Krugman Disses Hayek

Paul Krugman tells us that “Friedrich Hayek is not an important figure in the history of macroeconomics.” He insists that there were no Keynes-Hayek debates in the 1930s, that “Hayek essentially made a fool of himself early in the Great Depression, and that therefore “his ideas vanished from the professional discussion.”

Krugman is not well versed in the history of ideas—he once opened a keynote speech at a conference honoring Bertil Ohlin by admitting he hadn’t read Ohlin—so it’s not surprising that he gets the story of the 1930s completely wrong. That Hayek was regarded as a main rival to Keynes in the early 1930s is beyond dispute among serious intellectual historians, though after 1936 Hayek’s ideas were quickly buried under the Keynesian avalanche. Alex Tabarrok adds that Hayek’s underlying framework, if not his specific business-cycle theory, has been extremely influential on new classical macroeconomists such as Lucas, Sargent, Barro, and Wallace.

Krugman closes with the unintentionally funny snark that “the Hayek thing is almost entirely about politics rather than economics.” I suspect if one polled professional economists on which recent Nobel Laureate received the prize not so much for technical contributions, but because the Nobel committee wished to make a political statement, the answer would overwhelmingly be Krugman. I don’t know anyone who thinks Krugman’s work on trade and geography merited the Nobel at the relatively tender age of 55. Indeed, the Krugman thing is almost entirely about politics rather than economics. Quelle Ironie!

Peter G. Klein is a Research Fellow, Associate Editor of The Independent Review, and Member of the Board of Advisors of the Center on Culture and Civil Society at the Independent Institute.
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