Partly because I was invited by Harold Evans, and partly because the event had a tie-in with the new book Keynes Hayek: The Clash That Defined Modern Economics, by my former New York Sun colleague Nicholas Wapshott, and partly because there aren't that many Hayek events in New York, I ventured out last night for a Thomson Reuters-sponsored debate between Keynesians and Hayekians.
John Cassidy of the New Yorker was there representing the Keynes side, though he said he could have represented Hayek as well. He called Hayek "one of the most important economists of the 20th Century," but said "on macroeconomics he got things completely wrong." He said even Rep. Paul Ryan, who argued for tax cuts in 2001 on the grounds that they would "juice the economy," was a Keynesian.
An editorial board member of the Wall Street Journal, Stephen Moore, said if anything good has come out of the past three years, it has been the repudiation of Keynesian economics. He said that if Keynesian economics worked, we'd be in the middle of a big boom.
Mr. Cassidy countered that the Obama Keynesian stimulus had been "relatively small" and that the federal stimulus had been offset by cuts in state and local government spending.
Mr. Moore replied that Reagan had achieved twice the growth of Obama with half the borrowing.
Diana Furchtgott-Roth, arguing for Hayek, echoed Mr. Moore, saying, "what we've done the past few years hasn't worked."
Steven Rattner, arguing for the Keynesians, said that markets sometimes fail, and defended the auto bailout by saying that at the time, no private capital was willing to go into the auto sector, "not one penny." He said that the $700 billion TARP pushed by Bush Treasury Secretary Henry Paulson was the "most important piece of economic legislation since the New Deal." He said the economy would be in "far worse shape" if government had done nothing the past three years.
Lawrence White, an economics professor at George Mason, replied, "Steve Rattner mentions that nobody wanted to invest in GM and called that a market failure. I call it a market verdict."
"We would have been better off if we had followed the rule of law rather than the rule of central banks," Professor White said. He said the Occupy Wall Street protesters "should be occupying Maiden Lane, which is the street outside the Federal Reserve Bank of New York."
Ms. Furchtgott-Roth said the auto companies should have been allowed to go into orderly bankruptcies, calling the bailout deals a "big giveaway to the unions."
Mr. Cassidy resisted efforts to describe the financial crisis as a government failure, insisting that subprime lending was an "overwhelmingly private sector phenomenon."
James K. Galbraith, a professor at the University of Texas representing the Keynes side, said, "The United States is not in any way in any kind of debt problem." That was too much even for his debating partner Mr. Rattner, who disagreed, saying, "I think the debt is too high."
The crowd had started out as 47% pro Keynes, 33% pro Hayek, and 20% undecided. At the end of the debate, 52% favored Keynes, 42% favored Hayek, and 6% were undecided. So Keynes still had the edge, but the Hayekians won over more of the undecideds.
I was struck by how much the debate foreshadowed what is likely to be the 2012 presidential debate, with the Keynesians making Obama's argument that without the stimulus and the bailouts things would be even worse, and the Hayekians making the Republican or Tea Party argument that because things are pretty miserable now it shows that Obama's Keynesian measures did not work.
