Is Hayek or Keynes correct?

The names conjure opposing poles of thought about making economic policy: Keynes is often held up as the flag bearer of vigorous government intervention in the markets, while Hayek is regarded as the champion of laissez-faire capitalism.

Did Keynes believe the economy was unstable?

The new economic activity then feeds continued growth and employment. Without intervention, Keynesian theorists believe, this cycle is disrupted and market growth becomes more unstable and prone to excessive fluctuation.

Did Keynes agree with capitalism?

The General Theory Keynes believed that free-market capitalism was inherently unstable and that it needed to be reformulated both to fight off Marxism and the Great Depression. His ideas were summed up in his 1936 book, “The General Theory of Employment, Interest, and Money”.

Why did John Maynard Keynes disagree with Hayek?

He criticized Keynes’ belief in monetary policy that drives down interest rates through increased money supply. Hayek contended that this strategy would increase inflation and ultimately lead to “malinvestment” as interest rates would be artificially low.

Did Keynes support free-market?

Keynes challenged a key free-market principle that saving is always good because it provides the money for investing in businesses. Keynes agreed saving was a good idea during normal economic conditions. But he argued that it hurt the economy in a depression.

Is Hayek a capitalist?

He was an ardent defender of free-market capitalism. Hayek is considered by most experts as one of the greatest critics of the socialist consensus.

What was Hayek’s response to Keynes?

But Hayek saw it differently. He criticized Keynes’ belief in monetary policy that drives down interest rates through increased money supply. Hayek contended that this strategy would increase inflation and ultimately lead to “malinvestment” as interest rates would be artificially low.