Keynes: Government should just spend, spend, spend and we’ll all be rich and prosperous.
Hayek: Government has no money to spend without taking it away from someone else. It’s like dipping water out of one end of a swimming pool and pouring it into the other end. Prosperity only comes from economic growth that produces new wealth rather than just redistributing existing wealth. In fact, such redistribution schemes are inefficient in moving wealth from one group to another group because by undermining incentives to produce new wealth, there is less and less available for redistribution. Finally, redistribution of wealth according to government schemes is legalized theft and is immoral.
Of course, those are my words, they are not quotes from Keynes of Hayek, nor from the video:
If Hayek’s approach of lassiz faire economics and free markets is superior to Keynesian government spending, why is it that politicians seem to always prefer Keynes? Because Keynesian spending allows politicians to look like they are doing something and Hayek’s approach has them mostly doing nothing except making sure free markets remain free. Telling a politician that the best thing he or she can do for the economy is to leave it be is not something they want to hear. That’s the temptation of socialism, it gives politicians a reason for constant tinkering even though most of what they are doing is destructive. Capitalism and free markets largely operate on their own. Politicians do not favor anything they can’t claim credit for.