It is the case the Keynes has received a lot of attention lately due to the debate over the need for, and effectiveness of, fiscal stimulus in response to the economic crisis, but Hayek simply hasn't gotten the same visibility.
Freidrich August Hayek was an economist affiliated with what is now known as the Austrian School. Some of his major work was on business cycles, the booms and busts that economies experience. Here is a description of one of his insights (from the Library of Economics and Liberty):
One cause, he said, was increases in the money supply by the central bank. Such increases, he argued in Prices and Production, would drive down interest rates, making credit artificially cheap. Businessmen would then make capital investments that they would not have made had they understood that they were getting a distorted price signal from the credit market....he concluded, artificially low interest rates not only cause investment to be artificially high, but also cause “malinvestment”—too much investment in long-term projects relative to short-term ones, and the boom turns into a bust. Hayek saw the bust as a healthy and necessary readjustment. The way to avoid the busts, he argued, is to avoid the booms that cause them.Sound familiar? You would think with an insight that so nearly describes our recent history, lawmakers, and everybody else, would be beating down the door to the Austrian School, and that this would show up in their decision making.
Well, the Senate recently had a chance to demonstrate whether or not they had made such a conversion with the confirmation vote on the guy who exerts an enormous amount of control on our money supply, Ben Bernanke. The result? Sean Scallon at the @TAC blog said it best:
Yes the two political parties may have bitter disagreements when it comes to abortion, or climate change, or health care reform, but when it comes to benefiting themselves and the establishment they serve they do know how to come together for a common purpose.
I mean you had Sen Thad Cochran, Republican of Mississippi and Charlie Schumer of New York, as different as two men can possibly be from two completely different places and backgrounds, and yet Ben Bernanke brought them together. Not only can he drop money from out of the sky, not only is he’s Time’s Man of the Year, he’s also a peacemaker as well. Perhaps he should nominated for a Nobel Peace Prize as well. Ain’t he swell?
So, rumors of a Hayekian awakening are, I fear, greatly exaggerated. We now return you to your regularly scheduled boom and bust cycle already in progress.