John Maynard Keynes

1 . Describe Keynes` depiction of the Great Depression and his economic prescription for alleviating the crisis

John Maynard Keynes is a British economist who first brought about the modern field of macroeconomics . He did it with a new theory of economic growth and unemployment , explained in his book The General Theory of Employment , Interest and Money , published in 1936 . It took another 10 years for his ideas to earn widespread acceptance by economists . But when the U .S . Congress passed the Employment Act of 1946 , his ideas became an official part of

American policy and economic education

As a child , Keynes was already prodigious . Heilbroner , in his book Worldly Philosophers (1972 , deemed that Keynes at age four and a half was already puzzling out for himself the economic meaning of interest at six he was wondering about how his brain worked at seven his father found him a thoroughly delightful companion ' Heilbroner pointed out that Keynes ' abilities were so prodigious that it was as if the talents that would have sufficed half a dozen men were by happy accident crowded into one person

Keynes was mainly interested in monetary theory and he had worked in this field long before he encountered the Great Depression . He noticed the deep gap between the theory of the exchange of goods and monetary theory and made a lasting contribution to economics by introducing central issues discussed in the first field to the discourse of monetary economics . Monetary theory had so far concentrated on the quantity of money and the velocity of its circulation and its impact on prices Elasticities of supply and demand which were discussed with regard to the exchange of goods were not even mentioned in monetary theory as they were considered to be irrelevant in this sphere . Pre-Keynesian monetary theory was also wedded to a rather mechanical doctrine of equilibrium and to the basic assumption of the neutrality of money as a medium of exchange . The great insight of Keynes , that money links the present with the future and is therefore linked to all elements of uncertainty which beset predictions of the future course of events , was of no concern to earlier monetary theorists

At the onset of the Great Depression , the dominant view among mainstream economists in the U .S . was that the initial downturn of investment and output was a more-or-less normal cyclical phenomenon and that recovery would inevitably follow . Economists disagreed about the proper monetary wage and price policies for facilitating recovery but the idea that this recovery might fail to lower unemployment below catastrophically-high levels did not initially enter the heads of mainstream economists . The Depression and associated policy issues were initially viewed in short-run cyclical context rather than as connoting any long-run barrier to a full recovery of investment (Stoneman , 1979

In his early works on monetary theory , Keynes did not question neoclassical doctrine and the quantity theory of money . But he was already grappling with the phenomenon of `liquidity preference , like the propensity to hold...