An Analysis of John Maynard Keynes's Economic Theories and Legacy

This essay provides an overview of the economic contributions of John Maynard Keynes, often considered the father of Keynesian economics. It explores his revolutionary ideas that challenged neoclassical economics, particularly his views on aggregate demand and its impact on employment. The essay highlights Keynes's advocacy for fiscal and monetary policies to combat recessions and depressions, along with his belief in the evolution of capitalism and the importance of addressing corruption, short-sighted policies, and knee-jerk reactions. It also discusses his key works, including "Economic Possibilities for Our Children" and "The General Theory of Employment, Interest and Money," which emphasized the role of aggregate demand in determining employment levels. The essay further examines Keynes's influence during World War II and the subsequent adoption of Keynesian policies globally, while also acknowledging the challenges his ideas faced during the stagflation period. The essay concludes by referencing relevant books, journals, and online resources to support its analysis.

Economic

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ESSAY.............................................................................................................................................1
REFERENCES................................................................................................................................3

ESSAY
John Maynard Keynes was an economist at an early 20th-Century, known as the father of
Keynesian economics (Keynes, 2018). His ideas fundamentally changes the theory and practice
of macroeconomics. At the time of Great Depression of 1930's, he leads a revolution in
economic thinking, challenging the ideas of neoclassical economics that held free markets would
offer full employment. He also argued that aggregate demand determined the overall level of
economic activity & inadequate demand could result in prolonged periods of high
unemployment. Further, the use of fiscal and monetary policies was advocated by him to reduce
the adverse impact of recession & depression. He understood that capitalism to be an historical
institution that develop by different phases, by each one calling for new modes of theory. He also
believed that the three crucial issues that hold back countries is; corruption, knee-jerk policies
and short-sightedness. Also, if these three problems are corrected, then humanity can look ahead
to a period of incredible and lasting (Keynes, 2017).
It has been discovered that, he has also written his ideas in an essay on “Economic
Possibilities for Our Children”. In this he demonstrated the wish that his generation's
grandchildren would no longer be driven by personal gain. Moreover, he also hoped for a new
kind of state capitalism that would pay attention on the supply of things that is not provided by
market. He has also mentioned about his General Theory of Employment, Interest and Money,
which is the most important book by him. The aim of this book is that the employment level is
measured not by price of labour, as in classical economics, rather by the level of aggregate
demand. He stated that, if the sum of demand for products at full employment is less that the
total output, then the economy is supposed to contract until equality is attained. He argued that,
Britain suffered from high unemployment during the 1920's and so he suggested the depreciation
of sterling to promote job by making exports more affordable in British. Also, in the year 1924
he introduced a fiscal response through which jobs can be created through government by
spending on public works (Dillard, 2018).
At the time of world war II, he argued that the war effort must me funded by higher
taxation and particularly by savings rather than, deficit spending so that they can avoid inflation.
Apart from this, he was also involved in Bloomsbury Group together with writer Lytton
Strachey. Keynes died of complications from a series of heart attack in the year 1946 and it was
discovered that throughout his life, Keynes worked for both public and his friends. Yet his
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legacy lived on, as after Second world war Keynesian policies were adopted across the world.
Additionally, his ideas were become the new belief and were particularly attractive to the
political part (Heywood, 2015). Later on, US had experienced high inflation also with high
unemployment i.e. known as stagflation, by this Keynes ideas were discredited as he was unable
to explained the phenomenon. Afterwards, the G20 nation decided an economic stimulus
package of 2% of gross domestic product to stimulate growth (Briggs, 2018).
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REFERENCES
Books & Journals
Dillard, D., 2018. The Economics of John Maynard Keynes: the theory of a monetary economy.
Pickle Partners Publishing.
Heywood, A., 2015. Political theory: an introduction. Macmillan International Higher
Education.
Keynes, J. M., 2017. The economic consequences of the peace. Routledge.
Keynes, J. M., 2018. The general theory of employment, interest, and money. Springer.
Online
Briggs, B., 2018. John Maynard Keynes : The Man Who Transformed the Economic World.
[Online]. Available on: <https://investinganswers.com/education/economics/john-maynard-
keynes-man-who-transformed-economic-world-621>
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