Friedrich a Hayek

Inflation is one of the most talked about words in society that causes a big problem in economics today. Inflation is an increase in the overall prices of goods and services and a decline in the purchasing value of money. This exists when the money supply surpasses the goods and services that are available. For this commentary, I chose to pick the article In a Venezuela Ravaged by Inflation, ‘a Race for Survival’ that deals with the topic inflation.

Two major economic thinkers of the of the early twentieth century, John Maynard Keynes and Friedrich A. Hayek, hold very different economic viewpoints. Keynes is among the most famous economic philosophers. Keynes, who's theories gained a reputation during the Great Depression in the 1930s, focused mainly on an economy's bust. It is where the economy declines and finally bottoms-out, that Keynesian economics believes the answers lie for its eventual recovery. On the other hand, Hayek believed that in studying the boom answers would be provided to lead the economy out of the bust that was sure to follow. Hayek backed the Austrian school of economics.

The most essential theoretical tradition to public policy is rational choice theory as developed in An inquiry into the nature and causes of the wealth of nations (Smith,1785). I cite an online edition of Adam Smith's work for ease of reference, Smith (2005). Rational choice does not mean every player has perfect knowledge, or promotes their own self interest at the cost of every other member of society Smith (2005), instead rational choice should instead be seen through the lens of bounded rationality (Weible, Sabatier, 2014; Kingdon, 2014). As Smith says "it is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest" (Smith, P.19, 2005). In many ways, Smith outlines an ideal society where cooperation leads to mutual beneficial relationships.

There are only a few ways to increase production, which include hire more workers, increase hours, buy more equipment, and take advantage of technology to produce more. The government must form a way that the economy doesn’t grow too slow or fast so they can prevent disastrous events. The importance of modern currency lies in its purchasing power. Inflation signals the rising prices, but the way to think about it isn’t like that, but that the currency’s purchasing power decreases. With hyperinflation, fixed loans are impossible because nobody wants to risk it when the money can potentially become worthless. With moderate inflation, it can destroy wealth if it isn’t managed properly. Inflation is good for those who owe debt, but bad for those who lend money. Inflation may be bad, but deflation is worse. Prices fall because the economy is broken, but now the economy is broken because the prices have fallen.

The information needed to operate effectively in a complex market is that of the supply and demand. To illustrate Hayek presents a disruption in the tin market. If there is disruption of tin on the global market, this will lead to less tin to be supplied. This disruption will spread through information into the markets and consumers will economize tin, without knowing the causes of the disruption. This will lead to an increase in the price of tin, and because consumers economized they will eventually look for substitutes, instead of tin cans they might buy in bulks. Relevant information was communicated by the tin’s price which led the complex market economy operate effectively.

living.” (Purvis 116). Because of this, the issue of inflation not only caused the rise of numerous,

hoarding of money is causing deflation, it was written by a Ming dynasty court official. Then

There are also many economists who would agree with the claim that zero inflation is the optimal rate of inflation. This claim employs

The way to control it, he taught, was to limit the supply of money. With inflation brought the "supply side" of economy (supply side economics). Debt through not paying back loans, government spending, nations banks even once drowning in debt (during great depression). One of Americas biggest questions is, how and when should we spend our money? Sometimes a bigger question is, do we need to spend our money on this? America is digging a massive hole, that it seems too late to climb out of. Our economy is in dire straits. We were once leaders in manufacturing, but now are regulated to a "service economy" and make nothing of value. We are in 18.5 trillion dollars in debt. Our U.S. National Debt is 18.5 Trillion dollars! And I can't blame us. Our national debt only increases. We are not paying countries back. Our student debt is massive. We just keep building a bigger hole. It's safe to say is no longer a democracy, it's run by the rich for the rich. We used to help the common man, the average American fulfill his American dream. Supply a net for our country. Franklin Delano Roosevelt used our federal government to provide programs and relief for the middle class. But those days are gone, and it seems that the wealthier only create more meaningless wealth which will never solve our

For as long as money has existed, governments have sought to control its supply for their own benefit. The ancient Romans, for instance, regularly debased their coins so that, by the end of the 3rd century AD, the actual content of silver had declined to less than 5% purity. The debasement of and inflation of the money supply has historically been a tool of governments to expand their power. In conventional economics, which this paper will assume as a positive background in defending the feasibility of a sound money amendment, the result is a redistribution of real wealth from savers to the government, the banking and finance system, and other

Inflation, which is the rise and fall of value in money, increased dramatically as people began to have very acquisitive views in life. “In 1964, inflation measured a little more than 1 percent per year. It has been in this vicinity over the preceding six years. Inflation began ratcheting upward in the mid-1960s and reached more than 14 percent in 1980. It eventually declined to average only 3.5 percent in the latter half of the 1980s” (“Great Inflation”). As people purchased more and more items, the prices rose in order to keep up with demand, resulting in what will later be called as the Great Inflation. The increase in prices also had an effect on human consumption rate, just as consumers affected inflation. “Finally, inflation can discourage saving and encourage consumption. It thus is perceived as an attack on certain moral virtues -- a strong work ethic, deferred gratification -- that support a healthy economy” (“Great Inflation”). With the inflation causing price rates to elevate, many Americans see it as an opportunity to buy things, just because of the market at the time. As a result, more products were bought, bringing up the inflation rate drastically, thus being named the Great Inflation. However, the Great Inflation wasn’t the only event that made its mark during the 1960’s, as the Counterculture Revolution changed people’s ideas about fashion, religion, and

As has been mentioned previously, Hayek had an entirely different approach to economics. There have been arguments made that Hayek’s arguments are more related to politics rather than economics, although politics and economics tend to go hand-in-hand. Contrary to Keynes arguments, Hayek believed that artificially low interest rates would only lead to artificially high investment only causing greater issues that would turn an economic boom into a recession (Econedlink). According to the PBS segment on “Commanding Heights”, Hayek had some major concerns about inflation. Hayek believed that inflation was malign and had the potential to weaken a society and democracy (PBS Commanding Heights). Hayek argued that markets are unpredictable and relatable to human influences.

In 1929, the stock market crashed. The values of production gone down, work force lost their jobs, millions of families lost their homes as well as millions of saving accounts were lost because banks closed for good. Those events resulted in the Great Depression. As a result, the world was plunged into economic turmoil. However, two prominent economists emerged with competing claims and sharply contrasting approaches on how a capitalist economy works and how to revive it when depressed. John Maynard Keynes an English economist believed that government has responsibility to intervene in an economical crisis whereas, Friedrich Hayek an Austrian-born economist and philosopher believed that the government intervention is worthless and

Collectivism¡¦s main argument is that society should not be controlled by people who are irresponsible. Hayek counters that point by stating that collectivism is nothing more than totalitarian in which individual freedoms are lost. He also states that the welfare and happiness of the society cannot be satisfied by a single plan (Hayek 63-64). This is especially true in countries that are very diverse in their people¡¦s education and culture. Collectivism also has the dilemma of ¡§who plans whom, who directs and

The famous American economics columnist Hazlitt (1978) has ever said that there is not a problem such as the inflation has been discussed too many times and it is not easy for people to understand.