Was Hayek right?


So Paul Krugman has won this year's Nobel Prize for economics. Well, congratulations, I suppose, but Krugman's not exactly our kind of economist. Anyone described as neo-Keynesian has got to be bad news.

One interesting question, which I was asked yesterday, is whether there should be a Nobel Prize for economics at all. Friedrich Hayek, who won it in 1974, subsequently said that had his opinion been consulted, he would “have decidedly advised against" its creation.

I can see his point. After all, the old joke is that if you take two economists, you get three points of view. It’s not like physics, where you can test things and then everyone can agree at the end of the test. Economics is complicated. It’s a human science, and human beings are unpredictable.

At the same time, most economics is very academic, very rarefied. Its link with what’s actually happening in the world is tangential. It is too much based on mathematical theorems with little basis in reality.

Hayek used to say the success of a country was inversely proportional to the number of economists. I don’t think he was wrong. But then again, all the economists were Keynesians in his day.

Now I think about it, yes, maybe we should get rid of the Nobel Prize in economics – at least once Israel Kirzner has won it, anyway.