So after watching the video (for those who actually watched the video), who do you think won the battle? Did the arguments by Keynes and/or Hayek change your view on the economy at all?
Monday, March 11, 2013
Fight of the Century: Keynes vs Hayek Round 2
As you guys may recall, a few weeks ago we watched a Youtube video in class in which John Maynard Keynes and F.A. Hayek engaged in a rap battle about their views on government spending in the economy. Hayek represented the Classical perspective while Keynes represented the Keynesian perspective, obviously. If you guys enjoyed the video then I think you will enjoy the sequel to it, which I personally thought was better than the first one.
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I had watched the video before. Those summarized the main ideas of two schools of economic thought. I agree with the rap of Keynes that the one sees the things that one wants to see. Based on that, we formulated our perceptions of the world and makes opinions. That is the best point of Keynes. Maybe, he benefited from the government as some politician and that why agree with him. In my case, I have never found any benefit from the government. I have only felt that the government exists when the government asks me to pay taxes. It is clear that the spending is not free. Nothing in the economy is free, everything represents an opportunity cost. I do not think that I am aligned with certain point of view. However, Hayek is a genius because he realized that we do not need more people who think for us. People in the government are there by their self-interests and pretend to defend our interests when they are far from our reality. Maybe, they are still in power because the bureaucracy has benefited from that and people believe on them. As Machiavelli stated, one should say what people want to hear and not what you will do. So, politicians have learned very good the simple lesson of him although they should repeat certain basic economics courses to learn the basic principle of the economy such as irrationality, limitations of the aggregation, and so forth.
ReplyDeleteThey do make some pretty great videos. What I think is funny is how every side always thinks their voice is losing. The Keynesians thinks no one ever listens to them and that austerity always comes too soon and stimulus too late. Meanwhile, the classicists think the world is addicted to big government and more spending. I think both of them are right, the real answer is that no one listens to economists :P
ReplyDeleteJust like in the end how they both received accolades, I think they both are right in many ways. Keynes is right in the fact that we need fiscal stimulus right now while monetary policy is ineffective but Hayek is right when he says that the economy is far more complex than just a cycle that will pass through. It is a collection of different perspectives, clashing incentives, and differing behaviors that play a bigger role in the recession.
ReplyDeleteAs far as bottom up or top down, I think that both need to be utilized for it to be a successful process. We need to structure our new economy from concepts and context of policies and regulations that we know will work and allocate that money so firms minimize debt quickly and consumers and investors change their attitudes for a bettering economy.