Keynesian Economics
John Maynard Keynes, born in Cambridge, England wrote the famous book Treatise on Money and Means to Prosperity and The General Theory of Employment, Interest, and Money. This book and many of Keynes ideas are legendary. In fact, some people have said that Keynes ideas may have saved capitalism.
Markets Don't Work
Economists have always studied markets and more specifically market failures. If markets were so great, why did they create boom and bust cycles? How are people to get through the downturns without income, food, or shelter? It is a serious problem. Markets are always touted as invincible during good economic times, but when markets fail people are more open to new ideas.
When markets failed in the great depression, Keynes thought that governments should spend more money to stimulate the economy. He even went on to say that governments should spend money they do not have (borrow). Maybe that is why we have such a huge debt here in American. Government policy makers believe and still follow Keynesian theory.
In the current market downturn in America, the government has spent trillions of dollars that they do not have.
Criticisms of Keynesian Ideas
People often criticize Keynes ideas because they do not always seem to work well. Milton Friedman cited the stagflation of the 1970s as proof that Keynesian theory doesn't work. Over the years, Keynesian theory has come out of favor and come back in favor. It seems that when a real crisis hits, people revert to Keynesian theories because it seems to be the only thing that will work. In the last few years of economic recession, Keynesian theory is strong.
Schools of Keynesian Theory
Some economics schools favor Keynes and some do not. If you wish to study how governments can avert economic crisis than you may want to find a good economic school that studies Keynesian theory.
Keynes was considered to be a strong supporter of the capitalist system and so strong capitalistic schools are great choices.
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