Management Economics - Personality of John Maynard Keynes - Essay Example

?Management economics Management economics Personality of John Maynard Keynes John Maynard Keynesis considered one of the most influential economists of the 20th century. British by birth (1883-1946), the economist achieved maximum fame during the first few years of 1900s due to “his revolutionary theories on the causes of unemployment and recession” (“John Maynard Keynes”). Later on, these theories attracted the attention of various other economists and thinkers around the world and became known by the name of Keynesian economics. The vibrant personality of this economist was a combination of his intellect, sharp mathematical skills and strong deducing capabilities that helped him to assess the future consequences of the present economic activities taking place in an economy. He displayed both mathematical dexterity and wide literary grace. As a good economist, Keynes took keen interest in statistical methods of solving economic problems and maintained strong vigilance on the activities that took place in the economy. He mastered the way of observing the particular details that occurred in an economy and then used these details to develop general economic theories. As a person, Keynes demonstrated a dazzling intellect and an arrogance which, to some appeared to be the result of dismissive elitism of the Victorian era. Three elements guided the thoughts and writings of Keynes. These three elements were his presumptuous egotism, his strong identification with the elite class to which he was born and his despise for the values held by the bourgeoisie class (Rothbard, “Keynes, the Man”). Keynes overweening egotism allowed him to get the confidence that he was capable of handling the intellectual problems that arose during the contemporary period and solving them with precision. He scorned at the general principles that went against his ego. This man strongly believed that he was destined to become the leader of the ruling elite class of Great Britain. Keynes dealt with the issues that arose in Britain with a sense of perceived self confidence. He occupied a “position of power and dominance” (Rothbard, “Keynes, the Man”). Besides, the deep hatred of the values held in the bourgeoisie way of leading life made Keynes rebel against the institutions and establishments of family life, that supported the notions of savings and prudence. He led the life that was characterized by “social intellectual rebellion” (Rothbard, “Keynes, the Man”), the life of an aesthete and a bohemian. Major contributions in the field of economics Keynes’s elucidated the causes of rampant unemployment that affected major economies around the world. In most of the countries, unemployment rates soared high and all efforts to reduce inflation rate failed to bring the desired result. Keynes was able to realize the looming shadow of depression that was going to envelop the world economy and argued that monetary policies would not be sufficient enough to combat the effects of depression (Snowdon and Vane 34). He suggested the policy measures, which would help in increasing the aggregate demand and reduce unemployment. Despite the optimism of the time during his youth, Keynes intellectual career started with his thoughts about recession that was about to hit the world economy after a period of economic boom. The Great Depression actually arrived in the mid 1930s, towards the end of Keynes life span. During his life, Keynes had made significant efforts “to make sense of the disruptions and crises that began with the First World War and continued through the Great Depression” (“John Maynard Keynes”). His theories made profound impact in the macroeconomic field of study. Microeconomics Micro economics deals with the theories of demand and supply in the market at the firm level. According to most economic thoughts, there is a departure between micro and macro points of view of the world and the market. There is a distinction between the way in which the economy as a whole works and the way single firms behave. However, it has to be acknowledged that macro economy is an aggregate view of the micro elements in the economy. Keynes attempted to study the instability in the aggregate variables, which helped to develop micro foundations to macro economics. In his book General Theory written by Keynes, he agreed that human decisions affect the behavior of the market and all personal and political actions are derived from micro level individual behavior (Rodrigo, “Micro and Macro: The Economic Divide”). Macroeconomics Keynes was of the view that government has to interfere in the economy and the market. In order to make the economy operate in a smooth manner, the government has to play an important role in the economy. Keynes’ vision was “reformed capitalism” (“John Maynard Keynes”), which was a combination of capitalism and socialism. Keynes’ works contributed to a theory of “comprehensive socialization of investment” (“John Maynard Keynes”). He devised the IS-LM model that helped to study the movements of the different market actors and the level of money supply. He strongly emphasized that the state was responsible to make fiscal policies that would boost up investment activities in the economy. In this condition, the monetary policies are not powerful enough to correct the economic anomalies that occur in course of a business cycle. The aim of these fiscal policies is to improve the business climate in the country and help the managers of various companies to take such investment decisions that would increase overall level of investment in the economy. According to Keynes, the decision making process should be decentralized and aligned to the market rather than being developed by a central planner (Keynes 56). This theory became widely accepted after the World War II in the developed nations of Europe and North America (Stroup, Sobel and Macpherson 47). Relevance to modern day economy Keynesian economics in simple terms refers to the aggregate demand in an economy and considers the effect of aggregate demand on price level and aggregate output in the economy. Keynesian theory is the “theory of total spending in the economy (called aggregate demand) and its effects on output and inflation” (Keynes 37).It is a general theory of employment, interest rate and money supply in the economy. Therefore, this theory is highly relevant to the present day economies. It has been argued by several economists that although Keynesian tools are still being used in the modern economies, the conclusions of the general theories are not always found to hold true (Pressman 520). It can be said that the conclusion of the theories are not static with the time frame, but changes with passage of time. Hence, when the same theories are applied to the modern day economies, the conclusions have to be derived in accordance with the current economic environment. The principal tenets of Keynesian school of thought are unemployment, aggregate demand, aggregate output and inflation. These elements are always the fundamental and most crucial elements in the economic decision making. Contributions to extend the field of economic study Keynes lived during the late Victorian era when there was peace and prosperity in the economies around the world. Although Keynes was optimistic about the period during which he lived and was self confident about the prosperity of the British rule that run the world economy, he was insightful about the period of profound economic disruptions that followed the Victorian era. His theories relates to the level of unemployment in the economy, the aggregate demand and price level in the economy (Dow and Hillard 6). The theories of Keynes have turned the economic view of the world economy and have lent a new outlook and approach to economic thinking. Based on these foundations, new developments would be made in the process of economic decision making. Works Cited Dow, Sheila C. and John Hillard. Post Keynesian Econometrics, Microeconomics and the Theory of the Firm. Post Keynesian. The UK Forum for Post Keynesian Economics, 2002. Web. 10 Sep. 2013. John Maynard Keynes. PBS. Public Broadcasting Service (PBS), n.d. Web. 10 Sep. 2013. Keynes, John Maynard. General Theory of Employment, Interest and Money. New Delhi: Atlantic Publishers & Dist, 2006. Print. Pressman, Steven. “Microeconomics After Keynes: Post Keynesian Economics and Public Policy.” American Journal of Economics and Sociology 70.2 (2011): 511–539. Print. Rodrigo, G. Chris. Micro and Macro: The Economic Divide. IMF. International Monetary Fund, 2012. Web. 10 Sep. 2013. Rothbard, Murray N. Keynes, the Man. Mises. The Ludwig von Mises Institute, 2003. Web. 10 Sep. 2013. Snowdon, Brian and Howard R. Vane. Modern Macroeconomics: Its Origins, Development and Current State. Cheltenham: E. Elgar, 2005. Print. Stroup, Richard L., Russell S. Sobel and David A. Macpherson. Economics: Private and Public Choice: Private and Public Choice. Connecticut: Cengage Learning, 2009. Print. Read More