John Maynard Keynes and Adam Smith: Compared and Contrasted Ideas
John Maynard Keynes and Adam Smith were two major, influential philosophers of economic history. Adam Smith, commonly known as the father of modern economics, influenced the growth of economic theory and the evolution of modern and market-based societies. John Maynard Keynes was a British economist whose ideas have profoundly affected modern macroeconomics and social liberalism. Each economist has similar ideas yet different opinions that distinguish them as economic leaders. Adam Smith is one of the first people to offer an explanation of how a market based economy works. Smith used economics not just to explain small scale production or differences in pay between two specialized occupations, but to address some of the most critical political issues of the day. He opposed any form of economic concentration because he believed that it distorts the market's natural ability to establish a price that provides a reasonable return on land, labor, and capital. Smith has sometimes been characterized as someone who saw no role for government in economic life. In fact, he believed that government had an important role to play. Like most modern believers in free markets, Smith believes that the government should enforce contracts and grants patents and copyrights to encourage inventions and new ideas. He advanced the idea that a market economy would produce a satisfactory outcome for both consumers and producers. He also believed that his idea would evenly distribute society's resources. John Maynard Keynes is one of a few economists who have significantly affected the course of history. His revolutionary theories on supply, demand, and unemployment led to the first use of government programs to help manage the nation’s economy. Keynes created Keynesian economics which is a theory of total spending in the economy, also called aggregate demand, and the effects on output and inflation. Keynesian economics...
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