What is Keynesian Economics?
Keynes Would Have Hated The FIRE Movement
In the long run, we are all dead
Keynesian Economics refers to a school of thought that believes government intervention is necessary to maximize economic output. Keynesian economics was developed by the British economist John Maynard Keynes during the great depression.
Prior to Keynes, the standard economic theory was that the most effective way for the government to manage the economy was to do nothing and let the free market sort things out for its self. If the economy went into recession, the market would correct its self in the long term.
The great depression threw cold water on the idea that market forces could adequately correct any economic downturn on its own.
The Goal of Keynesian economics is to reduce the magnitude of “boom and bust” cycles that are inevitable in a free market economy.
The methods to achieve that goal focus on short term government policies based on currently available data. The idea that the market would correct its self in “the long run” led to Keynes famous quote that “In the long run, we are all dead”.
I interpret that quote as meaning that while the economy may sort itself out over time, the people living in that…
