The Great
Depression was a tricky situation for people to try and remedy, especially economists
(and policy makers, but nobody really cares about them). The shift from
classical economics to modern economics allowed for a variety of new theories
to develop and I feel as though this process was fostered immensely by the
Great Depression. Keynes was one of the individuals who really took advantage,
in a sense, of those events. His theories were based on the belief that goods
must be purchased in order to help the economy grow and he strongly disagreed
and found numerous flaws in Hayekian ideas, which support savings and free
markets. Prior to reading this chapter, I would have labeled myself as
hoping-to-be-Hayekian as I have faith in the natural tendencies of things.
However, I now find myself gravitating towards Keynesian thoughts because they
do in fact make sense. If I were to save all of my earnings in some secret
stash, that money is being inefficiently removed from the flow. But if I were
to spend my money on cool items and whatnot, then I am helping the economy grow
and preventing, by at least a small amount, any major wackiness in the market
as it is defined in Keynes’ circular flow model.
Keynes
created a remarkable display of the intricacies of money flow. While I
understand that he was not the first person to stumble upon these ideas, I
believe that his model, since it was provided to me in the book, should be
applauded. The market, at least to a non-economics savvy individual like
myself, is extremely complex and Keynes’ model appears to be a very accurate
and concise visualization of it. This is important because it provides a model
for how to combat and spot problems within a system such as the issues that led
up to and lengthened the Great Depression. Although it would be nice to say
Hayek was the victor in putting faith in an “organic” system, it begrudgingly seems
to be more fitting to apply Keynes’ model as a fair suggestion if not solution
for issues concerning economic blunders.
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