Hayek, Keynes, and the Economic Role of the State

The chapter considers how two economic giants of the twentieth century saw the economic role of the market, comparing Hayek’s trust in the market with Keynes’ growing doubts about its role. There are areas where they strongly disagreed but also many areas of convergence. The greatest divergence in their positions was in the role of government in stabilizing policies. It can be said that these two economists actually had less extreme views that many assume they did. Keynes’ views were less socialist than many assume while Hayek’s views were less conservative. Hayek theorized a government role in regulations vis-à-vis the environment and vis-à-vis guaranteeing a low income for the poor; Keynes was against high taxes and was relatively indifferent to welfare policies.