What’s funny is that Krugman himself blew up that silly claim two days later, without even realizing it, in a contradictory (or at least Kontradictory) post making fun of those nutty Austrians:
Still thinking about the Bloomberg Businessweek interview with Rand Paul, in which he nominated Milton Friedman’s corpse for Fed chairman. Before learning that Friedman was dead, Paul did concede that he wasn’t an Austrian. But I’ll bet he had no idea about the extent to which Friedman really, really wasn’t an Austrian.
In his “Comments on the critics” (of his Monetary Framework) Friedman described the “London School (really Austrian) view”
[MILTON FRIEDMAN:] that the depression was an inevitable result of the prior boom, that it was deepened by the attempts to prevent prices and wages from falling and firms from going bankrupt, that the monetary authorities had brought on the depression by inflationary policies before the crash and had prolonged it by “easy money” policies thereafter; that the only sound policy was to let the depression run its course, bring down money costs, and eliminate weak and unsound firms.
and dubbed this view an “atrophied and rigid caricature” of the quantity theory. The Chicago School, he claimed, never believed in such nonsense.
I put the important part in bold above. Do you see the significance? In his zeal to rip Hayek, Krugman is admitting that Hayek spoke for the London School as well as the Austrian economists. So, unless Hayek’s mom was the only other person in the econ faculty, I think we can safely declare that Krugman (and his apologist, Kevin Donoghue) are wrong about Hayek’s influence at the time.
Moreover, von Pepe in the comments pointed out yet another inconsistency in Krugman’s beef against Hayek’s (seemingly) liquidationist writings of the early 1930s (with mild edits from me for clarity/typos):
[T]his is why I get frustrated with arguments that the Austrians were wrong or caused the Great Depression:
1. Hayek was irrelevant in the ’20s and ’30s; no one took him seriously. He was not even a footnote to Keynes.
2. Hayek’s advice was followed religiously to liquidate everything and Hayek only allowed medium-level deficit spending. If he had allowed bigger deficits, no Great Depression.
3. Hayek’s monetary policy caused the Depression–yet no one even paid attention to him.
4. Sticky wages were a problem. Hayek thought if you let the market adjust it would fix many problems. But, AD people thought that keeping wages high would get us going: AD, AD, AD…
So, we did the opposite of Hayek’s theory–Hayek’s fault…