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Why the Keynes-Hayek Macro Debate Cannot be won by either Side

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  • Alexandru Patruti

Abstract

The controversy between Keynes and Hayek is one of the most renown in economics. Although it is now almost a century old, it does gather momentum from time to time, especially during periods of crisis when decision-makers are looking for policy solutions. However, in academic writings the actual debate did not and cannot find a common ground. I aim to show in the present article that at the center of the controversy is not a logical fallacy in the theoretical apparatus of either of the two economists, but the empirical premises which they took for granted. While Hayek believed that the market will tend towards equilibrium, and that real life conditions actually approximate this, Keynes considered that the market can be stuck in a partial equilibrium compatible with unemployment. I will further argue that subsequent developments attempt to move the debate in a whole new direction rather than solve this central issue.

Suggested Citation

  • Alexandru Patruti, 2018. "Why the Keynes-Hayek Macro Debate Cannot be won by either Side," HISTORY OF ECONOMIC THOUGHT AND POLICY, FrancoAngeli Editore, vol. 2018(2), pages 113-125.
    • Handle: RePEc:fan:spespe:v:html10.3280/spe2018-002006
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    References listed on IDEAS

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    1. François Facchini, 2016. "The Hayek-Keynes Macro Debate Continues," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01348748, HAL.
    2. Facchini François, 2016. "The Hayek-Keynes Macro Debate Continues," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(1), pages 1-13, July.
    3. Antonio Magliulo, 2016. "Hayek and the Great Depression of 1929: Did he really change his mind?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 23(1), pages 31-58, February.
    4. Ahiakpor, James C. W., 2009. "The Phillips Curve Analysis: An Illustration Of The Classical Forced-Saving Doctrine," Journal of the History of Economic Thought, Cambridge University Press, vol. 31(2), pages 143-160, June.
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    More about this item

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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