Day 8: Keynes the Optimist

For some, Keynes was a messiah who saved the world from the evil clutches of Great Depression, while for others, he is responsible for the mess that the current global economy is in. No matter what you stand by, it is a universal fact that Keynes was a cheery optimist. He was known for his sunny outlook and his ability to see beyond the grim present to better days, even amidst the darkest periods of economic history. He was dedicated to breaking the vicious cycle of economic pessimism that was plaguing his times, constantly reassuring the public that "this too shall pass." He very boldly made claims that when his great-grand children were adults, the world would've solved all its economic problems and the material requisites for a good life would be available to all (in the West).

Keynes's positive mindset withstood the storms of the Great Depression and the Second World War. When the Depression failed to respond to monetary policies, he strived to come up with a new cure for this disease. Keynes vehemently refused to accept the belief of his predecessors that the working classes must simply accept their fates and rather believed that people can design their own destinies.

Keynes helped make the "dismal science" of Economics a little less grim with his injections of positivity and optimism.

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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 13: Multiplier Effect

I am hungry. I buy two huge margherita pizzas. The cost of the pizzas to me is income to the seller. What the seller spends out of this income would be income to someone else. This goes on and on and on. This becomes an economy-wide chain reaction, or the "multiplier effect" as Keynes called it. Thus, consumption rather than thrift promotes economic growth, and the government should stimulate demand. Each unit of money it spends increases economic activity, not by one unit, but by one unit times a multiplier. The expenditure more than pays for itself! This seems like the panacea to all economic evils: the government should just spend and spend and this initial injection will further create waves of spending and thus, reboot the economy. However, this solution of spending more and not worrying about the incoming due bills sounds a bit too idealistic and "too good to be true" to me.

15 Days of Keynes.

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