Recently in Hayek Category

IN THE WAKE OF 9/11 historians have been calling the 1990s America's "vacation from history" in the area of national defense. Now, with the financial industry in trouble and the housing market in collapse, the NY Times is suggesting the end of America's "vacation from history" in the ream of economics, taking direct aim at Fed Chairman Ben Bernanke's theory of a new economic age he calls "The Great Moderation". But as the NY Times points out, "These days .. the great moderation isn't looking quite so great -- or so moderate."

Here's my view.  America has been on an economic "vacation from history".  However, this policy vacation is largely the consequence of the economic profession's vacation from science in the domain of macroeconomics. The problem of bad economic policy begins and often ends with the bad science, taught at all of the top economics departments in the country.  So we get the repetition once again of the fiasco of a Keynes engineered artificial boom - bust cycle, with the economists having no idea what they have wrought, or why their nostrums for "fixing" things only makes things worse.

What I'm saying here is little more than a quick rendering of Nobel economist Friedrich Hayek's famous account of what has gone wrong with economic theory and policy since the time of Keynes.  Readers interested in an accessible account of Hayek's non-Keynesian macro-economics are encouraged to take some time working through the well-written articles found at economist Roger Garrison's web site.

A GREAT LETTER in the WSJ with a great Friedrich Hayek quote:

Edward Ortiz Jr., in his Jan. 12 Letter responding to "Liberty Theology" (op-ed, Dec. 31), has the nature of capitalism backward. He says that "the idea of capitalism...demands that the individual be selfish (i.e., looking to profit)." More accurate is Friedrich Hayek's observation that "Profit is the signal which tells us what we must do in order to serve people we do not know. By pursuing profit, we are as altruistic as we can possibly be, because we extend our concern to people who are beyond our range of personal conception." The fundamental concerns of the church are fully compatible with this more profound understanding of how markets work.

Ted Carman
Jamaica Plain, Mass.

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