The return of the views of Friedrich Hayek (and his mentor, Ludwig von Mises) are becoming fashionable once again as a result of the continuing financial crisis. This video from the BBC discusses his economics in contrast with the Keynesian views that have created this crisis.
The roots of the current crisis can be tracked back many decades, probably the 1960s when John F. Kennedy brought his “best and the brightest” to Washington. His economists were all Keynesians and there was a belief that government interventions could eliminate business cycles. Then, it was still acceptable to lower taxes as a means to spur economic growth. Kennedy did so and the economy revived.
Arguably, the beginnings of adverse effects on the economy can be seen almost at the same time. For example, the real average wage in 1966 was higher than it is today. It rather consistently declined from that point forward.
Perhaps it is less proper to blame Keynes for his improper theory than the political class who saw their opportunity to utilize Keyne’s activism to grow government and their own power. Economists who accepted the Keynesian version of economics did well. This version of economics was essential for economists to gain lucrative employment in Washington, tenure in most universities and the abundance of research grants.
The video below focuses primarily on Hayek. Most of Hayek’s ideas were expressed before Hayek, by his mentor von Mises. Hayek duly deserves credit for his contributions and his exposure of von Mises’ ideas who received little during his lifetime. In my opinion, Mises was the true genius in my opinion.
This video is both a nice presentation of history and Austrian economics. It contrasts Hayek’s views with those of Friedman and Keynes.