Tuesday, 2 July 2013

Hayek's Critisism of Keynesian Economic Policies

According to Wikipedia,
Austrian economist Friedrich Hayek criticized Keynesian economic policies for what he called their fundamentally "collectivist" approach, arguing that such theories encourage centralized planning, which leads to malinvestment of capital, which is the cause of business cycles. Hayek also argued that Keynes's study of the aggregate relations in an economy is fallacious, as recessions are caused by micro-economic factors. Hayek claimed that what starts as temporary governmental fixes usually become permanent and expanding government programs, which stifle the private sector and civil society.
Hayek made sense back then. And he makes perhaps even more sense now with the resurgence of Keynesian economic policies, taken to a whole new level, in the western world following the financial crisis. 

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