John Maynard Keynes was a British economist born in 1883 who developed theories about government intervention in the economy. His most influential work, The General Theory of Employment, Interest and Money, argued that markets are inefficient and governments should stimulate consumption and investment to boost employment during recessions. Keynes believed governments should run deficits and lower taxes to increase aggregate demand. His ideas formed the basis for modern macroeconomic policies focused on fiscal and monetary policy.

1. John Maynard Keynes
Life, work and impact on modern world

2. Biography
 Born: 5 June 1883 in Cambridge, England, died: 21 April 1946
in Firle, Sussex, England
 His father John Neville Keynes was an economist and a
lecturer in moral sciences at the University of Cambridge
 Keynes won a scholarship to Eton, where he displayed talent
in a wide range of subjects
 In 1902 Keynes left Eton for King's College, Cambridge
 In May 1904 he received a first class B.A. in mathematics
 In August 1906 he took the Civil Service examinations and
was placed second of the ten who were accepted that year.
 Keynes was very unhappy when he received detailed results
of the examination.
 He expressed disbelief at both the mathematics and
economics results, and commented, probably accurately, that
he knew more about economics than his examiners.

3.  By 1915 Keynes was working at the Treasury where
„...he was daily concerned with the economic
management of the war. His special responsibility
covered relations with allies and the conservation of
England's scant supply of foreign currencies“
 Another important period of Keynes' career was during
the 1930s. This was a period of unemployment and the
depression.
 Conventional economics could not cope with the
extraordinary events which took place leaving traditional
economic theory with no answer.
 Keynes first major work which indicates the direction his
ideas were taking away from the conventional approach
was A Treatise on Money published in 1930.
 His most important work giving the culmination of his
ideas was The General Theory of Employment, Interest
and Money published in 1935-36

4. Keynesian economic beliefs
 Markets are ineficient and they can fail
 In the long run, economy can operate at equilibrium
with unemployment because factor prices do not
always change
 Government stimulation and control in the economy
is necessary for the economic wellbeing/
Government has the duty to intervene in the
economy in times of recession.
 Stimulation should in general case be approached
trough encouraging consumption in the market
place.
 Country’s debt should be betwen 50% and 70%

5. Excessive saving
 To Keynes, excessive
saving, i.e. saving beyond
planned investment, was
a serious problem,
encouraging recession or
even depression.
Excessive saving results if
investment falls, perhaps
due to falling consumer
demand, over-investment
in earlier years, or
pessimistic business
expectations, and if
saving does not
immediately fall in step,
the economy would
decline.

6. Active fiscal policy (government spending)
 The classical economists wanted to balance the
government budget. According to Keynes, this would
lower the demand for both products and labor. For
example, Keynesians see Herbert Hoover's June 1932
tax increase as making the Depression worse and would
advise tax cuts instead.
 Keynes′ theory suggested that active government policy
could be effective in managing the economy
 neo-classical and classical counter-arguments: firstly, it
would increase the demand for labor and raise wages,
hurting profitability; secondly, a government deficit
increases the stock of government bonds, reducing their
market price and encouraging high interest rates, making
it more expensive for business to finance fixed
investment.

7. Keynes’s influence in modern world
 Keynesian economics held great influence from
1930s – 1970 after which came a long period of
domination of neo-classical economists, which lasted
until 2008 when Keynesians start to win the
importance back
 Keynesian philosophy is incorporated in most of
economies/countries of the world such as EU
countries and in socialist countries in particular