Economics Vassignment

Commanding the Heights: the Battle of Ideas

This essay starts with an introduction of the documentary Commanding the Heights: the Battle of Ideas made by PBS, then conducts the analysis on the two competing economic ideas of Keyes vs. Hayek, and finally presents a detailed illustration of their impacts on the America’s economic policies since 1980.

Introduction

The PBS-made documentary ‘Commanding the Heights’ is to promote better understanding of globalization, economic development and world trade, featured with specific examples of different countries and interviews with related parties.

Episode One "The Battle of Ideas," gives an overview of the battle between two major competing ideas about the world economy over the course of last century. On the one hand, the English economist Keynes believes in the ‘planned economy’ and advocates the government intervention to mitigate the risk during economic recession or depression; On the other hand, the Australian economist Hayek favors the free market mechanism and believes in minimum government intervention as market will eventually take care of itself and the prices system is at the heart of what makes a functioning economy work. The episode tracks the root of these ideas and explains how the world moved toward the government controlled economy during the 20th century in a chronological order summarized as below.

The Russian Revolution in 1917 marked the beginning of communism economy, in which government is very important to allocate resources and goods. During the great depression of 1930, the Keynes’ theory began to dominate. According to Keynes, the solution to the depression was for the government to spend more money to restore the full employment. By late 1940s, ‘socialism was on the march and free market was on the retreat’ all over the world. The Keynes’ economic theory dominated for decades until the economic crisis of 1970s, which forced political leaders to look for new ideas. In the 1980s...