Keynes Vs Hayek Flashcards
(10 cards)
Q1: What is the main idea of Keynesian economics?
A: That governments should actively intervene in the economy to achieve full employment and social welfare through public spending and regulation.
Q2: What is the “multiplier effect” according to Keynes?
A: It’s the idea that government spending creates more jobs and income, which in turn leads to more consumer spending, creating further economic growth.
Q3: Why did Keynes believe unemployment was a failure of the system?
A: Because it wasted human resources and reduced national income. He believed government should create jobs to solve this.
Q4: What was Hayek’s biggest fear about collectivism?
A: That it would lead to authoritarianism and the loss of personal and political freedom—he called this the “road to serfdom.”
Q5: How did Hayek define real freedom?
A: As freedom from coercion, which could only be maintained through economic liberalism and a competitive market.
Q6: What did Hayek argue about state planning and democracy?
A: That central economic planning undermines democracy and requires coercive control—thus planning leads to dictatorship.
Q7: What role did Keynes see for taxation?
A: As a tool to redistribute wealth and reduce inequality, supporting public services and economic stability.
Q8: How did Hayek respond to calls for economic equality?
A: He argued that forced equality through state control threatened individual liberty and personal dignity.
Q9: What was Hayek’s criticism of the welfare state?
A: That seeking security through state benefits could lead people to sacrifice their freedom.
Q10: How did the Beveridge Report support Keynesian thinking?
A: It called for a welfare state to tackle the “Five Giant Evils” (Want, Disease, Ignorance, Squalor, and Idleness) through social insurance and state responsibility.
