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Keynesian and Hayekian economics Essay

Nick Hickman 10/10/2013 Mr.. Buchanan Block 2 Keynes and Hayes were two academic economists who had two differing views about what economic policies would pull the U. S. Economy out of the Great Depression. What I find interesting is that these two views still have importance today because we’re in a pretty similar situation right now, the only difference is that this time it’s a recession instead of a depression. Keynesian economics says that economic output is strongly influenced by aggregate demand.

Keynes thought that the private economy was the thing that was preventing a return to prosperity. When people save their money he says that there’s no guarantee that the money “will find their way into investment in new capital construction. ” They say that a lack of confidence is the reason they don’t invest. So Keynes claims that “the public interest in present conditions doesn’t point towards private economy’; they then conclude that we should endorse public spending in order to offset unwise private thrift.

Because of this, Keynesian economics promotes a mixed economy. Keynes also that economic output is strongly influenced by aggregate demand. Keynes solution to stimulate the economy was a combination of wow approaches; one reduce interest

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rates, and two have the government invest in infrastructure. By reducing the interest rates that the central banks lends money to commercial bank, this will encourage these banks to do the same for their customers, which would then encourage the customers to take out more money and put it back into the economy.

He wanted the government to invest infrastructure because if they did it would create business opportunities. Hayes found a few faults with Keynesian Economics. First off he pointed out that Kennedy’s argument about savings is actually an argument about the dangers of hoarding. It’s agreed that hoarding money is deflationary in its effects. No one thinks that deflation is in itself desirable. ” So therefore one of Kennedy’s points in debunked. The second point he disagreed on the nature that the spending needed to be.

Hayes said that the spending could be either for consumption or investment. The final and largest disagreement he had with Keynes was about the benefits of government spending which are financed by deficits. He argued that “the existence of public debt on a large scale imposes frictions and obstacles very much greater than the frictions and obstacles imposed by the existence of private debt. Hayes thought that the less government intervention there was, then the more economic freedom there would be.

He also thought that when the people are free to choose the economy runs more efficiently. He thought this because he felt the consumers would know better than the politicians where the funds could be most useful. So Keynes thought the economy would run smoother if the government played a larger role in it, but Hayes said that that was a terrible idea and the consumer should have more control. I found it interesting when I was researching this how much Keynesian and Hegelian economics

By Nick-Hickman because the government wanted people to buy into Keynesian economics because it would give the government more power, and they hushed up Hake’s theory because it would take power away from them. Obviously using Keynes’ ideas haven’t worked for America so far, so I think we should try Hake’s theories for a bit and see how that goes. Works Cited Hayes, Frederica A. Von, and Bruce Caldwell. The Market and Other Orders. N. P. : n. P. , n. D. Print. Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Amherst, NY: Prometheus, 1997. Print.

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