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Keynesianism vs Neorealism Essay


There are a lot of different approaches which help consider the economical and political situations in the world, connect the realities and help solve some problems. The economical theories are created with the purpose to help the country to solve the issues either social or economical.

Some of the theories are effective, others are not. Still, each of the existing economical theories helps the development of the economy in the country and impact the urban state of affairs.

Comparing and contrasting the Keynesianism and Neorealism theories, it should be stated that they are directed at different principles of economics development and therefore impact various spheres which help the economics of the country function appropriately. Moreover, the spheres of impact are different, which influences the scope of the considered themes.

The main idea of Keynesianism is as following. The market economics does not have the features of balance which ensures the full employment. The main reason for this is the intention to conserve the part of the income which leads to the fact that the aggregate demand is lower than the aggregate supply. It is impossible to overcome the tendency to economy.

That is why the government should regulate the economy by means of influencing the economics of the country by means of the effect on the aggregate demand applying to one of the following measures, increasing of the monetary stock, decreasing the interest rate which leads to the stimulation of the investment activity. The lack of the demand should be compensated by means of the public works and budget financing.

Referencing the discussed theory to the ecological problem in the cities, the following examples of an ecological Keynesianism should be considered, “the state’s use of transfer and investment measures so as to accelerate the shift from reliance on fossil fuels towards reliance on renewable energy; state intervention to discourage incineration of waste, and to enhance reliance on recycling; and conversion of military production facilities into units which produce for the sustenance of life on earth.” (Custers 173).

Considering the effect of the Keynesianism on the urban economy, the full employment and increased resources of planning and redevelopment are to be mentioned. The government should play the vital role in the economics of each state and city (Dilworth 55).

Dwelling upon the advantages and disadvantages of applying to this theory in practice van der Burg refers to increase of the private or government consumption aimed at helping the country to increase the production and employment fast. However, one of the main disadvantages in this case is the raise of the government debt which creates the circumstances for deterioration in the balance of payments (van der Burg 141).

Shifting to the discussion of the Neorealism, it should be stated that this theory was then reaction to the deficit of the classical realism. One of the principal characteristics of the Neorealism is the consideration of the international relationships and world economics as two different notions (however, these items are considered as equal terms in Keynesianism).

The international relationships are based on the relationships between the states and t is believed to be the holistic system which functions on the basis of the particular laws. At the same time, the world economics is considered to be the interconnection of the non-state participants. Neorealism refers to the state as to the central participant of the economic relations.

The government should control all the aspects of economics and interfere into the city’s ones (Baldwin 148). The state is the head and all the smaller formations are to subordinate to it. Moreover, one should understand that this is about the state politics and there is no such a head in the world economics and international relationships.

The main difference between the Keynesianism and Neorealism theories is that Keynesianism considers the urban economy as the central one and the state should act in the interests of each city separately, while the main idea of the Neorealism theories is the subordination of the cities to the state and the business implementation under the interests of the government.

The stress of the head is made on different centers and it may change the perception of the whole economy. What is meant is that Neorealists “argue that all states aim to acquire power and that state cooperation can therefore only be temporary, based on a common opposition to a third country” (May, Rosecrance, and Steiner 1).

In conclusion, it should be stated tat each of the theories was developed under the particular circumstances and the conditions in the whole world generally and one particular state in particular. The implementation of each of the theories in the modern world in their pure condition is impossible as the economy has changed and there are no conditions necessary for applying to any of the theories successfully.

Keynesianism and Neorealism are the theories which have different features and direction in their functioning. However, they are both directed at the improvement of the economic relations in the world.

Works Cited

Baldwin, David Allen. New Directions in World Politics. New York: Columbia University Press, 1993. Print.

Custers, Peter. “The Tasks Of Keynesianism Today: Green New Deals As Transition Towards A Zero Growth Economy?.” New Political Science 32.2 (2010): 173-191. Print.

Dilworth, Richardson. The City in American Political Development. New York: Taylor & Francis, 2009. Print.

May, Ernest R., Rosecrance, Richard and Zara Steiner. History and Neorealism. Cambridge: Cambridge University Press, 2010. Print.

Neorealism and Neoliberalism: The Contemporary Debate van der Burg, Tsjalle. “Keynesianism In Practice: The Case For Government Support For Sustainable Energy Projects.” Public Policy Research 17.3 (2010): 141-146.

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