For for free trade, smaller government and a

For our first assignment, we are tasked with comparing and
contrasting the viewpoints and theories of Milton Friedman, John Maynard
Keynes, Friedrich Hayek, and Adam Smith on their views on economic theory. These
scholars laid the groundwork for modern thinking and understanding about all
things in the economy from debt/credit, government intervention, and production.
Adam Smith, considered the “founder of modern economic theory”, helped develop
the work for which Friedman, Keynes, and Hayek developed their own theories
upon.

The first on the list is John Maynard Keynes, who is the
father of his own economic principles called “Keynesian Economics”. Keynesian
Economics is an economic theory that is centered upon total spending in the
economy and its effects on output and inflation (Investopedia). Keynes believed
that if an economy’s total investment exceeded its total savings, it will result
in inflation. On the reverse side, if its total savings are higher than its total
investment, it will result in a recession. This was the underlying principle of
Keynes philosophies that an increase in spending would result in a lowering of
unemployment and help economic recovery. Keynes also believed that demand
actually drove production and not supply, as during his time, the flip side was
actually believed. Keynes also believed in heavy government intervention during
times of crisis and recession, as he thought that they best way for the economy
to thrive was for the government to borrow large sums of money and increase
demand in the markets so that people would have more capitol to spend with (thewallstreetpsychologist).

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Milton Friedman, on the other hand, completely opposed Keynes
and his Keynesian economics. He strongly went against many of the policies put
forth by the Keynesian thinkers, arguing for deregulation across most areas of
the economy and free market economical practices. He challenged the ideas of
deficit spending and said that only discoordination and inflation could result
from expansionary fiscal and monetary policy (Investopedia). He also argued for
free trade, smaller government and a steady increase of the money supply in the
economy. His ideals and theories on monetary policy and the quantity theory of
money became known as monetarism. “In his seminal work, “Capitalism and
Freedom,” he called for floating exchange rates, a voluntary military, negative
income tax, education vouchers, and abolition of medical licenses” (thewallstreetpsychologist).