Keynes and Shumpeter

Who is John Maynard Keynes?

John Maynard Keynes was an early 20th-century British economist, known as

the father of Keynesian economics. His career included academic roles and
government service.

One of the hallmarks of Keynesian economics is that governments should

actively try to influence the course of their nations' economies—especially to
increase spending and lower taxes in order to stimulate demand in the face of
recession. His theories also address the causes of long-term unemployment.
In his seminal 1936 work, The General Theory of Employment, Interest, and
Money, Keynes became an outspoken proponent of full employment and
government intervention.
Key Takeaways
● British economist John Maynard Keynes is the founder of Keynesian
economics.
● Keynesian economics argues that demand drives supply and that healthy
economies spend or invest more than they save.
● Among other beliefs, Keynes held that governments should increase
spending and lower taxes when faced with a recession, in order to create jobs
and boost consumer buying power.
● Another basic principle of Keynesian economics is that government spending
is necessary to maintain full employment, even if a government has to go into
debt.
● Keynesian economics is attacked by critics for promoting deficit spending,
stifling private investment, and causing inflation.
Who is Joseph Schumpeter?

Joseph Alois Schumpeter (1883-1950) was an Austrian-trained economist,

economic historian, and author. He is regarded as one of the 20th
century's greatest intellectuals. Schumpeter is best known for his theories
on business cycles and the development of capitalist economies, and for
introducing the concept of entrepreneurship. For Schumpeter, the
entrepreneur was the cornerstone of capitalism—the source of innovation,
which is the vital force driving a capitalist economy.
Key Takeaways
● Joseph Alois Schumpeter is best known for his 1942 book Capitalism, Socialism,
and Democracy, the theory of creative destruction, and for offering the first
German and English references to methodological individualism in economics.
● Schumpeter served as minister of finance in the Austrian government, the
president of a private bank, and a professor, before being forced to emigrate, due
to the rise of the Nazi Party.
● The economist coined the term "creative destruction" to describe how the old is
being constantly replaced by the new.
● Schumpeter also introduced the concept of entrepreneurship.
● Schumpeter’s work was initially overshadowed by the contrasting theories of his
contemporary, John Maynard Keynes, but it now has become the centerpiece for
modern thinking on how economies evolve.