John Maynard Keynes

John Maynard Keynes

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  John Maynard Keynes Life,work and impact on modern world
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  Biography  Born: 5 June 1883 in Cambridge, England, died: 21 April 1946 in Firle, Sussex, England  His father John Neville Keynes was an economist and a lecturer in moral sciences at the University of Cambridge  Keynes won a scholarship to Eton, where he displayed talent in a wide range of subjects  In 1902 Keynes left Eton for King's College, Cambridge  In May 1904 he received a first class B.A. in mathematics  In August 1906 he took the Civil Service examinations and was placed second of the ten who were accepted that year.  Keynes was very unhappy when he received detailed results of the examination.  He expressed disbelief at both the mathematics and economics results, and commented, probably accurately, that he knew more about economics than his examiners.
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   By 1915 Keynes was working at the Treasury where „...he was daily concerned with the economic management of the war. His special responsibility covered relations with allies and the conservation of England's scant supply of foreign currencies“  Another important period of Keynes' career was during the 1930s. This was a period of unemployment and the depression.  Conventional economics could not cope with the extraordinary events which took place leaving traditional economic theory with no answer.  Keynes first major work which indicates the direction his ideas were taking away from the conventional approach was A Treatise on Money published in 1930.  His most important work giving the culmination of his ideas was The General Theory of Employment, Interest and Money published in 1935-36
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  Keynesian economic beliefs  Markets are ineficient and they can fail  In the long run, economy can operate at equilibrium with unemployment because factor prices do not always change  Government stimulation and control in the economy is necessary for the economic wellbeing/ Government has the duty to intervene in the economy in times of recession.  Stimulation should in general case be approached trough encouraging consumption in the market place.  Country’s debt should be betwen 50% and 70%
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  Excessive saving  To Keynes, excessive saving, i.e. saving beyond planned investment, was a serious problem, encouraging recession or even depression. Excessive saving results if investment falls, perhaps due to falling consumer demand, over-investment in earlier years, or pessimistic business expectations, and if saving does not immediately fall in step, the economy would decline.
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  Active fiscal policy(government spending)  The classical economists wanted to balance the government budget. According to Keynes, this would lower the demand for both products and labor. For example, Keynesians see Herbert Hoover's June 1932 tax increase as making the Depression worse and would advise tax cuts instead.  Keynes′ theory suggested that active government policy could be effective in managing the economy  neo-classical and classical counter-arguments: firstly, it would increase the demand for labor and raise wages, hurting profitability; secondly, a government deficit increases the stock of government bonds, reducing their market price and encouraging high interest rates, making it more expensive for business to finance fixed investment.
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  Keynes’s influence inmodern world  Keynesian economics held great influence from 1930s – 1970 after which came a long period of domination of neo-classical economists, which lasted until 2008 when Keynesians start to win the importance back  Keynesian philosophy is incorporated in most of economies/countries of the world such as EU countries and in socialist countries in particular