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Phelps is a big Hayek guy -- and his Capitalism & Society Center has dozens of articles posted on the web discussing or referencing Hayek:

Google Search this domain:


I hope this is one of those times to not judge a book by its cover, but I see Jeffrey Sachs, Joseph Stiglitz, and Robert Shiller on the membership roll. I think you can understand my concerns.


We know he cites him, but has he absorbed his teachings?


"I applied once for a fellowship to Stanford to a program on 'Ethics and Society' and I got back a rejection which read "As a student of Buchanan and Tullock, you undoubtedly have philosophical interests, but they have nothing to do with either ethics or society." Seriously!"

Wow, just wow. Do you still have the letter? The attitude towards Public Choice & Austrian Economics has changed quite a bit in 30 years. I never realized how 'left' academia used to be, I 'knew' they were, just not how much. I am glad that's changed/changing.

Phelps seems to have a solid handle on Hayek on the knowledge problem, and if memory serves, Hayek's _The Constitution of Liberty_ was a seminal influence on Phelps.

Anyway, here's Phelps giving a talk on Hayek & capitalism:

And this is Phelps in the Financial Times:

" Joseph Schumpeter’s early theory proposed that a capitalist economy is quicker to seize sudden opportunities and thus has higher productivity, thanks to capitalist culture: the zeal of capable entrepreneurs and diligence of expert bankers. But … most growth in knowledge is not science-driven. Schumpeterian ­economics – Adam Smith plus sociology – captures very little.

Friedrich Hayek offered another view in the 1930s. Any modern economy, capitalist or state-run, is a great soup of private “know-how” dispersed among the specialised participants. No one, he said, not even a state agency, could amass all the knowledge that each participant “on the spot” inevitably acquires. The state would have no idea where to invest. Only capitalism solves this “knowledge problem”."

Very, very nicely done!

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