The Economists’ Views On Keynesian Economics Since Beginning And Now

In the year 1941, Milton Friedman was the early economist who favored to Keynesian economics theory. After the war, he refuses to accept with Keynesian style, saying that Keynes’s economics ignored the impact of money supply and monetary policy of the economic cycles by coming up with monetarism. In Friedman’s view, monetary policy has higher impact on businesses in the economic much more than fiscal policy. His hypothesis changes Keynes’s consumption function as well as weaken the taxation progress.

Robert Emerson Lucas Jr. also opposed Keynesian economics. He argued that it is impossible for country to have zero unemployment. Keycnes neglect the role of marketing mechanisms and public reaction to economic policy. Keynes excessively concentrated on government interference of the economy and ignored the individual decision. Robert states that recession will generally improve by itself when the seller is aware of recession. Seller will lower down the price of goods in order to clear the existing stocks and reduce wages based on the demand.

Paul Robin Krugman agrees with Keynesian theory. He researched on the Mexico crisis as well as the global financial crisis and discover that the actual purpose was to bring an adequate demand. Keynes’s theory aligns with his studies where aggregate demand is mainly attentive. He acquaints his new trade theory according to his article “the core issue of today’s economy is how to increase demand”. The theory analyses the reason why countries sustain unnecessary production that does not bring any benefit to the country.

Friedrich August Hayek has contrast views towards Keynesian economics theory during Great Depression era because he assumes that Keynes’s theories favored centralized planning which might cause wrong decision on capital expenditure, that motivate unsteady business cycle.

He thinks that when economics shocks happen to the country, the economy is able to recover naturally with the help from government as well as central bank policies. But Keynes thinks that business cycle is sensitive to decrease level of demand and strongly believe that natural recovery is not effective to restore economic growth.