Tuesday, 23 August 2011

Hayek v Keynes

I have just watched the LSE Hayek v Keynes debate on the Adam Smith Institute blog. It seemed to me that the Hayekians won the argument. Hayek believed in the free market whereas Keynes believed in government intervention but, we learned, that is not to say that Hayek would not have agreed with quantitive easing. He would though have been against allowing the money generated by QE to have been sat on by the banks. He would also not have bailed out insolvent banks nor would he have pursued a loose monetary policy that eventually led to a boom and then inevitably to a bust. The Keynesians only seemed to have a concern about how to deal with a bust to which problem they had but one solution which was for government spending through something like the green bank that the government is in course of setting up. The Hayekians also called for the abolition of the central banks. I imagine that the Hayekians do not like central banks or the government's new green bank because all governments are notoriously bad at business of any kind. Hayek we were told did not say that markets were perfect but that they were to thing which worked best. The Keynesians gave examples of the beneficial effects of following his policies but these were easily refuted by the Hayekians. It was a fascinating debate but what was not clear was exactly how the Hayekians would proceed from here but whatever is their plan Osborne should follow it. Keynes is clearly not the answer.

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