Keynes Vs Hayek

Many economists think they know the most efficient ways to create stable economies, two of the most powerful and influential economists, who have very differing views, are Keynes and Hayek. Both of these economists feel their methods will help to steer the economy into a more stable state, Keynes believes we should have a strong influence over markets, while Hayek believes they need to run their course and build up “real growth”. The Keynesian view was arguably the most popular way to boost an economy, especially during his time. Keynes believed that in order to lift an economy out of a depression you must increase aggregate demand, which is the total demand for goods and services during a period of time. He believed there was a paradox of thrift: by saving money you are hurting the economy. If you aren’t stimulating the economy by spending your money to help other people make gain you are working to keep the economy in a recession. He stated that even a broken window can help the economy, because even though you now have a broken product you will be spending money to replace it which in turn creates more profit for all of the companies and manufacturers that help to produce those windows. Keynes also frequently …show more content…
The Hayek view states that saving and interest create growth, not credit spending. There is no way to make real growth if you are just borrowing money from your future self. Hayek also warned that a boom is to be feared much more than a bust, because that signals inflation and the possibility of a crash in the near future because markets can’t consistently maintain high levels of production. Hayek insists that you must save to invest; low interest rates just create cheap money that isn’t backed by any savings. If you have nothing to back your money it is harder to argue its worth. If you are consistently trying to control the economy you will over