George Selgin: belief

Transcript context

…Why did the Austrian economists underperform in their diagnoses of the 1930s? Or would you challenge that premise? The problem with the Austrians, I think — and here, it’s most clear in Hayek’s case — is that their policy recommendations were not necessarily consistent with their theories. Hayek, in theory, came around to the view that, at the very least, you had to maintain the level of spending, or what Keynes would call aggregate demand, in an economy, or get it back up when it has collapsed. Stabilize the product of the money stock and its velocity. This is in Prices and Production and other works by Hayek, and he’s very good on that. On the other hand, he seems to have been inclined to see the collapse of the early 1930s in Britain as well — perhaps more so than in the US — as an opportunity to break the trade unions, and was more determined to let that damage continue. Also, he was keen on keeping the gold standard, whether it was consistent with stabilizing spending or not. So, there were these inconsistencies between the practical recommendations, which were for austerity, for keeping the gold standard, et cetera, with at least Hayek’s version of the Austrian theory, which said you must maintain stability of spending in the economy if you’re not going to have trouble. How did the early Chicago School do? Henry Simons, Jacob Viner?…

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