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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Keynes

Definition:

Through the 1960s, British economist John Maynard Keynes was popular with economists. Today? He's lost some fans.

In his book, General Theory of Employment, Interest and Money (1936), Keynes wrote that the Depression was caused by a huge decline in total economic spending (he called this total spending in the economy "aggregate demand"). Keynes also wrote that once employment dropped, a new balance with low employment was created and the Depression might continue on and on unless the government started spending.

According to Keynes, the big solution was to have the government spend and spend to get things moving economically—even if it meant the government got into debt. This went against the ideas that economists had before, i.e. that the economy would eventually correct itself, no interference needed.

Not everyone likes Keynes' ideas, but President Roosevelt and the rest of the administration eventually did create the New Deal, which took on a broadly Keynesian quality, characterized by major and unprecedented government interventions into the economy. Keynesian ideas went on to dominate academic and government thinking about political economy through the 1960s.