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A tour de force
on May 28, 2012
It is amazing how much the author can pack into 400 pages, The writing is clear and entertaining, leavened by anecdotes and sketches of some very famous economists. Yet the author covers hotly debated issues in enough depth that the reader can understand what the opposing positions were, and why people held them. This is particularly important to a lay reader, as some positions may seem so weird that an uninformed reader may wonder why anyone could reasonably hold them. After White's explanations, they become plausible, even if not convincing to a twenty-first century reader.
To take just one example, Hayek long advocated privatization of money, i.e. government should get out of the business of printing (or minting) money and let competing private sector issuers do it. Sounds absurd, but White shows the logic in terms that can be understood by a lay reader, and that might be informative to a professional economist.
While White covers a great many issues, the common thread is the scope of government versus the scope of private enterprise and market forces. Thus at one extreme Oskar Lange claimed that, now that we had computers (written around 1950), bureaucrats could calculate a proper price for everything and there is no need for free markets to set prices (or for any other reason). At the other extreme, James Buchanan and Gordon Tullock argue that governments usually act to please special interests, including bureaucrats and certain producers, at the expense of the general taxpayer.
The centerpiece of the book, however, is the argument between Keynes and Hayek, as to whether government should massively intervene when the ec0onomy turns down, or whether market forces should be allowed to play out. This is a crucial debate today among both economists and policy-makers. White's account of Keynes and Hayek sheds welcome light on the issues. Indeed, one can compare this book with Nicholas Wapshott's account of the same clash. While Wapshott writes at greater length, and covers much more of the politics, White does a much better job of getting at the economic principles behind each position (and that are still in play today)..