Austrian Economics

0:00It's an honor and a great pleasure for the department and the university to welcome you to the campus today, Professor Hayek. Thank you very much. Although I admit that I'm really much more interested in the questions that the chairman alluded to as being the subject of my current work, I feel that the primary duty of, at this moment, of any economist who is worth the title, is to tell the public and the students that the present unemployment is a direct and inevitable cause of the so-called full employment policy we have been pursuing for the past 25 years.

0:54And most people still mistakenly believe that an increase of aggregate demand will lastingly remove the causes of extensive unemployment. And nothing short of the insight that it is the means we have employed for this purpose, The constant artificial increase in added debt demand that has produced that misdirection of labor, which now manifests itself in unemployment, will prevent people in pressing for more inflation as soon as unemployment becomes at all things. What seems to me the most important part to undeceive people about this belief that unemployment can be lastingly cured by just creating more dimension.

1:52Now, I'm afraid this contention, which I believe a steadily increasing number of economists begins to accept, implies, however, nothing less than the assertion that the great majority The majority of economists who advise governments have taken in the last 25 years have been forfeited the right to be listed to in the future, and orderly to do penance in sackcloth and ashes for what they have been saying, because the inflation has been brought about by Following the Dominating Economic Doctrine, the doctrine which is known as Keynesian economics.

2:50I stress Keynesians in the sense of the economics of a Keynesian school because I have positive reason to believe that if Lord Keynes had lived he would have become one of the formal Fighters Against Inflation, but he unfortunately died at a moment when the main effect of his past teaching adapted to a particular situation, tended in the inflationist direction, as he himself told me once that his theories were frightfully important in the 1930s when the The task was to combat an acute deflation, but that I could count upon him to change public opinion rapidly if his ideas ever should become dangerous.

3:49Now, unfortunately, the six weeks after he told me that it was dead, and the development of theories was left in the hand of his pupils, who developed it in a manner which I am not I'm not sure he would have fully approved their extraordinary influence as recently been let out in a publication which probably has not yet reached this country that has just been published in England, an interesting volume of essays on John Maynard Keynes published by his nephew Milo Keynes containing contributions by his greatest admirers In his essay we find the curious remark that admits that sometimes they, his pupils, had trouble in getting Maynard to see what the point of his revolution really was, that they were pushing him in a direction which he didn't quite like, I think is the question.

5:06Now, what does it really mean? It meant a scientific sanction to the popular view of the business man that what prosperity Depends Upon a Sufficient Consumer's Demand. Generalizing this, and raising it to the dignity of an economic theory, it became Cain's in economics and led to the belief that all unemployment could lastingly be cured by simply keeping aggregate demand high enough. Now this view came to a victory by a serious prejudice about what scientific method really demanded.

6:03Before the change in sanctification of the business man's view became dominant, There had been a widely accepted view about the cause of unemployment, which I still regard as a true one, which was later abandoned. That view was that unemployment, extensive unemployment, is due to a definite discrepancy between the manner in which demand is distributed, – which means the different services and commodities, and the manner in which on the other side the resources are distributed between producing the different services and commodities, with the result that there were in each individual field differences between demand and supply which led to unemployment.

7:01Although still there is one great disadvantage. It claims that unemployment is caused by deviation of the actual price structure from the equilibrium structure which would produce correspondences in demand and supply in each sector. For such a deviation of prices from a hypothetical equilibrium structure, it's something which by definition cannot be statistically measured. We can only find out what the equilibrium prices will be if we let the market under appropriate conditions work and establish an equilibrium position.

7:48But since we don't know what equilibrium prices would be, we cannot measure the deviation of actual prices from the flow. It is very clear, the result, that a generation which was taught that no theory should be adopted, it could not be proved statistically, dismissed this theory as not scientific. It's a very clueless procedure to say something, because we cannot prove it, must be false. But the rest is on the belief that we had in our power to find scientific evidence forever. On the other hand, there was a much simpler contention that unemployment was caused by a insufficiency of aggregate demand, and there it was in fact possible to show statistically there was a rough approximation between fluctuations in aggregate demand and fluctuations in unemployment.

8:51Although this is only a very approximate correspondence, it happened to be the theory for which we could adduce statistic levitation. And according to the current fashion, the theory, which was probably the better theory, but which could not be statistically understood, was discarded, and the inferior theory, which was only an approximate, which was the only one for which there was some statistical confirmation, are going to be adopted as the ruling theory. And so we began acting on a theory which economists up to 1935 had regarded as a theory of cranks and beliefs of practical men, but undefensible scientifically, was suddenly raised to the and the strength of the dominant theory and came to dominate act of policy.

9:50The reason why some of us at that time objected to this was that we had known from experience and knew from the theory we based from this that such a policy of raising aggregate demands At every moment, sufficient to secure full employment involved a constant addition to the income stream, which attracted resources to places where they could be used only for longer if this increase in addition to money continued to grow. It created jobs which were not additional in number, but which were at places where as it could be preserved and maintained only by continuing and even accelerating inflation.

10:44What it suggested to us, certainly to me and many of people at that time similarly, was the experience of the great German inflation, which I had watched from fairly close, and We had a good deal of it even in Austria where I lived through it, where during a very rapid inflation, so long as the inflation accelerates, there was no unemployment. But as soon as the rate of acceleration of the inflation slowed down, unemployment had once reappeared. It was exactly this which led us to recognize the effect of inflation on producing misdirections of the use of labor, which led on these past occasions to pills of unemployment, which we found, which we called then stabilization crisis, an almost invariable phenomenon at the end of an inflation period.

11:52And developing this, we began to recognize that after all, the great industrial fluctuations of the past, the so-called business cycle, were just miniature phenomena of the same kind, thirds of three or four years of rapid credit expansion, producing this misdirection of labor, in that case, almost entirely is a form of attraction of too much labor and other resources into the production of capital equipment, which at a certain later stage proved to be excessive and led to unemployment in at first the capital industries, then by a certain process of cumulative contraction The point we then maintained, and which I particularly tried to elaborate just before Keynes became so influential, was essentially that the initial cause, even of the past period of unemployment, was not an insufficiency of finite amount, but a misdirection of labor during the Boehm period, which when the Boehm came to an end, led to unemployment in this field.

13:10This unemployment then admittedly setting up a further cumulative process of contraction. Unemployment now becoming the cause of real insufficiency of demand, that insufficiency of demand leading to further unemployment, and the whole downward spiral which we know because for this reason that from the very beginning I opposed the Keynesian proposal of controlling unemployment by an expansionist policy by maintaining aggregate demand. I was convinced it couldn't last permanently, couldn't be effective only for a limited period would in the end make matters only worse because during the period of credit expansion it created more and more misdirection of labor.

14:01I confess that I never thought the thing could last as long as it did during the pre-war period. When the great post-war boom started, I expected it might be conducted for a continue for five, six, perhaps eight, mostly ten years. For that we should lead into that great prosperity of 25 years with only minor recessions, never leading to any really deflationary interval in between, for that was something I did not really foresee. But I had not really, perhaps fully understood that in the past, the kick into the expansion It usually does not come from any inherent cause, as it has already become impossible to continue, but by external factors.

14:57The mechanism of the gold standard during the 19th century and early 20th century provided an early automatic check to expansion. We have removed that. Wherewith Bretton Woods removed another check by placing subverting of adjustments entirely on the surplus countries and relieving the deficit countries from ever having to contract. When there then became a danger of expansion being checked, we invented a method of creating additional international liquidity, surely for the purpose to prolong the period of expansion. And in the end, by removing fixed rates of exchange, we removed the last automatic check on the expansion, and that made it possible to continue the inflationist prosperity for practically 25 years till the obstacle came from people feeling they no longer would put up with that amount of rise of prices, which at that stage it was all about.

16:11But they are still in a mood where they believe, and in fact all the politicians still promised that they would get at the same time cessation of inflation and very soon full employment. Once they realize that this is impossible, that if you stop now inflation, you must get unemployment, there will be an outcry for more inflation. Now, that partly with a reservation in people's minds that after all we can deal with the effect of inflation by price controls. And I fear what we are actually heading for is that the unemployment, which has now appeared as a result of checking the process of inflation, will cause such pressure on the politician that the inflation will be resumed, but its approaches against rising prices will force government to combine continued expansion of the quantity of money with extensive price controls.

17:25That will make the whole market mechanism largely ineffective and that we shall get this worst of all possible worlds, a so-called repressed inflation where there is too much I always add that so far as this country is concerned, the one spark of hope which I see is that I knew from long observations, that the market is entirely suspended. I'm afraid I feel very pessimistic about the immediate future. I always add that so far as this country is concerned, the one spark of hope which I see is that I knew from long observations, which I see is that I knew from long observation that you people here are capable of changing your opinions amazingly rapidly and that the present state of opinion which forces a certain development may no longer be the dominant state of opinion in a year's time or in two years time. Then it would Would it be possible to do what has been done in the past, that some skillful man believing,

18:40not in any kind of very sophisticated theory, but who has grasped the bare elements of the quantity theory of money, which for practical purposes is still the most useful thing, although I have many objections against it as an adequate explanation, and will, as people like young Yalmer Schacht did in 1924, or Dr. Erhard did in 1949, just say, well, we should stop the increase in the quantity of money and carry it out. Only doubt I have is that with all your willingness to change your opinions, you are prepared in such a crisis situation, if a suitable man should turn up to give him the power he would need to carry such a program through.

19:28I'm not sure that Dr. Ehrhardt, who really achieved a miracle in Germany by having the courage of bringing about the currency reform and removing all controls at the same time, could do the same sort of thing in this country. I think it's much too dependent on the whole machinery of government. I will just tell you in conclusion a joke, which was not a joke, a true story, which Dr. Erhard loves to tell about his own experience. When he had decided and informed the other authorities that he was to announce on a certain day in 1949 It was on the one hand carrying out the currency reform which involved the complete stoppage of the increase in the quantity of money and at the same moment to scrap all price controls General Mark Clark, the commander of the American Army of Occupation came to see him and said Dr. Earhart, all my advisors tell me you are making a great mistake, from which Earhart I wonder whether there could be, with the existing American system of government, a man who would act according to his conviction, disregarding the advice of his advisors. Thank you.

21:12If you could address your questions to Professor Hayek distinctly so that they can be heard around the room, please. Professor Hayek, you said you were surprised that we didn't have a collapse center. Now by hindsight, do you have any explanations why we kept on going for 25 years, why the collapse didn't come center? Because for a long time, a slower acceleration of the rate of inflation was sufficient to keep the boom going than I should have expected. I should have thought, without any definite evidence for it, it's a matter of feeling, which you can't have quantitative evidence, that in order to continue inflationary boom of this kind, the acceleration of inflation would have to start much earlier.

22:09It was a much more long-drawn process than I expected. I believe my rather unreflected expectation of a soon end was really based on the purely factual experience that in the past the check which had come from external restraints, the ones I mentioned, had come so much sooner. had never been in the past a real experiment of letting this thing go on indefinitely without any check. We were the first generation who had the courage in the belief in a theory, I believe a wrong theory, to remove all those safety devices which in the past restricted the discretion of the monetary authorities in order to enable them to act indefinitely on that theory.

23:03So we have for the first time tried it out and it turned out that evidently that inflation, which is necessary, achieves alarming proportion only after a period of something like 20 or 25 years. It didn't then, but as I say, later than I expected. If the policies of aggregate demand, increased aggregate demand, that has been followed over the last 20 years, the post-war period according to Keynesian economics, had not been put into effect, had not the world economy follow the same pattern of economic activity that it What did it have before the war, which was one of high unemployment and low inflation?

24:20to preserve the employment effect which they had before, which meant a greater speeding up of inflation that had actually, now speaking not of the last eight months when the thing has become so acute, but the last two years when the thing began to slow down and unemployment to appear in the market. The great question which I have no answer is, would it still have been possible by sufficiently speeding up inflation in this period to achieve or maintain nearly full employment? I just don't know. I rather hope that now it is no longer possible.

25:05I rather say I rather hope for the reasons given before because if we succeeded once And once more, the continuing near-full employment for, say, another two years would add to the amount of misdirection of labor and would merely postpone the evil day and have an even worse crisis in two years' time. For that reason, I say, I hope we shall have to face the facts now and change our policies rather than another two years' time. If the politicians knew that, that there is still a chance of, say, recovering full employment for a few months before the next election, they would certainly try that and say, after after the deluge, if we only can assure by a short spurt of near full employment that we are re-elected or that we are elected, they will do it.

26:03That, of course, is incidentally an illustration to a point I only implied. What many of my fellow economists do not seem to see is that, very frequently, what from an economic point of view is only the second or third best institution may still be the from a political point of view in the world in which we live. It may well be, I doubt it, but it may well be that the monetary authority, with complete freedom to act as it wanted, without any rules, merely doing the appropriate things, but completely protected against political pressure, would act more wisely than any kind of mechanical system.

27:00But in the world in which we live the most important system is that the monetary authority has an excuse of saying no to political pressure. And for that reason I personally believe that certainly fixed rates of exchange are absolutely indispensable. They may be inferior in a system where the monetary authorities are wise to flexible exchanges. But the reference to the necessity of maintaining exchange rates is almost the only defense monetary authorities have against the political pressure to do a little more inflation. And if you remove that one restraint, it's inevitable that they are being driven in inflationary policy.

27:46Therefore I believe that what is second best from an economic point of view may still be indispensable from a political point of view If you want to place the monetary authorities in a position where they can avoid doing greater harm. I wonder if you could give some specific examples of the misdirection of labor activity associated with monetary claims? Well, that is actually, in our present situation, actually extraordinarily difficult in the past, during the business cycles. It was comparatively simple, because then nearly all the credit expansion came by way of an expansion of credits for the purpose of industrial investment.

28:38So we had the typical overdevelopment of the production of iron and steel, of heavy machinery, of building, and they were the overdevelopments with the over-attraction of labor. Now the process of credit expansion during the last 25 years has only been partly of that character. It has come very largely by different routes. roots. So I believe you can make new general statement about it. You would really have to analyze the situation separately for every country, and even for every part of the epoch of 25 years. And what the net effect is, whether there still is any one large block of misdirected labor, or whether it's widely spread with all kinds of very specific things, whether what is more important is that overinvestment has been going into industries connected with investment or in industries or trades where the expectation of a future rise of prices was a guiding factor, I simply do not know.

29:49The general model tells me that a great many misdirections must have occurred. In a simple situation like the past business cycle, I can point to a class of industries. I know now it must be very dispersed. That may have the advantage that less serious, widely dispersed misdirections may be easier to correct as a great block of misdirection, a great mass of labor drawn from the capital industries is stuck there. We can only know if we find a way of establishing a new standard of relatively stable equilibrium. But what sort of corrections are there for it? I think the market is the only way of finding out.

30:49The chairman was very kind to me and gave all kinds of reasons for you speaking out, but he mentioned the main fact that I am semi-deaf. I am literally deaf on one ear and the other, which might amuse you, that I am deaf on the left ear has given rise to a great deal of joking about the political significance of this. And since I've since discovered that Karl Marx was deaf on the right ear, I'm beginning almost to believe it. But if you will speak up and speak so it can see your mouth, I think I should be able to answer your question. Oh, do you envisage any kind of model building that could deal with this effect of over-investment and other factors?

31:47Well, there is of course the model for the typical business cycle of the past based on industrial over-investment. and I think you might build quite a number of models corresponding to the alternative methods of maintaining full employment which have been used. I believe you could possibly, at least for any one country, build a model on the assumption that it was all done by fiscal policy, by deficit or government spending. You might have another one, but assume that it's based on low interest and private borrowing, and so you might build a number of models for different assumptions, but I'm not sure that it's very well worthwhile because they have such specific...

32:42But I think, well, in a way, yes, anyone who wrote a history, an economic history, would would, where he wants to explain what has happened, would really have to do that on the basis of a model based on the realistic assumptions applied to that period of time. You seem to be saying, too, that the misdirection is between the man that is actually distributed where it goes into a new, what we call in Germany, rationalization, right? And what would be your alternative? I mean, how would it be ideally distributed?

33:27Well, again, we don't have the concrete manifestation. We can only state the conditions in which it would be avoided. And that is, in very simple terms, really a condition in which currently the amount of funds available for investment is kept approximately equal to current voluntary savings. are still formula, try to keep investment in step with current voluntary savings, and you can hope to achieve some approach to a equitable situation. Have you considered rewriting your book, The Road to Serfdom, and taking into account any increases in the amount of books you've written?

34:19Again, I must ask you to speak up. I heard that the question about... Have you considered rewriting your book, The Road to Serfdom, and taking into account any increases in the amount of books you've written? Have you considered rewriting The Road to Serfdom, taking into account trends towards socialism in the United States? No, I couldn't do that again. That was in a very particular flush of excitement about a problem. I wish somebody would do it. I think it's worth doing. But you cannot always write the books which may be wanted by the times. Your mind develops in a certain course, and I feel other things, I'm better quality.

35:08In fact, I refused. Actually, in the beginning, if I may tell you a story. Immediately after I had published the Road to Serfdom, within six months, I was asked for a lecture tour over to this country. And because of this lecture tour, I was visited at one place by a gentleman who shall be anonymous for this purpose, I was trying to be very brief and said, I'm not going to take up much of your time. A book like this would be written especially for this country. I said, yes. Are you prepared to do it? No. Could somebody else do it?

35:53Yes, probably. We've been doing this for two years. We've been intimately acquainted with the conditions, with fashion. How much would it cost? Oh, I suppose at that time, I said, engaging the first class men who was interested in it for two years, it was all the cost for $30,000, I think, could be done. The money is yours. Well, I didn't side with that. Let's raise, yeah right, I'll get back to that. You know, on the surface, one of your primary arguments, a positive argument against socialism, is that it cannot work because of the informational quality required by the planner, which is impossible to obtain. What about the counter-argument of decentralized socialism, or market-based socialism?

36:43Well, I think it found us on one difficulty. It wouldn't be socialism if you didn't also decentralize the acquisition and formation of capital. And so long as the allocation of capital remains a matter for the central authority, you don't solve the problem. You see, they have never faced this fact, that if the decentralized industries are dependent For every new investment, and what some central investment board is willing to give them, it is not in their power to restore a really competitive system. And if you allow the individual firms to own their capital, it would really restore capital In other words, if you just say you had a capital offense, you turned the factory down for the work, you eliminated the increasing your children's wealth from the factory, only the point of your work in the factory had to say, in the allocation of the capital, what was being produced, how was the price and so on. You would not call that social equilibrium.

38:04And you've got, as you would in this case, substantial incomes from the return on capital. You would retain all those features of capitalism, which, so far as I can judge, the socialists most dislike. You would leave the distribution of incomes to the market, including to the pricing of of Capital, and to the accident of people being able to build up capital resources. I mean, I have, in these discussions in the 1930s, found some of my opponents being driven by the argument and practically proposing to restore capitalism.

38:51All they objected in the end is that to begin with, capital ought not to be distributed by by Historical Accidents, but in some just manner, which my answer is, of course, yes, to begin with, you might have it, but even if then the system works, in five years it is again distributed by the accidents of the market, and no longer by justice, and you are back very well. Mr. President, could you comment on the opportunity of direct involvement, direct subsidy by the government towards unemployed families? I don't know what these proposals are. I've found that you're referring to some Americans.

39:37In other words, a pool of experience in Germany back in the 1930s? Are you just thinking of public works as a means of creating employment? That could be one method or... Well, that may in certain circumstances be necessary when it comes to the question of what I've before called the secondary depression, that cumulative deflationary process which is started by the initial appearance of unemployment. In fact, I knew no other way of combating it, except some form of public work, which in that case I knew that it also creates certain difficulties by potentially creating misdirections of labor.

40:29But if you employ these people on work, which is really only a temporary expedient where that they don't want to stay, but we're looking for something else, and at the same time use it only to give them an income so that the general demand for consumers' goods is maintained at approximately the kind they would have if these people were employed. I think this is still the best way out, but I should explain here one thing because I I have a reputation for things I've faced in the past which is not fully justified, but which rather I can explain. You see, I did actually argue in the 1930s, during the beginning of the Great Depression, that a deflationary process of some kind had a function in restoring equilibrium.

41:27The reason for this was that already then, that rigidity of wages, which has now become a major problem, was making its first appearance. And I was hoping, probably wrongly, at the political considerations, that this wage rigidity, which made the market ineffective, might still be broken by a short process of depletion. That's a matter of practical judgment. I no longer think now this is an effective means. I think we should have to find other means to restore a genuine labor market. But I admit that in the early 1930s, perhaps partly guided by observing the British experiment.

42:16See, the British had, very honestly but foolishly, tried in 1925 to return to the gold standard at the former parity, and had for six years stuck through a very painful process of deflation, which in the last two years had gone very far in bringing about a play in wages, fall of some wages, and if it had gone on, probably would have restored a wage structure which corresponds to equilibrium. They gave up in the acute crisis of 1931, I think in the belief that this hook of bringing I think, after that, it was hopeless to think that any government would again try this, that a tent was discredited rightly or wrongly, and when I, in the early 1930s, still held to believe it was probably a political misjudgment, but I would just explain that it was for this reason, that for in general considerations I then did occasionally maintain that some Some little preflation might be a good thing.

44:05What do you mean it is already part of the market, or is it already part of the market? What do you mean it is already part of the market? Of course, it is a fact that the labor is in places where it could not be kept in employment without the continuance of accelerating inflation. That means, in my opinion, that we cannot get a stable distribution of resources without some considerable redistribution.

44:58It is true that the new equilibrium, which we must hope to achieve, will have among its determinants certain capital accumulations which are kept within the interval, it will not be the same which we would have achieved if we had not inflated and had achieved an equilibrium in 1925. There are new data which determine the present equilibrium in the form of the particular and other kinds of capital growth which have been created since, but it's still a problem of a just distribution of labor to these data, which now exist and you must accept. The thing is, I believe, that this will involve very good many people who cannot hope to continue in their present jobs, and if they are to find durable employment, they must move elsewhere.

45:56Professor Hayek, you stand up. Given your current research, politically unlikely that we can solve aggregate problems and the problem of relative crisis through deflation, I'd like to know what, in your opinion, The fact that price changes at not at the same time but successively in a certain order. The additional money comes in at some point of the economic system at certain prices first and reaches out only very late.

46:47And while this proceeds, there is a constant, what shall I call it, inclination in the price system, with those which are hit first always somewhere ahead, and those which are reached last always in the end. And this distortion of the whole price system can be corrected only if this extra influx At some point, or some points nowadays, I sometimes use only similar, which perhaps helps you to see what I have in mind. The effect of a change in the quantity of money on the price structure can be compared to the effect of a stream of silt into a pot of silt when the thing falls into the middle.

47:38You will have a little hill in the middle, which gradually spreads to the side. And so long as the stream of additional silver blasts, you still have this distortion and no equal level. It's only when the stream stops that it will level out again. So while inflation lasts, the price structure is always distorted, just as while the influx of silver blasts, the level of the surface is always distorted. Could I just ask one partial question to that? You feel this is true even in the face of inflationary pressure through consumer credit. In the earlier distortions, the initiation of the business cycle, it was often because of the point of injection of additional spending power, We've led to an over-investment in capital goods, but we're often asserted to have a consumer-oriented inflation with the expansion of consumer credit.

49:01are well there is a possible change of this relationship, when some of you may have come across the concept of the Ricardo effect, which bases itself very largely on the fact that the relation, a change in the relationship between the crisis of consumer goods and the crisis of factors has a profound effect on the volume of investment. So it may well be that an increase in the demand for consumer goods may have very deep I would say not obtain merely to maintain the demand of consumers' goods at a level where the prices of consumers' goods will keep at the same. That's what I had before a man. That's the purpose for which I would employ public works if an actual inflation threatened.

49:52I would have the public works, essentially, to create a source for money to be spent on consumer goods, people of the golden age. I'm not worried about the concept of equilibrium. There's a statement of the human imagination and of the real world. Of course, it never exists, it is part of the world as an evolutionary system. And although it's a very useful thing, I have a great deal of attempting with the view you've expressed that the structural problems of societies are not necessarily told by these overall aggregate measures.

50:42The only difficulty is that the angle of measure seems to be all we know how to do. I think that, by the way, I can put this in a question. If I ask why both the change of revolution and the post is successful, well, listen to me. Whereas the you which you represent is essentially not. Well, why don't I ask you? Why don't I ask you? Because I'm not being ad hominem. I think this is back to the last 25 years. I'm trying as much as you to avoid the concept of equilibrium, because I appreciate its misleading character, and yet there isn't a simple short other term which you can use.

51:34We need a description for the state of affairs in which the activities of the different members of an economic system are so adjusted to each other that each has at least a good chance that these expectations will be met. Well, that's what we like to achieve, and our policy aims at bringing out something like that. This sort of state has first been described by the mathematical economy by applying the term equilibrium to it, and we haven't got a better term. I would very much prefer to have another term, and in my present writings, when I speak of equilibrium, I generally put it in inverted commas, I think as you do, for the same reasons.

52:23But it's a general dilemma in getting a rather complex set of ideas over. Should you use an oversimplified explanation which is readily intelligible, or should you be very careful, cautious, and introduce all your provisional hesitations you have about

53:19We must not throw the baby out with the bath water. We must occasionally simplify, even if we know that simplification is half wrong.

53:49and Employment, a proper approach to better understanding what you call the improper distribution of output and employment. I think there are great improvements on the crude acceptance of a macroanalysis by Keynes and Secaynesians proper. We really are a step in a return to a microanalysis, which I think is all the little knowledge we have. I think all the macro-analysis or macro-dynamics are rough approximations which we have temporally adopted because they help us to deal with the statistical data which we have, but which are really very misleading. Let me just add one thing, the reason why when Keynes published his general theory which became his most influential book, I did not return to the charge.

54:45I did not devote as much effort to criticizing as I had done earlier because I didn't at once realize that the main difference was no longer a difference of particular point of detail. Although the book really marked the transition from microeconomics to macroeconomics, it took me years to find it out that what I would have to do is not to criticize Cain's particular and the formal macroeconomics, as they are addicted to making macroeconomics research.