An cult member, apologist for state intervention, propagandist, and all-around useful idiot.
Keynesian: GDP = C + G + I +Ne. More government spending (G) increases GDP. The government needs to stimulate to increase prosperity.
Sane Person: But doesn't that substitute the political process for the market process in determining how society's scarce resources are allocated? If central economic planning lead to prosperity wouldn't North Korea be the most prosperous place on Earth?
Keynesian: Paul Krugman didn't tell me that, so it can't be true! Racist!
influenced by the economic theory of John M. Keynes (1883-1946); in particular, Keynes' book *The General Theory of Employment, Interest, and Money* (1936). The main point of Keynes' general theory (GT) was that market economies are not usually self-correcting, and occasionally require some sovereign intervention to prevent inflation or depression.
One of the policy prescriptions of the GT for curing recessions was to lower interest rates; another, more potent tool, was to deliberately run a fiscal deficit
as a strategy for increasing aggregate demand
. The GT was too late to have much of an impact on the Great Depression
, but it did have a major impact on the economic policies of the Western Democracies from 1946 to the present.
During the period 1979 to 2001, Keynesianism was supposedly discredited, but national governments continued to use stimulus packages
and monetary policy
to resolve recessions. The policy has evolved, but remains the cornerstone of actually existing government behavior.
Attacks on Keynesianism: the most famous adversary of the GT was Friedrich von Hayek (1899-1992) of the London School of Economics, who insisted that an authentically free market would be self-correcting ...