Keynesian vs classical economics Essay
Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations on March 9, 1776, which is believed to be considered the first modern work in the field of economics. Three main concepts that Smith expands upon within his writings are the division of labor, pursuit of self interest, and freedom of trade. These three main concepts also assisted in the foundation of free market economics. Adam Smith deeply impacted economics in general and helped form some of the various economic systems that are still used today.
The “Invisible Hand” is a metaphor created my Adam Smith to describe the self-regulating behavior of the marketplace. Many traces of Adam Smith’s work can be found in today’s economic systems and structures. He was surely a pioneer to the study and teachings of economics. Comparatively to Adam Smith’s work, British lord and economist John Maynard Keynes had a much different perspective on how the economy works and how it should be handled. Keynes had Just as much of an influence on economics as Adam Smith. John Maynard Keynes was the founder of Keynesian economics.
Keynes believed that in a receding economy, economic depression, or economic downturn of any kind, a
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However, as you can see in today’s day in age; the government does not have the money to fuel the economy any further. So perhaps a variation between the two types of economic systems that were discussed here could be a better solution to the recent economic downturn. I believe that John Maynard Keynes is right in the sense that the government should provide some sort of back-up plan for when the economy begins to recede or alls into a depression. However, the government should only give the minimum amount of assistance and then let Adam Smith’s theory of the “Invisible Hand” take place.
For instance, after the Great Depression struck, unemployment was extremely high and no one was spending, thus causing the economy to crumble. Franklin D. Roosevelt decided to create government Jobs throughout the country to decrease the level of unemployment and get people to start spending again. After that, the economy began to stabilize. This is the kind of variation I was talking about. Perhaps one day a new type of solution for the economy can be found.