John Maynard Keynes, Milton Friedman, and F.A. Hayek Compared


By Jonathan Mariano
Three of the most influential economists include John Maynard Keynes, Milton Friedman, and F.A. Hayek. Keynes and Friedman are typically viewed as opposing, rather than supporting each others views. Hayek often gets overlooked, although is becoming prominent once again, as of the last boom and bust. It’s interesting to note the overlap and differences between the three economists.

Keynes vs. (Friedman + Hayek) on Markets
When it comes to markets, Keynes suggests interventionism from the government, and Friedman + Hayek usually suggest free markets with little, if any government involvement.

(Keynes vs. Hayek) vs. Friedman on Monetary Policy
Friedman suggests that monetary policy, controlling the money supply, can help smooth out recessions. On the other hand, Keynes suggests monetary policy plays little role in stimulating the economy and aggregate demand. Rather, Keynes’ solution is spending by government. Hayek is adamantly opposed to monetary policy, as he thinks its implementation is what causes boom-bust cycles in the first place.

Keynes vs. (Friedman vs. Hayek) on Fiscal Policy
Keynes suggests fiscal policy to help prime the pump to recovery after a recession, where government stimulus packages prop up the economy. Friedman and Hayek oppose such intervention on the basis of interfering with the market process. Hayek takes a stronger stance against any such intervention.

(Keynes + Friedman) vs. Hayek
If we look at interventions government has taken to help “stimulate” the economy, the actions are more akin to the economics of Keynes and Friedman, where Congress passes stimulus packages, and the Central Bank inflates the money supply. Mainstream economics is a hybrid of the Keynes and Friedman approach. However, from Hayek’s view, the actions of a “stimulus” and inflation sow the seeds to next bust. In one respect, Friedman is a “Keynesian”, but in another he is not.

The free market usually gets associated with Friedman, but not all free market folks follow Friedman’s economics. Many free market economists follow Hayek’s vision of economics, Austrian Economics. Austrian Economics rarely uses any mathematics, but seeks to understand human action. It takes into account the human element of economics. If one is interested in understanding booms and busts from this perspective, Roger Garrison, has a slide show which depicts a model of sustainable economic growth, based on the Hayek’s Nobel Prize winning work. Also, view this music video which contrasts the Keynes versus Hayek boom-bust models.

Regardless if we disagree with the thoughts on markets, economics, or policy of Keynes, Friedman, and/or Hayek, it is interesting to note their areas of agreement, and their respective visions towards a sustainable economy.
Additional Resources

Garrison, R. (1992)Is Milton Friedman a Keynesian?in Mark Skousen, ed., Dissent on Keynes: A Critical Appraisal of Keynesian Economics, New York: Praeger Publishers, 1992, pp. 131-147.
Garrison, R. (2002). Business Cycles: Austrian Approach . Auburn University. Retrieved March 21, 2010, from
Garrison, R. (2004). From Keynes to Hayek: The Marvel of Thriving Macroeconomics.
Garrison, R. (2007). Hayek and Friedman: Head to Head. SEA Meeting: New Orleans. Retrieved March 21, 2010, from
Mariano, Jonathan (2010).  Business Cycles: Symptoms vs. Causes.  Austrian Scholars Conference 2010, Mises Institute.  Retrieved March 21, 2010, from
Papola, John (2010). Fear the Boom and Bust.  Retrieved March 21, 2010, from


Jonathan Mariano is an MBA candidate with the Presidio Graduate School in San Francisco, CA. His background ranges the spectrum from co-founding an internet startup, to leading technological change for an established nationwide home builder. His interests include the convergence between lean & green and pursuing free-market based sustainable solutions.

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