Economics: Keynes vs. Hayek

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The past few years the United States has seen some rough economic times. The unemployment rate is extremely high and many people have lost their homes and businesses. Because there are so many factors in an economy, it is hard to find the right people to blame. The protest group “Occupy Wall Street” has come to the conclusion that corporations are making us poor through taking advantage of us and the governmental system. The share of income going to the top one percent of Americans has increased dramatically over the past few years and “Occupy Wall Street” is outraged. They are calling for increased governmental regulation so that the lower quintile Americans can gain some equality (Cesca). I wonder who is actually at fault. Is it actually this top one percent who have been hurting us or some other factor? Maybe the government has created the problem.

A good way to approach it is to take a step back and look at the philosophy of economics. From learning about classical economic theory, modern dilemmas, specifically “Occupy Wall Street,” may be easier to solve. There are two main theories on economics and how a society should run. The classical theory is that of the British economist, John Maynard Keynes. The other, less popular theory is from the Austrian economist, Friedrich August Hayek. These two highly respected economists did most of their important work in the mid-20th century. (Cochran and Glahe 69).

John Maynard Keynes classical approach to economics and the business cycle has dominated society, especially the United States. His idea was that government intervention was necessary in a properly functioning economy. One economic author, John Edward King, claimed of the theory that:

Keynes believed tha...

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