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Between Keynesian economics and classical economics, which theory can be argued as...

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sj83 | Valedictorian

Posted September 23, 2013 at 10:57 PM via web

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Between Keynesian economics and classical economics, which theory can be argued as better? Why?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 24, 2013 at 12:19 AM (Answer #1)

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It is possible to argue that either one of these is a better theory.  That is why both theories are still adhered to by some economists today.  There is no way to prove which argument is correct, so people can still believe in either theory.

It is possible to argue that Keynesianism is a better theory.  This argument rests on the idea that relatively laissez-faire governments have not necessarily experienced good economic conditions at all times.  The best example of this was the Great Depression.  At that time, the US government was relatively hands-off in its treatment of the economy and yet the Depression occurred.  Under Hoover, the economy did not fix itself after the Depression began.  Once Roosevelt engaged in more Keynesian actions, the economy improved, though it did not completely heal.

However, it is also possible to argue that classical economics is better.  The major argument here is that Keynesianism simply does not work in the real world.  The government is driven by political motives rather than economic ones.  This means that it typically does not do what is best for the economy.  Instead, it tends to try to do things like cutting taxes and increasing spending even when the economy is going well.  This undermines Keynes’s theory and leads to huge deficits and debts in the long term.

Thus, an argument can be made either way.

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