John Maynard Keynes:

Keynes was a British economist and one of the most

influential of the 20th Century.
John Maynard Keynes was born on the 5th of June 1883 in
Cambridge into a well-to-do academic family. His father
was also an economist and his mother became the
towns first female mayor. After being educated at Eton,
he followed onto further education at Cambridge
University and excelled academically

What is Keynesian Economics?

Keynes believed that if Investment exceeds saving, this will cause inflation
and that if saving exceeds Investment, this will cause recession. During an
economic depression, some think that the government should encourage
spending and discourage saving to stimulate the economic growth further.
However, Keynes believes the contrary and states that For the engine which
drives Enterprise is not Thrift, but Profit, arguing that caution is required in hard
times.
Keynes also commented on Says law, a popular economic given of his
era. The law states that supply creates demand but Keynes believed the
opposite to be true- output is determined by demand as he thought that this
would stimulate consumer competitiveness and thus enhance sales.
He also argued that full employment could not be reached by decreasing
wages. This is because the economy is made up of AD resulting from how much
people inject (spend) money on the economy, which therefore supports his
theory that unemployment is caused if people dont spend enough money.
In recessions the AD of economies falls because firms and households
have more Marginal propensity to save which causes demand to fall and
therefore results in the increase of unemployment and further falls in spending.
Yet Keyness solution to this problem was to encourage governments to borrow
money and inject money into the economy, boosting demand. Then, once the
economy had recovered, and was growing in GDP, governments could thus pay
back the loan.
In order to maintain an economically and socially successful economy,
they have to have significant contributions from the government and private
sectors, promoting a mixed economy in order for achieving maximum economic
potential. Keynes believed that governments play a major role in economic
management and this marked a break with the laissez-faire economics of Adam
Smith, which stated that economies function best when markets are left free of
state intervention.