Hayek Returns to Cambridge

Cambridge, England, was a piquant choice for the general meeting in September of the Mont Pelerin Society. The city was once the celebrated home base of John Maynard Keynes, the King’s College economist whose theories about the curative value of public spending have been eagerly embraced by politicians for two generations. But, as is less well known, it was also the city of Friedrich Hayek, Mont Pelerin’s founder and honorary president, now 85 years old, who spent the World War II years in Cambridge and came to be Keynes’s friendly enemy. Hayek wrote The Road to Serfdom in a Cambridge house when the London School of Economics, where he was teaching, moved northward out of London to get away from Hitler’s bombs.

The two Cambridge heritages, which take opposing views of the virtues of government interventionism, have been battling ever since the publication of The Road to Serfdom forty years ago. The Keynesian theories relied on the Phillips Curve, which stipulated a direct connection between public spending and the increase of employment. But the curve no longer works—the more that governments seize, whether by taxation or inflation, the more sluggish the economy seems to be. In spite of this, our governments go on spending even when their heads—Ronald Reagan in America, Margaret Thatcher in England—believe they should be doing the opposite.

JC

About the Author

John Chamberlain

John Chamberlain (1903–1995) was an American writer.

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Cambridge, England, was a piquant choice for the general meeting in September of the Mont Pelerin Society. The city was once the celebrated home base of John Maynard Keynes, the King’s College economist whose theories about the curative value of public spending have been eagerly embraced by politicians for two generations. But, as is less well known, it was also the city of Friedrich Hayek, Mont Pelerin’s founder and honorary president, now 85 years old, who spent the World War II years in Cambridge and came to be Keynes’s friendly enemy. Hayek wrote The Road to Serfdom in a Cambridge house when the London School of Economics, where he was teaching, moved northward out of London to get away from Hitler’s bombs.

The two Cambridge heritages, which take opposing views of the virtues of government interventionism, have been battling ever since the publication of The Road to Serfdom forty years ago. The Keynesian theories relied on the Phillips Curve, which stipulated a direct connection between public spending and the increase of employment. But the curve no longer works—the more that governments seize, whether by taxation or inflation, the more sluggish the economy seems to be. In spite of this, our governments go on spending even when their heads—Ronald Reagan in America, Margaret Thatcher in England—believe they should be doing the opposite.