Russ Roberts, a professor of economics at George Mason University, is the co-creator of two online rap videos pitting the ideas of economists John Maynard Keynes against those of Friedrich Hayek. The second of these, in which the two scholars drop rhymes about government spending while trading blows in a boxing ring, was unveiled in May. Following its release, reason.tv Editor Nick Gillespie spoke with Roberts about the video series and why Hayek is still relevant today.
Q: What’s the story of the second Hayek-Keynes rap video?
A: We focus on stimulus spending, and we focus in particular at the beginning on World War II.
Q: This is what you hear all the time: Spending on World War II ended the Great Depression. Why is that wrong?
A: Hayek’s response is: Wow, one data point and you’re jumping for joy.
In Keynesian ideas, there’s all this slack around, so you can just spend with no cost. In fact, war spending takes real resources out of the economy.
Q: In the U.S., there was a boom after World War II.
A: There was.
Q: Where did that come from, if not Keynesian magic?
A: In the early part of the ’40s, the economy wasn’t that good in England or the United States or Germany. They had this huge increase in government spending that really didn’t stimulate a thing. In the late years of the war—from 1943 onward—all the Keynesians, as we say in the song, cried disaster. They looked at the Keynesian multiplier. They saw government spending falling dramatically—which it did—and wondered, “All of these unemployed workers, how are they going to find jobs?”
Well, they found jobs. The economy did great. People say, “Well, if it wasn’t the war, what was it?” I think it was leaving things alone.
Q: Nowadays we’re debating the impact of Obama’s stimulus spending. Some people say, “Look, if it weren’t for stimulus spending, things would have been far worse.” And other people are saying, “If we hadn’t spent that, maybe we’d be out of the mess we’re in.” Is there a way to have a definitive end to this battle? Or is it really two faiths clashing?
A: I think it’s a little awkward when you have really smart, Nobel Prize–winning economists say “if only we’d spent $2 trillion”—instead of what we spent, close to $1 trillion—while others say “we should have spent zero.” What does that tell you?
It tells you it’s not science. That’s the first thing it tells you. It tells you that despite 80 years of trying to understand how the macroeconomy works in the face of big recessions and sometimes a depression, we don’t really understand it. And again I think Hayek has the right thing to say about this dispute. In his 1974 Nobel Prize lecture “The Pretense of Knowledge,” he says macroeconomics is not really ever going to be “solved.”
Q: Hayek’s main message is not even “let things alone.” It’s “let’s see a lot of different ways of doing things.” Can that ever be successful as a guide to mass society?