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The Key Contributions to the Macroeconomic Theory Made by John Maynard Keynes

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John Maynard Keynes was an early 20th-century British economist, known as the father of Keynesian economics. His theories of Keynesian economics addressed, among other things, the causes of long-term unemployment. In a paper titled "The General Theory of Employment, Interest and Money," Keynes became an outspoken proponent of full employment and government intervention as a way to stop economic recession. His career spanned academic roles and government service.

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The absence of important technical inventions between the prehistoric age and comparatively modern times is truly remarkable. Almost everything which really matters and which the world possessed at the commencement of the modern age was already known to man at the dawn of history. Language, fire, the same domestic animals which we have today, wheat, barley, the vine and the olive, the plough, the wheel, the oar, the sail, leather, linen and cloth, bricks and pots, gold and silver, copper, tin, and lead-and iron was added to the list before 1000 B.C.-banking, statecraft, mathematics, astronomy, and religion. There is no record of when we first possessed these things. At some epoch before the dawn of history perhaps even in one of the comfortable intervals before the last ice age-there must have been an era of progress and invention comparable to that in which we live today. But through the greater part of recorded history there was nothing of the kind. The modern age opened; I think, with the accumulation of capital which began in the sixteenth century. I believe-for reasons with which I must not encumber the present argument-that this was initially due to the rise of prices, and the profits to which that led, which resulted from the treasure of gold and silver which Spain brought from the New World into the Old. From that time until today the power of accumulation by compound interest, which seems to have been sleeping for many generations, was re-born and renewed its strength. And the power of compound interest over two hundred years is such as to stagger the imagination. For the moment the very rapidity of these changes is hurting us and bringing difficult problems to solve. Those countries are suffering relatively which are not in the vanguard of progress. We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come—namely, technological unemployment

This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.

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As a result, the lack of demand causes the problem of unemployment more directly than the factor of the supply, as it was stated by other economists previously. Furthermore, Keynes pays attention to the fact that it is the task of the government to stimulate the increases related to the demand. That is why, Keynes accentuates the necessary intervention of the governments into economy in order to overcome the problematic economic situations and to improve the economic development. According to Keynes, the government’s intervention into economies and the impact on the aspect of demand are the necessary conditions to cope with the problem of the unemployment (Keynes 2006). Although Keynes’s ideas are based on the traditional capitalist theory promoted by Keynes, these ideas influenced the progress not only of the theoretical revolution but also the changes in the practical approaches to regulating the economic questions because Keynes proposed to look at the main economic principles from the alternative perspective

The Keynesian Revolution developed because Keynes’ ideas were rather simple to understand, but they threw light on many economic questions, and provided new perspectives for their interpretation. Although Keynes promoted the capitalist vision of the economic development, many researchers found that the author’s ideas are correlated with the communist ideas, and this approach changed the general understanding of the economic theory in the West World (Tily 2007). On the one hand, Keynesianism became the leading economic movement related to the theory of the economic analysis in the twentieth century. Moreover, Keynes’s ideas were implemented in practice in the United States in the form which did not promote the communist ideas but supported the capitalist ones.

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As can be seen, although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. Keynes wrote, ‘Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slave of some defunct economist.’ In 2008, no defunct economist is more prominent than Keynes himself.” But the 2007–08 crisis also showed that Keynesian theory had to better include the role of the financial system. Keynesian economists are rectifying that omission by integrating the real and financial sectors of the economy.

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Keynes, J. 2006, General theory of employment, interest and money, Atlantic Publishers & Dist, London.

Krugman, P. 2006, Introduction by Paul Krugman to The General Theory of Employment, Interest, and Money, by John Maynard Keynes. Web.

Laidler, D. 1999, Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and Unemployment, Cambridge University Press, UK.

Schumpeter, J. 2003, Ten great economists, Routledge, London.

Tily, G. 2007, Keynes’s General Theory, The Rate of Interest and ‘Keynesian’ Economics: Keynes Betrayed, Palgrave, Macmillan, London.

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