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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: CalculatedRisk who wrote (52043)6/5/2006 12:52:48 AM
From: gpowell  Read Replies (2) of 116555
 
"Respect" was the wrong word - Hayek is still well respected. Garrison wrote "no standing among modern mainstream macroeconomists" - that is a better description of the mainstream attitude - not a lack of respect - Hayek deserves historical respect.

Hayek’s revival in the 1970’s was in part a response to the failings of mainstream macroeconomics to explain the capital reswitching phenomena. That prompted a lot of old frontline Keynesians (e.g. John Hicks, Joan Robinson etc.) to reexamine Hayek’s capital theory and that reexamination netted Hayek the Nobel. When Garrison uses the term “modern mainstream macroeconomists" that doesn’t confer the meaning of “most vetted and sound” (no one would who is aware of the failings of mainstream macroeconomics). Mainly, in this case, he is referring to Keynesian macro economists educated in an ISLM model.

BTW, no one would claim that Keynesian economics is wrong – it certainly is a correct theory in a world where there are no real scarcities, or capital goods. And no one should claim that austrian business cycle theory is incorrect in a world of heterogeneous capital and time, where the structure of production matters. That is why Krugman’s criticism of the theory demonstrate his ignorance of capital theory.
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