K: Clode's Right Political Dictionary
“Keynesian Economics” This is a school of thought developed by John Maynard Keynes, built on the belief that aggregate demand is the primary source of business cycle instability. Keyne’s economic theory was most fully elaborated in his book The General Theory of Employment, Interest, and Money, published in 1936, in the wake of the “Great Depression”. For the next forty years, the Keynesian school dominated the economics discipline and become influential in government policy-making. Keynes argued that Great Depression was caused by the lack of aggregate demand, therefore he believed that government could phase public spending to offset fluctuations in the business cycle. Theories of the “Keynesian School” have been as much shaped by the followers of Keynes, as by Keynes himself. Over time, Keynesian economics has become used as a justification for welfare spending, rather than for spending on production or capital investment which Keynes originally saw as a means to creating multiplier effects which increased growth. Although Keynesian economics was widely practiced through the 1950s and 1960s, by the 1970s there was increasing inflation and higher unemployment suggesting to many policy makers serious flaws in Keynesian thinking. For instance, some analysts argued that aggregate supply might be at least as important as aggregate demand, leading to the creation of Supply-Side Economics as a counter theory. Although Keynsian policies have since been debunked, this economic theory has drawn attention to important factors, such as the role of aggregate demand, the business cycle instability of investment spending, the multiplier effect, and the role of fiscal and monetary policy.