Theories of John Maynard and Keynes F.A. Hayek

Theories of John Maynard Keynes F.A. Hayek

Introduction

The theory of Employment, Interest and Money was introduced by John Maynard Keynes, and this theory was published in 1936. He raised the issues in classical economic tradition. The era of classical economic was destroyed during First World War (Mark well, Donald, 2006). The creation of new theory was necessary at that time. Keynes was one of the economists to create a theory. He concluded that classical economic got errors.

Hayek was famous in spreading the Austrian ideas into the English world. The new theories of Hayek were the rivals of the theories of Keynes. Both Hayek and Keynes emerged in 1930s with their theories.

Discussion

Hayek considered Keynes as an ally, and he was not ready to interfere in Keynes' work. Keynes was continuously changing his theoretical aspects and Hayek did not see any point to work in detail critique with the General Theory. Keynes presented mixed economy. He represented the private sector but with the influence of government and the public. He presented the economic model during the World War II. The creation of the global finance crises in 2008 caused some modification in Keynesian thought. According to Keynes, if some macroeconomics actions are considered to collect by large numbers of firms and organizations, it cannot give the aggregate macroeconomics result, therefore, economy continue, below its potential results and growth rate. According to Keynes' view, economy was not stable, and it had to be balanced, supply and demand also balanced out, and employment was not fully delivered. The reasons might be not sufficient investment and over savings. The solutions were easy that the replacement of the private investment by the public investments (Blinder, Alan S., 2002).

I also agree with the Keynes' believes that government should also take an interest in investments, and there should also be investments by the public sector. The government would spend money on public works and this result in the creation of new jobs and increment of purchasing power. During the slump when government's budget may strive to balance it will make things not better. Keynes developed new tools, standardized national income accounting, concepts of aggregate demand. Keynes' idea was to lay the foundation of the field of macroeconomics. It deals with the whole economy and also pays attention to the government fiscal policy such as tax and spending. These tools can hold the aggregate demand and also ensure the availability of employment. The government would assist by cutting its expenses during the tie of recovery.

Keynes urged the government to play a vital role in the economy. His idea was the reformed capitalism and managed capitalism. He also discussed the comprehensive socialization of investment, and he believed that the state should take responsibility for directly organizing investment. During the World War II, Keynes thought was to focus how to finance the war and what is the way to develop postwar currency system.

In Keynes General theory he also argues, that it depends on individual, to ...