How Society Use Scarce Resources

Two major economic thinkers of the of the early twentieth century, John Maynard Keynes and Friedrich A. Hayek, hold very different economic viewpoints. Keynes is among the most famous economic philosophers. Keynes, who's theories gained a reputation during the Great Depression in the 1930s, focused mainly on an economy's bust. It is where the economy declines and finally bottoms-out, that Keynesian economics believes the answers lie for its eventual recovery. On the other hand, Hayek believed that in studying the boom answers would be provided to lead the economy out of the bust that was sure to follow. Hayek backed the Austrian school of economics.

1. The first chapter in the book is about the market and its inner workings. The book briefly explains the idea of supply and demand, in which the price of a certain good or service will reach the point where all the demand is equivalent to the supply. However, the value of something is not determined by its necessity, but its desire within society, as seen by the difference in cost between a diamond and life giving water. Markets operate as they do because people try to maximize the amount of utility for themselves. Nevertheless, a strict rationalism model cannot be used for predicting all the occurrences of a market because of the ever changing behavior of people; thus economists must take precautions against

John Maynard Keynes was an economist instrumental in the theories that aided in the construction of the New Deal during the great depression. He believed that it was appropriate for government to use tax and spend policies in order to stimulate the government. He felt that by using this fiscal policy it would keep the country out of a recession or depression. Beings it is an election year, and the economy affects everyone in the country, I wanted to look into the Keynes theories and discover if it is necessarily a good economic choice.

John Maynard Keynes was born in 5th of June 1883 and died at the age of 62 on the 21st of April 1946. His work in economics and his ideas fundamentally changed the practice and theory of modern macroeconomics as well as the economic policies of governments. Keynes is very well known for his exceptional work on the implications and causes of the business cycles and is also regarded as the founder of modern macroeconomics. The school of thought also known as ‘Keynesian economics’ as well as the various offshoots have his ideas as foundation.

During the Great depression, British economist John Maynard Keynes developed what is known as the Keynesian economics. Keynesian economics is an economic theory of aggregate demand or the total spending in the economy. (Investopedia, LLC., 2003)

Keynesian economics, derived from the ideology of John Maynard Keynes’, was a strategy used during post World War II that would prevent economic decline in the United States by incorporating government spending. Keynesian economics would work by using “...deficit spending to stimulate the economy when in the down cycle and increased taxes to retire the debt during the upswing.”(Lecture A, Week 5). Some government spending programs that reflected the idea of Keynesian economics in America included The Employment

* Economic problem: how a society can satisfy the unlimited wants (of individuals or the community) with the limited resources available.

This paper will be discussing the Great Depression; it will analyze the causes and the events that led to this depression, focusing on the role of Keynesian economics during that time. This article will briefly compare the 1920 downturn with the great recession and discuss the possibility of another depression affecting the world economy.

My findings mostly fit with the idea of the Keynesian model. This model develops a theory that would explain determinants of saving, consumption, investment and production. In that theory, the interaction of aggregate demand and aggregate supply determines the level of output and employment in the economy.

The Great Depression shaped economic theory, social life, and people’s view of a market economy in general. The capitalist economic system seemed to be on the verge of collapse. Something drastic needed to be done in order to get society out of the depression. In his famous book, The General Theory of Employment, Interest and Money, Keyes attempted to show how economics and the market functioned and he proposed different approaches to creating government policy to guide the economy post war.

During the early 1900s (a period of economic and intellectual development) lived John Maynard Keynes, a man whose economic theories continue to influence economic thought and government policy. (Judis, John) Among economists who have labored to refute economic principles taught by the Austrian School, Keynes is arguably the most famous.

He did this to further develop concepts that would be useful in the comprehension and understanding of economics. “Keynes' best-known work, 'The General Theory of Employment, Interest and Money', was published in 1936, and became a benchmark for future economic thought. It also secured his position as Britain's most influential economist “[CITE# 3 BBC]. Keynes also established that Investment and Savings are determined independently, as well as the responsibility for government intervention to help stimulate consumption and investment in the economy. [CITE #4 Invest Answer]. Keynes came to the assumption that in a recessionary period (high unemployment and lower production), the best possible solution would be to promote increased consumption and investment, while reducing the amount saved by consumers. [CITE #4] He also influenced the creation of the central bank and international currency regulation body. [CITE #4]. Keynes revolutionized the fact that people make irrational decisions in terms of wage expectations and labour adjustment. This means that the claims of the neo-classical theorists prove that wage rate does not respond to a shock.[CITE #5

economy. Since the U.S. economy and financial system are extremely impactful, a global repercussion would be expected. Additionally, due to the high levels of financial integration, the U.S. financial collapse now has the ability to have a larger and more immediate effect globally. In contrast, this large financial vulnerability in modern times was less prevalent in the 1930’s, as places like Germany were already in a recession. Nevertheless, some existing parallels between the Great Depression and the current status of the economy exist. For example, “the deterioration in financial conditions from balance sheet contraction, asset fire sales, and increased demand for liquid assets has been more rapid than during the Great Depression” (Thomas Helbling). Essentially, the economy is experience similar defects and declines, resulting in similar but not exact situations, the Great Depression being an extremely more detrimental event. Overall, I believe that in order to maintain a strong and successful economy, we need to understand and put Keynes theories into action. This would create a more sustainable economy and level of employment thus creating more success for the nation. In addition, these theories are susceptible to negative effects, meaning that although they may create a stronger economy, at points the economy will experience sudden drops and declines, which unfortunately, in my opinion, are

ere is a doctor in the house, and his prescriptions are more relevant than ever. True, he’s been dead since 1946. But even in the past tense, the British economist, investor, and civil servant John Maynard Keynes has more to teach us about how to save the global economy than an army of modern Ph.D.s equipped with models of dynamic stochastic general equilibrium. The symptoms of the Great Depression that he correctly diagnosed are back, though fortunately on a smaller scale: chronic unemployment, deflation, currency wars, and beggar-thy-neighbor economic policies.

imagine living in a world in which there are infinite amounts of goods and resources to satisfy every human desire. People will not find need to budget their limited incomes, businesses will not worry about the cost of labor, and governments will not have reason to tax its citizens, or give importance to environmental issues. People living in this society will be equal to one another and everything would be free, like water in the ocean and sand in the desert. All prices would be zero and society will not find need for markets or financial institutions. Unfortunately we do not live in a utopia of limitless possibilities; we live in a scarce world of unlimited wants. Given unlimited wants, we must make the best use of our limited resources, a science our ancestors have developed and named economics. This study measures how societies use scarce resources to produce valuable commodities and distribute them efficiently among different people.