Hayek Vs. Keynes

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The clash between Hayek and Keynes has defined modern economics. On one hand we have Keynes standpoint, which was if investment exceeded savings, there would be inflation, but if savings exceeded inflation, a recession would be present. On the other hand Hayek presented ideas of less government initiative and to have people make their choices on economic decisions more freely. Hayek argument on Keynes government spending was that if the economy should be more concerned with consuming or investing.
The particular opinions of these two rivals were quite different and in many respects set the groundwork for today’s great debate between the Keynesians and so-called “Austrian School” of economics (O’Driscoll, 2011). They both recognized problems, however, somewhat opposite viewpoints on the importance of combining credit and credit breakdown into any serious large economic examination.
In 1929 Hayek indicated that a serious delay to trade was expected, since the easy money policy initiated by the US Federal Reserve Board in July 1927 (Bas, 2011) had continued for two years after it should have ended. This suggestion would initiate Keynes argument on inflation as Keynes stated that the government had plenty of savings and no evidence of inflation was present. The downfall of trade would be due to overinvestment in securities and real estate. For Hayek the depression was threatened by ‘investment running ahead of saving’; for Keynes by ‘saving running ahead of investment’. (Bas, 2011)
Of course, once the downfall started and increased, predictions grew into explanations and policy recommendations, it became clear that Keynes would win this debate, mostly because his ideas were far more politically acceptable than those of Hayek. It was...

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...oduct is still high because the feelings of the well-informed are that of needing to pay the taxes to keep everything in a balance. Keynes had thought of this in his debate with Hayek explaining that in order to keep everything glued together you have to spend to make money. The government uses this same thought today throughout the decision making process of borrowing, and taxing. Hayek’s view has not been fully pursued in today’s economy, as he wanted to save with bonds and such in order for the government to have a balance.
Although the idea of having low taxes is ideal, it cannot contribute to the growing economy debt that has been placed. With taxes being paid by well-informed citizens the economy can still continue to borrow money in order to spend money for the safety and well-being of the people. Keynes has been the theorist whose ideas we still use today.

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