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In ordinary language we describe by the word "planning" the complex of interrelated decisions about the allocation of our available resources. All economic activity is in this sense planning; and in any society in which many people collaborate, this planning, whoever does it, will in some measure have to be based on knowledge which, in the first instance, is not given to the planner but to somebody else, which somehow will have to be conveyed to the planner. The various ways in which the knowledge on which people base their plans is communicated to them is the crucial problem for any theory explaining the economic process, and the problem of what is the best way of utilizing knowledge initially dispersed among all the people is at least one of the main problems of economic policy—or of designing an efficient economic system.
John Maynard Keynes, (born June 5, 1883, Cambridge, Cambridgeshire, Eng.—died April 21, 1946, Firle, Sussex), English economist, journalist, and financier, best known for his economic theories (Keynesian economics) on the causes of prolonged unemployment. So influential was John Maynard Keynes in the middle third of the twentieth century that an entire school of modern thought bears his name. Many of his ideas were revolutionary; almost all were controversial. Keynesian economics serves as a sort of yardstick that can define virtually all economists who came after him.
Adam Smith is often identified as the father of modern capitalism. While accurate to some extent, this description is both overly simplistic and dangerously misleading. On the one hand, it is true that very few individual books have had as much impact as his An Inquiry into the Nature and Causes of the Wealth of Nations. His accounts of the division of labor and free trade, self-interest in exchange, the limits on government intervention, price, and the general structure of the market, all signify the moment when economics transitions to the “modern.”
Karl Marx (1818–1883) is best known not as a philosopher but as a revolutionary communist, whose works inspired the foundation of many communist regimes in the twentieth century. It is hard to think of many who have had as much influence in the creation of the modern world.
F. A. Hayek (1899-1992) is undoubtedly the most eminent of the modern Austrian economists. Hayek was more successful than anyone else in spreading Austrian ideas throughout the English-speaking world. Unfortunately, Hayek's theory of the business cycle was eventually swept aside by the Keynesian revolution. Ultimately, however, this work was again recognized when Hayek received, along with the Swede Gunnar Myrdal, the 1974 Nobel Memorial Prize in Economic Science. Hayek was a prolific writer over nearly seven decades; his Collected Works, currently being published by the University of Chicago Press and Routledge, are projected at nineteen volumes.
As it is the power of exchanging that gives occasion to the division
of labour, so the extent of this division must always be limited by the
extent of that power, or, in other words, by the extent of the market.
When the market is very small, no person can have any encouragement to
dedicate himself entirely to one employment, for want of the power to
exchange all that surplus part of the produce of his own labour, which
is over and above his own consumption, for such parts of the produce of
other men's labour as he has occasion for.
This equal right is an unequal right for unequal labor. It recognizes no class differences, because everyone is only a worker like everyone else; but it tacitly recognizes unequal individual endowment, and thus productive capacity, as a natural privilege. It is, therefore, a right of inequality, in its content, like every right. Further, one worker is married, another is not; one has more children than another, and so on and so forth. Thus, with an equal performance of labor, and hence an equal in the social consumption fund, one will in fact receive more than another, one will be richer than another, and so on. To avoid all these defects, right, instead of being equal, would have to be unequal. But these defects are inevitable in the first phase of communist society as it is when it has just emerged after prolonged birth pangs from capitalist society.
My second reflection relates to the technique of Recovery itself. The object of recovery is to increase the national output and put more men to work. In the economic system of the modern world, output is primarily produced for sale; and the volume of output depends on the amount of purchasing power, compared with the prime cost of production, which is expected to come n the market. Broadly speaking, therefore, and increase of output depends on the amount of purchasing power, compared with the prime cost of production, which is expected to come on the market. Broadly speaking, therefore, an increase of output cannot occur unless by the operation of one or other of three factors. Individuals must be induced to spend more out o their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees, which is what happens when either the working or the fixed capital of the country is being increased; or public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money. In bad times the first factor cannot be expected to work on a sufficient scale. The second factor will come in as the second wave of attack on the slump after the tide has been turned by the expenditures of public authority. It is, therefore, only from the third factor that we can expect the initial major impulse.