I’m sensing some panic in the air. Certain people seem mighty concerned that other people are...discovering Hayek. As a W. S. Gilbert character might say, Oh horror!
Economics and business reporter David Warsh is getting much attention for suggesting that F. A. Hayek, far from being one of the two most prominent economists of the 1930s—the other being Keynes—is rather more like the woman who was thought to have won the Boston marathon in 1980 when in fact she had joined the race, mostly unnoticed, a half-mile from the finish line.
Hayek’s fans “have jumped a caricature out of the bushes late in the day and claim that their guy ran a great race,” Warsh writes. “But the fact remains that Hayek just didn’t contribute very much to the development of technical economics,” he continues.
Warsh, whom we may judge by the fact that he calls The Road to Serfdom “an embarrassment,” nonetheless does have some positive things to say about the 1974 Nobel Prize laureate: “With the publication of ‘The Use of Knowledge in Society’ in the American Economic Review in 1945, he essentially won on the ‘calculation debate,’ conducted with Ludwig von Mises and Oscar Lange, concerning the possibility of central planning.”
Considering how many respectable economists favored central planning—essentially the abolition of spontaneous competitive markets—until fairly recently, that would seem to be no mean feat. And there’s more:
[I]t is pleasing to think that Hayek himself may yet turn out to have been a very great economist after all, far more significant than [Gunnar] Myrdal or [Joan] Robinson, when seen against the background of a broader canvas. The proposition that markets are fundamentally evolutionary mechanisms runs through Hayek’s work. [Bruce] Caldwell, of Duke University, notes that, starting with the Constitution of Liberty, “the twin ideas of evolution and spontaneous order” become prominent, especially the idea of cultural evolution, with its emphasis on rules, norms, and decentralization.
These are today lively concepts in laboratories and universities around the world. “It could have been that Hayek was running a different race, and the fact that he didn’t do well in the [mainstream] Walrasian race was that he wasn’t running in it -- he was running in the complexity race,” says David Colander, of Middlebury College. Hayek may yet enter history as a prophet of evolutionary economics, a discipline dreamt of since the days of Thorstein Veblen and Alfred Marshall in the late nineteenth century but not yet forged, whose great days lie ahead. [Emphasis added.]
In other words, maybe Hayek’s critics judge him by an inappropriate standard. We’ll get back to this.
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As Jacob T. Levy surmises, not everyone eager to dismiss Hayek as a lightweight read Warsh’s post to the end. Take Paul Krugman, ever ready to trash anyone who doubts that Keynes was the fount of all wisdom:
David Warsh finally says what someone needed to say: Friedrich Hayek is not an important figure in the history of macroeconomics.
These days, you constantly see articles that make it seem as if there was a great debate in the 1930s between Keynes and Hayek, and that this debate has continued through the generations. As Warsh says, nothing like this happened. Hayek essentially made a fool of himself early in the Great Depression, and his ideas vanished from the professional discussion....
[T]he Hayek thing is almost entirely about politics rather than economics. Without The Road To Serfdom — and the way that book was used by vested interests to oppose the welfare state—nobody would be talking about his business cycle ideas.