Free market or government managed? – Which economic model Hayek or Keynes?

How do you see the future of the American economy? Which road is better?  Please I beg you to watch the video below. You can skip my homily on economics and sit back and relax and watch one minute of the economic video.  Just go to the center of the post and watch economics as you have never seen it before. If you do not like it turn it off and nothing lost. But it will draw you in.

The two main competing economic schools of though today are:

  • Continue to prime the pump with trickle down economics of from above with one central plan (Keynes) which is achieved by a spending push. This is supported by Obama but also the Neocon Republicans, who are most Republicans.
  • Instead of one central plan, 1000s of plans by entrepreneurs creating jobs on their own initiative, that is ground up economics. This economics arise when people are free  to act on their own dreams and initiative (Hayek). This idea is supported by the Libertarians and the Tea Party.

All political and economic empires have their end because of over extension

I live in a Post communist country. Bellow is an image I took the other morning of a building that is a monolithic ruin from this past civilization. That world was about the government can help the people better than people can help themselves.

stimulate the economy
Helping the economy with government planning will create nothing but massive waste and collapse. It does not matter if this is maintaining our empires around the globe or interfering with the markets domestically.

From an economic standpoint the answer is clear. What amazes me is why people do not see this? I am just asking the question. I would be very curious about people’s reaction to this video and if it is partial or basis to one side.

Here below, is a video created by EconStories, which illustrates the two approaches to economics.

The amount of detail in the video is amazing. Look close who is declared the winner and what happens to the loser. They made other videos which dealt with monetary policy and the Federal reserve bank. They are all good and recommended.

It is interesting to note that John Hicks who formalized Keynes’ theories with the IS-LM model and C (consumption) + I (Investment) and G (Government) = GDP and the general equilibrium theory was not a fully a believer in the ideas of Keynes. Keynes left out things like uncertainty and there were other aspects John Hicks did not agree with.

Hayek is always clearly the underdog. I do not know why and it is a question I continue to ask myself. Is it that people are influence too much by the charisma of the people carrying the message or they can not understand there is no economy at all. There is no ‘it’. This is an important point, as there is nothing really to manage or prime.

With few exceptions government central planning will create a disaster and collapse. You do not have to call it socialism but more fitting, corporatism.

There you have  it Friedrich Hayek and Keynes – which one has the answer for today’s economic crisis?

One last note please take my poll on capitalism.


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One response to “Free market or government managed? – Which economic model Hayek or Keynes?”

  1. Greg

    Nice post and great video, it summarizes some complex economic problems in a simple way.

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