John Maynard Keynes?

Question

who is John Maynard Keynes?

what was "Bretton woods" conference? what role did keynes play in the conference?

what was Keynes theory of full employment?

Answer 1

John Maynard Keynes, Baron Keynes of Tilton (June 5, 1883 – April 21, 1946) was a British economist whose ideas, called Keynesian economics, had a major impact on modern economic and political theory as well as on many governments' fiscal policies. He is particularly remembered for advocating interventionist government policy, by which the government would use fiscal and monetary measures to aim to mitigate the adverse effects of economic recessions, depressions and booms. Economists consider him one of the main founders of modern theoretical macroeconomics. His popular expression "In the long run we are all dead" is still quoted.

In his magnum opus, The General Theory of Employment, Interest, and Money, Keynes laid the foundation for the branch of economics termed "Macroeconomics" today. Based on the methods devised by Alfred Marshall he argued that macroeconomic relationships differ from their microeconomic counterparts because the ceteris paribus clauses applicable to different levels of aggregation differ. The view that for given prices and wages income determines demand (see IS-LM), pre-dates Keynes. His innovation is to take, in his core argument, prices and wages as perfectly flexible and establish that the interaction of "aggregate demand" (in his sense) and "aggregate supply" (in his sense) may lead to stable unemployment equilibria. His work on employment went against the idea that the market ultimately settles at a state of full employment - a central tenet of Classical economists. Instead he argued that there exists a continuum of equilibria, the full employment equilibrium position being just one of them. (This idea underlies the choice of the title "General Theory": the classical theory being just a special case.)

His main contribution can be seen in establishing an approach to macroeconomics that maintains its relationship to the underlying microeconomic behaviors but assumes a form qualitatively different from microeconomic models. In doing so, he maintained many factually doubtful assumptions. He assumed for instance that (marginal) labor productivity decreases with expanding employment. This is incompatible with the empirical findings summarized in Okun's Law. He combined this position with the marginal productivity theory of wages, implying that real wages decrease with increasing employment. This is empirically incorrect, as has been pointed out by the economist Dunlop, and the criticism has readily been accepted by Keynes. Further, Keynes suggested in the General Theory that inflation would occur only near "full employment" (in his sense), but it has been observed in many cases that inflation creeps up in states of severe underemployment (Stagflation). The errononeous assumption entertained by Keynes that inflation can only occur near full employment is still maintained in modern macroeconomics (NAIRU, New classical economics). Keynes held that the cause of unemployment is a too high rate of savings, or insufficient investment expenditure. He conjectured that the amount of labor supplied is different when the decrease in real wages is due to a decrease in the money wage, than when it is due to an increase in the price level, assuming money wages stay constant. This conjecture relates to the "actual attitudes of workers" and is "not theoretically fundamental," although the New Keynesian economics emphasizes this point.

In his Theory of Money, Keynes said that savings and investment were independently determined. The amount saved had little to do with variations in interest rates which in turn had little to do with how much was invested. Keynes thought that changes in saving depended on the changes in the predisposition to consume which resulted from marginal, incremental changes to income. Therefore, investment was determined by the relationship between expected rates of return on investment and the rate of interest.

Answer 2

Keynes was a very famous economist who was a major architecht of the post Depression, post WWII world economy. His theories had alot of support in the US and UK governments in the 1940s. Rather than just quoting alot of stuff about him, check out this link, http://en.wikipedia.org/wiki/John_Maynard_Keynes

As for Bretton Woods, that was the conference (held at Bretton Woods, USA) where the major victor powers decided how the world economy would work after WWII. The major outcome of the conference would be that all currencies would be tied to the US dollar, which would be tied to $35 per ounce of gold. This would keep the other economies strong at a time when they all might have failed in the face of US economic might. Remember that at this time, all of Europe was destroyed and the USA had most of the world's economy.

Answer 3

C+I+G=E
Consumption plus investment plus government expenditures = full employment. There is a level of spending that has to happen to produce full employment. If the capitalist market, consumption plus investment, falls short, the government can add enough spending to produce the desired employment level. The equation implies that without G, E will spin off one way or another, either declining to low employment or exploding into inflation, so using government expenditures to help the economy stabalize at high employment and low inflation is necessary. Keynes was a genius. Also gay, by the way. His scientific analysis of the economy has been the key for all government efforts to produce a stable, growing economy, to fend off depressions and hyper inflation.

Answer 4

he was an economist. heard he drove his car on the other side of the road