Mr. Rattakarn Komonrat
Keynes vs. Hayek
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions. They develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. The two major theories of economics are Classical Economics and Keynesian Economics. Classical economists believe that markets function very well, will quickly react to any changes in equilibrium and that a “laissez faire” government policy works best. Keynesian economists believe that markets react very slowly to changes in equilibrium (especial to changes in prices) and that active government intervention is sometimes the best method to get the economy back into equilibrium. It may sound like classical economy speaks for a more capitalistic approach and the Keynesian economy proxies for a more Socialist economic environment. Hayek and Keynes are outstanding economists that espoused two separate philosophies on how the market should be stabilized while working towards equilibrium. Firstly, I’d like to talk about their backgrounds and how they influenced the economics;
“John Maynard Keynes” was born on June 5, 1883. He was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments. He greatly refined earlier work on the causes of business cycles, and advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions. His ideas are the basis for the school of thought known as “Keynesian economics”. In the 1930s, Keynes spearheaded a revolution in...