I think Keynes is right because you need government intervention in order to initiate major economic change in a society. If left to a free market system, people will act and respond doing only what is best for themselves rather than the economy as a whole. A larger driving force is needed to stimulate changes and that is where monetary and fiscal policy comes in. Keynes was an advocate of government playing a role in the economy, not being the only role such as in socialist central planning. I don't believe that complete central control is necessary either, either extreme will lead to extreme economic poles. Overall, I feel Hayek is taking too extreme a stance in pushing a laissez-faire market and that Keynes' idea for some government intervention to help rather than completely control the economy is crucial to keep society stable and prosperous.
I think that Keynes is right for one basic reason: without government intervention, the market would move towards the path of least resistance. When competition occurs in the market, there seems to be a lot of chaos and strange behavior. Sales, bonuses, price fixing etc. are competitive moves to get an edge on each other, but sometimes these tactics fail and that's where bankruptcies and closures come in. I think that in a world without regulation, eventually the economy would become a "1 company, 1 good/service" system. Every company would have a monopoly over their provided goods or services and that just cant happen.
In order to combat this shift towards a less stable economy, the government needs to have some kind of control over market transactions. Although I don't agree with all of Keynes' ideas (i.e. price fixing) the central idea of regulation is the right one. The economy is a balancing act between socialism and complete capitalism and I think Keynes was almost right when he said that a capitalist economy needs government intervention.
I feel Hayek is right. In a capitalistic economy such as the United States, Laissez Faire is in affect. The whole basis of capitalist economy is the fact that there is and will be no government intervention in the private sector. Survival of the fittest has always been the mind state of the U.S. economy and that is how it should be. If a company is going under there is a reason; whether due to poor management, extortion, a bad product, or a obsolete object. So what is the point of reviving a dying company when most likely that company will just fail again. There are some exceptions with banks making poor investment and lending decisions and learning from their mistakes. Otherwise i personally feel similar to Mr. Hayek that their should not be government intervention. -Rocco
I think both are right and counter act each other in a way that influences the boom and bust cycle. I believe if you look at our present economic state which was caused by using Hayek's ideology that the quickest way to stop the recession is to increase government spending like Keynes said. If this method isn't used the economy may die before it rebounds as expressed by Kayne's quote saying "In the long run we will all be dead" will lead to inflation which is the side effect to Keynes' economic idea. This will ultimately lead to a period of economic prosperity until inflation reaches critical levels and the economy once again hits a bust part of the cycle in which case Hayek's economics will be to best solution to the problem. Similar to the economic issues faced by Reagan using Hayek's ideas will "slay the inflationary dragon." This will than for a short while hurt the economy a bit while inflation decreases and than rebound into prosperity as shown by Reaganomics and Marget Thatchers Brittan. History supports this to be right and each time one of the economic crisis' occurred usually a change of economic policy happens.
I'm going to have to go with Hayek. Under Keynesian economics, in response to unemployment the government would increase the money supply. Two things could result. First, successive increases in the money supply could lead to inflation. Or, the increase in money supply will drive down interest rates, artificially expanding credit. Investment will expand, but in the form of malinvestment, meaning investment in long term projects rather than short term projects. What happens? BOOM -> BUST
Hayek has continually proved himself to be right in the last century. For example, deregulation in Germany let prices fall and consumer spending rise. When the airlines began to deregulate, twice as many people were employed to fly three times as many people. Demand was severely underestimated. It's clear that a free market is the key to success.
I think that it is difficult to choose one of the two economists as being right over the other, for both of their philosophies proved useful during times of economic boom or bust. In fact, I see the two philosophies as being complimentary. For instance, Keynesians may argue that government control over the money supply and interest rates are the only way to ensure that the private sector does not make it impossible for consumers to buy products at fair prices, and that a free market leaves room for economic chaos, while a someone who identifies with Hayek would say that an economy free from government control would prosper without greediness of politicians playing into the success of the market. I however, would argue that in times of recession, Keyne's philosohpy should be adhered to, and in times of economic prosperity government needs to relinquish control of the economy and let the markets run themselves like in Hayek's philosophy. Basically, I would advocate that a free market system would lead to the most economic stablility in times that do not show signs of recession.
I think that Hayek is right. When the government pours money into the economy at such an alarming rate, not only does it incur a massive deficit, which later needs to be paid off somehow (by taxpayers). But this massive spending and influx of currency leads to massive inflation. The market will always work itself out. Businesses that don't make the cut will go bankrupt and new businesses will take the initiative to advance and turn a profit.
If there is regulation then businesses cannot do this, the fundamental principle of capitalism. A market performs best when left alone. When competition is the controlling factor.
Hmm I agree with most of Hayek's ideas. Too much aggregation and too much government spending often result in severe inflation,and people's mal-investments can cause economic depression and recession, as shown in the Great Depression and the sub-prime mortgage crisis. If people had followed Hayek's beliefs, such as high interest rates, these economic crisis would've never occurred. Furthermore, Hayek's economic ideas have been proven efficient and applicable in Germany, right after the WWII, and the US during Reagan's presidency. Free market system is the key to a stable economy, not C+I+G. Have faith in Laissez-faire, and let the markets solve their own problems. Too much aggregation will make things only worse.
I agree with Hayek because the government involvement that Keynesian suggests has not yet been perfected. Until the government can find a way to decrease the peaks and troughs of the economic cycle that Hayek suggests is bound to happen (when left alone) the government should not be involved. Keynesian economics suggests fixing one problems with another, and simply continuing that cycle. Unemployment? Increase the money supply. Inflation or low interest rates? Contract the economy. Oh, wait, there's unemployment again. Just today we learned that Hayek believes that government involvement concerning the money supply will effect prices and not Real GDP, while under Keynesian economics, both are effected.
In response to Andrew J.'s post (Andy Jay, as many call him), I disagree that the market will "move towards the path of least resistance" if left alone. That cannot be proven. He describes competition in the market, and that might just be able to keep the economy under wraps. Without government intervention, businesses will compete with their prices, and in response, help their customer. The businesses must realize that the government can't save them, and listening to the customer is the real way to make money.
I believe that Keynes is more correct over Hayek because no economy can stand strong without government intervention. Since our economy is split between socialism and capitalism, when Keynes stated that the capitalist economy works better with government intervention, it made more sense because this controls the rivalries between companies. Without government intervention, making any sort of changes or reforms to society would be pretty difficult. If the government is not involved, a majority of the people simply wouldn’t have the will to work together in order to benefit the society as a whole when they could just be doing things for themselves. Keynes truly promoted the government having a role, and the usage of monetary and fiscal policy. Hayek’s ideas of pushing a free-will, per say, government is taking too much of a chance of an economy to plummet due to a lack of stability by some form of government.
Although I believe that both Hayek and Keynes make excellent points on how to operate the economy, I do believe that Keynes ideas are more correct. For the most obvious reason, I think that government intervention is crucial for the economy. I believe that letting things "run free and fall as they will" is a very risky decision that Hayek seems to put great trust in. I think by letting the market be left free, your leaving a great deal of trust into everyone where competetiton can occur and people start to get greedy. I also agree with Keynes fiscal and monetary policies to fix the different economic problems; although his methods may lead to great inflation, I think it is better than bank closures and depression. Although Hayeks ideas have worked, they are not stable nor long lasting.
In response to Joanna H. post, I would have to disagree when thinking that Hayeks economy is more beneficial according to the graphs that we have learned today. Although Keynes graph would effect the inflation rate and gdp, it will help decrease unemployment and the inflation rate would only increase by very little. Hayeks graph only goes up where the inflation rate will continue to increase at a much rapid pace and it does not benefit the people in any way.
While I think that both men make great points and I can not fully agree with one side, I agree more toward Keynes. This does not mean I want our government to be capitalistic but a free market might just ruin our economy. We have learned that a free market can lead to people just taking care of themselves and cause a depression that would ultimately hurt us. Also, without government intervention, businesses might have a hard time staying in the market and we might lose competition which can result in higher prices and lower quality from other businesses.
I believe Hayek's view on the economy is correct. The economy works in a cycle just like nature does. Once something is going well, a "boom" in the cycle, it will eventually take a turn for the worst and the economy will wind up in the "bust" stage. And once the economy stays in this trough for sometime, it too will eventually find its way out and return to prosperity. As seen in Germany, once deregulation kicked in and prices fell, consumer spending increased and people were able to bring themselves out of their recession. Hayek's idea can also be supported by the deregulation of airlines. Once the government stopped their interference, more airlines were able to open therefore creating more jobs and allowing more people to fly.
However, I agree with Marc's post. The economic philosophies of Keynes and Hayek are both needed because they feed off of one another. If Keynes' policy is in place and eventually leads to inflation, people will demand for Hayek's policy to be used in order to counteract the inflation. And once that is in place and rampant unemployment occurs, people will then demand for Keynes' policy.
I believe Keynes beliefs can better a society's economy due to the amount of intervention. If there is more intervention, people cannot complain that the government is not doing their job or trying hard enough, and hopefully if they are intervening, they know what they are doing and are assiting the economic situation of a country. While many of Hayek's ideas do seem very reasonable, it is just too risky to not have government intervention, there has to be some type of a head figure in economics and the government would have to serve the country with that role. The government should be a necessity to economics and has to have hands on with transactions within a market.
I believe That Keynes is right, only because in Hayek's ideas, he doesn't take into account what effect no government intervention would have. For example had the government not bailed out high ranking corporations as it did most recently in the current recession, the unemployment rate would have soared much higher, and globally we could have seen a market crash far worse than what we already experienced. A scary scenario is presented without government intervention since as Hayek believes, he essentially say lets things fall where they fall regardless of who gets crushed underneath. Its a chilling "what if" scenario to see ourselves in a pure capitalistic society without any forms of government intervention. I believe that government intervention is necessary for any economy trying to be successful in today's global market, and that's I feel Keynes is correct.
I agree with Lisa that both economic theories are useful in different points of the economic life cycle. However, I still think that Keynesian economics will work better in most situations. Depending on the country and the state of the economy, it may be better to combine the policies or to switch to Hayek for a while. But then the country should return to Keynes' ideals for the long run. Keynes control of the economy will allow for the most stability over longer periods of time. However, people should not be close minded and should consider Hayek in times when the economy is in a critical state and typical Keynesian policies are not being effective.
I don't believe that either economist was completely correct in his thinking. Both schools of thought have proven themselves to be successful at some points, and unsuccessful at others. People tend to take a more Keynesian point of view in times of recession- no one wants to wait for the economic problems to sort themselves out and risk losing a job. But Hayek's laissez-faire approach can seem favorable to the people in times of prosperity, as they resent the government interference that can often continue to drive up prices. Therefore, I believe that neither economist is entirely correct, but that a moderate policy drawing from both schools of thought would be most successful
I think that Hayek is right but not by far. It is hard to really say who is right because both polices of economics are used and both have succeeded at times, and both have failed at times. Most people change their minds with the way the tide goes. Keynes' economic policy is better during a recession period when more government regulation is needed. Hayek's economic policy is better for the economy when we are in a booming economy. The market should be allowed to grow without government regulation during periods when the economy is booming. Overall I feel that Hayek’s economic policy is generally better but stills needs some government control so the economy doesn’t get out of control. It is not good to go to either side too much. You need both in an economy to make it work.
Keynes believe that government intervention is necessary to monitor and keep the economy at a stable level. He believed this could be done in the form of fiscal and monetary policy. This is said to regulate the economy. While Hayek believed in a laissez-faire economy, where the government didn't get involved at all. I believe that during time of inflation and recession Keynes policy would be most effective. Though it needs to be constantly monitored. During the current recession the expansionary fiscal policy has helped to correct our economy and proves to slowly be working, as our economy turns upward. This was also the case before World War 2. Keynes Policy is most effective in these cases in my opinion and will ultimately help the most to monitor and repair the economy effectively.
In response to Lisa's post. I agree that both policies are necessary and that during times of inflation/ recession that Keynes is necessary. Though while the economy is doing better we can use Hayeks believes. I also think though that during stagflation we should use Hayeks beliefs of free markets. Last time stagflation occurred in the United States we used a Keynes policy it was un effective. I believe that laissez-Fair would have been more effective. Therefore a mixture of both policies will probably be the most effect for our economy.
I think that Keynes economic ideas work better than Hayek’s. If the economy is going into a recession, the government should step in to try to improve the economy. We can’t simply just wait for the economy to rebound. Even short recessions make millions of people’s lives more difficult; therefore the government must attempt to stabilize the economy as fast as possible. However even though the government should get involved, it should have limited involvement. Ideally there should be a balance between Keynes and Hayek’s idea’s, but overall I think Hayek’s ideas alone are just too risky.
I believe that Hayek is right because the government corrupts our economic system. With the government constantly bailing out and creating more money will just make the problem worse. Of course, Keynes has a point that the government should intervene with the economy is in such a economic depression like the Great Depression. Anything else, we should the market and business' buy and sell to keep the economy flowing.
I agree for the most part with Hayek. He makes very strong points about how government intervention with the money supply and fiscal policy will cause inflation. Inflation is a by-product of increasing the money supply which weakens the dollar and has no positive effect on the economy. A free market, in which the economy is run by the people's wants and needs rather then the government deciding what the relative price ranges should be and controlling the highest reaches of the economy, should be the economic policy. In a free market, businesses can compete with each other driving down prices and increase the quality of goods and services while government controlled industries often are inefficient and lose money such as the coal industry in England or the US Postal system. This ends up costing the people more money in the long run. However, I agree that regulation is needed to an extent in a free market economy. With no rules, business will cut corners and that will hurt the economy. Left completely to its own devices, an economy would crumble. The government should be used it order to help an economy fits the people’s need, not run an economy and tell them what they need.
I disagree with Reena’s views. The economy runs itself based upon what the needs of the people are. The government should not be initiating a change in the economy because it runs in cycles and will adjust on its own. Government will only hurt its people by spending unnecessary money and going into debt. Also, people should not be concerned with whether or not their actions help the economy as a whole. The people are the economy and their needs control it. They should do what they want to do rather than worry that they have to follow what the economy is doing right now. They shouldn’t spend more money in a recession because it is good for the economy while they are unable to. In the end, it will adjust itself to the people’s interests.
I think Keynes is correct because there needs to be some kind of supervision in the markets where in case the economy turns south or starts to get out of control, the government will at least be able to make an effort to fix it. The problem is that there needs to be a proper balance of government intervention and not otherwise it is just useless trying to run an economy that way. Corruption and too much power given to the government can hurt the economy but if they are smart about it and know when to intervene and when to not it is the best system. The government is a necessary evil because it keeps everything in check. Keynes ideas for the economy are that the government can be flexible and will only intervene with the markets when needed to. Otherwise the markets are running on their own. The government acts more like a saftey net for the economy rather than an authoratative force which, when it works out right, is able to keep everybody happy.
i think that Hayek is correct because when a country is in stagflation there is nothing that the government can do to help. If they lower taxes than people will just continue to spend and that will increase inflation more. If the government decides to increase taxes than that will cause higher unemployment and a recession. Therefore, i think Hayek's idea of leaving the country to work its way out of this situation on its own is the best idea. Our country could have suffered tremendously if Regan didnt enforce the ideas of Hayek during his presidency. As well as in Germany, if Margaret Thatcher did not show the people that if the government intervenes, capitalism will fail, it would cease to exist in their country. All in all, i believe stongly in the ideas of Hayek. -Alexandra Ricci
I agree with Brendan T's post because if the government keeps helping us get out of little situations then it will ruin our economy. In a capitalist country there is meant to be ups and downs and by trying to only have a good booming economy will end up creating major issues because once one thing goes wrong then the entire economy will tank. I believe by letting the economy play out naturally, like Hayek says, will always benefit us in the future.
What it comes down to is are you willing to deal with high inflation when trying to recover from a recession or high unemployment. If you go with Hayeks view, inflation won't be a problem, but unemployment will. Doing nothing will cause people to lose jobs until the economy rebounds. However, with Keynes view, your going to have high inflation because your spending money to boost demand, causing higher employment. Your always going to have to deal with one of the two evils, so the decision comes down to which one?
I feel as though Keynes view makes more sense for an economy, because some inflation is manageable and increasing the velocity of money helps consumers and businesses alike. Hayeks views were shaped by seeing one of the greatest inflationary economies the world has ever seen, post war germany. However, Keynesian economics over the past century has shown that a little inflation is not a terrible thing. As long as unemployment is controlled, people have money, and currency is changing hands, everyone benefits.
The market is not some perfect machine, it is made up of people, who sometimes make bad choices. Sometimes people need more confidence in the economy, and demand needs to be boosted. Other times people are spending too much and the government needs to cut the money supply. Hayek economics assumes that the market is always right when in reality it is made up of people who can make poor decisions.
I'm not certain I can choose between the two. The economy is susceptible to change which would induce two separate means of thought. During economic times of prosperity, we should seek to Hayek's view as to not interfere with progression. But when recession occurs, we should seek to Keynes' ideas to counteract it. The public alone cannot enhance the economy; it takes a combined effort between a much more significant power and the people to retain prosperity. No country truly stays close to their economic definitions. Because we are capitalists doesn't mean that we have to remain free of all government intervention; at some point, the government is needed to curb difficulties. But at the same time, the government can obtain too much power over industries and drive the economy down as well.
In response to Laura's post, I agree with the fact that "people change their minds with the way the tide goes". People are easily persuaded by what they hear and for the most part, if they hear that the economy is functioning poorly, they will react accordingly.
I'm going to have to agree with Keynes on this one...based on one simple principal: humans are human. As with most economic beliefs and even government ideas, one major factor is left out, which is the fact that humans are greedy, selfish, and a majority of the time don't act as expected. Keynes' principal allows for government intervention to allow the government to control the economy to keep stability. Businesses do need to have freedoms to control how they run, but depending on businesses alone to regulate and completely control the economy simply is not a good option. I believe (as the American Constitution states) that the government exists to protect the citizens, and not big corporations (who are separate entities and not humans / citizens). Hayek's model simply isn't feasible because it allows for major shifts in the economy, which in theory are essential, but in reality lead to the misfortunes of many citizens.
Laissez-faire economic beliefs work in theory, but in reality Keynesian control over the economy is essential for a successful economy.
I disagree with Matt H. because he simply does not take realities into account when arguing the basis of Hayek's principles. The entire teaching of economics that Matt refers to is completely based on theory of how people should react. Additionally, his examples are simply two examples that are an anomaly in history. It has been proven time and time again (the recent financial crisis as a prominent example) that leaving the economy on its own will only result in poor economic conditions due to human nature that cannot be controlled. The economy must be adjusted to balance human nature, not left untouched.
I believe that Keynes is right and that some government intervention is needed in the economy. Without it, the market will still run on its own, recover from depressions, and fix its own problem, but it will take much longer than with government help. Effectively using fiscal policy can help an economy recover quickly from a recession, or control it so that there is not too much inflation. Even if the government gets involved, it should be limited because excessive government spending in a recession would not be good, so there has to be a balance.
I believe that Mitchell was right that there has to be a balance. Relying on Hayek's ideas can be risky because it trusts the market to recover on its own, and without anything to help demand boost, consumers would have no reason to spend money, prolonging the recession. Government spending and tax cuts can help increase demand and help fix the economy quicker
I feel that Hayek's economic policies are better than Keynes'. Hayek doesn't use government intervention to control the economy, it fixes itself. With government envolvement, the government can, yes, influence people to do what will keep the economy stable, but sometimes this influence pushes the people too hard. The government has the power to say that a recession has hit the economy and cause the nation to scare into stopping spending. The same goes for inflation, if the government says that the economy is booming, everyone runs out and spends much more than before. I feel this gives the government too much power in controlling the money supply and a citizens cost of living. With Hayek's economic policies, the market controls itself. Naturally it will fix itself from recession and inflation without the government's intervention.
I disagree with Bryan K. People are greedy, I do agree with that, but it's people that control the government. The government isn't a magical God-like force that always has the answers. It's made up of other citizens who are just as greedy as the next guy. Government intervention is allowing a select group of greedy people decide where our economy stands. You could argue that the people that make up the government are looking out for the greater good, but who says that the rest of us aren't? Aren't all of our needs the greater good? The thing is, government officals can look out for the greater good, but knowledge is power, especially knowledge of power, and that's what they have. Government officals have the power to control who's pockets the money enters.
I feel that both extremes of government involvement can have severe problems. I think Keynes is right because without some form of government involvement, the majority of people would be walked all over. I can also understand why Hayek would believe government could cause socialism. With these thoughts in mind, I still would agree more with Keynes because it is more important to protect the people than it is to protect businesses. The crucial importance of Keynes’ beliefs can be seen by looking at America since WWII. Keynes model has been used with great success to counteract unemployment or inflation, contrary to Hayek's belief that government intervention could not affect unemployment. After careful consideration it becomes evident that Keynes’ ideas should always be utilized.
I would have to say I agree most with those that, like Ken A-S. believe that it is very hard to decide who is better because both have benefits and pitfalls, but still would choose Keynes over Hayek. It was very hard to decide but in the end arguments for Hayek are not good enough to sway my views.
It is hard to choose between the two economic icons becuase both of their policies have been both beneficial and detremental at some point in the boom and bust cycle. Since a decision has to be made, I am going to have to side with Keynes. Even though government intervention is not always perfect, it does help stimulate and fix the economy in times of need. Monetary and Fiscal policies do have some unwanted side effects but they do not leave the country waiting for self stimulation like Hayek's ideas. The only problem is that the right policies have to be used at the right time to regulate the economy in a successful way.
I don't believe that either Keynes or Hayek is right or wrong; however I do agree with Keynes more than I do with Hayek. Economy cannot run a free market and do as it pleases, there needs to be at least some government intervention or control to prevent any major downturns and other economic problems. By looking over the economy, the government is also able to manage large businesses that would otherwise run the economy and grow even stronger and richer in Hayek's ideal economy. Still, any extreme is bad and an overregulated economy could be the same or even worse than a laissez-faire one. There must be a balance between Hayek and Keynes' ideas for a successful economy.
I agree with Bryan in that businesses will be greedy and they will look out for the best for themselves in a free market economy. As I said before, without government intervention there will be no control in what businesses are doing and how they can really hurt the economy. "Keynes' principal allows for government intervention to allow the government to control the economy to keep stability."
I think that neither Keynes nor Hayek is "correct." There is no right or wrong economy, there is only an economy that is agreed upon amongst the majority of the population. As Americans, we have chosen a capitalist economy, and when we define ourselves as such, then I believe that Hayek's views are most accurate. By definition, a capitalist economy isn't meant to include government intervention, but follow a "laissez-faire" system. We have chosen to go with capitalism, and like all major decisions, we must accept both the benefits and the consequences that may come. America has enforced the idea of "survival of the fittest" but when we are no longer looking like the fittest, we seek easier ways out. Americans are constantly afraid of becoming too socialist or too communist, especially when it comes to health care. However, when it comes to our economy, we expect our government to intervene as much as is necessary and fix everything for us. If we are to truly live in a capitalist society, then we must follow the views set by Hayek, or we stand as phonies.
In response to Sam DeMonte's post, I agree that no country stays true to their economic definitions. Each country tends to choose a basic economic outline to follow, and makes tweaks, both big and small, here and there as time goes on in order to better fit the population's demand.
I think Hayek is right. Under keynesian economics in a time of recession he thinks the government should spend money to get out of the recession which could lead to inflation. More government spending could also bring down interest rates.
Hayek is clearly right the best form of an economy is a free market. The private sector should be setting prices because the public are the people buying the goods and services. In the second half of the 1900's it was keynsian economics that brought Germany out of their econmic downturn and when the airlines were deregulated and prices dropped the private sector made money and more people started flying.
It is clear to me Keynes is correct. In Keynes theory peoples spendings goes towards anothers earnings,and when that person spends his earnings he is supporting anothers earnings. This circle creates a normal functioning economy. When the Great Depression hit people's natural reaction was to hoard their money. Under Keynes's theory this would have stopped the circular flow of money, keeping the economy at a standstill. Keynes's soltion to this poor economic state was to increase government spending. Keynes argued that the government should step in to increase spending, either by increasing the money supply or by actually buying things on the market itself. This is much more effective than Hayeks theory of cutting taxes because he is not taking peoples mps into account. If the goverment was to spend 1 million dollars, 100% of that money would be cycled into the economy. However if the Goverment was to cut taxes by 1 million dollars without any mandates, a good portion of that money would be saved instead of spent. Therefor the government would have to cut more tax dollars and create a bigger deficit in order to have the same affect.
And i know Joe Stef hasn't posted yet...but hes just wrong in general
I believe in Hayeks views. i believe that capitalism will always have booms and busts no matter what. spending money during a recession might shorten by maybe 6 months but is that really worth it with all the debt the government is piling up. the only way to pay for all this debt is the take payers. what the government should do is cut taxes and government spending to a minimum let people spend money. by people buying products business will hire more people and people will get more wealthy. with these new wealthy people they will go in a higher tax bracket making the government money. that is how the economy should be taken care of.
RESPONSE I will be commenting on Joe Solomitas post. First of all Joe is 100% incorrect. The only thing that all that government spending does is drive up prices. Joe brings up a half way decent point near the end when he says that MPS is not taken into account. that is true but when someone saves where do they save? the bank what does the bank do with your money it invests it in mutual funds and gives other people loans. so virtually all the money from tax cuts is spent. thus showing my theory is correct and Joe is a stupid fan of obscure sport teams(Minnesota Vikeings, San Fransisco Giants).
RESPONSE Joe Stef's argument is about as sound and solid as Antonio Cromarties morals. Joe just dosnt understand that in tough times bussiness are not always willing to spend more money and massive unemployment rates occur. This "animal spirit" only creates more peverty and without the goverment stepping in to help, it will not be resolved. (Its no wonder Joe got the 2nd quarter grade he did) because he's clearly off the mark when it comes to basic economic principals.
RESPONSE Joe how did Germany's economy bounce back after WWII? oh wait Hayek said let markets play out and they did and it worked. so your theory is about as good as Brett Favres decsion making in the playoffs
RESPONSE No Joe Germany successeded because it was Keynes original idea not to make them pay war reperations. Otherwise they would have crumbled like Mark Sanchez's PCL. Come on Joe just come to my side, i got plenty of red shirts in my closet for you to wear and we can celebrate the passing of the Health Care bill together, today.
I disagree with Reena she says that in a Keynesian society people wont act in their own self interests. People will still act in there own self interests no matter what because its a capitalist society. People are inherently evil and for the most part people will not hesitate to throw another under the bridge to increase there own wealth. Also when you keep intervening in the market when you are in a time of economic boom you will drive up inflation causing the cycle to shift faster from boom to bust in which case you would need to uses Hayek's economics in order to reduce the inflation to acceptable levels to be able to restart the economy.
RESPONSE Don't get me started on the socialist Health Care Bill. the treaty stated that Germany didn't have to pay back the whole debt. Keynes idea is really working now isn't it with all of Obamas spending were really getting somewhere arent we. yeah were getting closer to socialism. so Keynes beliefs are complete garbage.
I agree with Bryan, that most humans greedy, and selfish. Many people profit, and make a living off of other peoples misfortunes. An example of this can be easily seen in the tourist industry. When visiting a new city/country there are always people looking to profit from the unknowing tourist. Bryan is right that the government needs to control the economy in order to keep stability. I would disagree with anyone who solely believes in Hayek’s idea; in a country of over 300 million citizens, we can’t all just wait, and hope that the economy will naturally improve.
I feel that the Keynes view of the economy is right. There needs to be government intervention because they have enough influence and power to quickly fix economic problems like unemployment, recessions, and inflation. If the economy was left alone, it would often take too long for the economy to fix itself. Too much government intervention is also a bad thing. If the government regulates and controls too much, competition between business would decrease which would lead to less products available for consumers.
I agree with Bryan about the natural human tendency to be naturally greedy and selfish, and that is the main reason that the Hayek way of thinking would not play out in the the long run. Though it is idealistic to think that people would be fair and not too ambitious when it comes to money, it is very unrealistic to think so. Without government regulation and protocol, people would stop at nothing to make the most profit, while jacking up prices and only self-benefiting. Though Hayek envisioned an economy "by the people, for the people", such a utopian view proves inconsequential in the human quest to outdo everyone else financially.
response: I disagree with Ken's statement of "We have learned that a free market can lead to people just taking care of themselves and cause a depression that would ultimately hurt us." In a free market, there still needs to be economic interactions among people in order to fulfill a selfish motive. This network of interactions is what connects us and keeps the economy stable.
I also disagree with Bryans Response. Those were two solid examples is a couple of governments, no? A clear effect from a clear cause. Keynes may have had a couple of moments at the start of the 20th century, but Hayek has been right for the remainder. So isn't it a possibility that Keynes is the anomaly? Also, our government is Keynesian at the moment, so if you're blaming the crisis on anything, its Keynes! BOO GOVERNMENT INTERVENTION.
there are too many posts, so i guess i'll agree with whoever supports Hayek hahaha
I agree with Max because Hayek's philosophy really does not take into account what no government interaction could possibly lead to. Hayek's ideas could be wise, but very risky because government should always have control in order to be some type of a monitor in order to watch the economy and do their best to fix any problems that are occurring, or could occur in the near future. Hayek's philosophy is risky because if the market crashes, it could be twice as bad as it would have been with government interaction because maybe they would have been able to prevent a certain situation.
I agree with Rocco, that the US is a capitialist country and we should follow the laissze faire system with no government intervention. For private business, social Darwinism should be in effect to regulate the economy. If a company fails, let it go down so the interest rate can change and allow people to buy and sell.
I think that both Keynes and Hayek are right. Both systems have had their success through history and both have failed to keep economic stability in the long term. Each system seems to create its own demise problems, and each system has the ability to solve the problems that the other system creates for itself. for example Keynes economics brought the United States out of the great depression only to fall back into a recession a couple of decades later. By moving over to Hayek's system for the economy, by deregulating businesses, the economy was rejuvenated. Because of this cycle, both Hayek and Keynes are right.
I primarily agree with Marc E because I agree that the two forms of an economy can counter what the other has created. In most cases that is the problems that both economic systems create for themselves. For example the United States economy has currently reached the end of an era were Hayek’s economic beliefs were the standard of an economy. But by having no regulation in the economy people were able to make bad investments and jeopardize the state of the economy. The only way to solve this problem is for the government to get involved, so the economy moved towards Keynes economic philosophies. In this way Keynes economics were able to counter the problems that Hayek’s economic created, and in a similar way Hayek’s economics will eventually have to fix the problems that Keynes economics will eventually create.
I'm going to join the crowd and say that I am inclined to agree with Bryan K's ideas as well. A lack of governmet control leaves only busineses in charge and allows for the uglier side of human nature to take over. People are usually selfish and this will likely show in their economic practices. It is this reason that causes people to become disenchanted with Hayek's beliefs- the selfishness of business can cause people to lose jobs and the lack of government intervention prevents ecnonomic services from being availavble to those in need. Though Hayek's economic system can result in great wealth for a country, people must be aware of the possible consequences in times of recession.
In response to Blake's comment, I disagree. I feel that too much Government regulation will not allow the economy to grow. Keynes' economic values are communist and we all know that communism failed because there was too much government regulation and the people's salary was controlled by the government causing a lack of incentive for people to work. Therefore Keynes' ideas have failed in the past due to the fact that they do not allow the economy to grow and prosper like Hayek's economic ideas allows.
As much as I agree with Stefurak that solo likes obscure sport teams and brett farve throws interceptions in the postseason, his economic principles and test grades are shaky at best. Hayeks views do not take into account that people during a recession are not going to be readily willing to spend money. Also, with banks needing a reserve requirement the government is always going to be able to boost demand more by spending than cutting the same amount of taxes. (AKA the Government spending multiplier always being 1 more than the tax multiplier, Macroeconomics 101.)
Stefuraks logic is about as broken as Leon Washingtons Right leg.
In response to Jen A's comments, I have to agree with her statement that under Hayek's ideals the economy would not be able to undergo serious change in either direction without government involvement attempting to stabilize things. Its not feasible nor is it a highly successful scenario. If a nation wants its economy to fail quite miserably, they will install Hayek's ideas even in the worst of economic conditions, resulting in the entire collapse of the government choosing to not be involved.
I have to disagree with Joanna H. for her ideas and for calling me out. The concept of the "perfect economy" doesn't exist. The economy is a dynamic system, a system that can expand, shrink, shift etc. When you have a complex system, with so many variables, there is no way you can bring all those components together to form a perfect system. Keynes realized that in order to maintain some control over the economy, you need to sacrifice something, namely inflation. We can live with a little bit of inflation in order to prevent unemployment.
To the competition in the market that she refers to, I'd like to bring up Standard Oil. At its peak, Standard Oil had control of more than 90% of the US oil supply and had amassed nearly $320 billion (current dollars) for its owner, John D. Rockefeller. What stopped this massive corporation? Government intervention that broke up trusts and monopolies. This shows that competition wont really exist when you have a totally free market. Government is the only thing preventing a corporate takeover of the American economy.
I'd also just like to say that the current recession was preceded by eight years of economic deregulation.
In response to Mark E's comment: I agree with him in the sense that I agree that both of them are right and that they both counter act each other; however, I still believe that Keynesian economics reaches ahead of Hayek’s ideas. Both economists have had an influence in the way today’s economy has been developed but Keynes ideas for the economy allows for the most helpful methods and control over the long run. Hayek’s policies are not completely out of the running, but it basically depends on what state the economy may be in. For the most part, both men influenced our economy and different policies are always looking to be used in effect. The ideas of Keynes seem to have prevailed over Hayek due to the inflation factor part of his idea. The economy however will be more stable, which is better, due to Keynesian economics.
I agree with pat shannon because the two different types of economies are really just two different ways of getting things done. There really is no right and wrong beause both have their equal share of problems and both have their ways of solving problems. Any economic system will have cycles no matter how good or bad they are meaning that there will always be booms and there will always be recessions. It is just how they are able to work through the cycles is the big differences. In the end though, as long as both economic systems get the job done, they are both right.
I think Keynes is right in his theory because the government does need to get involved in economic problems. The Great Depression required work programs and a war to get out of, both products of government intervention. We are in a time where the government needs to spend to get back on the right track. Once we are, they need to back off, but in general, we do need this government involvment.
With what the hungarian fool said, not having government spending making a recession longer by 6 months is a statement with completly no facts behind it. Every recession is different and I don't think any recession with be longer by only 6 months if the government doesnt spend. It will be years if anything, varying depending on how severe and such. He needs to relax and calm down and know that DJ penny is a fan of Keynes.
I feel that Hayeks theory on how to manage an economy is correct. The government should be hands off, allowing the economy to run by itself. When people try and step in and control the economy, I believe that there can be prosperity. However this prosperity will be short lived. For example: The ecopnomy is not doing well, unemployment is rising and there is less spending by consumers. The government steps in and takes action, they increase spending and lower interest rates. Feeling more confident people will now take out more loans and spend more money. This will certainly help the economy faster than if it was left to its own devices. However in time, the economy will start to grown to fast and inflation will begin to rise. So the government does the opposite of what it did when the economy was doing poorly. This is when it begins to fail, because now with the lack of consumer spending, higher taxes and higher interest rates, the people that took out loans are left scrounging for money to pay back their loans, and the higher taxes. So now the economy is doing bad again and they have to pump more money into the economy again. This cycle can only work for so long before so many people have acquired so much debt that the country is now faced with tons of people that owe money that cannot pay off their loans, and at that point who knows what will happen; however one thing for certain is that it wont be good. In an economy without the government intervention these problems wont occur. The economy may never reach the same heights that it would while under government supervision but it will also not reach the same bottoms that a government supervised economy will reach. So in conclusion a free market economy is the way to go.
In response to Andrew S, Hayeks theory does take into acoount that people are less willing to spend money during a recession. In a free market society, during a recession, people will go and save their money more than usual. Banks will compete with each other, trying to get you to invest your money witht hem, so they will raise interest rates on the money that you have deposited. People will eventually accrue enough wealth that they will begin spending money again. The economy will naturally fix itself and does not need the governement to step in and screw it all up.
I think that both Hayek and Keynes are right, simply because both of their policies (or lack of policies) brings results in a certain economic climate. And that's pretty much all that matters in economics, (besides curves) the bottom line. And the bottom line is that if a country is recovering from a recession/depression, then government intervention can be used as a tool to lessen the burden on the people. Because no one wants angry serfs threatening to overthrow the government with pitchforks and torches, like in Frankenstein (only nothing like it). Likewise, in a time of economic well-being, no government involvement will insure the long term stability, unless some crazy multitude of coincidental factors all decide that they want to destroy economics as we know it. So, it's not really a question of "Hayek or Keynes?", but "What's the weather like outside?" (get it, like climate. Economic climate. Economics joke! BONUS POINTS)
I disagree with Matt H disagreeing with me. I understand his point of view but when I stated that "We have learned that a free market can lead to people just taking care of themselves and cause a depression that would ultimately hurt us", I meant that our actions toward the market would be more for personal reasons and not what was best for the country. We can all agree that the market has its ups and downs but in a free market you can't control how high or low it will go. If we go too low then it will take a longer time to get back where we are, however if we were to control the movement then we wouldn't be in such danger.
I also disagree with Craig S. Inflation can be controlled through a contractionary policy. As long as people have faith in the government and spend when they need to spend then this method will continue to work. Our national debt can be solved through other ways such as exporting more goods than importing.
I agree with keynesian economics. First of all, people are ignorant, stubborn, and like their own self-benefit. The Great Depression was caused because of unfettered capitalism and self-destructive competition. It was at this time when Americans looked for government intervention which came and followed some sort of prosperity. Roosevelt and the Congress created laws that allowed the regulation of sale of stocks, set rules for wages, allowed worker unions, insured bank deposits and more. Since than, many more laws have been passed including the prohibition of child labor and laws against discrimination. Basically, governement intervention is good in the hood. Leaving the economy to the hands of stray animals can allow it to eventually become infectious (well not all stray animals have diseases but a lot do, I like cats).
This comment's for Matt, or as he calls himself, Ttam. You think your so clever with your backwards name. It's akin to putting one's hat backwards, it makes no difference. You know nothing of names! First off, let me just say there is no way that BOTH policies can be right. One of them has to be right or wrong. And your assumption that it all depends on the economic climate is so misguided I pity your vain attempt at trying to stray from the argument, regardless of comedic relief. Keynes knew what he was talking about, end of story. People talk as if Keynes' theory completely failed the world, but they often ignore the good his policy did in the time it was implemented, the Great Depression. Classic economics has failed to adapt to modern times. Hayek's theory revolves around complete freedom, but complete freedom is never a good thing in any society. Would you rather have a society with complete freedom to do anything, or a society that had some form of structure? And it seems at times that Hayek was only opposed to Keynes' way of thinking because of his past experiences, (like the war) not because of economic soundness. Quite frankly, I challenge anyone who agrees with Hayek to fisticuffs at dawn. And to the people who chose both (Ttam, you fool), a million fisticuffs challenges to you. It's time to take you down a peg.
I believe that Keynes is right. One major problem when the economy goes into a recession is that consumer confidence decreases. Using Keyne's ideals, during a recession the government will increase spending. This will allow for the consumer to feel that things are getting better and they are more liekly to spend money. Using Hayek's ideals, we would not know when the economy was going to start doing better again. This would only cause more people to save for fear of a prolonged recession or even a depression. I understand that many people agree with Hayek because we live in a capitalist society and this is a part of the way we choose. I think that Hayek's methods are too harsh though. To just wait and do nothing while people lose their jobs and are going hungry is just too risky for me.
I think that Reena makes a good point when she states that "Keynes was an advocate of government playing a role in the economy." Keynes did not believe that the entire economy should be run by the government. He believed that during times of hardship, however, the government should be there to step in and lend a hand. This does not mean that Keynes was a socialist, but more of a activist. Rather than Hayek, who believed in waiting for the economy to rebound.
I believe that Hayek is right. The boom and bust is the nature of capitalism and all government spending does is drive up the general price level and build the national debt. An overall tax and spending cut should be enacted, encouraging people to spend more money and bring us out of recession.
RESPONSE
I agree with Joe Stefurak. The general trend of blindly throwing money at a problem does nothing but drive up prices with tax cuts, people will spend more, then earn more, and in the long run move up the tax brackets bringing in more revenue for the government to decrease the debt.
well I DEFINITELY disagree with Schmidt. Stupid schmidt. He's just wrong, trust me. I agree with Bryan because Bryan is very smart, trust me. He wrote a lot of good stuff about Keynes and his economic viewpoint. He also made such a good constitutional reference, "government exists to protect the citizens". It's so true, so true. Look at our economy today, it just sucks. a lot. I agree that businesses do have initiative to make some of their own decisions, but being completely hands off will be detrimental in the long run. Take me for an example. Mr. Karmin will be government intervention in this case. If I choose to succumb to him (doing homework, studying for tests, going to extra help)I would be doing fantastic in AP Macroeconomics, but since I don't, I fail. Economy without government intervention fails. To sum it up, I don't know, Bryan is right and Schmidt is simply wrong (and always will be).
I disagree with what Kenneth A-S. I believe that government intervention is ultimately, most often the cause of inflation and the reason that when we are in a recession, we remain in it for so long. Recession is a part of the natural business cycle. When the government interferes the cycle is altered or stopped and we remain in the recession for a longer period of time.
I agree with Joe stef. The only reason Germany got out of their economic downturn is because of Hayeks ideas of a free market economy. Also keynes idea of spending to get out of recession is garbage because it is increasing inflation and running a higher deficit. Keynes idea of regulation was also wrong and when the airlines deregulated they made more money and more people started flying because the best economy is an economy with government intervention. And by the way the health care bill is a horrible socialist idea and joe solomita is fans of the worst sports teams and athletes like Baroid Bonds. Yes joe he did and your in denial if you think he didnt
RESPONSE- Michael Schmidt could not say it better. The foundation of America was and always should be based on a free market, isn't that the reason why people fled england to start a new country? Competition is key in everything whether it be in sports or economics, would you want to watch football or baseball if the same team always won and had no competition? Such things need to be around to keep prices in check and consumers happy. Without this key element prices can skyrocket and perhaps the ideas of Keynes are not particularly saying this will happen but it is definitely a derivative from such ideas with government control.
I agree with Matt Hung. Government intervention may be needed in times of recession. However, too much gov intervention can cause severe inflation and other unexpected consequences.
I agree with Chris S over the fact that in bad downturns in the economy, there needs to be some government intervention to try and fix the problem. I also agree with his point about there being a balance of power where the government has just enough control to have a good effect on the economy and not cause any corruption- the government has to be smart about the decisions they make and the policies they enact on our economy.
I believe that Hayek's economic philosophy was right. The simple truth is that Keynes was wrong as seen in our economic history. Too much government intervention will always lead to either inflation or unemployment. In most cases however government intervention will lead to inflation. Keynesian economics also take away competition in society which can lead to less quality goods and services. It takes away what gives goods their value. Hayek's philosophy of a free market has proved itself very effective in the long run over the years. In Germany deregulation of the economy like the airlines let the price level fall and consumer spending increase drastcally reducing the inflation. Deregulation also helped the economy in the US when we had high inflation in the 1980s. In the end Hayek's economic philosophy will create a stable economy while Keynesian economics will always eventually lead to a bust.
I agree with Matt Hung. Too much government intervention in the economy may seem to help it at first, but will then create inflation. Hayek's free market economy is the best key to success.
I believe the government should act as an emergency brake for the economy, interveining only as the economy slides down at an extreme pace. The government should hold the economy stable as it regains its footing. the government should merely watch as the economy then regains its footing and continues onward. Too much intervention will act as a crutch and the people will become dependant on the governments intervention which can limit economic growth
i agree with Brendan and Rocco to an extent. The government can't allow for its country to drown in inflation or unemployment but constant stimulus to the economy will act similar to morphine and help until the wound has healed and then become a worse problem then the orginal recession
82 comments:
I think Keynes is right because you need government intervention in order to initiate major economic change in a society. If left to a free market system, people will act and respond doing only what is best for themselves rather than the economy as a whole. A larger driving force is needed to stimulate changes and that is where monetary and fiscal policy comes in. Keynes was an advocate of government playing a role in the economy, not being the only role such as in socialist central planning. I don't believe that complete central control is necessary either, either extreme will lead to extreme economic poles. Overall, I feel Hayek is taking too extreme a stance in pushing a laissez-faire market and that Keynes' idea for some government intervention to help rather than completely control the economy is crucial to keep society stable and prosperous.
I think that Keynes is right for one basic reason: without government intervention, the market would move towards the path of least resistance. When competition occurs in the market, there seems to be a lot of chaos and strange behavior. Sales, bonuses, price fixing etc. are competitive moves to get an edge on each other, but sometimes these tactics fail and that's where bankruptcies and closures come in. I think that in a world without regulation, eventually the economy would become a "1 company, 1 good/service" system. Every company would have a monopoly over their provided goods or services and that just cant happen.
In order to combat this shift towards a less stable economy, the government needs to have some kind of control over market transactions. Although I don't agree with all of Keynes' ideas (i.e. price fixing) the central idea of regulation is the right one. The economy is a balancing act between socialism and complete capitalism and I think Keynes was almost right when he said that a capitalist economy needs government intervention.
I feel Hayek is right. In a capitalistic economy such as the United States, Laissez Faire is in affect. The whole basis of capitalist economy is the fact that there is and will be no government intervention in the private sector. Survival of the fittest has always been the mind state of the U.S. economy and that is how it should be. If a company is going under there is a reason; whether due to poor management, extortion, a bad product, or a obsolete object. So what is the point of reviving a dying company when most likely that company will just fail again. There are some exceptions with banks making poor investment and lending decisions and learning from their mistakes. Otherwise i personally feel similar to Mr. Hayek that their should not be government intervention.
-Rocco
I think both are right and counter act each other in a way that influences the boom and bust cycle. I believe if you look at our present economic state which was caused by using Hayek's ideology that the quickest way to stop the recession is to increase government spending like Keynes said. If this method isn't used the economy may die before it rebounds as expressed by Kayne's quote saying "In the long run we will all be dead" will lead to inflation which is the side effect to Keynes' economic idea. This will ultimately lead to a period of economic prosperity until inflation reaches critical levels and the economy once again hits a bust part of the cycle in which case Hayek's economics will be to best solution to the problem. Similar to the economic issues faced by Reagan using Hayek's ideas will "slay the inflationary dragon." This will than for a short while hurt the economy a bit while inflation decreases and than rebound into prosperity as shown by Reaganomics and Marget Thatchers Brittan. History supports this to be right and each time one of the economic crisis' occurred usually a change of economic policy happens.
I'm going to have to go with Hayek. Under Keynesian economics, in response to unemployment the government would increase the money supply. Two things could result. First, successive increases in the money supply could lead to inflation. Or, the increase in money supply will drive down interest rates, artificially expanding credit. Investment will expand, but in the form of malinvestment, meaning investment in long term projects rather than short term projects. What happens? BOOM -> BUST
Hayek has continually proved himself to be right in the last century. For example, deregulation in Germany let prices fall and consumer spending rise. When the airlines began to deregulate, twice as many people were employed to fly three times as many people. Demand was severely underestimated. It's clear that a free market is the key to success.
I think that it is difficult to choose one of the two economists as being right over the other, for both of their philosophies proved useful during times of economic boom or bust. In fact, I see the two philosophies as being complimentary. For instance, Keynesians may argue that government control over the money supply and interest rates are the only way to ensure that the private sector does not make it impossible for consumers to buy products at fair prices, and that a free market leaves room for economic chaos, while a someone who identifies with Hayek would say that an economy free from government control would prosper without greediness of politicians playing into the success of the market. I however, would argue that in times of recession, Keyne's philosohpy should be adhered to, and in times of economic prosperity government needs to relinquish control of the economy and let the markets run themselves like in Hayek's philosophy. Basically, I would advocate that a free market system would lead to the most economic stablility in times that do not show signs of recession.
I think that Hayek is right. When the government pours money into the economy at such an alarming rate, not only does it incur a massive deficit, which later needs to be paid off somehow (by taxpayers). But this massive spending and influx of currency leads to massive inflation. The market will always work itself out. Businesses that don't make the cut will go bankrupt and new businesses will take the initiative to advance and turn a profit.
If there is regulation then businesses cannot do this, the fundamental principle of capitalism. A market performs best when left alone. When competition is the controlling factor.
Hmm I agree with most of Hayek's ideas. Too much aggregation and too much government spending often result in severe inflation,and people's mal-investments can cause economic depression and recession, as shown in the Great Depression and the sub-prime mortgage crisis. If people had followed Hayek's beliefs, such as high interest rates, these economic crisis would've never occurred. Furthermore, Hayek's economic ideas have been proven efficient and applicable in Germany, right after the WWII, and the US during Reagan's presidency. Free market system is the key to a stable economy, not C+I+G. Have faith in Laissez-faire, and let the markets solve their own problems. Too much aggregation will make things only worse.
I agree with Hayek because the government involvement that Keynesian suggests has not yet been perfected. Until the government can find a way to decrease the peaks and troughs of the economic cycle that Hayek suggests is bound to happen (when left alone) the government should not be involved. Keynesian economics suggests fixing one problems with another, and simply continuing that cycle. Unemployment? Increase the money supply. Inflation or low interest rates? Contract the economy. Oh, wait, there's unemployment again. Just today we learned that Hayek believes that government involvement concerning the money supply will effect prices and not Real GDP, while under Keynesian economics, both are effected.
In response to Andrew J.'s post (Andy Jay, as many call him), I disagree that the market will "move towards the path of least resistance" if left alone. That cannot be proven. He describes competition in the market, and that might just be able to keep the economy under wraps. Without government intervention, businesses will compete with their prices, and in response, help their customer. The businesses must realize that the government can't save them, and listening to the customer is the real way to make money.
I believe that Keynes is more correct over Hayek because no economy can stand strong without government intervention. Since our economy is split between socialism and capitalism, when Keynes stated that the capitalist economy works better with government intervention, it made more sense because this controls the rivalries between companies. Without government intervention, making any sort of changes or reforms to society would be pretty difficult. If the government is not involved, a majority of the people simply wouldn’t have the will to work together in order to benefit the society as a whole when they could just be doing things for themselves. Keynes truly promoted the government having a role, and the usage of monetary and fiscal policy. Hayek’s ideas of pushing a free-will, per say, government is taking too much of a chance of an economy to plummet due to a lack of stability by some form of government.
Although I believe that both Hayek and Keynes make excellent points on how to operate the economy, I do believe that Keynes ideas are more correct. For the most obvious reason, I think that government intervention is crucial for the economy. I believe that letting things "run free and fall as they will" is a very risky decision that Hayek seems to put great trust in. I think by letting the market be left free, your leaving a great deal of trust into everyone where competetiton can occur and people start to get greedy. I also agree with Keynes fiscal and monetary policies to fix the different economic problems; although his methods may lead to great inflation, I think it is better than bank closures and depression. Although Hayeks ideas have worked, they are not stable nor long lasting.
In response to Joanna H. post, I would have to disagree when thinking that Hayeks economy is more beneficial according to the graphs that we have learned today. Although Keynes graph would effect the inflation rate and gdp, it will help decrease unemployment and the inflation rate would only increase by very little. Hayeks graph only goes up where the inflation rate will continue to increase at a much rapid pace and it does not benefit the people in any way.
While I think that both men make great points and I can not fully agree with one side, I agree more toward Keynes. This does not mean I want our government to be capitalistic but a free market might just ruin our economy. We have learned that a free market can lead to people just taking care of themselves and cause a depression that would ultimately hurt us. Also, without government intervention, businesses might have a hard time staying in the market and we might lose competition which can result in higher prices and lower quality from other businesses.
I believe Hayek's view on the economy is correct. The economy works in a cycle just like nature does. Once something is going well, a "boom" in the cycle, it will eventually take a turn for the worst and the economy will wind up in the "bust" stage. And once the economy stays in this trough for sometime, it too will eventually find its way out and return to prosperity.
As seen in Germany, once deregulation kicked in and prices fell, consumer spending increased and people were able to bring themselves out of their recession. Hayek's idea can also be supported by the deregulation of airlines. Once the government stopped their interference, more airlines were able to open therefore creating more jobs and allowing more people to fly.
However, I agree with Marc's post. The economic philosophies of Keynes and Hayek are both needed because they feed off of one another. If Keynes' policy is in place and eventually leads to inflation, people will demand for Hayek's policy to be used in order to counteract the inflation. And once that is in place and rampant unemployment occurs, people will then demand for Keynes' policy.
I believe Keynes beliefs can better a society's economy due to the amount of intervention. If there is more intervention, people cannot complain that the government is not doing their job or trying hard enough, and hopefully if they are intervening, they know what they are doing and are assiting the economic situation of a country. While many of Hayek's ideas do seem very reasonable, it is just too risky to not have government intervention, there has to be some type of a head figure in economics and the government would have to serve the country with that role. The government should be a necessity to economics and has to have hands on with transactions within a market.
I believe That Keynes is right, only because in Hayek's ideas, he doesn't take into account what effect no government intervention would have. For example had the government not bailed out high ranking corporations as it did most recently in the current recession, the unemployment rate would have soared much higher, and globally we could have seen a market crash far worse than what we already experienced. A scary scenario is presented without government intervention since as Hayek believes, he essentially say lets things fall where they fall regardless of who gets crushed underneath. Its a chilling "what if" scenario to see ourselves in a pure capitalistic society without any forms of government intervention. I believe that government intervention is necessary for any economy trying to be successful in today's global market, and that's I feel Keynes is correct.
I agree with Lisa that both economic theories are useful in different points of the economic life cycle. However, I still think that Keynesian economics will work better in most situations. Depending on the country and the state of the economy, it may be better to combine the policies or to switch to Hayek for a while. But then the country should return to Keynes' ideals for the long run. Keynes control of the economy will allow for the most stability over longer periods of time. However, people should not be close minded and should consider Hayek in times when the economy is in a critical state and typical Keynesian policies are not being effective.
I don't believe that either economist was completely correct in his thinking. Both schools of thought have proven themselves to be successful at some points, and unsuccessful at others. People tend to take a more Keynesian point of view in times of recession- no one wants to wait for the economic problems to sort themselves out and risk losing a job. But Hayek's laissez-faire approach can seem favorable to the people in times of prosperity, as they resent the government interference that can often continue to drive up prices. Therefore, I believe that neither economist is entirely correct, but that a moderate policy drawing from both schools of thought would be most successful
I think that Hayek is right but not by far. It is hard to really say who is right because both polices of economics are used and both have succeeded at times, and both have failed at times. Most people change their minds with the way the tide goes. Keynes' economic policy is better during a recession period when more government regulation is needed. Hayek's economic policy is better for the economy when we are in a booming economy. The market should be allowed to grow without government regulation during periods when the economy is booming. Overall I feel that Hayek’s economic policy is generally better but stills needs some government control so the economy doesn’t get out of control. It is not good to go to either side too much. You need both in an economy to make it work.
Keynes believe that government intervention is necessary to monitor and keep the economy at a stable level. He believed this could be done in the form of fiscal and monetary policy. This is said to regulate the economy.
While Hayek believed in a laissez-faire economy, where the government didn't get involved at all.
I believe that during time of inflation and recession Keynes policy would be most effective. Though it needs to be constantly monitored.
During the current recession the expansionary fiscal policy has helped to correct our economy and proves to slowly be working, as our economy turns upward. This was also the case before World War 2. Keynes Policy is most effective in these cases in my opinion and will ultimately help the most to monitor and repair the economy effectively.
In response to Lisa's post.
I agree that both policies are necessary and that during times of inflation/ recession that Keynes is necessary. Though while the economy is doing better we can use Hayeks believes.
I also think though that during stagflation we should use Hayeks beliefs of free markets. Last time stagflation occurred in the United States we used a Keynes policy it was un effective. I believe that laissez-Fair would have been more effective.
Therefore a mixture of both policies will probably be the most effect for our economy.
I think that Keynes economic ideas work better than Hayek’s. If the economy is going into a recession, the government should step in to try to improve the economy. We can’t simply just wait for the economy to rebound. Even short recessions make millions of people’s lives more difficult; therefore the government must attempt to stabilize the economy as fast as possible. However even though the government should get involved, it should have limited involvement. Ideally there should be a balance between Keynes and Hayek’s idea’s, but overall I think Hayek’s ideas alone are just too risky.
I believe that Hayek is right because the government corrupts our economic system. With the government constantly bailing out and creating more money will just make the problem worse. Of course, Keynes has a point that the government should intervene with the economy is in such a economic depression like the Great Depression. Anything else, we should the market and business' buy and sell to keep the economy flowing.
I agree for the most part with Hayek. He makes very strong points about how government intervention with the money supply and fiscal policy will cause inflation. Inflation is a by-product of increasing the money supply which weakens the dollar and has no positive effect on the economy. A free market, in which the economy is run by the people's wants and needs rather then the government deciding what the relative price ranges should be and controlling the highest reaches of the economy, should be the economic policy. In a free market, businesses can compete with each other driving down prices and increase the quality of goods and services while government controlled industries often are inefficient and lose money such as the coal industry in England or the US Postal system. This ends up costing the people more money in the long run. However, I agree that regulation is needed to an extent in a free market economy. With no rules, business will cut corners and that will hurt the economy. Left completely to its own devices, an economy would crumble. The government should be used it order to help an economy fits the people’s need, not run an economy and tell them what they need.
I disagree with Reena’s views. The economy runs itself based upon what the needs of the people are. The government should not be initiating a change in the economy because it runs in cycles and will adjust on its own. Government will only hurt its people by spending unnecessary money and going into debt. Also, people should not be concerned with whether or not their actions help the economy as a whole. The people are the economy and their needs control it. They should do what they want to do rather than worry that they have to follow what the economy is doing right now. They shouldn’t spend more money in a recession because it is good for the economy while they are unable to. In the end, it will adjust itself to the people’s interests.
I think Keynes is correct because there needs to be some kind of supervision in the markets where in case the economy turns south or starts to get out of control, the government will at least be able to make an effort to fix it. The problem is that there needs to be a proper balance of government intervention and not otherwise it is just useless trying to run an economy that way. Corruption and too much power given to the government can hurt the economy but if they are smart about it and know when to intervene and when to not it is the best system. The government is a necessary evil because it keeps everything in check. Keynes ideas for the economy are that the government can be flexible and will only intervene with the markets when needed to. Otherwise the markets are running on their own. The government acts more like a saftey net for the economy rather than an authoratative force which, when it works out right, is able to keep everybody happy.
i think that Hayek is correct because when a country is in stagflation there is nothing that the government can do to help. If they lower taxes than people will just continue to spend and that will increase inflation more. If the government decides to increase taxes than that will cause higher unemployment and a recession. Therefore, i think Hayek's idea of leaving the country to work its way out of this situation on its own is the best idea. Our country could have suffered tremendously if Regan didnt enforce the ideas of Hayek during his presidency. As well as in Germany, if Margaret Thatcher did not show the people that if the government intervenes, capitalism will fail, it would cease to exist in their country. All in all, i believe stongly in the ideas of Hayek.
-Alexandra Ricci
I agree with Brendan T's post because if the government keeps helping us get out of little situations then it will ruin our economy. In a capitalist country there is meant to be ups and downs and by trying to only have a good booming economy will end up creating major issues because once one thing goes wrong then the entire economy will tank. I believe by letting the economy play out naturally, like Hayek says, will always benefit us in the future.
What it comes down to is are you willing to deal with high inflation when trying to recover from a recession or high unemployment. If you go with Hayeks view, inflation won't be a problem, but unemployment will. Doing nothing will cause people to lose jobs until the economy rebounds. However, with Keynes view, your going to have high inflation because your spending money to boost demand, causing higher employment. Your always going to have to deal with one of the two evils, so the decision comes down to which one?
I feel as though Keynes view makes more sense for an economy, because some inflation is manageable and increasing the velocity of money helps consumers and businesses alike. Hayeks views were shaped by seeing one of the greatest inflationary economies the world has ever seen, post war germany. However, Keynesian economics over the past century has shown that a little inflation is not a terrible thing. As long as unemployment is controlled, people have money, and currency is changing hands, everyone benefits.
The market is not some perfect machine, it is made up of people, who sometimes make bad choices. Sometimes people need more confidence in the economy, and demand needs to be boosted. Other times people are spending too much and the government needs to cut the money supply. Hayek economics assumes that the market is always right when in reality it is made up of people who can make poor decisions.
I'm not certain I can choose between the two. The economy is susceptible to change which would induce two separate means of thought. During economic times of prosperity, we should seek to Hayek's view as to not interfere with progression. But when recession occurs, we should seek to Keynes' ideas to counteract it. The public alone cannot enhance the economy; it takes a combined effort between a much more significant power and the people to retain prosperity. No country truly stays close to their economic definitions. Because we are capitalists doesn't mean that we have to remain free of all government intervention; at some point, the government is needed to curb difficulties. But at the same time, the government can obtain too much power over industries and drive the economy down as well.
In response to Laura's post, I agree with the fact that "people change their minds with the way the tide goes". People are easily persuaded by what they hear and for the most part, if they hear that the economy is functioning poorly, they will react accordingly.
I'm going to have to agree with Keynes on this one...based on one simple principal: humans are human. As with most economic beliefs and even government ideas, one major factor is left out, which is the fact that humans are greedy, selfish, and a majority of the time don't act as expected. Keynes' principal allows for government intervention to allow the government to control the economy to keep stability.
Businesses do need to have freedoms to control how they run, but depending on businesses alone to regulate and completely control the economy simply is not a good option.
I believe (as the American Constitution states) that the government exists to protect the citizens, and not big corporations (who are separate entities and not humans / citizens). Hayek's model simply isn't feasible because it allows for major shifts in the economy, which in theory are essential, but in reality lead to the misfortunes of many citizens.
Laissez-faire economic beliefs work in theory, but in reality Keynesian control over the economy is essential for a successful economy.
I disagree with Matt H. because he simply does not take realities into account when arguing the basis of Hayek's principles. The entire teaching of economics that Matt refers to is completely based on theory of how people should react. Additionally, his examples are simply two examples that are an anomaly in history. It has been proven time and time again (the recent financial crisis as a prominent example) that leaving the economy on its own will only result in poor economic conditions due to human nature that cannot be controlled. The economy must be adjusted to balance human nature, not left untouched.
I believe that Keynes is right and that some government intervention is needed in the economy. Without it, the market will still run on its own, recover from depressions, and fix its own problem, but it will take much longer than with government help. Effectively using fiscal policy can help an economy recover quickly from a recession, or control it so that there is not too much inflation. Even if the government gets involved, it should be limited because excessive government spending in a recession would not be good, so there has to be a balance.
I believe that Mitchell was right that there has to be a balance. Relying on Hayek's ideas can be risky because it trusts the market to recover on its own, and without anything to help demand boost, consumers would have no reason to spend money, prolonging the recession. Government spending and tax cuts can help increase demand and help fix the economy quicker
I feel that Hayek's economic policies are better than Keynes'. Hayek doesn't use government intervention to control the economy, it fixes itself. With government envolvement, the government can, yes, influence people to do what will keep the economy stable, but sometimes this influence pushes the people too hard. The government has the power to say that a recession has hit the economy and cause the nation to scare into stopping spending. The same goes for inflation, if the government says that the economy is booming, everyone runs out and spends much more than before. I feel this gives the government too much power in controlling the money supply and a citizens cost of living. With Hayek's economic policies, the market controls itself. Naturally it will fix itself from recession and inflation without the government's intervention.
I disagree with Bryan K. People are greedy, I do agree with that, but it's people that control the government. The government isn't a magical God-like force that always has the answers. It's made up of other citizens who are just as greedy as the next guy. Government intervention is allowing a select group of greedy people decide where our economy stands. You could argue that the people that make up the government are looking out for the greater good, but who says that the rest of us aren't? Aren't all of our needs the greater good? The thing is, government officals can look out for the greater good, but knowledge is power, especially knowledge of power, and that's what they have. Government officals have the power to control who's pockets the money enters.
I feel that both extremes of government involvement can have severe problems. I think Keynes is right because without some form of government involvement, the majority of people would be walked all over. I can also understand why Hayek would believe government could cause socialism. With these thoughts in mind, I still would agree more with Keynes because it is more important to protect the people than it is to protect businesses. The crucial importance of Keynes’ beliefs can be seen by looking at America since WWII. Keynes model has been used with great success to counteract unemployment or inflation, contrary to Hayek's belief that government intervention could not affect unemployment. After careful consideration it becomes evident that Keynes’ ideas should always be utilized.
I would have to say I agree most with those that, like Ken A-S. believe that it is very hard to decide who is better because both have benefits and pitfalls, but still would choose Keynes over Hayek. It was very hard to decide but in the end arguments for Hayek are not good enough to sway my views.
It is hard to choose between the two economic icons becuase both of their policies have been both beneficial and detremental at some point in the boom and bust cycle. Since a decision has to be made, I am going to have to side with Keynes. Even though government intervention is not always perfect, it does help stimulate and fix the economy in times of need. Monetary and Fiscal policies do have some unwanted side effects but they do not leave the country waiting for self stimulation like Hayek's ideas. The only problem is that the right policies have to be used at the right time to regulate the economy in a successful way.
I don't believe that either Keynes or Hayek is right or wrong; however I do agree with Keynes more than I do with Hayek. Economy cannot run a free market and do as it pleases, there needs to be at least some government intervention or control to prevent any major downturns and other economic problems. By looking over the economy, the government is also able to manage large businesses that would otherwise run the economy and grow even stronger and richer in Hayek's ideal economy. Still, any extreme is bad and an overregulated economy could be the same or even worse than a laissez-faire one. There must be a balance between Hayek and Keynes' ideas for a successful economy.
I agree with Bryan in that businesses will be greedy and they will look out for the best for themselves in a free market economy. As I said before, without government intervention there will be no control in what businesses are doing and how they can really hurt the economy. "Keynes' principal allows for government intervention to allow the government to control the economy to keep stability."
I think that neither Keynes nor Hayek is "correct." There is no right or wrong economy, there is only an economy that is agreed upon amongst the majority of the population. As Americans, we have chosen a capitalist economy, and when we define ourselves as such, then I believe that Hayek's views are most accurate. By definition, a capitalist economy isn't meant to include government intervention, but follow a "laissez-faire" system. We have chosen to go with capitalism, and like all major decisions, we must accept both the benefits and the consequences that may come. America has enforced the idea of "survival of the fittest" but when we are no longer looking like the fittest, we seek easier ways out. Americans are constantly afraid of becoming too socialist or too communist, especially when it comes to health care. However, when it comes to our economy, we expect our government to intervene as much as is necessary and fix everything for us. If we are to truly live in a capitalist society, then we must follow the views set by Hayek, or we stand as phonies.
In response to Sam DeMonte's post, I agree that no country stays true to their economic definitions. Each country tends to choose a basic economic outline to follow, and makes tweaks, both big and small, here and there as time goes on in order to better fit the population's demand.
I think Hayek is right. Under keynesian economics in a time of recession he thinks the government should spend money to get out of the recession which could lead to inflation. More government spending could also bring down interest rates.
Hayek is clearly right the best form of an economy is a free market. The private sector should be setting prices because the public are the people buying the goods and services. In the second half of the 1900's it was keynsian economics that brought Germany out of their econmic downturn and when the airlines were deregulated and prices dropped the private sector made money and more people started flying.
It is clear to me Keynes is correct. In Keynes theory peoples spendings goes towards anothers earnings,and when that person spends his earnings he is supporting anothers earnings. This circle creates a normal functioning economy. When the Great Depression hit people's natural reaction was to hoard their money. Under Keynes's theory this would have stopped the circular flow of money, keeping the economy at a standstill. Keynes's soltion to this poor economic state was to increase government spending. Keynes argued that the government should step in to increase spending, either by increasing the money supply or by actually buying things on the market itself. This is much more effective than Hayeks theory of cutting taxes because he is not taking peoples mps into account. If the goverment was to spend 1 million dollars, 100% of that money would be cycled into the economy. However if the Goverment was to cut taxes by 1 million dollars without any mandates, a good portion of that money would be saved instead of spent. Therefor the government would have to cut more tax dollars and create a bigger deficit in order to have the same affect.
And i know Joe Stef hasn't posted yet...but hes just wrong in general
I believe in Hayeks views. i believe that capitalism will always have booms and busts no matter what. spending money during a recession might shorten by maybe 6 months but is that really worth it with all the debt the government is piling up. the only way to pay for all this debt is the take payers. what the government should do is cut taxes and government spending to a minimum let people spend money. by people buying products business will hire more people and people will get more wealthy. with these new wealthy people they will go in a higher tax bracket making the government money. that is how the economy should be taken care of.
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I will be commenting on Joe Solomitas post. First of all Joe is 100% incorrect. The only thing that all that government spending does is drive up prices. Joe brings up a half way decent point near the end when he says that MPS is not taken into account. that is true but when someone saves where do they save? the bank what does the bank do with your money it invests it in mutual funds and gives other people loans. so virtually all the money from tax cuts is spent. thus showing my theory is correct and Joe is a stupid fan of obscure sport teams(Minnesota Vikeings, San Fransisco Giants).
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Joe Stef's argument is about as sound and solid as Antonio Cromarties morals. Joe just dosnt understand that in tough times bussiness are not always willing to spend more money and massive unemployment rates occur. This "animal spirit" only creates more peverty and without the goverment stepping in to help, it will not be resolved. (Its no wonder Joe got the 2nd quarter grade he did) because he's clearly off the mark when it comes to basic economic principals.
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Joe how did Germany's economy bounce back after WWII? oh wait Hayek said let markets play out and they did and it worked. so your theory is about as good as Brett Favres decsion making in the playoffs
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No Joe Germany successeded because it was Keynes original idea not to make them pay war reperations. Otherwise they would have crumbled like Mark Sanchez's PCL. Come on Joe just come to my side, i got plenty of red shirts in my closet for you to wear and we can celebrate the passing of the Health Care bill together, today.
I disagree with Reena she says that in a Keynesian society people wont act in their own self interests. People will still act in there own self interests no matter what because its a capitalist society. People are inherently evil and for the most part people will not hesitate to throw another under the bridge to increase there own wealth. Also when you keep intervening in the market when you are in a time of economic boom you will drive up inflation causing the cycle to shift faster from boom to bust in which case you would need to uses Hayek's economics in order to reduce the inflation to acceptable levels to be able to restart the economy.
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Don't get me started on the socialist Health Care Bill. the treaty stated that Germany didn't have to pay back the whole debt. Keynes idea is really working now isn't it with all of Obamas spending were really getting somewhere arent we. yeah were getting closer to socialism. so Keynes beliefs are complete garbage.
I agree with Bryan, that most humans greedy, and selfish. Many people profit, and make a living off of other peoples misfortunes. An example of this can be easily seen in the tourist industry. When visiting a new city/country there are always people looking to profit from the unknowing tourist. Bryan is right that the government needs to control the economy in order to keep stability. I would disagree with anyone who solely believes in Hayek’s idea; in a country of over 300 million citizens, we can’t all just wait, and hope that the economy will naturally improve.
I feel that the Keynes view of the economy is right. There needs to be government intervention because they have enough influence and power to quickly fix economic problems like unemployment, recessions, and inflation. If the economy was left alone, it would often take too long for the economy to fix itself. Too much government intervention is also a bad thing. If the government regulates and controls too much, competition between business would decrease which would lead to less products available for consumers.
I agree with Bryan about the natural human tendency to be naturally greedy and selfish, and that is the main reason that the Hayek way of thinking would not play out in the the long run. Though it is idealistic to think that people would be fair and not too ambitious when it comes to money, it is very unrealistic to think so. Without government regulation and protocol, people would stop at nothing to make the most profit, while jacking up prices and only self-benefiting. Though Hayek envisioned an economy "by the people, for the people", such a utopian view proves inconsequential in the human quest to outdo everyone else financially.
response:
I disagree with Ken's statement of "We have learned that a free market can lead to people just taking care of themselves and cause a depression that would ultimately hurt us." In a free market, there still needs to be economic interactions among people in order to fulfill a selfish motive. This network of interactions is what connects us and keeps the economy stable.
I also disagree with Bryans Response. Those were two solid examples is a couple of governments, no? A clear effect from a clear cause. Keynes may have had a couple of moments at the start of the 20th century, but Hayek has been right for the remainder. So isn't it a possibility that Keynes is the anomaly? Also, our government is Keynesian at the moment, so if you're blaming the crisis on anything, its Keynes! BOO GOVERNMENT INTERVENTION.
there are too many posts, so i guess i'll agree with whoever supports Hayek hahaha
I agree with Max because Hayek's philosophy really does not take into account what no government interaction could possibly lead to. Hayek's ideas could be wise, but very risky because government should always have control in order to be some type of a monitor in order to watch the economy and do their best to fix any problems that are occurring, or could occur in the near future. Hayek's philosophy is risky because if the market crashes, it could be twice as bad as it would have been with government interaction because maybe they would have been able to prevent a certain situation.
I agree with Rocco, that the US is a capitialist country and we should follow the laissze faire system with no government intervention. For private business, social Darwinism should be in effect to regulate the economy. If a company fails, let it go down so the interest rate can change and allow people to buy and sell.
I think that both Keynes and Hayek are right. Both systems have had their success through history and both have failed to keep economic stability in the long term. Each system seems to create its own demise problems, and each system has the ability to solve the problems that the other system creates for itself. for example Keynes economics brought the United States out of the great depression only to fall back into a recession a couple of decades later. By moving over to Hayek's system for the economy, by deregulating businesses, the economy was rejuvenated. Because of this cycle, both Hayek and Keynes are right.
I primarily agree with Marc E because I agree that the two forms of an economy can counter what the other has created. In most cases that is the problems that both economic systems create for themselves. For example the United States economy has currently reached the end of an era were Hayek’s economic beliefs were the standard of an economy. But by having no regulation in the economy people were able to make bad investments and jeopardize the state of the economy. The only way to solve this problem is for the government to get involved, so the economy moved towards Keynes economic philosophies. In this way Keynes economics were able to counter the problems that Hayek’s economic created, and in a similar way Hayek’s economics will eventually have to fix the problems that Keynes economics will eventually create.
I'm going to join the crowd and say that I am inclined to agree with Bryan K's ideas as well. A lack of governmet control leaves only busineses in charge and allows for the uglier side of human nature to take over. People are usually selfish and this will likely show in their economic practices. It is this reason that causes people to become disenchanted with Hayek's beliefs- the selfishness of business can cause people to lose jobs and the lack of government intervention prevents ecnonomic services from being availavble to those in need. Though Hayek's economic system can result in great wealth for a country, people must be aware of the possible consequences in times of recession.
In response to Blake's comment, I disagree. I feel that too much Government regulation will not allow the economy to grow. Keynes' economic values are communist and we all know that communism failed because there was too much government regulation and the people's salary was controlled by the government causing a lack of incentive for people to work. Therefore Keynes' ideas have failed in the past due to the fact that they do not allow the economy to grow and prosper like Hayek's economic ideas allows.
As much as I agree with Stefurak that solo likes obscure sport teams and brett farve throws interceptions in the postseason, his economic principles and test grades are shaky at best. Hayeks views do not take into account that people during a recession are not going to be readily willing to spend money. Also, with banks needing a reserve requirement the government is always going to be able to boost demand more by spending than cutting the same amount of taxes. (AKA the Government spending multiplier always being 1 more than the tax multiplier, Macroeconomics 101.)
Stefuraks logic is about as broken as Leon Washingtons Right leg.
In response to Jen A's comments, I have to agree with her statement that under Hayek's ideals the economy would not be able to undergo serious change in either direction without government involvement attempting to stabilize things. Its not feasible nor is it a highly successful scenario. If a nation wants its economy to fail quite miserably, they will install Hayek's ideas even in the worst of economic conditions, resulting in the entire collapse of the government choosing to not be involved.
I have to disagree with Joanna H. for her ideas and for calling me out. The concept of the "perfect economy" doesn't exist. The economy is a dynamic system, a system that can expand, shrink, shift etc. When you have a complex system, with so many variables, there is no way you can bring all those components together to form a perfect system. Keynes realized that in order to maintain some control over the economy, you need to sacrifice something, namely inflation. We can live with a little bit of inflation in order to prevent unemployment.
To the competition in the market that she refers to, I'd like to bring up Standard Oil. At its peak, Standard Oil had control of more than 90% of the US oil supply and had amassed nearly $320 billion (current dollars) for its owner, John D. Rockefeller. What stopped this massive corporation? Government intervention that broke up trusts and monopolies. This shows that competition wont really exist when you have a totally free market. Government is the only thing preventing a corporate takeover of the American economy.
I'd also just like to say that the current recession was preceded by eight years of economic deregulation.
In response to Mark E's comment:
I agree with him in the sense that I agree that both of them are right and that they both counter act each other; however, I still believe that Keynesian economics reaches ahead of Hayek’s ideas. Both economists have had an influence in the way today’s economy has been developed but Keynes ideas for the economy allows for the most helpful methods and control over the long run. Hayek’s policies are not completely out of the running, but it basically depends on what state the economy may be in. For the most part, both men influenced our economy and different policies are always looking to be used in effect. The ideas of Keynes seem to have prevailed over Hayek due to the inflation factor part of his idea. The economy however will be more stable, which is better, due to Keynesian economics.
I agree with pat shannon because the two different types of economies are really just two different ways of getting things done. There really is no right and wrong beause both have their equal share of problems and both have their ways of solving problems. Any economic system will have cycles no matter how good or bad they are meaning that there will always be booms and there will always be recessions. It is just how they are able to work through the cycles is the big differences. In the end though, as long as both economic systems get the job done, they are both right.
I think Keynes is right in his theory because the government does need to get involved in economic problems. The Great Depression required work programs and a war to get out of, both products of government intervention. We are in a time where the government needs to spend to get back on the right track. Once we are, they need to back off, but in general, we do need this government involvment.
With what the hungarian fool said, not having government spending making a recession longer by 6 months is a statement with completly no facts behind it. Every recession is different and I don't think any recession with be longer by only 6 months if the government doesnt spend. It will be years if anything, varying depending on how severe and such. He needs to relax and calm down and know that DJ penny is a fan of Keynes.
I feel that Hayeks theory on how to manage an economy is correct. The government should be hands off, allowing the economy to run by itself. When people try and step in and control the economy, I believe that there can be prosperity. However this prosperity will be short lived.
For example:
The ecopnomy is not doing well, unemployment is rising and there is less spending by consumers. The government steps in and takes action, they increase spending and lower interest rates. Feeling more confident people will now take out more loans and spend more money. This will certainly help the economy faster than if it was left to its own devices. However in time, the economy will start to grown to fast and inflation will begin to rise. So the government does the opposite of what it did when the economy was doing poorly. This is when it begins to fail, because now with the lack of consumer spending, higher taxes and higher interest rates, the people that took out loans are left scrounging for money to pay back their loans, and the higher taxes. So now the economy is doing bad again and they have to pump more money into the economy again. This cycle can only work for so long before so many people have acquired so much debt that the country is now faced with tons of people that owe money that cannot pay off their loans, and at that point who knows what will happen; however one thing for certain is that it wont be good. In an economy without the government intervention these problems wont occur. The economy may never reach the same heights that it would while under government supervision but it will also not reach the same bottoms that a government supervised economy will reach. So in conclusion a free market economy is the way to go.
In response to Andrew S, Hayeks theory does take into acoount that people are less willing to spend money during a recession. In a free market society, during a recession, people will go and save their money more than usual. Banks will compete with each other, trying to get you to invest your money witht hem, so they will raise interest rates on the money that you have deposited. People will eventually accrue enough wealth that they will begin spending money again. The economy will naturally fix itself and does not need the governement to step in and screw it all up.
I think that both Hayek and Keynes are right, simply because both of their policies (or lack of policies) brings results in a certain economic climate. And that's pretty much all that matters in economics, (besides curves) the bottom line. And the bottom line is that if a country is recovering from a recession/depression, then government intervention can be used as a tool to lessen the burden on the people. Because no one wants angry serfs threatening to overthrow the government with pitchforks and torches, like in Frankenstein (only nothing like it). Likewise, in a time of economic well-being, no government involvement will insure the long term stability, unless some crazy multitude of coincidental factors all decide that they want to destroy economics as we know it. So, it's not really a question of "Hayek or Keynes?", but "What's the weather like outside?" (get it, like climate. Economic climate. Economics joke! BONUS POINTS)
I disagree with Matt H disagreeing with me. I understand his point of view but when I stated that "We have learned that a free market can lead to people just taking care of themselves and cause a depression that would ultimately hurt us", I meant that our actions toward the market would be more for personal reasons and not what was best for the country. We can all agree that the market has its ups and downs but in a free market you can't control how high or low it will go. If we go too low then it will take a longer time to get back where we are, however if we were to control the movement then we wouldn't be in such danger.
I also disagree with Craig S. Inflation can be controlled through a contractionary policy. As long as people have faith in the government and spend when they need to spend then this method will continue to work. Our national debt can be solved through other ways such as exporting more goods than importing.
I agree with keynesian economics. First of all, people are ignorant, stubborn, and like their own self-benefit. The Great Depression was caused because of unfettered capitalism and self-destructive competition. It was at this time when Americans looked for government intervention which came and followed some sort of prosperity. Roosevelt and the Congress created laws that allowed the regulation of sale of stocks, set rules for wages, allowed worker unions, insured bank deposits and more. Since than, many more laws have been passed including the prohibition of child labor and laws against discrimination. Basically, governement intervention is good in the hood. Leaving the economy to the hands of stray animals can allow it to eventually become infectious (well not all stray animals have diseases but a lot do, I like cats).
This comment's for Matt, or as he calls himself, Ttam. You think your so clever with your backwards name. It's akin to putting one's hat backwards, it makes no difference. You know nothing of names! First off, let me just say there is no way that BOTH policies can be right. One of them has to be right or wrong. And your assumption that it all depends on the economic climate is so misguided I pity your vain attempt at trying to stray from the argument, regardless of comedic relief. Keynes knew what he was talking about, end of story. People talk as if Keynes' theory completely failed the world, but they often ignore the good his policy did in the time it was implemented, the Great Depression. Classic economics has failed to adapt to modern times. Hayek's theory revolves around complete freedom, but complete freedom is never a good thing in any society. Would you rather have a society with complete freedom to do anything, or a society that had some form of structure? And it seems at times that Hayek was only opposed to Keynes' way of thinking because of his past experiences, (like the war) not because of economic soundness. Quite frankly, I challenge anyone who agrees with Hayek to fisticuffs at dawn. And to the people who chose both (Ttam, you fool), a million fisticuffs challenges to you. It's time to take you down a peg.
Courtney Ryan
I believe that Keynes is right. One major problem when the economy goes into a recession is that consumer confidence decreases. Using Keyne's ideals, during a recession the government will increase spending. This will allow for the consumer to feel that things are getting better and they are more liekly to spend money. Using Hayek's ideals, we would not know when the economy was going to start doing better again. This would only cause more people to save for fear of a prolonged recession or even a depression. I understand that many people agree with Hayek because we live in a capitalist society and this is a part of the way we choose. I think that Hayek's methods are too harsh though. To just wait and do nothing while people lose their jobs and are going hungry is just too risky for me.
I think that Reena makes a good point when she states that "Keynes was an advocate of government playing a role in the economy." Keynes did not believe that the entire economy should be run by the government. He believed that during times of hardship, however, the government should be there to step in and lend a hand. This does not mean that Keynes was a socialist, but more of a activist. Rather than Hayek, who believed in waiting for the economy to rebound.
I believe that Hayek is right. The boom and bust is the nature of capitalism and all government spending does is drive up the general price level and build the national debt. An overall tax and spending cut should be enacted, encouraging people to spend more money and bring us out of recession.
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I agree with Joe Stefurak. The general trend of blindly throwing money at a problem does nothing but drive up prices with tax cuts, people will spend more, then earn more, and in the long run move up the tax brackets bringing in more revenue for the government to decrease the debt.
well I DEFINITELY disagree with Schmidt. Stupid schmidt. He's just wrong, trust me. I agree with Bryan because Bryan is very smart, trust me. He wrote a lot of good stuff about Keynes and his economic viewpoint. He also made such a good constitutional reference, "government exists to protect the citizens". It's so true, so true. Look at our economy today, it just sucks. a lot. I agree that businesses do have initiative to make some of their own decisions, but being completely hands off will be detrimental in the long run. Take me for an example. Mr. Karmin will be government intervention in this case. If I choose to succumb to him (doing homework, studying for tests, going to extra help)I would be doing fantastic in AP Macroeconomics, but since I don't, I fail. Economy without government intervention fails. To sum it up, I don't know, Bryan is right and Schmidt is simply wrong (and always will be).
I disagree with what Kenneth A-S. I believe that government intervention is ultimately, most often the cause of inflation and the reason that when we are in a recession, we remain in it for so long. Recession is a part of the natural business cycle. When the government interferes the cycle is altered or stopped and we remain in the recession for a longer period of time.
I agree with Joe stef. The only reason Germany got out of their economic downturn is because of Hayeks ideas of a free market economy. Also keynes idea of spending to get out of recession is garbage because it is increasing inflation and running a higher deficit. Keynes idea of regulation was also wrong and when the airlines deregulated they made more money and more people started flying because the best economy is an economy with government intervention. And by the way the health care bill is a horrible socialist idea and joe solomita is fans of the worst sports teams and athletes like Baroid Bonds. Yes joe he did and your in denial if you think he didnt
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Michael Schmidt could not say it better. The foundation of America was and always should be based on a free market, isn't that the reason why people fled england to start a new country? Competition is key in everything whether it be in sports or economics, would you want to watch football or baseball if the same team always won and had no competition? Such things need to be around to keep prices in check and consumers happy. Without this key element prices can skyrocket and perhaps the ideas of Keynes are not particularly saying this will happen but it is definitely a derivative from such ideas with government control.
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I agree with Matt Hung. Government intervention may be needed in times of recession. However, too much gov intervention can cause severe inflation and other unexpected consequences.
I agree with Chris S over the fact that in bad downturns in the economy, there needs to be some government intervention to try and fix the problem. I also agree with his point about there being a balance of power where the government has just enough control to have a good effect on the economy and not cause any corruption- the government has to be smart about the decisions they make and the policies they enact on our economy.
I believe that Hayek's economic philosophy was right. The simple truth is that Keynes was wrong as seen in our economic history. Too much government intervention will always lead to either inflation or unemployment. In most cases however government intervention will lead to inflation. Keynesian economics also take away competition in society which can lead to less quality goods and services. It takes away what gives goods their value. Hayek's philosophy of a free market has proved itself very effective in the long run over the years. In Germany deregulation of the economy like the airlines let the price level fall and consumer spending increase drastcally reducing the inflation. Deregulation also helped the economy in the US when we had high inflation in the 1980s. In the end Hayek's economic philosophy will create a stable economy while Keynesian economics will always eventually lead to a bust.
I agree with Matt Hung. Too much government intervention in the economy may seem to help it at first, but will then create inflation. Hayek's free market economy is the best key to success.
I believe the government should act as an emergency brake for the economy, interveining only as the economy slides down at an extreme pace. The government should hold the economy stable as it regains its footing. the government should merely watch as the economy then regains its footing and continues onward. Too much intervention will act as a crutch and the people will become dependant on the governments intervention which can limit economic growth
i agree with Brendan and Rocco to an extent. The government can't allow for its country to drown in inflation or unemployment but constant stimulus to the economy will act similar to morphine and help until the wound has healed and then become a worse problem then the orginal recession
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