Keynes Vs. Hayek : Planet Money We talk with Nicholas Wapshott, the author of the new book Keynes Hayek: The Clash That Defined Modern Economics. The fight over their ideas has never been more relevant.

Keynes Vs. Hayek

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FRIEDRICH HAYEK: Keynes and I were the best-known economists. Then two things happened. Keynes died and was raised to sainthood, and I discredited myself for publishing "The Road To Serfdom."


HAYEK: And that changed the situation completely.



Hello, and welcome to PLANET MONEY. I'm Robert Smith.


And I'm Adam Davidson. Today is Friday, October 28. That was Friedrich Hayek you heard at the top. He is one of the two economists - one of the two combatants, I should say - on today's podcast.

SMITH: It is a philosophical cage match. Two economists go in. Only one comes out.

DAVIDSON: Actually, I think...

SMITH: I think both of them...

DAVIDSON: ...Both come out.

SMITH: ...Actually come out, and we don't really resolve it.

DAVIDSON: But it is a fascinating 80-year battle that goes on today - maybe more relevant this year than it has ever been. But first - the PLANET MONEY Indicator with our very own Jacob Goldstein.

JACOB GOLDSTEIN, BYLINE: Today's PLANET MONEY Indicator - 3.6. Americans saved 3.6 percent of their - of our - disposable income in the month of September. This is the lowest that the savings rate has been since way back in December 2007. That's according to IHS Global Insight. And December 2007 - not coincidentally, you may recall - is exactly when the recession started.

DAVIDSON: People are saving less, which is fabulous news, right?


DAVIDSON: I mean, the other combatant on today's podcast is John Maynard Keynes, and he's the economist who, among many, many other things, coined the phrase, the paradox of thrift - this idea that we'd all be better off if everybody started spending like crazy, but each one of us individually is better off if we save a lot. And that's one of the things that can keep a recession just lousy for a much longer time. So the idea that people are out there spending now is a hopeful sign, right?

GOLDSTEIN: It is. And you see that really clearly in those GDP numbers that just came out yesterday. The economy - it grew by 2.5 percent over the past three months. This is not awesome, but it's pretty good. It's definitely better than what we'd been seeing. And part of the reason for this is that consumers, regular people are indeed saving a little bit less. They're spending a little more. And you know, in the long term, this can't work forever, right? Eventually, you want people to be making more money. You want us to be exporting more so the economy can keep growing and people can keep saving. But in the short term, yeah, this is a good thing.

DAVIDSON: So you heard it from Jacob Goldstein. Grab your credit card. Go spend like crazy.

GOLDSTEIN: Or, at least, a little more boringly, don't save quite so much right now.

DAVIDSON: Thank you, Jacob.

SMITH: Thanks, Jacob.

GOLDSTEIN: Thanks, guys.

DAVIDSON: I was joking in the office the other day that if you stopped me at any point and said - what are you thinking about right now? - there's a decent chance the answer would be Keynes and Hayek.

SMITH: (Laughter) This is why nobody stops you and asks you that question at PLANET MONEY. We know better.

DAVIDSON: Fair enough. Fair enough. But, you know, these are the - two of the giants who have defined radically different views of how the economy should work, what the role of government is in an economy. They're both brilliant. They're both contentious. They're both fascinating, which is why Caitlin and I and others on the team have been raving about this new book "Keynes-Hayek: The Clash That Defined Modern Economics." It's just a fun, smart, engaging read about these two men and the battle they fought together, sometimes contentiously, sometimes weirdly friendly. The author's name is Nicholas Wapshott. He's a journalist who lives here in New York.

SMITH: And we brought him in today to speak to us about the book "Keynes-Hayek"

NICHOLAS WAPSHOTT: This is an unresolved dispute. There's something that 80 years ago, they started fighting about, the two of them, together. And it still - they locked antler horns, and they didn't disengaged. And they never quite knocked each other out. And the result is to this day that there're gangs of Keynesians and gangs of Hayekians, and they're still fighting the good fight but with no obvious success yet.

DAVIDSON: And we'll get into the fight, but just the quick headlines for listeners who aren't quite familiar - Keynesian, roughly speaking, very crudely - more comfortable with government intervention. If there's a problem in the economy, smart people in power can fix it a little bit. Hayekians - very, very skeptical of that possibility and think probably what government's going to do is mess things up. But let's get into what we mean exactly. So who's Keynes? And we have obviously talked about him a fair bit on the PLANET MONEY podcast, but give us a sketch. Who's this guy?

WAPSHOTT: John Maynard Keynes - a young economist from King's College, Cambridge - brilliant. As a young man, he was so brilliant, he was taken in by the British Treasury to work on borrowing money in order to fight the First World War. And he was - he taught at Cambridge. He was hugely influential. And what he really made his name with is a book saying that, at the Treaty of Versailles, that if you deliberately cripple a modern economy like Germany or like the former Austro-Hungarian Empire, that it will cause such human misery that it will lead to extreme politics and probably a second world war. And because he was so prescient, he became very famous very quickly.

SMITH: And you say, you know, somebody who was an economist who works in the Treasury department - he was not cutting the typical figure of an economist - a low-level economist at a Treasury department.

WAPSHOTT: No. I think that his intellect, his genius was so evident to everybody, and he was so persuasive, and he was so able to describe very complex matters very simply so that even Treasury ministers could understand it allowed him to be hugely influential.

DAVIDSON: And it was also - his personal life was - if there were tabloids - or were there tabloids at the time? I mean, his personal life is very good fodder for - he was sleeping with many of the literary lights of the time.

WAPSHOTT: That's right.

SMITH: Male and female.

DAVIDSON: Mostly male.

WAPSHOTT: He was a member of the Bloomsbury Group, and he believed in their sort of free-love ideas. And he believed in all of that, yes. And he was Duncan Grant's lover for many years. And, I mean, Keynes had everything both ways. So half his life is homosexual. The second half of his life, he was - heterosexually married a young dancer from the Ballets Russes - admittedly, a boyish girl, but, I mean...

DAVIDSON: And apparently, happy for the rest of his life...

WAPSHOTT: Immensely happy. And if you really want to read some pornography, read the letters from Keynes to his wife and vice versa. I mean, this is pretty hot stuff.

DAVIDSON: Six-foot-6.

WAPSHOTT: Enormous, mustachioed...

DAVIDSON: And probably one of the most exciting dinner party companions you could imagine. I mean, he knew everything, was brilliant and hilarious, from all accounts.

WAPSHOTT: Exactly. Lord Clark said of him, he was a man who couldn't dim his headlights. He was someone - he was just always on. He was burning, like, sort of phosphorous bulb. He was the most exciting person. I think, undoubtedly, if you were to leave Winston Churchill aside, he was the most dazzling and glorious Englishman of the 20th century.

SMITH: So take us to Austria now.

WAPSHOTT: Ah. Meanwhile, in Austria - the defeated Austria - there was Friedrich Hayek. He was a young economist who actually worshiped Keynes from afar. This was someone, after all, who had pointed out that Austria was in dire straits and should not be punished anymore.

DAVIDSON: After World War I...

WAPSHOTT: After World War I...

DAVIDSON: ...The very cruel financial victory that the Allies imposed on Germany and Austria.

WAPSHOTT: Yeah. But the interesting thing there is, of course, that Hayek discovered from his own experience and from his family's experience the damage that inflation can do to a society. He was one of those guys who took his pay home in wheelbarrows. His monthly check, which - it was a government job, so it was inflation-adjusted - would just - they'd add another couple of naughts every month. It was an astonishing thing. And Hayek for the rest of his life and Hayekians to this day remain devoted to curbing inflation and keeping costs and prices under control, whereas the Keynesians were quite the opposite of that. Keynes was worried about persistent unemployment that came immediately after World War I. So it's unemployment versus inflation, which is another way of looking at the Keynes-Hayek clash.

DAVIDSON: Could Hayek dim his headlights? Was he a flamboyant and dazzling personality?

WAPSHOTT: No, he wasn't, I'm afraid. And it's a shame because, actually, he was rather interesting and very dry - very droll sense of humor - and much more interesting than he appeared. But he was literally buttoned-up. You know, he had a three-button jacket, and all three buttons were done up, you know? And he was - he had very, very strong accent, very strong German Austrian accent, which made him rather difficult to understand.

The whole of this debate might have been very different if the two personalities were more equal, but I'm afraid that Keynes ran away with it in terms of charisma. I mean, literally charisma might've been invented for him. He was a man who's - even Hayek - I mean, not someone often given to generous prose about anybody - he loved Keynes. He loved the way that Keynes just with his eyeballs was able to seduce him. And right from the very beginning, he always gave him credit for that, the fact that Keynes was such a powerful personality.

SMITH: So how does this fanboy - how does Hayek in Austria all of a sudden get elevated to be the man who will take on John Maynard Keynes?

WAPSHOTT: Well, it became because there was a man called Lionel Robbins, who was the youngest professor appointed to economics in the London School of Economics. And he wanted to set up something which would be counter to Cambridge. Cambridge was obviously the coming place. Keynes was on the move. He was thinking, you know, 24 ideas before breakfast every day.

SMITH: And people wanted to bring him down - a notch, at least.

WAPSHOTT: At least a notch, yes. I mean, you know what - well, the English are even worse than everybody else in terms of cutting down the tall poppies. There's no doubt about it. But at the same time, there was an intellectual thing. Robbins was somebody who actually read German. This is very rare for an Englishman. And he'd actually read some Austrian economics. And there was - he knew that there was an alternative. And what he wanted to do is to make LSE the alternative to what was already burgeoning Keynesianism coming at Cambridge. He thought that it would be good for his reputation and good for the LSE. And so he was looking for somebody to bring Keynes down, and he chose Hayek, rather like you might go out and choose a gunslinger in the Wild West. He actually chose somebody deliberately to say, stop this guy in his tracks; he's getting too powerful.

DAVIDSON: Wow, because if Hayek had just stayed in Austria, there'd be stuff written in German for a German audience that was critical and that - but nobody in the English-speaking world would care less.

WAPSHOTT: No. There is Anglo-Saxon economics. In between the United States and Britain, it still dominates to this day, actually.

DAVIDSON: Yeah. OK. So let's get to the intellectual substance. So as I understand it, Keynes until the '30s is a brilliant but fairly classical standard economist. He really breaks with economic - the history of economic thought in the '30s in response to this puzzle which - you know, classical economics teaches that an economy's going to heal itself. Prices will fall to the right point when there's a slowdown, and then businesses will eventually start selling more at that price. They'll employ people. There cannot be a long term - what they call equilibrium - a long-term period where people are completely unemployed and there's no hope for economic growth.

And we should say, in the U.S., we think of the Depression as only starting after 1929. The U.K. was pretty bad in the 1920s already for quite some time when the global depression hit. So Keynes looks around and says - well, everyone's looking around and saying, you know, our classical economic models don't actually make any sense right now. But nobody really knew what to do about it until Keynes. So explain what Keynes' idea was.

WAPSHOTT: Yeah. Keynes first believed that an equilibrium in - would come to rest at full employment, that an economy in normal times would be at full employment. That's the message that his great mentor Marshall, who was his great predecessor, taught him.

DAVIDSON: Alfred Marshall.

WAPSHOTT: Alfred Marshall. But he said it doesn't make any sense. I mean, looking at the business cycle, and what's meant to happen is that over time, everything will come out in the wash, and everybody will be employed. But it seems to me that the equilibrium that you're promising never, ever quite comes about. Why have we got such large, persistent unemployment? Which is why it's such a similar thing to today, of course.

DAVIDSON: So what did Keynes come up with? How did he answer this?

WAPSHOTT: Well, Keynes looks at the economy in a different way. He looked at it from above. He looked at it as a whole. He looked as if it is a whole machine, and he looked at the constituent parts, and he came to the conclusion that, actually, if you change some things, it would alter other things. So what was it that would lift unemployment? And he came to the conclusion that it was a lack of aggregate demand, that it was to do with not enough people buying things. And that is, therefore, what he set about to do. How could you get people to buy more things? And if the private sector didn't buy things, maybe the state had to buy things. So maybe government had to buy things instead, and they had to employ things - people - so that they could buy things.

DAVIDSON: Now, there's several revolutions in what you just said. So one of the biggest revolutions, which applies in good times and bad and really is the battle that Keynes has completely won, is defining something called macroeconomics - that, before, there was one economics. You basically - if you wanted to think how an economy works, you start with a person or a household or a firm, and you kind of build up from there. And Keynes - I mean, other people had toyed with it, but he's really the first guy to come up with a systematic way of thinking of an entire economic system - a macroeconomy.

WAPSHOTT: Absolutely. He's the big-picture guy. He actually sees that it's a whole organism which is rather like a body, that each organ has different things to do, and that's exactly what the economic world is like. And, of course, therefore, he invented not only macroeconomics, but as soon as you start saying and that you start fiddling around with an economy in order to change it, you also need to measure exactly what bits of the economy are doing what, which leads to the other great invention of his, which was econometrics. Of course, he thought econometrics was rather tedious and dry, but actually, most economists today - econometricians, if you like - that is, that they study models of things - they actually look at the economy as a whole, and they try, like Keynes, to work out what you have to do with one thing change.

DAVIDSON: So every time, like, we on the radio say GDP grew 2.5 percent, or the unemployment rate was 9.1 percent, we're basically, we could almost say, because John Maynard Keynes completely won a major battle in the 1930s, I'm about to tell you some very Keynesian ideas or Keynesian-derived ideas. Like, there's something called GDP. There's a number that refers to the entire economy. Every day, we're reminded that Keynes won this battle.

SMITH: Everyone turns to the government or turns to the central bank and says what are you going to do about the whole picture?

WAPSHOTT: Exactly. That is Keynesian. And Keynesian, it assumes that governments are prepared to do things. And, of course, this comes about from the fact that electorates demand, voters demand that governments do things. They might blame the government if the economy goes bad, but the corollary of that is that they want the government to do something if the economy is bad. Actually, it's because they blame the president when the economy is wrong that the president has to do something or has to seem to be doing something. And the first great instinctive Keynesian, if you like, is Franklin Roosevelt because he tried everything. He said, I'm just going to try anything you like because that's what they elected me to do.

SMITH: This is so comforting to a population that is desperate, that is unemployed, that is that is poor, that is seeing poverty around them. This is this notion that someone can come in and save us, that there's a big picture, that, you know, it's almost religious in its epiphany. So this gunslinger Friedrich Hayek brought in, what could he possibly say to this hopeful philosophy, really, that Keynes had?

DAVIDSON: Created by arguably the smartest man in England, maybe the smartest man in the world at the time.

WAPSHOTT: Exactly. That's what Hayek said. He said it's all very well. You can fiddle around with the economy if you like, but we don't know enough about the economy yet. We just don't know how this works.

SMITH: That is not a hopeful statement.

WAPSHOTT: It's not. No. It's a very pessimistic thing to do. In fact, Hayek admitted later in life, he said, I'm very disappointed in a way that my whole contribution to the whole of economic debate is to say probably not, probably not. Don't fiddle with that. You don't want to know what's going to happen. He said it was a bit like early surgery. You know? You go to a barber, and he'd hack off a bit of this and that. He said that's not what you should do.

DAVIDSON: I always think of the phone industry. I mean, you have, for decades and decades and decades, this monopoly, this AT&T government-posed monopoly. And you have these government bureaucrats sort of discussing price levels and long-distance phone calls and this and that with AT&T corporate executives. And everyone in America has the exact same phone. They don't even own the phone. They're renting it from AT&T. And I'm sure there's meetings where people say, do you think people want a different phone? No. That's a perfectly good phone. And then we eliminate that monopoly, and suddenly - I remember in the '80s everyone had all these different phones. And for a while we had the...

SMITH: Shaped like a football.

DAVIDSON: Right. Like a football. There was that flat phone that you put down, but everyone would hang up with their cheek. And, you know, there's all these innovations. Suddenly we have answering machines and voicemail, and then of course we have cellphones and the iPhone. And, just this morning, I bought this thing I wouldn't have even imagined in the - how could I even think of it? A Bluetooth speaker so that my phone can remotely across the room play music in my house through this speaker. And...

SMITH: I'm sure a government committee could've come up with that.

DAVIDSON: Yeah. Exactly.

WAPSHOTT: But you can't imagine that Ma Bell would ever have come up with an iPhone, however long they'd been in charge. You know, because they were complacent. Inevitably, if you're a monopoly - it's true of private monopolies, too, by the way. Or even duopolies. The fact is they stop trying. They carve the market up, and that's that. But a freer market does allow people to innovate. Entrepreneurs, you know, can take advantage if the government steps out of the way.

DAVIDSON: And I would think a Hayekian would say right now, sure, Keynesian, you can spend a trillion dollars or whatever building roads and bridges, et cetera. But there's several thousand people, several thousand future Steve Jobs out there in the economy, and they've got great ideas. And to the extent that you direct money towards these bridges or these schools or these government programs, you're missing something. There's some information out there about some idea and what people are going to want in five or 10 years that they don't even know they want, and you're just going to mess things up the more you intervene.

WAPSHOTT: Yeah. Hayek thought the prices were the key to everything because at least you could work out the - somebody agreed on a price, at least two people came to an agreement, which was something.

SMITH: Now, what surprised me about your book is I knew this was a philosophical debate. What I had no idea with is that, of course, they're both in England at the same time. It is a personal debate. They are actually giving lectures that reference each other. They're writing, I would say, critical, cruel, scathing reviews of each other. This becomes a personal fight.

WAPSHOTT: Absolutely. As you say, usually when big movements clash, when Newton and Einstein clash, it's generations apart or continents apart. In this case, these are two guys who actually were in the same city and knew each other, and knew each other pretty well, pretty well. They actually quite liked each other in a weird way. They were a bit cagey. But on the other hand, they knew each other enough to be able to sort of take liberties with the discussion, which of course led to the problem. Because when Hayek reviewed one of Keynes' books, which actually didn't say anything particularly startling or new, he did it in such a snippy, sarcastic, coarse way almost, that Keynes was taken aback. I mean, it was as if you'd punched Keynes on the nose.

SMITH: He called it unintelligible, unfinished. I mean, you call Keynes' work unfinished?

WAPSHOTT: Keynes might admit, I mean, you know, that nothing is ever quite finished.

DAVIDSON: Keynes' defense was it's not fair you reviewed that book 'cause I changed my mind after it was published.

SMITH: (Laughter).

WAPSHOTT: Exactly.

SMITH: But you're not supposed to say that out loud.


WAPSHOTT: Then he said, by the way, if we're talking about rubbish, look at your book. And then he zapped into Hayek's book and said, that's just nonsense from beginning to end. He said, if you read that book, that just shows how, if you extend logic right to the end of the line, you just reach bedlam. And so and that was the beginning of what turned out to be the vituperative debate which went on for 80 years. Because when Keynes and Hayek were so exhausted to carry on the fight themselves, they handed it over to their disciples. There was a group of people around Keynes called the Cambridge Circus, and they lambed into all of the Hayekians who'd arrived at the LSE and were watching Hayek week by week and thought that he was their God. And in a way that describes today why this great clash of two irreconcilable, different approaches to economics remains about as nasty and vile and vicious as you can possibly get it.

DAVIDSON: So the battle today, I mean, is it like there was a big argument in 1938, and they're just having that same argument? Has it advanced at all?

WAPSHOTT: It has advanced very little. We are about to go into - in fact, I think Obama's already started it with his Jobs Act campaign. We've already started what is inevitably a Keynes-Hayek election. On one side, there's a party that says we've got terrible unemployment, we need to do something about it and the best way to do it is for the government to start intervening - to spend some money here, to provide cheap interest rates there, to cut taxes somewhere else. And the other side says, no, that the government should do absolutely nothing or as little as possible.

SMITH: The market can sort it out.

WAPSHOTT: And what's more, we should shrink the government, which is also a Hayekian notion. Let's get the government out of people's lives. Let's give back to the people what the government's currently doing for them, like pensions and so on. And while then they're not sort of root and branch, while they're not saying this should all be done within two years, what they are saying, we are hard and fast. We're not giving in here. Part of the thing about the debt in the summer, that great debate was exactly that. We are not prepared to compromise any more. You've constantly, on the other side, nibbled away. The government has a sort of ratchet effect. The more the government takes part, it continues to take part. We want to withdraw from that and let the market do its business. The market is better at understanding us than the government is.

DAVIDSON: But what frustrates me, though, about that is the Keynesians would say Obama's a very timid Keynesian, that this $400 billion jobs package, and even his $800 billion stimulus package a few years ago, it's nowhere near enough. We needed, you know, $1.5 trillion or $2 trillion in government spending, and he's just, you know, nickel and diming us and playing around on the edges. And the Hayekians, I believe, would say that no Republican in office or running for office right now is truly a Hayekian. They're constantly giving little favors to corporations and trying to mess with the tax code and regulation to goose this industry and this buddy and hurt that one. You know, something I think is important to mention about Hayek is he was as much an enemy of corporate special interests as he was of welfare, and social security and things like that. I mean, you know, most corporate policy is very much non-Hayekian.

WAPSHOTT: Yeah. And you can see on the GOP debates, by the way - and that's why Mitt Romney gets so much trouble. They suspect Romney. You know, let's assume that...

SMITH: He's being a closet Keynesian.

WAPSHOTT: Exactly. Let's assume the Tea Party are very similar to Hayekians. You know? I mean, they think, Tea Party people think along Hayekian lines. Let's put it that way. And they see in Mitt Romney, you know, a rich guy, made a lot of money out of amending corporations and firing people and so on. But he was just the same as the previous lot. And also think George W. Bush, for instance. You know, was he a Hayekian? Well, he said he might be, but actually, of course, when he gets into power, he isn't at all. Even Ronald Reagan, who's a great god of the right...

SMITH: And an explicit fan of Hayek, right? He talked about...

WAPSHOTT: An explicit - yeah. He actually read Hayek and mentioned Hayek, just like Margaret Thatcher, you know, who'd go 'round with Hayek in her handbag and thump it on the table and say that's what we believe, Hayek. But actually, of course, in reality, Hayek was always rather nervous about Reagan and Thatcher and said, well, they may be trying, but I don't represent them, you know. I mean, they're not really Hayekian. Because when it comes to it, think of Reagan. He actually was a sort of closet Keynesian. He increased the size of the deficit. He blew a fortune on defense, which is just government spending. It's a way of hosing money into various communities. It was Keynesian, whether he liked it or not.

SMITH: And even much of the George W. Bush tax cut. I mean, you might think, tax cuts, that must be Hayekian. But targeted tax cuts are Keynesian. Keynes proposed those as much as much as anyone, and George W. Bush, certainly some of his tax cuts, if they were made permanent, I guess you could argue are Hayekian, but many are Keynesian.

DAVIDSON: So for those of us who haven't picked a side, which I'm guessing is the vast majority of Americans, I would guess, is one of them right?


WAPSHOTT: You know, it's a bit like Agatha Christie, who did it in the final chapter, isn't it? I think you have to come to your own conclusion, and that comes, actually - it's got nothing to do, in a way, with who is right in terms of which is the most plausible and which is the most effective argument. It comes, in a way, back to sort of individual psychology. People, some people, have a nervousness about the world out there, about governments. They have an innate disrespect or a suspicion of them. And then there are other people who don't. And when it comes to it, it's to do with optimism or pessimism, too. The optimists may be on the Keynesian side saying if you can do something, you should do something. And, of course, the whole of the human condition is improved, has always in history been improved, by humans deciding what they want and then changing things to get there. And the Hayekians say, I'm afraid this is an organic thing. It may be an unfortunate truth, but I'm pessimistic about it. If you stop fiddling around with these things, it will only go wrong. It'll only end up worse later. So I think in a way when it comes to it, it depends on your personality as much as anything else.

SMITH: And your value system, and...

WAPSHOTT: Yeah. Because I've been over this stuff, and so have you. You know, three of us, we've been over this stuff, back and forth and back and forth. If it was as simple as saying that, well, that plainly is the truth and that makes no sense at all, it would be easy. But it's not like that. At the same time, these are two totally irreconcilable views of the world. You can't have Keynesianism and Hayekianism in the same country at the same time.

SMITH: Nicholas Wapshott, thank you so much for coming in.

WAPSHOTT: Great pleasure.

DAVIDSON: The name of the book, again, is "Keynes-Hayek: The Clash That Defined Modern Economics."

SMITH: And we cannot do a podcast about Keynes and Hayek without playing you a bit of the rap video made by George Mason University economist and a PLANET MONEY friend, Russ Roberts. He is brilliant, and he brought you this rap video. And he did it with television producer John Papola. That's what we're going to leave you with.


ADAM LUSTICK: (As Hayek, rapping) We've been going back and forth for a century.

BILLY SCAFURI: (As Keynes, rapping) We've been going back and forth for a century. I want steer markets.

LUSTICK: (As Hayek, rapping) I want them set free.

SCAFURI: (As Keynes, rapping) There's a boom and bust cycle, and good reason to fear it. I've made my case, Freddy H. Listen up. Can you hear it?

DAVIDSON: By the way, another hat tip to Russ. He did a great interview with Nicholas Wapshott on his really great podcast, "Econ Talk." You can Google it. It gets into more technical details, and I think it's a good complement to this podcast.

SMITH: We always want to know what you think of PLANET MONEY and what you thought of today's show so please email us,

DAVIDSON: Or you can find us on Facebook, Twitter. I'm Adam Davidson.

SMITH: I'm Robert Smith. Thanks for listening.


LUSTICK: (As Hayek, rapping) Don't look for a cure from the hair of the dog. Real savings come first if you want to invest. The market coordinates time with interest. Your focus on spending is pushing on thread. In the long-run, my friend, it's your theory that's dead. So sorry there, buddy, if that sounds like infective. Prepare to get schooled in my Austrian perspective. We've been going back and forth for a century.

SCAFURI: (As Keynes, rapping) I want to steer markets.

LUSTICK: (As Hayek, rapping) I want them set free. There's a boom and bust cycle, and good reason to a good reason to fear it. Blame low interest rates.

SCAFURI: (As Keynes, rapping) Nah, it's the animal spirits.

LUSTICK: (As Hayek, rapping) The place you should study isn't the bust. It's the boom that should make you feel leery. That's the thrust of my theory. The capital structure is key. Mal-investments wreck the economy.

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