Abstract
Friedrich Hayek was born on the 8th of May, in the year 1899 in Austria, Hungary. Hayek passed on the 23rd of March, 1992. Hayek is best acknowledged for his justification of the classical liberalism. It is for such reasons that he received a Noble Memorial prize in Economics Sciences, an award, which he shared, with Gunnar Myrdal for his revolutionary work in economic fluctuation and the theory of money, as well as, an insightful analysis of economic interdependence, institutional and social phenomena. Hayek was Hayek’s workings, publications, along with being a significant participant in crucial and active debates, touched on various economic issues such as cycles of business, unemployment causes, the socialist planning possibilities, capital theory and methodology of economics. Some of Hayek’s significant contributions included writing concerning the international monetary connection along with the feasibility of socialism. Hayek’s work in the responsibility of knowledge in economics can be regarded as both an assessment and contribution of what the conventional economists refer to as the economics of information.
Table of Contents
1. Abstract
2. Introduction
3. Literature Review
4. Discussion
5. Conclusion
6. References
Introduction
Hayek is regarded to be a significant political philosopher and economist of the twentieth century. The accounts of Hayek concerning the manner in which price changes communicate information, has enabled persons to coordinate their plans broadly, and is consequently considered as a significant accomplishment in economics. In addition, Hayek made a contribution to the areas of system thoughts, neuroscience, jurisprudence and the history of concepts. The system of free enterprise is an economic system, from which businesses and individual consumers make choices regarding the allocation of resources and production of services and products. The attributes distinguish the system of free enterprise from the system, which is centrally planned with the government directing all the activities of the economy.
The majority of the discussions on such issues as the system of free enterprise center on the rights of citizens even though within such an economic system, it is acknowledged that citizens as well, have responsibilities. Hayek in some of his writing put it down that in a free social order whereby the system of free enterprise is an essential element; individuals have the responsibility and right of choice. Consequently, the responsibility of decision for consumers implies that individuals ought to analyze their requirements and desires along with consideration of the resources they have prior to making decisions on whatever to purchase (Steele, 2007). On the other hand, the human resources have the freedom of pursuing whatever work they aspire for even though they also have the responsibility of acquiring the schooling and training essential for the occupations they desire.
Consumers have the freewill of deciding from an assortment of products and services under the mode of free enterprise system suggested by Hayek. The majority of the products and services the consumers pick from are provided by businesses, which are engaged in competition by them. The freewill of choosing possesses the responsibility of seeking information that is reliable concerning a product prior to its purchase. This is inclusive of accuracy evaluation and reliability of advertisements and labels. Immediately the consumers make products purchases assumption of responsibility for the utilization of the products responsibly is hinged on the consumers (Hoover, 2003).
Hayek suggests for the consumer adherence on the heeding to the instructions for use by maintaining information of warranty, keeping receipts along with consumers referring to instructions. On the contrary, the consumers who practice caution when deciding and making use of products or services have the responsibility of making complains to the manufacturers, retailers or the service providers if the services or products happen to have developed problems or defects. In the case of products with serious defects, this could pose a danger to the wellbeing and security of the others. The citizens bear the responsibility of notifying not only the retailers and manufacturers but also suitable to the regulatory agencies of the government. The arguments proposed on the theory of economics by Hayek are subject to discussion on the literature review among other perceptions by Hayek on economical concerns.
Literature Review
The theory of welfare economics has been subject to debates by numerous economists for some time. Different points of views on the subject are still existence. Even though economics is regarded as a science by academia, achieving a consensus can be difficult. A number of economists have passionately deliberated on the need for government intervention so as to lessen the ills in the social order even though other economists have pushed for the laissez faire technique. Nevertheless, the majority of the leading theories, which assisted in the establishment of the fields, are not utilized in the creation of policies to the present. However, a contrary perception occurs in the workings of the mainly prominent proponent of economics from the economics school in Austrian, Friedrick Hayek. Hayek considered the relationship between the movements of the socialist and the rise of the dictatorships that were subsequent. Hayek’s argument was that the policies of welfare attempted to reform the social structures, which have naturally evolved over the millennia. This approach of central planning is predestined to the imperial freedoms because bureaucracies lack the capability of accounting for the complexities, which exist within and between diverse institutions (Hayek, 2009).
The economics of supply side were spearheaded by Friedrich Hayek and Milton Friedman. Hayek articulated that the government should not carry on infusing cash into an economy that is illiquid. The overall belief is that commercial ventures should transform operations and carry on businesses further effectively instead of receiving the government bail outs from the downturn situations. The provision of government finances rewards the negative decisions by the commercial ventures. Therefore, Hayek believed that markets characteristically correct by self and move in cycles. Commercial ventures consequently should make savings during the robust economy periods and depend on this pillow all through the downturns. Hayek argued that the injection of supply of money with dollars with the aim of bolstering the operations of the business create an adverse consequence such as the weakening of the dollar and resulting inflation.
Nevertheless, adoption and implementations on both set of views have been undertaken by the government. For instance, the majority of the programs by Delano Roosevelt had the bearing of demand side economics approach. The government provided subsidies and supported numerous businesses in an attempt to withdraw the economy from the Great Depression. On the contrary, Ronald Reagan made use of the supply side economics through the removal of regulations in the banking, auto and media industries (Pizano et al, 2009).
Discussion
Commercial ventures encounter different results depending on the economic perceptions of the government along with the economy status. When the government has a mentality of demand side, the commercial ventures will typically receive additional assistance from the government all through the downturn of the economy. On the contrary, when the government adopts the supply side technique of operation, it will not be predisposed with the interference on the business. Nevertheless, both sets of perceptions have their advantages and undoing. The economics of demand side is founded on the principles of John Keynes who believed that the government had the responsibility of keeping the supply of money flush with cash especially throughout the downturn of the economy. The argument by Keynes was that the operations of the business functioned mainly smoothly when the flow of capital supply was available. Similarly, the demand side economists have made arguments that an economy that is liquid is crucial for the commercial ventures to keep up operations. Commercial ventures require loans, financing and investment so as to remain in business. Failure to land access to activities of the economy, credit access and consumption, grinds the business to a halt (Caldwell, 2005).
The system of free enterprise requires the holders of commercial ventures, human resources and consumers to have the responsibility of being honest. This is inclusive of the contracts that are enforceable, payment of obligations and making use of the business and consumer credit wisely. According to Hayek, the consumers who put into effect their rights in the system of free enterprise and acknowledge the responsibilities, which are accompanying, are their individual best production.
Conclusion
Hayek made numerous suggestions in the course of his working such as the poor policies of monetary by the Federal Reserve to be the grounds from which the great depression occurred. Furthermore, Hayek was an opponent of the progressive income tax owing to the crossing of the boundaries of ideology. Hayek’s argument on the justification of low interest rates stimulating growth was conceive to be contrary as the consequence is individuals making investment decisions that are unsound. Hayek perceived that low interest rates, which resulted from the expansionary monetary policy, could distort the prices of the market. Not many administrators wholly are demand or supply side. All throughout the administration of Reagan for example, the defense and agriculture industries, were the sector beneficiaries, which received subsidies from the government, a standard in direct disagreement the economics of supply side. Later, the administration of Clinton, which was essentially Keynesian, did away with the oversights by the government on the by the banking industry through the Act of Glass.
The task of limiting oneself to the role of only summarizing Hayek’s writings in economics can turn out to be massive. Additionally, some of Hayek’s workings in other fields include contributions in theoretical psychology, methodology in social science, history of ideas and political philosophy. The numerous contributions by Hayek rightly place him up for consideration as the renaissance economist in the twentieth century. This is because his concepts are extremely remarkable in a field that the relevance of thoughts frequently is eclipsed by the developments on the primary theory. Insights and knowledge on economics are still derived from his article pieces that were written several decades ago.
References
Caldwell, B. (2005). Hayek’s challenge: An intellectual biography of F.A. Hayek. Chicago, Ill: University of Chicago Press.
Hayek, F. A. (2009). Denationalisation of money: The argument refined. S.l.: Ludwig Von Mises Inst.
Hoover, K. R. (2003). Economics as ideology: Keynes, Laski, Hayek, and the creation of contemporary politics. Lanham, Md. [u.a.: Rowman & Littlefield.
Pizano, S. D., Hayek, F. A., Hicks, J., Kaldor, N., Kantorovich, L. V., Robinson, J., Samuelson, P. A., … Tinbergen, J. (2009). Conversations with great economists: Friedrich A. Hayek, John Hicks, Nicholas Kaldor, Leonid V. Kantorovich, Joan Robinson, Paul A. Samuelson, Jan Tinbergen. New York: Jorge Pinto Books, Inc.
Steele, G. R. (2007). The economics of Friedrich Hayek. Houndmills [u.a.: Palgrave Macmillan.
