Question

Using your knowledge of Commanding Heights and answer the following questions: (please type them)

a) What is the difference between the economic philosophy of Keynes and the

economic philosophy of Von Hayek?

b) What politicians supported the views of Hayek?

c) What politicians supported the views of Keynes?

Answer 1

a. Keynes and Von Hayek are the two greatest economists with contrasting thinking and ideologies.

Economic philosophy of Keynes: Keynes said that the government would borrow money to spend it on sectors and other works like public works, on deficit spending, which in turn would lead to job creation and increase in purchasing power. Trying to balance government's budget would not make things better. Keynes analysis laid the basis of macroeconomics field, which treats the economy as a whole and focuses on government's use of fiscal policy.

Economic philosophy of Von Hayek: Keynes views were challenged by Von Hayek who believed that the problem was that there was no economic calculation, no rational decision making of where to put the money and which good to buy because there was no price system to measure the alternatives. To Hayek, less intervention of government meant more economic freedom. He affirmed that when people have economic freedom or freedom to choose, they make better decisions and economy works efficiently.

b. Prime Minister Margaret Thatcher supported the views of Von Hayek and she also followed his book ' The road to serfdom'.

c. Many economists like George Akerlof, Paul Krugman, Robert Shiller and Joseph Stiglitz supported the views of keynes while many others thought that spending would not improve the circumstances.