The Hayekians, led by Professor George Selgin, argued that Keynes failed to see the way busts are the natural result of booms – the “malinvestment hangover” from the party that went on too late the night before. In the rap, by the way, Keynes is depicted as the life and soul of the party, getting all the girls (not quite what happened in his real private life), but then throwing up after too much whisky. Prof Selgin pointed out that, since the current crisis began in 2007/8, absolutely tons of public money has been poured into all the banks that went wrong, and they have only gone wronger.
Moore sums things up nicely:
Hayek’s ideas … appeal to anyone who inclines to believe that people are more likely than governments to act in their best interests. Reality is the best counsellor: “There is no painless recovery from an unsustainable boom”, and if something is unsustainable, it makes no sense to try to sustain it.
Keynes appeals to our longing for a clever piece of magic which can rescue us from our follies. Hayek appeals to our more common-sense understanding that only our own best efforts can save us. Being highly suspicious of prestidigitation by governments, I lean to the side of Hayek.
Very encouraging times to be an Austrian!