John Maynard Keynes and Friedrich Hayek, two prominent public figures associated with the Great Depression that started with the collapse of the stock market in 1929, both proposed different ways to restore the economy. Keynes, an economist from Cambridge, believed that the government should intervene in the situation, whereas Hayek, a professor from Austria, maintained that government involvement would be futile.Although Hayek almost singlehandedly established the distinction between microeconomics and macroeconomics, engineering the transfer from classical economics to the more practical and application-oriented methodology of mathematical economics, his solution for emerging from the Great Depression was underestimated in the light of Keynes' contribution to economic theory.In his 2012 study Keynes Hayek: The Clash that Defined Modern Economics, famous theorist Nicholas Wapshott traces the history of the applications of both men's theories, giving unprecedented importance to Hayek's work. Describing how the Keynesian vision dominated Western economic analyses until the 1970s, Wapshott surmises that the primary reason for the dominance of Keynes' theory during the Depression was that Hayek's solutions to the issue of economic recession were not politically viable. Hayek prescribed to the belief that, when left to its own devices, the market would eventually recover from its downturn and resume its equilibrium; this position was, not surprisingly, rejected by both the US and European political organizations, each seeking to prove its worth in reestablishing the economy's prosperity.
Which of the following would the author most likely agree with?
A-Hayek's theory was dominated by Keynes' because Keynes had a better long-term vision than Hayek did.
B-Even though the reaction of the political organization could be anticipated, the underwhelming response received by Hayek in general was not indicative of the potential of his theory.
C-In addition to being politically viable, Hayek's ideas were probably ahead of their time.
D-Had Keynes also argued for limited government intervention, his ideas too would have been vehemently rejected by the political organizations.
E-In the light of the real reason that Hayek's theory did not receive much appreciation, Keynes probably did not contribute as much to economics as he is credited for.
The OA is B. However I selected option A for the following statement from the passage, 'Hayek prescribed to the belief that, when left to its own devices, the market would eventually recover from its downturn and resume its equilibrium; this position was, not surprisingly, rejected by both the US and European political organizations'. Could you please explain what's wrong with my reasoning?
Regards,
Amit
Which of the following would the author most likely agree with?
A-Hayek's theory was dominated by Keynes' because Keynes had a better long-term vision than Hayek did.
B-Even though the reaction of the political organization could be anticipated, the underwhelming response received by Hayek in general was not indicative of the potential of his theory.
C-In addition to being politically viable, Hayek's ideas were probably ahead of their time.
D-Had Keynes also argued for limited government intervention, his ideas too would have been vehemently rejected by the political organizations.
E-In the light of the real reason that Hayek's theory did not receive much appreciation, Keynes probably did not contribute as much to economics as he is credited for.
The OA is B. However I selected option A for the following statement from the passage, 'Hayek prescribed to the belief that, when left to its own devices, the market would eventually recover from its downturn and resume its equilibrium; this position was, not surprisingly, rejected by both the US and European political organizations'. Could you please explain what's wrong with my reasoning?
Regards,
Amit
