Neo-liberalism and Keynesianism essays

Neo-liberalism and Keynesianism essays It is often quipped that economists base many of their theories on assumptions. The old joke is that should an economist be stranded on a desert island, he will merely assume that a boat is available and quickly depart from the island. Indeed, whilst analytically comparing Keynesian and neo-liberal economics, it seems that economists assume that every person that peruses their journal articles has an extensive and exhaustive knowledge of macroeconomics. Thus, the danger for an enquiry such as this to degenerate into a fruitless analysis of finer points in economic theory can become apparent. For that reason, these two economic theories will be examined and analysed in the broadest possible terms. The work of the British economist, John Maynard Keynes, provides the basis for the Keynesian system. During the early 1920s and 1930s, there was widespread unemployment in Britain, the causes of which were extensively debated and analysed . Having attended the Paris Conference at the end of World War I as the principal representative of the British Treasury and deputy for the chancellor of the Exchequer on the Supreme Economic Council, Keynes was a prominent figure in this debate . Following the Great Depression in 1929, unemployment levels across the globe rocketed, with US unemployment reaching 26% in 1932 . In his book, The General Theory of Employment, Interest and Money, Keynes postulated his theory regarding the relationship between high unemployment and the deficiency in aggregate demand . Aggregate demand is the total demand for all goods and services by all buying sectors within an economy . Essentially, Keynes argued that the unemployment apparent in the United States and Britain arose as a result of a deficiency in aggregate demand, which was low because of inadequate demand for investment . In order to remedy this situation, Keynes suggested that government spending was the answer . The logic behind this is reasonably simpl...