Where politics and economics meet, we often hear terms such as ‘Keynesian economics’, ‘Keynesian theory’, and the ‘Keynesian model’ bandied about. All of these terms are a reference to the late British economist John Maynard Keynes. Keynes’ ideas were considered revolutionary during his heyday as an economist, and they laid the foundation for the study of macroeconomics.
Why is Keynes so important as an economist? Because, whether you agree with him or not, his ideas have largely shaped the economic thinking of the late 20th and early 21st centuries. More world governments these days embrace his ideas than not. Keynesian economics can be observed throughout Europe, Asia, Africa, and South America.
It would be impossible to do Keynes justice by attempting to explain his entire line of thought here. As simply as possible, Keynesian economics rests on the belief that spending is the single strongest influence on economic strength. The more spending occurring within an economy, the stronger it is. Keynesian economics directly oppose the neoclassical economic model, which is based primarily in the concept of supply and demand.
Those who agree with the Keynesian model in the United States cite America’s recovery from the Great Depression through the war machine as evidence. They are quick to point out that the government spent untold billions to finance World War II. Those who disagree cite the faltering economies of Europe and South America as proof that it does not work as well as free markets. The faltering European Union and the debt crises observed in Greece, Spain, and Italy serve as examples.
The world may not agree on the validity of Keynesian economics, but that does not change the fact that John Maynard Keynes has been one of the most influential people in shaping modern economic policies. History will one day reveal if the many accolades he and his ideas receive are deserved. Until that day comes, the debate over neoclassic and Keynesian principles will continue in the halls of academia and government. The rest of us will keep working and paying our bills.