Keynesianism in the 70's
At the time John Maynard Keynes was a widely praised British economist in the 30’s and 40’s, and his teachings were extremely influential over the economic policies that were taking place throughout the 70's. His economic teachings were called Keynesianism as many agreed with his opinions. Keynesians focus on the short term and the aggregate demand of an economy. They believe that government intervention in the economy is necessary in an economic crisis because of the aftereffects it will have. When America used Keynesianism they believed that in order to strengthen their weakened economy demand and prices should increase with no regard to a rising inflation. From this the government thought that employment would increase, overall strengthening the whole economy, but instead, America faced stagflation. A famous quote from Keynes is, “In the long run we are all dead.” This is supposed to oppose the beliefs of classical economics as its reasoning is that the government should not intervene in the economy in a sort of laissez-faire style as government intervention only leads to more problems. From the 1970's Keynesians learned that they had to restructure some of their teachings as stagflation became a possibility through their instructions. This hurt their credibility as classical economics began to sound more appealing. The article "Keynesian Economics, Government Shutdowns, and Economic Growth" written by Daniel J. Mitchell explains the Keynesian theories and how they have affected the U.S. government over the years.