Keynes Essay Research Paper Keynesian Economics vs

Keynes Essay, Research Paper

Keynesian Economics vs. Supply Side Economics Two controversial economic policies are Keynesian economics and Supply Side

economics. They represent opposite sides of the economic policy spectrum and were introduced at opposite ends of the 20th

century, yet still are the most famous for their effects on the economy of the United States when they were used. The founder of

Keynesian economic theory was John Maynard Keynes. He made many great accomplishments during his time and probably his

greatest was what he did for America in its hour of need. During the 1920 s, the U.S. experienced a stock market crash of

enormous proportions which crippled the economy for years. Keynes knew that to recover as soon as possible, the government

had to intervene and put a decrease on taxes along with an increase in spending. By putting more money into the economy and

allowing more Americans to keep what they earned, the economy soon recovered and once again became prosperous. Keynes

ideas were very radical at the time, and Keynes was called a socialist in disguise. Keynes was not a socialist, he just wanted to

make sure that the people had enough money to invest and help the economy along. As far as stressing extremes, Keynesian

economics pushed for a happy medium where output and prices are constant, and there is no surplus in supply, but also no

deficit. Supply Side economics emphasized the supply of goods and services. Supply Side economics supports higher taxes and

less government spending to help economy. Unfortunately, the Supply Side theory was applied in excess during a period in which it

was not completely necessary. The Supply Side theory, also known as Reganomics, was initiated during the Regan administration.

During the 1970 s, the state and local governments increased sales and excise taxes. These taxes were passed from business to

business and finally to the customer, resulting in higher prices. Along with raised taxes for the middle and lower classes, this effect

was compounded because there was little incentive to work if even more was going to be taxed. People were also reluctant to put

money into savings accounts or stocks because the interest dividends were highly taxed. There was also too much protection of

business by the government which was inefficient and this also ran up costs, and one thing the Supply Side theory was quite good

at was reinforcing inflation. The two opposites of the Supply Side and Keynes theories are well matched theories, but it was the

time of use that made them good and bad. Keynes theory was used during that aftermath of the Great Depression, a catastrophe

America will never forget and will never be able to repay Keynes for the economic assistance in recovering from it. The Supply

Side theory was used after a long period of prosperity, and although seeming to continue the practices of the past administration,

was the cause of a fearful recession. The success of those or any economic theory is based on the time at which it is



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