John Keynes Theories About The Monetary Policy example essay topic

Adam Smith was born in Kirkcaldy, Fife, Scotland in 1723. He then left Kirkcaldy to attend Glasgow University in 1738, where he studied moral philosophy under Francis Hutcheson. In 1748 went back to Scotland with Lord Kames as his patron giving public lectures in Edinburgh. In 1751, Smith became a professor in logic, and in 1752 a professor of moral philosophy at Glasgow University. One of Smiths many writings earned him a new job as a tutor to the young Duke of Buccleuch.

He then resigned as professor, and he and the Duke traveled in France. In 1778 he was appointed to a comfortable post as commissioner of customs in Scotland, and went to live with his mother in Edinburgh. He died there in 1790 at the age of 67. Karl Marx was born in Trees, Germany in 1818. He studied at the universities of Bonn and Berlin, and would eventually become the editor of a liberal newspaper at Cologne. His articles in this paper caused it to be covered up by the government in 1842.

Marx then went on to Paris, where he came into close touch with a group of socialists. In 1845 he was driven out of France, and went to Belgium. Marx later returned to Germany and took part in the revolutionary movements there. In 1849 he was then exiled from Germany. He moved on to Paris and then to London, where he would live until his death. He spent the rest of his life in spreading his communistic views throughout his writings and by organizing political groups.

In 1864 he organized the International Workingmen's Association in which was his greatest ambition of his life. In 1869, he helped find the Social Democratic Labor party in Germany. He died in 1883 at age of 65. John Maynard Keynes was born in Cambridge in 1883. He attended King's College in Cambridge where he would earn his degree in mathematics in 1905.

After leaving Cambridge he served the British treasury as an adviser from 1915 to 1919 and was the chief British financial representative to the Paris Peace Conference following World War 1. He later resigned because he thought the Treaty of Versailles was too burdensome on the Germans. From 1944 to 1945, Keynes was actively involved in the resulting creation of the International Monetary Fund, later to become the World Bank. Keynes was also a patron of the arts, financing the establishment of the Arts Council in Great Britain. Keynes died in 1946 at age of 63.

Adam Smith in 1776 published "An Inquiry into the Nature and Causes of the Wealth of Nations", which examined in great detail the consequences of having economic freedom. It covered concepts of the role of self-interest, the division of labor, the function of markets, and the laissez-faire economy giving business people moral justification for their growing wealth and power. Smith is most often recognized for his expression in the "invisible hand" which he used to demonstrate how self-interest, along with a minimum of government interference under competitive conditions, would bring about the greatest good for society as a whole. Karl Marx's economic analysis was found in early expressions of the "Economic and Political Manuscripts of 1894".

In the first of three manuscripts, he discusses the wages of labor, profit of capital, rent of land, and estranged labor. The second manuscript, in which many portions were never found, contains a couple pages discussing the relationships of private property. The third manuscript discusses private property of labor and commission, need, production, and division of labor, and money. So basically in those manuscripts, he argued that the conditions of modern industrial societies consistently results in the alienation of workers from their own labor. Then in 1848, he and Friedrich Engels issued the "Communist Manifesto" which describes the class struggle between the proletariat's and the bourgeosie, distinguishes communism from other socialist movements, proposes a list of specific social reforms, and urges all workers to unite in revolution against existing regimes. John Maynard Keynes was a believer in monetarism.

In 1923, Keynes wrote "Tract on Monetary Reform", and later published "Treatise on Money", which both dealt with the monetary policy. His major view on this policy was that in order to stablilze the economy, you must stabilize the price level, and that the government's central bank must lower interests rates when prices tend to rise, and raise them when prices tend to fall. Then he wrote "The General Theory of Employment, Interest and Money". First theory introduced the notion of aggregate demand as the sum of consumption, investment, and government spending. Second it showed that full employment could be maintained only with the help of government spending.

Keynes wanted wages not to fall, but to be kept stable. So to Keynes, a general cut in wages would decrease income, consumption, and aggregate demand. He also believed government should play role of business by investing in public works and hiring the unemployed. Lastly he stated that there should be deficit spending during economic downturns to maintain full employment.

Adam Smith's theories of "Laissez-Faire", and "The Invisible Hand" can be most reflected towards our modern economy. We still practice these theories today, as we are a capitalistic nation. We have many business organizations that regulate the hands off business such as the sole proprietorships which allow a business owned by one person, in which he can do what he pleases with his business. Also partnerships deal with same effect a sole proprietor would have of establishing and managing their business without government interference. Lastly the corporations deal mostly with the invisible hand theory, stating that there must be self-interest and only with a minimum of government interfernece. Corporations must be granted charters from government which is essential for starting their business, and they must pay income taxes for any amounts of profits they receive from their business.

Now unlike Adam Smith, Karl Marx believes soley in his theory of Communism, in which government controls how the nation is run along with factors of production, and how everyone works for the government. This doesn't give the people the oppurtunity to start their own business in order to make more money, instead in communism, everyone receives the same wages of pay, and there isn't any competition since there are no businesses to compete against each other. That I know of, there are only a few countries today who still practice this theory of communism, but we are not one of them. John Keynes theories about the monetary policy and how cut wages would result in massive loses in the persons income, still relates to what happens when these are put into play in our economy. Today your wages are dependant on how well you can perform your skill into your profession, but skill must be something not too many can do, or else you will not get paid much for something everyone knows how to do. A skill everyone has, might result in the lowering of wages, along with the loss of persons income, amount of consumption, and investment.

Now as for the investment theory of Keynes, it is also used commonly today. If you are making lots of money, interests rates will decline, so it can stable the economy, and vice versa, if your not making lots of money, more that likely interests rates will go up, to help you out. So deficit spending and balancing the budget still applies to what we do today. 1. Field Enterprises.

Karl Marx. The World Book Encyclopedia. 1956. October 5, 2003.2. Henderson, David. John Maynard Keynes.

1993. October 5, 2003. web 3. Chew, Robin. Adam Smith Economist and Philosopher. 1996. October 5, 2003. web.