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Hayek vs Keynes Rap Anthem


alee228

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Thank you to pparaman for this video.

It provides a nice summary of the economics of Keynes and Hayek.

Keynes first.

Keynesian Economics

  1. Nominal wages are downwardly sticky
  2. Markets are driven by animal spirits
  3. Government spending and lower interest rates can be used to boost output
  4. Sometimes monetary policy may fail to stimulate the economy (see liquidity trap)
  5. An increase in spending (by increasing investment, consumption, government spending or net exports) will increase aggregate demand by a multiple of the initial increase in spending

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Hayek's Economics

  1. Free markets can coordinate prices and the distribution of resources; governments should have a limited role
  2. A business cycle boom starts with an expansion of credit and low interest rates which lead to an expansion in the supply of money
  3. Easy money leads investors to seek out an ever diminishing number of new investment opportunities; lack of desirable investment opportunities leads to widespread malinvestment
  4. Excess money supply leads to inflationary pressure which leads to higher interest rates, and the business cycle turns from boom to bust

That's a wrap.

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  • 4 months later...

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