ECONOMICS FOR REAL PEOPLE: Hayek v Keynes, on Why Economies Crash (and How They Grew)

"Instead of furthering the inevitable liquidation of the maladjustments brought about
by the boom during the last three years, all conceivable means have been used to prevent
that readjustment from taking place; and one of these means, which has been repeatedly
tried though without success, from the earliest to the most recent stages of depression,
has been this deliberate policy of credit expansion. … 
    "To combat the depression by a forced credit expansion is to attempt to cure the evil
by the very means which brought it about; because we are suffering from a misdirection
of production, we want to create further misdirection—a procedure that can only lead
to a much more severe crisis as soon as the credit expansion comes to an end. … It is
probably to this experiment, together with the attempts to prevent liquidation once
the crisis had come, that we owe the exceptional severity and duration of the depression.”
- F.A. Hayek, Introduction to “Monetary Theory
and the Trade Cycle,” 1932 (PDF, pp. 5-7)

Here’s your note about tonight’s discussion from our friends at the Auckland Uni Economics Group:

Tonight we conclude our 'two-parter', explaining the boom and bust cycle, said to be a natural feature of mature economies.
Part 1: Hayek v Friedman: How Economies Grow
Part 2: Hayek v Keynes: Why They Crash

We started out by explaining how economies grow, contrasting Hayek’s growth theory with that of the Chicago school economists, of whom Milton Friedman was the best known.
What does growth look like? What exactly grows? What part do savings and credit creation play? And what’s the difference between growth and progress—and how do the two schools differ on this and other related questions?
Tonight we will look at what economies crash: Why bubbles burst, why booms turn to bust and growth turns to capital consumption. And we discuss how exactly did Keynes and Hayek differed on what causes and continues downturn.
Don’t miss the thrilling conclusion (no, really) of this two-part discussion, which should help integrate the material we’ve discussed over recent sessions.  (But don’t worry if you missed last week—there are still many lessons to learn.)

Join us at …

    Date: Tonight, September 24
    Time: 6-7pm
    Location: Case Room 2, Level Zero, Business School, Owen Glenn Building, Auckland Uni
                            (Note the room change)

Look forward to seeing you there.

PS: Remember this, the world’s most viewed econo-rap video?

PPS: Don’t miss this great collection of Hayek quotes on Keynes.

PPPS:  Here’s a link to a comic book that might interest you too; explaining, well, just what the title says. (Yes, Virginia, Irwin is Peter’s dad.)

PPPPS: And here’s another couple of bonus videos bringing it all back home: Bob Murphy at the recent Mises University event explaining the problems with Keynesian solutions to the current depression…

and [audio only] Mark Thornton Thornton wondering why Austrian economists have called every major economic crisis while mainstream economists have not?