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 State must be pragmatic and immediate government action is a prerequisite to boost demand and jumpstart the economy.

Thus, I believe that as the coronavirus ravages the economy, the government must take lessons from Keynes and indulge in immediate intervention by targeting the most vulnerable and affected. Through the multiplier effect, this initial injection will further create waves of spending and thus, reboot the economy.

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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...

Day 9: The Bible of Macroeconomics— The General Theory

Reading Keynes's The General Theory of Employment, Interest, and Money is a life-changing experience even in the 21st century. This means it was practically explosive during his times. A time dominated by the reigning classicists and their accepted axioms and ideologies, Keynes challenged all these existing theories and his book was a radical reconsideration of some of these founding principles of Economics, provoking a widespread revolution in economic thought. Keynes's affinity and prowess for problem-solving shines throughout this masterpiece of a book. The heart of The General Theory lies in its analysis of poverty and unemployment, which Keynes saw as having permanent and tragic political and economic consequences. According to Keynes, unemployment is not caused by rigidity of wages or prices, but by lack of incentives to increase production, due to lack of effective demand in the short run and lack of knowledge of the future in the long run. Keynes also addressed the ...

Day 5: Fiscal Policy

If Keynes were to take a peek at the economic scenario of the recent past, what would he see? Most households reduced spending in a bid to repay mortgages which were larger than the values of their houses. Though businesses acquired large amounts, they were hesitant to invest owing to decline in the value of assets. Student debt increased, while consumption decreased. Most importantly, governments reduced their spending in light of austerity policies that aimed to reduce public debt. As a result of an overall decrease in spending, national income decreased and so did jobs, which adversely affected global incomes and employment as well. Central banks increased money supply to stimulate spending, but reluctance to spend was at an all-time high. We were experiencing a Keynesian liquidity trap. This situation calls for a fiscal policy rather than a monetary policy. The government's bid to increase money supply rendered ineffective as the policymaker's ...

15 Days of Keynes.

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