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KEYNESIAN ECONOMICS.   Term Paper ID:18947 Click to get this paper

Essay Subject: Discusses the theories of John Maynard Keynes.... More...

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Paper Abstract: Discusses the theories of John Maynard Keynes. Paper Introduction: In 1936, John Maynard Keynes published a book entitled The General Theory of Employment, Interest, and Money. In economic and political circles, the book was an immediate success, particularly among the new breed of American economists. Not to be immodest, British Keynes wrote a letter to the philosopher George Bernard Shaw stating that, "I believe myself to be writing a book on economic theory which will largely revolutionize . . . the way the world thinks about economic problems" (Harrod 462). Keynes' theory, and the furor it continues to cause, will be the subject of this paper. The paper will begin with a background analysis of both Keynes and his General Theory. It will then focus on the Keynesian legacy in economics, politics, and intellectualism. Finally, the paper will conclude with an assessment of the General Theory within the context of the modern Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Intellectually, Keynes' contribution to society focuses more on theapproach to analysis present in his attempts to solve problems. Continuing, Keynes noted that the world did not reallyneed a complete change of economic programs, but an enlargement of thosewhich worked and allowed for the greater good. "Is This Just a Recession?" Newsweek (21 Jan. He believed in therestoration of right moral thinking - a return to proper moral values insocial philosophy (49-5 ). Not to be immodest, British Keynes wrote aletter to the philosopher George Bernard Shaw stating that, "I believemyself to be writing a book on economic theory which will largelyrevolutionize . In 1936, John Maynard Keynes published a book entitled The GeneralTheory of Employment, Interest, and Money. Keynes's General Theory: Fifty Years On. He believed, however, that the planning should take place in acommunity in which as many people as possible, both leaders and followers,wholly share a single moral position. Keynes was thus a man who contributed more than just an economictheory. . . It will then focus on the Keynesianlegacy in economics, politics, and intellectualism. "A Keynesian Defense of the Reagan Deficit." The American Journal of Economics and Sociology 48 (1989): 47-54.Burton, John, et.al. Intellectually then, Keynes left a vision of a government that shouldbe a benevolent dictator. In the samelight, however, Keynes name is also mentioned as the savior of moderneconomic theory, and the intellectual basis for providing the industrialworld impetus into the twenty-first century (Kutter 62-5). . Brighton: Wheatsheaf, 1981.Harrod, R.F. Although the extent ofthe book's impact on governmental economic policy is still hotly debated inacademic circles, its influence has been considerable in the post-wareconomic policies in the West. These arguments continue to take place in the contemporary world,with economists using Keynes to justify the policies of the Reagan years asnecessary for the development of the American economy (Alexander 47-54).Similarly, Keynes is blamed as the originator of a theoretical bias thatcontrols the global economic marketplace, favors the wealthy, andcontributes to unemployment and exploitation (Thomas 44). London: Macmillan, 1951.Kahn, Richard F. Keynes' conclusion shows thathe was not attempting to describe a complete economic system, but rather adirection toward which the industrial nations of the world could moreproductively proceed. For economists of the late twentieth century, Keynes' main messageran counter to the basic tenet of classical economy, namely that productionin general was confined by the scarcity of human and material resources(e.g. 51). Thus, Keynes clearly shows that be believed that economists andeconomic theory could best contribute to the improvement of society byusing the system to manipulate the control of political and socialauthority to achieve the desired result. . These people, because of both their training and theirattitude, can be expected to act in the best interests of the public.Ultimately, however, Keynes' vision of economics was more globallyoriented, which explain his modern popularity. Keynes ordinarily approached a problem in threestages: First, he analyzed the problem in all its aspects moresearchingly, more radically, than many of his peers at the time. Second,he set out to discover what factors in the situation had created theproblem and what factors needed to be changed if a satisfactory solutionwas to be achieved. As hasalready been noted, Keynes employed a three-pronged approach to problemsolving. from habitual modes of thought andexpression" (Worswick and Trevithick 5). . In economic and politicalcircles, the book was an immediate success, particularly among the newbreed of American economists. Keynes' lasting appeal to economists lies more in the benevolence inwhich he practiced monetarism. Keynes and the Modern World. 49-5 ).Keynes continues by saying that the world does not need an absence ofplanning, or even less planning, but more centralized and careful economicplanning. The new globaleconomy was not yet functioning, nor were the tremendous multi-nationalcorporations that continue to influence almost every aspect ofindustrialized economies well into the 199 s. Works CitedAlexander, Robert J. Since supply constitutes demand in thatsense, there is no such thing as a problem of demand. Sometimes these factors were institutional; sometimesthey were a matter of how a particular institution was being operated inpractice; sometimes they were a matte of political policy; sometimes theywere a matter of public opinion. Any particular output thus constitutes demand forother non-competing outputs. 4-7). This tradition argues that people of high moraland intellectual fiber tend to be attracted to operations within thegovernment. In fact, the generaltheory appeared as the new explanation of the events of the 193 s. general employment levels, output of goods,). 1991): 44.Worswick, David and James Trevithick, eds. [M]orally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in deeply moved agreement (Burton et al. Moderate planning will be safe ifthose carrying it out are rightly orientated in their own minds and heartsto the moral issue. During the early phases ofthe post-war era, though, Keynes' vision, both politically andintellectually, dominated the attention of both the public and privatesectors. The longer consequences of Keynesian attitudes and theories,based in a large part on the General Theory, are still more properlyunderstood in terms of a classically oriented research program within theeconomic sphere (Burton et al. The Life of John Maynard Keynes. In its inception, Keynes' General Theory challenged the foundationsof the whole traditions of classical economic doctrines. Moreover, for Keynes, economics was "a branch of logic, a way ofthinking . One of the scholars whoworked with him, Sir Austin Robinson, sees him as the architect of a masterplan (the General Theory) but far more complex than that. It must be remembered that Keynes wrote during one of the mostimportant economic upheavals of the modern world, post-World War II, theGreat Depression, and the coming of the second world war. Keynes' Economics. . Instead, Keynes wasconcerned with a paradigm for existence within society, in which theeconomic theory of value and distribution was a central mechanism. The paper will begin with a background analysisof both Keynes and his General Theory. Instead, Keynesargued that changes in monetary conditions could influence real variables(e.g. Thus, the legacy of Keynes lives on, just as he imagined,through economic theory, philosophical discourse, and political debate. Briefly, the theory's economicthesis states that behind the veil of monetary policy (money), peoplespecialize in producing goods and services to exchange for the specializedoutput of other people. 66-7). There was a scope forsecuring greater material welfare through the direction of the economy byusing a combination of fiscal and monetary policies which could secure fullemployment while still avoiding excessive inflation (Worswick andTrevithick 2). Finally, the paperwill conclude with an assessment of the General Theory within the contextof the modern economic system. Insteadof the economic health of a nation being based on the laws of supply anddemand, first formally advocated by Adam Smith over two centuries before,Keynes' General Theory saw a greater interplay between the forces ofmanagement, the government, and the labor supply. In fact, this would allow thebenevolent civil servants and elected officials to follow their own advice. Keynes's Economics and the Theory of Value and Distribution. Cambridge: Cambridge UP, 1983.----------------------- 1 . London: Duckworth, 1983.Fender, John. The claim that an under-employment equilibrium could exist in the absence of money wage rigiditywas argued to be false and said to take no account of the effect ofmonetary wealth on consumption (Fender 1). "Keynes the Able." New Republic 2 1 (1989): 62-5.Lawson, Tony and Hashem Pesaran, eds. Keynes' theory, and the furor it continues to cause, will bethe subject of this paper. Indeed, his attitude indicatesthat it is not new ideas which cause difficulty - instead it is the removalof old ones that constrain the human spirit. "He was an eternal optimist in the sense that he was neverdefeatist and never gave up fighting for something that he regarded asnecessary" (Worswick and Trevithick 256-7). land, labor, or money). . Understanding Keynes. Milton Friedman, one of the foremost economists of the 198 s and199 s, notes with some conviction that Keynes' bequest to politics can besummed up with Keynes' own words: In my opinion it [The Road to Serfdom] is a grand book . London: Croom Helm, 1985.Thomas, Rich. The Making of Keynes' General Theory. Moreover, in Keynes' analysis the stock of money in theeconomy was no longer seen as having a neutral effect. "The role of the voters is to elect person with the 'right' moral valuesto office and let them run the country" (Burton et al. Keynes' theory then gave birth to macro-economics, in that theexplanation of his theory put forth a model of the interaction of a limitednumber of strategic variables operating on the economy which serve toexplain the manner that the economy as a whole is determined (Worswick andTrevithick 2-3). the way the world thinks about economic problems"(Harrod 462). He never accepted the inevitability of some obstacle, thesanctity of some institution with long traditions, the impregnability ofpowerful political figures, the impossibility of changing some dominantpublic opinion. Keynes' General Theory has stood up to the monetary policies of thepost-war world, although the recessionary economies of the 197 s, 198 s,and 199 s are often seen as a result of some of his less-than-adequateplanning. Keynes' General Theory changed economic theory by emphasizing themacro problems of employment and demand. For many, though, the economic legacy ofKeynes' General Theory lies in the fact that liberals can use it to supportthe idea that no mechanism exists to keep saving and investment equal atfull employment, and conservatives use the same notion to posit that aneasy repair of any economic downturn (recession, etc.) will preserve andstrengthen the system itself (Burton et al. However, the exact nature of thetheoretical contribution made by Keynes has been the subject of a heateddebate. Even in an economicdepression, people are willing to work in order to exchange goods andservices. 39). Indeed, a central point to the theory concerned the criticalrole of demand in determining output and balancing unemployment within thestructure of an industrialized economy (Eatwell and Milgate; Lawson andPesaran). Intrinsic within thisequation were the infinite variables surrounding consumption, unemployment,wage law, and other cultural and economic modifiers (Burton, et al. Cambridge: Cambridge UP, 1984.Kutter, Robert. As a twentieth-century economist and intellectual, Keynes isconsidered by many to be one of the great minds. Keynes asserted quite a different story.His major proposition maintained that in normal circumstances, productionin general was limited by effective demand which determined how much ofpotential resources were effectively utilized. That he was successful in stimulating so manyeconomic thinkers in the late twentieth century is evident from the widevariety of sources that cite the General Theory as a basis for theirparticular economic and political contributions (Kutter 64-5; Lawson andPesaran passim). After the book was published, harsh criticism of his theorieseventually led to the emergence of a neoclassical economic synthesis,accord to which Keynesian economics was a special case, derived by imposingthe assumption of monetary wage rigidity. London: Institute of Economic Affairs, 1986.Eatwell, John and Murray Milgate, eds. Additionally, he argues that the failure of some of the granderportions of economic policy over the past few decades has been less afailure of Keynesian economics and more of a failure of the currentgeneration of economists to analyze "clearly the essential preconditions ofreconciling a high level of employment and avoidance of inflation, toidentify the institutional changes necessary to achieve this, and then toestablish first a consensus and then action regarding the making of theinstitutional changes" (Worswick and Trevithick 257). economics is a science of thinking in terms of models joinedto the art of choosing models which are relevant to the contemporary world"(Kahn 219). Keynes concluded his General Theory by noting that the book was "along struggle to escape . As he predicted, the General Theory made a major impact on economictheory, clearly not confined to the economic world. This approach, albeit simple, may be common to many of the greateconomic thinkers but nevertheless is undiminished in its outcome. He remarks thatKeynes had a particular way of approaching problems, one that focused onpractical solutions. In particular, employers are willing to hire more workers andthus produce more goods as long as they can find adequate customers eagerto spend money (Eatwell and Milgate passim). It was in this manner that his economic theory became usefulin a wide variety of other disciplines, analogous to his philosophicalviews of using economic ideas as merely a tool to discover the greaterintricacies of the way in which the world operates within a global realm.Keynes clearly meant that his contributions to the field of economics wereimportant and valid but that the real contribution of the General Theoryheld that the relationships and theoretical maxims established withineconomic models could be used profitable within other structures andframeworks, much like the mathematical models of Aristotle and Plato(Lawson and Pesaran passim). He redefined themain economic problem not as the allocation of scarce resources amongcompeting rivals, but as the maintenance of aggregate demand and employmentin the short run. Third, and most important, he went aheadto change some institutional setting, to change the traditions of operatingsome sacrosanct institution, to change the political policies, to changepublic opinion, or where necessary to secure the creation of some newinstitution. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.