Re: [OT] USA Elections
- Posted by jimcbrown (admin) Jan 24, 2013
- 2522 views
And I think Hayek nailed it with the knowledge problem in describing why central planning is inferior to a market guided by prices.
I agree with this. Keep in mind that this is important to the central premise of Keynesian economics - that the market works best most of the time, but something a carefully limited helping hand is needed to prevent and limit damage.
A key Austrian critique of Keynesian economics is that they consider all capital to be fungible (human or physical).
Matt
After doing some further research, that "key critique" appears to be a widely accepted element of mainstream economics.
One assumption to labor being fungible would be that everyone is willing (or at least able) to do the same work at the same rate. However, this is not true.
In 1963, Rothbard noted that "Sophisticated Keynesians now admit that the theory of 'underemployment equilibrium' does not really apply to the free and unhampered market: that it assumes, in fact, that wages rates are rigid downward."[38] Indeed, Keynes himself quietly said this, and his contemporary Pigou wrote an entire treatise on unemployment explaining its inextricable connection with the real wage. What many Austrians barely realize is that by 1997, even quite unsophisticated economists essentially agree with Propositions 1 and 2. Milton Friedman said as much in his 1969 AEA Presidential address. Robert Lucas' work along these lines were one of the main reasons he recently received a Nobel prize. Subtleties aside, the Mises-Rothbard view of unemployment now prevails among academic economists.[39]
Anyways, it appears to be well understood that labor is not fungible - that some areas have unfulfilled jobs despire also having high unemployment, due to a lack of workers trained in the correct skills and the expense involved in training an unskilled worker to the relevant level.
http://www.macon.com/2012/02/19/1909706/despite-high-unemployment-in-macon.html
http://online.wsj.com/article/SB10001424052748704895004575395491314812452.html
I don't see how this would have affected the premise I posited originally - that the market works best most of the time, but something a carefully limited helping hand is needed to prevent and limit damage.
I'm not too familiar with Austrian economics, but I'm not aware that it critiques the welfare state.
I've done further research on this.
Hayek does appear to have supported the welfare state.
I pointed out that even the later Hayek defended a universal basic income, a policy considered solidly welfare statist. And he even supported the UBI as a condition of democratic legitimacy, not merely as a pragmatic measure. Thus, Hayek supported what we typically call a welfare state throughout his career.
Hayek distinguished this from the concept of a planned economy, which he rightly considered doomed to failure.
Despite this, there seems to be a widespread belief that Hayek was against welfare. (For example, http://www.scientificamerican.com/article.cfm?id=the-social-welfare-state )
