Question

Comparing and Contrasting: How were the Iives of Hayek and Keynes similar? What differences might have contributed to the
Offerences in their economic theories?
Analyzing: What impact did Keynes believe government spending could have during an economic downturn? Why did Hayek disagree?
Making Inferences: President Obama and Congressman Ryan disagree about the role of give in the economy. Which one seems moreinfluenced by Keynes? By Hayek?

Answer 1

1. The similarities in the life of Hayek and Keynes is based on the fact that both men were opposed to the method of empiricism to economics.

The similarities between Hayek and Keynes

• They both disagreed to the use of observation solely as the source of economic knowledge.
• They agreed to intentionality and motivation.

The differences in their economic theories

• Hayek is known to have believed in the laissez faire system of economy
• Keynes believed in the intervention of the government in the economy.
• Keynes believed that increased money supply would cause the interest rate in the economy to fall.
• Hayek disagreed with this, he believed that this method would cause inflation in the economy because the interest rate would be too low

According to Keynes, in a period of economic downturn, an increase in government spending would help to stimulate the economy towards the path of recovery.

From a personal experience from his home country, Hayek disagreed because he believed that stimulating the economy would lead to market distortions in the long run.

President Obama is more influenced by Keynes given his comments on creation of more infrastructure in order to put people to work.

Ryan is more influenced by Hayek because he is more on how people can be free from depending on the government.

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