Hayek’s Top 10 Do’s and Don’ts in a Recession

David Azerrad / February 14, 2011

With the country in the midst of the worst recession since the Great Depression, it’s no surprise that the economy is on everyone’s mind. According to the latest Gallup poll, 7 in 10 Americans point to economic issues as the most important problems facing the country.

Such are the problems—now what do we do about them? Well, it depends on who you ask.

According to Paul Krugman of The New York Times, we need another $800 billion stimulus. The first one, you see, wasn’t big enough. “The stimulus right now makes almost no difference,” Krugman recently said at the World Knowledge Forum in Seoul. And for those who worry about the deficit, he had these soothing words: “What does a trillion dollars of borrowing do to the U.S. long-run fiscal position?”

For those of us who find little comfort in Krugman’s prescriptions, we turn to the ideas of Friedrich Hayek, the author of the classic Road to Serfdom and one of the most important economists of the 20^th century. In a new essay, Bruce Caldwell, the editor of The Collected Works of F.A. Hayek (19 volumes), distills the key Hayekian insights on what to do—and not do—during a recession. The short of it: “We usually don’t have the necessary knowledge to intervene effectively in the economy, and the political process is such that, even if we did, we still likely would get bad policy, coupled with an ever-growing government sector.” With a little help from public choice theorists, here are the 10 Hayekian insights for trying economic times: (more…)