John Keynes And Friedrich Hayek

Milton Friedman and John Keynes are two world renowned economist, with many similar and contrasting views that have helped set the foundation of our economy. Friedman 's ideology on subjects such as the Monetary Policy, Gold Standard, and the Theory of the consumption function are what made him a extremely impactful economist. Keynes has made his impact on the modern day world as well in many aspects. Both of these economists have helped pave the way to a better, more efficient economy.

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.

Adam Smith and Karl Marx both came from very different worlds, however they saw the world in similar ways. Both had thoughts derived from different views. Smith had a very capitalistic view on things, while Marx was socialist in many ways. They expressed their thoughts in ways that were surprisingly similar while other ideas were dissimilar. Ultimately socialism and capitalism can go hand in hand. One main idea that both works addressed was the productivity of work and the ability to accumulate property, stock and capital. They both wanted a wealthy nation but Marx believed that redistribution of wealth was the way to go. Smith believed in a free economic system that gave capitalists rights to accumulate their wealth.

However, on Black Thursday, stocks prices plunged and the downward spiral could not be stopped. During the 30s, values and prices spiraled downward and left people with no ability to earn, repay, spend, or consume. The banks also went down with it and people tried to rush to withdraw all of their savings. Millions of people lost everything and the government could not do anything about it, but instead made it worse. There was extremely high unemployment. Keynes was the real inventor of macroeconomics during these time period, as well as GDP, rate of inflation, and many other things. When Roosevelt came into office, he had to face the debt and his confidence rallied the whole nation, along with the New Deal. He created new agencies to regulate banks and the stock markets. Under the New Deal, industry came under many new rules and regulations. Keynes ideas began to gain ground during this time and World War II is what it took for his theories to become government policies. As the war began, high unemployment ended and the depression was gone, which was a demonstration of Keynesian ideas.

Hayek believed the economy should remain untouched and in times of trouble, with enough time, the markets would regain equilibrium. He also surfaced the ideas that increasing taxes led to discouragement of consumer spending. These ideas are viewed as flawed because during times of depression unemployment remains constant and there is so guaranteed time issues will resolve while the economy is trying to rebalance itself. No government regulation results in unfair monopolies of industries or businesses in the free market. This restricts modern liberal principles such as the equality of outcome. No government intervention is an ineffective way to structure the economy. It allows for numerous issues such as cheap labor, overpriced goods, non-equal wages. All issues could be resolved through government action and regulation. Hayek’s ideas can be closely ties with those of the Untied States president in 1981, Ronald Reagan. Reagan upheld a huge economic practice know as “Trickle-Down Economics”. This practice involved an attempt to redistribute wealth among different social classes. The government would cute taxes on wealthier citizens with hopes the wealth would trickle down in the economy through mass spending of the elite. This effect was never successful in practice, by cutting taxes for the rich it left them with a high concentration on wealth. This practice aimed at the wrong target and did not prevent relative poverty; it just increased the economic gap between the rich and poor. Both theory’s are evidently flawed and validate the need for a government to obtain economic responsibilities. Regulations ensure an equal ground for the mixed market, which is a key aspect in a stable economy. Modern liberal principles require government involvement to achieve economic

John Maynard Keynes was an economist instrumental in the theories that aided in the construction of the New Deal during the great depression. He believed that it was appropriate for government to use tax and spend policies in order to stimulate the government. He felt that by using this fiscal policy it would keep the country out of a recession or depression. Beings it is an election year, and the economy affects everyone in the country, I wanted to look into the Keynes theories and discover if it is necessarily a good economic choice.

John Maynard Keynes was born in 5th of June 1883 and died at the age of 62 on the 21st of April 1946. His work in economics and his ideas fundamentally changed the practice and theory of modern macroeconomics as well as the economic policies of governments. Keynes is very well known for his exceptional work on the implications and causes of the business cycles and is also regarded as the founder of modern macroeconomics. The school of thought also known as ‘Keynesian economics’ as well as the various offshoots have his ideas as foundation.

Since the beginning of time people have been affected by their income and ability to accumulate wealth. People live their lives spending or saving money based on their own expectations of what the economy might do. For hundreds of years we have studied how the economic decisions of individuals and governments affect the welfare of society as a whole. John Maynard Keynes introduced a new economic theory that emphasized deficit spending to help struggling economies recover. Keynesian economics revolutionized the traditional thinking in the science of economics. His ideas and theories were deemed radical for his time but were later enacted by some of the largest governments in the world including the United States during the Great Depression. President Franklin Roosevelt enacted the New Deal in an attempt to stimulate the economy through government spending. In this paper I will be giving background to the history economics, the Great Depression, the New Deal, the development of Keynesian Economics. This paper will focus on analyzing the following question: In an attempt to address high unemployment and economic contraction, was Roosevelt’s The New Deal efficacious in stimulating the economy and ending the Great Depression?

Ans. Adam Smith trusted that in Laissez Faire framework government does not meddle in the activity of the economy and Smith said that economy will accomplish the best useful for the best number however this is just conceivable if everybody takes after self - intrigue. Where Keynes' feelings for private enterprise were comparable as Adam Smith and Keynes said that legislature need to intercede with a specific end goal to leave the monetary droops.

He acknowledges that his system isn’t going to be ideal, saying, “Of course, these adjustments are probably never ‘perfect’ in the sense in which the economist conceives of them in his equilibrium analysis” (Hayek 527). This is important because, while the structure may have its flaws, Hayek doesn’t rely on natural balance like classical theory or the government as an ever-present safeguard like Keynes. Instead, Hayek is realistic about the ups-and-downs of the economy, saying that people must swallow the “bitter pill” of tough times in order to keep their free will (Wise). A strong government infrastructure helps the economy persevere through its struggles and thus his economic structure finds a realistic approach to stabilize individual power and

The relationship between economists John M. Keynes and Friedrich A. Hayek is quite complex. Both had influential roles in economic studies, emerging after World War II and during the Great Depression era (BBC). It’s important to note that both of these economists had opposing views when it came to economic theories and policies. Briefly summed up, Keynes theories were in support for government involvement in the economy (EconedLink). In contrast, Hayek argued that the government should have a lesser role in economic decisions in order to achieve greater economic freedom (EconedLink). These two opposing arguments are what have primarily stirred the Keynes versus Hayek debate. Of course, both Keynes and Hayek’s theories

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

The concept of equality is multi-faceted and widely debated among scholars. While there is no singular definition for equality, equality deals with the distribution of some “thing” in a specific domain. For this paper, equality will be narrowed down to the domains of economic and political. It is essential to note that distinct types of equality can become conditions for equality in a different domain. In this case, economic equality will be analyzed as a condition for political equality. How is it exactly that economic equality can undermine political equality? By answering this question, this paper will prove that economic equality is a necessary pre-condition for political equality. I will do this by analyzing the political writings of

There have been different views from John Maynard Keynes, Milton Friedman and central banks when it comes to inflation. However, what both John Maynard Keynes and Milton Friedman can agree on is the fact that inflation is seen to be a great evil. Moreover, the central banks interpret inflation as moderate being the fact that some inflation is seen to them as tolerable. Historically, Friedman and Keynes have had disputes on a better system for the control of inflation. For instance, Friedman put forward the monetary policy for the government to use in order to keep interest rates to stabilize an economy, whereas Keynes believed the government should be in control of inflation by the amount of spending produced between goods and services. Central banks have viewed both reasoning’s to Keynes and Friedman’s theories and decided the monetary policy is the best route for an economy to take. A great example of this can be illustrated in Canada with inflation rates only being kept between 1 and 3 percent. The other factors that central banks might have to deal with in other countries would be the change in political views and how much power the government has over central banks to control cash flow throughout their respective countries. The central banks must also avoid dealing with poor decisions made by government leaders which could affect the economy tremendously. In many underdeveloped countries, there have been a lot struggles even until present day where government leaders

There is perhaps not a more famous ongoing dialectic argument in the field of political economy than the one between Adam Smith and Karl Marx in regards to capitalism. The two thinkers, although coming to radically different conclusions about the outcomes of the capitalist system for all parties involved, agree on a surprising number of ideas such as labor being the source of commodities’ value, as well as the fact that the division of labor increases productivity. However, their different conceptions of what determines the price of a commodity, the driving force behind and the effects of the division of labor, and the purpose of the capitalist system have widespread implications that cause their holistic arguments to diverge considerably.