Hayek vs Keynes: How Much Influence Should Governments Have in the Economy?

Keynes vs. Hayek: How much influence should the governments have in the economy?
Rowhan Janjuah Stone Prize Essay

Friedrich August von Hayek and John Maynard Keynes have been axial point of a hundred-year debate over the role that government should play in the economy. Time and again, the ideas and theories of Keynes and Hayek have been used to argue for and against the involvement that government should be allowed to have in making economic (be it fiscal, monetary or supply-side) policies. Moreover both Hayek and Keynes have played pivotal roles in the outlook economists have developed for observing the economy and deciding which policies should be implemented when. In short, they formed the basic building blocks of today’s economics, but their dichotomy is no more apparent and no more significant than when we look at their differing views on government intervention in the economy. Only one of these two men, though, has made his ideas successful (in that they are widely used) in today’s society, and Keynes. The theory that the government should be merely an outsider from the market and market forces- that of Hayek- has been long overlooked and only used as a tool for central planners to demean bad economic outcomes from the Keynesian economic policies that have been put in place.
Before divulging into the two economic masterminds’ differing views, its first important to show what is meant when I refer to ‘central planning’. By central planning, I do not mean a centrally-planned economy akin to that of Communism, whereby the state allocates the entirety of the resources on its own. By central-planners I am referring to the part of the government that act to counter some of the free-market forces that can often cause such social issues as inequality. It is fairly uncontroversial to say that the government should provide Defence, Policing and I would go so far as to say basic education and healthcare (though the last two are more debatable), however any more...