Question

IN YOUR OWN WORDS.

Give the background history of John Maynard Keynes and also give his contributions to economics.

Answer 1

John Maynard Keynes was a British economist who is considered to be the most influential economist of the first half of the 20th century and perhaps of all time. His ideas dominated the economics practics for 4 decades from the 1930s to mid 1970s. Despite attempts by Alfred Marshall ( the father of neoclassical economics) to persuade Keynes to study economics, he went on to do a philosophy course from University of Cambridge.

Although Keynes had become a prominent name by the mid-1920s and wrote at length about the great depression, his most important work came in the form of 'The general theory fo employment, interest and money' in 1936. the ideas presented became the major economic paradigm. Keynes supported the role of the government in managing business cycles through budget deficits and interventions. H believed that there is always some involuntary unemployment even at the equilibrium level and it is not investment that reacts to savings but savings that react to investment. He made a case for demand-side policy, increasing government expenditure during a crisis and reducing it during a boom (countercyclical policy). He also introduced the concept of price stickiness based on the belief that workers will not accept a nominal cut in their wages even if it is rational to do so. Overall the book is seen as the foundation of modern macroeconomics and the major themes have become the most researched and used tools in economic policymaking.