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Keynes advocated big, activist governments and regulations aimed at avoiding another Great Depression by creating incentives. His ideas were and still are very popular. FDR was a Keynesian. President Obama is, too, based on the intent of such policies as TARP and Quantitative Easing.
Keynesian theory in a nutshell: Security with an acceptable erosion of liberty.
Hayek was a free-market advocate who thought that the way to get through a post-boom recession was to let the weaker businesses fail. Private investment, not government spending, would re-ignite economic growth and stimulate jobs. He argued that companies who owed their fortune to easy money policies of the boom and nothing else deserved to go under. He was derided as the Liquidator. Bear Stearns, Fannie Mae, Freddie Mac, General Motors--under Hayek's theory, they would have all gone under.
Hayekian theory in a nutshell: Freedom at the cost of some social discontent.
Please see the article here regarding the debate among proponents conducted at the London School of Economics: BBC News - Keynes v Hayek: Two economic giants go head to head
If you have 30 minutes to invest, I recommend you listen to the debate here: On-line Podcast. Are you a Keynesian or a Hayekian? Does the debate cause you to reconsider your position, or possibly even change from one camp to the other?
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