Keynesian can be Confusing
After watching the Economics 101 Week 8 lecture, this might have been your reaction. But then again, government intervention in the economy is always perplexing and complicated. Buying and selling bonds to change the money supply, or changing the amount the banks must hold in reserve are powerful tools the government has to affect the amount of money in the market.
If it is confusing to you, you can be sure that it is confusing to the government officials who try to apply it. This is why economists like Dr. Wolfram prefer the Austrian business cycle to the Keynesian model.
If we as individuals do not have enough information to determine whether the money supply should be decreased or increased, and by how much, our elected officials probably do not have enough information either. This deficiency is at the heart of the confusion over the Keynesian model. It is also why Austrian economists believe that government intervention causes recessions.
Does the government intervention in the Keynesian model concern you? Are you ready to see Week 9 and find out why this model could be the cause of recessions? Comment below.
To learn more about the Keynesian system vs. free markets, sign up for Hillsdale’s Economics 101 online course.
Monica Brandt is a sophomore from Utah, pursuing a major in Economics and a minor in Journalism. She writes weekly for the sports section of the Collegian. Her freshman year, she also competed on the Forensics team.