It has never been an easy task to select the greatest. But if there must be one, then J. M. Keynes would be the answer. Keynes was a heroic figure – a superman whose personality dominated economic discussion of the free world. Keynes ‘had exhausted himself in setting up the post-World War II basic economic institutions – the International Monetary Fund, the World Bank, the US post war loan to Britain and so on. Most of all, the greatest majority of young economists were debating Keynes, and mostly on the affirmative side.’ As Arthur Burns, the Chairman of Eisenhower’s Council of Economic Advisers, mentioned, “Keynes’ thinking moved the world…as profoundly as Adam Smith’s Wealth of Nations did in his time.” Then I regard that Milton Friedman to be the second one who deserves using the word, great, to describe his intelligence and genius contributions to Economics and finally will be Irving Fisher which are also very important to the Economics Before we discussed how Keynes’ theories have affected in such a way that the entire world of economics has been moved, let us first have a look at the environment in which this economic giant grew up. Keynes was born in 5th June 1883 in Cambridge, England. His father was a noted Cambridge economist and his mother was the mayor of Cambridge. The excellent academic background flourished Keynes and had recondite impact on the development of his work and personality. He accepted position in British Treasury during World War I and returned to Cambridge to teach in 1919, the time he wrote The Economic Consequences of the Peace. The book met with a reception that makes the word ‘Success’ sound commonplace and insipid. The book sold 84,000 copies and made Keynes an instant celebrity. But the book, no matter how popular it was, was considered scientifically unimportant. The real achievement was in 1936, the time when The General Theory of Employment, Interest and Money appeared. Though the General Theory was considered as convoluted and badly organized, the analytical structure of the theory “not only remains intact, but also defined the research programme for both theoretical and empirical macroeconomics for the following three decades and more.”
The General Theory was first introduced in 1936, the time when the western world was in depth of Great Depression, of which the depression was bewildering and creating millions of unemployed. The theory offered an explanation to the depression and prescription for ending the depressions by proper government policies.
The General Theory stated that in order to keep the society fully employed, government had to run deficits when the economy is slowing, which means its expenditure should be larger than its income. The government expenditure would be used to invest in public projects, which could generate employment opportunities. That’s because the private sectors’ investment won’t be enough to satisfy the potential demand. As their markets become saturated, businesses reduce their investments, setting in the motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest.
According to the General Theory, a decrease in consumption will lead to...