One of the most difficult that I’ve ever read is and will always be Keynes’s General Theory. I am not a hardcore economist or hold any certification in the field, which already ruled me out from the target audience. I know that picking up this book will be a bit of a slog, but thankfully it wasn’t as huge of a slog that I need to reread a sentence twenty times over. Maybe ten. Yeah, I maxed out at ten. And to be completely honest, I don’t understand half of what Keynes is trying to convey in General Theory, but thankfully Wapshott was apt enough to summarise Keynes’s ideas into his writing in mostly layman terms.
More than anything else however, Keynes vs Hayek is more of a history book than biographies of the two men. The structure of the book is roughly divided to the lives of the two men, and after Keynes’s death, how the ideas from the two sides shape and form economic policy. It is an astoundingly well-researched book with an easy to follow narrative, and the readers might only stumble in the difficult concepts that always plague economic theory. I often marked question marks on the pages where I was completely lost.
Keynes is one of the most important individuals who had ever lived, as his ideas shape our concept of money, and the decisions of the government often borrow whole chapters from his theories — particularly in fiscal expenditure and intervention during crisis times. He was also one of the most interesting humans — an overt homosexual, part of the Bloomsbury group and was a housemate of Virginia Woolf, going against the government by avowing (correctly) that punishing Germany will only cause further instability, and he is brash and arrogant in nature.
Hayek is on the other side of the spectrum in terms of his ideas and personality — a taciturn and reserved man who struggles with the English language — his most profound ideas were often lost in his incapability to express his ideas. It took him a while before he arrived at his magnum opus, The Road to Serfdom which is seminal for other seminal economists of the twentieth century, like public enemy #1 Milton Friedman, who also breathed the same air as Hayek in his early days. Hayek’s ideas can be summarised in championing free-market, believing that government intervention will only lead to unbounded totalitarianism a la Nazi Germany. Hayek’s ideas is graduated and excelled by Milton Friedman who took these theories to its extremes.
It is difficult to pinpoint the differences however, as Keynes and Hayek agree on many things, such as keeping the market as free and competitive as possible, and they both tend to dislike socialism. The difficulty is to mark where the lines are drawn. Keynes believed that the economy must spend in order to get itself out of the crisis, as the multiplier effect will redistribute wealth by recirculating money at hand; Hayek believes in letting the economy run unimpeded, the economy will course correct as Smith’s invisible hand inevitably will.
The history of the Twentieth Century was often crafted from the theory of either men, and the future history of this century even markedly so. Wapshott described in detail each of the American president’s tenure and how their decisions on the economy come into play. Roosevelt’s New Deal was significant in giving America the illusion of going out of the slump of the Great Depression, a win for the Keynes corner and Keynes peaked when the Kennedy gamble paid off in keeping a deficit during peace time. The myth of security that Keynesianism promised broke down quickly during the stagflation of the 70s when prices remained high and unemployment even more so regardless of government intervention.
Thatcher and Reagan, under the advice of Milton Friedman would be some of the most ruthless administrations to experiment with the free market. It is here that the shadows of Hayek lived on. The crisis of 08–09 brought about unprecedented borrowing to stimulate economic languish globally and this is where the book ended. Yet, the story of the 08–09 crisis lived on a decade later as we are witnessing bank collapses and bank rescues which resemble much of the previous decade. I am writing this review a week before a decision to raise the US debt ceiling, so that good times can roll on. And as I write, no decision has been made yet.
The theories of these men, while often not contradictory, form the battleground of the economic conflict that the world is fighting on. But the enemy is not clear. We are perhaps, the villains of our own making as we are part of the system that supports the inevitably exploitable moral hazard which reward greed and punish consistent, steady hard work. Between these two spectrums we still will find ways to rescue ourselves, but the experiment is becoming more precarious every day, and the century-long experiments between Keynes and Hayek in the battleground of economic policies are unlikely to provide many winners, perhaps only losers — us.
