Sunday, April 25, 2010

Lord Skidelsky on Hayek versus Keynes

Just something to add to my references if I ever manage to publish my critique of Austrian Business Cycle theory:
"The Achilles heel in Hayek’s position was that his remedy of Nature's cure was politically unacceptable. But it was also analytically incoherent, as Piero Sraffa pointed out, in a devastating review of Price and Production in 1932. Sraffa singled out for attack Hayek's claim that a structure of production built on credit was less stable than one built on voluntary saving. Credit creation, he argued, produced an increased flow of voluntary saving on the part of those who received credit facilities. So there would never be a shortage of voluntary saving. Thus Hayek's account of the genesis of the slump collapses. Admittedly, Sraffa's argument is incomplete, since, like Keynes at the time, he assumed full employment, and thought of credit creation as redistributing income from wage earners to entrepreneurs. But this was Hayek's line, too. Sraffa was accepting Hayek’s assumption, and making a nonsense of it." -- Robert Skidelsky, "Interpreting the Great Depression: Hayek versus Keynes", prepared for the INET Conference, Cambridge University, 8-11 April 2010


Anonymous said...

This is amusing at best! That Sraffa's critique was easily countered by hayek and then by Lachman

Robert Vienneau said...

Presumably the above comment was intended as a response on another thread.

Anonymous said...

You are right
Howver I am amazed at how Sraffa's is considered given that his works cannot be of any value to explain whatever economic phenomenon
Beside his critiques to Hayek are so naive and inconsistent

Probably Blaug is right: his thought is just a whig reading of history