Saturday, April 11, 2015

What are the benefits of the Keynesian approach to the economy today?

First of all, we must note that this question presupposes
that Keynesian economics is correct.  Not all economists agree that this is so.  If
Keynesian economics is valid, its benefit today is that it could get an economy like
that of the US out of its recession.


Keynes argued that
capitalist economies can remain below full output for long periods of time.  Classical
economics does not believe this is true.  Classical economists would argue that the
government should leave the economy alone and let it rebound
naturally.


It would appear that our economy has been
underperforming for some years now.  If Keynes is right, government policy makers should
cut taxes and increase spending.  This would cause our deficit and our debt to increase,
but it would be worth it because consumers would have more money to spend.  They would
spend the money, thus increasing aggregate demand and getting the economy growing
again.


If Keynes is right, then, following his
recommendations would get our economy out of its slump.

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