Smith And Hayek Research Paper

When it comes to economic theory on the government's responsibility in economic regulation there is no one correct way, however, there are theories that have more merit than others. There are two main viewpoints, little government intervention and major government intervention. This very notion is one of the many reasons that the United States split into two main parties and why there are such heavy party lines today. Keynesian school of economics attributed to John Maynard Keynes, who wrote The General Theory of Employment, Interest, and Money, preaches more government interaction to rough around the edges of capitalism. On the other side of the spectrum the Classical School attributed to Adam Smith, who wrote the Wealth of Nations in 1776,
Smith/Hayek wanted very little government interaction because the “Government isn’t the solution to the problem, government is the problem”. Too much government interference would discourage business to start in the United States of the given country. Also the viewpoint is if interest rates are kept artificially low for too long it causes assets to bubble and eventually the bubble will burst. So the government would cause these recessions instead of prevent them in the minds of Hayek and Smith. Smith also had a really positive view on human nature viewing that people were good and competition would drive his or her self interest to make his or her business prosper. However, in reality big business owner often exploit the market and laws in place to kill the competition. This is most notably during the gilded age when big business would form trust and price gouge until the smaller businesses could not sustain causing foreclosure. So industrialization brought in this complexity where no government interaction would be impossible. Industrialization forever changed the world economy and the government's responsibility within it. There are not many similarities between these two theories, the main one is that both believe that markets will eventually self correct themselves, but keynes thinks that
Franklin Delano Roosevelt is the most famous president for using this priming the pump method to get the United States out of the depression. He started many new government programs which cost money in the short run but in the long run created more jobs and job security. Many of his additions are still in place today, such as social security. Herbert Hoover was the other president who was in office during the great depression. He sat on his hands and said things will get better eventually, however, they never did. This is the exact moment when Keynes theory became the overall favorite. Eisenhower also used this policy and implemented new programs to help strengthen the United States economy. For example, the Federal Aid Highway Act of 1956, was the largest public works project in United States History. Its cost was $25 Billion however, in return the United States received 41,000 miles of interstate highways. This helped increase business success because it was easier to transport goods across multiple states without flying. These interstates are still in effect today and are such a large part of many americans daily commute to work. SO in the long run these roads were well worth the investment. Conservatives who undermine Keynes still are Keynesian at hearts to some extent. For