Unlike Keynes, Hayek believed that genuine recovery from a post-boom crash called not just for adequate spending, but for a return to sustainable production - production purged of boom-era distortions caused by easy money.
Hayek was dismissed as someone who wanted to "liquidate labour, liquidate stocks, liquidate the farmers," and so on.
But an unsustainable boom is one after which some things really do need liquidating. The straightforward recipe for the revival of healthy investment following the 2008 crisis was to liquidate.
Liquidate Bear Stearns! Liquidate Fannie Mae and Freddie Mac!
Liquidate, in short, the whole sub-prime bubble-blowing apparatus that was nurtured by easy monetary policy.
That would have meant letting insolvent banks that lent or invested unwisely go bust.
But instead our governments chose to keep bad banks going and that is why quantitative easing has proven a failure.
Quantitative easing failed because almost all the new money the government created has gone to shore up the balance sheets of irresponsible bankers.
Now those banks sit on piles of idle cash while other businesses starve or cannot get started for want of credit.
The economy is like a drunk throwing up the morning after the night before.
It is disgorging itself - or trying to disgorge itself - of bad investments it was tempted to undertake largely because of easy money.
Giving it still more money will not prevent the inevitable suffering.
It might mask or delay it somewhat, but only at the cost of more suffering later.
This is not the sort of advice that governments welcome.
They want a painless, easy cure like the one Keynesians offer.
But, as Hayekians warned again and again, there is no painless recovery from an unsustainable boom.
The only way to have no pain is to avoid the boom itself.
To cut government spending was completely the wrong policy in a slump.
When an economy is booming, a hair shirt at the Treasury is the right policy, when it is stagnating it is the wrong policy.
Keynes's message was: you cannot cut your way out of a slump; you have to grow your way out.
Eighty years on we have still not fully learnt the lesson.
Three years after the collapse of 2008, our economy is flat: there are no signs of growth, nor can the Osborne policy of a thousand cuts produce any.
It was Friedrich Hayek, who represented the orthodox theories which Keynes attacked.
According to Hayek the main cause of slumps was excessive credit creation by the banks leading to overspending.
The boom was the illusion; the slump the reality.
The situation following an injection of money by the banking system would be similar to that of a people on an isolated island, if, after having partially constructed an enormous machine… they found they had exhausted all their savings before the new machine could turn out its products.
They would then have no choice but to abandon, temporarily, the work on the new process and to devote all their labour to producing their daily bread without any capital.
That is, go back to growing their own food - much as the Russians did when their economy collapsed in the early 1990s.
Keynes was scathing in his comment on Hayek's book, Prices and Production, which he called "one of the most frightful muddles I have ever read".
"It is an extraordinary example of how, starting with a mistake, a remorseless logician can end in Bedlam."
Hayek gave up serious economics, though not serious writing.
He and Keynes developed a wary respect, and even liking, for each other. "We get on very well in private life", Keynes wrote. "But what rubbish his theory is."
Keynes's magnetism made a deep impression on Hayek, but he never stopped believing that his influence on economics was "both miraculous and tragic".
The Keynes vs Hayek debate will be broadcast on BBC Radio 4 on Wednesday, 3 August at 20:00 BST and will repeated on Saturday, 6 August at 22:15 BST. You can listen again via the BBC iPlayer or by downloading the Analysis podcast.
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