In modern economics there are two major schools of thought in regards to how the economy should be run; socialism and libertarianism. As with the issue of prohibition in the 1920’s, how our government should interact with our economy has been a polarizing issue in American politics for decades. Both sides carry valid points and support different ideals. I will walk you through a brief history and explanation of libertarianism, highlight a fundamental economist who really developed the ideals behind libertarianism and give the pros and cons. I will then do the same for socialism. I will attempt to share this knowledge with you in as unbiased a way as possible.
First we will discuss libertarianism. The main ideal of libertarianism is that the individual or business should be regulated by the natural flow of the economic market. Some of the ideals of libertarianism include deregulation of many of the economic, social and legal practices that our government has established. Libertarianism advocates the practice of free enterprise where governments have little to no input to how businesses function. They believe that individuals can and should regulate themselves; that business should be regulated by the flow of the markets, not the manipulation of the government. Libertarians believe that the economic market will, over time, regulate itself and that government shouldn’t interfere.
The most prominent founder of libertarianism is Friedrich August Hayek. Hayek was born in Austria in 1899. He fought in the First World War and lived in Austria during the Nazi Party’s rise to power. He later moved to Britain where he became a professor at the London School of Economics for eighteen years. In the nineteen twenties and thirties, Hayek was concerned with the way social planning was controlling individual’s actions. He believed that a free market would regulate itself without government interference. He later went on to teach at University of Chicago, but later returned to Europe to teach in West Germany. He shared the Noble Prize for his work on economic fluctuations.
Hayek viewed the school of thought that puts equality over individualism as “Rationalism”. One of Hayek’s fears was that under Rationalism, governments would become to controlling and we would face a new kind of tyranny. This view was dangerously illustrated as the Nazi Party took control of Germany and the surrounding countries. This time and place influenced his belief that government should have limited action in a countries economy. American history is rich with examples of government oppression and tyranny. The American Revolutionary War was due, in large part, to the economic abuse we suffered at the hands of the British government.
Within the business world, free enterprise would be able to expand significantly with less interference from the government. For instance, when governments unnaturally change the amount of money in the market, they also affect interest rates. This can...