1/13/2020

Stimulating Debate

"The similarities Hoerber finds between Hayek and Keynes are illuminating. Hoerber emphasizes each man’s reliance on narrative to explain his ideas. The degree to which many economists equate economics with the use of mathematical formulae was deeply regretted by Hayek, and would horrify Keynes. In addition each economist sought to rethink liberalism’s approach to the economy. Keynes was prone to rhetorical excess, but generally avoided caricaturing laissez-faire economics as “savage capitalism.” Post-Smithian economics, he knew, acknowledged the importance of a stable framework of rules, as well as of clear, but limited, economic roles for government. Keynes wanted to expand that framework to allow the state to go beyond the limits advocated by 19th-century liberals. Hayek criticized Keynes for fatally blurring the distinction between a rule of law-focused framework and habitual government interventionism, but Keynes was not as comfortable with government expansionism as is often supposed. In a letter to British-Australian economist Colin Clark he suggested that the figure of “25 percent [of GDP] as the maximum tolerable proportion of taxation may be exceedingly near the truth.” Where “the maximum tolerable proportion” truly lay preoccupied both Hayek and Keynes (as evidenced by their correspondence following The Road to Serfdom’s publication), but was never resolved to either man’s satisfaction.

Though both were convinced of its inner logic, neither Hayek nor Keynes ever definitively settled whether economics was a positive social science or part of political economy. That is not such a bad thing. We should never forget the basic insights revealed by economic thinking, such as the importance of comparative advantage and marginal utility. But just as people study medicine because they ultimately want to promote the good of health, one of the points of studying economics is to help us realize particular goals considered good for our particular societies."