“A poisonous, vituperative, intensely personal debate” is what shaped the contours of the political battle today. That’s how Nicholas Wapshott, formerly one of the editors of The New York Sun, characterizes the clash between John Maynard Keynes and Friedrich Hayek — and he does so in an interview for that The New York Sun asked him to conduct with himself on the occasion of the publication of his new book, Keynes Hayek: The Clash that Defined Modern Economics. Mr. Wapshott’s interview:

* * *

NYS: What interested you about the original debate between John Maynard Keynes and Friedrich Hayek?

Mr. Wapshott: It was a great story. A poisonous, vituperative, intensely personal debate fought eighty years ago in England came to define the key battleground, economically at least, over which our politicians fight to this day: should the government intervene in the economy or should the market be allowed to operate freely?

Mr. NYS: Hadn’t it been written before?

Wapshott: Unbelievably, it has lain buried in dusty learned journals and forbiddingly dry economic texts, waiting to be liberated. Happily, there turned out to be a great narrative drive to the battle. In the late twenties, Keynes was making great headway on his theory that when an economy was stuck in recession — as England was through the twenties —governments should take measures like easing credit and funding public works to boost employment. Hayek, who believed such artificial stimuli would fail, was summoned to London like a western gunslinger from Vienna to stop Keynes in his tracks. The ensuing debate was ill-tempered and venomous from the start and waged with such fury that appalled old school academics compared it to a knife fight.

Mr. NYS: Who won?

Mr. Wapshott: That’s a good question. And one that has been asked for the last eighty years. In a way it is the key question of our times. George Will suggested the other day that GOP presidential wannabes should answer a single question yes or no: Keynes or Hayek? The question has yet to be decided. Next November’s presidential contest is important because there will, it seems, be a clear choice between a Keynesian and a Hayekian in the White House. All politics between now and then is better understood if you know the theoretical battle that lays beneath the surface. To know the story of Keynes and Hayek is like having the annotated edition of what we are about to witness.

NYS: That’s all very well, but who won back then? Keynes or Hayek?

Mr. Wapshott: Although Keynes and Hayek went at it like pit bulls with teeth bared, exchanging two letters a day at the height of the scrap, neither of them could deliver a knockout blow. They abandoned the fight, exhausted. It was plain that neither of them would be able to persuade the other, so they continued their fight by other means, including vendetta. Keynes went on to great things. His revolutionary General Theory transformed the use of economics by governments and Hayek continued to plug away at his Austrian Economics ideas. Two schools of thought sprang up, neither of which could tolerate the other. Hayekians were invisible to Keynesians; they were ignored; they did not exist. In Robert Skidelsky’s magisterial three volume life of Keynes, there is barely a mention of Hayek. Even then it is to marginalize him as a crank, an outsider, a maverick, a contrarian.

NYS: So the story petered out?

Mr. Wapshott: Not at all. While Keynesians were claiming that the funding of World War Two cured unemployment, proving that their hero was right, Hayek’s mind took a quite different turn. Looking at the rise of the Nazis and the Soviet communists, he began a line of thought that was to ring true down the ages. He suggested, in his masterwork The Road to Serfdom, that all government spending contained the seeds of authoritarianism as it took the place of individual choices expressed through prices in the market place. He came to think government “planners” to be petty dictators, always taking the wrong decisions, often with the best of intentions. The big government that Keynes had facilitated contained a fatal flaw.

NYS: That sounds like Ronald Reagan.

Mr. Wapshott: Yes, Reagan had read Hayek and agreed with a lot of it. I reported the rise and reign of Margaret Thatcher at close quarters and wrote a great deal about her rejection of Keynes in favor of Hayek. Then I wrote a book about Reagan and Thatcher, whose political marriage was founded on a shared belief that Hayek was right. So the story of Keynes and Hayek is a subject that has been long on my mind.

NYS: And whose side are you on?

Mr. Wapshott: I think there is enough drama and intrigue in the story without adding my three penn’orth. I usher the boxers into the ring and let them go at it.

Nicholas Wapshott’s Keynes Hayek: The Clash That Defined Modern Economics is published by W. W. Norton. To read extracts, please click here.