Keynes Hayek: The Clash that Defined Modern Economics

by Nicholas Wapshott

Overview

“I defy anybody—Keynesian, Hayekian, or uncommitted—to read [Wapshott’s] work and not learn something new.”—John Cassidy, The New Yorker

As the stock market crash of 1929 plunged the world into turmoil, two men emerged with competing claims on how to restore balance to economies gone awry. John Maynard Keynes, the mercurial Cambridge economist, believed that government had a duty to spend when others would not. He met his opposite in a little-known Austrian economics professor, Freidrich Hayek, who considered attempts to intervene both pointless and potentially dangerous. The battle lines thus drawn, Keynesian economics would dominate for decades and coincide with an era of unprecedented prosperity, but conservative economists and political leaders would eventually embrace and execute Hayek's contrary vision.

From their first face-to-face encounter to the heated arguments between their ardent disciples, Nicholas Wapshott here unearths the contemporary relevance of Keynes and Hayek, as present-day arguments over the virtues of the free market and government intervention rage with the same ferocity as they did in the 1930s.

Product Details

ISBN-13:	9780393343632
Publisher:	Norton, W. W. & Company, Inc.
Publication date:	09/10/2012
Edition description:	Reprint
Pages:	400
Sales rank:	536,120
Product dimensions:	5.40(w) x 8.10(h) x 1.10(d)

About the Author

Nicholas Wapshott’s many books include biographies of Margaret Thatcher and Carol Reed, Keynes Hayek: The Clash That Defined Modern Economics, and The Sphinx: Franklin Roosevelt, the Isolationists, and the Road to World War II. He lives in New York City.

Table of Contents

Preface xi

1 The Glamorous Hero 1

How Keynes Became Hayek's Idol, 1919-27

2 End of Empire 15

Hayek Experiences Hyperinflation Firsthand, 1919-24

3 The Battle Lines Are Drawn 29

Keynes Denies the "Natural" Order of Economics, 1923-29

4 Stanley and Livingstone 46

Keynes and Hayek Meet for the First Time, 1928-30

5 The Man Who Shot Liberty Valance 65

Hayek Arrives from Vienna, 1931

6 Pistols at Dawn 81

7 Return Fire 95

Keynes and Hayek Lock Horns, 1931

8 The Italian Job 110

Keynes Asks Piero Sraffa to Continue the Debate, 1932

9 Toward The General Theory 123

The Cost-Free Cure for Unemployment, 1932-33

10 Hayek Blinks 138

The General Theory Invites a Response, 1932-36

11 Keynes Takes America 154

Roosevelt and the Young New Deal Economists, 1936

12 Hopelessly Stuck in Chapter 6 171

Hayek Writes His Own "General Theory," 1936-41

13 The Road to Nowhere 188

Hayek Links Keynes's Remedies to Tyranny, 1937-46

14 The Wilderness Years 207

Mont-Pèlerin and Hayek's Move to Chicago, 1944-69

15 The Age of Keynes 226

Three Decades of Unrivalled American Prosperity, 1946-80

16 Hayek's Counterrevolution 247

Friedman, Goldwater, Thatcher, and Reagan, 1963-88

17 The Battle Resumed 266

Freshwater and Saltwater Economists, 1989-2008

18 And the Winner Is… 285

Avoiding the Great Recession, 2008 Onward

Acknowledgments 297

Notes 299

Selected Bibliography 347

Index 357

Editorial Reviews

I heartily recommend Nicholas Wapshott’s new book, Keynes Hayek: The Clash that Defined Modern Economics.... Many books have been written about Keynes, but nobody else has told the story properly of his relationship with Hayek. Nick has filled the gap in splendid fashion, and I defy anybody—Keynesian, Hayekian, or uncommitted—to read his work and not learn something new.”

John Cassidy - The New Yorker

Nicholas Wapshott’s new book, Keynes Hayek, does an excellent job of setting out the broader history behind this revival of the old debates. Wapshott brings the personalities to life, provides more useful information on the debates than any other source, and miraculously manages to write for both the lay reader and the expert at the same time. Virtually every page is gripping, and yet even the professional economist will glean some insight...”

Tyler Cowen - National Review

Mr. Wapshott has written an important book. It is compelling not only as a history of two distinctive thinkers and their influence, but also as a narrative of political decision-making and its underlying priorities. Underlying Mr. Wapshott’s analysis are vital questions for this moment in American history: What kind of society do we want? And what do we owe to our fellow citizens and our collective future?

Nancy F. Koehn - The New York Times

As we face off against the Great Recession, the only book you need to understand the debate raging in the streets today: economic freedom versus government intervention. An essential primer on the two men who shaped modern finance.

Newsweek

In the fluency of his writing and his ability to make complex financial questions easily comprehensible, Nicholas Wapshott has done economics itself a great service, by opening the subject up to the general reader, as seen through the prism of one of the most important intellectual gladiatorial contests of modern times.

Andrew Roberts

Nicholas Wapshott brings the Keynes-Hayek fight of the twentieth century back to life, making the clash both entertaining and highly relevant for understanding economic crises of the twenty-first century.

John B. Taylor

Nicholas Wapshott’s Keynes Hayek is a smart and absorbing account of one of the most fateful encounters in modern history, remarkably rendered as a taut intellectual drama. Wapshott brilliantly brings to life the human history of ideas that continue to mold our world.”

Sean Wilentz

Mr. Wapshott has written an important book. It is compelling not only as a history of two distinctive thinkers and their influence, but also as a narrative of political decision-making and its underlying priorities. Underlying Mr. Wapshott’s analysis are vital questions for this moment in American history: What kind of society do we want? And what do we owe to our fellow citizens and our collective future?

The New York Times - Nancy F. Koehn

Nicholas Wapshott’s new book, Keynes Hayek, does an excellent job of setting out the broader history behind this revival of the old debates. Wapshott brings the personalities to life, provides more useful information on the debates than any other source, and miraculously manages to write for both the lay reader and the expert at the same time. Virtually every page is gripping, and yet even the professional economist will glean some insight...

National Review - Tyler Cowen

I heartily recommend Nicholas Wapshott’s new book, Keynes Hayek: The Clash that Defined Modern Economics.... Many books have been written about Keynes, but nobody else has told the story properly of his relationship with Hayek. Nick has filled the gap in splendid fashion, and I defy anybody—Keynesian, Hayekian, or uncommitted—to read his work and not learn something new.

The New Yorker - John Cassidy

Mr. Wapshott has written an important book. It is compelling not only as a history of two distinctive thinkers and their influence, but also as a narrative of political decision-making and its underlying priorities. Underlying Mr. Wapshott’s analysis are vital questions for this moment in American history: What kind of society do we want? And what do we owe to our fellow citizens and our collective future?”— Nancy F. Koehn

The New York Times

Nicholas Wapshott’s new book, Keynes Hayek, does an excellent job of setting out the broader history behind this revival of the old debates. Wapshott brings the personalities to life, provides more useful information on the debates than any other source, and miraculously manages to write for both the lay reader and the expert at the same time. Virtually every page is gripping, and yet even the professional economist will glean some insight...”— Tyler Cowen

National Review

I heartily recommend Nicholas Wapshott’s new book, Keynes Hayek: The Clash that Defined Modern Economics.... Many books have been written about Keynes, but nobody else has told the story properly of his relationship with Hayek. Nick has filled the gap in splendid fashion, and I defy anybody—Keynesian, Hayekian, or uncommitted—to read his work and not learn something new.”— John Cassidy

The New Yorker

In his latest, Wapshott (Ronald Reagan and Margaret Thatcher: A Political Marriage) masterfully recounts the strange clash between economists Freidrich Hayek and John Maynard Keynes, including their different approaches to life and work, and their changing fortunes. After he shared a Nobel Prize with leftist Gunnar Miyrdal in 1974, right-winger Hayek's brand of Austrian economics was in decline until 1978, when it was revived by Margaret Thatcher. His putative opponent, the liberal economist John Maynard Keynes, had sought practical solutions to the depression and war, and was influential in setting up the 1944 Bretton Woods agreement. Hayek suffered isolation, even ostracism, following the publication of his Road to Serfdom in 1944. Wapshott links Winston Churchill's stunning electoral defeat in June 1945 to his espousal of Hayek's view of the relationship between socialist planning and tyranny. Even though he had been attacked on its pages, Hayek failed to publicly address Keynes's magisterial General Theory. The two had, however, viciously argued over Keynes' 1930 book, A Treatise on Money. Wapshott offers a colorful look at a bygone period and the theories that epitomize the economic divide still shaping Anglo-American politics today. (Oct.)

Publishers Weekly