Day 15: Goodbye, Keynes!

"The difficulty lies not so much in developing new ideas as in escaping from old ones."

As we come to the end of our 15-day journey exploring Keynesian ideologies, I cannot help but to reflect on how much influence Keynes has exerted in not only the global economy, but in our daily lives as well. His revolutionary mind and endless vigor to challenge existing ideas paved way for new opinions and diverse outlooks in the field of Economics. The discipline was extremely rigid, unaccepting, and wary of alien inputs that varied from existing theories. However, Keynes barged in with his sunny optimism and completely revolutionized economic thinking, thus injecting flexibility in Economics and creating space for differing opinions.

Though Keynes has attracted cartloads of scrutiny and criticism, it cannot be denied that his contributions to the field of Economics are invaluable and have definitively shaped the course of modern Economics and how the global economy functions. Present-day governments still look to Keynesian ideologies, which further cement the relevancy of his work in different time periods.

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Day 3: In the Long Run, We are All Dead!

Today, I attended quite an interesting Public Economics lecture on government grants. My professor was talking about how the US government had approved $2.2 trillion worth of loans and grants in order to soften the blow of the COVID-19 pandemic on the most affected families and businesses. He then asked a fundamental question that left us pondering: "Do these hefty government grants and packages financed by taxpayers' money which benefits only a select few make good economic sense?" This brings us back to the 20th century, specifically the 1930's, and how Keynes's influential ideas led to aggressive government policies, rescuing the global economy from the Great Depression. Keynes was a staunch proponent of short-term policy interventions and famously believed that, "In the long run, we are all dead." Yes, things might get better in the future, but why wait for when no one will be alive to reap the fruits of the future? In times of economic crisis, the...

Day 12: Sticky Wages

Keynes blames the stickiness of wages for distortions in the job market, which affect employment rates. Looking at the trends exhibited by the economy during the Great Recession of 2008, nominal wages couldn't decrease owing to the sticky nature of wages. Companies responded by increasing lay-offs to cut costs without reducing the wages of the remaining employees. Therefore, the popular sticky wage theory postulates that employee pay tends to respond slowly to changes and exhibits resistance to decline even under deteriorating economic conditions. This can be attributed to the fact that workers will fight against a reduction in pay, so a firm will seek to reduce costs elsewhere. In a case of rising unemployment, wages of those workers who remain employed tend to stay the same or grow at a slower rate instead of decreasing with a decline in labour demand. Thus, wages are "sticky-down" as they can move up easily but experience difficulty moving down. Real wages are inste...

Day 10: The Interventionist

Out of all the contributions Keynes has made in the field of Economics, his interventionist approach is probably the one I most agree with. According to Keynes, economies don't stabilize themselves very quickly and require active state intervention to boost short-term demand. Wages and employment too, are slow in their response to the needs of the market, requiring government intervention to keep them on track. I firmly believe that interventionist policies are a massive improvement from the classical inclination to a laissez-faire stance. Such a "leave-it-alone" mentality can be downright harmful for the economy, as absolute autonomy can lead to chaos and mayhem, with private interests taking precedence over overall societal welfare. It also invariably widens the chasms of income inequality. Without government intervention, monopoly power would freely reign and such intervention can regulate markets to function more effectively, as well as cater to public and economic...

15 Days of Keynes.

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