(in its Austrian variation)
In 1969 British economist and Nobelist John R. Hicks wrote:
When the definitive history of the economic analysis during the nineteen-thirties comes to be written, a leading character in the drama (it was quite a drama) will be Professor Hayek. Hayek's economic writings--I am not concerned with his later work in political theory and in sociology--are almost unknown to the modern student; it is hardly remembered that there was a time when the new theories of Hayek were the principal rival of the new theories of Keynes. Which was right, Keynes or Hayek?
(as interpreted in its heyday)
In 1998 American economist and Future Nobelist Paul Krugman wrote:
[I]f one asks what substantive contributions [F. A. Hayek] made to our understanding of how the world works, one is left at something of a loss. Were it not for his politics, he would be virtually forgotten.
(Friedrich A. Hayek)
|Classical (Austrian) theory explains why ill-conceived or politically motivated macroeconomic policies do not actually have the beneficial effects suggested by the political rhetoric used to justify them. In particular, it shows how monetary policy aimed at "growing the economy" can create an artificial boom-and a subsequent bust.||Keynesian theory serves as a basis for prescribing fiscal and monetary policies for achieving full employment, reducing inflation, and for "growing the economy"-that is, for making the economy's growth rate exceed the rate implied by the savings that income earners have made available to the business community.|
|Classical (Austrian) theory suggests that market economies are stable and blames recessions, inflations, and business cycles on ill-conceived fiscal and monetary policy.||Keynesian theory blames recessions, inflations, and business cycles on the market economy and specifically on the inherent instability of the investment sector.|
|Policy prescription: laissez-faire||Policy prescription: stimulants and stabilizers|