The financial crisis shows why we should admire Friedrich Hayek. Por Philip Booth.
Some people have suggested that the current crisis suggests that ‘free’ markets are dead. Given the high degree of regulatory scrutiny in the financial sector that is not a point of view I hold. However, the neo-classical case for the market economy has certainly become strained, though the Austrian or Hayekian case has been strengthened.
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Hayek suggests too that booms and busts are the product of poor monetary policy. Central banks hold interest rates too low. People consume too much and invest in business projects that would not be profitable at higher levels of interest rates. Resources then get misallocated. And then the whole thing goes bang and we get a recession (in this case accompanied by a banking crisis).
The socialists can carry on arguing – though they are wrong. But the equation-driven, data-driven neo-classical economists should stand back a bit and admire Hayek. They have a lot to answer for too. They should not lose confidence in the free-market cause, but look for better arguments.
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