Keynes vs Hayek

In the world of economic study there are many different schools of thought, but two influential economists have steered the way for modern economics. John Maynard Keynes and Friedrich August Hayek were both pioneers of the early twentieth century. They developed economic theory that would shape polarizing sections of the economic belief. Keynes was a product of King’s College, Cambridge and his general theory was an examination of the economic forces behind the Great Depression. But while Keynes was developing his own theory on employment and interest rates, Hayek was doing much of the same.

Hayek was an Austrian native who created the theory that would later be classified as Austrian economics. Later in his life he moved to London to work at the School of Economics where he would later keep in regular contact with the Keynes. A series of letters were written between Hayek and Keynes discussing Hayek’s book on the negative implications of central planning. Keynes generally agreed with Hayek’s work, as he was a part of the anti-authoritarian movement.

But the Keynesian and Hayekian schools of thought are generally polar opposites of one another. Thus, Keynes no doubt had some criticisms of Hayeks’ vision of free market economics. Keynes thought it essential for the government to play a significant role in curbing unemployment. For him, deficit spending was the only way to bring the economy out of a depression and to a point of higher employment. But Hayek saw it differently. He criticized Keynes’ belief in monetary policy that drives down interest rates through increased money supply. Hayek contended that this strategy would increase inflation and ultimately lead to “malinvestment” as interest rates would be artificially low.

Both economists pushed these theories and gained following during the twentieth century. It is generally said that Keynesian school of thought is the theory that came out on top. But in latter part of the twentieth century and in recent years, Hayekian theory and Austrian Economics has made its way into mainstream thought. Now, the work produced by these two economists shape almost every economic or political conversation had today. Whether you have conservative or liberalism views, belief in democrat or republican policies, you can tie that way of thinking back to either Hayekian or Keynesian theory. And thankfully, you can now learn more about Keynes and Hayek by watching a super “lit” rap battle found on

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