A Summary of Keynes’ and Hayek’s Views on Economics Essay

In 1929, the stock market crashed. The values of production gone down, work force lost their jobs, millions of families lost their homes as well as millions of saving accounts were lost because banks closed for good. Those events resulted in the Great Depression. As a result, the world was plunged into economic turmoil. However, two prominent economists emerged with competing claims and sharply contrasting approaches on how a capitalist economy works and how to revive it when depressed. John Maynard Keynes an English economist believed that government has responsibility to intervene in an economical crisis whereas, Friedrich Hayek an Austrian-born economist and philosopher believed that the government intervention is worthless and†¦show more content†¦Unlike Keynes, Hayek, in his book The Road to Serfdom, points out that any form of government intervention is dangerous and leads to serfdom. He argued that central government planning leads to serfdom or servitude which destr oys personal freedom. Society has tried to ensure continuous prosperity by centralized planning which leads to totalitarianism. For example, socialism was supposed to be a means of assuring equality through restrain and servitude whereas democracy seeks equality in liberty-personal freedom and economical freedom. On the other hand, planning which is coercive is the least method of regulation where as cooperation of free market is superior because it is the only method that can adjust our activities with each other without the intervention of the authority. Furthermore, he argued that central planning is undemocratic because it imposes the will of the minority upon the majority. In pursuing their centralized goals, they take money or properties of the majority thus, destroying individual freedom. In addition, centralized planning reduces the individual to merely a means to be used by the authority as well as, giving away individual’s economic liberty. Unlike centralized planni ng, an open society offers more personal and economical freedom even to the very poor. He concluded by saying â€Å"The guiding principle that a policy of freedom for the individual is the only truly progressive policy remains as true today as itShow MoreRelatedKeynes Vs Hayek Essay804 Words   |  4 PagesKeynes Versus Hayek The relationship between economists John M. Keynes and Friedrich A. Hayek is quite complex. Both had influential roles in economic studies, emerging after World War II and during the Great Depression era (BBC). It’s important to note that both of these economists had opposing views when it came to economic theories and policies. Briefly summed up, Keynes theories were in support for government involvement in the economy (EconedLink). In contrast, Hayek argued that the governmentRead MoreKeynesian Theory And Aggregate Demand1499 Words   |  6 PagesThe great depression in the 1930’s devastated the economic market, but also produced two of the greatest economists to ever live, John Maynard Keynes and Friedrich August Hayek. Why did the economist John Maynard Keynes advocate for the government to have an active role with influencing the level of economic activity. This is because Keynes believes that this will stimulate the economic activity and bring the country out of economic drought. Keynes’ theory leads to the government influencing the level