Lawrence White on Friedrich von Hayek
I caught this video along with the Keynes video I just profiled. Look at this as a rebuttal to some of the themes Lord Skidelsky went through in that previous video. Lawrence White explains the genesis of the Austrian Theory of Boom and Bust in two parts. The two run fifteen minutes in total, concentrating on Friedrich von Hayek and Ludwig von Mises, two Austrians and Knut Wicksell, a Swede.
My main criticism here is twofold. One, White presents a well-argued view that is geared to explaining how not to let credit cycles get out of control and create a large bust. He also explains why resource reallocation after a bust is necessary to promote longer-term growth. And he does address the concept that fear or ‘animal spirits’ during a depression drive savings patterns below a natural equilibrium level which could create dead-weight losses, extending imbalances and depression. However, I hear White making the intellectual case for quantitative easing at the 2:40 mark in the second video without adequately demonstrating how base money is tied to credit or how QE doesn’t itself distort resource allocation. The second missing element has to do with the focus on the central bank in White’s explanation in the first video for creating a misallocation of capital. In my view, the central bank facilitates or extends this misallocation.
Still, a quick and dirty primer on Austrian Theory. The second video is a bit more technical, however.
More videos on Keynes and Hayek to come.