Kayne vs Hayek - 1370 Words

Chanya Udomphorn ID# 5380040 Macroeconomics 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†¦show more content†¦In 1974, Hayek shared the Nobel Memorial Prize in Economic Sciences (with his political rival, Gunnar Myrdal) for his pioneering work in the theory of money and economic fluctuations and... penetrating analysis of the interdependence of economic, social and institutional phenomena. He considered the efficient allocation of capital to be the most important factor leading to sustainable and optimal GDP growth, and warned of harms from monetary authority manipulation of interest rates. Interest rates should be set naturally by equilibrium between consumption of goods or capital stock. He is considered to be a major economist and political philosopher of the twentieth century. He was an important contributor to the Austrian school of economic thought. He also contributed to the fields of systems thinking, jurisprudence, neuroscience and the history of ideas. These two great thinkers had more in common than it is usually thought, including their idea of what is a civilized society and how assuming their colleagues-economists may be when they pretend to know . This can be traced in their correspondence. But their views on the monetary system radically differed. As an article states that Hayek viewed the market as capable to correct itself, when facing shocks, by taking advantage of competitive forces, and regarded government and central bankers policy efforts to restore growth as causes of more instability. On the other hand, Keynes viewed