What difference, if any, is there in the economy under the no government intervention of the Classical economi

Question

What difference, if any, is there in the economy under the no government intervention of the Classical economists, and the fiscal policy intervention of the Keynesians?

Answer 1

A better question would be, what would remain the same?

The fundamental premise of the Keynesians is that discretionary government behavior can have a beneficial effect on the economy; the truly classical economists claim that government intervention is always bad.

Consider anything that the government does and its economic implications will cause advocates of the two approaches to have violently different views.

Let's start with taxes: who shall be taxed? how (sales, value added, income, poll)? at what rate? etc. Consider that most tax policies in the U.S. are explicitly geared to encourage certain kinds of economic behavior. For example, tax breaks on interest payments are designed to encourage people to buy homes.

Or how about public bailouts of private industries? These take various forms including import tariffs to protect domestic industries; direct subsidies of agriculture; buy America first policies; etc. (Even the capitalists who claim to adhere to Libertarian government-stay-out policies were in favor of bailing out the savings and loan industry when it crashed; the Fed has, more than once, kept banks afloat by changing its policies; etc.)

Or "insurance programs" such as Social Security (federal), unemployment insurance (state), food stamp programs, medical care for kids and the indigent, bank deposit insurance, pension insurance for the big companies (but not their workers), etc.

Or the handling of other "public" goods: education, roadways, air traffic control, liability insurance requirements for drivers; product safety requirements (FDA, EPA, automobile requirements such as airbags & seatbelts, etc.)

Most of these are not specific to the Keynesians, but they are all in keeping with the Keynesian model and anathema to the true non-intervention classicists (though most modern "classicists" wouldn't really embrace true non-intervention to this extent, despite their rhetoric).

If you want to focus on "the Keynesians", then you have the problem of first deciding who is and who isn't a Keynesian. This is not a trivial detail, so good luck.