Keynes and Hayek: Both Liberals but Economic Adversaries

Peter de Haan

Chapter Chapter 5 in Great Economists and the Evolution of Economic Liberalism, 2025, pp 123-162 from Springer

Abstract: Abstract Keynes and Hayek differed fundamentally in the way each analysed the economy. Friedrich Hayek praised the free market, the price system, and small government, while Keynes strongly argued in favour of government’s role in overcoming depressions. When aggregate demand fell short, as it did during the Great Depression, the government had to fill the demand gap and restore a balance in the economy. He triggered the Keynesian Revolution. Hayek stuck to conservative classical economic theory. He defended that the free market system should be left to itself. Keynes and Hayek represent two mainstream schools of thought: Keynesianism and neoclassical economics. Their debate did not end with them; it was continued by younger generations of economists. Part II of this chapter— describes the different interpretation each gave to liberalism. Both felt that ideas and freedom were essential elements of liberalism. But they differed regarding other aspects. Keynes moved in the direction of what new liberalism added to liberalism’s classical notions, while Hayek remained the more conservative liberal.

Date: 2025
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DOI: 10.1007/978-3-031-93831-3_5

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