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Quotation of the Day…

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… is from page 401 of Axel Leijonhufvud’s magnificent 1968 treatise, On Keynesian Economics and the Economics of Keynes [2]:

If one must retrace some steps of past developments in order to get on the right track – and that is probably advisable – my own preference is to go back to Hayek.  Hayek’s Gestalt-conception of what happens during business cycles, it has been generally agreed, was much less sound than Keynes’.  As an unhappy consequence, his far superior work on the fundamentals of the problem has not received the attention it deserves.

Leijonhufvud then, in a footnote, singles out for “especial” attention Hayek’s articles “Economics and Knowledge [3]” and “The Use of Knowledge in Society [4].”

I share the widespread view that Leijonhufvud’s Armen-Alchian-and-Robert-Clower-inspired interpretation of Keynes is way off base – an interpretation that Gottfried Haberler, for example, quite rightly described as being “entirely unconvincing.”  I suspect that it is Leijonhufvud’s interpretation of Keynes as having had a far better grasp of microanalytics than Keynes actually had that prompts Leijonhufvud (seemingly) to buy into the prevalent assessment that Hayek’s “Gestalt-conception of what happens during business cycles … was much less sound than Keynes’.”