Doug writes: >Why is it then that so many lefties have felt completely disarmed by Hayek, >and so many liberals were by Lucas? a) Hayekian ideas helped fill a theoretical gap. Socialists had to deal with the seeming failure of the USSR's planning methods. One problem was the problems of information and motivation that plagued the planning system: the planners didn't have enough info and couldn't get the plannees to go along with the plan. Hayekian criticisms provided answers here, allowing leftists to avoid the other, to my mind more crucial, problem with the USSR's planning system, i.e., the lack of democracy. Many leftists didn't want to deal with the way in which a top-down system alienates its participants, encouraging them to distrust the plan and actively work against it. They didn't want to deal with the class relations within the Soviet economy. (See for example, the discussion of planning in Bowles & Edwards' UNDERSTANDING CAPITALISM.) b) Lucasian ideas helped fill a theoretical gap. It wasn't simply a matter of Keynesian ideas being unable to predict the stagflation of the 1970s. Abba Lerner, one of the big Keynesians, allowed for such events back in the 1950s. Milton Friedman -- who has never been a Lucasian and today would be called a "new Keynesian" rather than a monetarist -- also had a theory of stagflation (very similar to Lerner's). The problem was that "good old Keynesianism" didn't have a theory that lived up to the standards of mathematical rigor (mortis) and atomistic individualism that good economists are supposed to live up to. Lucas and his ilk supplied the "microfoundations" that promised to make macroeconomics "rigorous." in pen-l solidarity, Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/Departments/ECON/jdevine.html
