THE ECONOMIC THEORIES OF JOHN MAYNARD KEYNES

The Economic Theories Of John Maynard Keynes And Their Social And Political Effects



The Economic Theories Of John Maynard Keynes And Their Social And Political Effects

John Maynard Keynes is doubtlessly the most important figure in the entire history of economics", that is a powerful statement that I can't really make a good decision, however based on the books and information that he has provided I would suggest that he is a major player in the evolution of twentieth- century economics. He developed theories that were regarded as probably the most influential social science treatise of the 20th Century, in that it quickly and permanently changed the way the world looked at the economy and the role of government in society. Never before had a book have so much influence.

The ideas of Keynes are still relevant in today's society as the market must be under control and balance the different levels of our economy. He initially started working in the tradition of the Neoclassical Marshallians at Cambridge, the impotence of Neoclassical theory in explaining the Great Depression of the 1930s led Keynes to construct an entirely new theory - a more "general" theory of the economy - which broke him off from the Neoclassicals. Keynes stated,

"I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium. Moreover, the characteristics of the special case assumed by the classical theory happen not to be those of the economic society which we actually live, with the result that its teaching is misleading and disastrous if we attempt to apply it to the facts of experience." (Keynes, 1936: 59)

Keynes sought to develop an explanation (AD-AS model) that could explain the determination of aggregate output and as a consequence, employment. He offered that the determining factor was aggregate demand. Among the revolutionary concepts initiated by Keynes was the concept of a wherein unemployment is possible, the ineffectiveness of price flexibility to cure unemployment, a unique theory of money based on "liquidity preference", the introduction of radical uncertainty and expectations, the marginal efficiency of investment schedule breaking Say's Law (and thus reversing the savings-investment causation), the use of fiscal and monetary policy by government to help eliminate recessions and control economic booms, indeed, he single-handedly constructed the fundamental relationships and ideas behind Macroeconomics.

For the greater part of his professional life John Maynard Keynes was known as a practical man: the author of topical tracts on current economic questions, an advisor to, and an emissary from, the British Treasury, a successful player of financial markets for himself and King's College, a member of corporate boards, a portfolio manager for two insurance companies. He was, in this sense, a part-time academic. And, although he had long been known to be a first-rate economist, it was only after the publication of the

General Theory of Employment Interest and Money ...