Day 9: The Bible of Macroeconomics

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 "fallacy of composition" that exists in the way classicists ran things, referring to the mismatch between individual behavior and aggregate outcomes. This paved way for Keynes's being a staunch proponent of interventionism.

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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 2: The King of Macroeconomics

Keynes is regarded globally as the founding father of Macroeconomics. Keynesian economics is a macroeconomic theory of total spending in the economy and its effects on output, employment, and inflation. This theory was the first to make the move from studying individual markets to studying broad national economic aggregate variables and constructs. Macroeconomics as a distinct discipline only came to fruition due to Keynes's seminal work, The General Theory of Employment, Interest, and Money. Through this macroeconomic masterpiece, Keynes introduced the notion of aggregate demand, a sum of consumption, investment, and government spending. He put forth the idea that it is this aggregate demand that drives supply in the economy, and not vice versa like the classicists believed. Therefore, demand is the driving force of the economy, not supply. Keynesian economics thus argues that healthy economies spend or invest more than they save. To create jobs and boost consumer purchasing p

15 Days of Keynes.

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