The Keynesian prescription

Though most people are unfamiliar with the names of economists, the name John Maynard Keynes may generate some interest, says host Mary Walden. Keynes is associated with government stimulus programs, which are very controversial. She asks her husband, N.C. State economist Mike Walden to give a thumbnail summary of Keynes’ ideas.

Mike Walden, “Well, Keynes was an English economist, Mary, who died in the late 1940s. He’s probably the most influential economist of the 20th century, whether you think that influence is good or bad. He worked on a lot of issues across the board. Probably the issue that he’s most famous for is the one that you mentioned in that he institutionalized the idea of government taking action during recessions to try to moderate the depth of the recession and indeed try to bring the economy back. These (efforts) are called stimulus programs. Some call them ‘pump priming.’ The United States used them in the 1930s, and really now every time we’ve gone into a recession they’ve been using one shape or form. The downside of course to these programs is that government has to go into debt to fund them. And we saw that again in a major way during this past recession. Perhaps what is not remembered though about Keynes’ prescription is that he recognized governments would go into debt to try to stimulate the economy during recessions. Therefore, he said once the economy’s back on its feet, the government should actually run surpluses to pay down on that debt. So, he actually had a very comprehensive plan, both for during the recession and after recession.  I think many people have actually forgotten part two of Keynes’ prescription.”

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