Macroeconomics Essay Example | Topics and Well Written Essays - 500 words

Macroeconomics - Essay Example According to Hayek, â€Å"the price mechanism of the free market serves to convey information about supply and demand that is dispersed among many consumers and producers and which cannot be assembled or coordinated efficiently in any other way†. And seriously â€Å"doubts whether a socialist economy is capable of solving the problems of rational allocation of its resources (Hayek, 1982)†. Keynes on the other hand favored government intervention through its fiscal and monetary policy to assuage the impact of recession and depression or financial crisis like the one United States recently had in 2009. Keynes believe that it is not only the market that can make an economy work at a maximum efficiency but such can also be raised to the that level by the intervention of the government. In contrast to Hayek, Keynes advocated collectivism through international coordination of fiscal and monetary stimulus to deflect and mitigate any downturn in economic cycle. He is also the s ponsor of deficit spending to lift an economy from depression in contrast to Hayek’s proposal that it solely market the (free) market that can achieve utmost efficiency in an economy.