Monday, July 8, 2013

Knut Krugman vs. Krugman von Hayek

Lance Taylor suggested that if you look closely into Paul Krugman's ideas you actually find the ghost of Knut Wicksell. Now Nathan Tankus argues in a post here that Krugman looks more like Friederich Hayek. The crucial thing is that:
"Both Krugman and Hayek have argued quite consistently that there was a 'natural rate of interest' which according to Krugman is “the rate of interest that would match desired savings with desired investment at full employment. “ Hayek makes the same argument in his writing. This interest rate is not the interest rate set by the central bank, indeed it is not an interest rate set on any market. It is a hypothetical interest rate which we will finally know if or when full employment returns."
Note also that Hayek's model, like Keynes' in the Treatise on Money, was quite Wicksellian. So Nathan and Lance might be onto the same thing in fact.

1 comment:

  1. Thanks! Yes, I didn't make the connection in the piece but they are very similar. Sraffa also argues that Keynes of the TOM is quite close to Hayek in his original attack on Hayek. I didn't think making the Wicksell connection would have been meaningful for the audience so I didn't make it but it is obviously connected.


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