The Classical Economists and Keynes: the Debate on Government Policy Activism

Milton Friedman and John Keynes are two world renowned economist, with many similar and contrasting views that have helped set the foundation of our economy. Friedman 's ideology on subjects such as the Monetary Policy, Gold Standard, and the Theory of the consumption function are what made him a extremely impactful economist. Keynes has made his impact on the modern day world as well in many aspects. Both of these economists have helped pave the way to a better, more efficient economy.

John Maynard Keynes a British economist was the founder of Keynesian economic theory. Keynesian economics is a form of demand side economics that inspires government action to increase or decrease demand and output. Classical economists had looked at the equilibrium of supply and demand for individuals, but Keynesians focuses on the economy as a whole. Keynesian

John Maynard Keynes fostered a school of thought that came to be known after him,

In order to discuss the statement in the title, I will first talk about J. M. Keynes and give some general information regarding his life and career. Following I will discuss about Keynes criticism of Say’s Law starting with Aggregate Demand and how consumption together with investment are in relation to income. Afterwards I will highlight the role of investment and what the policy implications are. For the final part of this essay I will conclude with some evidence to support the claims made.

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

During the time of war Keynes ideas were more successful because the government was able to make a large quantity of jobs for people through goods needed for the war. Since Keynes ideas were so widely used and accepted at this time, Hayek’s ideas were rejected and considered bad because the purposed to do the opposite. After the “good 30 years” Keynes economic ideas began to show flaws through inflation and unemployment rates. This issue resulted from the restriction

The success of Keynesian economics was such that even Richard Nixon once said, "We are all Keynesians now(Keynes, 289)."      Well, that was the theory the governments were using at the time to control the economy. Obviously there were some people who objected against use of this theory. One of them was Milton Friedman. He believed that the only function the government should be allowed is to control the circulation of cash.

British economist John Maynard Keynes said “Lower aggregate expenditures in the economy contributed to a massive decline in income and to employment that was

John Maynard Keynes school of thought is that with government intervention, the economy can be stabilized. Friedrich A. Hayek opposed the theories of John Maynard Keynes and argued that with government intervention in the free market will cause destructive repercussion and it could not prevent inflation, recession or unemployment.

Before the depression when economics was at a low they would soon rise again in fluctuation. The depression put an end t this because there was such a shortage of jobs. This made Keynes start to think about how to help people and handle economy in a real crisis. The thought that life as people knew it was never going to return causing a “boom and bust” system. Keynes’ suggestion about this was that when the government was going good they should raise taxes and spend less money, and when they were in a bust they should lower taxes to retain money to the people. Keynes did not just expect the government to cycle money, but for the people to as well. He thought that unless you were putting money back for the future that you should keep your money cycling in the economic system. One of the biggest factors that had a part in Keynes’ style of economics was something called multiplier effect (which is essentially banks making money from lending money). He was strong in the belief that if the government spent and invested, then they would make more money. If people were willing to spend their money as well then, the PD would eventually begin to

Ans. Adam Smith trusted that in Laissez Faire framework government does not meddle in the activity of the economy and Smith said that economy will accomplish the best useful for the best number however this is just conceivable if everybody takes after self - intrigue. Where Keynes' feelings for private enterprise were comparable as Adam Smith and Keynes said that legislature need to intercede with a specific end goal to leave the monetary droops.

The author surveys three influential economists of the Classical era—Ricardo, Marx, and John Stuart Mill—and introduces the reader to their Macroeconomic perspectives based on some of their more prominent Macroeconomic theories.

developed his theory based on the Adam Smith’s theory. Keynes did not entirely disagree with

What was Keynes' theory and how did he influence the world| economy in the 19th century?