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Karl Polanyi and Friedrich Hayek’s Economic Ideas Essay


It is imperative to mention that the argument between Hayek and Polanyi is a fascinating topic that has led to numerous discussions. Moreover, the fact that the views of these economists were dramatically different should not be overlooked, and it is possible to see that their influence on many other authors is quite significant.

It is necessary to understand that both sides of the argument had a different perception of the role of the government. Hayek thought that such interference is not needed and leads to processes that are not natural. On the other hand, Polanyi states that the state may be viewed as a force that would help to defend the population from issues related to the market (Migone 2011). Another core aspect that should not be overlooked is that both authors were influenced by different aspects.

Polanyi regarded Vienna in the 1920s as a cultural achievement and Hayek preferred liberalism (Polanyi-Levitt 2012). Polanyi believed that the influence of markets on the economy has been limited, but the situation has changed because of the Industrial Revolution. Also, he has stated that severe consequences may be introduced if the market is not controlled. The problem is that this approach has been criticized because many economists believe that the role of cultural factors is not significant. Furthermore, the author states that the market economy has been created artificially because of numerous internal and external factors. Also, it is paramount to mention that the way he has criticized the liberal economy is also fascinating, and he suggested that society may not be separated from the economy.

The most significant difference that should not be disregarded is that Polanyi thought that populations should be capable of protecting themselves from the influence of markets in many spheres with the use of an approach titled double movement. However, it is necessary to understand that Polanyi has noted that the realization of this project is not possible because a relationship between economies and societies is always established. The concept of spontaneous order is especially interesting because the economist suggested that it may be created as a result of activities performed by a group of individuals and is not established because of the influence of the government.

Moreover, one of the most significant aspects that should not be overlooked is that both scientists have used this term in their works. Also, it is important to note that several similarities between the works of these economists can be noted. Hayek has devoted enormous attention to a socialist economy and thought that it may be incredibly beneficial. On the other hand, Polanyi suggested that this approach would not be possible from the perspective of economics, and it could lead to severe consequences in most cases. Another aspect that is worth mentioning is that Hayek has supported the ideas of Mises and believed that socialist planners may have to deal with numerous issues such as tacit knowledge.

Moreover, it is evident that both scientists have reached a consensus on this topic. Hayek stated that the efficiency of the unplanned economy is significant because it develops at a rapid speed, and it is not possible to predict some of the aspects with the use of planning (Bladel 2005).

The issue that should not be disregarded is that Hayek was not able to identify that market capitalism could lead to severe consequences in some cases and has focused primarily on instrumental value (Birsen 2012). Moreover, Hayek thought that the focus on coercion is vital, and it should be regarded as one of the factors that influence the market. He suggested that the intervention is problematic because it may affect the freedom most of the time. Another unique idea that has been voiced by the economist is that any conformity according to ethics and moral values hurt the decision-making process of an individual.

Furthermore, it is paramount to mention that he thought that rulers were able to utilize this concept to manipulate the masses most of the time. Also, it is imperative to note that such ideas were frequently criticized and have led to numerous disagreements. The role of ethical aspects also needs to be mentioned, and it is suggested that the abstract view of liberty can be incredibly problematic because it is not possible to determine issues and complications that may occur (Kekes 2000). Also, it is important to understand that both authors have noted particular issues that may occur, and believed that their position is the most reasonable.

In conclusion, it is evident that the difference in the ideas suggested by these two economists is quite significant but numerous similarities are also present. Moreover, it is important to understand that their influence on the modern economy is enormous, and their works may be viewed as masterpieces. Some of the concepts that were introduced are vital and should be studied to get a better understanding of issues related to markets. Overall, it is imperative to note that such theories can be viewed from different perspectives, and both approaches have particular strengths and weaknesses.

Reference List

Birsen, F 2012, ‘Polanyi and Hayek on freedom, the state, and economics’, International Journal of Political Economy, vol. 41, no. 4, pp. 69-87. Web.

Bladel, J 2005, ‘Against Polanyi-centrism: Hayek and the re-emergence of ‘spontaneous order’, The Quarterly Journal of Austrian Economics, vol. 8, no. 4, pp. 15-30. Web.

Kekes, J 2000, ‘Beyond liberalism: The political thought of F. A. Hayek and Michael Polanyi’, Ethics, vol. 110, no. 2, pp. 451. Web.

Migone, 2011, ‘Embedded markets: A dialogue between F.A. Hayek and Karl Polanyi’, The Review of Austrian Economics, vol. 24, no. 4, pp. 355-381. Web.

Polanyi-Levitt, K 2012, ‘The power of ideas: Keynes, Hayek, and Polanyi’, International Journal of Political Economy, vol. 41, no. 4, pp. 5-15. Web.

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IvyPanda. (2020, July 8). Karl Polanyi and Friedrich Hayek's Economic Ideas. Retrieved from https://ivypanda.com/essays/karl-polanyi-and-friedrich-hayeks-economic-ideas/

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IvyPanda. "Karl Polanyi and Friedrich Hayek's Economic Ideas." July 8, 2020. https://ivypanda.com/essays/karl-polanyi-and-friedrich-hayeks-economic-ideas/.

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IvyPanda. 2020. "Karl Polanyi and Friedrich Hayek's Economic Ideas." July 8, 2020. https://ivypanda.com/essays/karl-polanyi-and-friedrich-hayeks-economic-ideas/.

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IvyPanda. (2020) 'Karl Polanyi and Friedrich Hayek's Economic Ideas'. 8 July.

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