This archived content originally appeared at, the predecessor site to, and does not carry the sponsorship of the Cato Institute.

Lord Skidelsky’s Late Punch

Back in 2001, supermiddleweight boxer James Butler was heavily fined and barred from the sport for sucker-punching his opponent instead of congratulating him after being bested in a match.

Alas, there are no similar penalties for late sucker punches delivered after economics debates, or else the BBC-sponsored Hayek versus Keynes debate held at the LSE last month might have been Lord Skidelsky’s last. For yesterday his noble lordship delivered a most ignoble below-the-belt blow to his late opponents in the shape of a Project Syndicate column titled “The Keynes-Hayek Rematch.”

Here, among other things. Lord Skidelsky suggests that Keynes “savaged him [Hayek] while he was still alive,” and that Hayekian ideas have only succeeded in gaining popularity since thanks to Hayek’s having long outlived Keynes–as if Hayek’s growing popularity wasn’t itself mainly posthumous, and as if Keynesian ideas have lacked huge battalions of defenders, both in and out of the academy, since his death. He writes as well that only “Hayekian fanatics” could possibly not believe that the “global stimulus of 2009 stopped the slide into another Great Depression”–a statement that, besides dismissing as “fanatics” a large number of persons, including some pretty good macroeconomists who are no more Hayekian than Lord Skidelsky himself, seems rather brash. He repeats the slur, which I took pains to expose as such during the debate, that Hayek favored doing nothing to combat a post-boom collapse of spending, likening Hayek’s stand to one of “denying blankets and stimulus to a drunk who has fallen into an icy pond, on the grounds that his original trouble was overheating.” He also repeats the claim, refuted in my last post, “that public-sector austerity at a time of weak private-sector spending guarantees years of stagnation, if not further collapse.” Finally, Lord Skidelsky declares that “Hayekians have nothing sensible to contribute” (my emphasis) to the debate concerning the extent to which “strengthening the tools of macroeconomic management”–meaning (presumably) further expanding government spending and indebtedness as well as further strengthening central banks’ powers–is likely to prove beneficial and prudent.

To the last assertion, an astute commentator offers a most appropriate reply. “It’s hard to believe,” he observes, that the observation in question, among others noted,

was written by the same man who, half a dozen years ago, said of Hayek, “The particular threats to liberty that he identified may be on the wane—his book has done its work well—but there are other threats, and the victory of liberty is never secure. Hayek’s key message for us today is surely this: every new restriction or regulation should be judged by its effect not just on the problem that it is designed to solve or the danger that it is designed to avert but by its effect on the system of liberty as a whole. If we are blind to this, we will be left with a damaged system of liberty long after the particular problem or danger has passed away.”

“That, however,” the commentator continues, “was upon receiving the Manhattan Institute’s $50K ‘Hayek Prize.’ Perhaps they ought to have spread out the payments!”

It turns out that, when Lord Skidelsky was given it back in 2005, the Hayek Prize was worth only $10 thousand. I leave it to readers to decide whether to wish it had been more, or that it had been less.

  • BillWoolsey

    He writes as well that only “Hayekian fanatics” could possibly believe that the “global stimulus of 2009 stopped the slide into another Great Depression

    I think it is “not believe”

    • George Selgin

      Thanks, Bill: I’ve fixed the error.

  • Adrian Ravier

    It is interested to compare two keynesians with very different points of view on Hayek and the crisis. See this article by Axel Leijonhufvud, Keynes and the crisis,

    • George Selgin

      Ah, good old Axel. Now there’s a noble Keynesian!

  • rhmurphy

    Is there any legitimate evidence that the German planners were at all influenced by Hayek?

    • George Selgin

      Though I left that one alone, it is another canard, as vicious as it is untrue. Skidelsky resorted to it during the debate as well. So far as I’m aware, Austrian-school thinking had little influence in Germany in the early years of the depression or at any time from then until the postwar “German Miracle” in which Austrian-school economist Wilhelm Röpke played an important part.

  • Daniel Kuehn

    I don’t get it George. Is it just the “fanatics” point? People have been saying that Keynesians have nothing to offer during the current crisis too. Are you going to accuse all your friends who have said anything like that of throwing a “suckerpunch”? Unless it’s all about the one “fanatic” line, it seems to me the only thing your angry about is that he draws a different conclusion from you.

    If you think saying Hayek is popular because he had decades longer to spread his ideas is a “suckerpunch”, what do you think of the argument that Keynes is popular because he tells politicians exactly what they want to hear and Keynesians just want to win the favor of people in power? This is what lots of your friends and colleagues argue, George. Is that a “suckerpunch”? I don’t see how anyone could be offended by simply pointing out that if you’re in the field for decades you’re going to establish a following. Why do you find that offensive?

    I was a little surprised by the negative press this article got. I personally was impressed with the description of Hayek that Skidelsky offered, which was better than his usual. Forget the “fanatic” passage. What did you think of this passage:

    “For Hayek in the early 1930’s, and for Hayek’s followers today, the “crisis” results from over-investment relative to the supply of savings, made possible by excessive credit expansion. Banks lend at lower interest rates than genuine savers would have demanded, making all kinds of investment projects temporarily profitable.

    But, because these investments do not reflect the real preferences of agents for future over current consumption, the savings necessary to complete them are not available. They can be kept going for a time by monetary injections from the central bank. But market participants eventually realize that there are not enough savings to complete all the investment projects. At that point, boom turns to bust.

    Every artificial boom thus carries the seeds of its own destruction. Recovery consists of liquidating the misallocations, reducing consumption, and increasing saving.”

    • Daniel Kuehn

      This isn’t to say “oh feel bad for us Keynesians” – it’s meant as surprise that people were so put off by the Skidelsky article which I expected would build bridges do to a pretty good description of Hayek.

      • Daniel Kuehn

        *due to a

    • George Selgin

      Daniel, Skidelsky’s ad hominem dismissal of Hayekians as “fanatics” is indeed a big part of what I’m calling his “sucker punch,” especially as it seemed designed to counter the generally favorable reception the Hayekian side got from the debate. But there’s much more than that that’s scurrilous about his article, including the contemptible suggestion that Hayek is only been gaining popularity relative to Keynes because Keynes has been dead longer, Skidelsky’s repetition of claims that were refuted during the debate, and the crap about Hayek being responsible for Hitler’s rise to power. Such things have every appearance of being the flailings of someone anxious to convince everyone that he must surely be the real winner of a debate in which he was in fact (to judge by most of the feedback, not by my own personal impression) trounced.

      As for what my “friends and colleagues” argue, I am of course not answerable for it. However I will say that to suggest that Keynes’s ideas were popular among politicians because they supplied them with a defense of profligacy is hardly in the same low vein as referring to Keynesians as “fanatics.”

      • Daniel Kuehn

        First, one man’s refutation is another man’s poor logic. I think you and Whyte recycled points that have been refuted too. As an example, you mentioned several times in the debate that consumption isn’t the problem – investment is and that Keynesians ignore this. They haven’t ignored it – the Keynesian explanation is entirely an explanation of depressed investment demand. I can disagree with you and say this has been refuted before, but I wouldn’t have thought that amounts to a “suckerpunch” simply because we disagree.

        And now you’re here repeating the point about politicians and Keynesianism which is considerably more of a sucker punch than saying that Hayek’s continued presence in the field contributed to his popularity (I’m still not sure what’s wrong with this… I’m willing to admit, for example, that Samuelson’s longevity or Friedman’s longevity has been an important factor in their influence – if Keynes had lived to 90 he certainly would have been an even more towering figure than he already is).

        Anyway – at least I know your position now. I can’t pretend to understand it.

        What did you think of the passage I quoted???

        • George Selgin

          With all due respect, Daniel, I did not “repeat the point” about Keynesianism and politicians. I merely compared that point, as made by others, with Skidelsky’s about Hayekian fanatics. Your reading is sloppy here.

          Regarding investment, yes, Keynesians claim that an “autonomous” decline in investment causes downturns. It’s not much of a theory; it also isn’t the same as recognizing that not every stimulus that raises spending serves also to increase investment. Lord S. himself expressly denied during the debate that the manner of government spending made any difference, suggesting that all that matters is that people are somehow employed, which (according to him) means that they will demand things, inspiring more production of those things, and so stimulating investment. The crude fallacy involved in such reasoning–the fallacy that increased spending on anything, including consumption, will itself suffice to promote increased investment–should be readily evident to anyone who ponders it a bit. If drawing attention to this is “recycling” old stuff, it is recycling that’s necessary so long as Keynesians continue to recycle their own confused and dangerous ideas.

          The passages you quote from Lord S.’s article are themselves perfectly fair characterizations of Hayek’s ideas, Had Lord S. merely stuck to the tone they embody, I’d have no quarrel with him. But he doesn’t do any such thing. I will add that my disappointment with him is somewhat increased by the fact that he was extremely cordial before and after the London debate, and that I shared with him an article I wrote showing at length that the differences between Hayek and Keynes were in many respects more subtle than is usually imagined (Keynes among other things had conceded that the late 20s were a period of “profit inflation”; he also came within an ace of accepting a stable nominal wages criterion of sound monetary policy that was essentially identical to Hayek’s ca. 1933), which led to a round of also cordial correspondence. It was shocking under the circumstances to see him then put on public display such a hoary cardboard caricature of Hayek as that contained in the Project Syndicate article.

          I’m not prepared to deny that Keynes would be more popular today had he lived longer. I merely insist that the suggestion that Hayek is gaining popularity relative to Keynes only or mainly because Hayek lived longer, rather than because more people have come to conclude that Hayek’s ideas have greater merit, is a cheap shot.

          • Sam Grove

            To claim that one’s ideas win out because the originator has been around longer than someone else doesn’t say much about the ideas, does it?

            It’s a strange thought anyhow, considering the dominance of Keynesian economics in academia, politica, and media.

            As Hayek lived MUCH later, his ideas should have been dominating, according to that strange claim.

            The rise of Hayek’s ideas can only be because he made stronger arguments.

  • Stephan Kinsella

    See also Bob Wenzel’s The Case for Robert Skidelsky as a Liar.

    • George Selgin

      Although Keynes’s remarks are certainly revealing–they cast doubt, for one thing, on the depiction of him as someone determined to save capitalism from more radical enemies–Mr. Wenzel does not at all meet the burden of establishing that his failure to refer to the radio address in question makes Lord S. a “liar”: this is just another instance of the sort of low swipe that I’m objecting to.

  •!/trollyball.mvp Scott Burns

    “shared with him an article I wrote showing at length that the differences between Hayek and Keynes were in many respects more subtle than is usually imagined”

    Is this article available online? If not, is there any chance you’d be able to post that article on this site or elsewhere? It’d fit well with my research.

    • George Selgin

      I’ve now made a link to the article where it is mentioned, Scott. Access is however limited to subscribers, which should include most universities.

  • Paul Marks

    I am not an empiricist (in economics), but let us be “empirical” and examine two different approaches (policy responses by government) to a major bust (full disclosure – what follows is not from my mind, I read it years ago in one of the works of the historian Paul Johnson, I think it was “Modern Times”).

    In 1921 the major bust (the breaking of the First World War credit money bubble) was responded to by the Harding Administration by massive CUTS in government spending – and a refusal to follow the adivice of (then Commerce Sec) Herbert Hoover, for government intervention to keep up wage rates. Wages and prices were simply left to “market forces” (i.e. human choices – not government orders or “nudge” like pressure).

    In 1929 the credit money bubble of the late 1920s (what I would call the Ben Strong, M. Norman bubble) broke.

    The government (then headed by President Hoover) responded by intervention to prevent wage rates falling (in order to keep up “demand”) and by various government spending schemes.

    The very government spending schemes that (expanded still further and renamed) were later to be known as the “New Deal” of FDR.

    Well what happened?

    In 1921 the economy was in recovery with six months – unemployment (after a terrible rise) went back down – and wages (after a fall) started to rise after (not before) economic recovery occured.

    And in 1929?

    The Great Depression.

    Keynesians demand we are “empirical”.

    Well the above is empirical.

    The policy of massive cuts in government spending and allowing prices and wages to operate freely (markets to clear), the policy of the Warren Harding Administration, worked.

    And the policy of the Hoover and Roosevelt Administrations (the policy of big increases in government spending, and interventions to prevent wages and other prices adjusting to changed conditions) was a failure – a terrible failure.

    How would Lord Skidelsky respond to all the above?

    He would either ignore it, or go on about how Warren Harding was a moron – and talk about Tea Pot Dome (as if the FDR Administration did not have worse cases of corruption, almost every month, that the historians just choose to downplay or ignore – indeed the favourate agency of the modern left, the WPA, was a byword for corruption, oddly enough the left rarely praise the PWA which, although it was not economically sensible, was at least basically straight).

    But would Lord S. really reply to the economic argument – even though it is empirical (just as they demand that evil a priori Austrian School people should be).

    Of course he would not.

    Someone is not a, favourable, biographer of J.M. Keynes if he admires honesty (Keynes was as bent as a seven Dollar note – and I am NOT pointing at his sexuality). An economist can ignore the personal dishonesty of another economist if he admires his work (like a Catholic he can say, with total openness, “I despise the life led by Pope such and such – but what he wrote about theology was true”), but a biographer can not like a bent (dishonest, deceptive, vile) subject of his biography – without raising at least the possibilty that he is bent himself.

    In short if going into debate (etc) with someone like Lord S. EXPECT bad faith.

    By the way – when their voices are gentle and they seem friendly and recpetive, that is the time to watch out the most.

    I am not like that (in spite of being British) – if I am hostile to someone (or something they have said) I let them know (in a very direct way), but these elite British types are nothing like me (to put things in American terms I am more of a Redneck – indeed as I work outside and I have pale skin, my neck is literaly red).

    These people (such as Lord S.) are totally different – they will pretend that they really see your point of view (even that they are your close friend) and then they will gut you, they will (suddenly) do all they can destroy you. And tell any lie and pull any trick to do so.

    They just are like that – please believe me.

    Most people have an “agenda” – and they have one.

    They wish to see (to help create) a society (if possible on a world wide scale) where life is controlled by an educated and cultured elite (people like themselves) and they will do anything (literally anything) to help acheive this.

    Sounds utterly paranoid.

    But it is the stone cold truth.

    • George Selgin

      There are, of course, important differences between 1919-23 and both 1929-33 and 2007-11, so that the facts that Paul Johnson and I relate don’t at all suffice to establish that measures taken in the first crisis would have allowed speedy recovery if taken in the others: economic empiricism is more complicated that that! For starters, the earlier crisis involved no financial panic, the banks entered it well prepared. Also, all authorities agree that prices were much more capable of rapid downward adjustment in the first episode, becoming less so (thanks partly to government interventions, it must be said) in the later downturns.

      That’s why both here and in my previous post I limited my claims to countering Lord Skidelsky’s assertion that “public-sector austerity at a time of weak private-sector spending guarantees years of stagnation, if not further collapse” (my emphasis; during the debate he put the same claim in historical terms). The blanket statement, I’ve tried to show, is empirically false. Whether a turn toward greater government austerity will assist or further slow down recovery today is another matter upon which I haven’t ventured an opinion. I wished to show only that an opinion to the effect that such measures must necessarily be antithetical to recovery cannot be supported by appeal to the historical record.

  • AlanGrey

    I listened to the debate, and was amazed at how the Keynesian supporters kept asserting their theory works without any reference to empirical evidence, even when challenged.

    One thing that disappointed me was the response to the ‘drunk person’ analogy was tepid and ineffectual.

    Quite simply, I would suggest that the analogy should have been expanded to highlight that keynesian’s response to a drunk person is not to give him blankets, but to give him more alcohol…stay drunk and avoid the hangover…

  • Paul Marks

    Good comment AlanGrey