The debate about which economic theory the United States should be following oftentimes comes down to the argument between Keynesian and Hayekian theories by politicians and political pundits. Here is a brief description of both theories:
- Keynesian economics is an economic theory named after John Maynard Keynes (1883 - 1946), a British economist. It was his simple explanation for the cause of the Great Depression for which he is most well-known. Keynes' economic theory was based on an circular flow of money. His ideas spawned a slew of interventionist economic policies during the Great Depression.
In Keynes' theory, one person's spendings goes towards anothers earnings, and when that person spends her earnings she is, in effect, supporting anothers earnings. This circle continues on and helps support a normal functioning economy. When the Great Depression hit, people's natural reaction was to hoard their money. Under Keynes' theory this stopped the circular flow of money, keeping the economy at a standstill. (From wisegeek.com)
- Friedrich August Hayek CH (8 May 1899 – 23 March 1992), born in Austria-Hungary as Friedrich August von Hayek, was an economist and philosopher best known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought. (From wikipedia.com)
Here's Part II of Keynes vs. Hayek Rap Battle from econstories.tv.
From the extremely creative and clever website:
According to the National Bureau of Economic Research, the Great Recession ended almost two years ago, in the summer of 2009. Yet we’re all uneasy. Job growth has been disappointing. The recovery seems fragile. Where should we head from here? Is that question even meaningful? Can the government steer the economy or have past attempts helped create the mess we’re still in?
In “Fight of the Century”, Keynes and Hayek weigh in on these central questions. Do we need more government spending or less? What’s the evidence that government spending promotes prosperity in troubled times? Can war or natural disasters paradoxically be good for an economy in a slump? Should more spending come from the top down or from the bottom up? What are the ultimate sources of prosperity?With the advent of more technology being used in the classroom, this should be shown in economic classes everywhere. Maybe something catchy and fun to watch will cause students (and adults) to pay attention to the reasons of our severe economic woes.
If teachers are allowed to move into serious discussions in their classroom about economic theories and can use their own curriculum, the site offers some great links for students to study:
Interested in learning more about the ideas debated in “Fight of the Century”? John and Russ discuss the ideas and thought processes behind the video in a new episode of EconTalk, available at EconTalk.org as well as on iTunes.
Then dig deeper by checking out the following links featuring economists and thinkers from across the spectrum.Wouldn't it be a great day in public education when students would become more interested in economic theory (which they should be interested as we are spending their future with our $14 Trillion debt) and less interested in learning the fine art of boycotting and petitioning?