Economics is one of the most confusing disciplines in the sense that there exists so many theories which are completely opposite to each other and yet known and accepted by many. This is really absurd in itself as we can never really expect such a thing to happen. How can we have two contradictory propositions on the same subject be held valid at the same time? It’s just crazy which keeps me even more excited to read and know this subject better. The thing is that when you already know the right thing you have no scope to create or give your opinions about anything. For instance we all know the third law of mechanics and i quote To every action there is an equal and opposite reaction. We have been learning this since years and there’s nothing that you can say or give your opinion about. While you could go deeper and start building the theory of everything, but chances are that no one will really give a damn till you prove it. On the other hand, in the case of economics you are free to say and write about things your way and if it really makes sense their will be people who will come and support you.
Now coming back to contradictions in economics. One of the biggest known contradictions was between Sir Hayek and the very popular Keynes. Hayek was always in the favor of free market economies while Keynes was in favor of command economy. Both of them completely correct in their propositions. There became two distinct categories of economists, the first one contained those who supported Keynes and the other one contained those who supported Hayek. Both of them wrote papers which were widely applauded by general public. At that time their was no one who could really tell whose theories had more weight. The point is that one is open to believe in and support any theory until it is proved. In a way it is similar to people who believe in god and people who don’t. Till the time god doesn’t show up himself their are going to be atheists in this world. Similarly till the time scientists aren’t able to crack the mystery of universe their are going to be people who believe in god. My point here is that Economics works mainly on speculations. Speculations can differ widely between several schools of thought. Hence till the time these speculations aren’t reflected in real life, any number of speculations can be held completely legit. This is the beauty of Economics. It gives everyone a chance to develop and create ideas till the point they can be seen in reality.
Today we know that a purely free market economy cannot work because we have witnessed the great depression of 1929. This is also the reason why most of you may know John Maynard Keynes but not Hayek. Just to let you know, Hayek wrote a book called “The Road to Serfdom” which is one of the most influential books of all time. Thumbs up if you have already read that book. Today what we also know is that an economy completely controlled by the government is also not something that can be called the right way. You may now wonder why is Keynes still so famous then. The reason behind this is that Keynes work was partially correct. Also, Hayek turned into a political philosopher in the second half of his career due to which he lost most of his supporters. Add this with the Great Depression and you now probably know why Keynes is more popular.
Contradictions are not something that can be condemned just because they are contradicting. I believe that contradictions are what makes you want to rethink and evaluate both yourself and your contradictor better. Do you know who won the nobel prize in economics during the year 1974? It was shared between Myrdal and Hayek for two ideas completely opposite and contradictory to each other. Isn’t that surprising? It is in a very positive way. Both the works were pure in terms of the kind of study that was involved. It opened the world to understand and do things from where they left it. It also left much scope for people to read both the theories and believe in what they feel can actually work. This is what creation is all about.
- Hayek: Keynes was a Quack… (economicpolicyjournal.com)