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August 22, 2007

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Tessa Berman

Keynes’s response to WW1 and the Paris Peace Talks demonstrates a new recognition of the interconnectedness of the global economy. Previously, the economic policies of particular countries had been narrowly geared toward improving their own domestic economies, Keynes took the stance that domestic prosperity relied on the economic and political health of a country’s trading partners. As noted above, Keynes demonstrated a great deal of foresight in advocating the cancellation of wartime debt and open markets in order to allow for continued growth of the international economy. Keynes’s innovation however, was in theoretically reconstructing inter-state relations such that nations were no longer merely competitors, but collaborators as well. Paradoxical as this may seem, Keynes’s vision indeed advocated for the health of the economy over the protections sought by producers. Following WW1, rebuilding economies presented new challenges to economists as wartime industries had to be demobilized and soldiers reintroduced to the civilian economy. Keynes’s solution to these challenges did little to cushion producers who had taken on new functions during the war from the changeover from a military to a civilian economy. Workers were thus expected to shoulder the majority of the burden of this transition, with the intent that the ultimate efficiency achieved by the international economy as a whole through this ‘tough love.’ In this respect, Keynes’s prescription for post-war economic recovery valued the health of the international economy over the well-being of individual industries and workers.

Tal Yeshanov

In order to get the world back on track, Keynes believes that the following three actions must be taken: 1. the government should be in charge of maintaining what individuals cant themselves, 2. the government should separate between social and technical services and 3. the government should help individuals with investment. My classmates have done a great job explaining how these three government interactions will allow for the economy to grow so I will focus on the bigger picture. I will attempt to explain WHY (by addressing the significance and history of laissez-faire) Keynes thinks the way he does and how his rationale affects free market economies.

In his writing, Keynes wrote a lot about laissez-faire. So let’s take a step back and examine in depth the importance of this concept. Laissez faire supports free market economies and opposes intervention by the state. While a free market breeds competition and efficiency, lack of government intervention can cause poverty, unequal wealth distribution and ultimately chaos. This is why I believe Keynes is not 100% in favor of Laissez-Faire economics. According to Keynes, a "wisely managed" economy will be successful if there are "semi-autonomous bodies" ruling it; in simple terms both government and individuals need to be in charge of running the economy.

Now that we understand the concept behind Laissez-Faire, it is important to understand the history behind it. After WWI, the U.S. economy was devastated; the world quickly went into a recession and the Great Depression hit. From my studies in PEIS 100, I learned that Keynes believed that Laissez-Faire policy helped foster some of the conditions which in turn helped prompt the Great Depression. Keynes in turn advocated for "semi-autonomous" bodies (interventionist government) to help control fiscal and monetary policy. From my studies in Macroeconomics, I learned that through his ideas, we now have prudent policies in place to help control our economy while keeping us away from another great depression. Ultimately I agree with Keynes’ arguments. I feel like some of them should be a little updated or revised, but I feel as though the man has the general idea down right.

P.S. I thought this was due Thur (not Tues) like the last one...sry:(

Norris Tran Duc

I believe that John Maynard Keynes’ keen eye on the necessity of an economic shift from classical liberalism to a more realist perspective was pertinent for the post-War era. It has been already stated by the 80 plus posts ahead of mine that Keynes believes that 1) the government should intervene in matters that individuals can’t be in charge of themselves, 2) semi-autonomous institutions should be created whose hierarchy are in between the individual and the state and whose objective is to pursue public goods, 3) “intelligent judgment” is important in the domain of savings and investments, and 4) maintain and support a certain population size.
As Keynes’ looks towards the future and envisions the world of tomorrow and the necessary economic shifts that need to be made, it is also important to note the moral convictions he also strives for. True, the theories of the past had been ripped to shreds by the War, but Keynes maintains a notion of morality and collective action.
“I may do well to remind you, in conclusion, that the fiercest contests and the most deeply felt divisions of opinion are likely to be waged in the coming years not round technical questions… but round those which want for better words, may be called pscyhological, or perhaps, moral.”
Keynes brings up the notion that economics is also a cultural system, about beliefs, affected by the individual’s sense of moral responsibility and social justice. In this sense, it seems that he may be pessimistic about the economic world of his day, but he remained optimistic at the potential for human integrity and moral conscience to develop and shift the economy to form a better world, not perfect, but better.

P.S. I'm extremely overdue in this and I apologize for not checking the due date on time, but I felt a necessity to post my thoughts, and not just forgo this assignment.

Madeleine Dale

Keynes lent some important insight to policy-makers in the Great Depression era. Keynes believed that the economy is a cycle of high unemployment and low demand and it is up to external forces like a government to intervene and increase demand, encourage entrepreneurial business ownership, lower interest rates, encourage consumption among the poor, etc. Keynes did not trust the markets to function at full employment on their own (which he thought was necessary for markets to work) so Keynesian public policy would be geared towards encouraging full employment so to stimulate the market economy. Keynes felt that the government should take control of those necessary functions that fall outside of the responsibility of the individual. Keynes writes that “progress lies in the growth and the recognition of semi-autonomous bodies within state bodies”. He recognizes that institutions within the state are necessary for maintaining a stable economy because they protect those individual actors that cannot act for themselves, for example; the control of currency by a central bank. Keynes is very interested in government intervention to help glue back together the post-war world because he sees a government with the ability to influence public policy as an essential semi-autonomous group that is set out to act for the public good free of individual motes.

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