Friday, August 19, 2011

How to get out of a Recession - or the Keynes-Hayek Rematch (fg)

I really do not want to get into another debate on the origins (mal-investment, low articifal interest rates, bad luck, lack of transparency that contributed to the build of systemic risk, etc???), the trigger of the crisis (Lehman, loss in confidence, reduction in expected GDP???) and the ways how to get out of it (stabilizing spending expectations vs. austerity???). For the sake of completeness, I just want to link a recent contribution of Robert Skidelsky on the different views of Keynes and Hayek about how to produce a recovery (see also a recent amv's post in our blog). According to him,
Whereas for Hayek recovery requires the liquidation of excessive investments and an increase in consumer saving, for Keynes it consists in reducing the propensity to save and increasing consumption in order to sustain companies’ profit expectations. Hayek demands more austerity, Keynes more spending.