Boxing Professor Keynes

Nick Gillespie from the August/September 2011 issue

Russ Roberts, a professor of economics at George Mason University, is the co-creator of two online rap videos pitting the ideas of economists John Maynard Keynes against those of Friedrich Hayek. The second of these, in which the two scholars drop rhymes about government spending while trading blows in a boxing ring, was unveiled in May. Following its release, reason.tv Editor Nick Gillespie spoke with Roberts about the video series and why Hayek is still relevant today. Q: Whats the story of the second Hayek-Keynes rap video? A: We focus on stimulus spending, and we focus in particular at the beginning on World War II. Q: This is what you hear all the time: Spending on World War II ended the Great Depression. Why is that wrong? A: Hayeks response is: Wow, one data point and youre jumping for joy. In Keynesian ideas, theres all this slack around, so you can just spend with no cost. In fact, war spending takes real resources out of the economy. Q: In the U.S., there was a boom after World War II. A: There was. Q: Where did that come from, if not Keynesian magic? A: In the early part of the 40s, the economy wasnt that good in England or the United States or Germany. They had this huge increase in government spending that really didnt stimulate a thing. In the late years of the war from 1943 onwardall the Keynesians, as we say in the song, cried disaster. They looked at the Keynesian multiplier. They saw government spending falling dramaticallywhich it didand wondered, All of these unemployed workers, how are they going to find jobs?

Well, they found jobs. The economy did great. People say, Well, if it wasnt the war, what was it? I think it was leaving things alone. Q: Nowadays were debating the impact of Obamas stimulus spending. Some people say, Look, if it werent for stimulus spending, things would have been far worse. And other people are saying, If we hadnt spent that, maybe wed be out of the mess were in. Is there a way to have a definitive end to this battle? Or is it really two faiths clashing? A: I think its a little awkward when you have really smart, Nobel Prize winning economists say if only wed spent $2 trillioninstead of what we spent, close to $1 trillionwhile others say we should have spent zero. What does that tell you? It tells you its not science. Thats the first thing it tells you. It tells you that despite 80 years of trying to understand how the macroeconomy works in the face of big recessions and sometimes a depression, we dont really understand it. And again I think Hayek has the right thing to say about this dispute. In his 1974 Nobel Prize lecture The Pretense of Knowledge, he says macroeconomics is not really ever going to be solved. Q: Hayeks main message is not even let things alone. Its lets see a lot of different ways of doing things. Can that ever be successful as a guide to mass society? A: Youre right. Theres a basic, fundamental distrust of leaving things alone. And the person who says I can fix it! is always going to have an advantage even if hes using the wrong tool to fix whats broken. Q: Whats your hope for the success of the video? A: My favorite comment on the first video was, Whos this Hayek guy, and why havent I heard of him? Were trying to get Hayek into the debate. We want him to have a place at the table.