Hayek Versus Keynes: The Crucial Difference

And in the same post noted just below, Kuehn puts his finger right on the crucial difference between Hayek and Keynes: For Keynes but not for Hayek, "those expectations of future profits are compared to an interest rate that is determined by liquidity preference and not the supply and demand of loanable funds."

Just so!

And they were both partially correct: the interest rate is influenced by both of these factors. So here is where we must get empirical: To the extent that the interest rate is determined by liquidity preference, to that extent Keynes was correct. To the extent the interest rate is determined by the supply and demand for loanable funds, Hayek was correct.

As Olivia Newton-John would have put it:

I've been patient, I've been good
Tried to keep my data off the table
It's gettin' hard this holdin' back
If you know what I mean

I'm sure you'll understand my point of view
We know the scene theoretically
You gotta know that you're bringin' out
The data miner in me

Let's get empirical, empirical
I wanna get empirical
Let's get into empirical
Let me hear your data talk, your data talk
Let me hear your data talk


  1. That poor woman. She's giving it her all, even has a bunch of boy toys dancing up there with her, and that is just the WHITEST crowd ever. That's how I felt teaching principles classes.

    1. You feel like you have a bunch of boy toys dancing with you?


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