In this extract of an interview with John O’Sullivan, F. A. Hayek discusses the Great Depression and the influence of John Maynard Keynes. Professor Hayek explains that he spent a year analysing Treatise on Money (1930) and Keynes’ earlier books, only for Keynes to admit soon afterwards that the ideas he had expounded were wrong. When The General Theory was released in 1936, Hayek assumed Keynes would quickly change his mind again, and decided not to devote time to writing a systematic critique – a decision he regretted for the rest of his life. The General Theory has had immense influence on government economic policies, as we see today in the misguided response to the current crisis.
(Hayek’s writings on Keynes are collected in A Tiger by the Tail: The Keynesian Legacy of Inflation.)
A comment and a question.
1. It’s interesting to hear Hayek say he didn’t understand why Keynes’ economics took off. Public choice, surely: Keynes provided an ex post facto justification for politicians’ actions, so of course they leapt on his work.
2. Hayek says that Keynes was relying on an old fallacy linking aggregate demand to employment, and Leslie Stephens (sp.?). I’ve tried looking but can’t really make any headway on tracking down more details. Any ideas?