News analysis: Differing philosophies at the core of economic arguments for President Obama, Mitt Romney

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President Barack Obama and Republican challenger Mitt Romney are facing off in the 2012 presidential election, but two other figures may prove to be omnipresent despite not appearing on the ballot — twentieth century economists John Maynard Keynes and Friedrich Hayek.

"Right now, Congress should pass a bill to help states put thousands of teachers, firefighters and police officers back on the job," Obama said during his weekly address Saturday. "They should have passed a bill a long time ago to put thousands of construction workers back to work rebuilding our roads and bridges and runways."

"The president and many of his allies seem to measure success on how many people are dependent on government programs," Wisconsin Gov. Scott Walker said in the Republican rebuttal. "Those policies have failed. In contrast, I and many other Republicans define success just the opposite way, by how many people we can free from government dependency by growing the private sector."

The arguments laid out most recently in the dueling Saturday speeches are an example of two divergent viewpoints that have found their way into the national debate as Obama and Romney face off. Both parties believe that more can be done to create jobs, but differ on what that more is.

Nicholas Wapshott, author of the book, "Keynes Hayek: The Clash That Defined Modern Economics," predicted during an NPR Planet Money podcast in October 2011 that the election would come down to this very issue.

"We've already started what is inevitably a Keynes-Hayek election," Wapshott said at the time. "On one side there's a party that says we've got terrible unemployment, we need to do something about it, and the best way to do it is for the government to start intervening ... the other side says no, the government should do absolutely nothing, or as little as possible, and what's more, we should shrink the government. Let's get the government out of people's lives."

John Maynard Keynes and Friedrich Hayek were twentieth century economists with two fundamentally different views of how to deal with a weak economy or a recession. Keynes believed that unemployment could be affected by aggregate demand, and that if the private sector wasn't buying things, the government ought to step in to buy things and employ people.

In contrast, Hayek believed that the price system, or free markets, could coordinate people's actions into the spontaneous order of the market system. Fiddling with the market could have unforeseen consequences, such as increases in the money supply that could make credit artificially cheap, leading to busts.

Or, as Russ Roberts, an economist at George Mason University, and John Papola, a producer/director, suggested in a Keynes vs. Hayek economic rap video, Keynes and Hayek would argue thus:

Keynes: "You see, it's all about spending, hear the register cha-ching. Circular flow — the dough is everything. So if that flow is getting low, doesn't matter the reason, we need more government spending. Now it's stimulus season."

Hayek: "The place you should study isn't the bust, it's the boom that should make you feel leery, that's the thrust of my theory. The capital structure is key, malinvestments wreck the economy."

Falling on a more Keynesian side, Obama has pushed government spending with the $831 billion stimulus bill, his $447 billion jobs bill and his budget proposals.

During a recent Q&A with reporters, Obama again said that Congress can takes steps to help the economy, including hiring teachers, police officers and firefighters, "all of which, by the way, when they get laid off, spend less money buying goods and going to restaurants and contributing to additional economic growth."