What is the problem with Keynesian Economics?

Anonymous 01/01/2018. 7 answers
Social Science Economics

I hear people say that demand side economics AKA Keynesian economics is bad, why?

7 Answers


DoILiveInOz 01/03/2018.

It does not work. It creates inflation and excess government spending crowding out the more efficient private sector.


francky 01/02/2018.

Inflation


Noah 01/01/2018.

Basically what John stated that when business is good the government should cut back on spending and when the business cycle cycles down the government should spend more. Government should never borrow except for various capital projects often called 'infrastructure'....but of course that would require 'taxes' and who wants to pay taxes? Putting cash at the bottom of the economic heap will always result in that cash moving upward...that's why we have Social Security and at one point even some military spending. Once we moved this country into a permanent WAR economy government had to borrow massive amounts of cash as a 'war tax' would have been impossible to levy. We now borrow 800 billion a year for military and security expenses...Keynes never suggested that. Of course the above is just the Cliff Notes version... as everything else it's more complicated.


Anjaree 01/01/2018.

It can not conquer sticky price and wage. And it cannot work alone without printing more money.


Foxhole 01/01/2018.

1) Borrowing causes higher interest rates and "crowding out" (i.e. discourages private imvestment)...this can occur to such a degree that private investment is reduced so much that it's worse than if the government had not increased spending

2) Timing is a problem. The government intervention usually comes too late, and causes inflation

3) It encourages bigger government (this is only a problem if you are opposed to that politically/philosophically)

4) In the 70s it was revealed that Keynesian polcies do not always reduce unemployment as previously thought. So, instead of accepting a trade off of more inflation for less unemployment, you might get more inflation and more unemployment ("stagflation")

5) Inaccurate demand estimates. Keynesian economics assumes you can know how much demand needs to be increased to fix the economy, however, that can't be accurately predicted.

The biggest problem for most people overall is the tendency of Keynesian policies to cause inflation.


Jeff S 01/01/2018.

Because it promotes a middle class!

Conservatives want an elite class and a servant class! Although there's actually the sub-servant class begging and living in the streets!


Blelo 01/01/2018.

Because it failed in Kenya


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