HAYEK'S TIMELY COMEBACK
June 30, 2010
Austrian economist Friedrich Hayek is making a comeback and some of his ideas would provide great alternatives to the policies currently pursued by the Obama administration, says economist Russ Roberts in a recent Wall Street Journal article.
According to Roberts, Hayek highlighted the Fed's role in the business cycle:
- Former Fed Chairman Alan Greenspan's artificially low rates of 2002-2004 played a crucial role in inflating the housing bubble and distorting other investment decisions.
- Current monetary policy postpones the adjustments needed to heal the housing market.
Another timely idea of Hayek's, says Roberts, is that order can emerge not just from the top down but from the bottom up:
- The American people are suffering from top-down fatigue.
- President Obama has expanded federal control of health care and he'd like to do the same with the energy market.
- Through Fannie and Freddie, the government is running the mortgage market; it now also owns shares in flagship American companies.
- The president flouts the rule of law by extracting promises from BP rather than letting the courts do their job.
- By increasing the size of government, he has left fewer resources for the rest of us to direct through our own decisions.
Meanwhile, over at the New York Times, Nobel prize-winning economist Paul Krugman laments the lack of government intervention. Around the world, he says, governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
More importantly, Krugman says the United States is in the "early stages of a third Great Depression." If he's right, it's only because American policymakers have been following his advice, says Investor's Business Daily.
Source: Veronique de Rugy, "Hayek's Timely Comeback," National Review, June 28, 2010.
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