Whenever and wherever economists congregate, the conversation inevitably turns to the enduring question, “What is the greatest economic rap video ever made?” Okay it isn’t true that economists, political scientists, and political economists get together, they always argue about what is the greatest economic rap video of all time. Okay, that is not strictly true because there is nothing to argue about: the greatest economics rap video of all time is Fear the Boom and Bust, which portrays the ongoing debate between John Maynard Keynes and Friedrich von Hayek, which has been ongoing for some time. .
The video’s tagline is the Keynes want to steer markets, while Hayek wants them set free. Markets are human constructs, so there is a certain about of artifice in their construction, in which the buyers and sellers have a certain amount of freedom to conduct transactions. The source of the debate is that there are limits both to the ability to direct and operate within the market. Most problematic is the desire of Keynes to interfere with the market and engage in the favorite activity of politicians, pick winners and direct outcomes. Keynes argues that interfering in markets inevitably leads to perverse incentives, poorly functioning markets, and bad outcomes.
Confounding the identification of market intervention consequences is that the benefits—that is the boom, the enrichment of politically selected beneficiaries— tends to be unambiguous and in the short-term, while the costs—that is the bust, the impoverishment of larger numbers of people like the general public—tends to be more causally confused and long-term. Venezuela provides only the most recent example because the wealth of the country has been unambiguously concentrated in one person, Hugo Chavez’s daughter, while the country is doing unambiguously less well. The boom and bust may appear to be separate phenomena, and those who benefit from the boom and seek scapegoats for the bust, but Hayek argues that the causes of the bust are initially through the boom.
The video memorably portrays Keynes as having rockstar status, while Hayek is seen in the eyes of comely young women who, it is rumored are graduate students, as a quickly forgotten stick-in-the-mud, nay-saying nerd. Hayek’s arguing against Keynes’ boom policies however is done for the best of reasons: to prevent the population from enduring the painful bust, but that doesn’t buy one any friends in economics apparently.
Finally, there is the matter of complexity. The benefits of Keynes’ optimistic and popular boom are quickly enjoyed and easily identified, while the costs of Hayek’s pessimistic bust obtain over the longer term and causality is harder to determine. Even though Hayek may not be popular with the ladies in the video, he did win the Nobel Prize for economics in 1974, which is doubtless of some consolation.