When Governments Create Excessive Welfare States, The Safety Net Begins To Resemble A Hammock

When governments create excessive welfare states, the safety net begins to resemble a hammock.

Fight of the Century: Keynes vs. Hayek, Round Two

“Fight of the Century” Lyrics.

Written by John Papola and Russ Roberts

KEYNES

Here we are… peace out! great recession
thanks to me, as you see, we’re not in a depression
Recovery, destiny if you follow my lesson
Lord Keynes, here I come, line up for the procession

HAYEK
We brought out the shovels but we’re still in a ditch…
And still digging. don’t you think that it’s time for a switch…
From that hair of the dog. Friend, the party is over.
The long run is here. It’s time to get sober!

KEYNES
Are you kidding? my cure works perfectly fine…
have a look, the great recession ended back in ’09.
Surely, I deserve credit. Things would have been worse
All the estimates prove it—I’ll quote chapter and verse

HAYEK
Econometricians, they’re ever so pious
Are they doing real science or confirming their bias?
Their “Keynesian” models are tidy and neat
But that top down approach is a fatal conceit

REFRAIN
Which way should we choose?
more bottom up or more top down
…the fight continues…
Keynes and Hayek’s second round

it’s time to weigh in…
more from the top or from the ground
…lets listen to the greats
Keynes and Hayek throwing down

KEYNES
we could have done better, had we only spent more
Too bad that only happens when there’s a World War
You can carp all you want about stats and regression
Do you deny World War II cut short the Depression?

HAYEK
Wow. One data point and you’re jumping for joy
the Last time I checked, wars only destroy
There was no multiplier, consumption just shrank
As we used scarce resources for every new tank

Pretty perverse to call that prosperity
Rationed meat, Rationed butter… a life of austerity
When that war spending ended your friends cried disaster
yet the economy thrived and grew ever faster

KEYNES
You too only see what you want to see
The spending on war clearly goosed GDP
Unemployment was over, almost down to zero
That’s why I’m the master, that’s why I’m the hero

HAYEK
Creating employment’s a straigtforward craft
When the nation’s at war, and there’s a draft
If every worker was staffed in the army and fleet
We’d be at full employment with nothing to eat

REFRAIN

HAYEK
jobs are the means, not the ends in themselves
people work to live better, to put food on the shelves
real growth means production of what people demand
That’s entrepreneurship not your central plan

KEYNES
My solution is simple and easy to handle..
its spending that matters, why’s that such a scandal?
The money sloshes through the pipes and the sluices
revitalizing the economy’s juices

it’s just like an engine that’s stalled and gone dark
To bring it to life, we need a quick spark
Spending’s the life blood that gets the flow going
Where it goes doesn’t matter, just get spending flowing

HAYEK
You see slack in some sectors as a “general glut”
But some sectors are healthy, and some in a rut
So spending’s not free – that’s the heart of the matter
too much is wasted as cronies get fatter.

The economy’s not a car, there’s no engine to stall
no expert can fix it, there’s no “it” at all.
The economy’s us, we don’t need a mechanic
Put away the wrenches, the economy’s organic

REFRAIN

KEYNES
so what would you do to help those unemployed?
this is the question you seem to avoid
when we’re in a mess, would you just have us wait?
Doing nothing until markets equil-i-brate?

HAYEK
I don’t want to do nothing, there’s plenty to do
The question I ponder is who plans for who?
Do I plan for myself or leave it to you?
I want plans by the many and not by the few.

We shouldn’t repeat what created our troubles
I want real growth not just a series of bubbles
Let’s stop bailing out losers and let prices work
If we don’t try to steer them they won’t go berserk

KEYNES
Come on, Are you kidding? Don’t Wall Street’s gyrations
Challenge your world view of self-regulation?
Even you must admit that the lesson we’ve learned
Is more oversight’s needed or else we’ll get burned

HAYEK
Oversight? The government’s long been in bed
With the Wall Street execs and the firms that they’ve led
Prosperity’s all about profit and loss
When you bail out the losers there’s no end to the cost

the lesson I’ve learned? It’s how little we know,
the world is complex, not some circular flow
the economy’s not a class you can master in college
to think otherwise is the pretense of knowledge

REFRAIN

KEYNES
You get on your high horse and you’re off to the races
I look at the world on a case by case basis
When people are suffering I roll up my sleeves
And do what I can to cure our disease

The future’s uncertain, our outlooks are frail
Thats why free markets are so prone to fail
In a volatile world we need more discretion
So state intervention can counter depression

HAYEK
People aren’t chessmen you can move on a board
at your whim–their dreams and desires ignored
With political incentives, discretion’s a joke
The dials you’re twisting… are just mirrors and smoke

the market’s a process where we can discover
the most valuable ways to serve one another
we need stable rules and real market prices
so prosperity emerges and cuts short the crisis

REFRAIN
Which way should we choose?
more bottom up or more top down
the fight continues…
Keynes and Hayek’s second round

it’s time to weigh in…
more from the top or from ground
…lets listen to the greats
Keynes and Hayek throwing down

Path to Prosperity

We can lift the crushing burden of debt. It is up to our generation to choose prosperity.

Quote of The Day

"Over the course of our deliberations, the urgency of our mission has become all the more apparent. The contagion of debt that began in Greece and continues to sweep through Europe shows us clearly that no economy will be immune. If the U.S. does not put its house in order, the reckoning will be sure and the devastation severe.


After all the talk about debt and deficits, it is long past time for America’s leaders to put up or shut up. The era of debt denial is over, and there can be no turning back."

National Commission on Fiscal Responsibility and Reform
(Debt Commission appointed by President Obama) The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, Preamble
December 1, 2010

The Most Insidious Budget Problem: The National Debt - WSJ.com

There is a cancer eating away at the budget from within, one that steadily drains American wealth, sends much of it overseas and only gets worse over time. It is the interest America pays on its national debt.

This year the U.S. will spend more than $200 billion—roughly the gross domestic product of Chile—merely paying off that interest. That's nearly as much as it will spend to provide health care to poor citizens through the Medicaid program.

The Most Insidious Budget Problem: The National Debt - WSJ.com