How to Solve Crisis with Hayek Point of View

According to Hayek, the government in the Eurozone of the recession still lacks an understanding of how to use energy effectively. Instead, they choose the most common forms of public spending in elections (Bjrnskov, 165). However, once the money is spent, it is spent on the wrong sectors of the economy, causing the economy to deteriorate. In such cases, the government should refrain from intervening. As a result, we should encourage private companies to decide whether or not to use unused money (Cachanosky, and Alexander 180). Furthermore, we should eliminate any and all obstacles to industry and competitiveness, such as taxation, regulations, and government interference. In a free market, the prices will always signal that there is a loss, profit hence the prices will enable full employment and market equilibrium.

When the government is allocating resources free market has always been superior to the government in the manufacture of goods and services that are demanded. According to Hayek, the government should provide little basic guidelines which will enable functioning of the economy. For instance, the government should provide a legal system of property rights and allow the free market to care for education, defense, and security (Horwitz,106). To overcome the challenges related to inflation such as the rise in the interest rates and increased number of unemployment, the government should eliminate unnecessary spending such as money used in campaigning as this affects the economy of the country reducing the circulation of money (Schmiegelow, and Michèle 102). However, it should also reduce tax rates to improve the incentives for investment, savings, job creation, starting businesses. These can be done by pursuing of anti-inflationary monetary policies that will maintain the stable dollar. It should perform deregulation which will reduce the cost for businesses as well as consumers thus increase efficiency (Bjørnskov, 11).

Work cited

Bjørnskov, Christian. “Do economic reforms alleviate subjective well-being losses of economic crises?.” Journal of Happiness Studies 15.1 (2014): 163-182.

Bjørnskov, Christian. ”Economic freedom and economic crises.” European Journal of Political Economy 45 (2016): 11-23.

Cachanosky, Nicolas, and Alexander W. Salter. ”The view from Vienna: An analysis of the renewed interest in the Mises-Hayek theory of the business cycle.” The Review of Austrian Economics 30.2 (2017): 169-192.

Horwitz, Steven. ”6. The problems with Keynesianism: a view from Austrian capital theory.” What’s Wrong with Keynesian Economic Theory? (2016): 106.

Schmiegelow, Henrik, and Michèle Schmiegelow. ”Contract Modification as a rebus sic stantibus Solution to the Subprime Crisis.” Institutional Competition between Common Law and Civil Law. Springer Berlin Heidelberg, 2014. 83-117.