad investments, seems like they’d thrive
You must save to invest, don’t use the printing press
Or a bust will surely follow, an economy depressedYour so-called “stimulus” will make things even worse
It’s just more of the same, more incentives perversed
And that credit crunch ain’t a liquidity trap
Just a broke banking system, I’m done, that’s a wrap.We’ve been goin’ back n forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No it’s the animal spirits
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All the facts behind Hayek Vs Keynes Rap:
The Road to Serfdom was written by Hayek in 1944 and is among the most influential and popular expositions of libertarianism. In February 1945 a picture-book version was published in Look magazine and later made into a pamphlet and distributed by General Motors. For Hayek “the road to serfdom” inadvertently set upon by central planning, with its dismantling of the free market system, ends in the destruction of all individual economic and personal freedom. Hayek’s central thesis is that all forms of collectivism tend towards tyranny, and he used the Soviet Union and Nazi Germany as examples of countries which had gone down “the road to serfdom” and reached tyranny.
26. Hayek argued that democratic legislatures move too slowly to manage a modern industrial economy. Management of socialism would therefore lead to bureaucrats gaining discretionary powers. Disagreement about the practical implementation of any economic plan would invariably necessitate coercion in order for anything to be achieved. Hayek further argued that the failure of central planning would be perceived by the public as an absence of sufficient power by the state to implement an otherwise good idea. Such a perception would lead the public to vote more power to the state, and would assist the rise to power of a “strong man” perceived to be capable of “getting the job done”. After these developments Hayek argued that the worst get on top of socialist bureaucracies. Those who are good at acquiring and exercising discretionary powers in government are usually the most ruthless and corrupt individuals. Hayek argued that countries such as the Soviet Union and Nazi Germany had already gone down the “road to serfdom”, and that various democratic nations are being led down the same road.
27. Keynes read The Road to Serfdom and said of it: “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”. Having said that, Keynes did not think Hayek’s philosophy was of practical use; this was explained later in the same letter, through the following comment and prophecy: “What we need therefore, in my opinion, is not a change in our economic programmers, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger is the probable practical failure of the application of your philosophy in the United States.”
http://israelfinancialexpert.blogspot.com/2010/02/all-facts-behind-hayek-vs-keynes-rap.html
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It seems to me the Hayek and Friedman lead to serfdom and/or civil ar, at the very least class hatred.
NAIRU fills me with rage. The chant of the insults and hate for the jobless, thus homeless,
that Hayek and Friedman and Libertarians all insist on creating and maintaining, 50% of the human race lives in poverty 6% homeless to make life a little nicer and richer for 5% of the richest..
Just off the cuff remaks.