MAKING SENSE -- April 29, 2011 at 3:23 PM EDT
Cut taxes? Hike them? Cut government? Save the safety net? These economic questions are dominating debate in DC. So we thought we'd consult two of the greatest economists of all time: What would YOU do about today's budget deficit?
Friedrich August Hayek and John Maynard Keynes were 20th century economists with opposite views of the role of government in the economy. To oversimplify drastically, Hayek believed in the power of the market - not the government - to make the most efficient choices in the long run. He argued that "central planning," popular during the 1930s and '40s, so strengthened the state that it put a society on "the road to serfdom," the name of a book he wrote in 1945. Hayek has become the economic hero of free marketeers and libertarians in the decades since and won the Nobel Prize in economics in 1974.
Keynes died before the Nobel Prize in economics was inaugurated. Perhaps the best-known economist of his era -- from World War I through WWII -- he argued that government played a vital role in any economy, and that it needed to be especially active in times of crisis and contraction. Full employment was his overriding goal and thus he advocated government spending to keep an economy going when consumers and businesses pulled back and caused a recession -- or worse. To the objection that consumers and businesses would spend again and, in the long run, lead the economy to recover, Keynes famously wrote, back in the 1920s: "The long run is a misleading guide to current affairs. In the long run we are all dead."
Since Keynes and Hayek have both proved the accuracy of this observation, we were forced to ask stand-ins to put words in their masters' mouths, answering our main question: How might the great intellectual rivals have addressed today's economic problems?
George Mason University economics professor Read Full Article »
