Like many others, I’ve enjoyed the Keynes-Hayek raps and the recent Keynes-Hayek debate. Today, while browsing through the Roy Harrod (1951) [amazon_link id=”0140214402″ target=”_blank” ]Life of Keynes[/amazon_link] – which is so good for its insight into the evolution of Keynes’s thinking – I came across the following quotation from a letter Keynes wrote to Hayek in 1944, about [amazon_link id=”0415253896″ target=”_blank” ]The Road to Serfdom[/amazon_link]:

“In my opinion it is a grand book. You will not expect me to accept quite all the economic dicta in it. But morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but deeply moved agreement…. Your greatest danger ahead is the probable practical failure of the application of your philosophy in the US in a fairly extreme form. No, what we need is the restoration of right moral thinking – a return to proper moral values in our social philosophy. If you could turn your crusade in that direction, you would not look or feel quite so much like Don Quixote.” (p515 Harrod, 1972 paperback edition)

This is fascinating for at least two reasons – the heartfelt agreement, and the warning about the extreme application of the ideas in The Road to Serfdom in the US.

The real reason I was browsing in the first place was to try to get my head around the role of changes in wealth and household assets and saving in a situation of excess demand in labour and goods markets. Malinvaud’s [amazon_link id=”063117690X” target=”_blank” ]Theory of Unemployment Reconsidered[/amazon_link] highlights this variable. Adverse wealth effects for the household sector have been enormous, and of course interest on savings is more or less zero at present. But, not being a macroeconomist, I’ve not made much headway with this. More another time.

[amazon_image id=”0393300242″ link=”true” target=”_blank” size=”medium” ]The Life of John Maynard Keynes[/amazon_image]