Source
r/Economics•
yeropinionman

Are most economists Hayekians?

Prior to frequenting this subreddit my exposure to public discussion of macroeconomics was mostly reading The Economist, and reading the textbooks and popular writings of Keynesians like Mankiw, Krugman, and Charles Wheelan. The only Macro class I took used Mankiw's book. So I thought most economists had somewhat-to-very Keynesian models of the world.

Then I came to this subreddit and I noticed that many of the frequent and most thoughtful commenters don't think Keynes' models work, and find Hayekian explanations more persuasive. I also noted that linking to articles that argue for additional monetary or fiscal stimulus is a good way to get lots of downvotes.

So I ask: do I have a mistaken view about what the field thinks about macroeconomics (i.e. most economists think Keynes got a lot right)? Or does this subreddit happen to be frequented by more Hayekian thinkers?

Note: I am not saying that disagreeing with what most economists think makes one necessarily wrong. I understand that macroeconomics is really hard to study in a way that gives air-tight empirical results, so it's not like you can just go replicate a lab experiment a thousand times and settle the matter.

Posted Jul 13, 2011, 12:20 PM UTC

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GRANITO•

The first thing to keep in mind is that you don't need an economics degree to post on r/Economics. I just finished my bachelor's and to be honest if someone told you Hayek or Keynes was completely wrong or completely right they probably don't know what they are talking about. They created tools for understanding what was happening during their time and as we have found out their tools were not entirely accurate. So now we discuss ways to make them more accurate. Then there's the gap between academics and policy. Economists may suggest one thing or another but at the end of the day it is politicians who enact policy. This means there's always a "well, a TRUE insert Hayek or Keynes here would have XYZ." Like my economics history professor said: "Economists generally agree on certain basic things but disagree on the details. The public then takes these disagreements and blows them completely out of proportion. So if you want to get noticed, go with that." It's pretty much how Robert Fogel got his nobel prize.

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ecsilver•

So I sort of agree. "They" (Hayek and Keynes) were not really about tools for understanding but rather theories and models for explaining and suggestions. But what I would say is that for Keynesian logic, I thin kyou are right. Not completely right or wrong. But generally more wrong than right. Hayek is really the Austrian school of thought which hasn't really been tried much.

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reddddditer•

Good points.

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Jericho_HillBureau Member•

very good post

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[deleted]•

I think out there in meatspace the mainstream is mostly Neoclassicalism combined with Neo-Keynesianism. Hayek-Misesian econ is popular mostly on the internet.

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Choppa790•

With due reason. Private enterprise, voluntary cooperation, and individual freedom it's what allowed the internet to thrive.

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Whaddaulookinat•

Ehh, and massive government infrastructure to set the stage.

Not everything is one way or another.

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Choppa790•

Do you assume that the internet would not have existed had the government not funded it? I think the internet was the next step of the telecommunications evolution. It would exist regardless.

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jayme0227•

I think the internet would not exist as it is today without government funding. I think the biggest change is that net neutrality would not even be a concept if the internet was entirely privately funded.

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louieanderson•

Except companies don't like working together, and it took government policies to force them into network reciprocity.

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myp415•

I don't think it is fair to tie Mises and Hayek into one form or type of econ. I think it doesn't do either justice- they are probably the two best examples of the divergent schools within what is broadly defined as the Austrian school.

Edit: On second thought the two greatest contrasts are probably Hayek and Rothbard, but even then Hayek and Mises have their notable differences.

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pipesthepipes•

Not at all. OK first note that I'm gonna call "Hayekian's" Austrians because that's the classification used more often. Also note that by "most economists" you mean "most macroeconomists." The great many economists outside macroeconomics usually have privately held beliefs, but they have the luxury of not having to take sides in the great macro debates. That's why it's a little eyebrow-raising to see economists like Gary Becker (primarily a microeconomic theorist) offering their commentary. But I digress.

Austrian economics is very much a heterodox school of economics and here's why. The view from within mainstream economics is that Hayek et al had some excellent points (the subjective theory of value, for one) but that they ultimately fail on scientific grounds because of their refusal/inability to a) produce falsifiable theories (see Popper), and b) their refusal to use formal logic and mathematics. I'm happy to have a debate another day about the use of mathematics in economics, but suffice it to say that mathematics is nothing more than an extremely efficient tool for making consistent arguments based on pure logic. Anyways, because of these two critiques, Paul Samuelson and company took the good ideas and abandoned the Austrian mode of analysis in favor of mathematical modeling, which developed into contemporary economics, which I'll describe a little later.

So why are so many Redditors fans of Hayek? Well, why are so many psychology enthusiasts fans of Freud? Because he (Hayek or Freud) provides an easy framework for analyzing problems ex post, and because the non-falsifiability of his claims leads one to a false sense of understanding. Note that academic psychologists have taken Freud's few good ideas (the unconscious mind, trauma, etc) and abandoned the rest of psychoanalysis...the parallels are very strong in my mind. That, and the lack of math in Austrian analysis, makes people gravitate toward the Austrian school.

Now, what school are most modern economists a part of? Well, in the evolution of modern macro, there came a point where Friedman, and then more properly Nobel Economists Robert Lucas and Ed Prescott, developed what's called New Classical economics, helped along by the stagflation of the 1970s which blew Keynesian Macro out of the water. The only real difference between Neoclassical and New Classical: the New Classical guys used rigorous mathematical modeling (the theory of dynamic stochastic general equilibrium if you want to look it up). On policy guestions, The New Classical school of macro is then very Friedmanesque: discretionary monetary/fiscal policy crowds out investment and consumption, so the government should not intervene much in a recession.

In response to this, some economists you mentioned like Mankiw and Krugman developed New Keynesian models, which challenged the assumptions of New Classical models: by adding some market imperfections, they were able to rescue the Keynesian implications of the model, most prominent among them the fact that discretionary policy could ameliorate recessions. The New Classical and New Keynesian economists duked it out for quite a while. Some things Paul Krugman says make him look more Old Keynesian than New Keynesian but he's in a small minority among academic economists in that regard.

NOW, though, the distinction between NK and NC (New Keynesian and New Classical) is fading in favor of the DSGE (Dynamic Stochastic General Equilibrium) models of various market imperfections, such as (notably) financial or housing market frictions. There's still a healthy debate about the optimal monetary/fiscal policy, and while economists largely agree that this approach to modelling will lead to the best understanding of the macroeconomy, they still disagree on whether discretionary fiscal spending like the stimulus has an impact, and there are a lot of empirical papers on this topic. Edit: Another thing I feel compelled to add is that there are obvious flaws to the NK and NC frameworks, and macroeconomists are probably more aware of the problems than a casual observer...or an Austrian economist. In behavioral macroeconomics, for example, David Laibson has shown that time-inconsistent preferences can destroy important implications of the standard NC model. The difference is that working from within mainstream modern macro, one can actually propose alternatives to critiques of the workhorse models, and then see how much the veracity of that particular assumption matters, and what happens when it fails. So macro is in a very self-critical phase right now, and IMO it's likely that there will be a great deal of change in the way we think about the macroeconomy over the next 10 years.

tl;dr This board is frequented by Hayekians/Austrians, but most macroeconomists these days are neither Keynesian nor Hayekian. The stuff you learn as an undergrad (ISLM, AD-AS, etc) is Keynesian and/or neoclassical economics, but it does a poor job of reflecting current thought in macroeconomics.

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reddddditer•

Not by a long shot. Reddit happens to be a popular place for them, so it might give that impression. The most influential economist of the moment is Milton Friedman. The Keynesianism that is popular today is actually new-Keynesianism, which is more Friedman than Keynes. The Keynesianism that you see criticized on reddit is old Keynsianism which isn't very popular, but it was at the time Hayek wrote, so Hayek did a lot of criticizing of Keynes. His followers parrot him in blaming all sorts of things on Keynes. They've both been dead a long time so it's kind of amusing to see the Hayekians continue the feud between them which ended many decades ago.

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stev_meli•

The Keynesianism that you see criticized on reddit is old Keynsianism which isn't very popular

This isn't entirely true. The first half of your post is correct. Friedman is more influential than Keynes because Keynesian theory was pretty much abandoned following the '70s stagflation. But there has certainly been a revival of many of the tenets of Keynes' general theory in the wake of the recent crisis. The push towards full employment, boosting aggregate demand, and really the misunderstanding of Say's Law still permeates.

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reddddditer•

"isn't very popular" doesn't mean 100% rejected. It's a mistake to think of one theory in any intellectual field coming along and totally replacing an old one, so it's saying too much to say Keynesian theory was "abandoned". Many of his contributions live on, and that's how it should be. Keep what works, abandon what doesn't.

There has been a little bit of a

revival of many of the tenets of Keynes' general theory in the wake of the recent crisis

but just a little bit. There is no new CCC, for instance.

the misunderstanding of Say's Law still permeates.

There is no Say's law, or, to say the same thing in different words, there are so many different versions it's meaningless to say it's misunderstood. Keynes posited one, but there are other versions. I'm sure you have a version in mind which you feel is the right one. In any case, your version and Keynes's version both stand or fall on their own merits or lack thereof. Which Say really meant is of historical and not of economic interest.

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stev_meli•

but just a little bit. There is no new CCC, for instance.

That is because it is politically unpopular and improbable. That doesn't mean that there isn't strong support for giant public works programs by mainstream economists.

There is no Say's law, or, to say the same thing in different words, there are so many different versions it's meaningless to say it's misunderstood. Keynes posited one, but there are other versions. I'm sure you have a version in mind which you feel is the right one. In any case, your version and Keynes's version both stand or fall on their own merits or lack thereof. Which Say really meant is of historical and not of economic interest.

I have to disagree with you there. There are things Say did say and things Say didn't say. Say's law was pretty well understood up until Keynes * reinterpreted* it as it were. Keynes believed that Say's Law did not apply in a monetary economy. He focused on demand. Essentially, he believed you could create something from nothing whereas Say was making the simple yet profound point that goods and services are paid for by the production of other goods and services.

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reddddditer•

There are things Say did say and things Say didn't say.

Say that 10 times fast.

Say's law was pretty well understood up until Keynes reinterpreted it as it were.

If you mean there was a consensus, maybe. I can't say much about this historical question, though it's not what I understood.

However, Keynes didn't believe you can create something from nothing. Whatever your criticisms of him he wasn't a complete idiot. You ( and your kind ;) ) are misinterpreting the misinterpreter, if he was one.

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Splenda•

No. Keynes has defined economics for nearly a century. The Web is a refuge for frustrated rebels of all sorts; as such, it harbors a disproportionate number of Keynes haters.

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praexeologue•

No idea, widely accepted by academia and governments, has ever been flawed.

1
bouleuterion•

And for good reason.

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Jericho_HillBureau Member•

No, probably much less than 1%.

(An Economist)

8
kking254•

On the contrary, most economists ignore the austrian school as pseudoscience. They don't make falsifiable claims therefore they cannot enter into scientific debate.

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[deleted]•

[deleted]

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ieattime20•

Bear in mind both (but especially the latter) were skewed heavily in favor of Hayek and specifically the Austrian point of view (not all of which even Hayek agreed with). The writer was engaging in a little Marty Stu'ing if you know what that means.

11
mikeperson0•

Could you please explain or give examples of what Hayek didn't agree with in the Austrian school? Like all schools of thought, people differ on some specifics. However, Hayek was instrumental in the advancement of the Mises/Austrian Theory of the business cycle. Hayek would be one of the last economists I would mention that didn't agree with "Austrian" thought. I find the rap videos to portray the Austrian perspective quite well.

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ieattime20•

Could you please explain or give examples of what Hayek didn't agree with in the Austrian school?

Virtually all of the ethical and anarcho-capitalist Rothbardian camp. He was with Mises in that economics is ethics-free, it's merely about efficiency, and that "natural rights" people were mystics. These videos play up the ethical concerns, and make straw men of Keynesians in the same way that Rothbard did and Hayek didn't (i.e. Keynes never even came close to advocating spending cycles followed by spending cycles and never raising tax rates to recompense in booms, never recommended conscripting already employed people for government labor).

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fluffybunny83•

I think/hope he was joking.

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apnelson•

r/economics is a very conservative place on reddit. My impression over the last several months has been that most postings indicate either a very poor understanding of Keynes or a very poor understanding of reality. Generally speaking, if something does not validate the worldview of a particular armchair economist redditor, then it must be a child-like belief that must be scoffed at.

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sfultong•

Don't you call libertarians conservative; they'll get mad.

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[deleted]•

I love how Keynesians always accuse the other side of this but never see it in themselves. I mean just look how Keynesians ignore the comparsion the recession of 1920 to the Great Depression. Both in 1920 and 1929 were very severe contractions, the one in 1920 actually being worse. In 1920, there was no fiscal stimulus or monetary stimulus and prices were allowed to fall (before Keynesianism) and the economy recovered very quickly. Nobody talks about the depression of 1920. However when the economy contracted in 1929, there was tons of stimulus, government spent money, attempted to hold up prices and wages and it was the worse economic performance in this countries history. What lesson do Keynesians draw from this? Absurdly, we didn't spend enough in the Great Depression ignoring all the previous evidence from the recession of 1920 (and all previous recessions for that matter) that would destroy their theory.

Yeah, we are the ones with the "child-like belief".

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saturnight•

Well, you just illustrated apnelson's point, didn't you?

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apnelson•

Yeah -- I don't know why he went into a tirade about the 1920's. I think his response would have been a lot more effective if it showed a more sophisticated understanding of Keynes than "moar spending!"

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whoisearth•

The Chicago School has been very good at effectively brainwashing the American populace. Friedman would be proud.

There is hope though, Latin America woke up, although it took dictators and decimated economies to do so.

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Choppa790•

Wtf?

3
whoisearth•

Just my opinion. I'm currently reading "The Shock Doctrine" and it goes into great depths on The Chicago School and Friedman economic theory.

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Choppa790•

Naomi Klein vs. Friedman

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[deleted]•

[deleted]

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whoisearth•

I'll be honest I have no idea who Hayek is, but a lot of the chatter I see in reddit concerning Economics are fairly standard Friedman talking points. (GOVERNMENT BAD! REGULATION BAD!) whereas Keynes wasn't necessarily the opposite of this, if anything he was a moderate.

I think any sane person understands that a government can get bloated like any business, but unless business there are some things that government needs to do that do not necessarily generate profit such as the aformentioned "regulation".

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[deleted]•

I'll be honest I have no idea who Hayek is

GTFO, seriously. You have no business posting here.

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thedaveoflife•

i would caution you from applying what you read on this message board to the broad beliefs of economists in general. people like to argue so they focus on the areas of intense disagreement, but there are a lot of areas of consensus as well. i think most economist would say they were heavily influenced by both the thinkers you mention.

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[deleted]•

I go to a school where all the macroeconomists subscribed to freshwater macro. Keynesian and Austrian macro are not taught.

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geezerman•

"Are most economists Hayekians?"

Jeebus no!

Alas, most of the self-proclaimed Austrians running through Reddit aren't Hayekians either, they're Paleo-Austrian Rothbardians. If they were Hayekians this little part of the world would be a better place.

As Austrians go Hayek was Ted Williams and Rothbard was the guy in the bleachers selling beer. But the crowd, man, it loves its beer! Much easier to get intoxicated on.

So I ask: do I have a mistaken view about what the field thinks about macroeconomics

If you took a course in economics you know the problems with a biased sample. Reddit commenters are far, far from an unbiased sample.

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[deleted]•

[deleted]

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NeutralMilkResort•

The only place where you can find actual economists that subscribe to Austrian thought is at George Mason, and maybe a sprinkling in a few other schools. Most macro theorists fall under the Keynesian umbrella some how.

Then your huge amount of other economists - the ones who study more micro concepts such as labor, behavioral and many others subfields - mostly never deal with such schools of thoughts.

2
asjohnson•

From my macro classes and a bit of reading here and there I was always under the impression that the majority of economists are neo-keynesians. Though I don't have any specific numbers to back it up.

http://en.wikipedia.org/wiki/Neo-Keynesian_economics

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thedangerboy•

Most of the professors in college I had would probably fit into this model, though not all. I did have two very interesting professors who were almost "anti-Keynes". I learned a great deal from them and I have never thought that Keynes was right about them. Interestingly, one of them claimed that he was not a full believer in the law of gravity, though we never covered why he believed this in class. He simply just mentioned it one day in class.

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pipesthepipes•

It's important to distinguish between New Keynesian Economics, which is a semi-contemporary paradigm (also called saltwater macro), and neo-keynesian economics which died out following the stagflation of the 1970s. Sorry, I didn't invent the names. Strangely, though, the ISLM model that undergraduates learn is neokeynesian. Why undergraduate education has not evolved to reflect current thought is something that irks me.

About 10 years ago, it would have been proper to call most economists New Keynesian or New Classical (freshwater macro), but this distinction has faded, since most macro theory is moving away from both schools of thought and toward DSGE models with various frictions. On the most important (for current events) problem of macro, that of the optimal policy during a recession, economists are still divided.

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icko11•

I suspect that there are a lot more economists that don't like fiscal stimulus compared to monetary stimulus.

1
[deleted]•

they're all just ill-defined categories.

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csyuppie•

No, I think most modern economist subscribe to the keynesian view of economics, but that doesn't necessarily mean armchair economists will.

There are a lot of people that think climate change isn't occurring, how many of them are climate scientists?

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baggytheo•

Most economists are Keynesians who pay a loose lipservice to Hayek for all his pull, but weasel out of accepting the ramifications of Hayek's work in any meaningful way.

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ecsilver•

To answer your question...Yes, most economists tend to agree more with Hayek. To me, Keynes is similar to Freud. A great thinking for his time with new and interesting ideas. But generally not well accepted today. The real problem is that Economists (if they are good), won't pass judgment on an idea. They will simply state what will happen with a course of action (and usually they have a lot of hands to cover all the bases, i.e. the "2 handed economist"). But when they are pressed for "actions", they accept some merit of Keynes but more from HAyek. that is my opinion from working in the field and knowing many.

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