What are the benefits of the Keynesian approach to the economy today?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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First of all, we must note that this question presupposes that Keynesian economics is correct.  Not all economists agree that this is so.  If Keynesian economics is valid, its benefit today is that it could get an economy like that of the US out of its recession.

Keynes argued that capitalist economies can remain below full output for long periods of time.  Classical economics does not believe this is true.  Classical economists would argue that the government should leave the economy alone and let it rebound naturally.

It would appear that our economy has been underperforming for some years now.  If Keynes is right, government policy makers should cut taxes and increase spending.  This would cause our deficit and our debt to increase, but it would be worth it because consumers would have more money to spend.  They would spend the money, thus increasing aggregate demand and getting the economy growing again.

If Keynes is right, then, following his recommendations would get our economy out of its slump.

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