Who was 'John Maynard Keynes'

John Maynard Keynes was an early 20th-century British economist, known as the father of Keynesian economics. His theories of Keynesian economics addressed, among other things, the causes of long-term unemployment. In a paper titled "The General Theory of Employment, Interest and Money," Keynes became an outspoken proponent of full employment and government intervention as a way to stop economic recession. His career spanned academic roles and government service.

BREAKING DOWN 'John Maynard Keynes'

John Maynard Keynes was born in 1883 and grew up to be an economist, journalist and financier, thanks in large part to his father, John Neville Keynes, an Economics lecturer at Cambridge University. His mother, one of the first female graduates of Cambridge University, was active in charitable works for less-privileged people. 

Keynes' father was an advocate of laissez-faire economics, and during his time at Cambridge, Keynes himself was a conventional believer in the principles of the free market. However, Keynes became comparatively more radical later in life and began advocating for government intervention as a way to curb unemployment and resulting recessions. He argued that a government jobs program, increased government spending, and an increase in the budget deficit would decrease high unemployment rates.

Principles of Keynesian Economics

The most basic principle of Keynesian economics is that if an economy's investment exceeds its savings, it will cause inflation. Conversely, if an economy's saving is higher than its investment, it will cause a recession. This was the basis of Keynes belief that an increase in spending would, in fact, decrease unemployment and help economic recovery. Keynesian economics also advocates that it's actually demand that drives production and not supply. In Keynes time, the opposite was believed to be true.

With this in mind, Keynesian economics argues that economies are boosted when there is a healthy amount of output driven by sufficient amounts of economic expenditures. Keynes believed that unemployment was caused by a lack of expenditures within an economy, which decreased aggregate demand. Continuous decreases in spending during a recession result in further decreases in demand, which in turn incites higher unemployment rates, which results in even less spending as the amount of unemployed people increases.

Keynes advocated that the best way to pull an economy out of a recession is for the government to borrow money and increase demand by infusing the economy with capital to spend. This means that Keynesian economics is a sharp contrast to laissez-faire in that it believes in government intervention.

RELATED TERMS
  1. Keynesian Economics

    Keynesian Economics is an economic theory of total spending in ...
  2. Keynesian Put

    A Keynesian Put is the expectation that markets and the economy ...
  3. Milton Friedman

    Milton Friedman was an American economist and statistician best ...
  4. Say's Law Of Markets

    Say's law of markets is a controversial economic theory that ...
  5. Fiscal Policy

    The use of government spending and tax policies to influence ...
  6. Quantity Theory of Money

    The quantity theory of money is a theory about the demand for ...
Related Articles
  1. Trading

    Giants Of Finance: John Maynard Keynes

    This rock star of economics advocated government intervention at a time of free-market thinking.
  2. Insights

    Seven Decades Later: John Maynard Keynes' Most Influential Quotes

    It's been 72 years since the influential economist died; here are some of his most influential quotes.
  3. Investing

    Deflation and Debt: Is the United States the New Japan?

    Discover how mainstream macroeconomics has failed Japan and why the United States should take care to avoid Japan's borrow, spend and print model.
  4. Investing

    Explaining the Liquidity Preference Theory

    According to the liquidity preference theory, investors demand interest in return for sacrificing their liquidity.
  5. Insights

    A Look at Fiscal and Monetary Policy

    There's a debate over which policy is better for the economy, monetary policy or fiscal policy. Find out which side of the fence you're on.
  6. Insights

    What Causes Bubbles?

    A look at how asset bubbles are formed according to different schools of thought.
  7. Insights

    Free Market Maven: Milton Friedman

    As proponent of free market capitalism, this economist changed the way the world's economies operate.
  8. Insights

    The History of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.
RELATED FAQS
  1. What is the difference between Keynesian and monetarist economics?

    Discover how the debate in macroeconomics between Keynesian economics and monetarist economics always comes down to proving ... Read Answer >>
  2. How do I negotiate a lower annual percentage rate (APR) with my credit card company?

    Discover the main factors of economic policy that, according to Keynesian economic theory, drive the marginal propensity ... Read Answer >>
  3. Why aren't economists rich?

    "If you're so smart, how come you're not rich?" is a question that economists seem to invite. If they can explain the intricacies ... Read Answer >>
  4. What is the Keynesian multiplier?

    Introduced by Richard Kahn in the 1930s, the Keynesian multiplier demonstrated that any government spending brings about ... Read Answer >>
  5. Why does unemployment tend to rise during a recession?

    Learn what a recession is, some attributes of an economy in a recession, and why the unemployment rate tends to rise during ... Read Answer >>
  6. How long has the U.S. run fiscal deficits?

    Read about the history of deficit spending in the United States, dating back to 1789, and learn about then-Treasury of the ... Read Answer >>
Hot Definitions
  1. Capital Asset Pricing Model - CAPM

    Capital Asset Pricing Model (CAPM) is a model that describes the relationship between risk and expected return and that is ...
  2. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  3. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  4. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  5. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  6. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
Trading Center