Keynesian-Keynesian economics

Keynesian-Keynesian economics-what is keynesian economics?

Keynesianism (Keynesian economics) is based on Keynes's book, "Employment, Interest and Money" (Keynes, 1936) based on the idea of economic theory, that all countries adopt expansionary economic policies to promote economic growth through increased demand. Keynesian view that the macro-economic trends will restrict the individual's specific behavior. Since the late 18th century, the "political economy" or "economics" based on the continuous development of production, in order to increase economic output, while the Keynesian aggregate demand for goods is that the reduction is mainly due to the recession. Proceeding from this, he maintained that the balance of overall economic activity data can be macro measures to balance supply and demand. Thus, Keynes and the other based on Keynesian economic theory based on the theory known as macroeconomics, the study of individual behavior with emphasis on micro-economics to distinguish.

The main conclusion is that Keynesianism does not exist in the economy to full employment, production and employment in the direction of the powerful automatic mechanism. This so-called neo-classical economics, Say's law of the relative, who believe that prices and interest rates will tend to create automatically adjusted full employment. Trying to macroeconomics and microeconomics efforts to link into Keynes' General Theory "In the future economics of the most fruitful area, on the one hand trying to find his micro-economist macro express their ideas, on the other hand, such as monetarist and Keynesian economic theory, Keynesian economists trying to find a solid microeconomic foundation. After World War II, this trend developed into an integrated neo-classical school.

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Keynesianism - historical background
Keynes felt that time the dominant assumptions and theories are increasingly being challenged thinkers, writers and artists. When physics began to question the necessity of absolute time, writers began to question the narrative structure, the composer began to question whether the harmony of tone, when necessary, when Keynes began to question the economics of the two pillars: first, whether the currency must be a solid foundation, generally using a gold standard, followed by the identification of Say's Law, if the demand, the supply or prices will be reduced, thereby re-balance.
Keynes revel in the atmosphere to change people's thinking. It is this experience and the signing of the Treaty of Versailles that he finally decided to break with the traditional theory. 1920 he wrote the "Economic Consequences of Peace," this article, in which he not only set out his view of the overall economic consequences of the Treaty of Versailles, and established him as a national policy can affect real political experience of the economist position.
1930, Keynes published a series of state power and the overall effect of economic trends the article, the development of monetary policy is not just a fixed point of reference of the theory, he increasingly convinced that the economic system does not automatically follow Economics is called a curve that is called the optimal level of production forward. But he did not find evidence of both, but could not find a form to express these ideas.
The late 1930s, the impact of global economic system started Britain - was living in the center of the country. To take advantage of competitive advantage, according to British free trade policy, import food from other places and other low-value commodities, and save out of labor with a high-value manufacturing goods for export. Ricardo's theory of comparative advantage in this application to the British Empire reached the peak, and control, including India, Egypt and vast colonies, and their different economic and military allies such as Britain, Canada and Australia.
With the collapse of the German economy and the advent of super-inflation and, later known as the Great Depression, the advent of global production decline, the gold standard, the economy and to adjust the characteristics of the mode of production has led to criticism of the economy began to emerge. Dozens of different schools of thought contests. Keynes is spreading in this case a simple point: The reason why the Great Depression of the thirties, when produce is because investment in production and there was a wave of speculation - the factories and transportation networks were far beyond the individual was ability to pay. Of "insufficient demand" attention and he created to allow the government to regulate the economy in the form of a key component of the time so that many young economists to accept his theories and methods.
There are many economists oppose his theory that the root cause depression is not lack of demand, but the business confidence; Therefore, the correct approach should be to cut government spending, in order to restore confidence in returning to the gold standard.

 

Keynesianism - the basic theory
Keynesian view that the level of production and employment decisions on the level of aggregate demand. Aggregate demand is the entire economic system needs for goods and services the total amount. In the micro-economic theory, prices, wages and interest rates adjust automatically aggregate demand tends to full employment level. Keynes pointed out that the situation was rapidly deteriorating production and employment in the reality of that theory have put it better, in fact, this automatic adjustment mechanism did not work. The key is "insufficient demand" exists. According to neoclassical economic theory - "General Theory" In the past practice used to say - lack of demand is declining and the economic chaos of the symptoms not the cause, which in a normal operation of the market is not the case.

 

Keynesianism - AnalysisKeynes believed that taxation is a means to stimulate demand. In capitalist society, the economic crisis and the resulting "involuntary unemployment" due to lack of effective demand, ie consumption and insufficient investment. Solve the lack of effective demand, the market economy can not rely on self-regulation, but must rely on state intervention, especially in financial and tax intervention. He advocated not to finance the fiscal balance as a basic principle, as long as they contribute to balanced economic development, increase employment and national income, the state can issue bonds, the implementation of fiscal measures to stimulate demand deficit, increasing government investment to offset lack of private investment. Meanwhile, the state must use other methods to change the tax system to guide the propensity to consume and spend more.
Keynes believed that the disparity in income distribution, will reduce the propensity to consume. Although a lot of revenue because of the rich, but they are only a small portion of the consumer, to save a large proportion; while most of the additional revenue will the poor for consumption, but their additional income is very limited, is a contradiction. He advocated the use of income redistribution solution to this conflict, that is part of the rich income tax with a progressive approach to focus on the hands of the State, through government transfer spending way to the poor, or by the Government to set up public works, both to solution caused by a low propensity to consume, lack of consumer demand, may also increase government investment, which stimulate demand, supply and demand balance and to promote increased job opportunities.
Keynesianism and tax idea popular in the Western world over half a century, many capitalist governments have enshrined. In the production of relative surplus of historical conditions, Keynesian ideas to ease their tax capitalist contradiction between production and demand, reducing the extent of damage and the economic crisis after World War II economic development of Western countries, have played a certain active role. However, state intervention in the economy too much, too much emphasis on stimulating demand, tax burdens are heavy, big government spending, regulations and red tape, the capitalists will inevitably affect the investment and production and management initiative. After entering the 1960s, Western economies into a state of stagflation, the Keynesian theory and policy failure of tax by the monetarist school of Western economists, supply-siders and other challenges.