More Economics.

JOHN MAYNARD KEYNES (1883-1946)

Assigned reading "Introduction by PAUL KRUGMAN to 'The General Theory of Employment, Interest and Money' by JOHN MAYNARD KEYNES".

"I find it helpful to describe it as a meal that begins with a delectable appetizer and ends with a delightful dessert, but whose main course consists of rather tough meat" [KRUGMAN on "The General Theory"]

We are all Keynesians.

KEYNES was writing during the 1930's when America was going through a "deflationary gap", of which there was more goods than money. Resources appeared to be limitless which led to advancements in mechanised agriculture. With new invention came new investment. "The Money Effect"  - Money has the power to affect human behaviour.

His Economic Philosophy was that 'money matters'. The economy should remain in a stable state of "Equilibrium" whereby the amount of money should match the amount of goods. In the event of a recession, for example, the economy goes through a process of "Disequilibrium" A products value increases as the money supply pumped into the economy decreases. This leads to negative economic growth.