The Economic Crisis in Retrospect

The Economic Crisis in Retrospect

Explanations by Great Economists

Edited by G. Page West III and Robert M. Whaples

As the United States continues its slow recovery from the global financial crisis of 2008, politicians, policymakers and academics are increasingly turning to the lessons of history to gain insight into how we might address both current and future economic challenges. This volume offers contributions by eminent economists and historians, each commenting on the theories of a particular 20th century economist and the ways in which those theories apply to modern economic thought.

Chapter 4: Insights from John Maynard Keynes

Bradley Bateman

Subjects: economics and finance, economic psychology, history of economic thought, international economics, political economy


What would John Maynard Keynes think about these trying economic times? These days this question immediately raises questions about the stimulus package. Was the stimulus package too big or was it too small? That is the big Keynesian argument today. Did the almost $800 billion package cause enough stimulus to lift the economy out of a bad recession, or was it too small, that we need more stimulus to the economy? However, if we are considering what John Maynard Keynes would have said about these rough economic times, I would say it is the wrong question. I do not think this is the particular debate that Keynes would have wanted to be in. He liked debates, so I am sure he would have gotten into the debate, but he would not have seen this as the core question. Let us start with what Keynes thought caused the Great Depression – or as Keynes would have called it, the ‘slump’. Between 1923 and 1939 there was only one year when unemployment was under 10 percent in Britain. After World War I, Britain settled into a very bad economic slump which lasted for several years before the Great Depression started in 1929. Keynes had already been working for many years trying to explain why the British economy was not performing as well as it might have. But when the Great Depression hit, he really went to work trying to explain what causes a capitalist economy to go through cycles.

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