Comparative Study Of Keynes And Friedman On Controlling Inflation Theory

Keynes and Friedman are recognized as the20th century’s greatest and mostimportant economists. Their contribution of economics is quite prominent. Keynes isknown as "the father of the Western Macroeconomics ". Friedman won the NobelPrize in economics in1976in recognition of his consumption analysis, monetarytheory, the complexity of stabilization policy and other areas. Both of their economictheories are not only as broad as the sea, but also entirely different. The debatebetween the two theories, including the debate on the theory of inflation which hasbeen the hot issues in economics, has never been stopped since Friedman’s theory waspublished. Especially when the economic crisis happened, the debate on the theory ofinflation attracted many economists. How should the government deal with inflationon earth? The government should intervene in the economy as Keynes said or adoptnon-intervention policies according to Friedman’s new economic liberalism?Keynes and Friedman have many great achievements and extensive researchesin economics. Learning from Keynes and Friedman’s original work, I start to makecomparative study of the inflation theory and policy making of these two giants inthis paper. The second and third chapters introduce Keynes’s and Friedman’s inflationtheory and policy respectively which are developed in the fourth and fifth chapters.The fourth chapter consists of a comparative study based on the two branches, withregard to the causes and backgrounds of inflation and other aspects, summed up fourdifferences and three agreements of the two theories. The fifth chapter is the contrastbetween the two policies in practical applications.The effects of the two theories ofgovernance studied as well as the negative impacts. The sixth chapter focuses on our country’s economy since the2008economic crisis. China has been tussling with thecontinuous rising of inflation since2008.Though the inflation is expected to drop in2014and the consecutive year of2015, the economy tends to face the risk of deflation.Thus, reducing the inflation is a key issue in the New Normal economiccircumstances.