In the wake of the pandemic, calls for a new economic approach have been heard in a number of quarters. In the US, President Biden has urged the country to change the economic system around so that we can build back better. Another world leader calls upon us not to follow the easy path of returning to a normality [but] to rethink our way of life and our economic and social systems. Lurking in the background in both are the notions that it is possible to direct and organize economic activities according to some new blueprint and that government officials can and will do so effectively.

Q1. What would Friedrich Hayek say regarding these calls to rethink and redo the economic system? Use his article The Use of Knowledge in Society and his book The Road to Serfdom in framing your answer.

Q2. Suppose you had to do an economic forecast of a country that was planning to adopt such an approach. Would whether it did so or not affect your forecasts of inflation and real growth? If so, why?