Keynesian versus Hayek Economic Concept
According to the video song, ““Fear the Boom and Bust” a Hayek vs. Keynes Rap Anthem”; two economic concepts are presented in this song. The first of the two opposing concepts presented by the Keynesian formula of steering the economy, asserts that: addition of the respective entities of consumptions, investment, government spending, exports minus imports is equal to the Gross of Domestic product, respectively written as a formula (C+I+G+X-M=Y (GDP). The formula is vital in analyzing the performance of country macroeconomic. Ideally, if the C, I, G and X increase, the gross domestic product would increase and vice versa. Therefore, as the song asserts, the Keynes is concerned about controlling the economy from depression and recession to development. Keynes asserts that the growing of government spending is the key to the increasing of the economic growth since money is everything and if the government keeps spending when the amount of money in market gets low, then there is a growth of the economy. Thus, the Keynesian concept discourages saving, which is the parody of thrift. The song is excellent is asserting that destruction is about saving in pockets instead of letting money grow in the economy as a multiplier effect of creating wealth.
On the contrary, Fredrick Hayek’s economic concept is of setting free the markets from stimulus, particularly government and sponsored centralized control of the forces of demand and supply to the extent that the debt is left by excessive spending. Instead, Hayek affirms that people should save to invest for the market interest as a way of growing wealth. The market boom creates a stimulus that leads to a market depression. The market boom results in increasing the interest rates and spending that in turn destroy the future of the booming market, whereby the constructed investments lose value due to the high expenses incurred, thus bringing about a devalued capital that may cause immediate slacking of markets. Hayek attacks Keynesian spending and bails out attributes of his economy stating that incentives perverse the market liquidity, interfering with the free forces of demand and supply. Therefore, the stimulus plan should be forgotten altogether and investors ought to concentrate in saving and creating investments.
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