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What led to the rise in acceptance of the views of Friedrich Hayek and the Chicago School? The views of Friedrich Hayek and Chicago school argued that the economy of a country needed more free market power and competition to provide the best outcomes for the economy. They were against the views of John Keynes who believe that government control over the market was the best method for a country to take. The views of Friedrich Hayek and the Chicago school came into acceptance due to the crisis that took place in the 1970s.The failure of the Keynesian consensus led to the end of the Golden’ Age’ which was the three decades(1945-1970) of economic prosperity benefited by mainly western countries. The oil crises, stagflation and the failure of the Bretton Woods system occurred in the 1970s.A good example would be USA. The rise in oil prices($3 to $30 per barrel) and the end of the Bretton Woods system lead to a higher increase in inflation, which had already been rising during the 1960s but became noticeable during the 70s.Economic growth was very low and unemployment rates were high. The belief by Keynes that it’s impossible to have high inflation and high unemployment rates at the same time was proved to be false. These three events led to the loss in confidence and the end of the Keynesian consensus. This failure gave birth to Neoliberalism which was the belief in the free action for the market forces with less government intervention. The Chicago School developed these grounds from the transition to Keynesian to neoliberalism. They proved Keynes’s idea of using taxes and government spending to handle an economy to be untrue. They argued that governments should remove completely from the economy and only intervene with focus on monetary policy (monetarism).This showed fiscal policy didn’t work. The crisis’s also brought more voice to Friedrich Hayek, who also viewed markets to be more efficient than governments .He argued that the government had a lack of knowledge...
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