The Keynesian Revolution is one of the most controversial phenomena in the economic theory and practice as well as in the social and political theory because many researchers, economists, and politicians cannot agree on the development of the revolution and on its role for the progress of the economic theory in the twentieth century.
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Many researchers are inclined to agree that John Maynard Keynes’s work The General Theory of Employment, Interest, and Money published in 1936 provoked the real revolution in understanding the economic theory and had the obvious significant effects on the development of the world economies when the other researchers state that the role of the Keynesian Revolution is exaggerated and, in many cases, fabricated (Colander 1991; Tily 2007).
That is why, it is necessary to analyse the aspects and effects of the Keynesian Revolution critically in order to determine its role for the progress of the modern economic theory and practice.
In his work, Keynes proposed the alternative for understanding the ideas of the classical and neo-classical economic theories and emphasised the role of the demand factor instead of the supply factor for the progress of the unemployment trends (Keynes 2006).
In spite of the fact that there is the extensive critique of Keynes’s theory and approach in the works which followed the publication of Keynes’s book and in the modern economists’ investigations, the Keynesian Revolution played an important role in the progress of the economic thought because Keynes’s ideas provoked re-thinking the neo-classical economic theory and practice, led to the academic debates, and influenced the practical changes in the governments’ approaches to regulating economic questions.
To understand the role of the Keynesian Revolution for the progress of the economic and political thought and practice, it is necessary to concentrate on the provocative ideas proposed by Keynes, which influenced significant changes in the visions of the economic principles and standards.
In his work The General Theory, Keynes provided two alternative ideas which affected the whole vision of the economic theory. Keynes claims that classical or neo-classical approaches are not effective enough to state the economic equilibrium in relation to the factors of supply and demand.
As a result, the lack of demand causes the problem of unemployment more directly than the factor of the supply, as it was stated by other economists previously. Furthermore, Keynes pays attention to the fact that it is the task of the government to stimulate the increases related to the demand.
That is why, Keynes accentuates the necessary intervention of the governments into economy in order to overcome the problematic economic situations and to improve the economic development. According to Keynes, the government’s intervention into economies and the impact on the aspect of demand are the necessary conditions to cope with the problem of the unemployment (Keynes 2006).
Although Keynes’s ideas are based on the traditional capitalist theory promoted by Keynes, these ideas influenced the progress not only of the theoretical revolution but also the changes in the practical approaches to regulating the economic questions because Keynes proposed to look at the main economic principles from the alternative perspective.
The Keynesian Revolution developed because Keynes’ ideas were rather simple to understand, but they threw light on many economic questions, and provided new perspectives for their interpretation.
Although Keynes promoted the capitalist vision of the economic development, many researchers found that the author’s ideas are correlated with the communist ideas, and this approach changed the general understanding of the economic theory in the West World (Tily 2007).
On the one hand, Keynesianism became the leading economic movement related to the theory of the economic analysis in the twentieth century. Moreover, Keynes’s ideas were implemented in practice in the United States in the form which did not promote the communist ideas but supported the capitalist ones.
On the other hand, the Keynesian Revolution was discussed as the fabrication because Keynes’s ideas did not add the new knowledge to the classical economic theory (Laidler 1999).
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As a result, it is impossible to speak about any revolution in the theoretic field with references to the fact that Keynes only re-thought the existed visions and principles (Laidler 1999). From this point, the role of the Keynesian Revolution is the controversial question because researchers have no single idea on the effects of Keynes’ ideas on the economic theory and practice.
While referring to the idea that the Keynesian Revolution developed as the real revolution in the theoretical thought and approach to discuss the questions of economics, it is important to state that Keynes provoked the revolution in the visions of the capitalist economy with accentuating the necessity of the effective demand.
This accent shifted the focus from the supply to the demand and changed the perspectives to provide the monetary analysis and discuss the principles of the monetary economics. The main problem associated with the critical analysis of the Keynesian Revolution is in discussion of Keynes’s ideas as the revolutionary alternative approach or as the traditional generalisation and re-thought of the classical viewpoints (Colander 1991).
That is why, Keynes’s ideas can be discussed as revolutionary by those researchers who contrast classical, neo-classical, and Keynes’s approaches and pay much attention to the idea of the economic equilibrium. Furthermore, the Keynesian Revolution is significant from the point of combining the capitalist and communist approaches to the economic theory.
In addition, the fact of the Keynesian Revolution’s development is supported with the practical effects, which are the implementation of the improved policies to regulate the economic demand with the help of the governments’ intervention (Colander 1991; Tily 2007).
On the contrary, Keynes’s ideas can be discussed as generalised by those economists who focus on the aspects of the monetary policy and consider Keynes’s approach as one more method to analyse the aspects of the economic theory.
It is important to note that the Keynesian Revolution is discussed from two opposite perspectives since the publication of Keynes’s book and acceptance of the idea that Keynes’s discussion is rather revolutionary.
Thus, Krugman states that Keynes’s ideas have a lot of similarities with the economic heresy, but Keynes is extremely persuasive in presenting his vision of the economic theory and the role of governments in the process (Krugman 2006).
Krugman claims that Keynes’s ideas are not effective enough to “foresee a future of persistent inflation” and that Keynes “underestimated the ability of mature economies to stave off diminishing returns” (Krugman 2006). Krugman does not provide the clear analysis of the Keynesian Revolution as the phenomenon which influenced the progress of the economic theory.
Nevertheless, Krugman does not reject the importance of the theory’s role for the progress of the idea as the economic heresy, which is rather influential for the development of the other economic viewpoints.
According to Schumpeter, Keynes proposed the “theoretical doctrine that not only obliterated the personal element and was, if not mechanistic itself, at least mechanizable, but also smashed the pillar into dust”, and moreover, the doctrine developed the idea with references to saving, “‘the unequal distribution of income is the ultimate cause of unemployment’.
This is what the Keynesian Revolution amounts to” (Schumpeter 2003, p. 290). As a result, different authors propose various visions related to the phenomenon of the Keynesian Revolution. That is why, the effectiveness of Keynes’s arguments on the necessity to transform the approach to policy implementation is still discussed along with the appropriateness of the author’s theoretical visions.
In spite of the fact that many researchers state that the Keynesian Revolution cannot be discussed as the real revolution related to the principles of the economic theory because Keynes’s arguments and ideas present the results of re-thinking the main classical and neo-classical economic principles in the form of generalisations, the other researchers state that the Keynesian Revolution is the important phenomenon which results are observed clearly because Keynes’s visions influenced the process of implementing the economic policies and the role of governments in the economic lives of the states.
Furthermore, the publication of Keynes’s book provoked the important and active debates on the role of the demand factor for the changes of the unemployment rates in the countries of the West World, and the theoretical discussion of the possible alternatives proposed by Keynes resulted in re-thinking the significant principles of the monetary analysis.
Colander, D. 1991, Mr. Keynes and the “Classics” again: An alternative interpretation. Web.
Keynes, J. 2006, General theory of employment, interest and money, Atlantic Publishers & Dist, London.
Laidler, D. 1999, Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and Unemployment, Cambridge University Press, UK.
Schumpeter, J. 2003, Ten great economists, Routledge, London.
Tily, G. 2007, Keynes’s General Theory, The Rate of Interest and ‘Keynesian’ Economics: Keynes Betrayed, Palgrave, Macmillan, London.