The Hayek-Keynes Debate and Hayekian Political Epistemology

These flashcards cover the essential terminology and concepts from the Hayek-Keynes debate and related economic theories, providing a comprehensive review for exam preparation.

Hayek-Keynes Debate

A discussion about the economic theories proposed by Friedrich Hayek and John Maynard Keynes.

Economica

The journal where the first Hayek-Keynes debate took place in 1931-1932.

Treatise on Money

Keynes' 1930 book, criticized by Hayek for its inadequacies in explaining the business cycle.

General Theory of Employment, Interest, and Money

Keynes' 1936 work that modified his earlier theories but still lacked a capital theory.

World War II

A global conflict which temporarily shifted focus from economic theory to war efforts.

Nobel Prize

An award received by Hayek in 1974 for his contributions to economic theory.

Keynesian Economics

An economic theory proposing government intervention through stimulus during recessions.

Austrian Business Cycle Theory (ABCT)

A theory explaining cycles of booms and busts in economies based on capital and interest theories.

Roundaboutness of production

The concept that longer production processes often lead to greater productivity.

Equilibrating function of interest rates

Interest rates adjust to balance the supply and demand for loans.

Homogeneity of capital

The idea that capital goods are interchangeable, criticized by Austrian economists as inaccurate.

Fiscal policy

Government spending and tax adjustments to influence the economy.

Monetary policy

The management of money supply and interest rates to influence economic conditions.

Output gap

The difference between potential and actual economic output during a recession.

Capital Theory

A framework in economics that examines the role of capital in production and its relation to interest rates.

Market competition

A system where individual economic agents make decisions based on supply and demand dynamics.

Micro vs Macro

Differences between studying individual market behavior (micro) and whole economies (macro).

The Pretence of Knowledge

Hayek's critique of policymakers who believe they can control the economy based on inadequate models.

Stagflation

A situation characterized by high inflation and high unemployment, contradictory to Keynesian theory.

Equilibrium in Economics

A state where supply equals demand, minimizing unemployment and inflation.

Heterogeneity of capital

The view that different capital goods serve specific functions and are not interchangeable.

Supply and demand

The economic model explaining how prices fluctuate based on consumers' needs and producers' offerings.

Interpersonal consistency

The requirement that individual economic plans do not contradict each other for market equilibrium.

False beliefs

Assumptions held by individuals that lead to economic miscalculations when planning.

Decentralized planning

An economic system where individuals make their own consumption and production decisions.

Central planning

An economic system where a central authority makes all economic decisions.

Monopoly planning

A mixed economy where some industries are centrally planned while others remain competitive.

Knowledge in Economics

The information necessary for individuals to make informed economic decisions.

Collective knowledge

The aggregated understanding derived from individual experiences and data.

Investment Spending

Expenditure on capital goods intended for future production.

Consumption Spending

Expenditure by households on goods and services.

Government Spending

Expenditures made by the government to influence economic activity.

Elastic money supply

A flexible currency supply controlled by central banks, influencing interest rates and economic cycles.

Inelastic money supply

A fixed currency supply linked to a commodity, influencing the behavior of interest rates.

Macroeconomic approach

A comprehensive view of economic phenomena focusing on aggregate outcomes.

Aggregate data

Overall economic statistics used to gauge general economic performance.

Empirical data

Information acquired by observation or experimentation, important for effective economic planning.

Economic growth

An increase in the inflation-adjusted market value of goods and services produced.

Inflation

The rate at which the general level of prices for goods and services rises.

Business cycle

The fluctuation of economic activity over time, characterized by phases of expansion and contraction.

Financial crisis

A situation in which the value of financial institutions or assets drops rapidly.

Homeownership crisis

The collapse of housing prices leading to widespread financial instability.

Central bankers

Officials controlling a nation's currency, money supply, and interest rates.

Production decisions

Choices made by producers regarding what and how much to produce.

Public works projects

Large-scale construction and infrastructure initiatives funded by the government.

Investment

The action or process of allocating resources, usually money, for future profit.

Unemployment

The state of being jobless and actively seeking employment.

Government stimulus

Economic policies intended to encourage consumer spending and investment.

Price system

A mechanism that uses prices to signal supply and demand in an economy.

Hayekian Economics

The economic theories proposed by Friedrich Hayek, emphasizing the limitations of centralized planning.

Socialism

An economic system where the means of production are owned and regulated by the community.

Economic efficiency

The optimal production and allocation of resources to maximize output.

Monetary authorities

Institutions responsible for managing a country's currency, money supply, and interest rates.

Consumer confidence

How optimistic consumers are regarding their expected financial situation.

Interest rate

The amount charged by lenders to borrowers for the use of money.

Nominal GDP

The total value of all goods and services produced in a country unadjusted for inflation.

Aggregate supply

The total supply of goods and services that firms in an economy plan to sell.

Business expansion

The growth in the number of operating businesses or their output.

Recession

A period of economic decline typically identified by a decrease in GDP.

Keynes' response to the Great Depression

The implementation of government measures to stimulate demand.

Austrian School of Economics

A school of economic thought emphasizing the importance of individual action and subjective value.

Behavioral economics

A field that examines psychological factors in economic decision-making.

Rational expectations

The hypothesis that individuals form forecasts of the future based on all available information.

Behavioral biases

Cognitive biases that can affect individuals' financial and economic decision-making.

Savings

The portion of income not spent on consumption.

Public policy

Government actions designed to address public issues.

Market signals

Indicators that provide information about supply and demand conditions.

Price stability

A situation in which prices in an economy do not change much over time.

Welfare state

A government that provides for the welfare of its citizens through various programs.

Output multiplier

The factor by which an increase in investment spending will increase total economic output.

Investment elasticity

Sensitivity of investment spending to changes in interest rates.

Labor market

The supply and demand for labor, where employees and employers interact.

Capital goods

Goods used to produce other goods and services.

Entrepreneurship

The activity of setting up a business or businesses, taking on financial risks.

Economic liberalism

An economic philosophy advocating for free markets and limited government intervention.

Inflationary expectations

What consumers and businesses believe will happen with inflation in the future.

Core inflation

The inflation rate excluding volatile items like food and energy.

Recessionary gap

The amount by which actual economic output is less than potential output.

Cyclical unemployment

Unemployment linked to the cyclical trends in economic activity.

Adaptive expectations

The theory that people adjust their expectations based on past experiences.

Market intervention

Actions taken by the government to influence the economy.

Investment risk

The possibility of a decrease in economic value of an investment.

Economic incentives

Factors that motivate individuals and businesses to make decisions in economics.

Resource allocation

The process of distributing available resources to various uses.

Consumer goods

Products that are purchased for consumption by the average consumer.

Economic models

Simplified representations of complex economic processes.

Determinants of demand

Factors that lead to changes in consumer demand for goods and services.

Labor productivity

The amount of goods and services produced per hour of labor.

Liquidity

The ease with which an asset can be converted into cash.

Trade balance

The difference between a country's exports and imports of goods and services.

Supply shocks

Unexpected events that affect supply, such as natural disasters.

Equity in economics

The concept of fairness and justice in economic distribution.

The role of government

The extent and manner in which government intervenes in the economy.

Opportunity cost

The loss of potential gain from other alternatives when one alternative is chosen.

High-impact strategies

Approaches to economic policy that are expected to yield significant results.