-F.A. Hayek
"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."
-John Maynard Keynes
Who would have thought that the ideas of these two economists would still be relevant over 100 years after ther they were born? Furthermore the central arguments are still being discussed today on Television and in the newspapers. What exactly is the role of government: a dangerous servant or a fearful master? Should markets drive the economy, or should government drive the markets?
Where do you stand on the issue? What are the best reasons to support your side? Identify the main flaws in the opposing argument. In addition to posting your opinion, you will also be responding to one of your classmates' posts.
Check out the articles below as you develop your arguments.
http://welkerswikinomics.com/blog/2011/10/31/keynes-versus-hayek-101-the-debate-continues/
http://www.soundmoneyproject.org/?p=2085
http://www.reuters.com/subjects/keynes-hayek - Watch the Debate!
http://online.wsj.com/article/SB10001424052748704738404575347300609199056.html
104 comments:
Brian D. Period 7
I believe that Hayek economics is a better way for the world to go. A government cannot control every commanding height of an economy, it has been proven in history that these economies do not work. Also, Keynesian Economics require deficit spending. Hayek's policies do not require increases in government spending, which in turn does not create a deficit. As we can see today, Keynes Economics is not that effective. Keynes Economists believe that a decrease in consumer spending can be offset by an increase in government spending. At times, this can be true, but it is not always the case. The government has been operating In a deficit since the bubble collapse in 2008, but the economy has not seen drastic improvements. The failure of Keynesian ideals to being the U.S out of the Great Recession calls for a new strategy in economic policy.
Cole Carucci, Period 6
As the debate continues upon whether it’s better to implement the views of Hayek or Keynes, I tend to lean towards the side of Hayek. Like Hayek, I, too, believe that shifts of economic growth and stagnation are natural for a free-market monetary economy. In the past (specifically the 1970s), applying Keynesian economics hurt the United States tremendously. Counter-cyclical and fiscal policy often make matters worse; however, more times than not, politicians agree with the views of Hayek, yet, find Keynes’ views for attractive because it may be necessary to show the citizens and voters that action is being taken. In addition, in 2008, Keynesian economics failed again for the United States. The government pumped money into the economy to jolt economic growth, but instead it hurt the United States because one of the central problems of the recent recession was the fact that so many citizens of the United States were borrowing so much money – it simply wouldn’t make sense for citizens to borrow even more money.
Mark R. Period 7
I believe that Keynesian economics should be used to a certain degree to control the ups and downs of the economy. Keynes is correct in suggesting that decreased confidence leads to decreased consumption, leading to economic recession. Left alone, it will eventually rebound, but according to Keynes, "In the long run we're all dead." While Hayek argues that increasing government spending to offset the decrease in consumption will lower investment, he would rather do nothing which cannot be in any way better than a partially crowded out increase in GDP. Hayek also argues that running deficits is bad for an economic recovery, but as long as that is offset by surpluses during inflationary periods, that will be irrelevant. In fact, it will help to contain Hayek's main enemy, inflation. As long as a balanced policy is maintained over the long term, unlike what is currently being done, then there should be no fear of deficits. If there is any reason to argue against Keynesian economics, it would be that it is not enough and should be balanced with a monetarist approach as well, rather than Hayek's glorified strategy of waiting and doing nothing.
Frank I. Period 7
For all but one circumstance in history, Hayek’s economic methods have proven ideal. While many might support the beliefs of John Maynard Keynes, many have now realized with our heavily influential government presently that intense government is not the best method. “Doing nothing,” might seem hard to accomplish in an economy turning for the worst, but that is exactly what the government should do to ensure a return of the business cycle to prosperity. Recently, we fell into a recession and the government is trying to solve the dilemma as fast as possible with the economic ideas of Keynes. Obviously, this isn’t going very well as we are in fear of going into a double-dip recession. Although it may seem counterproductive, Hayek’s way to fight the economy is the most reliable. The economy is a cycle and no matter when it is in a recession, it will return to a recovery and peak at some point if left unaltered. Critics of this theory highlight the unpredictability of how long the economy would stay in a recession. This one data point that supports this argument is the Great Depression. However, this is the only case and Hayek would just state that if people dealt with it, they would have recovered to a boom just the same. Keynesian economic beliefs may seem like the right choice because action is being taken right away to try and solve an economic problem, but if the wrong measures are taken, there can be a disaster. Also, deficit spending can wreak havoc on the government when people still save money and consumers don’t inject money into businesses and boost the economy into a recovery. Government spending cannot always be the solution because government spending, especially in a deficit, has unpredictable outcomes. Hayek’s method may be the extreme, but it is the method to which the government should similarly allow their economy to play out. Only with very slight and careful change should the government have any control over the nation’s economy. It is a full proof method that will allow for a relatively predictable cycle for all to deal with and understand. Whether it is Hayek’s method or Keynes’, the economy will undoubtedly fall into recessions, and the responsibility of fixing the economy should more heavily rest in the hands of the people to pull themselves out. The government cannot just save the economy from disaster when disaster is unstoppable and inevitable.
Emily Y. Period 6
Although Hayek’s argument is economically healthier in the long run, and can produce more favorable results, I agree with Keynes. While the economy can easily be seen through graphs and statistics, many forget that an economy is made up of people. Hayek’s theories can work in the long run (with fewer depressions with longer periods of prosperity) it isn’t a realistic setting for an economy. With Hayek’s ideas, the economy is guaranteed to be cyclical, but it cannot determine how long a depression can last. With government intervention, it can cause more depressions, but for a lesser amount of time. In long depressions, workers can become disenchanted, with an indefinite amount of time for the free market to adjust itself. People will also feel more at ease knowing that the government has some control over the economy, and many would agree that they would rather have shorter dips than longer depressions. Also, Hayek believed that wages and prices would change dramatically if the government intervenes, but this has not been the case in the United States. Under reasonable policies, there have also been several instances where governments can “fix the problem” with proper plans such as tax cuts, spending increases, and changing the interest rate.
Kavita J. Period 7
Although the Keynesian school of thought has been generally accepted as the "correct" version of macroeconomics, I believe that Hayek-ian economics is better. Keynesian economics believes in demand management. Keynesians believe that the government and Federal Reserve can fix an economy's recessions and return the economy to its full employment/potential output level through well planned fiscal and monetary planning. While this might seem like the better plan of action when the economy is in a downturn, laissez faire is actually the better way. No government intervention is the best method for handling a downturn. In Hayek’s school of thought, government projects, which fuel Keynesian economics, actually reduce the private sector’s ability to quickly and efficiently correct itself. The free market is actually better than government intervention when it comes to allocation resources to satisfy the needs and wants of consumers, because the free market always responds to the people, while the government acts on what it thinks is best for the economy. When the government tries to help the people and fix the economy, it actually hurts the efficiency and productivity of the economy. Any regulation of the private sector, including minimum wage laws, just takes away from the maximum potential/productivity of the economy. Without government intervention, wages and prices rise and fall with the level of demand in the economy, but output remains constant at full employment. Government should only be present in order to create a legal system and laws to govern the people, not the economy.
John V. Period 6
First off, I'd like to point out that the last link on the post does not seem to work for me. Also, I did not watch the entirety of the debate, and I doubt more than 5 or so people responding to this assignment will. The opportunity cost is too high.
The debate between Keynesians and Hayekians is one of control and convenience. The first one, control, is what normally comes to mind when thinking of this argument: Who should control the economy? In this respect, I have to side with Hayek. Government, as history has shown with the Soviet Union, cannot steer the economy towards the fullest and most efficient use of its resources. Markets, with all its subtleties and, presumably, rational entrepreneurs, are simply far better equipped to meet the demands of a population efficiently. Furthermore, allowing businesses to function unhindered would promote real economic growth in the long run, unlike Keynesian "pump priming" that, for all intents and purposes, is essentially a short term solution.
The second one, convenience, is less about economics and more about humanitarianism. Should the government intervene to help its citizens in economic downturns? In this point, Keynesianism is undoubtedly the winner. The power of most modern democracies is derived from the approval of the people; the government can only do as much as its citizens allow it to, at least in principle. The reason for the proliferation of Keynesianism is the fact that it provides relatively instant relief in times of economic turbulence. The hands-off policies endorsed by Hayek do not offer suitably convenient solutions for recessions or depressions. Logically, political coalitions in democracies are inclined to adopt Keynesian policies to perpetuate their power.
I think the government should not simply sit idly if it recognizes that the economy is headed for a downturn. Despite the problems with crowding out and the potential suppression of economic growth, government spending should be used to alleviate the most burdensome economic problems. Humans are incredibly susceptible to negative events, and a population of depressed workers during a depression can only result in social and economic disaster. However, the government should not go spending money willy-nilly just because it wants to pull the country out of recessions. It should be economical in its decisions and spend on industries and projects that are most likely to lead to long term economic growth, such as education, infrastructure, and alternate energy.
Kristal S. Period 6
Although Hayek's philosophy would ensure that the economy would do better in the long run, Keynes' philosophy offers more immediate relief to an impatient public. As a result, Keynesian economics should be utilized in moderation. According to Keynesian economics, a market will not automatically provide full employment. During downturns, there is the possibility of long periods of large-scale unemployment, and it is the government's duty to aid the jobless by increasing aggregate demand for goods and services. On the other hand, when inflation is high, the government should work to decrease aggregate demand. It goes about doing so by implementing an appropriate fiscal policy, which affects taxing, spending, and interest rates. When there is action taken by the government, there is a cause and effect that takes place. An economy is built on the activities of the market, which is comprised of people who feel and will respond to changes. Real progression in the long run may take place under Hayek's philosophy and may benefit the public overall, but it is unrealistic to expect that people will willingly and patiently wait during times of economic downturn. The beauty of government intervention is that though it may disrupt the normal business cycle, it offers relief to middle to lower class families who may not fare so well during depressions. If the government were to allow the market to go through the motions, a good portion of the public may lose faith in its government because they believe it is doing nothing. When an economy is doing well and the public feels more secure about the state of the market, the government may decrease involvement and use a hands-off approach. However, during times of economic downturn, the government cannot simply sit by and do nothing.
June Chang. Period 6
The ideas of Hayek and Keynes, whether or not the government should drive the markets, are still relevant and discuss even today. Both ideas have good and bad but I believe that Keynes’ ideas meet the commanding height of an economy better than Hayek’s. Keynes views aggregate demand as a main sector that leads to efficient macroeconomic. Aggregate demand, in this case, is mostly affected by the government through its fiscal and monetary policy; during the recession, government increases spending and decreases taxes, whereas, during the inflation government decreases spending and increases taxes; during the recession, Fed buys bonds, lower discount rate and reserve ratio, whereas, during the inflation Fed sells bonds, higher discount rate and reserve ratio. When government takes an action to control recession, inflation and unemployment, we see the immediately change to our economics and relief to public. Although Hayek’s argument seen favorable and healthier in a long run, it is indefinite when we will see the change or how long the problems will last. During the recession, Hayek’s idea will deepen the problem because the investment will dramatically decrease resulting in a decrease in consumer spending and GDP. One of the Hayek’s supporters will argue that Keynes’ idea is giving too much power to government and it is limiting citizens’ freedom. However, even though it is true, I think that no matter how much power government gets, it is worthy to do so in order to control/solve more bigger problems; recession, unemployment and inflation.
Kelly M. Period 6
Although Hayek’s argument is convincing in preaching “real GDP growth” through a policy of non-interference with prices—therefore not harming the inflation rates and allowing investment spending to increase through cause-and-effect, Keynes was right in his argument when he said “in the long run, we’re all dead.” However, neither Keynes’ nor Hayek’s policies can be implemented in EVERY situation. In cases of stagflation, Keynes’ policies of government intervention in interest rates, tax rates, and government spending are unable to shift any consumer confidence levels or GDP for that matter as proved by the conditions in the 70s; in this situation, it would be beneficial to the economy if the government allowed inflation rates and unemployment to balance out by themselves. However, in the case of a recession like the Great Depression, the government should implement Keynesian economic policies as a way to spark aggregate demand. Both policies cannot be relied on to fully steer the economy; the government is run by only people, and there are more factors that affect our economy than just our own deficit—this is a point that I feel Hayek didn’t take into consideration—other economies around the world can affect our own, and no matter how much our real GDP has increased through the more efficient production of goods on our own accord, we are still able to experience a recession that can continually linger on without any government intervention to stimulate our economy or another economy again. Hayek ignores the fact that the citizens are actual people who want to see change in the economy during their own lifetime, and not twiddle their thumbs until some magical invisible hand will come and alleviate economic problems. These citizens too can become disheartened by economic conditions, and sometimes, all they need is a spark or push from the government to increase morale and appear like they’re putting some conscious effort forth even if it is just a placebo pill for the masses.
Nick M. Period 6
While both theories agree about the detrimental effects of hoarding, Keynesianism expands this thought to private savings as a consequence of Keynesian economists’ lack of confidence in private investment. Instead they argue that government spending should “offset” the injurious private thrift that plagues the economy during periods of recession. This model, named stimulus spending by modern politicians, fails to address the national debt incurred as a byproduct.
Modern followers of Hayek who tend to align themselves with the conservative party of their respective country oppose the national debt the follows classic stimuli, emphasizing the strength of private sector investment. They argued that the existence of government securities in the market transforms private thrift into investment, and their existence should be maintained. Published in 1935, with the economy still reeling from the great depression, Hayek and his pals responded to the Times of London letter submitted by Keynes and his posse. What makes Hayek’s economic theories more attractive to me is his alternative proposition to achieve growth: the dissolution of trade barriers and the reestablishment of unabated world trade (the kind that was interrupted by WWI). Not only could this ensure growth in the long run, they argued, but it could also reduce the obscene debt sustained during Roosevelt’s grand stimulus. It’s surprising to me that the governing powers of the time did not find this as the perfect antidote for their countries’ condition.
Sara Heinlein
Although both Hayek and Keynes have convincing arguments, I believe that Hayek’s ideas are much better for the overall health of the economy. I agree with Hayek when he says that the economy must be driven by the market. Although this is not always the popular belief, because it doesn’t offer any instant relief, it is best for the long run growth of the nation and its economy. In an economy there are supposed to be dips and peaks; it is a natural part of the business cycle. Yet, people don’t want to have to deal with the lows of the economy; therefore they would rather have government interference. Allowing the government to interfere may cause temporary relief, but it will cause even worse problems for the future. It has been seen in the past that applying a Keynesian economics policy can cause great harm. For instance increases in government spending have put our country into massive debt, while increasing the inflation rate and weakening the dollar. Plus, an increase in government spending has the potential to crowd out private investment and lead to an even lower GDP. Another fault in Keynes argument is when he states that "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” Although he is probably implying that the “wickedest of men” are big business owners and heads of corporations, I think this statement could work against his argument. Who is to say that those in charge of the government are not the “wickedest of men?” How are we supposed to trust those in power to do things for the “greatest good of everyone?” You could easily say that , “allowing the government to drive the economy is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”
I believe that Hayek's view of economics is better in the long run, but that some level of Keynesian economics must be implemented in order to insure the survival of an economy. While it is true that the market will correct itself in the long run, simply doing nothing and waiting for that correction is not the way to go. It could take many years for an economy to get out of a recession or depression, and even longer for that economy to reach the level that it was at before the recession. This could completely destroy a countries economy, if following Hayek's system. However, Keynesian economics allows the goverment to stop the recession from reaching the levels that it would if left unchecked, and cause the recovery to start faster. While Keyesian economics may lead to other recessions that would not have happened otherwise, it also prevents them from reaching levels similar to that of the Great Depression. It is better to have more frequent, but less severe recessions under Keynesian economics, than the deep depressions under Hayek's system that can completely destroy a contries economy for many years to come.
Patrick McGuire
Period 6
Judy K. Period 7
Although both Keynesian and Hayek economies have pros and cons, I support Hayek economy. The main problem of Keynesian economics is its hands on approach, with the government spending money to relieve economic strain. Such spending increases the national debt and portrays the government's little faith in its citizens. It is also only a temporary fix. While it may subdue inflation for a while, it fails to solve the actual problems and creates more in the long run. Also, Keynesian economics make wrongful assumptions such as assuming that the government spending productivity will be higher than that of the private sector. Also, it assumes that the government will pay down the deficit that incurred during a period of monetary expansion. Additionally, I think that the economy will be best off when allowed to be fixed by itself. On the other hand, Hayek economy is more conservative, and doesn't involve such a powerful government. People have a stronger influence on the economy through free market. Also, it is believed that the free market would check itself through competition and consumer demand. For these reasons, I support Hayek economy over the Keynesian economic principles.
Ashley P
Period 7
I support Hayek's theory of no government intervention in the affairs of the economy. I believe that markets should drive the economy instead of government spending that leads to a higher national debt. According to Hayek, by allowing the economy to fluctuate naturally without government intervention, the economy will eventually cycle out of a recession. This process is more reliable than the Keynesian belief of government spending. Additionally, if the government distributed resources of production to the products that are demanded by the public, the private sector would have difficulty correcting itself. Thus, Hayek's theory is of a free market is more sufficient than government spending because the free market best responds to the wants of the people versus the government and the government deciding what is best for the economy.
Ellie Camanzo, Period 6
I am in favor with Hayek’s belief that government intervention hurts the economy more than helps it. The government controls minimum wage and sets price ceilings as well as price floors, which can force businesses to fire some of their employees. But if the government does not interfere, then wages and prices fluctuate to the level of the demand market. This leads to more competition between businesses, which increases the production efficiency and therefore increases employment. One of the problems with Keynes theory is that an increase in government spending increases the government’s budget deficit, and can cause an economic depression. In addition the magnitude of the government’s debt is always greater than the magnitude of the private sector’s debt. Moreover, when Keynes came up with his theory he essentially assumed a closed economy and never accounted for international trade or capital movements.
Danielle Domini, Period 6
Both John Maynard Keynes and Friedrich Hayek were distinguished economists of their era and rose to fame in between the two World Wars. Both economists saw the world fall into the Great Depression, but each formed their own distinct theory on the best way to deal with the depression. I agree with Hayek’s belief that during depressions, government intervention makes things worse by trying to intervene to restore full employment. Keynes believed in the government regulation of the private sector and other measures by government to redistribute wealth or promote equality; however, this reduces incentives for individuals in society to achieve their full productivity and strive to maximize their potential output. For the last 100 years, however, most Western economies have demonstrated more of the characteristics of the Keynesian model. Society has grown impatient, and if unemployment arises, it wants to “fix the problem” through stimulus plans immediately. But this poses a problem because an increase in government spending often leads to an increase in the government’s budget deficit. For the year 2014, the U.S. Federal budget deficit is projected to be $744 billion. These massive budget deficits may indicate that it is time to take Hayek’s approach on how to deal with the economy.
I think the most important factor to take into consideration when determining the benefits of both Hayek and Keynes’ economic philosophies is the time that would be needed for such a recovery. It is very hard for the confidence levels in the economy to be maintained if it is heading into a downward spiral rapidly. This is the main reason why I feel that Keynes’ policy is more effective and would ultimately be more successful. Using his ideas, the government would almost immediately be able to take action in different ways for example by increasing their spending to avoid a recession, increase taxes to reduce price levels, etc. The way in which people view the status of the economy is a significant factor in determining if it will improve or not in the future. Without the interference of the government people are not willing to wait around for the economy to improve on it’s own therefore making Hayek’s policy unrealistic. Without any government intervention at all, economic depressions can last much longer compared to if the government were to implement certain beneficial plans. Keynes’ policy is much more realistic overall and guarantees a more rapid recovery which ensures the citizens continued faith in an economy.
Claire T. Period 6
I believe that the only reason that Keynesian economics has been so relevant over the past few decades is because when the economy is suffering, people always look to their government for help. That’s what a government is for: to keep the people safe and happy. It’s for this reason that I believe that people have a hard time grasping the fact that the best thing for the government to do during an economic downturn is simply nothing. Hayek was the first one to realize this and he was, in the beginning, almost completely disregarded. The idea that the government would do nothing during a recession was frightening to many and so the people continued to support government intervention. And so the government increases spending during recessions. But how can this be helpful when it increases the national debt and leads to crowding out? The government is creating a new problem while trying to solve an old one. Soon that new problem will become the old one that can only be fixed by creating a new one. The cycle will go on and on and our economy will always be suffering, one way or another. Clearly, after what happened in Germany, it is safe to assume that having a free market is the best way to go. It’s hard to argue with a system that has proven beneficial. However, it is difficult to ask people to take that leap of faith, stay patient, and wait for the economy to self-adjust. But it might just be the best thing for us.
Both Hayek and Keynes provide well-thought economic policies that have provided the basis for myriad debates, and even right now, I am asked to declare my opinion on the timeless debate- Keynesian or Hayek’s theory. First off, I believe that it is extremely hard to believe in just one of the policies. With a future that will never be certain, it is hard to let the economy flow naturally or just put government intervention every time. So, I think that implementing both policies in moderation would be best, however, I do believe Hayek would be best for the long run. Even though Keynes’ policy provides aid to offset economic recessions and allows people to save money or even stay unemployed if wages are sticky, I believe that it provides a quick relief to something that does not need to be relieved. The economy was created with intentions to be “natural” in flow and be driven by the market. Markets were created in order to exchange goods and services between people; of course the government would get involved in order to help people less fortunate to enter the market or for military purposes. However, government involvement was never intended to fully interfere with the economy. And when they do interfere, it might provide relief for the moment, but its influence in the long run is far worse. Government influence restricts a natural flow of the economy. That is why I think Hayek’s theory would be better. Hayek lets the market drive our economy and does not have a course of action for the government, except for them not to intervene. However, I do believe that this system is flawed as well because government intervention is necessary for times of war and other national problems. In all, I believe that Hayek provides a stronger policy for our economy.
Danielle Reffsin Period 7
Both Hayek and Keynes provide well-thought economic policies that have provided the basis for myriad debates, and even right now, I am asked to declare my opinion on the timeless debate- Keynesian or Hayek’s theory. First off, I believe that it is extremely hard to believe in just one of the policies. With a future that will never be certain, it is hard to let the economy flow naturally or just put government intervention every time. So, I think that implementing both policies in moderation would be best, however, I do believe Hayek would be best for the long run. Even though Keynes’ policy provides aid to offset economic recessions and allows people to save money or even stay unemployed if wages are sticky, I believe that it provides a quick relief to something that does not need to be relieved. The economy was created with intentions to be “natural” in flow and be driven by the market. Markets were created in order to exchange goods and services between people; of course the government would get involved in order to help people less fortunate to enter the market or for military purposes. However, government involvement was never intended to fully interfere with the economy. And when they do interfere, it might provide relief for the moment, but its influence in the long run is far worse. Government influence restricts a natural flow of the economy. That is why I think Hayek’s theory would be better. Hayek lets the market drive our economy and does not have a course of action for the government, except for them not to intervene. However, I do believe that this system is flawed as well because government intervention is necessary for times of war and other national problems. In all, I believe that Hayek provides a stronger policy for our economy.
Matthew B.
Period 7
I believe, that Hayek's economic policy is superior to that of Keynes's. Although Keynesian economics did "work" to fix the Great Depression, it worked only because America was involved in a World War, not due to the New Deal; additionally, it only worked in this instance because World War Two was such a large war that a large amount of the population was drafted, reducing the labor force, and made the superficial impression that we were at full employment. Since World War Two, Keynesianism has not worked, and its current implementation isn't working. Despite the government's massive, incessant increases in spending, unemployment is still around 7.5% and inflation is only around 1%; even though we aren't in a recession and we have positive GDP Growth, we have characteristics of a recession in our economy. The only part of Keynesian economics that has held true in today's utilization of it is an increase in the government deficit. It is clear that Keynesian economics does not work in the long run and implementing laissez-fare capitalism would increase long- run stability.
Jimmy B.
Period 7
I would prefer not to choose either of the two viewpoints and instead use ideas from both to form my ideology on the issue, but if I had to choose one of the two viewpoints, I would have to choose the Keynesian viewpoint. I do not support the overuse/abuse of Keynesian ideas, but I believe that the government must have some role in the economy in order to avoid double-dip recessions, hyperinflation, and recessions or inflation that last too long. I do agree with Hayek in that the economy fluctuates between prosperity and recession, and, if left alone, the economy will fluctuate between prosperity and recession. However, there is no guarantee as to what extent the economy will experience prosperity and recession, and how long these phases will last. For example, the economy can go into a deep recession, then come out of the recession into a period of relative prosperity compared to the recession in which unemployment is still high, and then go into another deep recession. Theoretically, this can even happen endlessly, so this can mean that an economy can experience a seemingly unending recession. This is only one of the many bad things that can happen to an economy without some government involvement. Therefore, I am more a supporter of Keynes than of Hayek because I believe that some government involvement in the economy is necessary to avoid economic disasters.
William B Period 6
They are both wrong.
Secondly, Mr. Karmin’s pet unicorn, actually has formulated the perfect monetary policy, so we do not have to debate this at all. But I’ll “Play School.”
Neither Keynes’ theories nor Hayek’s, work as models of economics. In short, Hayek offers no solution for unemployment, Keynes offers government intervention. I would rather the government have less control over economy, that is just me. And Hayek’s approach to a depression, recession even, let it correct itself? Sure, most of the dips in the cycle are the culmination or greed-- from the private sector, the public, or the government. However, why should the public have to bare the brunt of unemployment, at the hands of business/government/their own uneducated greed. They should not.
Keynesian politics has been tried, discarded, and now tried again. Did the stimulus aid the recovery recently? Of course, a million a minute for months, obviously will aid the economy. The FED’s recent actions, show that it really does not have complete control. Economics is theory based, so there is no way the FED can actually know exactly how it’s policies will affect Americans, the same for the IMF and WB. These policies are educated guesses, and good ones at that, but they are not a sure thing. If the FED, an independent agency of professional economists, does not know exactly what its policies will do, why should I have faith that the Federal government will be able to implement beneficial policy.
Look at the current administration’s stimulus spending in green technology. Solyndra, bankruptcy, Fisker - near bankrupt. Sure Tesla repaid its 480+ million loans, but in the green sector alone, -33% return on investment? I would not invest in this administration, as it’s investment of stimulus money, which will be paid by us in the “long run,” -- which the politicians would convince you was forever from now, it is not, its here- is misguided and swayed greatly by campaign contributions.
While the current system that works, seems to be Keynes in bust, Hayek in boom. Sure, thats great, but it historically has led to various issues. We need a stronger global system of connected National Central Banks. Banks free of politics, free of profits, reasonably free of influence. Forget the US, the world needs economic policy. Want to argue with that? Look up globalization, read some of Thomas Friedman’s writings, then attempt to disagree with that. China’s political structure abuses its economists, and that has led to a GDP slowdown of 4%, which affects the US, much like the Eurozone’s stagnant growth does. We need a refined economic doctrine, which reflects Hayek’s core beliefs, and Keynes’ stimulus in bust cycles. But that won’t count for anything, if politicians have any influence. If you think that our elect, can lead economic policy, watch the Senate Finance committee, which our dear Chuck is a member of, on CSpan, and see if your opinion changes.
I believe that Hayek's theories on macroeconomics are correct. The economies have always proven to work in cycles, regardless of government intervention. So long as prices can adjust, the economy will be able to fix itself. History has proven multiple times that too much government control can break the cycle. Keynesian economists may first only suggest increasing government spending, but when that fails price fixes and market control become the new policies. Only the market can determine prices and wages, nothing else. Any attempt to control the forces of the market are sure to end in failure, just as was seen in Soviet Russia, Great Britain, and Germany. The current state of the U.S. economy may also be attributed to a Keynesian process of governing economic policy. in the past 20 years, the government has had an ever-growing control over features of the economy. At this point, they can control everything that's created and sold through subsidies, tax breaks, and price ceilings. At the same time, it's been 5 years since the 2008 recession, and the economy hasn't seen any significantly large growth. This is not merely a coincidence, as history has a tendency to repeat itself.
Kyle O. Period 7
Like many others I believe Hayek has given us a more suitable economic plan. I don't believe it should be taken to the level that Mises takes it because he called even Hayek a socialist yet, i feel Hayeks views have not been properly put to the test. It seems as though everytime the U.S is in a state of prosperity it is easier for citizens and politicians to say, "Hey, this is working... Let us leave it be." but once crisis hits then Hayek is no longer acceptable and action must be taken. Hayeks theory has not been proven absolute or given a full scale go upon an economy coming out of recession. The event that stood out to me when the prime minister of country xyz let the prices be free and thus his market was stablizing. that helped me feel more supportive of Hayek going into this discussion.
Noelle Ingrisano, period 6
People almost never blame themselves for any type of problem that arises. It's human nature to put the fault on someone or something else, and in times of economic hardship, who better to blame than the government? People will always blame the government on the state of the economy and therefore demand the government to repair what they have apparently led us into.
As we have seen over the past few days in school, there are really only two options for America to tame the economy and that is either to side with Hayek or Keynes. Many Americans tend to side with Keynes policy because Keynes believes in government intervention. The government seems to be taking initiative and shows Americans that the people are being cared about in his policy even if it will bring more problems in the future. However, I believe that Hayek's views would be much more beneficial. Hayek believes the economy will fix itself without help from the government. Without any government implemented laws, competition would increase and the economy would fix itself. This doesn't appeal to many people because it seems as though the government is abandoning the people in their time of need not realizing A) the problems Keynesian economics will bring in the future and B) people are just plainly impatient. Many people who support Keynesian economics bring up the Great Depression comparing Hoover's policy with FDR very conveniently forgetting what occurred in the 70's and in 2008 implementing Keynes views rather than Hayeks.
Personally, I am for less government intervention. Does that mean that I am pro-Hayek? Probably not, but ultimately the economy will fluctuate according to what is best for itself. It is undeniably a fact that we have the undulating business cycle, so in the end, the government really has no control over the cyclical nature of the economy. Realistically, the Keynesian viewpoint only has one significant data point -- World War II that relieved us of the Great Depression--and this recent increase in government intervention is yet to be determined if truly successful.
We as people want this business cycle to experience the highest highs but also the highest lows. it doesn't work that way. Recessions, as painful as it is to say, as necessary to fix an unchecked economy, and in drastic situations, depressions. The Great Depression occurred because there was also Great unchecked and unregulated growth in the economy that was matched by an equal downturn. However, we want the Keyensian government intervention to stop things like the Great Depression or Recession, which are, in fact, necessary to check an expanding economy. As crazy as it sounds, too much growth may be a bad thing, and in the end everyone wants what's best economically, so individuals and business will naturally recover (maybe even more quickly) from any downturn in the economy.
Nevertheless, this is also where my, as well as the Hayekian argument are flawed. What if there was no government intervention for the Depression or recent recession? The economy could've taken a year to completely recover, or it could've taken fifty. The latter point is the issue. Fifty years could be an entire lifetime, and economics isn't a science, we're talking about people. Government intervention ensured that at least we have some path to recovery, artificial or not. No one wants tough economic times period, but it's unfathomable to have recessionary economies lasting for drastically long periods of time. This fear of the unknown is perhaps the greatest flaw in the Hayekian argument.
Claire T. responding to Emily Y.
Aren’t we always striving towards favorable results? What we need to do is what is best for us in the long run. We might have to struggle before we get to that favorable result, but we have to do it anyway. Fewer depressions and longer periods of prosperity is a great outcome. If the Great Depression is used as an example, of course it would be a long one, but if the economy self-adjusts and we leave it be, the next one will not be nearly as bad and there will be fewer depressions. The market cannot be in depression forever; it will eventually rebound. However, I do understand your hesitation to accept Hayek’s system because of the unknown factors in it. Of course, it is hard to trust a system whose outcome is so hazy. We, as humans, need to have some order in our lives and we are always afraid of that unknown. But we need to at least give it a chance.
Faryn S
Although some feel that Hayek's views on economics are wrong, I have to agree with Hayek. Some may feel that if the government can fix the economy, then why wouldn't they? However, Keynesian economics is not always helpful as it may result in deficit spending while not even ensuring a quick fix. Hayek's views on economics tell that the economy will continue through its boom and bust cycle over time, and I agree with this. I also feel that in order to follow the idea of laissez faire economics properly, the government should remain hands off, and this would be violated to a degree if Keynesian economics were to be totally utilized and the government took too much control of the economy. In the end, the economy will continue through its cycle, so I do not think the government has a strong place in what should be a free market.
Thomas G. Period: 06
Keynes and Hayek were two economists whose theories have been debated for decades. However, I personally believe a free market economy would be the most beneficial to a country. A free market economy allows for virtually no government intervention, letting the private sector of an economy to naturally become stronger. When the government steps in to create programs to try and help the economy prosper, the private sector productivity decreases which does not enable for the economy to reach full employment. Hayek’s theory says that when the government does not interfere with prices and wages, the two are contingent and fluctuate accordingly. If prices rise, wages will raise with it which does not affect full employment and instead keeps it constant. A free market economy is charged by the demand that consumers have for services and prices. What consumers need, will allow for the economy to shift naturally without the use of any government intervention. In Keynesian economics, restoring the economy is a slow process that does not work. Keynesian economics has been used frequently and seems to not be able to get us out of economic down-turns. One reason may be the lack of productivity that the private sector has when the economy is controlled by the government. It also could be because Keynes theorist believe that to help the economy increasing the debt will spark consumers to spend, which may be true; however, in the long run will not be helping the economy to improve. Altogether, Hayek’s free-market economy would be better suited to help an economy prosper.
Josh Blum
Period 6
John Maynard Keynes lived by the quote, "If not now, when?" The essence of this quote captures the purpose of our government in the past, presence, and future. What exactly is the purpose of our government if it doesn't interact with its own citizens? I don't see any reason why a government deficit should be valued over the conditions of living of the citizens it was made to protect. Therefore, the government and FED should live by Keynes' Economics and run expansionary and contractionary polices when necessary, and not nearly let the recessionary and inflationary periods pass. Taking a more democratic approach, welfare and medicare/medicade should be readily available. In my opinion, Hayek's economic theories are outdated in today's more humanitarian-geared world and should be left with people like Ron Paul.
Both John Maynard Keynes and Fredirch Von Hayek have proven to be very influencful economics but I, personally, support keyniasn. Keynes's hands on approach has been proven to be very effective with presidents such as Ronald Reagan. Keynes suggests that a decrease in confidence can lead to a dressed in consumption that leads to a decrease in GDP and so on. Eventually you find yourself in a recession. With keyniasn, the government can counter act this effect by essentially increasing the money supply or buying bonds. Hayek believes that the market must go through the economic cycle without any intervention. In times of depression consumer's confidence in the market are very low and workers become disenchanted. Hayek believes that consumers will gain confidence and the market will slowly pull out of the recession. The problem wins that it's not fair to let the people suffer through unemployment because, honestly, no one knows how long a depression would last without any government intervention. I believe that John Marynard Keynes' economic out look on the economy is necessary for economic growth.
With the economic downturn over the past few years I people have turned to their government and looked for them to do something about the recession and not take a “hands off” approach. Although I think that the recession is the reason that Keynesian economics has become more widely accepted, I believe that Hayek had the better approach to economics. Keynesian economics focuses on how the government and Federal Reserve can implement policies that can help lessen the impact of recessions and return/keep the economy at full potential. Believers in Hayek driven economics believe that economy will fix itself in time and the government should keep out of the market. It has been shown that any regulation of private sectors holds the economy back from its potential and does not allow for wages and prices to naturally rise and fall with as a result in changes in demand in the economy. I think for an economy to be “healthy” in the long run, the economic views of Hayek should be followed (government stays out of the economy).
I usually shift back and forth between government intervention and a hand’s off approach. In times like today where the FED is printing billions of dollars and running a huge deficit, does it really make sense? Hayek argued that the government made things more costly and that the free market should just run its course in regards to production of goods and allocation of resources. The government should simply provide guidelines to function. After watching the video in class regarding the Hayek vs. Keynes debate, Hayek’s model shows deregulation works just fine. In the airline industry, price fluctuation led to decreased prices and increased demand for air travel. Possibly, if wage and price limits were abolished the same thing may happen. Although I agree with Hayek, his policies really won’t work today. People want results now in 2013 and are reluctant to wait through another recession that could happen for years. The result is large deficient spending.
Overall, although it may seem cold, Hayek's method is most effective. This will lead to the natrual cyclical state of the economy,which will lead to recovery during times of recession. Hayek's view of economics tends to end with better results and therefore I feel that they should be implemented overall, though I also feel that Keynesian ideas must be implemented in some areas to preserve public trust in the government. A hands off approach has proven to lead to a natural correction,but immediate relief is often necessary to prevent dramatic loss of faith. Too much government spending in this area will lead to a greater debt and further recessions down the line. Deficit spending leads to unpredictable outcomes. Hayek's philosophy will lead to a definite benefit overall, but it's often difficult for the impatient public who may be struggling in current conditions rather than looking into the future.
I agree with Hayek, i believe the shifts in the economic cylce are natural, and government intervention can do little to change it for the better. The main argument against Hayek is, it couldnt help us during the great depression. but that is just "one data point" in the course of economics history.
When choosing between the economics views of Hayek and Keynes my view point tends to lean towards the side of Hayek. I believe that the job of the government is to assist the economy not to control it. The economy is a living, breathing thing that has to be left alone. I agree with Hayek when he says that when in a recession the economy will fix itself if given time too. The reason that this belief is not popular is because people don’t like to wait for results, we live in a time where people wants to see quick results or your idea is wrong. Keynesian economics has hurt the US economy twice in the past memory, first in the 1970’s and then in 2008. Both times the United States pumping money into the economy did not work as Keynes said it would. Even though Hayek’s idea has some flaws in it, I believe that it is the more solid one.
Prady M, period 7
I find it hard to sit back and do nothing. I mean, personally, I love to sit back and do nothing. It is actually kind of my forte. That is also precisely why I should not control the most influential economy in the world. Something needs to be done to fix the economy and it must come from the government. I agree with Keynes, not because I am totally convinced that his philosophy will work but because I think that something one is better than nothing.
With so much of the country’s money held by so few people I think it is inevitable that there will be massive bust periods due to the actions of the few. I don’t think it is quite fair that the masses should have to suffer from their actions (SOCIALISM). Granted, they do also ride on the coattails in the boom periods but those never last as long as the potential depressions can last.
What it really comes down to is selfishness; I don’t’ particularly care about what I am leaving for people 100-150 years down the road, I want to get out of any economic downturn immediately. I don’t have time to wait for the market to correct itself and even if I have the time, why should I have to suffer if there are actions the government can take to try and help?
I lean towards the side of Hayek. I believe it is essential for economies to experience real growth, as opposed to growth bubbles often experienced with Keynes. I believe margaret thatcher did one of the best possible jobs as she lead the UK with Hayek policies. Many times it was difficult for the public because there were less tax breaks and bailouts, but in the long run it all worked out for the better. Leaving the economy to its own devices is the best way to allow growth and stability.
While reading through Hayek’s ideas on the economy, I see an ideology on par with communism. While the two policies are the exact opposite in practice, they would encounter a similar problem in regard to their implementation. While communism needs a non-corrupt leadership system to work as planned, Hayek’s form of economics requires an able-minded American public; it is clear to me that neither of these exists. To come out of a recession using Hayek’s ideas of the government waiting for the business cycle to follow through naturally, the responsibility of coming out of said recession would be placed upon the American consumer. If nothing was to be done in regard to the state of the economy, the American public would lose their faith within the system, and an unconfident consumer will be hesitant to spend. This leads to the flaw in Hayek’s ideas regarding how long the troughs of the business cycle will endure. It could take many years of missed economic opportunities to fix the economy in this manner. It is this large degree of uncertainty that mars Hayek’s approach. If it could be properly implemented, Hayek’s views of fighting inflation and allowing the economy to fix itself would be favorable. However, it is these factors inhibiting this practice from being used like this that, for me, give the edge to Keynesian economics.
Ryan H Period 7
I personally believe that Hayek presents a better path to the road of a successful economy than Keynes. Keynes' supporters always bring up the one data point of the Great Depression and although i despise the fact that i agree with someone who didn't know when the Division 1 Men's Basketball National Championship was, Bracco brings up an excellent point. During this dreadful time in the United States, World War II began and many men were drafted into the war-immediately reducing the labor force exponentially. Paired with this is the undeniable importance of the creation of new wartime jobs like ammunition and war vehicle production. These events greatly helped the economy and is truly the source of prosperity, not FDR's ABC organizations. If a Hayek theory is implimented, no government intervention is needed, allowing a complete free market to self-correct itself. Also, wages and prices are perfectly flexible b/c of no gov't intervention. The list of positives for a free market economy can go on and on. However, large flaws in the opposing argument are evident in the current state of the US economy. Keynesian economics states that decreases in consumer spending can be negated by an increase in gov't spending. This is obviously not factual since the past 5 years of the US economy has been coupled with trillions of dollars in national debt. Gov't spending to decrease the national debt has not been effective and we have to shift focus towards free market policies in order to improve the unemployment & inflation rates--which seem to never really move anywhere no matter how much money the Govt decides to spend. It is time to repeat history & return to the free market ways of the Reagan era! last thing... who yall got for game 7 monday night? #easternconferencefinals im hype. i no u r too
Kiefer K
Period 6
In the Hayek versus Keynes debate, I have to agree with Hayek the most. The main reason for this is the argument that he makes about people losing individuality and being forced to work like they are always within a war time economy. The main point most Keynesian use is how deficit spending and government spending, during World War Two, got the Allies out of the depression. The problem with using this as a basis though is the type of work, and standard of living people had. During the war people pretty much worked, and were provided with food and protection during this time. Another weak point of the Keynesian argument is that wages are sticky. The idea of sticky wages is not natural and will cause a recession to last much longer than it has to. The reason for this is that the economy could just get back on track but government intervention causes more people to be laid off by producers who can't supporter them at their lower production levels. Finally there having been a few events in history that have refuted the economic miracle that happened after world war two. The biggest one was stagflation. In most countries that had adopted Keynesian ideals, stagflation ran rampant because of government intervention. Only after Hayekians came into power like Reagan and Thatcher, were economies adjusted.
Weller, period 7:
In the debate of whether it is correct to function in a Hayek, or Keynes school of thought, and after the film we watched in class, I tend to lean toward the views of Hayek. After what we watched in class, I felt that when the government tends to attempt and control the markets, more negative tends to come from this than good. In times when Keynesian ideals were implemented, the United States economy was greatly effected, and not in a positive manner. I also feel that a free market is the best way for our economic stand point to be handled, partially because of it's morals. The free market tends to go where consumers want it to go, and has a great ability to correct itself. Like we saw in the film in class, when the government controlled sectors such as the cole industry, the economy wasn't positively influenced until a follower of Hayek, Margaret Thatcher, made the decision to give give away shares of the cole industry to individuals.
In response to someone else's argument, I would like to respond to Sarah Heinlein. Sarah makes a great point that although Hayek's school of thought does not offer instant relief to the economy, we must keep in mind the long run. In the long run, it will be easier to offset economic difficulties when letting the economy run its course. When the government intervenes, yes, problems may clear in the short run, but the long run is certainly murky, and problems tend to be even more strenuous in the long run. The markets should be run by the people, because we, the people of this country, should have the power and the ability to influence our markets the way we want to. The wickedest of men (a.k.a, big business), shouldn't be driven by government intervention to achieve what the government thinks it's people want. By letting the markets flow in a natural and untouched manner, it will eventually fix itself.
Tory G.
Period 6
In the “great debate” between the two economic policies, I have to agree with Hayek’s point of view. United States’ policies during the wartime economy of WWII just highlighted the benefits of having a government run economy, despite a previous decade of failed Keynesian policies during the Great Depression under FDR. The government implemented many programs to try and fix the economy, and in reality, very few worked, and most just cost the government lots of money in these already desperate times. When the economy is allowed to run freely, we can begin to see real growth and not have to worry about the bubbles created when the government steps in, or stagflation that can arise from the same circumstances. A smaller government that tries not to involve itself in economic affairs too much is the best course of action for any economy.
Chris D. Period 7
Although both Keynes and Hayek's views have there pros and cons. I tend to lean towards Hayek's side when dealing with the economy. I believe in a lasiez faire economy, and take a more conservative side on government intervention. In the 1970's, Keynesian economics hurt the economy causing stagflation. Fiscal policy and and counter cyclical can often make matters worse. In 2008 Keynesian economics failed again. The government pumped to much money into the economy to stimulate economic growth. This had the exact opposite effect on the economy causing the United States to go into a recession. This then led to many U.S. citizens borrow more money. I think that the economy will be better off when allowed to be fixed by itself. Hayek economy is more conservative, and doesn't involve such a powerful government influence over people and their decisions. People have a stronger influence on the economy through free market. A free market would check itself through competition and consumer demand. For these reasons I support Hayek's more classical view on the economy rather then Keynes views of government intervention.
Bryan W. Period 6
I agree with the arguments presented by Hayek, specifically that markets should drive the economy. The economic calculation problem is the idea that market is a complex system that is made up of too many different components for any of us to fully understand. I agree with Hayek's stance on the "pretense of knowledge." Attempting to understand something which cannot be broken down so easily, such as the market, is impossible. It is difficult to argue that certain government actions would be able to fix certain problems in the market and steer it in the right direction. Although all of these actions are with good intention, many cases of government intervention seem to hurt rather than help the economy. I understand that "doing nothing" may not be the best political campaign to run behind in eyes of the public, yet allowing the market to drive the economy is the better route. In recent years, the implementation of the Keynesian school of thought has arguably hurt the economy. The economy will likely fall into recessions regardless of which economic policy is being implemented, yet there is no specific formula to definitively provide employment and economic growth. I think that government intervention is theoretical and is ultimately a series of "educated guesses" regarding a complex system, which is inherently impossible to break down. Hayek's ideas should be implemented, allowing the market to drive the economy.
Matt L. Period 7
I believe that Hayek’s economics theories lead to a more successful economy than Keynes’s. Though I could see why people find it hard to just do nothing during a recession, government spending doesn’t really help. An example of this is stated in the “Keynes versus Hayek 101” article. It stated that the most government action should be to just lower some taxes during a recession. Government action and regulation restricts, and lowers productivity and output. When walker talks about Hayek’s ideas he says that the government promoting “equality or social welfare would reduce incentives for individuals in society to achieve their full productivity and strive to maximize their potential output.” Maximum productivity and output is needed for a stronger economy. The economy should just let the price and wage level adjust itself. Government spending during a recession fixes that problem but leads to a new problem. Once out of the recession, people have to face the debt that was accumulated during the recession. This is the case with the recent 2008 recession, in which Keynes ideas were used. The government just needs to give the economy some time to let it fix itself. Though people look toward the government for help during economic problems, people just need to be patient and wait. Hayek’s economic theories are better for the long run health of the economy.
Tory G.
Period 6
In response to Kiefer K,
While I agree with most of what you are saying, I do find issue with your statement “Only after Hayekians came into power like Reagan and Thatcher, were economies adjusted”. I feel as though while there were some changes to the economies of the world, it may be a stretch to say they were adjusted. I think in theory we saw some more Hayek influenced leaders, but policies remained the same. Reagan, while he was a huge supporter of small government, was the head of one of the largest peacetime military expansions in our nation’s history. He talked about cutting the size of government, but federal spending increased on average of 2.5%/year during his 8 years in office. To this day we see a very hands-on government (Stimulus package, misc. bailouts). While there may have a surge of Hayek influenced leaders during the 80s, we are still a long way from seeing any Hayek based economies any time soon.
Humans can’t stand to be in a position of misfortune. Ask around, and I can almost guarantee that no one will choose the Great Depression as the time they would most like to live in. Rampant poverty, hunger, and unemployment don’t make very accommodating living conditions. Oh, and did I mention the long food lines, garbage-filled streets, and terrible working conditions? It just keeps getting better and better. But as was mentioned in the “rap battle”, the Great Depression is one data point. Okay, let’s add in the Great Recession. Add in every little dip the economy has ever had. That’s more like it! With economic ‘dips’ come unemployment. And what happens when people lose their jobs? They want them back, of course. They’re not going to put up with worse economic times, and they want it fixed. NOW. As Time magazine puts it, we are the “Me, me, me” generation: the self-absorbed, entitled-feeling descendants of the “Me” generation. In the long run, we’re all dead. So how long before our spending catches up with us and we all ‘die’? Well, so long as it’s not now, it’s not our problem, so we don’t care. With this mindset, it’s obvious who wins. Keynesian economics is pretty much the solution: increase government spending, increase aggregate demand, increase GDP, increase employment. Hayek’s plan is flawed because it doesn’t take into account that humans can’t (and won’t) stand to be placed in a position of misfortune. It addresses the problem in the long-run, but not the short-run. It treats the economy like one big machine instead of little parts, and isn’t afraid to replace the parts to make the machine work. Well, that’s only logical. If the parts are broken, replace them. But they’re not just parts. They’re people. Keynesian economics isn’t only fast-acting; it’s humane. We as Americans preach labor laws and union membership and equality and justice and the golden rule. Why shouldn’t our economic system work that way? By spending more and jump-starting the economy, thousands upon thousands of people are handed a rope that leads out of the dark hole of recession. If Hayek knew that by implementing his economic policy, he and his family would go hungry and suffer for years, he would think twice.
Justin Kipperman Pd 6:
In my eyes, the better policy to follow interms of economic policy is F.A. Hayek's view. I feel as thoughgovernment intervention (Keyne's view) simply hinders economy as a whole. The economy is a cycle that goes through highs and lows, prosperity and recession. This up and down cycle is natural and should remain as such which is supported by Hayek's theory using a lassez faire approach toward economic policy. A prime example of Keyne's policy failing is the Nixon presidency. Nixon, a conservative president, went against the voice of his advisors and tried to intevene through government intervention, and the economy completely tanked. The issue with direct intervention of the economy is it only accounts for the short run outlook whereas Hayek's policy takes into account the long run. With the economy, things may have to get worse before you can see prosperity which is what happened under Ronald Regan and Margaret Thatcher of the UK.
Hayek vs. Keynes 2013
I personally agree with the beliefs of Hayek for the following reasons: First, businessmen know how the market works since it is their job to know, if they don’t know, they go out of business. Most government bureaucrats and politicians have not personally worked within the private sector and the marketplace, and are therefore not equipped with the proper knowledge to assess the nation’s market, and make adequate decisions on it. Second, history has shown that governments with the least amount of central planning within their economies, have had the most amount of economic growth and stability. Under Reagan and Thatcher, both the United States and Great Britain respectively, saw economic stability under policies of small government involvement (tax cut and lower government spending). Third, the market is too complex to predict. You can not have a few experts try to predict and control the actions of hundreds of millions of people.
Examples of Keynesian economics failing are everywhere. Within our own country, we have seen President Obama subsidize energy companies through the Department of Energy, just to watch them fail and go bankrupt. A government can not choose winners in the marketplace, only the market can choose winners in the marketplace. The biggest Keynesian disaster was the Soviet Union though. The Soviet Union through the ideals of Marx and Lenin created a communist society, in which central planning by the government was the only way in which the economy was allowed to function. It worked for a few years, but ended in mass poverty.
Everyone wants to find a solution to every problem, including the economy. The beauty of free-market Hayekian (I think I just made that word up, but just roll with it) capitalism is that it just works by itself. The market is a self-correcting function that needs to be left alone.
“Government is not a solution to our problem government is the problem.” -- Ronald Reagan
Matt Petracca
Sehar L. Period 7
(Sorry I am late)
In my own opinion I think that while Hayek does look more towards the long run and aims to prevent running government deficits (which sounds great) I think that Keynes's philosophy is the way to go. While Hayek appeals more to our logic to worry about our future I think during times of economic turmoil people want to see immediate action. I think that Keynesian economics is the right way to approach economic issues because during times of high unemployment the government spends more and runs deficits but it is a balanced system as during times of high inflation the government recovers its deficits. I personally believe that the best support for my side of the argument is that Keynesian economics has more of an immediate effect that is greatly desired during economic problems.
Taryn D. Period 7
Both sides of the argument between Keynesians and Hayek supporters have points that greatly support their argument. Basically, Keynes’ ideas sound brilliant on paper, but the way they have been executed in history has been unsuccessful. Keynesian ideas have also hurt the United States economy in recent years. Other than what history says, Hayek’s ideas also do not require government intervention, which prevents the deficit from increasing. However, Hayek’s ideas have their flaws, as well. In order to get an economy out of a recession, it is necessary that money flows, but if consumer expectations are pessimistic, people will want to save their money, leading to stagnation. Also, it is impossible to know how long a recession will last if left to run its course. For this reason, I lean towards Keynes ideas. While I do not believe the government should control every commanding height of the economy, I do think that it should use policies to dampen the effects of both recessions and periods with high inflation.
Lauren Hogan Period 7
I agree with Hayek's idea that economies as a whole have a cyclical lifespan. Too much government intervention most certainly can set an economy back or break the natural course of an economy's cycle. That being said, it is difficult to fully support the Hayek way of things because one cannot ignore immediate consequences. If an economy is constantly effected by the actions of the elite few, how can a government rightly wait out economic downturns at the expense of those at the bottom? It's hard to just wait suffering out and it doesn't make for an effective nation as a whole, when aspects other than the economy are taken into consideration. Overall, I see both sides and think that neither should be followed rigidly and without deviation. Theories do not apply perfectly to life, no matter how good they look on paper.
Ryan D. Period 7
I personally am in favor of Keynesian economics. Keynesian economics seems to be a way to deal with immediate problems in the economy while Hayek seems to focus on more of the long term problems in our society. If we continually focus on future problems then the people who are born into a poor economic time period have no way to really deal with it except to wait it out. In the long run we will all be dead. I personally feel the use of the government intervention to maintain a balanced budget is the right way to go. We need to focus on the problems of today's society and try to correct them and let the future generations handle their own economic problems. All in all I feel that the use of Keynesian economics is the best choice for our economy.
Jimmy B.
In response to Brian D.
While I agree that the government running a large budget deficit because of Keynesian fiscal policy is not a good thing, I believe that moderate use of Keynesian fiscal policy is necessary at some points in the economic cycle. For example, the government can increase spending by a modest amount, and decrease income taxes by a slightly larger amount during a recession so at least the government is not running a huge deficit. This may be necessary to avoid a severe recession, since a double-dip recession could occur if fiscal policy is not used at all to combat the recession. Since the business cycle can theoretically entail recessions of unlimited seriousness and length, we cannot rely on the business cycle's ability to return to prosperity at some point, since the next period of prosperity after a recession in an economy can theoretically not happen until the economy itself collapsed for one reason or another. Theoretically, it is possible that a recession in an economy can outlast the human race. Therefore, I believe that at least some fiscal policy is needed in any economy to stabilize the economy.
I agree with Hayek's view on how the economy should be run. The less government interference the better. Too much government interference can hinder the growth of the economy. It also teaches people they dont have to be responsible because a central force will be there to help. In a Keynesian economy people are less ambitious because they have the government to fall back on. It has much in common with a marxist economy. If the markets are left to them selves they will always balance out due to the rules of supply and demand.
I agree with Hayek's view on how the economy should be run. The less government interference the better. Too much government interference can hinder the growth of the economy. It also teaches people they dont have to be responsible because a central force will be there to help. In a Keynesian economy people are less ambitious because they have the government to fall back on. It has much in common with a marxist economy. If the markets are left to them selves they will always balance out due to the rules of supply and demand.
Jake Barone in response to Kevin Shannon
I agree with Kevin on his point that those who argue Keynesian economics got us out of the depression are only considering one time when it helped the economy. People can get statistics that prove anything they are trying to argue but it does not mean Keynesian economics is the best for the long run. The long run is important to the economy despite what Keynesians may believe.
Matthew B. in response to Mark R.:
While I do agree with Mark that Keynesianism can fix an economy quickly, this is only true in theory. The belief that any increase in the deficit due to an expansionary policy will be counteracted by the periods of prosperity is misguided because our government's debt has only increased for the past few decades. You even admit " As long as a balanced policy is maintained over the long term, unlike what is currently being done." If your statement is true (which in this case is fortunately is; thanks for helping me), Keynes never anticipated that governments will be running budget deficits during both recessions and prosperity, and thus the government is always making inflation, even when we are not in a recession. Hence, Keynesianism is not working, and it won' work... ever! Ok, maybe it might work sometime in the future (yes, I did just say that Keynesianism has some potential for success) but it is unlikely that it will.
Anthony G. Period 7
I agree with Hayek's view on the economy. I tend to favor less government involvement when dealing with the economy. While many people may not like it, recessions are part of the natural economic cycle, along with prosperity. We must take the ups and downs that come with Hayek's philosophy to get an overall better economy. It is important to be patient and realize that downturns are natural, and will be followed by prosperity. Keynesian economics seems to be more focused with the "here and now" rather than a time period down the road. Overall, I think Hayek's philosophy is the better choice for the U.S. economy
Kristal S. in response to Taryn D.:
Taryn made a great point when she stated that though Keynesian economics sounds wonderful, it also relies on how it is executed. Because Keynesian economics means more government involvement, it makes sense that its effectiveness will rely heavily upon what actions are taken. The beauty of Hayek's philosophy is that because the government is allowing the economy to regulate itself, it essentially will not take any actions that may potentially negatively effect the economy. However, as Taryn pointed out again, a market is made of people, and they will not be able to help themselves out of an economic downturn if they are pessimistic and are too afraid to take action. While there is an inevitable cycle, there is a big difference between a downtown that lasts for a few months and a downtown that lasts for weeks. Keynesian economics clearly offers much appreciated relief to families that are feeling financially strained when times are tough, which makes it appealing. However, it's fair to say that moderation between the two economic philosophies may also be helpful, since life isn't black and white and does not have to be only one or the other. There is always that pleasant, grey area in the middle that may produce much better results.
Emily Y responding to Catherine F, Period 6
I like how Catherine pointed out that we are a generation of instant want, and how Keynesian economics would foster this thinking. Hayek’s theories only work if the public is patient, but the time to wait is indeterminable. People can say they believe in Hayek’s theories and staunchly defend it, but how long will it be before they want change? Four, five, six, years? No one can wait that long, especially in this generation. Keynesian economics allows for quick solutions if done properly, and as Catherine pointed out, we are focusing on the present rather than allowing for the future to adjust itself. I also agree with Catherine’s comparison between labor laws and the economy. The American public is constantly pushing for reforms to increase productivity, whether it is in the form of price floors or ceilings, or other laws, so the economy should adhere to the same rules. It is easy to sit back and let the economy adjust itself when you aren’t the one suffering, but for the common American, waiting will not cut it, and government intervention is needed to remedy issues.
Bryan W. (Period 6) in response to Justin K.
I have to agree with Justin's opinion regarding Hayek's economic philosophy as the better policy. He brings up a good example of Keynesian economics failing during the Nixon presidency leading to economic disaster. This further proves the ideas that I previously presented regarding the economic calculation problem. The market it too large and complex for even the brightest of us to understand. Trying to fix something for the sake of fixing it simply serves no purpose. The laissez faire approach brought about times of great prosperity during the Reagan administration and concentrates on the economy in the long run. Although Keynes' ideas theoretically sound appealing, I believe that Hayek's policy would prove to be more successful for the US economy.
Anthony Garibaldi in response to Justin Kipperman
I agree with Justin's point. A lassez faire policy seems to be the most natural and effective for the U.S. economy. Justin brought up a great example with the Nixon presidency. Keynesian economics has only worked in one instance, which is clearly not ideal. Hayek's view is that highs and lows will occur, but we will be better off in the long run. This is better than being impatient and simply worrying about now, and disregarding the long-term health of the economy.
Brian D. Period 7 in response to Frank I.
I agree with Frank. During the Great Recession, the government ran tremendous deficits in order to give citizens and corporation more money. Deficits like the bailouts and programs like Cash for clunkers all provided the public with more money, but raised the national debt tremendously. To make matters worse, the overall state of the economy has not drastically improved. Granted we are on the road to recovery, but the road is very slow moving. The government is forced to use Keynesian economics because it gives the citizens, which vote public officials into office, money to spend. However, these everyday citizens cannot see that by the government not doing anything, it could help the economy in the long run.
Frank I in response to Henry K
Period 7
You say that, “these factors,” are what causes you to side with Keynesian economics, but what are the factors that proves to be better in the Keynes method? You highlight the flaws of Hayek’s system with simply hypotheses, but where is the support? Hayek’s ideology had only been recorded to fail at only one point in American history, so there is no proof to state that leaving the recovery of a recession up to American civilians will deteriorate their faith in government. You say that in Hayek’s economy, the economy will always recover naturally, but that it takes too long. Presently, although technically we are no longer in a recession, the economy has been consistently taking turns for the worse as Keynesian economics have been implemented so frequently. Who knows how long we would have been in the recession if we left the economy alone for consumers to fix it themselves? It just seems like although you recognize flaws of Hayek, you don’t take into account for the flaws of the Keynesian system compared to its advantages. Personally, I don’t agree with this decision because of the simple use of opportunity costs. Keynes opportunity costs in his economic system outweigh those of Hayek’s.
Ashley P
Period 7. In response to Claire T.
I agree with Claire. Most people turn towards their government during times of economic hardship, however this not the best solution for the problem. If people were patient enough to allow the economy to self-adjust without government intervention, the free market economy would be stronger in the long run and would be more predictable (as it would continue its natural cycle), compared to the uncertainty of increasing government spending. Clearly what happened in Germany illustrated that allowing the economy to naturally cycle without government intervention is the best solution in regards to economic policy.
Sehar L. period 7
Responding to Kristal
I agree with Kristal's response completely. As she mentions that although the Keynesian model goes against the natural flow of the economy because of government intervention I think it is a better approach. This is because while the Hayek method provides long term benefits people during times of high unemployment are impatient. People would rather see immediate relief from the government because by fiscal policy the government can directly inject money into the economy and attempt to shift it towards long term equilibrium. I think if a government ever stood there idly will its population faced economics problems that government would quickly lose support and most likely be replaced with one that does try to amend the economy. In my opinion Keynesian economics is the way to go.
Kiefer K responding to Tory G
Period 6
While government spending rose under Reagan about 2.5%. You fail to address Thatcher's approach to the British economy. With Thatcher you can't really deny that Great Britain was pretty much a Hayekian government because she had been a long time admirer and student of Keynes. Also with the government spending increasing 2.5% every year do you have a source? Because I want to know if that is adjusted for inflation. The reason for this, as we learned this year, is that a healthy rate of inflation in a country is between 2-3%, which would put that annual increase in spending right in between that. What you said though about not seeing any true Hayekian leaders currently is truthful though, but maybe as we saw during the 70s with Keynesian like Nixon, people may be more open to less government intervention as the economy slows down towards stagnation.
Mark R. in response to Matt B.'s response to Mark R.
You begin your argument by conceding that I am correct, then agreeing with me that the principles I propose (Keynes's ideas) are not actually being implemented correctly and so are ineffective while claiming that to be a counterargument. I appreciate the fact that your entire response is in agreement to mine, save how you believe that we should do nothing rather than change our misguided policies. The reason that this nation has been constantly running deficits is not Keynesian policies but simple politics. Americans want to have the benefits of government spending without having to pay taxes. Lawmakers want votes. You can see where this is going. As a result, the national debt has been piling up. A simple fix is to make sure that there is a budget surplus during times of prosperity (and inflation) and to make a less severe deficit during recessions. If this fiscal policy is implemented, then both recession and inflation will be dampened, the two scourges of the economy.
Catherine F. in response to Prady M.
Prady's post captures the mindset of many Americans: “I don’t have time to wait for the market to correct itself and even if I have the time, why should I have to suffer if there are actions the government can take to try and help?” Keynesian economics helps the suffering population recover, literally, from a depression or recession. If the government can help its people, there is no reason why it shouldn’t. The purpose of the government is to protect the people, whether from corruption, economic disaster, violence, or even themselves. Like Prady said, something is better than nothing. The government should at least try to help during bad economic times. Again, Keynesian economics works to this end; its philosophy is that the government should increase spending so as to increase GDP and increase employment. And why should Americans of the present feel like they should sacrifice for future generations? We are selfish, as Prady said. We don’t want to suffer more than we have to. Thus, Keynesian economics satisfies the wants of the population, and is practical.
Catherine F. in response to Prady M.
Prady's post captures the mindset of many Americans: “I don’t have time to wait for the market to correct itself and even if I have the time, why should I have to suffer if there are actions the government can take to try and help?” Keynesian economics helps the suffering population recover, literally, from a depression or recession. If the government can help its people, there is no reason why it shouldn’t. The purpose of the government is to protect the people, whether from corruption, economic disaster, violence, or even themselves. Like Prady said, something is better than nothing. The government should at least try to help during bad economic times. Again, Keynesian economics works to this end; its philosophy is that the government should increase spending so as to increase GDP and increase employment. And why should Americans of the present feel like they should sacrifice for future generations? We are selfish, as Prady said. We don’t want to suffer more than we have to. Thus, Keynesian economics satisfies the wants of the population, and is practical.
Sara Heinlein in response to Emma Kaufman
I completely agree with Emma when she states that Hayek’s theory will allow for a “healthier” economy in the long run. She is right when she says that any regulation of private sectors will hold the economy back from its potential. This is because regulation doesn’t let wages and prices naturally fluctuate in response to changes in demand. Although government intervention may allow for quick relief, the economy would be better off in the long run without it. I believe that the economy will fix itself. The markets should not be driven by the government. Allowing the economy to undergo its natural cycle is the best thing to do.
John Vera responding to... a bunch of people.
I did a quick and rough tally of the number of people who favored each side, and what I found is fascinating. There are about three Hayek supporters for each supporter of Keynes. The Keynes supporters are also more likely to be female than Hayek supporters.
Anyway, I'd like to address some common assertions from Hayek supporters.
As Jake B. said, there is a reasonable concern that Keynesian policies are likely to make people "less ambitious" because they become more reliant on government programs. I would like to point out that Hayek actually favored a government that provided a safety net for its citizens. "There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision." (http://voices.washingtonpost.com/ezra-klein/2010/07/hayek_on_social_insurance.html)
Supporters of Hayek, such as Ryan H. and Matt P., point to Reagan as an excellent example of the power of the free market. Under the Reagan administration, the national debt tripled as a result of increased government spending (primarily Defense spending) and lower tax rates. I don't know about Hayekians, but that looks to me like an expansionary fiscal policy consistent with Keynesian ideology.
Lastly, it seems that a lot of Hayek's supporters believe that businessmen can be trusted with the welfare of the economy. The thinking goes: if it's not profitable, then an industry will not and should not exist. This is dangerous thinking because services such as the USPS and AmTrack are not profitable. If these services were freed from government control and subjected to the "discipline" of the free market, they would fade away and become unavailable, harming the economy.
Danielle D. in response to Sehar L. (Period 6)
You are correct in saying that during times of economic turmoil people want to see immediate action, and Keynesian economics has more of an immediate effect that is greatly desired during economic problems. And as Catherine Feldman stated, we do live in a “Me, me, me” generation. People are selfish and think that so long as they are not facing a problem now, they do not care about the future and the effects that our huge amount of debt, for instance, will have on our children, grandchildren, and great-grandchildren. I don’t agree with this mindset. Increasing government spending, increasing aggregate demand, increasing GDP, and increasing employment seem like good options at the moment, and in some cases they may be necessary, but we must learn to not only worry about ourselves but also about the interests of others.
Danielle R. in response to Chris D:
I agree with Chris’ s ideals towards the economy and how the principles provided by Hayek would work well in today’s economy. When I expressed in my last post that Keynesian policy can have nefarious effects on the economy in the long run, even though immediate change happens with government intervention, Chris provided an example of failed government intervention. In the 1970’s, Keynesian policies were used to increase the money supply in order to encourage consumers to spend more in order to stimulate the economy. Unfortunaltey, this did have adverse effects on the economy and ultimately led to stagflation. Also, Chris pointed out the use of Keynesian economics in 2008, which ultimately led to a very damaging recession. Furthermore, through the use of United States history, I agree with Chris that we should maintain a more conservative view towards the economy. By letting the government act like a business in the market system rather than controlling it, I believe that a free, natural economy will arise and that will help our economy grow stronger in the future.
Justin K in response to Kevin S:
Good effort kid.
Now in response to Vinny G:
I agree with Vin. The government should be used as an aid to the economy, it should not act as the economy itself. There is a valid argument when Vin states that the economy has been hindered by government intervention rather than rescued twice in history. Hayek's conservative view, on the other hand, has proven successful under the presidency of Regan. The issue with the general public is that they want to see instant results. With Keynes' policy you may see instant action, however results may not be what you see. With Hayek's theory, people will need to be patient for results but in the end there will be an upturn.
Thank you for reading. Please make good choices.
Peter T(per 7) in response to Pat M
I feel that you bring up some interesting points regarding Keynesian vs. Hayek economics. In contrast to an economy totally following Hayek’s ideas, I feel your argument regarding “simply doing nothing and waiting for that correction is not the way to go” is against Hayek’s ideas completely. I feel that under the Hayek self-correcting economy, the markets course of prosperity and trough is interrupted. It makes the government run a deficit. Yet, a more favorable and common approach similar to yours is to spend to help the economy out and not wait. Your idea is much like todays economics where you raise government spending to help an economy out in a trough and ease spending at a peak.
Victoria L. in response to Emily Y.
Emily's post expresses the counterargument to Hayek-ian very well, showing the moral differences between the two ideas. She mentions that, realistically, a society can't just wait during times of recession while people are struggling to live. I agree with most of the points regarding long periods of depression and worker discouragement. However, I feel that a more hands off approach must be utilized overall to prevent creating unnecessary, new recessions and government debt, while intervening in rare circumstances to maintain public trust and, morally based, to help those who may be struggling. Intervention should definitely be limited to mimic an almost hands off approach and prevent further economic disaster.
Kayla M. in response to Emily Y.
I agree with the ideas that Emily mentioned about citizens preferring shorter dips with government intervention as opposed to longer depressions without any government intervention. I feel that it is extremely important to keep in mind the needs and opinions of the people because essentially they are the ones influencing the economies success in the long run. Emily makes a valid argument in favor of Keynes’ policy about people being more at ease when they know that the government is making some effort to help out and improve the current circumstances. The different ways in which the government can affect the state of the economy are much better plans than if it was forced to be fixed on its own for example following Hayek’s philosophy.
June Chang in response to Kristal S.
I completely agree with Kristal’s response. In her response, she mentions about the Keynesian model offering more immediate relief to an impatient public, which is something that Hayek’s can’t; although Hayek’s philosophy would ensure the better economy in the long run, people would rather want to see immediate change from the government. As Kristal stated, “it is unrealistic to expect that people will willingly and patiently wait during times of economic downturn.” Government increasing or decreasing taxes and spending directly inject money to the economy and sifts the aggregate demand curve. Therefore, I think that even though this is giving too much power to the government, it is necessary behavior.
Ryan H in response to Krissy
I agree with my friend kristina when she says she supports Hayek and his viewpoints. I believe Krissy brings up a great point when she says "The free market tends to go where consumers want it to go, and has a great ability to correct itself." After watching the video in class, we definitely saw this happen with the dreadful situation Great Britain was in and how they managed to avoid further economic damage by implimenting free market policies. Although Keynesian Economics provides relief for the short term economy, we have to be focused on the overall health and long term state of the economy. Like the situation we saw in the U.S. in the 70's, Keynesian's effects only last so long before the market has to return to self correct itself. Go Reagan! I have Miami in 5 #nbafinals #donewiththisblog
I’d have to completely and utterly disagree with Kayla’s point. Although, the government would have an immediate reaction to the any economic downfall, there is also an immediate response that naturally occurs under Hayek’s theory. When the economy is going to towards a depression, the economy automatically begins to go to adjust such as changing price levels and wages, without the use of any government interaction. Also, government interference only helps the economy in the short run and increases the deficit greatly when adjusting to the times. With Hayek’s theory, the economy is never changing and is more or less constant as things adjust with the times. Hayek > Keynes. Thomas > Kayla.
Taryn D. in response to Prady M.
I agree with Prady that something is better than nothing. If government officials were to sit back and watch as the economy crumbled, people would promptly vote new people into office who would implement fiscal policy. People today are impatient and want an immediate solution to their problems. Hayek’s ideas do not provide that, and, considering we have a democratic republic here, supporters of his ideas would not be elected in the first place.
Taryn D. in response to Prady M.
I agree with Prady that something is better than nothing. If government officials were to sit back and watch as the economy crumbled, people would promptly vote new people into office who would implement fiscal policy. People today are impatient and want an immediate solution to their problems. Hayek’s ideas do not provide that, and, considering we have a democratic republic here, supporters of his ideas would not be elected in the first place.
Lauren H in response to Victoria
I agree with the idea that Hayek's theory can seem the most effective, but I also believe that there are major flaws with both theories and that following one strictly won't necessarily end well. If either were truly superior, or at least one had a wider margin of superiority, this argument wouldn't be so relevant. Therefore, I agree with the (admittedly irresolute) assertion that a combination of both might be the best method to help an economy.
Ryan D. In response to Prady M.
I do completely agree with Prady's ideology. Today's society need constant reassurance that the government is using all of there power to fix any problems in the economy. If the government were to sit back and let time heal the wounds of the economy, people would see this as the government failing to do their job. In a competitive society like today's society, people will not want to hear that the time correct the matter and that we have to ensure the economy is well for future generations. I feel the majority of the people of our country will feel that taking care of the present should be the priority.
Hunter in response to Prady.
I completely agree with Prady. While I am for less government, the government today cannot ever sit back and just do nothing. It is almost public expectation that the Fed and Congress should act in times of economic disaster.
I also agree with his point about selfishness. We cannot let an economy correct itself because we collectively want things better for us immediately. This is where economics fails to be a science and the nature of people comes into play. A self-correcting economy could be good, but not when that means bad economic decades for some people.
And here I would like to provide to you, Mr. Karmin, one last dose of my obnoxiousness. I wholeheartedly thank you for making me do homework on my very last school night. I mean, what would a school night be without homework? You just had to be that guy. And if I don't get an award from you tomorrow, you better lock your doors in North Bellmore and kiss your mezuzahs. Thank you for an amazing year and and mazing class (I actually mean this), but Conan is on now so peace.
Emma K responding to Sara H.
Period 6
I agree with Sara’s point that Hayek’s ideas are much better for the health of the economy in the long run and the economy must be driven by the market. I also agree that it usually takes longer for this theory to take effect and show results, which makes the theory unappealing to many in times of crisis. In the long run, however, the natural dips and peaks of the business cycle will drive the economy. I agree with Sara’s argument that a Keynes style economics can cause harm in the long run, putting the country in massive debt by increasing government spending, all the while increasing inflation.
Kelly M. (Period 6) in response to Victoria L.
Although Hayek's views will encourage real growth in infrastructure and business investment, how would you respond to an argument regarding other economies? It's thought that the things are only as strong as their weakest link, and although we will encourage our own nation's people to prosper with this long term growth as opposed to "a series of bubbles", how will this increase in output benefit us if other nation's economies downturn? If the US is unable to trade with anyone, then how will out goods be consumed or be anything more to us than just mere surplus? This may be on an international level, but in this case it may be right for the government to spend elsewhere in order to spark other economies. What if our economy was just an enormous downward spiral during our lifetime because that's just how the cycle works, and everyone in our generation has to suffer? I don't know how the nation would feel encouraged to put any work into the economy if they don't see anyone else taking action. Even though government spending creates our own deficit, people may often feel motivated if they feel like an upswing is on the horizon. A long, prolonged recession may lead to a mooching off of welfare and other government programs that help those in need of financial help.
Henry K in response to Frank I's response to Henry K
I see where your discrepancy is coming from in regard to my argument. However, the argument was centered soley around the flaws of Hayek's system. I did not find it necessary to point out the flaws of the Keynesian system because, in the manner which I presented my argument, I stated that the flaws of Hayek's system would make it impossible to correctly implement. Remember, I started my response saying that in an ideal world I would like to see a free-market system be implemented. However, the fact that the common American is, in my eyes, a simpleton would make this system's implementation unrealistic. American's will not sit back and just wait; this quality is just not one that the commoner in our nation possesses. Americans would become discouraged consumers if the Government did not take any form of action, and would not contribute the necessary funds into the economy to get it out of the trough of its cycle. Simply put, in theory, Hayek's system is better, but it would not work correctly in today's modern age.
I have not had the chance to read Bracco's argument, but I am sure that it is false.
Jordan F.
period 7
I agree with Josh when he says that John Maynard Keynes lived by his famous quote, "If not now, when?" This quote definitely captures the purpose of our government in the past, presence, and future. He nails it right on the head when asking the rhetorical question what exactly is the purpose of our government if it doesn't interact with its own citizens? Like Josh I don't see any reason why a government deficit should be valued over the conditions of living of the citizens it was made to protect. Therefore, the government and FED should live by Keynes' Economics and run expansionary and contractionary polices when necessary, and not nearly let the recessionary and inflationary periods pass. If we were to take a more democratic approach, welfare and medicare/medicade should be readily available. And I completely agree with Blum when he said, Hayek's economic theories are outdated in today's more humanitarian-geared world and should be left with people like Ron Paul. Just mentioning Ron Paul in his post made me laugh
Kyle O. In response to Prady M
I, for one, highly agreed that Pradys forte is sitting back and its almost as if he wears that idea on a shirt... Maybe you've seen it, "Lazy but Talented." Prady Brings up an interesting point. It is hard to do nothing. It is hard enough to struggle through a recession and when the people dont see a government who is active its hard to instill a confident body of citizen support. Selfishness is in the hands of the politicians who see it that way yet, maybe they just think a one hundred day, new deal and alphabet soup idea like FDR could do the trick. Personally i believe we should tackle unemployment and i believe the keynesian ideas of a proactive government could definitely do the trick.
Kyle O. In response to Prady M
I, for one, highly agreed that Pradys forte is sitting back and its almost as if he wears that idea on a shirt... Maybe you've seen it, "Lazy but Talented." Prady Brings up an interesting point. It is hard to do nothing. It is hard enough to struggle through a recession and when the people dont see a government who is active its hard to instill a confident body of citizen support. Selfishness is in the hands of the politicians who see it that way yet, maybe they just think a one hundred day, new deal and alphabet soup idea like FDR could do the trick. Personally i believe we should tackle unemployment and i believe the keynesian ideas of a proactive government could definitely do the trick.
Matt Petracca (Period 6) Responding To Josh Blum:
While I highly considered responding to Kevin’s “comments”, I resisted the urge, and instead decided to respond to Josh Blum, and other Keynesian supporters.
Josh, I disagree with you on the following topics:
First, I recognize your logic of “If not now, when?”, but I rebut your thinking with another quote, “Patience is a virtue”.
Second, in your comments you also discuss what the “purpose” of our government is. The purpose of our government is not to “interact” with its citizens in such a manner that it makes them dependent upon the government for handouts such as, welfare, medicare, and medicaid. The true purpose of our government, as according to the United States Constitution, is to protect our civil rights and liberties, not to distribute wealth. Fortunately, the U.S. Constitution was not made to be altruistic, it was made to protect our rights/liberties and establish justice.
I also would like to comment on the responses of other Keynesian supporters, most specifically in their lack of addressing the issue of the national debt. Last time I looked, money doesn’t grow on trees. So to support these Keynesian ideals of government intervention during recessions (low taxes and high government spending), the government would need to borrow money from other countries to make up the difference in their imbalanced budget. But, what happens when the federal deficit finally gets so high that we could never possibly pay them off, and we default on our loans, and suddenly the U.S. dollar tanks, and is then worth less than the paper it is printed on, what happens then? What happens when you need to bring a wheelbarrow of dollars just to buy a loaf of bread? You may look at the government for help, but all they can do is just print more money to help make a bad problem worse.
I also would like to recognize John Vera’s tossing of my love for Ronald Reagan in his last response, along with my appreciation of him using my newly created word, “Hayekian”.
Lastly, Mr. Karmin how did you propose to your wife?
Oh I forgot,
Ron Paul 2016.
Kavita in response to Sara H
I agree with Sara. I believe that the economy must be driven by the market, and like she said, although it isn’t always the popular belief for the government to not do anything, it is the best for long run growth of a nation’s economy. The economy is supposed to have troughs and peaks; it’s a part of the business cycle. However, when the government interferes, as it is doing now, there is fear that instead of coming out of a recession, towards prosperity, we may experience a double-dip recession. Like Sara states, Keynesian economic policy can cause great harm to an economy. Increased government spending can increase inflation while also increasing national debt; in addition there is the potential of crowding out, which would decrease investment by the private sector, therefore lowering overall GDP. If and when the government interferes in order to “fix” the economy, it actually hurts the nation. The free market knows how to allocate resources best in the market because it responds directly to the people. Government involvement decreases the efficiency of the economy and in the end does more harm than good.
Sorry it's a little late
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