Project #30451 - Economic history thoughts

The following excerpts are from John Maynard Keynes, “Open Letter to Franklin D. Roosevelt,” New York Times, December 31, 1933, three years before the publication of The General Theory of Employment, Interest and Money in 1936.

 

Broadly speaking, therefore, an increase of output cannot occur unless by the operation of one or other of three factors. Individuals must be induced to spend more out of their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees, which is what happens when either the working or the fixed capital of the country is being increased; or public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money. In bad times the first factor cannot be expected to work on a sufficient scale. The second factor will come in as the second wave of attack on the slump after the tide has been turned by the expenditures of public authority. It is, therefore, only from the third factor that we can expect the initial major impulse….

 

[Another] set of fallacies, of which I fear the influence, arises out of a crude economic doctrine commonly known as the quantity theory of money. Rising output and rising incomes will suffer a set-back sooner or later if the quantity of money is rigidly fixed. Some people seem to infer from this that output and income can be raised by increasing the quantity of money. But this is like trying to get fat by buying a larger belt. In the United States today your belt is plenty big enough for your belly. It is a most misleading thing to stress the quantity of money, which is only a limiting factor, rather than the volume of expenditure, which is the operative factor.

Explain, evaluate and analyze Keynes’ arguments in the context of the analytical model he developed in The General Theory and his criticism of orthodox “classical” policies to deal with a severe economic depression.

 

 

CITATIONS AND REFERENCES:  The Kuhn Library has a very helpful research help site that includes several standard systems for text citations, footnotes and reference/bibliography listing.

Go to: http://lib.guides.umbc.edu/citing

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Due By (Pacific Time) 05/14/2014 12:00 am
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