Economic philosophies Essay Example for Free

Economic philosophies EssayThis paper allow for focus on the contributions of John Maynard Keynes and Milton Friedman to economical philosophies. Keynes is considered by many as the most famous and authoritative economist. Though having that veneration, a number of economists had been in enemy to the Keynesian school of thought. Among the forefront oppositions to the Keynesian economic philosophy is Milton Friedman, along with his accounts on monetarism.In his General Theory of Employment, Interest and Money, Keynes laid out the foundations of his framework, which roughly all macroeconomists make use of today. This framework finds its basis on spending and demand, the factors that determine the components of spending, the liquidity-preference theory of short-term interest rates, and the necessity of the government to make strategic but powerful interferences in the economy in order to keep it on balance and avoid the extremes of depression, as well as manic special (Delong , 2006).Keynes theory was said to be incomplete as it only deals with interest employment and property. There was no mention on the theory about prices. Friedman introduced the principles of prices and inflation to Keynes framework, based on the idea that there exists a natural rate of unemployment. Friedman also made mention of the limitations of government policies have with regard to the stability of the economy, pickings into consideration the trend of its long-run growth.Friedman considered these as limits beyond which an intervention from the government would trigger an inflation of unwieldy and destructive nature (Delong, 2006). The events that took place during the Great stamp made Keynes and his orthodox followers to underestimate the sour and role monetary policies have in making a viable solution (Delong, 2006). Keynesians are prepared to prefer fiscal policy to monetary policies as a tool to influence production and employment.They believed that money has no direct influence. Moreover, they question the power of monetary policies to influence employment and production (McCain, 2007). The Great natural depression was indeed considered to be a unique event in history, which called for explanation in terms of events sort of than in pursuit for a new line of economic theory. One of the events that took place during the Great Depression was the failure of the money and banking system.Thus, the Great depression illustrates the influence of changing monetary conditions (McCain, 2007). Keynes and Friedman both agreed on the necessity of a superb macroeconomic management. The underground economy, when on its own, might be subjected to unbearable imbalance and that there is a necessity for a powerful, strategic, but limited intervention coming from the government in order to maintain stability within the economy (Delong, 2006).Though having these ideas in agreement, Friedman had been a staunch opposition to some of Keynes economic principles. Accord ing to Keynes, the key to maintaining economic stability is to keep government spending and private investments on stable grounds. Friedman, on the other hand, opined that the key to economic stability is keeping money supply, i. e. the touchstone of purchasing power, which are readily available to be spent by businesses and households stable (Delong, 2006).