John Maynard Keynes was arguably the greatest economist of the 20th century. He discovered the idea that governments should stimulate demand during economic downturns – and was the creator of both the IMF and the World Bank. His ideas continue to underpin a lot of the modern economic system. If you like our films, take a look at our shop (we ship worldwide): https://goo.gl/C92mGs
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Dr Chris Grocott
Keynsian thinking always made sense to me because it was driven by the idea of preventing extreme economic failures. Neoliberal thinking just seems to rely too heavily on "markets will solve everything" - a very irrational and faith, rather than evidence based, thinking.
Keynes was good, yes, but is not "arguably the greatest economist of the 20th century" as your description of him would suggest. He got a lot wrong and invokes the government (ie. reduce freedom at the point of a gun) whenever he can't figure out how to make his system work. He's a mediocre economist at best.
Keynes' most serious analytical failure was to discount out of hand the power of land markets and land speculations as a fundamental driver of cycles of boom-to-bust. He ignored changing land use; and, in particular, the rising rents extracted by owners of centrally-located or resource-laden lands.
Keynes was correct, the way that the world economy snapped back after the 2008 crash proves the basics yet again, for one thing, it is consumption that drives the economy and when consumers stop buying the government MUST step in for the short term, end of story. If he were alive now he might be appalled at the way that the United States is spending like there is no tomorrow when it had a chance to start paying off some of the debt however, I suppose that we will see how that plays out over the next couple of years.
Given the current state of education in increasingly class stratified 🎺 ‘Merca, seemingly approaching pay to play for education etc...these vids, data, libraries & podcasts might literally become the new PhDs lmao
The Great Depression began with the Wall Street Crash of 1929. Keynes main contribution to economics 'The General Theory' was only published in 1936 but wasn't really listened to by governments until the 1940s. Now, you might blame the economic problems of the 1970s on Keynes, but you simply can't blame those of the 1930s on him.
Brilliant, summary...'Not Dogmatic', when in discussion about economics its the phrase I use about Keynes, so thanks for the confirmation. Friends and I always agreed that "Philosophy should always be written in pencil', and so should economic theory, it maybe considered a science, but its not an absolute....yet...
The narrator was 'economical' with his explanation of how the increased public spending was to be repaid. Keynes clearly states that the borrowing was to be repaid by increased taxation - meaning higher rates of tax and not just by increased tax revenue from the increased economic activity. The higher rate of tax was necessary to avoid the economy overheating. Money was put into the economy in a downturn and was to be taken out on an upturn so as to level consumption and prevent inflation. No government anywhere has ever applied Keynes' principles in full. Almost all western governments borrowed and spent but none of them did the politically difficult bit of increasing the tax rate on the upturn.
Governments shouldn't inject money into the economy to stimulate growth or create employment. The market is more competent than the government. Keynesians have some level of trust in a government that I can't muster. The only way a Keynesian based economy can truly function is under a Keynesian based dictatorship that one can genuinely trust to make "wise regulations."
I think you left out the part where he recommends that, in good economic times or upswings of growth, that governments should decrease spending, and allow the markets to do their thing, maintain or increase taxes and pay down its deficits...woeful and/ or willful obfuscation?
You had me until you blamed the 2008 crisis on neo-liberals, in which you clump the classic liberal Milton Friedman, which is laughable. If things were so wonderful under the keynesian system, why the switch? And LBJ was not Keynesian by your initial definition. He didn't create a deficit in order to create jobs, he provided a welfare state.
Keynes only believe that governments would save economies from recessions, stagnations, and crises because, in his own argument, the free market had gone through unexpected pace, which in the end, the markets were out of control.-
Basically he teached the world how do create more poverty using the State (a coercitive and imoral institution) to manipulate the economy. Unfortunately people do not try to understand the real effects of his method of "solving the market problems"
when has the government ever saved a penny? oh yeah, never. and even if they did, how would that help? think about it. if the government had a 50% flat tax during "good times" (doing this for easy math) and packed all of it away in a piggy bank it would drive prices down, so that they would be approximately half what they would be if there were no taxes (not exactly, as people have savings), but since people only have 50% income nothing really changes. but the thing is, static money, is in some ways nonexistant. the government saving money is identical to the government reserving the right to print massive amounts of money. literally the exact same thing, effectively. when you try to reintroduce that money into the system it doesn't produce any more goods, instead it will cause inflation.
The real reason people like Keynesian economics is because it gives the government power over who wins and who loses, instead of that being decided by society as a whole through voluntary transactions. the most important point is how the "saved up money" is distributed once the time comes. who payed into that savings fund vs who receives money out when things get bad. THAT RIGHT THERE IS THE KEY(nesian). it is a wealth redistribution scheme just like any other. It can be more akin to socialism, where the unproductive reap the rewards of the productive in return for votes, or more often than not, crony capitalism, where those who lobby government get first grabs on the "stimulus".
Its pretty simple once you think about it for a few minutes. and also explains why Keynesian economics has received a surge of popularity in gov subsidized schools...
The one thing i do find interesting about it though is the psychological aspect of it. if the economy looks healthier than it truly is due to this stimulus people will invest more into it which should ACTUALLY make it stronger. or it might just create bubbles which is kind of the opposite of what keynesian is supposed to do. Its like if you are playing poker and you think you are playing with better cards than you really are. yes, you will put more money in (so have the potential to get more out), but the question is, will you win?
and you think that makes it better? when the government pays for things it doesn't have the money for all it does is cause inflation which is essentially a tax on anyone with a savings account. this is also why the real tax rate is actually much higher than it would appear.
But Keynes isn't suggesting that the government should save money, not least of all because government doesn't pay for things out of money on deposit, it pays for it via loans from central banks which it then pays back with taxation.
Yet again...an example of how Britain produced far more egalitarian minded economists versus the malignant guerrilla vulture capitalist minded Americans bent on unfettered free market capitalism ...corporate greed has stars and stripes written all over it
Tragically for the world, Keynes' ideas are impossible to correctly execute. He assumed that politicians would use reason to adapt it's policies to the cycle. In reality, government expansion is always easier than shrinking government. His theory has caused big harm because of the political aspect.
good rundown! im gonna have to read that essay about the grandchildren. it seems to me in the war of ideas, the nation centric idea of economy has sailed, and globalism has won. i hope for good reason.
i do not like to see my country backsliding on more primitive ideas, and nothing to me is more primitive than chanting over and over 'America first'
sure buddy look out for yourself. who will look out for the vietnamese rice farmer, themselves? or is it supposed to be vietnam? i guess they should be in charge of pulling the still active mines out of their country, too.
sucks to suck, bucko.
Poor Keynes will be spinning in his grave after learning you CANNOT manipulate markets to try push them in any particular direction... it’s a natural trend based on human confidence.. look at the stupid quantity of money theory. QE 1, 2, 3 & 4 yet they didn’t get the inflation they wanted.. Keynes could have just looked back in history to the panic of 1840 to see this wasn’t gonna work.
What a massive deficit making, shortsighted, government manipulating, baby eating, disaster his Marxist academic theories have caused us.
As Richard Thaler puts it JM Kaynes is father of modern macro economics. Mr. Thaler won Nobel award for his work which is basically govts gotta give a nudge, I wonder what Frideman would say about Thaler if he was still alive or how Amazon, FB and Google's monopoly and free marker
So let me get this straight, the government basically gives the money to the people creating debt for government. And in return, they get the all the money back to pay off the debt and then some. And boom, the economic problem is fixed?
Well the government funds projects which creates jobs for people in the short term, hoping the people will use the money to increase consumer demand. Then, when consumer demand eventually increases again to a pre-downturn point and the economy enters another period of growth, the government pays off its debt with taxes.
IF the government doesn't have the money, it should acquire money through government bonds (debt). And the government can always find projects for people to work. There are always ways of improving our infrastructure or repairing and fixing housing and other buildings.
Ah, the "multiplier effect": the liberal alternative to the conservative shibboleth of prosperity "tricking down." Politics by phrases, if you ask me, but that's democracy. Still, as the man said, better than the alternatives.
Wow, you're comment is so misinformed it's kind of funny. First: No economist actually thinks trickle down economics is a thing. That phrase came from a misinterpretation of the policies of Republicans like Reagan. The original idea was to offer tax incentives to the upper class in order to get them to perform actions that the government deemed good for society. For example, one could get a tax break if they invested more in green energy for their manufacturing plants or opened up a new plant. A lot of news outlets didn't understand this though, and just assumed that the money was supposed to trickle down to the lower class, which was never the intention: https://fee.org/articles/there-is-no-such-thing-as-trickle-down-economics/
The fiscal multiplier is like was not an alternative to the tax incentives. For one: It's only ever supposed to be preformed during economic downturns. The rest of the time the government is supposed to be running a budgetary surplus under Keynes. You also put the phrase in quotes, implying to me that you don't think it exists. This is far from the case. There is no doubt that the fiscal multiplier does exist: https://www.imf.org/external/pubs/ft/wp/2014/wp1493.pdf and http://www.nber.org/chapters/c12634 The only question is whether these multipliers are large enough to warrant the government spending.
Yes, because our economy totally imploded due to our debt. First, nominal debt means nothing. Debt to gdp is the only statistic that really matters and, according to that, we're alright. Not great, but not horribly off.
Furthermore, Keynes only wanted government deficits during downturns. During economic growth he wanted the government to run a surplus. You can't blame the stupidity of policymakers on an economic school they decided not to follow.
Blockchain tech in conjunction with parts of keynesian and other economic theories could be exactly what this planet needs. We are just waiting for somebody to come along and put the puzzle pieces together.
Have you ever taken a job that didnt pay you fake money? Of course not. Everyone of us has been conditioned that fake money is real money. So as long the govt keeps printing fake money. People will continue to have jobs.
Most of the post war years to that point was Keynes getting into debates with Monetarists like Friedman. The school of economics we use today was a merging of the two debating fields (Keynesianism and Monetarism), into the neo-classical school. We also haven't had one crisis after another, and it's frustrating that you think so. In the last 15 years we've had one crisis, the Financial Crisis, and in the last 20 that number increases to two, with the Tech Bubble being added, but even that crisis was a minor one at best.
Also what go us into the Great Depression was the gold standard. Keynes himself even said so. And, as data shows, it was leaving the gold standard that got us out of the depression. This is shown here: http://www.nber.org/papers/w6060 here:https://upload.wikimedia.org/wikipedia/commons/b/b5/Graph_charting_income_per_capita_throughout_the_Great_Depression.svg and Friedman's famous book 'A Monetary History of the United States'. That's not to say Keynesian policies didn't help our economy, they just weren't the force to push us out of the depression.
Basically what I'm getting at is treating him like a messiah is only going to hurt your cause, and economics in general. He's human, he made mistakes. His biggest critic, Friedman, is also human and made mistakes. It's taking what they did right which is how we got to where we are today, with global poverty exponentially lower than it was even fifty years ago.
Just because the americans wanted to bound the exchange rates to gold in Bretton Woods. That system had to collapse, what it did in the 70s. But till this day Keynesianism was incredible successful. Today we have one crisis after another and economists who think there are non. And people who pray austerity in a crisis. Thats what got us in the biggest recession in history in the late 20s. Nowadays after every crisis neoliberals expand there theory, and still don't believe in the theory who can explain every crisis.
Keynes was correct that governments do have it in their power to bring about sustainable economic growth, but the mechanisms he advanced were critically flawed. A main problem with Keynes was his failure to understand that the rent of land was claiming a higher and higher proportion of the wealth produced by labor and capital goods. The escalating price of locations in major cities should have given him cause to revisit Ricardo's work in developing the law of rent, expanded beyond agricultural land into all locations, rural and urban, and land-like assets (e.g., the broadcast spectrum and even take-off and landing slots at airports. His perspectives remained neoclassical, ignoring the fact that the price mechanism does not clear the markets for land as it does for labor and capital goods (and, depending on the extent of government control, for credit).
Don't watch the video, ill sum this clown up in one sentence. Keynes believed during economic downturns, the government should pay people to dig holes in the ground and then pay other people to fill the holes back up.
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