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Is Economics the new Rock 'n' Roll?

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Innes Bowen Innes Bowen 17:52, Tuesday, 2 August 2011


Who would have thought that one way for Radio 4 to catch the attention of a younger audience was to organise a debate about two dead economists, with a septuagenarian member of the House of Lords as the star attraction?

Last Tuesday night, around 1000 people queued around the block at the London School at Economics to attend a Radio 4 debate about the ideas of John Maynard Keynes and Freidrich August von Hayek. In the 1930s, these two giants of economic thought advocated sharply contrasting responses to the Great Depression: Keynes argued for more state intervention and Hayek for a more free market approach.

As Western economies struggle to recover from the latest slump, the ideas of Keynes and Hayek are being eagerly revisited by a younger generation. There are even two rap videos (here and here) on the Keynes v Hayek controversy.

The audience at the LSE was mainly young - I'm guessing the average age was about 23. Our presenter, Newsnight's Economics Editor Paul Mason, tested opinion before the speeches.

Team Keynes, consisting of Keynes's biographer Robert Skidelsky and economics blogger Duncan Weldon, got an enthusiastic cheer from the audience. For Hayek's defenders, Professor George Selgin and management consultant Jamie Whyte, the whooping was even louder.

"I applaud the Hayekians' eagerness to come and hear the Keynesian case," joked Lord Skidelsky.

The debate went beyond the LSE auditorium into the Twittersphere, as the audience ran a live commentary using the hashtag #lsehvk, which was followed enviously by those who were turned away at the door - a large lecture theatre and two overspill rooms still didn't provide enough seats to meet demand.

"@DuncanWeldon You were amazing at #lsehvk. Go Keynes! (I said it)," was the verdict of 20 year old Emily Finch, a film festival administrator.

From 18 year old @vklmonro "#lsehvk - amazing debate. couldn't have cheered for Hayek any louder."

It was obvious that people had come to applaud their team rather than to make up their minds.

As Lord Skidelsky emerged from the LSE Old Building, he was surrounded by fans. "I can't believe I'm actually meeting you," one awestruck young man told the peer. Afterwards, in a nearby pub, a cheer went up as Professor Selgin and Jamie Whyte arrived for a post debate celebration attended by over 100 Hayekians.

"I didn't know so many young people think economists are like rock stars," said the event's producer Daniel Tetlow.

So, what on earth is going on? Well here's my theory. If you are a 6th former or a university student, the financial crisis of 2008 is probably the defining event of your politically conscious life. Understanding how we got into the financial mess we are in, and how to get out of it, is more than an issue of intellectual curiosity for that generation.

The effects of the economic downturn are being felt more acutely by the young than they are by the typical Radio 4 listener (average age 55 and likely to have paid off the mortgage). And if last week's debate is anything to go by, the youth are demanding a return to some older and more radical thinking.

Innes Bowen is Assistant Editor, Radio Current Affairs

  • You can hear the Keynes vs Hayek debate on BBC Radio 4 on Wednesday, 3 August at 20:00 BST. The programme will be repeated on Saturday 6 August at 22:15 BST.
  • Join in the Keynes vs Hayek debate on Twitter using the hashtag #lsehvk


  • Comment number 1.

    Encouraging that BBC are putting on economic discussions, given the current global economic crisis. There should be more of this on television as well. Only criticism is - Where is Marx in this debate? Both Hayek and Keynes believe there is nothing wrong with the current economic system - just needs tweeking a bit. Each can show convincingly that the other side is wrong. Maybe both of them are wrong.

  • Comment number 2.

    Sir, allow me to challenge the contention that hayakian economomists think that the economic system just "needs tweaking a bit". The change to Hakeyian from a Keynsian model would be absolutely radical. From centralised control to free market control. to answer the question of "Where is Marx in the debate?" I merely state that he lies (in more ways than one) on the junkpile of history. He was booted from the debate some time ago when every single country that tried his theories in practice crumbled into ruin. However Keynes' model does pay some lipservice to Marx and is somewhat socialist (Centralised control of the economy is the essence of socialism). Show Marx the Hayakian agenda, however (were Marx still alive to see such a thing) and he would go pale.

  • Comment number 3.

    Economics is mostly rubbish. It has no real explanatory or predictive powers. A "science" of getting wise after the event. Hayek, Keynes et al....bunch of flannel merchants. The only person to get even close to explaining it all was Marx.

  • Comment number 4.

    Readers interested in a pre-debate briefing on some of the key questions might find my blog post useful at the following link. Also, I have done my utmost to try not to favour either side - have I succeeded or are there unconscious biases showing through?
    Keynes vs Hayek and cognitive macroeconomics

  • Comment number 5.

    Listening to the debate, it appeared to me that economists are rather more the problem than the solution. They are near the level of estate agents and hairdressers and Douglas Adams knew what was best for them.

    We have lost completely our manufacturing base and most small companies and there is little chance of it coming back. We are left with corporate and financial businesses together with private and public sector service industries, a very poor cocktail.

    The only answer is the John Lewis principle to create companies that will invest in the future and their staff without fear of predation by private equity but it is up to Government to enable the right climate such as corporation tax to Zug levels.

    A good example is the Mondragon group of coops in Spain but it will take many decades to achieve it.

  • Comment number 6.

    2. Thanks for your response. Marx was the only economist who really got to the heart of the dynamics of capitalism, and why it must constantly seek to generate surplus, until overinvestment is reached, with stagnation and crises. I noted in the debate that the Hayek speakers explained the financial crises as being caused simply by the preceding booms, but never explain why there was a boom. It sounded like they believe that bankers just become unaccountably greedy from time to time, rather than appreciate that the export of capital to China, for example, to drive down labour costs and increase profits, led to the subsequent need to create credit to counteract the loss of buying power in the West as wages declined. It sounded like the Hayekians were not far from Marx in seeing the massive destruction of capital as the only way of escaping from a slump. The only problem with that, of course, is some humans don't appreciate mass unemployment and poverty, and tend to revolt, which didn't figure much in the debate. You are right that university economics departments don't have many Marxists - they oscillate from neo-liberalism to Keynesianism depending on the current state of the world economy, hoping that one or other will fix things. In the 1950s-60s, Keynes was the fashion, and when it failed in the 70s, neo-liberalism came back into fashion, and now? He who pays the piper, or funds the research, calls the tune.

  • Comment number 7.

    J M Keynes said “When the facts change, I change my mind. What do you do, sir?” In other words he was a pragmatist and a pretty good investor as well. I'm not sure what he would have 'done' if he was in the driving seat of the current crisis but then he’d not allowed this state of affairs to occur. But like any sensible person he would have seen it coming. I don’t have an answer, I'm not that clever, but I know that when "it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck". I.E. you'd have to be a nutter or living on another planet not to see this coming! I started putting my faith in gold 8 years ago, I don’t trust anyone with my future! At least it’s my fault if it all goes pear shaped

  • Comment number 8.

    The point that most struck me was made by the ant-Keynesian professor from the United States. The money "spent" by governments to improve their economies has gone mainly to strengthen the balance sheets of failed banks that in consequence have no need to lend. This type of measure is far removed from the Keynesian parody of simply paying people to dig holes and others to fill them in. It would seem that billions of dollars and pounds have been "parked" - no one doing anything with it: no one digging and no one spending.

  • Comment number 9.

    Parked in various banks I think would be the case. Bring on QE3, its coming in the USA is inevitable. They'll throw more of our money at the problem, they don’t have a plan B. My hack’s phrase is 'the more they print the higher the gold price will rise'! Unfortunately it’s the poor of society and this planet who will pay the price for this debacle. The majority of bankers, politicians, civil servants etc have their inflation proofed pensions, why should they worry, and they don't!

  • Comment number 10.

    Marx and Keynes and Kalecki -- A Better Rap

    Marx and Keynes and Kalecki
    Susan Feiner and Bruce Roberts

    They were not equi-liberals
    They really didn’t think that full
    Employment was the normal state
    Let alone some so called natural rate.

    They sought to show the system’s flaws
    Their notion was that there are laws
    Which govern how the system grows
    They never thought that income flows
    could be defended just because they
    Happened to occur. For them a man
    Who thinks there is some secret hand
    Which makes efficient outcomes rule
    Comes from a clearly vulgar school
    Chicago, never mind from where
    They surely don’t teach that stuff there.

    Marx was the first one to explain
    That there’s a surplus that’s a drain
    On every worker’s labor time
    No matter whether you’re the kind
    Whose clothes are dirty every night
    Or if you’re black or if you’re white
    Or if the board room is your goal
    If you don’t own you don’t control.

    Of course his message was ignored
    The system boomed, inflation roared
    Prices fell, deflation came
    And no one really could explain
    Why good times waxed and then they waned
    When unemployment reared its head
    “Let wages fall,” was what they said.

    Keynes made his contribution here
    A lower wage will never clear
    The market if demand declines
    And multiplies through shops and mines.
    If firms don’t know that there’s a buyer
    How can they know they should hire?
    And if they don’t investment sags
    ‘Cause no one spends when profits lag.

    Kelecki knew this too, he saw
    How corporate needs and policies
    Define the way that credit flows,
    Because as every banker knows,
    if unemployment falls to fast
    Then wages rise and that’s the last
    You’ll hear of cries for greater growth
    Controls or spending cuts or both
    Are what we’re told is needed for
    Real investment or the useless stuff that’s made for war.

    The textbooks tell us markets should be free
    And if they are it’s best you see
    ‘Cause each is paid, in line with contributions made
    It simply doesn’t work that way
    You really can’t with rigor say
    That factor prices all must be
    In line with factor scarcity.

    So, equilibrium aside
    The real problem is how shall we divide
    Our social wealth twixt those who save
    And those who work from cradle to grave?
    Will business cycles ever die?
    Not till the widow’s cruse runs dry
    And owners don’t get what they spend
    But this requires us to defend
    A social right to make the few,
    Paid heed to what the many do.

    Kalecki saw with Marx and Keynes
    That markets are like April’s rains
    Some flowers grow, but weeds do to
    We need a change they thought, don’t you?

  • Comment number 11.

    So the Hayakians think Keynes is dead.And the Keynesians think that Hayek never even got of the starting block....where does that leave us?...at " the End of Economics " to steal a phrase.
    The Chinese are breathing down our neck and this is not the 1930s or has'nt anyone noticed? As for Marx...now he really is dead!

  • Comment number 12.

    In response to Geoff: you say you were left wondering what the Hayekians thought was the cause of the boom. They blame artificially low interest rates. Jamie Whyte explained it in more depth in the 31 January edition of Analysis, which is still available online.

    "Interest rates are simply prices for borrowing. In a free market, that price - the rate of interest - would be determined by the demand for borrowing and by the supply of money that is available to be borrowed - that is, by the amount that has been saved.

    But we do not have such a free market. Interest rates are set by central banks - such as the Federal Reserve in the United States, the Bank of England and the European Central Bank. Interest rates are therefore very likely to be false signals, either artificially high or artificially low."

    There's an alternative to the free market view explored in Paul Mason's edition of Analysis from 7th Feb (also still online).

  • Comment number 13.

    Here's the link to the programme Innes mentions,

    Analysis - Radical Economics: escaping credit serfdom
    "The role of credit in the build up to the global financial crisis is well known - but what has our reliance on credit been doing to the wider economy and to human behaviour?

    The expansion of consumer credit has been encouraged by social democratic as well as centre right governments. But some on the left believe that the growth of the financial sector has given birth to a novel form of capitalism and with that a new kind of worker exploitation.

    Paul Mason meets the economists of "financialisation" who believe that credit has become the defining relationship between workers and employers, citizens and public services."

  • Comment number 14.

    Thanks for the links and comments, Innes and Paul. I'll follow them up. Concerning money supply and interest rates, as far as I understand, it is not only Central Banks that can increase money supply. Did not the private banks effectively increase money supply by coming up with various credit instruments like CMOs and CDOs? I recall that people were encouraged to borrow, bought property, drove up the price of property, and used credit from that virtual price increase to buy goods from China. Would not a free market view say that banks are welcome to create credit bubbles with no regulation? I liked Graham Turner's books which explain how the rapid industrialisation of China was not some just a Chinese phenomenon, but the result of Western companies moving capital East in huge amounts to seek low cost production, and maintain profit rate. The credit boom in the West was then not just "bad bankers" or "stupid governments", but necessary to compensate for stagnant or falling wages in the West, and keep people buying (Chinese goods), and thus returns on Chinese investments.

  • Comment number 15.

    I liked the rap, Sffein!

  • Comment number 16.

    Interesting programme on Radical Economics. Thanks for the link.
    I agree with the concluding thoughts that people would not be likely support any major change in the economic structure of society as long as the majority feel well-off. It would take the kind of catastrophe that struck in the 1930s. So far, we have been in a financial hole for 3 years (and Japan for 20 years), without the same social effects as in the 1930s. However, there is no serious sign of recovery yet, and the huge debts are still there...

  • Comment number 17.

    A full account of what happened in this, the greatest ever debate over economics and the political economy, can be found in my Keynes Hayek: The Clash That Defined Modern Economics, published by W.W.Norton in the US in October and in the UK in the Spring. To read an extract: https://sites.google.com/site/wapshottkeyneshayek/


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