An English economist who founded Keynesian economics
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John Maynard Keynes (1883-1946) was an English economist who was the founder of Keynesian economics. His father, John Neville Keynes, was also an economist and a lecturer at King’s College, Cambridge. His mother was a social reformer who was one of the first female graduates of King’s College
Born in Cambridge, England, Keynes was exceptionally gifted in mathematics. He went to Eton College and later transferred to King’s College, where he received a Bachelor of Arts in mathematics. After he graduated, he continued to attend classes in philosophy and economics.
Background and Career
After graduating from school, Keynes started working as a civil servant at the India Office in Whitehall. After leaving the position, he returned to the University of Cambridge to become a lecturer from 1908 until 1915. During this time, Keynes was able to leverage his experience as a civil servant to write his first book in economics called “Indian Currency and Finance” (1913). The publication eventually led him to become appointed to the Royal Commission on Indian Currency and Finance.
During the First World War in 1915, Keynes returned to work for the British government in the Treasury. He studied the terms of credit between Britain and its allies, as well as being responsible for figuring out strategies to conserve the supply of foreign currencies.
Keynes then represented the Treasury and went to the peace conference at Versailles. The conference provided him insight into the policies that were to be enforced upon Germany. It became a pivotal moment for Keynes because he resigned from the Treasury and then published another book called “The Economic Consequences of Power” in 1919. The book explained his perspective about how the Allies’ demand for reparation payments from Germany would devastate the German economy.
In the 1920s, Keynes continued to publish several books, including “A Treatise on Probability,” “A Revision of the Treaty,” “A Tract on Monetary Reform,” and the “Economic Consequences of Mr. Churchill.” He continued to put out more publications during the Great Depression and Second World War while continuing to influence the British government with economic decisions and revolutionizing modern economics.
Notable Works: Keynesian Economics
One of Keynes’ most notable works is being the founder of Keynesian economics. He provided profound insight into economic recessions and what governments should do.
Keynes argued that government should play an active role in stimulating the economy in a recession by increasing spending and lowering taxes. Even if governments go into a deficit because of increased spending, he believed that doing so can create more employment opportunities and improve buying power, which can improve the economy. Keynes wrote several books that are written on the basis of Keynesian economics, which includes:
The General Theory of Employment, Interest, and Money: In this publication, Keynes explained how the level of employment is determined by aggregate demand, not by the price of labor.
The General Theory: Keynes introduced the notion of how full employment can be maintained through government spending and a budget deficit. He argued how reducing wages does not lead to a reduction in unemployment, but rather, it would decrease income, consumption, and aggregate demand. Aggregate demand is defined as the sum of consumption investment and government spending.
The Legacy of John Maynard Keynes
Keynes’ research and publications formed the basis of macroeconomics today. The notion of challenging economic principles during his day led to the establishment of Keynesian economics. Although not all aspects of Keynesian economics may be relevant today, Keynes made a profound impact on economic theory and revolutionized the world of macroeconomics.
Keynesian economics can be seen in recent years. For example, then-U.S. President Barack Obama enacted the Economic Stimulus Act, where the government spent $224 billion in education, healthcare, and unemployment benefits. The legislation helped create more jobs in the economy as the government also provided grants and loans. It was an example of Keynesian economics as the U.S. government intervened in the recession by introducing actions that could stimulate the economy.
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