another thing that has to happen. i think that there are some recipes for their success. it starts with their public engagement of private engagement, private risk-taking, but again but there has to be some momentum that is built up, and the media can help to do that. that's really what i'm hoping will happen when we talk about homes. i just can't see that we are going to be satisfied with going back to where we where which is a situation in the early 2000's, the first of the new century, where we were putting so much at risk in terms of the housing market. we have come to a point of crisis so for me it is a wake-up

call and it requires us to go into camp out in front of wells fargo bank or in front of some other financial institution, soviet but i don't think that it does. i think my idea is we come together, all of us who have an an issue in resolving this crisis and that is everybody in this room. we come together and really start grappling with the issue of how we are going to move forward. ..

>> use your voice, talent, and skills to do something because a future generation really is depending on you. thank you. thank you very much. [applause] >> during this period at the department of education, my working relationship with judge thomas was positive. i had a good deal of responsibility and independence. i thought he respected my work and that he trusted my judgment. >> it's been 20 years since anita hill testified on capitol hill allegeing clarence thomas sexually harassed her. this weekend, she spoke about that testimony and the lasting effect on our culture. >> when you return from a

testimony that is becoming -- this event that you really had no idea what was going to be what it was, and then you -- i said i'd walk out on the street, and everybody did polling, so they did polling immediately after the hearing, and the polling showed that 70% of the population thought i had perjuried myself. in addition to the threats to me personally, the bomb threats to the law school, my home, i had to go to the grocery store and realized that, you know, every, you know, seven out of the ten people i encountered at the supermarkets thought i purr oned myself in my testimony. >> watch her remarks as well as the hearing online at the c-span

video library car -- archived and searchable. it's washington your way. ♪ >> coming up next, booktv presents "after words," and hour long program where we invite guest hosts to interview authors. nicholas and his book, keynes hayek, tackles economic theory explaning the market intervening. he discusses the perspectives and the man who made them famous , the economist, matthew bishop. ♪ >> host: so, nicholas, one of my favorite quotes is the one about how practical men are as

economist, and you wrote a book about two, himself, mr. keynes and frederick hayek. why do they matter today? >> guest: turns out the greet dividing line in economics in whether you interfere or manage it, and people said don't do that because it will cause a mess to be cleared up eventually was 18 years ago when john keynes started working out theories that looked to the economy in a different way. instead as a series of business propositions that is what they traditionally did, he started looking at it by hovering above and looked at macroeconomics, the big pictures of different almosts, moving parts, and also end of the 20s when britain

suffered unemployment, and at a time from 1929 with the subsequent collapse of the american economy, large scale unemployment was a great problem. he was looking at if from a practical point of view, anything a government may do to an economy that cures this terrible poverty, this terrible condition of people not finding work for years on end, and as that was 80 years ago, but it turns out this key division between whether you interfere or don't turns out to be the principle political issue of this electoral cycle and it's been submerged for a long period of time. when they managed to succeed, they enjoyed 30 years, i suppose, between 1935 and 1945 managing for the benefit of, well, let's say the population, but they made the economy bigger. between 1975 and 2008, say, we had a different thing.

we had a notion that you're right in principles, but you should try to ration the amount of new money you ease into an economy so it's not out of kilter with itself. >> host: they had the same schooling -- >> guest: started that way. he was -- he actually didn't think much of his economics, but that's neither here nor there. the principle was well keynes and hayek fought over was economics, but the strength of hayek turned out to be interferes into the economy. because keynes suggested you can directly employee people and government can cut taxes drastically and ensure business activity picks up, not with standing all these various things a government may do, hayek said yes, but that entails

increasing the size of the government, and there's a problem with that which is the more you increase the size of government, the larger of proportion of economies are spent by government agents rather than the people themselves through taxation rather than people spending from their own pocket, the more likely you are to have a tyranny, and he added something which was found a great echo in the tea party movement among a lot of libertarian thinkers in america and some conservatives that actually it's the government itself that's the problem, and that, of course, is something resinating since ronald reagan or maybe even goldwater in the republican tradition, but, again, it's just outside of the family. it's the main tradition has been like the conservative party in britain of embracing everybody together, but the hayek's had a different point of view with an

absolutist point of view of what should or should not be done, and government was the problem as far as hayek was concerned, and keynes's solutions whether they worked or not, and let's say they do, the fact is hayek said that's a bad idea because we don't want the state to be too big because that checks individual choices, and that's the bases of an underminding of free choice. >> host: what strikes me as very interesting in the book is the extent to which you get into the personalties and how keynes and hayek interacted with each other. you think about the debate today in politics, and there's a real shouting match going on. the tea party right that endorses hayek is in its opposition to keynes and like wise the keynes group being a voice of the school, so i think we can disagree how much keynes endorsed the position, but

there's an intolerance where in the book hayek had enormous admiration for keynes. i don't know if keynes admired hayek as much, but maybe talk about how that relationship developed over time, and did they really respect each other? >> guest: they really quite liked each other in the end. you're right about hayek liking keynes. keynes and hayek already knew, and as much as keynes was famous already by the time he moved into full employment as an comist, and he did that -- economist, and he did that through pointing out the signing of the treaty which would be tragic and lead to a second world war, which was true, and he was in the army in world war i, and he knew from his own personal experience that the amount of inflation that totally devastated austria at the end of the war was -- the keynes was right about it, that that was the way towards extreme politics, and so he was -- he

started off knowing keynes as a mythical heroic figure, and in a way that never departed from hayek. hayek always maintained respect for keynes as did anybody who came across him. no doubt that -- if not requester churchill, you couldn't doesn't keynes was the greatest man of the 20th century. he was an astonishing creature. i wish we could meet him. he was capable of juggle many different balls at the same time. even if just one career was on track and good, he would have been an astonishing person, but he ran cambridge, bought pictures for the national gallery, owned insurance companies. he was a day trader. stayed in bed until noon every day on the phone to his stockbroker saying sell this or that, and he was a speculator and understood the market more

than the people who say they do. >> host: today, he's just seen as the face of big government where as, in fact, you know, he was actually in many ways an capitalist or credited with saving the capitalist system back in the 1930s when there were much more extreme views as to what should replace and brought about the 1929 stock market crash. >> guest: it's a problem about knowing too much about theory in the modern political debate because where the band-aid around so absurdly and obama is a socialist and keynes is a socialist, well, not really, not really, but to go back to the keynes and hayek thing, so the problem was that hayek was brought in by lionel robins, a specialist at lsc brought to to counter keynes. it was set up in the first place for what could be a very interesting battle. robin already had a battle with keyness in the bank of england

committee or government committee about the use of the bank of england, and that started off pretty sharply. he was to remember, of course, this is not your gentle to and fro of an argument in a bar. this is pretty high flown stuff fought on tough measures. his stock and trade really was sarcasm. that's what he -- he had attacks on people and sarcasm on people who protected him. they literally buttoned up. his jacket had three buttons, and he was a very well mannered, both brought up to treat each other properly, but when it came to important things like disagreements over economic debates, then they just took their gloves off, and so right from the very beginning, the

keynes-hayek debate was very sour. they were rude to each other to the extent that other academics pulled them apart and said this is not the way to conduct academic date. please, don't talk in these terms. it set a trend that lasts until this day. for decades, they pretended they didn't exist. look at the genius of the three volume biography of keynes, hayek gets barely a mention. >> host: why is that? >> guest: i guess you can say i was talking about keynes, and keynes didn't take account of hayek, but he did take some account of hayek, although, it was exhausting, gave it over to his minons to continue the harassment, but he did -- the so-called cambridge -- this wonderful group of young economists around keynes, were as critical of hayek as

himself. they debated thing, and it could get personal, and when you leave tonight, it's a bit like las vegas, you know. when you leave the cottage, you know, but hayek was quite capable. i mean, one of those things we know about that crispness of autrian or german speech is it sounds far more abrupt than it might have to an englishman who loads everything with clauses and so on, but the christmas of that austrian debate meant that -- it's true even today that we can be taken aback when we come through a german who asks you outright a profoundly personal question, but in that case, hayek gave as good as it got, and the result was, certainly in the initial battle when the two men locked horns, they really did lock horns and

didn't let go. they barely, actually, scored a genuine point against each other in the real debate because they were too busy sniping at each other about investment, what do you mean by savings in this? i want to know more about what you mean by stocks. they got bogged deep down into the weeds, into the long grass, you know, and really didn't escape from it. >> host: there's different views in today's terms. i mean, how would you define today a hayek and keynes? >> guest: hayek is someone who is suspicious of all government efforts to manufacture a boom in the economy. hayek was true on this right from the very beginning, but the hayek's remain true to the day, and it's austrian economics generally, and then to say actually the market over the long term cures itself, and that eventually there will be an e quill equilibrium where

everybody is employed once again. >> host: under the austrian economics, you can have market failures, bubbles, and crashes, but somehow that is something you just have to get used to and live with and that ultimately though the economy will find its own way and we'll get more prosperous, that the idea? >> guest: absolutely. it comes from the school of thought that he made a virtue out of it saying at the bottom of the cycle there's destruction that's necessary in order to ensure that the economy continues to roll and expand and so on. >> host: and keynes? >> guest: that's different. they look at society as it is, the figures, and they say, my goodness, there's 9.3% unemployed and 15% of them have been unemployed for six months or longer, and then they start looking at how many young people, how many minorities, and so on wharks are the proportions, and they come to the conclusion this is intoll rational, and government has a

can intervene and should intervene by a method they think is best, and all of these methods have been tried by this administration. they made interest rates 0 to the horizon. 23 you want to borrow, it doesn't cost anything. the problem with that is you can't push on a string. you can expand something, but if people don't leap into the void, after all, companies have so much cash they don't need to borrow, that's not getting very summary. -- very far. keynes also suggested which is now impossible with the divided government with congress on one side particularly as it's not willing really to compromise on anything, is to directly employee people, the so-called shovel ready projects. we build the schools. we build the roads and so on. it's a matter of current date right now and what obama's jobs

bill says it's all about. that's what we ought to do, and we want to cut taxes. the fact is if you want to increase demand in the country which keynes said, lift it up so like providing extra electricity or something into something, if you lift the demand, you can do that by cutting taxes. >> host: how hayek's view sounds like a sort of counselor of dispair in a sense keynes says we're all intelligent people or some of us are intelligent, you know, the power of government, you know, exists to a apply our intelligence to sell the big challengings that the world faces whereas hayek's views say for all our intelligence, there's basically nothing to do through government. it sounds like dispair, or is there more to it than that? >> guest: there's not more to it. it's a pessimistic view of the world and when it comes to some

things, knowledge and intervention helps, medicine or whatever, but it does depend, according to hayek, at what stage of the discipline you had, and he thought that keynes was a total wrong direction, and when hayek was awarded his nobel prize, he said i come here to apologize for the economics profession. the fact is we've done a terrible job, and it's going to take decades to get out of, and unless we start now -- he actually lectured everybody -- saying we are back in the 30s, and it's going to take a long time to ever get back to a free and open society. the -- it does beg the question, of course, when we talk about politics today exactly what a hayek economy, a genuine hayek economy looks like. it's all very well to be an agitator if you like to constantly snipe that we don't want raising of taxes, no more

government spending. these are absolutes. we're not going to agree to anything unless those two conditions are met, but the -- nonetheless, the battle lines are drawn, and exactly that, it's -- if the world would come about, well, the size of the economy is large due to all sorts of things like things like pension, would they do without pensions? some people are nibbling around the edges of that now. >> host: he basically said government should do the absolute bear minimum to allow society to be on the defense as far as i can see. was he in favor of property rights and enforcement of law and order precisely? >> guest: exactly. the rule of law is what he wagged about everything, and it was picked up by margaret thatcher about the rule of law was essential to society and societies can get into trouble very quickly. >> host: he was cited as an

adviser to reagan and very much people regard it as to hayek and his thinking. i mean, how much in reality did what those two leaders produce actually sort of stand up against, you know, what hayekmented to be achieved? >> guest: yeah, a number of ways of looking of this. hatcher, when she went to the conservative research department and discussing what to believe, she graped out of her handbag an organ and slammed down the road to serfdom and says this is what we believe, so no doubt what she believed was to introduce, for the first time actually in the conservative party, an ideology, a real checklist of things you should try to attain that came out of a book. they never used to do this, so

it was novel. where they hayek? they went out of their way saying i'm not add an adviser to thatcher or advise president reagan. he always denied -- >> guest: >> host: did he disapprove? >> guest: he thought they got the message, but it didn't seem practical. in the election today, it's a matter of the difference between saying are you going to use this in order to nudge the world closer to your way of thinking, or do you actually intend to introduce the whole scheme, com hayek recommended, in which case, we're going to have an uncomfortable time however long it takes. it could be a uncomfortable 20 years because all things disappear including representative democracy. hayek didn't believe in -- he so

believed in prices, so believed in the market that he thought even things like town and city government shouldn't exist, that it should be handed over to a corporation. he didn't believe the -- so the pound -- the dollar should exist. he believed there should be private companies each issuing currencies, and that we would eventually come to understand which was the strong currency and which wasn't and how to use the various currencies and he believed, by the way, that there should be a free market of labor around the world, no borders between nations. this -- a lot of this real hayek stuff runs very counter to the people who say they are hayek or derive from hayek, but his main problem about reagan and thatcher, and no doubt that that's an indication of if they didn't do very much in hayek's terms, it shows what a real hayek future could be and how radical it might be because most of us believe that reagan and

thatcher noticeably changed the way we understand the world we live in and gave credit to the things such as hayek was suggesting such as a return to the free market instead of mixed industries. it is unbelievable if you think that when thatcher took over labor in 1979, bus services, post office, trch -- telephone services, coal mines, shipping, steel, they were in the state they were born, and that privatization was the beginning of the first step towards the state selling off all the bits they didn't need to do. she had 13 years, not near enough, and the conservatives fight about it ever since what her legacy is and if they should continue it. we're in an accidental

experiment. when the conservative coalition looked at the books and had a discussion with the governor of the bank of england, they were told there's a problem about sovereign debt because britain borrowed heavily as all did in the disaster, and you could do two things, start paying it off soon or manage the economy and get that back to health and pay it off later. 234 their wiz -- in their wisdom, they decided they were going to pay it off sooner rather than later, and the result is as you can see they have not quite got to a double dip recession yet, but i mean, the figures absolutely look as if they are heading south. we're talking about 0.1 growth in britain. >> >> host: do you think cameron and his advisers actually have read hayek or have any interest in that kind of intellectual debate? i mean, the way mrs. thatcher

clearly has at least got a copy in her handbag with her, whether she read it, i don't know. >> guest: i think sthe -- she did, and reagan read it, and all sorts of people, unlikely people, much more serious than one imagines, but have cameron and os born read it? and i'm sure obama has read about it. i don't think he's read much about economics at all, and nor had roosevelt. roosevelt had an instinct and obama has a less sure touch, but whether they read ppe, the fact they -- i don't think have a real grasp of keynes or have a slender understanding of hayek. it's -- it's not good. >> host: now, talk a little bit about the road to serfdom

and how that book came about and what drove hayek to write that in particular at that point. >> guest: it's really interesting because -- and it came about in an odd way. hayek moved britain in about 1930. he was none of the things one might have guessed about an austrian. he was not sympathetic to the right, all things he didn't fit the cliche. not with standing the fact he had letters of recommendation from the director of general of the bbc and presidents of the lse and everything else in order to get a job to help wartime britain, he was turned down, and i thought that was actually in terms of turning points of history. they should have used hayek, makesly valuable. a great insight into germany and austria, and extraordinary brain which was able to, you know, tackle things like rationing,

say, practice kl things you need to do in a wartime society, but they said no thank you, and the result was he devoted the war to writing what he thought -- he was actually aiming at more to the left than the right. he was an, about was once the war was over that because the war had been seen to cure unemployment in the keynes way, that governments would increase the size of the state wholesale, and he thought that in there lay the dangers of actually soviet communism. he was more worried about that because nazism was cured or defeated, and so that's exactly what he set about to try to do. >> host: he predicted a vicious totalitarianism because of that growth of government? it was not a cozy social

democracy, but a nasty, brutal regime. >> guest: absolutely. he looked at communism, looked at the recent evidence of the last dictatorship. it's beyond belief to assume people would ever behave in that way, but that just happened in the world, and still going on with soviet communism. it was not too difficult a warning, but it all went wrong because churchill, who half read a lot of things, half red the road to serfdom, and he jumps the conclusion if the labour party was elected in britain in 1945, that there was a british form of the gustapo, and he was foolish enough to say it, and it was another reason people disliked hayek because all the social democrats, nothing to do with communism at all, i mean, come mewists were the chief rivals, suddenly found hayek saying they would be just as bad as the communists, and so with a

single swipe, the very modest took hayek out of the game. >> host: that's interesting because in the book you talk about how sweden and some of those scandinavian democracies emerged now as i guess the definition of big government, and yet no one would look at those as sort of the awful places 20 live. in fact, life is good in those countries. what extent is there a representation of the hayek view? >> guest: i say pretty much because it doesn't strike me as being an oppressive society, but don't go too far away from the studio to find good americans who would say that to have a single payer health care is in itself a tyranny, you know? it's how you define your liberties. >> host: would hayek have recognized that? >> guest: well, yes, he did, and hayek actually had a snipe for this. he never addressed it properly,

but if he were here, it would be interesting what he had to say because he said, oh, yes, the scandinavian countries look on the face of it to be civilized places, but they are full of people with inner turmoil coming out of having so much of the market choices removed from them by the government, and that's why they commit suicide so often, so he sharp statement which left you dumbfounded for awhile. >> host: let's take a short break on that note. >> host: so today, you know, we talk about the hayek and keynes school, and one can easily make the mace tick of

thinking those schools just arose by accident and they admired their work and so forth and decided to follow them like they were on twit e but in reality -- twitter, but in reality, i mean, they were deliberate builders of movements, and maybe you can talk about how they set about creating an army of followers. >> guest: yeah, keynes had a rather simple way of doing it because he had a product to sell if you'd like. he wrote by the end -- he completed his general, so-called general theory where he described exactly how by tinkering with the economy, you could make it operate at a higher plane, and therefore employee more people, at least to his own satisfaction he proved it anyway, and because this was the message that so many people wanted to hear, at least in america and harvard, fringe, when the boxers of the general theory arrived, they were ripped open like contraband. it was an anistonishing thing,

and that opportunity to be at the fore front of the movement of how to cure unemployment that cursed america for a decade, you can see how obviously keynes himself was an attractive figure, elegant, and smooth, and how that's almost a movement waiting to form. hayek was in a different position because no sooner of had war ended, and keynes had largely designed the piece. he was the architect of the piece and designed things like the imf. he designs the woods currency -- currency fixing marginal flotation operations, so you wouldn't imagine there's much left for hayek to do. he had a very old opinion of himself. he was rather better known than he was, and when keynes died, he said before when keynes was

alive, i was an amazingly well known prominent economist, but as soon as keynes died, he was lifted to sainthood, and i was turned into oblivion. it was profound for him. this was a lifetime's work, and keynes was dead, he won, and the foreseeable future was keynes, which indeed it was for three decades. you can argue it's keynes to this day, and i would. economics is keynes. >>so in defeat, however, it shows his character, he fought for a short interval to call all those people who resisted keynes and came from the austrian school likely to be sympathetic to trying to find an ideology to counter keynes's wholesale. he invited them all to a hotel in switzerland, and that was the

crucible of what turned out to be the ideological revival of conservatism and the injection -- >> host: when is this? >> guest: this was 1946, and the -- this is also where conservatives and libertarianism got into the same bed. this is -- friedrich hayek invited -- i mean, i don't think anyone -- he knew they were maverick law. they had to be. he invited anyone who looked like they'd agree with him. from that time on, they met year after year after year, and they fought with each other all the time. one stormed out one day saying you're a bunch of communists. you know, it was lively stuff. it would have been great to be there and to have been invited to that meeting, to have attended that first meeting is, for a multiconservative, an ideological bent like having arrived on the mayflower.

this is absolutely key. hayek had taken a leaf out of keynes's book. keynes tried to purr suede government to -- persuade government to adopt his measures, and he got nowhere. orthodoxy was do in control that there was an unsympathetic government in brit dan. >> host: churchill didn't find him persuasive. >> guest: he did, but the treasury was more persuasive. it was better than the attitudes of keynes, but the rise of hayek's group is interesting because he decided that he would do just as keynes did with the general theory. instead r spending money on lobbying interests or persuading representatives, congressmen, senators, presidents of the way to go forward, if you convinced a large body of the academic community, and they taught people and so on, then it would

become -- it would become much more firm as a herely, and it would allow people to join in or not join in as much as they wanted providing a strand of thought that was contradictory to keynes, and that's how it worked out. american large groups, large big business groups or maverick self-made businessmen who always believed tinkering with the economy for the government to get too large is an un-american thing. >> host: i suppose this led to the chicago boys essentially did it then in terms of that whole movement coming from the university of chicago that was really about free market economics? >> guest: well, they were already there, but not as free market then as they are today, or they were more than 20 years ago, and it's interesting that although milton friedman and

others were invited to the meeting, but they went to europe to play bridge, and they recruited a fourth person to play bridge. they didn't take it seriously, but they became embroiled with the seriousness of hayek and his intent and powers, i think. in fact, they didn't think much of him as i mentioned before as an economist. they didn't think that early economic held much water. >> host: that's interesting because you write, as you say, keynes, today, is economics, and friedman, who, you know, in many ways, the tea party would look to as sort of one of their favorite economists. he actually endorsed much of the keynes frame work. >> guest: he said as much. he said as much. he said in a way we're all keynes today, which, of course, is leapt on by keynes, and he went on to say the way we understand the world is macroeconomic, which is keynes,

and the other hand, the government is too large, and the only way to cut the government is to cut the government, stop spending, and wait for the -- it's easier or the pressure of a deficit is much more strong upon a president than it is to have some leftover spending as it were. >> host: also struck by how another -- i guess the heroen of the movement, ayn rand. >> guest: i must say this reminds me about those sort of endless debates that took place on the left. you know, was rosa luxumberg a better person than tropski. they hated their next door neighbor more than they hated the person that should have been their enemy. >> host: and sort of that type

undoubtedly. >> guest: they used to spirit hayek thinking he was the biggest compromiser which would come to news to the tea party today who don't compromise about anything, but it's true, hayek did say some things like if we had this economy, i don't see why, for instance, people shouldn't be getting proper pensions and proper health care. everybody should at least have that, but that was a step too far for people like rand. >> guest: he thought the government should provide that? >> guest: yes, he did. something rarely mentioned. he was sound on it to and his logic made perfect sense, but everything else is private, there's some things that any state should guarantee its citizen, and that is at least the ability to stay alive and remain healthy. >> host: now, why did he think the state would be capable of funding that kind of welfarism i guess it would be called today? >> guest: well, i mean, these

times change, and i think the whole service was introduced in 1945, no one would imagine the leap and bounds that health care itself would take and medicine would take and the cost of it. also, of course, we were talking about pensions on the whole when pensions were invented, people were living four years beyond the pension date. now, because of good health, actually due to many of the things that the welfare state that keynes helped introduce brought about we all now live longer and we are healthier for long, and i'm not sure if hayek would revisit it today and agree. he might think there's another way to do it. >> host: in terms of his theories, and i mean, what -- how much was he actually willing to predict about how the world would actually turn out in reality as opposed to what he thought it ought to be like on paper? i mean, he obviously lived long enough to see the collapse of

the soviet soviet union and the iron curtain come down. was he surprised about that or did he predict it? >> guest: no, no, nothing surprised hayek. he worked it out in advance. he thought communism was the perfect example of the contra contradictory economy. the discretion to spend money to communist appellates, and you take it away from individuals, then what you end up with is a society like soviet union with all the horrorrism that entails, but also sooner or later it collapses because you can't resist the natural force of people wanting to bargain, wanting to trade, and spend, which he thought was absolutely one of the core things that made up humanity, but also he said that if the price mechanism had been invented, that is if one day somebody came out with contentions saying this is what we needed to do, he said it would be the single most

important elements of human life, and he was stuck to the fact that prices were the key to everything because that was where the millions, billions of people in the world bargained one-on-one with each other and agreed to at least something, but he was always very weary of going much beyond that, and he said it'll happen. i can tell you what happens -- he was -- he admitted one of his problems with with keynes is he was someone who was a nay sayer, and he really didn't have anything much to put in the place of the things that he shot down, so he could point out all the reasons why keynes was wrong, but when it was what would you do, he said i wouldn't do anything because i don't know enough about this stuff. >> host: is this the essence of his theory that essentially things were just too complicated for anyone in a position of authority to actually be able to know what they were doing was the right thing, or was it more

about a fundamental view of what one's political freedoms ought to be? >> guest: it came from both angles. the first one was just the impractical one saying it's impossible to understand what is in the minds of everybody, and therefore, how could a government agent make the right decisions? every 100,000 you please, you displease as least just as many, and that's because he was not making a proper market decision himself. it was patronizing, making decisions on behalf of others, and, of course, he has other agendas. in his nobel lecture, which is well worth revisiting, hayek said that it was a bit like going to a football match, where you knew all of the vital statistics of all of the individuals involved. you knew their ages, height, their abilities, abilities of

power, head ball, whatever, and you knew all of that. you knew what the weather was like. you knew what the time of day was like, all the personal circumstances with the people involved, and then trying to predict what would be the result of the game. he said, it is impossible to know that much information about people, and we will never reach that stage. >> host: that's an interesting issue because the movie that's out of the moment of "money ball" takes an economist as a hero, they do the statistics on baseball, and they have a formula where by you recruit players best on based value of the statistical performance you can predict, and in the end you have a team that ultimately, the red sox got rid of the course by employing this approach. i wonder in a sense if hayek, had he known the computing power available now in the era of big data, whether he would have taken a different view to the

technical feasibility of having economic policy that's designed based on pretty good information about the world. >> guest: yeah. i doubt it, i must say. he didn't believe in aggregates, so there was no -- you couldn't take all postmen or all butchers or all baseball players and try to work out whether there was a subeconomy with rules that would apply to that group. he said it couldn't be done. there's part of the argument that he had with pierre straffer, one of keynes's ac colieds, and one of those arguments is exactly about whether each commodity had its own natural weight of interest. it's too technical to get into, but the fact is there's a different natural rate for apples as there is for pears

like wool or furniture, but hayek was not prepared to get involved in any of that because he said that was too much of a leap. you probably couldn't even bring apples together or oranges together, so it -- he always used to suggest that it was like early surgery, economics is like early surgery. better to do nothing than actually to sort of get your sword out and hack limbs off. >> host: did he apyre to the idea that economics is like den industry ultimately that you go to technicians that keep your teeth looking good, and, you know, i guess just -- you really think he ultimately believed that he would never beyond early surgery and never reach that proficiency that they thought was so close? >> guest: he put so much work in the individual, and i suppose -- his admiration for

this, for individuals, his own starting off with himself, that he never liked anybody else to ever make any assumptions on his behalf. i think maybe his own mind was unique. >> host: do you believe in progress? >> guest: i don't know that he would be able to come to a conclusion about what progress would be. progress suggests, after all, it's moving in a positive direction, and i think he would say one person's positive is another person's negative. any way, we have to watch it. there's no need to press progress. keynes was the opposite, of course. he wanted progress to happen in two weeks time knowing full well it would happen in six months time by borrowing or getting there faster, but hayek wanted everything to go at its own speed. >> host: interestingly in the book you describe hayek as a utopian of a kind. surely, the essence of utopia is there is a belief in a better perfect world that one might live in. >> guest: yeah.

there are contradictions. keynes and hayek, one of the problems is gone on for a very long time, and you'll always find places in any individual thought, really, any thinker's thought where they contradict each other. at the hotel, he decided that what was missing from his side's logic was the warmth and humanity and the vision that the left had provided, and he said even if it went wrong, the fact was that communism started off with an admirable goal, therefore worth and tanning, and goodness m e did it not draw a lot of people in even with the horrors, and he said that's what we want to do on our side, that's what we ought to do, and that's when he started painting a broad brush on what society could be like if you take

government out of doing the bear minimum. he would withdrawal from everything, as i say from city governments and so on, and to that extent what he wanted to do is move the boundary between where parliamentary lines and where the market takes charge. he said the market is democratic, we all make decisions all the time ourselves. you don't really need to go through like sort of a reformation. you don't need somebody to form your thoughts or elect somebody for a good mayor. what you ought to do is move to a city that suits you, and if the mayor, the ceo of the city, does things you don't like and raises the tax too much, just move to another city. he lived in an ideal word, but it's so ideal it's impossible to imagine how it came about, and if it came about quickly, it would be painful for people. >> host: now, you say he saw

the market as certainlily democratic. some say here's a democracy that's basically become a commodity that the market buys. >> guest: sure, sure. >> host: there's so much campaign finance money in it and so forth. is there a way of hayek thought how government ought to be allocated to the highest bidder? >> guest: it's not the way he thought it would come about, and it's not transparent. the great thing as far as hayek was concerned about his plan where that because the market is open, it's open. that is everybody knows what everybody's up to. it's a straighted forward to read. you look at the price, and you know what's going on. we don't know the price of lobbying, so we don't know the price of the health care compromise that was reached by spending money on drug companies

and health insurance companies who restricted the ways obama changed the health care provision. we didn't want price was paid, and what we end up with is a bargain that probably suited nobody. >> host: in the final chapter of the book, the title is, "and the winner is," and, you know wharks is the current state? is hayek wins? is keynes winning? >> guest: the fact is it's too early to tell, and way too early to draw a finishing line in that. certainly, we see what is the keynes-hayek election. i don't know that there's anything that's -- it's been said by the president that's not pretty good pure keynes, and his jobs bill which may or may not come to fruition is a manifesto and there's a level of anger too saying this is what we have to do, here they are, and he lists them off. raising taxes is not keynes, but leave that aside.

whoever we end up with, even if it's mitt romney, his policy position will be guided by the tea party people, and they have roughly said we don't want you to raise taxes. we don't want you to increase government spending in any circumstances, and if they hold that line, then the republican candidate will have to find some justification, and will have to find a program that says this is how we're going to live without either raising taxation or spending more money. there's also an expectation about paying down the debt. you do that by cutting government services in which case the republican candidate has to point out where and when that the cuts take place, and how deep they'll be, and that makes for a very lively debate, i must say. >> host: do you feel, i mean, it seems in your conclusion that ultimately your sympathies, you know, come down with keynes,

ultimately, keynes saved capitalism or keynes saved capitalism in the 1930s when i guess the hayek school was saying liquid liquidate, liquidate, and let the market sort it out, and even in 2008 when the lehman brothers failed and the market system appeared to be on the brink of collapse, big government came in and stopped the collapse, and you seem to feel, i mean, you quote of all people, jake who i guess is not a hero of the hayek school, are you -- yeah, i mean, you quoted him basically saying well, you know, the policies saved capitalism, and if the capitalists had their way, they would be the people who would actually cause the demise of capitalism because it's so unsupported capitalism that's actually sort of intolerable in a modern

democracy essentially. >> guest: that's the threat of keynes and unless we do these things and make people happier than they are at the moment, this could tip, this economy could collapse and the society could collapse like it did in the 30s, and we can't return to that. it's the stying leers who said everybody is a keynes in a fox hole. the fact is that in 2008 and 2009, you didn't hear very have many people, even in the "wall street journal" who said, let them all fail, lehman, number one, let's get on with it. they were amazingly silent until the storm passed, and then that's what people said, oh, welt, we shouldn't have sent this money to the stimulus bill and so on. there were lone voices, but no principle people, no one of stature that said this is crazy, just let the market run its course, do it's worst, pick

ourselves up, and we'll be better off, and i can't see a gop presidential candidate either saying we've tried all of this keynes stuff, and we're not going to do it anymore. we're not going to intervene in any circumstances. >> host: do you think hayek himself would have been against bailing out the financial system in 2008 or would he be faced with a completely melt down of the system? >> guest: great question. we need a wigi board out to see what he would have to say. it's really hard to say because to go back on that would be to go back on almost everything that he said, so i would imagine that he would say you should find out where the bottom is, find out where the prices put these banks, let the market tell us how much these things are worth. >> host: again, 20 get the word -- to get the board out, if you were able to speak to keynes

today and ask him one tip for getting the world out of its current mess, what do you think his number one piece of advice would be? >> guest: it's not easy because we live in a world where there's practical considerations. even if keynes were the president, he'd find it difficult to get through the house of representatives. i think he'd say cut taxes a good deal, i mean, a lot, really cut taxes. he would say spend on roads and education, bridges, if you can, but if you are not allowed to do that, then you're stuck, and i think that he would, because so much of it is to do with the incentive motive of european debt, i think he'd try ingenious ways of lifting the whole of the level of government holdings, of notional goals if you'd like in in order to get out of it.

he'd suggest such a thing in the past where every nation would be given pieces of paper that were effectively gold films. >> host: what about hayek? >> guest: what would he say? >> host: what would he be saying at the moment? >> guest: i think he would say we're in for an incomfortable ten years. it's going to take a long time to get out of the mess they put us into. >> host: in that sense, in a way, you've articulated an keynes method for republicans rather than the hayek method that is more brutal. >> guest: i can't see any politician fully implying the hayek. that would be difficult. >> host: because it's so brutal. >> guest: you have to spell