John Maynard Keynes

John Maynard Keynes was a British economist who argued for increased government intervention and planning. His General Theory continues to be an incredibly influential work in economics. Born in Cambridge, Keynes eventually studied mathematics at King's College.

In 1919, after World War I, Keynes attended the Versailles Peace Conferences. However, he resigned from the talks due to the harsh reparations for Germany. Keynes argued that reparations would make the Germans seek revenge as they were a large burden to pay off. His insights were proven correct when Hitler, who shared the population's anger, took control of Germany, promising to fix the economy.

Throughout the 1930s, during the global depression, Keynes developed what is now called Keynesian economics. It involves increased government spending in times of depression to stimulate the economy and prevent it from getting worse. In times where the economy was successful, the government would spend less. His theory was widely criticized by von Hayek and other economists who supported strict laissez-faire. While Keynesian economics is mostly characterized by increased government planning, there are three principal tenets to Keynesianism about how the economy works.

1. The total spending of the economy is influenced by many public and private economic decisions. Decisions could be anything from buying consumer goods to investing in the stock market. Due to this belief, Keynesian economists advocate for a mixed economy - some public and some private involvement.

2. Prices and wages take a while to respond to fluctuations in supply and demand. This means that the labor market sometimes has shortages and surpluses.

3. Keynesians believe that prices are quite rigid and that fluctuations in any major component of spending (consumption, investment, government, or foreign trade) changes the output of a nation.

John Maynard Keynes and his ideas have had a large impact on governments and their economies since he first proposed his ideas. During World War II, his ideas prospered due to the need for governments to manage the economy. His ideas were widely implemented until the 1970s, which was when inflation increased and growth slowed (stagflation). Without effective ways of dealing with stagflation, Keynesian economics became less popular and they were replaced with more laissez-faire systems. These more hands-off economic theories asserted the ability of individuals to make decisions in the economy without much government control.

Still, Keynes' theory in economics has worked for countries, especially during downturns. As the father of macroeconomics, his ideas about large-scale economic factors, like national output and interest rates, are important today. The United States often values an economy characterized by private involvement. However, Keynes' impact is longlasting. Evident in both FDR's New Deal and Obama's American Recovery and Reinvestment Act during the 2008 Financial Crisis, more government planning has stimulated economic growth that ultimately brought the nation out of recessions.

Sources:
https://www.ineteconomics.org/perspectives/blog/why-keynes-is-important-today
https://www.imf.org/external/pubs/ft/fandd/2014/09/basics.htm
https://www.econlib.org/library/Enc/KeynesianEconomics.html
https://www.investopedia.com/terms/k/keynesianeconomics.asp
https://www.econlib.org/library/Enc/bios/Keynes.html