Keynes contrasted his approach to the aggregate supply, focused 'classical' economics that preceded his book. The interpretations of Keynes that followed are contentious and several schools of economic thought claim his legacy. Keynesian economists often argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, in order to stabilize output over the business cycle.  Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions. Keynesian economics served as the standard economic model in the developed nations during the later part of the Great Depression, World War II, and the post-war economic expansion
Generally, these policies were successful in preventing heavy unemployment like that experienced in the 1930s, but unfortunately they tended to give rise to the phenomenon known as `stop-go'. That is, in periods of high unemployment, the government would expand aggregate demand: this would reduce the unemployment but at the same time tend to create inflationary pressure so that eventually the government would have to reduce aggregate demand again. Thus, all 'go' periods tended to be followed by 'stop' periods and it became difficult to achieve long-term economic growth. Possibly the main problem is that the Keynesian model is only short term and, in the short run, it is not always easy to predict the effects of policy changes, and the management of the economy, therefore, may become very erratic. A second limitation of the Keynesian model is that it fails to take adequately into account the problem of inflation.
Keynes believed that the government should support the economy. He argued that the government had all the required measures to manage the spendings. Keynes's analyses of the Great Depression were concentrated on the role of savings. In his book ''The General Theory of Employment, Interest and Money'' Keynes wrote that excessive savings can lead to economic collapse. According to him saving during the hard times was the biggest mistake ever.
Smith disagreed and after nine years of work and research, challenged this idea in his book, The Wealth of Nations. Here, Smith proposed that economics should be measured by a country’s overall production and commerce, an idea that is known today as the Gross Domestic Product (GDP). Smith also discussed the concept of division of labor, explaining how productive the economy would become if people became specialized and focused on working in one area such as in an assembly
Hayek’s explanation of an economy’s business cycle “The Austrian Business Cycle”: In his book “Prices and Production”, Hayek’s argued that any business cycle commence as a result of a monetary policy or approach that is adopted by governments. Hayek agreed with Adam’s Smith theory of free markets. He argued that despite the fact that markets evolved over time as a result of human actions, at a certain stage markets fail resulting in unemployment and inefficient allocation of resources. On analyzing the factors behind markets failure, Hayek suggested that the reason behind fluctuations in the stability of markets was the intervention of governments in the monetary equilibrium of economies. There he argued for a monetary approach to the origins
He believed in personal liberty, constitutionally limited government and the free market of ideas and goods. In fact, with his strong liberal views Hayek was not so optimistic toward the future of liberalism on the political scene (p.12). He stated that there is little space for those who promote liberalization of the society as well as the notion of a free market. That is so because such ideas and in some point actions are usually absorbed by strong powers which show no signs of liberty at all. Rather totalitarian views and planned socialism with the ideas of overall control of a state and a society.
The Wealth of Nations is a book that has stood the test of time for scholars interested in economics for hundreds of years. The theories of Adam Smith were revolutionary in the way that they set up modern capitalism. In this essay, I will go over Smith’s views on the gains of specialization, the role of government in the economy, and the relationship between workers, landowners, and capitalists. One of the first principles Smith introduces is the idea of specialization. His theory was that people should work in the areas they are skilled in.
Jackson’s view on economy lead him to instate acts that significantly transformed the system of American economy such as the abolition of the second Bank of the United States. He mistrusted paper money greatly, as well as believed in power to the common people. Andrew Jackson feared the Bank’s power. He was afraid of the Bank becoming stronger and lending that power to the elite without holding accountability towards them, something he believed great powers should have; accountability. Jackson specifically stated that he believed the Bank made “the rich richer and the potent more powerful.” Jackson liked the so-called farmer’s economy since it motivated people to be hardworking and independent.
The intellectual architect of this creation was Alexander Hamilton, the first Treasury Secretary as well as a central figure who had a deep impact on the economic development of the United States. The title of the book clearly recalls Hamilton 's affirmation that a national debt, "if not
1 Introduction About 400 year b.c.e., Greek historian and philosopher Xenophon was first to use in his writings the word economy (oeconomicus) – which in translation means managing the household. Despite the name, economic ideas were and remained an integral part of the entire society. From antique to Greece today, the economy, as a social science, traded, developed and shaped under the influence of current of occurrences, changes and needs of the people. Keynes’s theory represented the biggest inspiration to European States and economic theoretics in the period between 1941 and 1976. In this period the macroeconomics has become a special scientific and teaching discipline.