Keynes vs. Hayek (continued)

Last Sunday (July 4), I posted on a pair of recently discovered newspaper clippings that featured a real time debate between John Maynard Keynes and Friederich Hayek on the nature of the biggest problem of that time - the Great Depression.

Now here's a follow-up. It's an article that appeared in both The Wall Street Journal and on the Cato Institute web site. (HT to Cafe Hayek for the pointer). In the article, by former Dallas Fed vice-president Gerold O'Driscoll, Keynes and Hayek debate the nature of savings, particularly in a downturn. According to the article (and the clippings), Keynes thought a dollar spent was a dollar spent. Therefore, prime the pump and let the spending do the work. Hayek was actually a bit pickier. He believed some dollars - those spent on investment - as more powerful.

There are a couple of other points Hayek and his colleagues made, but these countering views have much to suggest to us about "proper" (whatever that is) fiscal policy in the current environment - at least as Keynes and Hayek might have seen it.