Read the article and decide which famous Economist you most identify with. Then watch the two youtube videos at:
Fear the Boom and Bust:http://www.youtube.com/watch?v=d0nERTFo-Sk
and Part II of the Epic Battle at:
Fight of the Century: http://www.youtube.com/watch?v=GTQnarzmTOc
Identify at least 3 points from either Economist that you agree with. List the point and the video that it came from. Don't copy your classmates responses.
37 comments:
This is a tough question, but because I have to choose one, I would be support Keynes.
Although I believe there is a point where the government stops, I believe that governments should bailout business (Fight Of the Century). To this I must add a contingency to this which is a company should only have X amount of years to pay the loan back and there will be no extensions. This will increase the spending of the government and therefore help increase the aggregate supply of the economy.
In the article it refers to Keynes as believing in the demand-management system. In this system, a bank or the government create a situation that causes an stimuli to to increase aggregate demand on return it to full employment. I believe that this causes business to become efficient again and forces them to spend increasing the nation of the economy.
As stated in the " Fight of the Century" sometimes it is necessary to have big government projects to get the economy back on the right side of things. For example, WW2 was a good thing for our economy because it lead to an abundance of people being hired for military purposes, food, and the many other forms that it effected the economy. Without the war, the depression could have lasted much longer until we fell under radical leaders ( although I believe it would have never became THAT bad, the possibility is still there).
I find Hayek's point of view of the economy to be more logical throughout both of the videos.
In the video "Fear the Boom and Bust", I found that the the saying that there is "no free lunch" completely true. Everything cost money and simply because you are not or don't seem to be paying for it does not mean that somebody else is picking up the tab. I also agreed with the statement "stop bailing out the losers" because I think that if a business can not adjust to changes and is becoming ineffective then it should fail. Bailing out these companies is like taking a student that is failing and giving them a free hundred that boosts their grade to passing level. The student most often figures that they can continue the pattern that they are currently taking because why would you work for something that will just be handed to you for 'free'. I also have to agree with the idea that Keynes spending just creates inflation and a fake boom that will crash. The "Fight of the Century" video also had a few key points. The fact that WW2 cut short the depression seems to be pretty true. However, the points that Hayek brings up in retaliation makes a lot of sense as to why this idea of spending being the key factor to the recovery after the depression is completely bogus.
Overall, I agree more with the realist logic of Hayek's ideas. However, a little bit of government intervention should be allowed, especially when the economy is in an extremely bad situation.
Keynes
1) An increase in aggregate demand can help the Gross Domestic Product. Video 1
2) Real growth is the production of what people demand. Video 2
3) Government spending can only help to stimulate the economy. Video 1
Alexis Buck.
Although I find both economist's views to be somewhat logical, I believe I would have to go with Keynes.
1) In Fear the Boom and Bust, Hayek describes how in order to promote the economy, one needs to start saving, while Keynes repeatedly says that the government needs to improve spending during a depression or recession in order to promote the economy. Although I believe that at a certain point government should avoid intruding on the economy, how is the economy supposed to magically fix itself when interest rates are high, inflation is high, and no one wants to buy?
2) Another point that was brought up in the "Fear the Boom and Bust" video was how Keynes brought up the importance of "animal instincts" relating to his ideal of the best way of making money is to "guess what other people think is right" which is a true statement. Take stocks, for example. If we can accurately determine the factors that cause stock holders to hold onto their shares or sell them, then we can successfully gain a profit by selling and buying at the right times.
3) In the second video, the point that the point of government spending to start the flow is vital. One of his repetitive points in both our economics book and the second video is that it is pointless to focus on the future, because the future does not help us with NOW. We do not know we are even in a recession till a couple years later. So, instead of continually saving and saving until you believe the economy will get better won't help anything, it will just cause your money in your banks to have interest on it.
4)In the second video, Keynes repeatedly talks about his ideas facing the second world war, which he predicted would happen. He favored an enlarged government to help promote large government programs and spending which will help the economy. I believe this can be beneficial in a way because looking at, what I believe was a strong follower of Keynes, President Johnson, he had several different programs dealing with helping those with welfare get back on track. Even FDR had several New Deal proposals that would initiate new jobs and help promote the economy, even if he had to spend more.
Although I agree with both Keynes and Hayek's believes, If I had to pick one economist I would pick Keynes. Keynes' idea is more relevant for us now since we just had a depression and are moving to recovery so an another reason why Keynes' ideas appealed to me.
Reasons why I picked Keynes.
1) Boost Aggregate Demand (C, Ig)Consumer and government spending will boost the economy. Video 1
2) Government Spending will keep the circular flowing therefore helping the economy and its people. Video 1
3) Spend money everyday so that it will increase spending and keep the economy/GDP going smoothly. Video 2
Hayeks ideas seem to be stronger
While I do agree with Keynes that the government should lower taxes and give more room for people to spend, and that people spending money keeps the economy moving, that doesnt mean the government should take too large a role in pushing the economy forward. Businesses should not be bailed out and the government doesnt have to do large projects to put people to work. As for world war II, just because our economy went up doesnt mean that the standard of living increased. What good is a high GPD if everyone is rationing food and half of male population is out to war. It did set a foundation for a stronger economy in the future but thats only cause we were finally seen as a super power in the world. The government racking up a ton of debt to try to save everyone is not going to do anything in the end. We will just end up with more debt. TEAM HAYEK!!!
I agree with Keynes because:
1)People need to spend money to keep the economy flowing("Fight of the Century")
2)Governments should be able to intervene in times of economic downfall(Article)
3)Governments should implement economic policies(lowering interest rates and decreasing taxes) to encourage more spending, therefore helping to stimulate the economy.(Article)
I agree with both of them, but if I had to pick one, it would be Keynes because I think some of his important ideas make more sense than Hayek's, for example: his interpretation of the AS model, etc.
1. In "Fear the Boom and Bust", Keynes says that in order to get out of the depression in 1929, increasing Aggregate Demand would be the key. He supports this point by suggesting increasing government spending and to forget about saving.
2. I also agree with another point he made in "Fear the Boom and the Bust". The point he made was that monetary and fiscal policy are the same. I agree with this because they both: keep inflation low, maintain positive economic growth, and strive for full employment.
3. The other point he mentions that I like is in "Fight of the Century". He says that we only start to spend more money when there is a world war or after everyone realizes what has happened to the economy. I think he is trying to say to spend all the time.
Although Hayek's ideology is a valid one, I have to side with Keynes. I believe with Hayek's belief that any attempt by the "government to influence the allocation of resources through “stimulus projects” would only reduce the private sector‘s ability to quickly and efficienty correct itself" is false and that the economy is in need of government intervention. I believe in Keynes' perspective on how the "government and central bank could provide stimulus to a depressed economy and create demand for the nation’s resources that would help move a depressed economy back towards full employment." Without government's stimulus and intervention, the economy will either continue it's depression or worsen as a result of not doing anything. In "Fear the Boom and Bust," I agree that people should not save all their money but spend it in order to stimulate the economy. Hayek believes in saving (Fear of the Boom and Bust) but by doing so, the economy will suffer due to failure of people to spend money; this will result in a depression. Hayek does not believe in any government intervention and by doing so will just prolong the depression; therefore, i agree with Keynesian logic that it is necessary to stimulate the economy with government and bank intervention.
In a way, I would have to side Hayek because of Keynes' theory leads to overspending, if it is not kept on check, which leaves people in debt.
1. Real savings must comes first before the people invest. (Video 1)
2. Hayek also said that we, the people, are the economy. It is what we do that runs the economy(Video 2)
3. Entrepreneurial competition that also boosts the economy. (Video 2)
Keynes because...
1. Government spending can stimulate the economic
2. Its the people that keep the economy growing through spending
3. That means both of these will lead to a boost in Aggregate Demand, which will in turn boost the economy
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I agree more with John Maynard Keynes.
1) Allow deficits. Governments need some leeway in order for them to have the ability to pull a nation out of a recession/depression. The government's spending, as evidenced by the economic fluctuations over hundreds of years of any nation, is a major deciding factor on the overall performance of the country's economy. As a result, to increase government spending, the nation must allow deficits to occur. ("Fear the Boom and Bust")
2) State Intervention. The incongruities between the policies of the federal government when compared with the respective state governments delineate certain issues regarding stunted economic growth due to state policies. The state often lacks the vigor and action needed to fully allow the economy to become both successful and dependable. ("Fight of the Century")
3) Cut savings to increase spending. In a depression people will resort to saving when, for the best future, spending is the best alternative. Keynes argues that people must decide to spend more during failing economic times so as to influence the growth of the economy. ("Fear the Boom and the Bust")
I beleive Keynes
1.) More spending by the government and the people can help the GDP and stimulate the economy. This was proved during WW2 where the US government spent a lot of money.
2.) A contracting policy isn't good for the economy, we have had an expansive economy and look where it has got us. Highest valued economy in the world, a great standard of living for the most part, and the world-wide economy depends more on us then say the entire EU.
3.) As said in video 2, Hayeks idea and views don't have anything to do when recessions occur. Under the assumption that his methods wont lead to a recession, but if they do what will the fall back on? Keynesian methods.
Although I agree with both Hayeks and Keynes ideas, I find more sense in Keynes as it does include situations of recessions, other idea of his that I agree with from the videos include
1. Video 1, Keynes idea of increasing Aggregate Demand by increasing gov. Spending and lowering savings in order to get the US out of depression.
2. Video 2, The spending of money increasing during a world war or after one increases economy and allows it to grow.
3.Video 1, Monetary and fiscal policy being the same since they both maintain good economic growth, lower inflation and increase employment.
I think that I'd have to agree with Keynes overall.
1. Keynes' idea about not waiting for the economy to repair seems logical. While waiting for the natural cycle of the economy to pick up again, people are suffering. They could be homeless, starving, or just flat out in poverty. By boosting aggregate demand through a method such as allowing government spending to spur the economy, more businesses can get going and along with the economy can begin to pick up, hurting less people as a result. (Video 1)
2. I agree with the circular flow model that Keynes pointed out. His idea that by allowing government spending, aggregate demand increases and the economy begins to thrive was correct during the stock market crash of 1929 leading to the Great Depression. (video 1)
3. I also agree with Keynes idea that war promotes spending which ends recession. World War 2 put the major problems of the Great Depression under the group and it provides direct evidence of the advantages of spending during economic recessions. (video 2)
I agree more with Hayek's perspective.
1) "Fight of the Century": Hayek criticizes the Keynesian concept that to reinvigorate the economy, spending must occur, regardless of the sector it occurs in. I find Hayek to be undoubtedly correct in this aspect because certain sectors are already doing quite well and to stimulate those would only unbalance an already unequal distribution of wealth across industries.
2) "Fear the Boom and Bust": The chorus repeats the idea that Hayek favors a free market whereas Keynes seeks to direct spending. In my opinion, Hayek's perspective is much more beneficial because market freedom always yields increased efficiency whereas government bailouts and government spending (Keynesian) in general only support businesses that are failing for one reason or another.
3)"Fight of the Century": I agree with Hayek's point that the Keynesian model often works artificially. While Keynesian theories may apply to the full employment accompanying WW2, such numbers do not represent realistic situations. The US cannot be constantly at war in order to reduce employment. Furthermore, the other video refers to the bursting of the bubble after these phases of artificial growth associated with Keynesian spending. Hayek's logic appeals to me much more. The market should be free so that producers must streamline their industries in order to be successful.
If there was a battle between Keynes and Hayek, I would fight with Keynes.
1) Video One: I agree with Keynes' point that in order to prevent a recession, or to get an economy out of one, the people need to spend more money. In addition, the government would also need to spend more money. This stimulates the flow of resources and prevents depressions.
2)Video One: I definitely agree with Hayek's point that "malinvestments" have the potential to destroy the economy by creating inflation. The "stimulus" is actually worthless money that doesn't help the economy at all.
3)Video Two: I agree with Keynes point that the government needs to oversee the economy to prevent those "evil guys" from abusing the economy for their own benefit.
I agree more with Keynes...
1. Video 1: Government and consumers need to cut savings and spend in order to grow the economy.
2. Video 1: Savings are necessary in order to invest.
3. Video 2: Governments need to oversee the economy and intervene when there's something wrong.
I agree with Keynes.
1. Video one: Keynes idea of increasing aggregate demand with decreasing savings and increasing government spendings can help get us out of a depression.
2. Video one: government spending will help the circular flow.
3. Video two: Real growth is the result of what the people want.
I agree with Keynes because of his justification that
1. increasing aggregate demand works to recover a recession as proven in the recovery of the Great Depression (Fear the Boom and Bust)
2. Increasing government spending stimulates the circular flow of the economy (Fear the Boom and Bust)
3. “In the long run we’re all dead.” However this last point is skeptical because though it would work out great for economy if no one saved money, it is bad for the individual acting alone. (Fear the Boom and Bust)
4. “the future is uncertain.” He believes in acting in the economy to try to change it based on increasing government spending in a recession or increasing taxes in case of inflation (Fight of the Century)
I agree more with the ideas of Keynes.
1. From video 1 I agree with his idea that savings are bad for the economy and that if you keep too much money in your pocket there is no room for the economy to grow.
2. In video 2 I agree with the fact that spending boosts GDP which then decreases the unemployment rates. As in World War II, the government spent more on war resources and people were called into make weaponry for war and there was less unemployment and more spending which helped get the U.S. out of the recession.
3. In video 2 the fact that there is so much uncertainty on what the future holds and that's why a free market tends to fail. Therefore the discretion of the government is needed to get an economy out of a recession.
While I definitely see validity in both economists’ theories, I find myself agreeing more with Keynes, as…
1) Keynes illustrated the key need to increase aggregate demand in order to grow a shrinking economy (“Fear the Boom and Bust”)
2) There is a need to allow governments to spend more than they have in order to pull the economy out of a recession. In order to promote spending, and the growth of the economy, the government must spend money itself, and this action invariably leads to spending more money than is currently on hand. However, I can’t say I find myself in favor of the multi trillion dollar debt our government has currently found themselves in. (“Fear the Boom and Bust”)
3) I find myself agreeing with the idea that the government should be watchful of the national economy, as there are always those who attempt to exploit the common man for their personal gain, and there is at least small protection in government regulation (“Fight of the Century”)
I agree more with Keynes. He seemed to have to more points that made sense to me. Though Hayek had a few as well.
1. The first point I agree with comes from the first video. Keynes states that in 1929, when the market crashed, the economy did not come back. He advises that we should boost aggregate demand.
2. My second point also comes from the first video. Keynes says that the economy is all about spending and that we need more government spending. He says to forget about saving because it is destruction.
3. The third point I agree with comes from the second video. Keynes says that the only time there is more spending is during a World War, but more spending is the only way to cure a recession and depression. I agree with this, our spending always increases in a time of war.
I agree with Keynes' over Hayek!
Reasons being:
Circular flow, government spending- "Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem
Savings is destruction- "Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem
Money revitalizes the economy's juices- Fight of the Century: Keynes vs. Hayek Round Two
Keynes' idea of spending money to stimulate the economy makes the most sense. If money is being saved in excess then the economy would not be able to run properly. Also, the idea that the government should spend more during the recession makes sense as well
I'm going to go with Keynes
1. From video number one, boosting aggregate demand will, in turn, stimulate the national GDP.
2. Spending money before or during wartime can actually promote growth in a national economy.
3. I also agree with the similarities between monetary and fiscal policy that were pointed out in the first video.
I agree more with Keynes.
1. Governments require leeway to pull a nation out of a recession or depression. The government's spending is a major factor on the overall performance of the country's economy.
2. The incongruities between the policies of the federal government with the state governments delineate certain issues regarding stunted economic growth. The state often lacks the vigor and action needed to fully allow the economy to become both successful and dependable.
3. In a depression people will resort to saving when spending is the best alternative. Keynes argues that people must decide to spend more during failing economic times so as to expand the economy.
I concur most strongly with Keynes. While there is clearly a limit to what the government can and should hope to effect, large spending has proven enormously beneficial to the economy, albeit restricted to actually purchasing goods and services with the money spent.
Keynes is of course right when he says that WWII pulled America out of the depression. The money spent on the implements of war not only drove huge cash sums into the market, it also had the benefit of creating new technologies which made even more money after the war, such as the jet engine, radar, sonar, synthetic rubber, and many others.
Hayek is right when he says that an individual's own ambitions act as an unknown. The government should not attempt to control what its citizens pursue, because they will ultimately be unproductive.
He's also spot on with his criticism of bailouts. Injecting money into companies as life support is damaging to the competitiveness of the free market.
Finally, Hayek also states that growth can only be considered as such if what is produced is that which is demanded. Without a demand for something, production is pointless padding.
Keynes reminds us, though, that when the market is doing poorly, it decreases confidence and only exacerbates the issue. I do differ with the approach to repair (large scientific/engineering projects as opposed to bailouts), but government spending is still a huge boost to an ailing economy.
At its core though, Keynes is spot-on when he says that the destination for money is irrelevant; as long as its being put to use, it's doing more for the economy than sitting around.
Keynes
1. Spending is good to stimulate the economy, don' t wait. This point was clearly proven in the Great Depression. Prior to the depression, the government did little and assumed the free market would fix itself. (First Video)
2. Spending is a quick spark into the economy. This assumption can be seen in 2009, because after the stimulus package the economy stopped losing jobs at a huge rate and GDP stopped shrinking. Many economist argued the package was too small, and few doubts its positive impact. (Second video)
3. We need more oversight over banks. The Hayek view of the economy seem to think no regulation is always better, but the deregulated banks contributed to a bad economy. It is only natural that banks want to increase profits, so we should provide a few rules or guides for them to follow. (Second video)
I respectively side with Hayek because of how he argues for the long-run situation of the economy in hope of promoting longer-lasting results rather than Keynes' quick boosts that initially get the economy back onto its feet.
From the "Fight of the Century" Paying respect to Keynes' theory and demonstration that helped the U.S. get out of the Great Depression, it was clear that raising aggregate demand to stimulate the economy was a quick way to bring the economy back to a growing GDP (output). Hayek says that an individual's own ambitions are unknown. The government should not interfere with what its citizens pursue, because the government will blindly be unproductive. Hayek's criticism of bailouts, injecting money into companies as life support is ultimately damaging to the competitiveness of the free market. Despite World War II being a historical success, government must have a limit of how much they are allowed to interfere with the economy.
From the second video and the first video thus leading to the second point. Where if the government steps too far into the economy, then a surplus of apparent GDP actually is backed by a huge pool of inflation. Referring to the the second video, during World War II, what is the point of having a high GDP if the population is rationing their resources along half of the male population out of the country at the time. More demand with an inflation of what amount of money is actually their further risks more debt to pay in the end because of the stimulus.
From the first video: However, Keynes proves that idle money is money useless if not a part of the economy's growth cycle. Money must continue to be constant item of circular through the veins of the economy in order for it to thrive. Still, with too much injection of Government-life-support into the economy fabricates a false sense of economic success that hides the reality of the government's training wheels from its depriving effect on the economy to grow on its own.
The government needs to be there to stimulate the economy to get out of its rut once in a reccession (Keynes), but must not hold onto the economy once it has reached a point of steady growth -so that the government retract its interference in order to let the economy have healthy competition in the long-run (Hayek)
Boost aggregate demand; this means that people should go out and buy more things(video 1)
Have low interest rates so people can afford more. (video 1).
Spend money everyday so that the economy will always grow. (video 2).
I would agree and support Keynes out of the two because:
1) By cutting savings we will increase consumer spending. Video 1
2) In order to maintain stable and thrive governments need to be in charge of the economy and intervene whenever necessary. Video 2
3) Keynes discusses the circular flow model and i agree with what it represents and how it works within a government system. Video 1
I would support Hayek's view of the economy.
I believe that government should stay out of economic affairs as much as possible. If a business fails to be effective, it should die out without the intervention of the government. (article)
People should spend when they can. Saving money should be a bigger priority than spending money. (video 1)
Governments seem to make the economy more worse than it is when they try to intervene. The people are the ones who are in control of how prosperous the economy would be. (video 1)
I would support Hayek's view of the economy.
I believe that government should stay out of economic affairs as much as possible. If a business fails to be effective, it should die out without the intervention of the government. (article)
People should spend when they can. Saving money should be a bigger priority than spending money. (video 1)
Governments seem to make the economy more worse than it is when they try to intervene. The people are the ones who are in control of how prosperous the economy would be. (video 1)
I agree more with Keynes.
1)As the government and its people spend more money, they can collectively help the GDP and stimulate the economy. (Video 1)
2)The circular flow diagram will be assisted by government spending, thus helping the economy as well as people. (Video 1)
3)There is a flaw in the logic of the Hayek view of the economy as they advocate no regulation, but the unregulated banks contributed were proven to contribute to the bad economy. (Video 2).
I support Keynes
1)People should invoke their need to spend money to keep the economy flowing thus leading the continuation of money flow. ("Fight of the Century")
2)Governments should be able to intervene in times of economic downfall but the government's intervention in the economy could pose a threat and serious problems. (Article)
3)Governments should implement many policies if needed to encourage the consumer's desire for taxes. The stimulation of the economy is must needed and could help the economy.(Article)
I would side with Keynes.
1) Video 1: An increase in aggregate demand will boost the economy.
2) Video 1: Keynes' argument that businesses are led by "animal spirits," or animal instincts. Corporate decisions are based upon company instincts to predict the future of their company.
3) Video 2: Keynes supports daily/regulated spending in order to keep the economy stabilized.
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