The brief debate between keynesians and new classical economists in the 1980s was fought primarily over (a) and over the first three tenets of keynesianism—tenets the monetarists had accepted. Keynes and the classical economists: the early debate on policy activism lear n i ng obj ective s 1 discuss why the classical economists believed that a market economy would automatically tend toward full employment 2 explain why keynes rejected the views of the classical economists 3.
Keynes and the classical economists: the early debate on policy activism lear n i ng obj ective s 1 discuss why the classical economists believed that a market economy would automatically tend toward full employment. Monetarist economics is milton friedman's direct criticism of keynesian economics theory, formulated by john maynard keynes simply put, the difference between these theories is that monetarist economics involves the control of money in the economy, while keynesian economics involves government expenditures.
Classical economics or classical political economy is a school of thought in economics that flourished, primarily in britain, in the late 18th and early-to-mid 19th century its main thinkers are held to be adam smith , jean-baptiste say , david ricardo , thomas robert malthus , and john stuart mill. Keynesian economics were named after john maynard keynes, an english economist the founders of the classical school were adam smith, jeremy bentham, david malthus and david ricardo keynes believed that free markets led to uneven economic outcomes and that intervention was necessary to assure equity and efficiency. Classical economics places little emphasis on the use of fiscal policy to manage aggregate demand classical theory is the basis for monetarism, which only concentrates on managing the money supply, through monetary policy keynesian economics suggests governments need to use fiscal policy, especially in a recession. Keynesian economists believe in consumption, government expenditures and net exports to change the state of the economy fans of this theory may also enjoy the new keynesian economic theory, which expands upon this classical approach the new keynesian theory arrived in the 1980s and focuses on government intervention and the behavior of prices.
Keynesian economics is a theory that says the government should increase demand to boost growth keynesians believe consumer demand is the primary driving force in an economy keynesians believe consumer demand is the primary driving force in an economy. Keynesian economics may be theoretically untidy, but it certainly predicts periods of persistent, involuntary unemployment according to the early new classical theorists of the 1970s and 1980s, a correctly perceived decrease in the growth of the money supply should have only small effects, if any, on real output.
The principle difference between keynesian and classical economics is the role of government espoused in each keynesians advocate for increased governmental involvement in the economy, while classicists believe that the economy works best with limited governmental interference keynesian economics. Whether keynesian or classical economists are correct in their views cannot be determined with certainty business owners have to use the actions of politicians and business leaders as signposts to help them make their own decisions about the growth of their companies. Classical economics is essentially free-market economics, which maintains that government involvement in managing the economy should be limited as much as possible keynesian economics espouses the view that government should take an active role in managing the economy, particularly in depression/recession like periods.
Keynesian economy is also right - market is flawed and it needs interventions from time to time - but the original extend and kind of interventions which were supported by original keynesian economists are not all that good. Classical economists believe that the economy is self-correcting, which means that when a recession occurs, it needs no help from anyone the keynesian model came about when economist john maynard keynes observed that the economy is not always at full employment.