The great economists Hayek and Keynes continue their rap encounters. This time they go to a congressional hearing and wind up in a boxing ring.

Check out Fight of the Century at EconStories.

Some of my favorite lines:

In response to Keynes comment that all we need is regulation, Hayek points out there is an extremely heavy load of regulation on Wall Street and in return there is an extremely large volume of contributions going from Wall Street to Washington.  Here’s a great line on bailing out favored companies:

When you bail out the losers there’s no end to the cost

Hayek makes short work of the old argument that supposedly proves everything, specifically that federal spending on World War II ended the depression.   Hayek points out the rationing and scarcities in World War II are hardly a picture of prosperity.  Oh, taking a few million men out of the labor force involuntarily (i.e. the draft) would tend to reduce the unemployment rate.  When federal spending ended after the war, economists expected horrible things. What we saw was an incredible expansion in the economy that ran for what, two decades?

Takes about 30 seconds to demolish that old argument. Cool.

Another mind-blowing concept: give us “stable rules and real market prices” and see what happens:

We need stable rules and real market prices so prosperity emerges and cuts short the crisis

In contrast, we currently have rules of the game that change constantly and varying levels of inflation that no one can predict beyond next week.  Maybe only the middle of the week.

My previous post on round 1 is here.


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