Keynesian Theory vs. Von Hayek's Theory of Economics

I'm no economist--not like my friend, Dr. B. However, I find this particular field of study incredibly interesting. I always knew there were differences between those who subscribed to more of a free-market theory of economics (i.e. Republicans) versus those who feel strongly that the government (in this case the federal government) should set the course (i.e. Democrats) and create the environment within which the economy operates--providing funds for public projects, closely monitoring and setting interest rates, etc.

An observation: almost all Republicans are Hayekian in their thought, whereas not all Democrats are Keynesian--often associated with Socialism.

Anyway, the basic assumptions are that those who subscribe to the Keynesian theory of macroeconomics assert that the government has a responsiblity to intervene with public policies (monetary and fiscal) to protect against the adverse effects of economic trends (recessions, depressions, etc). See also Obama--this federal stimulus garbage being put forth by the current Administration (and to some extent the previous administration).

The basic assumptions for those who subscribe to Von Hayek's theory of macroeconomics believe in the principles that "when finance permit(s) investment to be greater than savings, then both desired investment and consumption demand cannot be met by actual output - thus there will be "forced saving" and changing degrees of "capital intensity" changing output and employment." Simply put--ups and downs in the health of the economy are natural and to be expected--and the market will make the necessary adjustments and bounce back. Further, government interference should be limited. For historic practicioners of this theory, think Reagan, Thatcher and, yes, according to my friend who educated me on this today, Bill Clinton.

My point: history has proven that when the Keynesian theory is pursued to re-stimulate economic growth (vast government intervention)--it DOES NOT WORK.

Our president is a smart man--why has he not learned the lessons of the past? All this spending is going to drive up inflation and utimately lead to an increase in taxes--making the economy even worse.

This plan is doomed to fail.

--G

P.S.--I'm new to the study of economics, so if I got something wrong, please feel free to correct me.